I've Been Mugged Blog

51 Corporations Tell Congress: A Federal Privacy Law Is Needed. 145 Corporations Tell The U.S. Senate: Inaction On Gun Violence Is 'Simply Unacceptable'

Last week, several of the largest corporations petitioned the United States government for federal legislation in two key topics: consumer privacy and gun reform.

First, the Chief Executive Officers (CEOs) at 51 corporations sent a jointly signed letter to leaders in Congress asking for a federal privacy law to supersede laws emerging in several states. ZD Net reported:

"The open-letter was sent on behalf of Business Roundtable, an association made up of the CEOs of America's largest companies... CEOs blamed a patchwork of differing privacy regulations that are currently being passed in multiple US states, and by several US agencies, as one of the reasons why consumer privacy is a mess in the US. This patchwork of privacy regulations is creating problems for their companies, which have to comply with an ever-increasing number of laws across different states and jurisdictions. Instead, the 51 CEOs would like one law that governs all user privacy and data protection across the US, which would simplify product design, compliance, and data management."

The letter was sent to U.S. Senate Majority Leader Mitch McConnell, U.S. Senate Minority Leader Charles E. Schumer, Senator Roger F. Wicker (Chairman of the Committee on Commerce, Science and Transportation), Nancy Pelosi (Speaker of the U.S. House of Representatives), Kevin McCarthy (Minority Leader of the U.S. House of Representatives), Frank Pallone, Jr. (Chairman of the Committee on Energy and Commerce in the U.S. House of Representatives), and other ranking politicians.

The letter stated, in part:

"Consumers should not and cannot be expected to understand rules that may change depending upon the state in which they reside, the state in which they are accessing the internet, and the state in which the company’s operation is providing those resources or services. Now is the time for Congress to act and ensure that consumers are not faced with confusion about their rights and protections based on a patchwork of inconsistent state laws. Further, as the regulatory landscape becomes increasingly fragmented and more complex, U.S. innovation and global competitiveness in the digital economy are threatened. "

That sounds fair and noble enough. After writing this blog for more than 12 years, I have learned that details matters. Who writes the proposed legislation and the details in that legislation matter. It is too early to tell if the proposed legislation is weaker or stronger than what some states have implemented.

Some of the notable companies which signed the joint letter included AT&T, Amazon, Comcast, Dell Technologies, FedEx, IBM, Qualcomm, Salesforce, SAP, Target, and Walmart. Signers from the financial services sector included American Express, Bank of America, Citigroup, JPMorgan Chase, MasterCard, State Farm Insurance, USAA, and Visa. Several notable companies did not sign the letter: Facebook, Google, Microsoft, and Verizon.

Second, The New York Times reported that executives from 145 companies sent a joint letter to members of the U.S. Senate demanding that they take action on gun violence. The letter stated, in part (emphasis added):

"... we are writing to you because we have a responsibility and obligation to stand up for the safety of our employees ,customers, and all Americans in the communities we serve across the country. Doing nothing about America's gun violence crisis is simply unacceptable and it is time to stand with the American public on gun safety. Gun violence in America is not inevitable; it's preventable. There are steps Congress can, and must take to prevent and reduce gun violence. We need our lawmakers to support common sense gun laws... we urge the Senate to stand with the American public and take action on gun safety by passing a bill to require background checks on all gun sales and a strong Red Flag law that would allow courts to issue life-saving extreme risk protection orders..."

Some of the notable companies which signed the letter included Airbnb, Bain Capital, Bloomberg LP, Conde Nast, DICK'S Sporting Goods, Gap Inc., Levi Strauss & Company, Lyft, Pinterest, Publicis Groupe, Reddit, Royal Caribbean Cruises Ltd., Twitter, Uber, and Yelp.

Earlier this year, the U.S. House of Representatives passed legislation to address gun violence. So far, the U.S. Senate has done nothing. Representative Kathy Castor (14th District in Florida), explained the actions the House took in 2019:

"The Bipartisan Background Checks Act that I championed is a commonsense step to address gun violence and establish measures that protect our community and families. America is suffering from a long-term epidemic of gun violence – each year, 120,000 Americans are injured and 35,000 die by firearms. This bill ensures that all gun sales or transfers are subject to a background check, stopping senseless violence by individuals to themselves and others... Additionally, the Democratic House passed H.R. 1112 – the Enhanced Background Checks Act of 2019 – which addresses the Charleston Loophole that currently allows gun dealers to sell a firearm to dangerous individuals if the FBI background check has not been completed within three business days. H.R. 1112 makes the commonsense and important change to extend the review period to 10 business days..."

Findings from a February, 2018 Quinnipiac national poll:

"American voters support stricter gun laws 66 - 31 percent, the highest level of support ever measured by the independent Quinnipiac University National Poll, with 50 - 44 percent support among gun owners and 62 - 35 percent support from white voters with no college degree and 58 - 38 percent support among white men... Support for universal background checks is itself almost universal, 97 - 2 percent, including 97 - 3 percent among gun owners. Support for gun control on other questions is at its highest level since the Quinnipiac University Poll began focusing on this issue in the wake of the Sandy Hook massacre: i) 67 - 29 percent for a nationwide ban on the sale of assault weapons; ii) 83 - 14 percent for a mandatory waiting period for all gun purchases. It is too easy to buy a gun in the U.S. today..."

How Trump’s Political Appointees Overruled Tougher Settlements With Big Banks

[Editor's note: today's guest post, by reporters at ProPublica, discusses enforcement approaches by the United States government with the banking industry. It is reprinted with permission.]

By Jesse Eisinger, ProPublica, and Kevin Wack, American Banker

Since Donald Trump’s election, federal white-collar enforcement has taken a big hit. Fines and settlements against corporations have plummeted. Prosecutions of individuals are falling to record lows.

But just how these fines and settlements came to be slashed is less well understood. Two settlements with giant banks over financial crisis-era misdeeds provide a window into how the Trump administration has eased up on corporate wrongdoers.

In settlements last year with the two big U.K.-based banks, Barclays and Royal Bank of Scotland, political appointees at the Trump administration Justice Department took the unusual step of overruling staff prosecutors to reduce the settlements sought, leaving billions of dollars in potential recoveries on the table, according to four people familiar with the settlements.

In the case of RBS, then-Deputy Attorney General Rod Rosenstein decided that the charges should not be pursued as a criminal case, as the prosecutorial team advocated, but rather as a less serious civil one.

Both cases were developed by the Obama administration DOJ and involved accusations that the banks misled buyers of residential mortgage-backed securities before the 2008 financial crisis. Prosecutors seemingly found numerous examples of bankers knowingly selling lemons to their customers. The mortgages they were putting into securities were “total fucking garbage,” one RBS executive said in a phone call that was recorded and cited in a DOJ filing. A Barclays banker said a group of loans “scares the shit out of me.” Mortgages that went into the two banks’ securities lost a total of $73 billion, according to calculations used by the government.

In March 2018, the DOJ settled with Barclays for $2 billion, a sum dictated by Trump appointees that was far below what the staff prosecutors in the Eastern District of New York in Brooklyn had sought. The settlement with RBS occurred in August 2018, for $4.9 billion. After Rosenstein downgraded the case from criminal to civil, other Trump appointees concluded that the settlement amount should be about half of what staff prosecutors in the District of Massachusetts had sought.

DOJ spokeswoman Sarah Sutton said that the Barclays and RBS settlements held the banks accountable for serious misconduct, and that the penalties recovered from the banks were fair and proportionate compared with those previously obtained from other banks. She did not respond to detailed questions about how the two settlements were reached and why key decisions were dictated from Washington. “They were largely negotiated by career attorneys in the Department and U.S. Attorneys’ offices with the support and collaboration of Department leadership,” Sutton wrote in an email.

Aspects of how the DOJ came to settle the cases have been recounted. The New York Times reported on Rosenstein’s decision in the RBS case. But this is the first extensive account of how the banks secured the favorable outcomes.

The British banks employed an old playbook, one that proved effective with the Trump administration: Hire prominent former high-level DOJ officials who were now at major law firms. These attorneys won access to the top echelons of the Trump DOJ, where they found an audience receptive to their arguments that the staff prosecutors were unfairly singling out their clients for excess punishment.

The two cases stemmed from the Obama administration’s efforts to bring charges against banks for misdeeds that contributed to the financial crisis. Critics assailed the Obama DOJ for what they perceived as tardy and inadequate policing of financial crisis malfeasance. For example, the Obama DOJ did not prosecute any top bankers for actions related to the crisis. But it did belatedly bring civil charges, and it reached large settlements with numerous banks, including JPMorgan Chase, Citigroup and Bank of America. Moreover, the Obama-era DOJ consistently required the banks to acknowledge their bad acts, a practice that has ceased during the Trump administration.

As the Obama administration was winding up in the fall of 2016, the DOJ had not completed all that it aspired to. It rushed to reach settlements with foreign banks that had shown less urgency to resolve the allegations than some of their U.S. counterparts.

Less than a week before Trump’s inauguration, the DOJ announced that Deutsche Bank had agreed to pay a $3.1 billion civil penalty, and that Credit Suisse would pay $2.48 billion. But there were holdouts, including Barclays and RBS.

Prosecutors in Brooklyn wanted Barclays to pay somewhere within a range in the high single digits of billions of dollars, according to two people familiar with the negotiations. Barclays balked, drawing a line at $2 billion, according to a Bloomberg News account.

Barclays hired an all-star team of defense lawyers. The roster included Karen Seymour, a partner at Sullivan & Cromwell who had previously served as chief of the criminal division in the U.S. attorney’s office in Manhattan and has since become general counsel at Goldman Sachs.

