The future of the Consumer Financial Protection Bureau (CFPB), an independent bureau within the Federal Reserve that implements and enforces consumer financial laws, is uncertain as the U.S. Supreme Court agreed last month to hear a constitutional challenge to its funding structure. At the same time, GOP legislative proposals that range from restructuring the agency to dismantling it completely are underway.

An example of how the CFPB carries out its powerful consumer protection functions can be seen in its enforcement action against U.S. Bank last year. U.S. Bank is the most recent bank to be fined millions by the CFPB for activities relating to employees creating customer accounts allegedly without customer permission. On July 28, 2022, the Bank entered into a Stipulation agreeing to the issuance of a Consent Order from the CFPB. The Consent Order fined U.S. Bank $37.5 million after it was discovered that U.S. Bank employees were allegedly accessing customers’ credit reports and other personal data to open unauthorized accounts. In addition to the fine, U.S. Bank is required to make harmed customers whole and undertake other reporting, recordkeeping and compliance activities.

The CFPB’s investigation found evidence that U.S. Bank was aware that employees were opening unauthorized accounts due to sales pressure and the bank had insufficient procedures to prevent and detect every unauthorized accounts. Sales goals, the investigation found, were part of the employees’ job requirements, and sales campaigns and other compensation incentives program rewarded employees.

The CFPB found the harm caused by these activities included:

  • Unwanted accounts
  • Negative impact on credit profiles
  • Loss of control over personally identifiable information
  • Wasted time and energy closing unauthorized accounts
  • Resolving consequences stemming from the accounts, including seeking refunds for improperly charged fees.

According to the Consent Decree, the bank’s activities violated the Fair Credit Reporting Act, 15 U.S.C. § 1681b(f), the Consumer Financial Protection Act, 12 U.S.C. § 5531, 5536 the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and the Truth in Savings Act, 12 U.S.C. § 4301 et seq.

The number of customers allegedly affected and number of allegedly unauthorized accounts were not included in the Consent Decree. U.S. Bank did not issue a press release about the Consent Order. The CFPB’s release and related documents can be found here.

While the CFPB Consent Order is complete, continued exposure may be far from over. There may be further investigations by other agencies into the Bank and individuals with knowledge.  There may be civil liability and even criminal exposure, depending on statute of limitations.

The Supreme Court decision about the constitutionality of the CFPB is not expected until 2024. The appeal to the U.S. Supreme Court stems from a Fifth Circuit Court of Appeals panel that ruled last fall that the CFPB’s funding is unconstitutional because it gets its money from the Federal Reserve, which in turn is funded by bank fees. Although the CFPB provides regular reports to Congress and is consistently audited, the Fifth Circuit held that the CFPB’s funding must be appropriated annually by Congress or the agency.

The attorneys at Kelley, Wolter & Scott, P.A. bring decades of experience in regulatory enforcement actions and white-collar criminal defense of large-scale corporate entities and executives, including the banking industry. Our attorneys have served clients for over four decades in a variety of regulatory and government investigations and related actions, white-collar criminal defense, and complex civil litigation. We are here to help if and when you find yourself in the government’s crosshairs.