CFPB Creates “Repeat Offender Unit” to Target Large Banks

In a recent report about its supervisory activity, the Consumer Financial Protection Bureau (CFPB) said that it had created a “repeat offender unit” to monitor large banks that frequently violate consumer protection laws. The unit will recommend solutions to hold banks accountable, as well as design a model way to review companies to reduce repeat violations.

It “will focus on ways to enhance the detection of repeat offenses, develop a process for rapid review and response designed to address the root cause of violations, and recommend corrective actions designed to stop recidivist behavior,” said the CFPB in its supervisory highlights report, according to American Banker. “This will include closer scrutiny of corporate compliance with orders to ensure that requirements are being met and any issues are addressed in a timely manner.”

In March 2022, CFPB Director Rohit Chopra told banks and other financial institutions that the Bureau was planning to crack down on repeat offenders. To deter recidivists, the CFPB will potentially ban certain business practices, force the disinvestment of business lines, and work with state agencies to revoke licenses.

Chopra identified many top banks as repeat offenders last year, including: American Express, Citigroup, Discover Financial Services, JPMorgan Chase, and Wells Fargo. Last month, the CFPB ordered Wells Fargo to pay $3.7 billion for “widespread mismanagement” of mortgages, auto loans, and deposit accounts.

The CFPB also plans to investigate whether the largest credit card issuers are involved in unfair practices, as eight companies control 70 percent of the credit card market. Many top banks and credit card companies have stopped reporting data on cardholder payments, so the CFPB has asked six major credit card companies to detail their practices.

A potential CFPB rule could revoke provisions from the Federal Reserve Board in 2010 that allowed credit card issuers to raise late fees due to inflation. “When a business model is heavily dependent on penalty fees, I think that’s where you have to question if that’s distortionary to the competitive process,” said Chopra.