Also on Barclays’ legal team was Kannon Shanmugam, a former high-ranking official in the George W. Bush DOJ who was then a partner at Williams & Connolly.

With the two sides far apart in December 2016, the DOJ sued Barclays. Prosecutors also brought civil charges against two former executives at the bank who played key roles in its pre-crisis subprime mortgage operations.

Suing was an unusual step — cases against large corporations normally settle before a complaint is filed — and it was meant to send an implicit message to Barclays. Because the DOJ had been forced to go to court, the British bank could expect the price tag of an eventual settlement to be higher.

Barclays was making the opposite bet: that it would be able to negotiate a more favorable settlement once Trump appointees were in place at DOJ.

In a 192-page complaint, the DOJ alleged that Barclays engaged in fraud on a massive scale, deceiving investors about the characteristics of mortgages used to create securities that sold for tens of billions of dollars.

A Barclays employee commented during a 2006 phone call that one particular pool of mortgages was “about as bad as it can be,” but he did not abandon the loans or modify the bank’s standard disclosures to investors, according to the government’s complaint. In another example, when that same banker said that a particular pool of loans “scares the shit out of me,” because he believed the company that originated the mortgages was likely to go bankrupt soon, Barclays bought the loans anyway. The bank deliberately did not conduct due diligence on the mortgages and then packaged them into bonds, the complaint asserted, all the while falsely telling a rating agency that due diligence had been done on 100% of the loans.

“More than half of the underlying loans defaulted,” the complaint stated, causing huge losses for investors.

Barclays’ legal team argued that the bank should not pay higher penalties in a settlement than other banks had paid relative to their market share. Barclays had been a relatively small player in the residential mortgage-backed securities, or RMBS, market, and its settlement should be sized accordingly, they reasoned.

This was an argument that the DOJ had long rejected. In a 2014 speech, then-Associate Attorney General Tony West argued that a firm’s market share should not outweigh evidence of the extent of its wrongdoing. “The facts and evidence of a particular case — they are what will ultimately matter the most,” he said.

In the Barclays matter, prosecutors in Brooklyn believed they had a strong case. The judge assigned to the case, U.S. District Judge Kiyo Matsumoto, seemed to agree. “This complaint is probably one of the more fulsome complaints I’ve ever seen,” Matsumoto said at an April 2017 hearing.

But the view that ultimately mattered was the one held by a new crop of officials at Main Justice, the DOJ’s headquarters in Washington. Besides Rosenstein, who was not involved in the Barclays case, key players in the RMBS settlements included Trump administration political appointees in the associate attorney general’s office, according to people familiar with the talks.

Steve Cox, the deputy associate attorney general, oversaw the cases, reporting to Jesse Panuccio, the principal deputy associate attorney general. In February 2018, Panuccio became acting associate attorney general, the No. 3 position at the DOJ, after Rachel Brand resigned from the post.

Neither had much experience with federal prosecutions. Panuccio was a former lawyer to Florida Gov. Rick Scott, as well as the chief labor and land use official in Florida, and Cox was a onetime associate at WilmerHale who had spent six years as a corporate counsel at an oil company, Apache Corporation, before joining the DOJ.

Following communications with the Barclays legal team, DOJ officials in Washington conveyed a message to the staff prosecutors in Brooklyn: settle the case within a narrow range around $2 billion, or we will take the negotiations out of your hands. The instruction came via a spreadsheet that listed the dollar range.

For DOJ officials in Washington to dictate specific terms of a settlement was unusual. U.S. attorney offices generally have wide latitude in choosing what they investigate and in making prosecutorial decisions. “Involvement of DOJ in cases handled in the U.S. attorney’s offices is not common” but happens on big cases from time to time, said Harry Sandick, a former federal prosecutor who is now a partner at Patterson Belknap. During Obama-era negotiations, Main Justice had tried to show a united front with prosecutors who’d investigated the RMBS cases, according to former department officials.

At least one prosecutor acknowledged the internal rift between Brooklyn and Washington to the Barclays’ defense team, according to a source familiar with the matter. Once prosecutors in Brooklyn learned Main Justice’s position, this prosecutor communicated to the Barclays side that the bank had prevailed. Recalling how the deal went down, one government official said: “It seemed like a defeat.”

The staff prosecutors weren’t just disappointed about settling for a fraction of what they had sought back in 2016. They had brought civil charges against two former Barclays employees, Paul Menefee and John Carroll, and in exchange for dismissal, the two men agreed to pay a combined $2 million. But the agreement did not include language that precluded Barclays from footing the bill. That meant that Menefee and Carroll, who did not admit wrongdoing, might not have to pay a dime out of their own pockets.

Lawyers for Menefee and Carroll did not respond to requests for comment. In a statement, U.S. Attorney Richard Donoghue said, “The substantial penalty Barclays and its executives had to pay was an important step in recognizing the harm that was caused to the national economy and to investors in RMBS.”

At Main Justice, at least one official also regretted the Barclays deal, but from the opposite perspective. Cox told a prosecutor that he wished the Barclays settlement had been even smaller, but he explained that it wasn’t feasible to go lower because it had been reported that the bank offered to pay $2 billion, according to a person familiar with the conversation.

Cox did not respond to requests for comment.

Panuccio, who stepped down from the DOJ in the spring, declined to answer specific questions, citing the confidentiality of the department’s process. In an email response, he said, “The general narrative the questions seem to suggest is belied by the facts — including the fact that DOJ recovered historically significant sums in its 2018 and 2019 FIRREA settlements, and the fact that DOJ filed a major FIRREA suit against UBS in November 2018.” (FIRREA is the Financial Institutions Reform, Recovery and Enforcement Act of 1989, a law dating from the savings and loan scandals of the late ’80s.)

Barclays declined to comment.

While Barclays had been in active negotiations with the DOJ during the Obama administration, the RBS defense team had not. RBS did not want to enter negotiations until the prosecutors dropped the criminal investigation.

Boston prosecutors declined to do so. Mortgages that went into RBS’ securities suffered about $54 billion in losses, ravaging their customers’ investments. The prosecutors believed they had compiled damning evidence that RBS officials knew what they were doing was wrong. In one example, RBS’ chief credit officer in the United States called the mortgages that were going into the securities “total fucking garbage” with “fraud [that] was so rampant … [and] all random,” according to calls the prosecutors later quoted in the statement of facts against the bank. He stated that “the loans are all disguised to, you know, look okay kind of … in a data file.”

In 2016, the RBS defense team, which included former Deputy Attorney General Jamie Gorelick, of WilmerHale, appealed to Stuart Delery, then the third-highest official at the DOJ. Delery knew Gorelick from their time at the DOJ. Despite that relationship, according to a person knowledgeable about the matter, Delery said he would not interfere with an ongoing investigation at a U.S. attorney’s office. (Delery did not respond to requests for comment. Gorelick directed questions to RBS.)

Then came November. A few months later, the Trump appointees arrived.

For a while, nothing changed. The Boston prosecutors continued their investigation, more convinced than ever that the RBS conduct merited a criminal charge. They wrote what’s known as a “prosecution memo,” which they had begun during the Obama administration, describing the underlying criminal acts under FIRREA.

Such a move would have been groundbreaking. The Obama DOJ had used FIRREA, but for civil charges. And the Boston prosecutors did not want to stop there. They argued for first charging the bank criminally, and then moving on to seek criminal charges against individual bankers. Those would have been the first of their kind.

They never got that far.

In time, Trump political appointees such as Panuccio and Cox began to figure out their way around the department. The RBS defense team, including Gorelick, requested meetings with top officials. Gorelick again had a connection with a key DOJ official. She had worked with Cox, earlier in his career when he was an associate at WilmerHale, defending BP in investigations of the Deepwater Horizon spill.

The defense group now also included Mark Filip of Kirkland & Ellis, representing the British government’s interest in RBS. Filip, who did not respond to requests for comment, has a special stature. During his tenure as deputy attorney general, he had codified the conditions prosecutors had to assess in bringing cases against corporations, which are today known as the “Filip Factors.” Prosecutors are supposed to weigh a variety of issues, such as how serious offenses are and whether the company has cooperated with investigators. As a private sector big hitter, companies hire him, in the view of prosecutors, to explain why his factors are not met in a given case.

The RBS team was able to meet with the No. 2 at the DOJ, Rosenstein. It’s unusual, though not unprecedented, for a defense team to get access to such a high-level official. The RBS team persuaded Rosenstein.

In the spring of 2018, Rosenstein informed Andrew Lelling, the U.S. attorney for the District of Massachusetts, that his office couldn’t pursue criminal charges against RBS. Rosenstein said he didn’t want the DOJ treating RBS differently from other banks, which faced only civil investigations. (The Massachusetts U.S. attorney’s office declined to comment on the details of the RBS settlement. Rosenstein, who left the DOJ in May, did not respond to inquiries.)

RBS spokeswoman Linda Harper confirmed that the Boston U.S. attorney’s office had recommended criminal prosecution and that the bank had met first with Delery and then with Rosenstein.

“The argument we made was for fairness and parity,” she said. The bank’s defense team, she added, argued that “Main Justice should ensure that like cases are treated alike.”

The Boston team was disappointed and angry. It argued that prosecutors charge people when they have the necessary evidence, even if they cannot charge all people who committed the same crime. And it maintained that the decision went against department policy. In May 2017, then-Attorney General Jeff Sessions issued a memo directing prosecutors to charge defendants with the most serious provable crimes carrying the highest penalties.

“It calls into question whether the memo meant what it says when it came to white-collar prosecutions,” a person familiar with the decision said.

