The Consumer Financial Protection Bureau plans to crack down on repeat industry offenders by potentially banning business practices, forcing the divestiture of business lines and working with state agencies to revoke licenses.
In a speech Monday, CFPB Director Rohit Chopra laid out a robust enforcement regime and a bigger arsenal of tools against large banks and other financial firms that he described as corporate recidivists, breaking the law again and again with few additional sanctions.
Chopra has previously talked about going beyond fines and restitution to consumers by targeting individual executives. In his speech Monday, he also discussed revoking privileges provided by the government, such as by terminating deposit insurance from the Federal Deposit Insurance Corp.
When citing big-bank repeat offenders, Chopra named names, including Citigroup, JPMorgan Chase, Wells Fargo, American Express and Discover Financial Services.
“How do we stop large dominant firms from violating the law over and over again with seeming impunity?” Chopra said in a speech at the University of Pennsylvania Law School. “Repeated offenses, whether it's for the same exact defense, or more malfeasance in different business lines, is par for the course for many dominant firms, including big banks, Big Tech, Big Pharma and more. Many large institutions see the law as mere expenses on their income statement.”
Though Chopra has spoken about corporate recidivism
Chopra described the Federal Reserve’s 2018 asset cap on Wells Fargo, which followed the bank's fake-accounts scandal, as one of the most successful curbs on illegal corporate behavior. Large financial firms are not deterred by regulatory penalties and instead continue to take bigger risks, he said.
“We have experienced what other enforcement agencies have been seeing for decades: large financial institutions crossing legal fault lines over and over again,” he said. “Specifically, the agency has taken action against Citigroup five times, JPMorgan Chase four times, Wells Fargo four times, American Express three times, Discover three times, one of which was a repeat violation of a previous 2015 CFPB order. There are many more examples, but you get the point.”
Chopra repeated a point often made by consumer advocates: public confidence in the rule of law was undermined after the 2007-2009 financial crisis because few bankers went to jail.
“Fast forward to 2008 and almost no single senior executive went to jail or was held financially responsible,” Chopra said. “This special treatment applied to large financial institutions over their smaller counterparts as well. The ‘too big to fail/too big to jail' problems undermines the public's confidence in the rule of law, a bedrock principle of our society. When the public perceives that powerful actors in the economy and society live by a different set of rules, this deeply undermines the promise of the rule of law and our market system.”
Chopra was also critical of deferred prosecution agreements, which allow companies to settle an issue even though they are being pursued for other misconduct.
He cited JPMorgan Chase for having “a history of multiple overlapping deals” with the Department of Justice in connection with deceptive trading practices.
“There has been a lot of noise by government officials that big financial institutions are not ‘too big to jail,’ but the way the government has been treating them suggests otherwise,” Chopra said.
Regulators should learn lessons from the example of Facebook, which was able to use highly unusual immunity clauses to shield its executives from additional scrutiny, Chopra said.
Facebook paid the Federal Trade Commission $5 billion to resolve the Cambridge Analytica data breach probe, but the agency dropped plans to sue CEO Mark Zuckerberg individually, according to
“For very large firms, seemingly large fines — even ones that are record-setting — may appear to be very punitive, but may have little effect,” Chopra said. “Corporate boards will go to great lengths to shield executives from scrutiny even though they're all bound by agency orders.”
The CFPB will be looking for the worst types of repeat offenders: those that violate a formal court or agency order, Chopra said.
“This is especially egregious because they often consented to the terms as part of a settlement,” he said. “They clearly understand the laws and provisions to adhere to, but failed to comply due to dysfunction, or they took a calculated risk.”
Other repeat offenders have multiple violations across different businesses, often due to problematic sales practices or incentives, or a failure to properly integrate technology or businesses after a large merger, Chopra said.
The CFPB plans to establish a dedicated unit in its supervision and enforcement division to enhance the detection of repeat offenders, he said.
