Patrick McHenryChairman

Washington, September 19, 2017 -

The House Financial Services Committee released a second interim staff report on its investigation into the Wells Fargo fraudulent account scandal and the Consumer Financial Protection Bureau’s (CFPB) enforcement action on the matter.

An internal CFPB “Recommendation Memorandum” for the Director – improperly withheld from the Committee for over a year – reveals the Bureau failed to fully and adequately investigate Wells Fargo.  Instead, the Bureau rushed to settle with Wells Fargo for less than 1 percent of the Bureau’s own estimate of the bank’s statutory civil monetary penalty.  

Not only does the Recommendation Memorandum fail to justify the CFPB’s settlement, it calls into question the accuracy of CFPB Director Richard Cordray’s testimony before Congress and his claims that the Bureau had conducted an “independent and comprehensive investigation.”

“The CFPB’s handling of this matter and its refusal to fully comply with the Congressional subpoena are a slap in the face to millions of Americans who were harmed by Wells Fargo and further evidence of the CFPB’s unaccountable structure and leadership.  The premature suspension of its investigation means that the CFPB also potentially lost the opportunity to discover recently revealed instances of further consumer harm,” said Chairman Jeb Hensarling (R-TX).

Rep. Ann Wagner (R-MO), Chairman of the Oversight and Investigations Subcommittee, said, “Today’s report confirms what everyone already knew -- the CFPB lacks accountability and oversight.  While everyday Americans suffered at the hands of Wells Fargo, Director Cordray evaded the truth before Congress and the CFPB settled for pennies on the dollar after being caught asleep at the wheel. Additionally, this second Interim Majority Staff Report confirms that the CFPB is willfully obstructing this Committee from conducting our oversight responsibilities.”

Regrettably – as with the first interim staff report, which was released earlier this year – the Committee remains unable to complete its investigation of the Wells Fargo fraudulent account scandal because Director Cordray remains in default of the Committee’s April 2017 subpoena.

Background and Summary:

• As a part of its investigation into the Wells Fargo fraudulent account scandal, the Committee has obtained a crucial new document – the “Recommendation Memorandum” – that was presented to and approved by Richard Cordray.  The Recommendation Memorandum assessed the CFPB’s case against Wells Fargo and sought authorization to enter into settlement negotiations with or to sue the bank.

• The Memorandum shows that the CFPB estimated that the bank was potentially liable for a statutory monetary penalty exceeding $10 billion. This penalty could potentially be increased further, CFPB enforcement attorneys noted, if CFPB determined whether the fraudulent behavior was reckless or knowing, as opposed to negligent, or if the CFPB discovered additional fraudulent behavior not yet reported or violations of other statutes.

• Director Cordray approved a settlement with Wells Fargo bank for $100 million.

• Furthermore, in records discovered by the Committee and made public in the report, Director Cordray, other senior CFPB officials, and CFPB oversight attorneys appear to have deliberately withheld the Recommendation Memorandum and other key records in response to the Committee’s records requests and subpoenas.  Some CFPB officials even appear to have taken affirmative steps to attempt to conceal the Recommendation Memorandum’s existence from the Committee. 

• These internal CFPB records suggest that Director Cordray and his staff appear to have engaged in these activities while simultaneously making public statements that declared an ignorance of what records the Committee sought, and despite Director Cordray’s representations to the Committee that the CFPB had produced “the key documentation of the Bureau’s investigation of Wells Fargo.”

• At a minimum, information revealed in the Recommendation Memorandum does not corroborate Director Cordray’s congressional testimony that the CFPB conducted an “independent and comprehensive investigation” of Wells Fargo and also raises questions as to the accuracy of the Director’s testimony before the Senate Banking Committee on September 20, 2016, before this Committee on April 5, 2017, and in his June 14, 2017, letter to Chairman Hensarling in response to the Committee’s June 2017 Interim Staff Report.

NOTE:  To read the second interim staff report, click here.  To read the supporting documents, click here.