Once the case was downgraded, the Boston team turned to deciding on the monetary settlement. Internally, prosecutors had discussed seeking a settlement in the $9 billion to $10 billion range, reflecting their belief that the RBS conduct was especially egregious.

At one point in the spring after the Rosenstein meetings, Main Justice sent Boston a similar spreadsheet that it sent to other U.S. attorney offices concerning their open cases, including those against Barclays, Japanese bank Nomura and Swiss bank UBS. For RBS, the range was between around $4.5 billion to about $6.6 billion.

The Boston prosecutors tried to get the settlement as close to the top of the range as they could. But they were thwarted even in that attempt. Cox told the Boston team that the DOJ would “call the bluff” of RBS and tell the bank it would take $4.9 billion.

Prosecutors thought the DOJ had caved. They complained to Cox that Main Justice had authorized the office to seek as much as $6.6 billion. Cox’s reply: But RBS won’t go that high.

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

Facebook Announced New Financial Services Offering Available in 2020

On Tuesday, Facebook announced its first financial services offering which will be available in 2020:

"... we’re sharing plans for Calibra, a newly formed Facebook subsidiary whose goal is to provide financial services that will let people access and participate in the Libra network. The first product Calibra will introduce is a digital wallet for Libra, a new global currency powered by blockchain technology. The wallet will be available in Messenger, WhatsApp and as a standalone app — and we expect to launch in 2020... Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost. And, in time, we hope to offer additional services for people and businesses, like paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit..."

Long before the announcement, consumers crafted interesting nicknames for the financial service, such as #FaceCoin and #Zuckbucks. Good to see people with a sense of humor.

On a more serious topic, after multiple data breaches and privacy snafus at Facebook (plus repeated promises by CEO Zuckerberg that his company will do better), many people are understandably concerned about data security and privacy. Facebook's announcement also addressed security and privacy:

"... Calibra will have strong protections... We’ll be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behavior... We’ll also take steps to protect your privacy. Aside from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent. This means Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook family of products. The limited cases where this data may be shared reflect our need to keep people safe, comply with the law and provide basic functionality to the people who use Calibra. Calibra will use Facebook data to comply with the law, secure customers’ accounts, mitigate risk and prevent criminal activity."

So, the new Calibra subsidiary promised that it won't share users' account information with Facebook's core social networking service, except when it will -- to "comply with the law." The announcement encourages interested persons to sign up for email updates. This leaves Calibra customers to trust Facebook's wall separating its business units. "Provide basic functionality to the people who use Calibra" sounds like a huge loophole to justify any data sharing.

Tech and financial experts quickly weighed in on the announcement and its promises. TechCrunch explained why Facebook created a new business subsidiary. After Calibra's Tuesday announcement:

"... critics started harping about the dangers of centralizing control of tomorrow’s money in the hands of a company with a poor track record of privacy and security. Facebook anticipated this, though, and created a subsidiary called Calibra to run its crypto dealings and keep all transaction data separate from your social data. Facebook shares control of Libra with 27 other Libra Association founding members, and as many as 100 total when the token launches in the first half of 2020. Each member gets just one vote on the Libra council, so Facebook can’t hijack the token’s governance even though it invented it."

TechCrunch also explained the risks to Calibra customers:

"... that leaves one giant vector for abuse of Libra: the developer platform... Apparently Facebook has already forgotten how allowing anyone to build on the Facebook app platform and its low barriers to “innovation” are exactly what opened the door for Cambridge Analytica to hijack 87 million people’s personal data and use it for political ad targeting. But in this case, it won’t be users’ interests and birthdays that get grabbed. It could be hundreds or thousands of dollars’ worth of Libra currency that’s stolen. A shady developer could build a wallet that just cleans out a user’s account or funnels their coins to the wrong recipient, mines their purchase history for marketing data or uses them to launder money..."

During the coming months, hopefully Calibra will disclose the controls it will implement on the developer platform to prevent abuses, theft, and fraud.

Readers wanting to learn more should read the Libra White Paper, which provides more details about the companies involved:

"The Libra Association is an independent, not-for-profit membership organization headquartered in Geneva, Switzerland. The association’s purpose is to coordinate and provide a framework for governance for the network... Members of the Libra Association will consist of geographically distributed and diverse businesses, nonprofit and multilateral organizations, and academic institutions. The initial group of organizations that will work together on finalizing the association’s charter and become “Founding Members” upon its completion are, by industry:

1. Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
2. Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify AB, Uber Technologies, Inc.
3. Telecommunications: Iliad, Vodafone Group
4. Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
5. Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
6. Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking"

Yes, the ride-hailing company, Uber, is involved. Yes, the same ride-hailing service which which paid $148 million to settle lawsuits and a coverup from a data breach in 2016. Yes, the same ride-hailing service with a history of data security, compliance, cultural, and privacy snafus. This suggests -- for better or worse -- that in the future consumers will be able to pay for Uber rides using the Libra Network.

Calibra hopes to have about 100 members in the Libra Association by the service launch in 2020. Clearly, there will be plenty more news to come. Below are draft screen images of the new app.

Federal Reserve Enforcement Action Against Banking Executives

Last month, the Federal Reserve Board (FRB) announced several notable enforcement actions. A February 5th press release discussed a:

"Consent Notice of Suspension and Prohibition against Fred Daibes, former Chairman of Mariner's Bancorp, Edgewater, New Jersey, for perpetuating a fraudulent loan scheme, according to a federal indictment."

The order against Daibes described the violations:

"... on October 30, 2018, a federal grand jury in the United States District Court for the District of New Jersey charged [Diabes] and an accomplice by indictment with one count conspiracy to misapply bank funds and to make false entries to deceive a financial institution and the FDIC, five counts of misapplying bank funds, six counts of making false entries to decide a financial institution and the FDIC, and one count of causing reliance on a false document to influence the FDIC... During the relevant time period, Mariner’s was subject to federal banking regulations that placed limits on the amount of money that the Bank could lend to a single borrower... the Indictment charges that in about January 2008 to December 2013, Daibes and others orchestrated a nominee loan scheme designed to circumvent the Lending Limits by ensuring that millions of dollars in loans made by the Bank (the “Nominee Loans”) flowed from the nominees to Daibes, while concealing Daibes’ beneficial interests in those loans from both the Bank and the FDIC. Daibes recruited nominees to make materially false and misleading statements and material omissions..."

The FRB and the U.S. Federal Deposit Insurance Corporation (FDIC) are two of several federal agencies which oversee and regulate the banking industry within the United States. The order bars Daibes from working within the banking industry.

Then, a February 7th FRB press release discussed a:

"Consent Prohibition against Alison Keefe, former employee of SunTrust Bank, Atlanta, Georgia, for violating bank overdraft policies for her own benefit."

The order against Keefe described the violations:

"... between September 2017 and May 2018, while employed as the manager of the Bank’s Hilltop Branch in Virginia Beach, Virginia, Keefe repeatedly overdrew her personal checking account at the Bank and instructed Bank staff, without authorization and contrary to Bank policies, to honor the overdrafts... Keefe’s misconduct described above constituted unsafe or unsound banking practices and demonstrated a reckless disregard for the safety and soundness of the Bank..."

Keefe was fired by the bank on July 12, 2018, and has repaid the bank. The order bars Keefe from working within the banking industry.

A February 21st press release discussed the agency's enforcement action against a former manager at J.P. Morgan Chase bank. The FRB:

"... permanently barred from the banking industry Timothy Fletcher, a former managing director at a non-bank subsidiary of J.P. Morgan Chase & Co. Fletcher consented to the prohibition, which includes allegations that he improperly administered a referral hiring program at the firm by offering internships and other employment opportunities to individuals referred by foreign officials, clients, and prospective clients in order to obtain improper business advantages for the firm. The FRB is also requiring Fletcher to cooperate in any pending or prospective enforcement action against other individuals who are or were affiliated with the firm. The firm was previously fined $61.9 million by the Board relating to this program. In addition, the Department of Justice and the Securities and Exchange Commission have also fined the firm."

The $61.9 million fine was levied against J.P. Morgan Chase in November, 2016. Back then, the FRB found that the bank:

"... did not have adequate enterprise-wide controls to ensure that referred candidates were appropriately vetted and hired in accordance with applicable anti-bribery laws and firm policies. The Federal Reserve's order requires J.P. Morgan Chase to enhance the effectiveness of senior management oversight and controls relating to the firm's referral hiring practices and anti-bribery policies. The Federal Reserve is also requiring the firm to cooperate in its investigation of the individuals..."

Last month's order against Fletcher described the violations:

"... from at least 2008 until 2013 [Fletcher] engaged in unsafe and unsound practices, breaches of fiduciary duty, and violations of law related to his involvement in the Firm’s referral hiring program for the Asia-Pacific region investment bank, whereby candidates who were referred, directly or indirectly, by foreign government officials and existing or prospective commercial clients were offered internships, training, and other employment opportunities in order to obtain improper business advantages for the Firm... the Firm’s internal policies prohibited Firm employees from giving anything of value, including the offer of internships or training, to certain individuals, including relatives of public officials and relatives and associates of non-government corporate representatives, in order to obtain improper business advantages for the Firm..."

Kudos to the FRB for its enforcement action. Executives must suffer direct consequences for wrongdoing. After reading this, one wonders why direct consequences are not applied against executives within the social media industry. The behaviors there do just as much damage; and cross borders, too. What are your opinions?

