These Are the Fines I Remember: Part II the CFPB and the Red Lines
First, great news, I have a publisher! The nice, beautiful, handsome, smart, courageous, and well dressed people at Business Expert Press will be publishing Stop Harming Customers: A Manifesto for Compliance in early 2023. I have signed the contract, but it can't hurt to keep on their good side while they await my final manuscript.
In the meantime, over here we shall continue down memory lane of July 2022 fines. This a continuation of my previous post:
Book Excerpt: These Are the Fines I Remember (Part I)
I encourage you to read down because all the good--good being a relative term--stuff is in the actual complaints from the CFPB. Everything in italics is a direct copy-and-paste from the regulator.
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Consumer Financial Protection Bureau
July 12, 2022 CFPB Sues ACE Cash Express for Concealing No-Cost Repayment Plans and Improperly Withdrawing Consumers’ Funds. Repeat offender kept borrowers in debt and in the dark, generating at least $240 million in reborrowing fees. This is just a lawsuit, no fines yet.
July 14, 2022 The Bureau issued an order against Bank of America, N.A., which is a national bank headquartered in Charlotte, North Carolina with branches and ATMs located in 38 states and the District of Columbia. Recall the OCC got $125 million. And the CFPB’s penalty? Just $100 million. I’m sure Bank of America was relieved.
July 26, 2022 The Bureau found that over several years Hyundai repeatedly furnished to consumer reporting companies information containing numerous systemic errors and that it knew of many of these inaccuracies for years before attempting to fix them[...] $13,200,000 in redress to affected consumers and a $6,000,000 civil money penalty
July 27, 2022 The Bureau’s and DOJ’s joint complaint alleges that Trident engaged in unlawful discrimination on the basis of race, color, or national origin. This was joint with the DoJ as noted above. The CFPB added on a $4 million fine.
July 28, 2022 The Bureau issued a consent order against U.S. Bank National Association, [...] The Bureau found that U.S. Bank issued credit cards and lines of credit and opened deposit accounts for certain consumers without their knowledge and consent [...] The order also requires U.S. Bank to pay a $37.5 million penalty to the Bureau. You may be confusing this with Consumer Financial Protection Bureau Fines Wells Fargo $100 Million for Widespread Illegal Practice of Secretly Opening Unauthorized Accounts, but that was back in 2016. And that $100 million fine fixed things in the industry, or apparently didn’t.
Let’s look at Trident. When I first skimmed the complaint, I saw it stated, From 2015 through 2019, Trident operated 53 offices, of which 51 were in majority-white neighborhoods. And I thought, a business needs to make money and if giving loans where the rich white people lived worked, that’s not the most ethical, but also not the most unethical either, is it?
The history here is about “redlining”, the practice of not giving mortgages in minority communities that dates back to the 1930s in America. The Federal government sponsored Home Owners’ Loan Corporation (HOLC) published maps literally classifying neighborhoods by color and black areas were labeled red meaning hazardous. If you were black you could not get a government back mortgage, which meant you couldn’t get a mortgage and had to rent. As a knock on, landlords knew this and charged higher rents to minorities as a result.
The Fair Housing Act, Equal Credit Opportunity Act, Fair Lending and a variety of other regulations attempted to prevent this by requiring regular reporting about fair credit access from mortgage lenders and mandating that they work proactively to make loans.
Trident, for their part, has said, in an email I found quoted on the web: Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race. We are committed to continuing to work to find more ways to serve homebuyers in every community we serve. I was unable to find any statement from Warren Buffet.
Then I read some more of the complaint.
53. In several instances, loan officers or other Trident employees referred to properties in majority-minority areas as being in the “ghetto.” For example:
a. A Trident mortgage loan officer emailed a Trident online lead coordinator regarding a consumer seeking prequalification, stating: “This one is in the ghetto. pass [sic] it along to ian. HAHAHAHAHHA kidding.”
b. A Trident mortgage loan officer sent an email discussing a comparable property that was used in an appraisal, stating: “This comps [sic] street is like a ghetto and he knows it and if he doesn’t that’s even worse.”
c. A Trident senior loan officer emailed another loan officer, stating: “talked to [agent].... He said to stay away from sears street, its [sic] upper ghetto blocked off bad area just a heads up.”
54. On another occasion, a Trident assistant loan officer received a racist email
entitled “Being White, reminder” from a Fox & Roach employee. The Trident employee forwarded that email to several others. Among other things, the email stated:
a. “Proud to be White;”
b. “You call me ‘White boy’, ‘Cracker’, ‘Honkey’, ‘Whitey’, ‘Caveman’... And that’s OK... But when I call you Nigger, Kike, Towel head, Sandnigger, Camel Jockey, Beaner, Gook, or Chink... You call me a racist.”
c. “You rob us, carjack us, and shoot at us. But, when a white police officer shoots a black gang member or beats up a black drug dealer running from the law and posing a threat to society, you call him a racist.”
d. “There is nothing improper about this email... But let’s see which of you are proud enough to send it on. I sadly don’t think many will.”
e. “BE PROUD TO BE WHITE!”
55. On another occasion, a Fox & Roach real estate agent forwarded an email to a
Trident loan officer, entitled: “YOU KNOW WHEN YOU’RE IN THE HOOD.” The Trident loan officer forwarded the message to several others. The email contained several racist images and racial slurs, including:
a. A picture of a wheelbarrow filled with watermelons with a sign on the wheelbarrow that said, “Apply for a Credit Card Free Watermelon.”
b. A picture purporting to show a liquor store sign with the message “SORRY— CLOSED A NIGGER ROBBED US... AGAIN.”
56. On another occasion, a Fox & Roach real estate agent forwarded an email to a
Trident loan officer and a Trident assistant loan officer with a subject line, “Quick Hide Kit For Illegals.” The email contained a video entitled, “Wetback-Quick Hide.” The video depicted a man hiding himself in an expandable metal tube.
Holy @#$!. And it’s in the public record, but I’m assuming the details noted above are not so well known, which is why I cut-and-pasted the parts that show the personal viciousness of financial crimes. People in suits and ties, it seems, can be just as terrible as a cartoon villain. But you knew that, you’ve been alive for a period of time longer than a day.
As an aside, email? Really? Are they so dumbass to not know that all electronic communication lives forever? Maybe they were too young on July 25, 2005–July!–to note when:
Wall Street banking giant Morgan Stanley recently suffered an adverse $1.45 billion court judgment, which contributed to a change in leadership at the top. The turning point? The judge's ruling that Morgan Stanley had acted in "bad faith" in failing to turn over relevant e-mails. "The storage folks found an additional 1,600 backup tapes in a closet," explained a Morgan Stanley executive.
But have they not been drunk and woken up the next day and looked at their sent messages? So maybe don’t use email to say terrible things. And don’t use some non-work messaging platform either:
December 2021, JPMorgan Admits to Widespread Recordkeeping Failures and Agrees to Pay $125 Million Penalty to Resolve SEC Charges. Firm also agrees to implement significant improvements to its compliance controls[...]
As described in the SEC’s order, JPMS admitted that from at least January 2018 through November 2020, its employees often communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts.
Compliance controls got a shout out, more on them later.
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Still to come: the SEC, FINRA, CFTC, Treasury, Fed, FINCEN, and a trip around the world in a balloon made of financial crime.