For CFPB’s Supporters, Wells Fargo is a Gift That Keeps On Giving

November 30, 2016 at 8:01 am Leave a comment

If I was one of those conspiracy theory nuts who dream up wild theories and spend late nights scouring the Internet for evidence vindicating my worst fears, I would believe that Wells Fargo is actually working with Massachusetts Senator Elizabeth Warren on a top secret plan to keep the CFPB alive.  The bank’s phantom account scandal was bad enough, but its continued mishandling of the consequences shows why so many well-meaning but misguided people feel that the Bureau in its current form must be protected at all costs and why it’s so important for credit unions to continually distinguish their conduct from that of the banking industry in both word and deed.

Exhibit A- On Monday, the CFPB issued a Supervisory guidance warning institutions against overly aggressive incentive based sales tactics. It warns that strict controls should be used at all financial institutions “where incentives concern products or services less likely to benefit consumers or that have a higher potential to lead to consumer harm, reward outcomes that do not necessarily align with consumer interests, or implicate a significant portion of employee compensation.”  One of the examples cited by the Bureau That Never Sleeps as an area of potential abuse is overdraft opt-In procedures. The Bureau noted that it took action against a financial institution that it alleged was deceiving consumers to opt-in to overdraft services.

In the old days, way back on November 7th, I would have told you that bulletin like this deserves close attention because, even though the CFPB has direct oversight over only the largest of credit unions, these types of warnings signaled that proposed regulations could be coming soon.  This assumption has been thrown into doubt by the Republican sweep.  But until further notice, the Bureau remains a, 1200 pound gorilla that is best not to be ignored. Besides, the guidance is consistent with a similar guidance issued by NYS’s DFS, which regulates state chartered credit unions.

Exhibit B,  With the Bureau pondering regulations that would prohibit financial institutions from including in their account agreements provisions forbidding members from joinning class action lawsuits and forcing them to arbitrate disputes, Reuters is reporting that Wells Fargo is seeking to dismiss a class action lawsuit stemming from the account opening scandal on the grounds that such lawsuits are banned  based in their account agreements.

Don’t get me wrong, if I represented the bank, I would be making the same exact argument, but on a policy level, Wells Fargo’s conduct provides the best argument I have seen for why categorical class action bans are a bad idea.  Never mind the fact that class actions benefit lawyers a heck of a lot more than consumers or that a  well-designed arbitration can provide a cost effective and swift alternative to the legal system.

On that note… enjoy your day!

Entry filed under: General, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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