The Federal Reserve Introduced A New Publication For And About Consumers

The Federal Reserve Board (FRB) has introduced a new publication titled, "Consumer & Community Context." According to the FRB announcement, the new publication will feature:

"... original analyses about the financial conditions and experiences of consumers and communities, including traditionally under-served and economically vulnerable households and neighborhoods. The goal of the series is to increase public understanding of the financial conditions and concerns of consumers and communities... The inaugural issue covers the theme of student loans, and includes articles on the effect that rising student loan debt levels may have on home ownership rates among young adults; and the relationship between the amount of student loan debt and individuals' decisions to live in rural or urban areas."

Authors are employees of the FRB or the Federal Reserve System (FRS). As the central bank of the United States, the FRS performs five general functions to "promote the effective operation of the U.S. economy and, more generally, the public interest:" i) conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates; ii) promotes the stability of the financial system and seeks to minimize and contain systemic risks; iii) promotes the safety and soundness of individual financial institutions; iv) fosters payment and settlement system safety and efficiency through services to the banking industry; and v) promotes consumer protection and community development through consumer-focused supervision, examination, and monitoring of the financial system. Learn more about the Federal Reserve.

The first issue of Consumer & Community Context is available, in Adobe PDF format, at the FRB site. Economists, bank executives, consumer advocates, researchers, teachers, and policy makers may be particularly interested. To better understand the publication's content, below is an excerpt.

In their analysis of student loan debt and home ownership among young adults, the researchers found:

"... home ownership rate in the United States fell approximately 4 percentage points in the wake of the financial crisis, from a peak of 69 percent in 2005 to 65 percent in 2014. The decline in home ownership was even more pronounced among young adults. Whereas 45 percent of household heads ages 24 to 32 in 2005 owned their own home, just 36 percent did in 2014 — a marked 9 percentage point drop... We found that a $1,000 increase in student loan debt (accumulated during the prime college-going years and measured in 2014 dollars) causes a 1 to 2 percentage point drop in the home ownership rate for student loan borrowers during their late 20s and early 30s... higher student loan debt early in life leads to a lower credit score later in life, all else equal. We also find that, all else equal, increased student loan debt causes borrowers to be more likely to default on their student loan debt, which has a major adverse effect on their credit scores, thereby impacting their ability to qualify for a mortgage..."

The FRB announcement described the publication schedule as, "periodically." Perhaps, this is due to the partial government shutdown. Hopefully, in the near future the FRB will commit to a more regular publication schedule.

Report: Navient Tops List Of Student Loan Complaints

The Consumer Financial Protection Bureau (CFPB), a federal government agency in the United States, collects complaints about banks and other financial institutions. That includes lenders of student loans.

The CFPB and private-sector firms analyze these complaints, looking for patterns. Forbes magazine reported:

"The team at Make Lemonade analyzed these complaints [submitted during 2018], and found that there were 8,752 related to student loans. About 64% were related to federal student loans and 36% were related to private student loans. Nearly 67% of complaints were related to an issue with a student loan lender or student loan servicer."

"Navient, one of the nation's largest student loan servicers, ranked highest in terms of student loan complaints. In 2018, student loan borrowers submitted 4,032 complaints about Navient to the CFPB, which represents 46% of all student loan complaints. AES/PHEAA and Nelnet, two other major student loan servicers, received approximately 20% and 7%, respectively."

When looking for a student loan, wise consumers shop around, do their research, and shop wisely. Some lenders are better than others. The Forbes article is very helpful as it contains links to additional resources and information for consumers.

Learn more about the CFPB and its complaints database designed to help consumers and regulators:

• Citizens receives 2nd-most CFPB complaints per deposits in U.S. in 2018
• The Top Complaints About Financial Services. One Complaint Type Grew 325 Percent
• The CFPB Consumer Complaints Database Does What It Was Designed To Do
• CFPB Accepts Complaints From Consumers About Checking And Savings Accounts

Federal Regulators Encourage Banks To Work With Borrowers Affected By Partial Government Shutdown

Six financial regulatory agencies issued a joint statement advising banks and financial institutions to be flexible with borrowers during the partial government shutdown in the United States. The January 11, 2019 statement said:

"While the effects of the federal government shutdown on individuals should be temporary, affected borrowers may face a temporary hardship in making payments on debts such as mortgages, student loans, car loans, business loans, or credit cards. As they have in prior shutdowns, the agencies encourage financial institutions to consider prudent efforts to modify terms on existing loans or extend new credit to help affected borrowers."

"Prudent workout arrangements that are consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy. Such efforts should not be subject to examiner criticism. Consumers affected by the government shutdown are encouraged to contact their lenders immediately should they encounter financial strain."

The six agencies which signed the joint statement include the:

• Board of Governors of the Federal Reserve System
• Conference of State Bank Supervisors
• Consumer Financial Protection Bureau
• Federal Deposit Insurance Corporation
• National Credit Union Administration
• Office of the Comptroller of the Currency

Today is day 25 of the shutdown. Yesterday, President Trump rejected calls by Republicans to temporarily reopen several agencies to encourage negotiations with Democrats in the House of Representatives.

Reportedly, OceanFirst Bank has suspended fees for borrowers unable to make monthly payments on mortgage loans, home equity loans, and lines of credit. Provident Bank it would offer a limited number of refunds on late payment fees for mortgages, home equity loans, checking account overdraft fees, and late credit card payment fees.

Has your bank shown flexibility? Or has it refused your requests? Share your experiences and opinions below.

Federal Reserve Released Its Non-cash Payments Fraud Report. Have Chip Cards Helped?

Many consumers prefer to pay for products and services using methods other than cash. How secure are these non-cash payment methods? The Federal Reserve Board (FRB) analyzed the payments landscape within the United States. Its October 2018 report found good and bad news. The good news: non-cash payments fraud is small. The bad news:

• Overall, non-cash payments fraud is growing,
• Card payments fraud drove the growth

Non-Cash Payment Activity And Fraud
Payment Type	2012	2015	Increase (Decrease)
Card payments & ATM withdrawal fraud	$4 billion	$6.5 billion	62.5 percent
Check fraud	$1.1 billion	$710 million	(35) percent
Non-cash payments fraud	$6.1 billion	$8.3 billion	37 percent
Total Non-cash payments	$161.2 trillion	$180.3 trillion	12 percent

The FRB report included:

"... fraud totals and rates for payments processed over general-purpose credit and debit card networks, including non-prepaid and prepaid debit card networks, the automated clearinghouse (ACH) transfer system, and the check clearing system. These payment systems form the core of the noncash payment and settlement systems used to clear and settle everyday payments made by consumers and businesses in the United States. The fraud data were collected as part of Federal Reserve surveys of depository institutions in 2012 and 2015 and payment card networks in 2015 and 2016. The types of fraudulent payments covered in the study are those made by an unauthorized third party."

Data from the card network survey included general-purpose credit and debit (non-prepaid and prepaid) card payments, but did not include ATM withdrawals. The card networks include Visa, MasterCard, Discover and others. Additional findings:

"... the rate of card fraud, by value, was nearly flat from 2015 to 2016, with the rate of in-person card fraud decreasing notably and the rate of remote card fraud increasing significantly..."

The industry defines several categories of card fraud:

1. "Counterfeit card. Fraud is perpetrated using an altered or cloned card;
2. Lost or stolen card. Fraud is undertaken using a legitimate card, but without the cardholder’s consent;
3. Card issued but not received. A newly issued card sent to a cardholder is intercepted and used to commit fraud;
4. Fraudulent application. A new card is issued based on a fake identity or on someone else’s identity;
5. Fraudulent use of account number. Fraud is perpetrated without using a physical card. This type of fraud is typically remote, with the card number being provided through an online web form or a mailed paper form, or given orally over the telephone; and
6. Other. Fraud including fraud from account take-over and any other types of fraud not covered above."

Card Fraud By Category
Fraud Category	2015	2016	Increase/(Decrease)
Fraudulent use of account number	$2.88 billion	$3.46 billion	20 percent
Counterfeit card fraud	$3.05 billion	$2.62 billion	(14) percent
Lost or stolen card fraud	$730 million	$810 million	11 percent
Fraudulent application	$210 million	$360 million	71 percent

The increase in fraudulent application suggests that criminals consider it easy to intercept pre-screened credit and card offers sent via postal mail. It is easy for consumers to opt out of pre-screened credit and card offers. There is also the National Do Not Call Registry. Do both today if you haven't.

The report also covered EMV chip cards, which were introduced to stop counterfeit card fraud. Card networks distributed both chip cards to consumers, and chip-reader terminals to retailers. The banking industry had set an October 1, 2015 deadline to switch to chip cards. The FRB report:

The FRB concluded:

"Card systems brought EMV processing online, and a liability shift, beginning in October 2015, created an incentive for merchants to accept chip cards. By value, the share of non-fraudulent in-person payments made with [chip cards] shifted dramatically between 2015 and 2016, with chip-authenticated payments increasing from 3.2 percent to 26.4 percent. The share of fraudulent in-person payments made with [chip cards] also increased from 4.1 percent in 2015 to 22.8 percent in 2016. As [chip cards] are more secure, this growth in the share of fraudulent in-person chip payments may seem counter-intuitive; however, it reflects the overall increase in use. Note that in 2015, the share of fraudulent in-person payments with [chip cards] (4.1 percent) was greater than the share of non-fraudulent in-person payments with [chip cards] (3.2 percent), a relationship that reversed in 2016."

More Consequences From The Phony-Accounts Scandal At Wells Fargo Bank

Consequences continue after the bank's phony-accounts scandal. Last week, Well Fargo announced several changes in senior management:

"Chief Administrative Officer Hope Hardison and Chief Auditor David Julian have begun leaves of absence from Wells Fargo and will no longer be members of the company’s Operating Committee. These leaves relate to previously disclosed ongoing reviews by regulatory agencies in connection with historical retail banking sales practices. These leaves of absence are unrelated to the company’s reported financial results..."

