CFPB Solidifies Its Presence With Wells Fargo Fine

The Consumer Financial Protection Bureau’s record $100 million fine against Wells Fargo & Co. last week marks a coming-of-age moment for the five-year-old agency. But the enforcement action probably won’t shield it from future political battles, observers told Morning Consult.

The agency levied its largest-ever fine against Wells Fargo & Co., part of $185 million in total fines and penalties, in a consumer fraud case in which regulators say the bank created more than 2 million sham accounts to pad sales results.

The case is dulling the burnish of a bank regarded as one of the post-crisis good guys, but it is giving the CFPB a new shine. Democrats, in particular, lauded the agency and the finance law that created it, Dodd-Frank, in the wake of the fine.

But the CFPB’s new spotlight likely won’t erode partisan disagreements over the agency’s reach and structure. Republican finance chiefs want to see the agency go away, although that goal becomes less attainable the longer that it exists and enforces the law.

Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, is skeptical that the Wells Fargo fine would endear the agency to Republicans. “I think they’re so dug in,” he said.

Brown, who is slated to chair the committee if the Democrats take control of the Senate next year, is still a CFPB fan. “It’s saved a lot of money for a lot of people and blown the whistle on a lot of problems.”

Some industry leaders echo Brown’s uncertainty that the agency’s star moment will shield it from criticism. But it’s also beside the point. Other, long-term factors, such as the upcoming election, could mean more for the agency’s future, and for banking regulation in general, than the Wells Fargo case, one senior bank lobbyist told Morning Consult.

“While this obviously is a shiny, white-hot issue right now, frankly, the future conversation over regulatory changes will be far more dictated by what happens two months from now in the election than by this event,” one senior bank lobbyist told Morning Consult. “There’s a considerable amount of media attention and all of that, but there is no expectation that any of these things will be passed into law this year anyway. This is all stuff that’s going to happen next year.”

Delay isn’t a bad thing for an agency solidifying its roots. That may be why progressive groups are calling on lawmakers to tout the CFPB in light of the case.

“I think it gives the public another opportunity to see just how important the CFPB’s work is for consumers, and I think it’s going to embolden the CFPB to pursue just as aggressive enforcement measures in the future,” Amit Narang, regulatory policy advocate at the left-leaning advocacy group Public Citizen, told Morning Consult. “What Congress and policymakers should be doing is encouraging them to continue.”

One feather in the CFPB’s cap is that Democrats and Republicans are united on the need for answers from Wells Fargo. The Senate Banking Committee will hold a hearing on the case, and House Financial Services Committee Chairman Jeb Hensarling (R-Texas) called it “an incredibly important matter” and said his panel will “look into” the issue.

The bank’s CEO, John Stumpf, will testify before the Banking Committee. Brown said he hopes to gain more insight at the hearing into how the fraud grew, unchecked, to such a large scale.

“I want to see how a management structure can allow that many employees, 5,000 employees, to start millions of accounts and not have management manage that better, stop it, understand it, predict it, do better than they have,” Brown told Morning Consult. “One of the things that John Stumpf said in some of those interviews is that ‘Everybody is a risk manager here.’ Well, clearly they aren’t. You see some of the problems.”

Hensarling said the case warrants questions, but he stood firm in his opposition to Dodd-Frank, which established the CFPB.

“It is certainly deserving of further inquiry,” Hensarling told reporters Tuesday. “If the facts are substantiated, and they very well may be, Wells Fargo deserves all the punishment they are getting.”

Hensarling made the comments after his committee had just passed a bill that would put the CFPB under the congressional appropriations process and restructure its leadership from a single director to a bipartisan commission. The wide-ranging bill, intended to replace Dodd-Frank, is unlikely to pass Congress this year, but it will set an agenda for next year’s Republican priorities.

Committee Democrats voted against the measure.

The high-profile CFPB fine gives Democrats ammunition to defend the agency against attacks from people such as Hensarling. Morning Consult asked Sen. Bob Menendez (D-N.J.), a member of the Banking Committee, if the Wells Fargo fine will prompt Republicans to take a second look at the CFPB. “I certainly hope so,” he said, adding that the case is the “best example” of the agency’s success.

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