Published on Aug 10, 2022
JPMorgan Chase Bank (JPM) avoided public sanctions during the Trump administration for allegedly creating fake accounts when the Consumer Financial Protection Bureau (CFPB) opted to quietly close the matter instead, according to sources familiar with the matter, adding yet another major institution to a list of those accused of opening accounts without customer consent.
The CFPB discovered the allegedly fake accounts at Chase, the nation’s largest bank, soon after Wells Fargo in September 2016 admitted that it routinely opened fake accounts in a settlement that became a national scandal. The agency has an open investigation into similar allegations against Bank of America, while last month U.S. Bank settled its fake account case with the regulator when the nation’s fifth-largest lender agreed to pay a $37.5 million fine for past abuses.
The Capitol Forum also has reported how TD Bank (TD) wrongly opened customer accounts and Trump administration regulators declined to penalize the lender.
Wells Fargo’s startling disclosures in 2016 prompted regulators to investigate whether the fraudulent practices were widespread within banking.
A month after the Wells Fargo story broke, the CFPB detected instances of fake accounts at four other banks that were so serious that the bureau’s enforcement unit began building cases that usually culminate in a public fine or lawsuit, according to the sources and agency documents.
Chase was one of the four banks. The other three were Bank of America (BAC), U.S. Bancorp (USB) and Fifth Third Bancorp (FITB). The CFPB’s enforcement unit investigated Chase for several years but closed the matter in early 2020—around the same time the CFPB opted to sue Fifth Third over suspected fake accounts.
The Capitol Forum couldn’t obtain more details about the Chase probe or what the bureau saw that spurred it to open—and then close—an enforcement matter.
A Chase spokesperson declined to comment. The CFPB also declined to comment.
Some of the probes continue. Bank of America has challenged the agency’s request for documents as part of its investigation, Bloomberg Law reported. Bank of America declined to comment.
The CFPB is still pushing its case against Fifth Third Bank. In public statements, the bank has argued that only a few unauthorized accounts have been detected.
Regulators now are considered more aggressive than their predecessors. Oversight of the financial sector eased under Trump, and the fake-accounts case wasn’t the only time Chase dodged a penalty during his term. The Office of the Comptroller of the Currency, the nation’s chief banking regulator, in 2019 decided to issue a quiet reprimand after it found a software glitch led to faulty overdraft charges for roughly 170,000 Chase customers, according to a joint Capitol Forum-ProPublica investigation.
No public penalties. Chase wasn’t the only bank to escape a public comeuppance for opening faulty accounts during the Trump Administration. The OCC found that TD Bank (TD) wrongly pressured customers into opening accounts and using banking services they didn’t want, but the regulator decided to reprimand the company privately.
The CFPB during the Trump administration also didn’t punish TD Auto Finance following a years-long investigation into the TD Bank subsidiary, according to an agency document and sources familiar with the matter.
Disclosure of the past cases by The Capitol Forum has led to calls for regulators to more closely scrutinize banks. In June, Senator Elizabeth Warren (D-MA) and three other lawmakers said that in light of the reporting, the OCC should prevent TD Bank, which has proposed a $13.4 billion buyout of First Horizon (FHN), from further acquisitions until “this pattern of behavior is addressed.”
Complaints of fraud. Chase is one of the leading banks with customers who said they had an “account opened as a result of fraud,” according to a Capitol Forum review of CFPB data.
Between 2016 and last year, Wells Fargo had 563 such complaints while Bank of America had 276; TD Bank, 272; Chase, 246; and Citibank, 117. The Bear Cave newsletter reported a tally of CFPB fraudulent accounts last month.