An investigation in 2017 found a new total of 3.5 million phony consumer and small business accounts set up by employees trying to game an internal sales compensation system. The phony accounts, many of which incurred fees and charges, had been set up without customers' knowledge nor approval. In a settlement agreement in 2016 with the Consumer Financial Protection Bureau (CFPB), Wells Fargo paid a $185 million fine last year for alleged unlawful sales practices with 1.5 million phony accounts known at that time. In 2016, about 5,300 mostly lower-level employees had been fired as a result of the scandal.

The latest announcement listed more executive changes:

"David Galloreese continues as head of Human Resources and will report directly to CEO and President Tim Sloan and join the Operating Committee. Cara Peck, who heads the Culture and Change Management teams, will report directly to Galloreese.

Jim Rowe continues as head of Stakeholder Relations and will report directly to Sloan. Stakeholder Relations will expand to include Corporate Philanthropy and Community Relations, headed by Jon Campbell... Kimberly Bordner, currently executive audit director, will become the company’s acting Chief Auditor..."

The bank is conducting an executive search for a new Chief Auditor.

Executives at the bank have plenty to fix. In April, federal regulators assessed a $1 billion fine against the bank for violations of the Consumer Financial Protection Act (CFPA) in the way it administered mandatory insurance for auto loans. In August, reports surfaced that the bank had accidentally foreclosed on 400 homeowners it shouldn't have due to a software bug.

In June 2017, U.S. Senator Elizabeth Warren (D-Massachusetts) called for the firing of all 12 board members at Wells Fargo bank for failing to adequately protect account holders. Let's hope these latest senior executive changes bring about needed changes.

New Phone-Based Phishing Scams Can Trick Even Experts. How You Can Avoid Getting Duped

Beware, phone scams are more sophisticated. The pitches are so slick that even some technology experts who know better were tricked into disclosing sensitive personal and payment information. Some phone scams include human callers (called "phishing"), while others include a mix of humans and computer automation (called "vishing").

The Krebs On Security blog listed several examples. Here's one:

"Matt Haughey is the creator of the community Weblog MetaFilter... Haughey banks at a small Portland credit union, and last week he got a call on his mobile phone from an 800-number that matched the number his credit union uses. Actually, he got three calls from the same number in rapid succession. He ignored the first two, letting them both go to voicemail. But he picked up on the third call, thinking it must be something urgent and important. After all, his credit union had rarely ever called him.

Haughey said he was greeted by a female voice who explained that the credit union had blocked two phony-looking charges in Ohio made to his debit/ATM card. She proceeded to then read him the last four digits of the card that was currently in his wallet. It checked out. Haughey told the lady that he would need a replacement card immediately... Without missing a beat, the caller said he could keep his card and that the credit union would simply block any future charges that weren’t made in either Oregon or California. This struck Haughey as a bit off. Why would the bank say they were freezing his card but then say they could keep it open for his upcoming trip?"

Maybe that struck you as odd, too. Against his better judgment, Haughey continued the phone call and didn't hang up. The caller knew his home address and asked him to verify his mother's maiden name, the 3-digit security code on the back of his card, and his PIN number. Those requests were more clues, too. The bank should know this information.

Like most people, Haughey thought that it was his bank trying to be helpful. Finally, he hung up and called his bank directly. That's when he learned it was a scam. His bank hadn't called.

This example provides several lessons for consumers:

1. Scam artists are persistent. They will keep calling hoping you'll give in and answer the phone calls.
2. Scam artists are well armed. Thanks to the recent multitude of massive corporate data breaches (like this one, this one, this one, this one, and/or this one), the bad guys have probably acquired plenty of stolen personal and payment information about consumers. Criminals also buy, sell, and trade stolen data on the dark web. Using the same technologies (e.g., artificial intelligence, open-source online tools) which the good guys use, the bad guys will "spoof" or fake valid phone numbers to pretend to be your bank or financial institution.
3. A bit of skepticism is healthy. We've all been taught to be polite and to answer the phone when it rings. Scam artists try to exploit this habit. Experts advise consumers to hang up on robocalls. Even if the Caller ID feature on your phone displays a familiar number, hang up and call your bank or financial institution directly. Their phone number is conveniently listed on the back of your credit/debit card. Ask your bank if they called. They probably didn't.
4. Learn how to spot robocalls acting like humans. If you're curious and have the time, ask a simple question like, "How's the weather where you live?" If the caller ignores your question or provides a canned response, like "I don't have that information" or "I'm sorry. Can you repeat that," then it's probably a robocall. Hang up.
5. Know scam artists' pitch. It's all about money. They will pretend to be your bank, financial institution, phone company, and/or computer company. (Yes, online scammers have a profile.) Similar to phishing emails, phone scams often include a sense of urgency. They want you to act now... in the moment. Wise consumers do product research and comparison shop before making purchase decisions. The "haste makes waste" advice your parents told you as a youth still applies.

You now know more, so you won't get duped by phone scams.

Federal Reserve Board Fined Citigroup For Mishandling Residential Mortgages

The Federal Reserve Board (FRB) announced on Friday that it had fined Citigroup $8.6 million for the "improper execution of residential mortgage-related documents" in a subsidiary. The announcement explained:

"The $8.6 million penalty addresses the deficient execution and notarization of certain mortgage-related affidavits prepared by a subsidiary, CitiFinancial. The improper practices occurred in 2015 and were corrected. CitiFinancial exited the mortgage servicing business in 2017.

Also on Friday, the Board announced the termination of an enforcement action from 2011 against Citigroup and CitiFinancial related to residential mortgage loan servicing. The termination of this action was based on evidence of sustainable improvements."

In 2014, Citigroup paid $7 billion to settle allegations by the Department of Justice (DOJ) and several states attorneys general (AGs) that the bank mislead investors about toxic mortgage-backed securities. So, sloppy or shoddy handling of mortgage paperwork  will get a bank fined. Good. There must be consequences when consumers are abused.

Earlier this month, Wells Fargo admitted to software bugs in its systems which led to the bank accidentally foreclosing on residential homeowners it shouldn't have. 400 homeowners lost their homes. Untold consumers' credit ratings wrecked. That sounds like shabby mortgage paperwork handling, too -- definitely worth a larger fine. What do you think?

Wells Fargo Accidentally Foreclosed on Homeowners. 400 Customers Lost Their Homes

Earlier this week, Wells Fargo Bank admitted that it accidentally foreclosed on nearly 400 homeowners it shouldn't have due to a "software glitch." The San Francisco Business Times reported:

"Nearly 400 Wells Fargo customers lost their homes when they were accidentally foreclosed on after a software glitch denied them the ability to modify their mortgages as they sought federal aid, the bank disclosed in a regulatory filing... The bank apologized and has set aside $8 million to compensate those affected by the glitch, which occurred from 2010 to 2015... the software mistake miscalculated customers' eligibility for mortgage modifications. The error caused about 625 customers to be denied loan modifications they sought from a federal program to help homeowners avoid foreclosures."

The $8 million set aside is one small step towards rebuilding consumers' trust. It seems that the bank and its executives have a nasty habit of alleged wrongdoing that often results in fines and settlement agreements. Earlier this month, the U.S. Department of Justice announced a $2 billion settlement agreement where:

"... Wells Fargo Bank, N.A. and several of its affiliates (Wells Fargo) will pay a civil penalty of $2.09 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet the quality that Wells Fargo represented. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo... The United States alleged that, in 2005, Wells Fargo began an initiative to double its production of subprime and Alt-A loans. As part of that initative, Wells Fargo loosened its requirements for originating stated income loans – loans where a borrower simply states his or her income without providing any supporting income documentation... despite its knowledge that a substantial portion of its stated income loans contained misstated income, Wells Fargo failed to disclose this information, and instead reported to investors false debt-to-income ratios in connection with the loans it sold. Wells Fargo also allegedly heralded its fraud controls while failing to disclose the income discrepancies its controls had identified."

Sadly, there's plenty more. In April, federal regulators at the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) assessed a $1 billion fine against the bank for violations of the, "Consumer Financial Protection Act (CFPA) in the way it administered a mandatory insurance program related to its auto loans..."

Since 2016, the bank paid a $185 million fine for alleged unlawful sales practices where its employees created phony accounts to game an internal sales compensation system. While the bank's CEO was let go and 5,300 workers were fired due to that scandal, bad behavior and poor executive decisions seem to continue.

In August of 2017, the results of an internal investigation of auto insurance policies sold from 2012 to 2016 found that thousands of the bank's customers were forced to buy unneeded and unwanted auto insurance.

The latest incident raises more questions:

• How does a "software glitch" go undetected and unfixed for five years -- or longer?
• Where was the quality assurance and software testing processes?
• The post implementation audits failed to detect errors?
• Were any employees reprimanded, demoted, or fired? And if none, why?
• What specific changes are being implemented to prevent future software glitches?
• How will the damaged credit histories of foreclosed homeowners be repaired?

Often, all or a portion of the settlement agreements are tax deductible. This both lessens the fines' impacts and shifts the burden to taxpayers. I hope that as regulators pursue solutions, tax-deductible settlements are not repeated. What are your opinions?

Keep An Eye On Facebook's Moves To Expand Its Collection Of Financial Data About Its Users

On Monday, the Wall Street Journal reported that the social media giant had approached several major banks to share their detailed financial information about consumers in order, "to boost user engagement." Reportedly, Facebook approached JPMorgan Chase, Wells Fargo, Citigroup, and U.S. Bancorp. And, the detailed financial information sought included debit/credit/prepaid card transactions and checking account balances.

The Reuters news service also reported about the talks. The Reuters story mentioned the above banks, plus PayPal and American Express. Then, in a reply Facebook said that the Wall Street Journal news report was wrong. TechCrunch reported:

"Facebook spokesperson Elisabeth Diana tells TechCrunch it’s not asking for credit card transaction data from banks and it’s not interested in building a dedicated banking feature where you could interact with your accounts. It also says its work with banks isn’t to gather data to power ad targeting, or even personalize content... Facebook already lets Citibank customers in Singapore connect their accounts so they can ping their bank’s Messenger chatbot to check their balance, report fraud or get customer service’s help if they’re locked out of their account... That chatbot integration, which has no humans on the other end to limit privacy risks, was announced last year and launched this March. Facebook works with PayPal in more than 40 countries to let users get receipts via Messenger for their purchases. Expansions of these partnerships to more financial services providers could boost usage of Messenger by increasing its convenience — and make it more of a centralized utility akin to China’s WeChat."

There's plenty in the TechCrunch story. Reportedly, Diana's statement said that banks approached Facebook, and that it already partners:

"... with banks and credit card companies to offer services like customer chat or account management. Account linking enables people to receive real-time updates in Facebook Messenger where people can keep track of their transaction data like account balances, receipts, and shipping updates... The idea is that messaging with a bank can be better than waiting on hold over the phone – and it’s completely opt-in. We’re not using this information beyond enabling these types of experiences – not for advertising or anything else. A critical part of these partnerships is keeping people’s information safe and secure."

What to make of this? First, it really doesn't matter who approached whom. There's plenty of history. Way back in 2012, a German credit reporting agency approached Facebook. So, the financial sector is fully aware of the valuable data collected by Facebook.

Second, users doing business on the platform have already given Facebook permission to collect transaction data. Third, while Facebook's reply was about its users generally, its statement said "no" but sounded more like a "yes." Why? Basically, "account linking" or the convenience of purchase notifications is the hook or way into collecting users' financial transaction data. Existing practices, such as fitness apps  and music sharing, highlight the existing "account linking" used for data collection. Whatever users share on the platform allows Facebook to collect that information.

Fourth, the push to collect more banking data appears at best poorly timed, and at worst -- arrogant. Facebook is still trying to recover and regain users' trust after 87 million persons were affected by the massive data breach involving Cambridge Analytica. In May, the new Commissioner at the U.S. Federal Trade Commission (FTC) suggested stronger enforcement on tech companies, like Google and Facebook. Facebook has stumbled as its screening to identify political ads by politicians has incorrectly flagged news sites. Facebook CEO Mark Zuckerberg didn't help matters with his bumbling comments while failing to explain his company's stumbles to identify and prevent fake news.

Gary Cohn, President Donald Trump's former chief economic adviser, sharply criticized social media companies, including Facebook, for allowing fake news:

"In 2008 Facebook was one of those companies that was a big platform to criticize banks, they were very out front of criticizing banks for not being responsible citizens. I think banks were more responsible citizens in 2008 than some of the social media companies are today."

So, it seems wise to keep an eye on Facebook as it attempts to expand its data collection of consumers' financial information. Fifth, banks and banking executives bear some responsibility, too. A guest post on Forbes explained (highlighted text added):

"Whether this [banking] partnership pans or not, the Facebook plans are a reminder that banks sit on mountains of wealth much more valuable than money. Because of the speed at which tech giants move, banks must now make sure their clients agree on who owns their data, consent to the use of them, and understand with who they are shared. For that, it is now or never... In the financial industry, trust between a client and his provider is of primary importance. You can’t sell a customer’s banking data in the same way you sell his or her internet surfing behavior. Finance executives understand this: they even see the appropriate use of customer data as critical to financial stability. It is now or never to define these principles on the use of customer data... It’s why we believe new binding guidelines such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act are welcome, even if they have room for improvement... A report by the US Treasury published earlier this week called on Congress to enact a federal data security and breach notification law to protect consumer financial data. The principles outlined above can serve as guidance to lawmakers drafting legislation, and bank executives considering how to respond to advances by Facebook and other big techs..."

Consumers should control their data -- especially financial data. If those rules are not put in place, then consumers have truly lost control of the sensitive personal and financial information that describes them. What are your opinions?

Federal Regulators Assess $1 Billion Fine Against Wells Fargo Bank

On Friday, several federal regulators announced the assessment of a $1 billion fine against Wells Fargo Bank for violations of the, "Consumer Financial Protection Act (CFPA) in the way it administered a mandatory insurance program related to its auto loans..."

The Consumer Financial Protection Bureau (CFPB) announced the fine and settlement with Wells Fargo Bank, N.A., and its coordinated action with the Office of the Comptroller of the Currency (OCC). The announcement stated that the CFPB:

"... also found that Wells Fargo violated the CFPA in how it charged certain borrowers for mortgage interest rate-lock extensions. Under the terms of the consent orders, Wells Fargo will remediate harmed consumers and undertake certain activities related to its risk management and compliance management. The CFPB assessed a $1 billion penalty against the bank and credited the $500 million penalty collected by the OCC toward the satisfaction of its fine."

This not the first fine against Wells Fargo. The bank paid a $185 million fine in 2016 to settle charges about for alleged unlawful sales practices during the past five years. To game an internal sales system, employees allegedly created about 1.5 million bogus email accounts, and both issued and activated debit cards associated with the secret accounts. Then, employees also created PIN numbers for the accounts, all without customers' knowledge nor consent. An investigation in 2017 found millions more bogus accounts created than originally found in 2016. Also in 2017, irregularities were reported about how the bank handled mortgages.

The OCC explained that it took action:

"... given the severity of the deficiencies and violations of law, the financial harm to consumers, and the bank’s failure to correct the deficiencies and violations in a timely manner. The OCC found deficiencies in the bank’s enterprise-wide compliance risk management program that constituted reckless, unsafe, or unsound practices and resulted in violations of the unfair practices prong of Section 5 of the Federal Trade Commission (FTC) Act. In addition, the agency found the bank violated the FTC Act and engaged in unsafe and unsound practices relating to improper placement and maintenance of collateral protection insurance policies on auto loan accounts and improper fees associated with interest rate lock extensions. These practices resulted in consumer harm which the OCC has directed the bank to remediate.

The $500 million civil money penalty reflects a number of factors, including the bank’s failure to develop and implement an effective enterprise risk management program to detect and prevent the unsafe or unsound practices, and the scope and duration of the practices..."

MarketWatch explained the bank's unfair and unsound practices:

"When consumers buy a vehicle through a lender, the lender often requires the consumer to also purchase “collateral protection insurance.” That means the vehicle itself is collateral — or essentially, could be repossessed — if the loan is not paid... Sometimes, the fine print of the contracts say that if borrowers do not buy their own insurance (enough to satisfy the terms of the loan), the lender will go out and purchase that insurance on their behalf, and charge them for it... That is a legal practice. But in the case of Wells Fargo, borrowers said they actually did buy that insurance, and Wells Fargo still bought more insurance on their behalf and charged them for it."

So, the bank forced consumers to buy unwanted and unnecessary auto insurance. The lesson for consumers: don't accept the first auto loan offered, and closely read the fine print of contracts from lenders. Wells Fargo said in a news release that it:

"... will adjust its first quarter 2018 preliminary financial results by an additional accrual of $800 million, which is not tax deductible. The accrual reduces reported first quarter 2018 net income by $800 million, or $0.16 cents per diluted common share, to $4.7 billion, or 96 cents per diluted common share. Under the consent orders, Wells Fargo will also be required to submit, for review by its board, plans detailing its ongoing efforts to strengthen its compliance and risk management, and its approach to customer remediation efforts."

Kudos to the OCC and CFPB for taking this action against a bank with a spotty history. Will executives at Wells Fargo learn their lessons from the massive fine? The Washington Post reported that the bank will:

"... benefit from a massive corporate tax cut passed by Congress last year. he bank’s effective tax rate this year will fall from about 33 percent to 22 percent, according to a Goldman Sachs analysis released in December. The change could boost its profits by 18 percent, according to the analysis. Just in the first quarter, Wells Fargo’s effective tax rate fell from about 28 percent to 18 percent, saving it more than $600 million. For the entire year, the tax cut is expected to boost the company’s profits by $3.7 billion..."

So, don't worry about the bank. It's tax savings will easily offset the fine. This makes one doubt the fine was a sufficient deterrent. And, I found the OCC's announcement forceful and appropriate, while the CFPB's announcement seemed to soft-pedal things by saying the absolute minimum.

What do you think? Will the fine curb executive wrongdoing?

Banking Legislation Advances In U.S. Senate

The Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155) was approved Wednesday by the United States Senate. The vote was 67 for, 31 against, and 2 non voting. The voting roll call by name:

Alexander (R-TN), Yea Baldwin (D-WI), Nay Barrasso (R-WY), Yea Bennet (D-CO), Yea Blumenthal (D-CT), Nay Blunt (R-MO), Yea Booker (D-NJ), Nay Boozman (R-AR), Yea Brown (D-OH), Nay Burr (R-NC), Yea Cantwell (D-WA), Nay Capito (R-WV), Yea Cardin (D-MD), Nay Carper (D-DE), Yea Casey (D-PA), Nay Cassidy (R-LA), Yea Cochran (R-MS), Yea Collins (R-ME), Yea Coons (D-DE), Yea Corker (R-TN), Yea Cornyn (R-TX), Yea Cortez Masto (D-NV), Nay Cotton (R-AR), Yea Crapo (R-ID), Yea Cruz (R-TX), Yea Daines (R-MT), Yea Donnelly (D-IN), Yea Duckworth (D-IL), Nay Durbin (D-IL), Nay Enzi (R-WY), Yea Ernst (R-IA), Yea Feinstein (D-CA), Nay Fischer (R-NE), Yea Flake (R-AZ), Yea Gardner (R-CO), Yea Gillibrand (D-NY), Nay Graham (R-SC), Yea Grassley (R-IA), Yea Harris (D-CA), Nay Hassan (D-NH), Yea Hatch (R-UT), Yea Heinrich (D-NM), Not Voting Heitkamp (D-ND), Yea Heller (R-NV), Yea Hirono (D-HI), Nay Hoeven (R-ND), Yea Inhofe (R-OK), Yea Isakson (R-GA), Yea Johnson (R-WI), Yea Jones (D-AL), Yea

Kaine (D-VA), Yea Kennedy (R-LA), Yea King (I-ME), Yea Klobuchar (D-MN), Nay Lankford (R-OK), Yea Leahy (D-VT), Nay Lee (R-UT), Yea Manchin (D-WV), Yea Markey (D-MA), Nay McCain (R-AZ), Not Voting McCaskill (D-MO), Yea McConnell (R-KY), Yea Menendez (D-NJ), Nay Merkley (D-OR), Nay Moran (R-KS), Yea Murkowski (R-AK), Yea Murphy (D-CT), Nay Murray (D-WA), Nay Nelson (D-FL), Yea Paul (R-KY), Yea Perdue (R-GA), Yea Peters (D-MI), Yea Portman (R-OH), Yea Reed (D-RI), Nay Risch (R-ID), Yea Roberts (R-KS), Yea Rounds (R-SD), Yea Rubio (R-FL), Yea Sanders (I-VT), Nay Sasse (R-NE), Yea Schatz (D-HI), Nay Schumer (D-NY), Nay Scott (R-SC), Yea Shaheen (D-NH), Yea Shelby (R-AL), Yea Smith (D-MN), Nay Stabenow (D-MI), Yea Sullivan (R-AK), Yea Tester (D-MT), Yea Thune (R-SD), Yea Tillis (R-NC), Yea Toomey (R-PA), Yea Udall (D-NM), Nay Van Hollen (D-MD), Nay Warner (D-VA), Yea Warren (D-MA), Nay Whitehouse (D-RI), Nay Wicker (R-MS), Yea Wyden (D-OR), Nay Young (R-IN), Yea

The bill now proceeds to the House of Representatives. If it passes the House, then it would be sent to the President for a signature.

Legislation Moving Through Congress To Loosen Regulations On Banks

Legislation is moving through Congress which will loosen regulations on banks. Is this an improvement? Is it risky? Is it a good deal for consumers? Before answering those questions, a summary of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155):

"This bill amends the Truth in Lending Act to allow institutions with less than $10 billion in assets to waive ability-to-repay requirements for certain residential-mortgage loans... The bill amends the Bank Holding Company Act of 1956 to exempt banks with assets valued at less than $10 billion from the "Volcker Rule," which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds... The bill amends the United States Housing Act of 1937 to reduce inspection requirements and environmental-review requirements for certain smaller, rural public-housing agencies.

Provisions relating to enhanced prudential regulation for financial institutions are modified, including those related to stress testing, leverage requirements, and the use of municipal bonds for purposes of meeting liquidity requirements. The bill requires credit reporting agencies to provide credit-freeze alerts and includes consumer-credit provisions related to senior citizens, minors, and veterans."

Well, that definitely sounds like relief for banks. Fewer regulations means it's easier to do business... and make more money. Next questions: is it good for consumers? Is it risky? Keep reading.

The non-partisan Congressional Budget Office (CBO) analyzed the proposed legislation in the Senate, and concluded (bold emphasis added):

"S. 2155 would modify provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank Act) and other laws governing regulation of the financial industry. The bill would change the regulatory framework for small depository institutions with assets under $10 billion (community banks) and for large banks with assets over $50 billion. The bill also would make changes to consumer mortgage and credit-reporting regulations and to the authorities of the agencies that regulate the financial industry. CBO estimates that enacting the bill would increase federal deficits by $671 million over the 2018-2027 period... CBO’s estimate of the bill’s budgetary effect is subject to considerable uncertainty, in part because it depends on the probability in any year that a systemically important financial institution (SIFI) will fail or that there will be a financial crisis. CBO estimates that the probability is small under current law and would be slightly greater under the legislation..."

So, the propose legislation means there is a greater risk of banks either failing or needing government assistance (e.g., bailout funds). Are there risks to consumers? To taxpayers? CNN interviewed U.S. Senator Elizabeth Warren (Dem- Mass.), who said:

"Frankly, I just don't see how any senator can vote to weaken the regulations on Wall Street banks.. [weakened regulations] puts us at greater risk that there will be another taxpayer bailout, that there will be another crash and another taxpayer bailout..."

So, there are risks for consumers/taxpayers. How? Why? Let's count the ways.

First, the proposed legislation increases federal deficits. Somebody has to pay for that: with either higher taxes, less services, more debt, or a combination of all three. That doesn't sound good. Does it sound good to you?

Second, looser regulations mean some banks may lend money to more people they shouldn't have = persons who default on loan. To compensate, those banks would raise prices (e.g., more fees, higher fees, higher interest rates) to borrowers to cover their losses. If those banks can't cover their losses, then they will fail. If enough banks fail at about the same time, then bingo... another financial crisis.

If key banks fail, then the government will bail out (again) banks to keep the financial system running. (Remember too big to fail banks?) Somebody has to pay for bailouts... with either higher taxes, less services, more debt, or a combination of all three. Does that sound good to you? It doesn't sound good to me. If it doesn't sound good, I encourage you to contact your elected officials.

It's critical to remember banking history in the United States. Nobody wants a repeat of the 2008 melt-down. There are always consequences when government... Congress decides to help bankers by loosening regulations. What do you think?

Citigroup Promises To Close Pay Gaps For Female And Minority Workers

USA Today reported that Citigroup:

"... will boost job compensation for women and minorities in a bid to close pay gaps in the U.S., United Kingdom, and Germany, becoming the first U.S. bank to respond to shareholder pressure about the inequalities. The New York-based financial company announced the effort Monday, saying it came after a Citigroup compensation assessment in the three countries found that women on average were paid 99% of what men got and minorities on average received 99% of what non-minorities were paid... Citigroup's action prompted investment advisory company Arjuna Capital to withdraw the 2018 gender pay shareholder proposal it had filed in an effort to force an investor vote that would require the bank to address pay inequality."

So, the bank made changes only after a major investor forced it to. The news report cited other banks (text links added):

"No other U.S. bank has taken similar action, Arjuna said. Along with Citigroup, Arjuna said it had filed gender pay shareholder proposals this year with U.S. banks JPMorgan Chase, Wells Fargo, Bank of America and Bank of New York Mellon. The investment adviser said it had filed similar proposals with American Express, Mastercard, Reinsurance Group, and Progressive Insurance. If approved by shareholders, the proposals would require the companies to publish their policies and goals to reduce gender pay gaps."

JP Morgan Chase promised in 2016 to raise the pay of 18,000 tellers and branch workers. It seems that the banking industry, kicking and screaming, has been forced to confront its pay-gap issues for employees. What do you think?

Report: Several Impacts From Technology Changes Within The Financial Services Industry

For better or worse, the type of smart device you use can identify you in ways you may not expect. First, a report by London-based Privacy International highlighted the changes within the financial services industry:

"Financial services are changing, with technology being a key driver. It is affecting the nature of financial services from credit and lending through to insurance and even the future of money itself. The field known as “fintech” is where the attention and investment is flowing. Within it, new sources of data are being used by existing institutions and new entrants. They are using new forms of data analysis. These changes are significant to this sector and the lives of the people it serves. We are seeing dramatic changes in the ways that financial products make decisions. The nature of the decision-making is changing, transforming the products in the market and impacting on end results and bottom lines. However, this also means that treatment of individuals will change. This changing terrain of finance has implications for human rights, privacy and identity... Data that people would consider as having nothing to do with the financial sphere, such as their text-messages, is being used at an increasing rate by the financial sector...  Yet protections are weak or absent... It is essential that these innovations are subject to scrutiny... Fintech covers a broad array of sectors and technologies. A non-exhaustive list includes:

• Alternative credit scoring (new data sources for credit scoring)
• Payments (new ways of paying for goods and services that often have implications for the data generated)
• Insurtech (the use of technology in the insurance sector)
• Regtech (the use of technology to meet regulatory requirements)."

"Similarly, a breadth of technologies are used in the sector, including: Artificial Intelligence; Blockchain; the Internet of Things; Telematics and connected cars..."

While the study focused upon India and Kenya, it has implications for consumers worldwide. More observations and concerns:

"Social media is another source of data for companies in the fintech space. However, decisions are made not on just on the content of posts, but rather social media is being used in other ways: to authenticate customers via facial recognition, for instance... blockchain, or distributed ledger technology, is still best known for cryptocurrencies like BitCoin. However, the technology is being used more broadly, such as the World Bank-backed initiative in Kenya for blockchain-backed bonds¹⁰. Yet it is also used in other fields, like the push in digital identities¹¹. A controversial example of this was a very small-scale scheme in the UK to pay benefits using blockchain technology, via an app developed by the fintech GovCoin¹² (since renamed DISC). The trial raised concerns, with the BBC reporting a former member of the Government Digital Service describing this as "a potentially efficient way for Department of Work and Pensions to restrict, audit and control exactly what each benefits payment is actually spent on, without the government being perceived as a big brother¹³..."

Many consumers know that you can buy a wide variety of internet-connected devices for your home. That includes both devices you'd expect (e.g., televisions, printers, smart speakers and assistants, security systems, door locks and cameras, utility meters, hot water heaters, thermostats, refrigerators, robotic vacuum cleaners, lawn mowers) and devices you might not expect (e.g., sex toys, smart watches for children, mouse traps, wine bottles, crock pots, toy dolls, and trash/recycle bins). Add your car or truck to the list:

"With an increasing number of sensors being built into cars, they are increasingly “connected” and communicating with actors including manufacturers, insurers and other vehicles¹⁵. Insurers are making use of this data to make decisions about the pricing of insurance, looking for features like sharp acceleration and braking and time of day¹⁶. This raises privacy concerns: movements can be tracked, and much about the driver’s life derived from their car use patterns..."

And, there are hidden prices for the convenience of making payments with your favorite smart device:

"The payments sector is a key area of growth in the fintech sector: in 2016, this sector received 40% of the total investment in fintech²². Transactions paid by most electronic means can be tracked, even those in physical shops. In the US, Google has access to 70% of credit and debit card transactions—through Google’s "third-party partnerships", the details of which have not been confirmed²³. The growth of alternatives to cash can be seen all over the world... There is a concerted effort against cash from elements of the development community... A disturbing aspect of the cashless debate is the emphasis on the immorality of cash—and, by extension, the immorality of anonymity. A UK Treasury minister, in 2012, said that paying tradesman by cash was "morally wrong"²⁶, as it facilitated tax avoidance... MasterCard states: "Contrary to transactions made with a MasterCard product, the anonymity of digital currency transactions enables any party to facilitate the purchase of illegal goods or services; to launder money or finance terrorism; and to pursue other activity that introduces consumer and social harm without detection by regulatory or police authority."²⁷"

The report cited a loss of control by consumers over their personal information. Going forward, the report included general and actor-specific recommendations. General recommendations:

• "Protecting the human right to privacy should be an essential element of fintech.
• Current national and international privacy regulations should be applicable to fintech.
• Customers should be at the centre of fintech, not their product.
• Fintech is not a single technology or business model. Any attempt to implement or regulate fintech should take these differences into account, and be based on the type activities they perform, rather than the type of institutions involved."

Want to learn more? Follow Privacy International on Facebook, on Twitter, or read about 10 ways of "Invisible Manipulation" of consumers.

Wells Fargo: 1.4 Million More Fake Accounts Found By Latest Investigation

Just before the long holiday weekend, Wells Fargo Bank announced in an August 31 news release the latest results of a third-party investigation into its retail bank account practices since 2009:

"The original account analysis reviewed 93.5 million current and former customer accounts opened in an approximately four and half year time period – from May 2011 through mid-2015 – and identified approximately 2.1 million potentially unauthorized accounts. The expanded analysis reviewed more than 165 million retail banking accounts opened over a nearly eight-year period – from January 2009 through September 2016 – and identified a new total of approximately 3.5 million potentially unauthorized consumer and small business accounts... In connection with these 3.5 million potentially unauthorized accounts, approximately 190,000 accounts incurred fees and charges, up from 130,000 previously identified accounts that incurred fees and charges, and Wells Fargo will provide a total of $2.8 million in additional refunds and credits on top of the $3.3 million previously refunded as a result of the original account review... a review of online bill pay services, as required by the Sept. 8, 2016, consent orders... the analysis identified approximately 528,000 potentially unauthorized online bill pay enrollments and Wells Fargo will refund $910,000 to customers who incurred fees or charges. "

To summarize: the latest investigation went two years further back in time, found about 1.4 million more phony accounts, found more customers affected by unauthorized bank accounts, and found possibly more phony online bill-pay enrollments. In a settlement agreement last year with the Consumer Financial Protection Bureau (CFPB), Wells Fargo paid a $185 million fine last year for alleged unlawful sales practices with the number of phony accounts known then.

Of course, the bank tried a different spin in its news release about the investigation's findings:

"... the completion of its previously announced expanded third-party review of retail banking accounts dating back to the beginning of 2009. Combined with a recent class action settlement and ongoing broad customer outreach and complaint resolution, the completion of the analysis further paves the way for making things right for Wells Fargo customers who may have been harmed by unacceptable retail sales practices."

Yeah, right. That sounds like some wayward teenager wanting praise for providing a complete list of damage to the family car which they didn't have permission nor a license to drive in the first place.

Much of Wall Street has seen through the spin. Some financial experts advise investors to sell Well Fargo shares and buy other banks' shares instead. One of the world's largest fund managers withheld support for three of the bank's directors. Some news headlines focused on the growing estimate of phony accounts uncovered. MSN Money listed reasons why the bank may not survive the growing scandal.

There is plenty of bad news. The Los Angels Times reported a lawsuit by former bank executives who claimed they were scapegoated and fired earlier this year after reporting unethical sales practices. News reports broke earlier this month about alleged insurance abuses of the bank's auto-loan customers.

Well, we now know more about the bank's retail banking practices. The latest announcement makes one wonder, a) how much damage one bank can do, and b) how many more phony accounts would have been uncovered if the investigation started before 2009. What are your opinions?

Wells Fargo Forced Customers To Buy Unwanted And Unnecessary Auto Insurance

Just when it seems that executives at Wells Fargo Bank have seen the light and turned the ethics corner, along comes a news report about another fraudulent program at the bank. The New York Times reported:

"More than 800,000 people who took out car loans from Wells Fargo were charged for auto insurance they did not need, and some of them are still paying for it, according to an internal report prepared for the bank’s executives.

The expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions, according to the 60-page report, which was obtained by The New York Times. Among the Wells Fargo customers hurt by the practice were military service members on active duty."

The internal report, by the consulting firm Oliver Wyman, investigated auto insurance policies sold from January 2012 through July 2016. While this was happening, the bank has been recovering from a scandal where employees opened millions of phony accounts in order to game an incentive system.

Wells Fargo released a statement about how it will help affected with unwanted and unnecessary insurance, and fix its Collateral Protection Insurance (CPI) policies:

"Wells Fargo reviewed policies placed between 2012 and 2017 and identified approximately 570,000 customers who may have been impacted and will receive refunds and other payments as compensation. In total, approximately $64 million of cash remediation will be sent to customers in the coming months, along with $16 million of account adjustments, for a total of approximately $80 million in remediation... in July 2016 Wells Fargo initiated a review of the CPI program and related third-party vendor practices. Based on the initial findings, the company discontinued its CPI program in September 2016... Wells Fargo’s review determined that certain external vendor processes and internal controls were inadequate. As a result, customers may have been charged premiums for CPI even if they were paying for their own vehicle insurance, as required, and in some cases the CPI premiums may have contributed to a default that led to their vehicle’s repossession... Wells Fargo already has been providing CPI-related refunds to some customers and, beginning in August, will send letters and refund checks to customers who are due additional payments. The process is expected to be complete by the end of the year and is as follows:

i) Approximately 490,000 customers had CPI placed for some or all of the time they had adequate vehicle insurance coverage of their own... These customers will receive additional refunds of certain fees and some additional interest. Refunds for this group total approximately $25 million;

ii) In five states that have specific notification and disclosure requirements, approximately 60,000 customers did not receive complete disclosures from our vendor as required prior to CPI placement. In these cases, even if CPI was required, customers will receive a refund including premiums, fees and interest. Refunds for this group total approximately $39 million:

iii) For approximately 20,000 customers, the additional costs of the CPI could have contributed to a default that resulted in the repossession of their vehicle. Those customers will receive additional payments as compensation for the loss of their vehicle. The payment amount will depend on each customer’s situation..."

Do the math. 490,000 customers were overcharged about $25 million, or about $51 per person. 60,000 customers were overcharged $39 million or about $1,950 per person. 34 percent of borrowers (274,000 divided by 800,000) were reportedly pushed into delinquency. Substantial amounts.

Besides reimbursements, the bank said it will work with credit reporting agencies to correct affected borrowers’ credit records. That seems to be the minimum solution. Not only did the bank overcharge some customers, but it also had inadequate controls for both internal processes and external vendors. Which managers were reprimanded, or fired, for those lapses? The bank's statement didn't say. Where were the bank's auditors throughout this mess?

National General Insurance (NGI) underwrote the auto insurance policies for Wells Fargo. A lawsuit by customers named both Wells Fargo and NGI as defendants. And, at least one other law firm is investigating a possible class-action suit.

How does unwanted and unnecessary insurance help customers? Not in any way I can see. Well, it probably helped the bank's profitability for a while.

Reportedly, military service members and their families were among the affected borrowers. And, this latest program isn't the first abuse by the bank of military members and their families. Last fall, the U.S. Justice Department (DOJ) sanctioned the bank for improperly repossessing cars owned by members of the military. The DOJ alleged 413 violations of the Servicemembers Civil Relief Act, and the bank agreed to pay more than $4 million to compensate borrowers affected by seven years of unlawful repossessions.

In June, one U.S. Senator called for the firing of all 12 board members for failing to protect account holders. It seems that unethical executive behavior at the bank will stop only when guilty executives serve jail time; not fines the bank can easily afford.

The whole sordid affair makes one wonder what other programs at the bank remain hidden. What are your opinions? If you received a refund letter and check, please share what you safely can about it below.