This story has been updated with news about a legal brief filed by Democratic state attorneys general, challenging President Trump’s appointment of an acting director to lead the Consumer Financial Protection Bureau.
President Trump on Friday lashed out against Wells Fargo, insisting that fines against the embattled mega bank would not be scrapped and threatening even harsher penalties.
“Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has been incorrectly reported, but will be pursued and, if anything, substantially increased,” Trump said in a tweet. “I will cut Regs but make penalties severe when caught cheating.”
Trump was apparently referring to a Reuters story published Thursday that said the Consumer Financial Protection Bureau, recently taken over by a Trump appointee, was reviewing whether the bank should be forced to pay potentially tens of millions of dollars for mortgage lending abuse. Wells Fargo has acknowledged that it improperly charged some customers fees to secure lower mortgage rates and said it would issue refunds. Wells Fargo declined to comment on the president’s tweet.
The CFPB’s former director, Richard Cordray, agreed to settlement terms with the company before resigning last month, according to Reuters, which cited three anonymous sources. But the “Wells Fargo sanctions are on ice” under Mick Mulvaney, Trump’s pick to lead the agency, Reuters said.
In his tweet Friday morning, Trump sought to dispel the notion that the bank could be off the hook.
“We can’t comment on pending enforcement matters,” John Czwartacki, a senior adviser at the CFPB, said in a statement. “However, as a matter of principle, Acting Director Mulvaney shares the President’s firm commitment to punishing bad actors and protecting American consumers.”
Mulvaney, also the White House budget director, said last week that he was reviewing the agency’s ongoing investigations and lawsuits. “I am looking at each of those on an individual basis,” he said.
Trump’s tweet alarmed some legal experts, who said he should not be weighing in on the work of an independent agency. Mulvaney’s ability to wear two hats — director of the Office of Management and Budget and acting head of the CFPB — has already raised concerns among some consumer advocates and Democrats. At the OMB, Mulvaney is a political appointee, subject to being fired at will by Trump. But at the CFPB, he’s a powerful independent financial regulator who can make nearly unilateral decisions affecting mortgages, credit cards, bank accounts and many other financial products, legal experts have said.
Trump has made rolling back banking regulations that he says have hindered economic growth a key focus of his administration, but he has been criticized for being too cozy with Wall Street executives he once promised to rein in.
“The president should not be commenting on what ‘will’ happen in an ongoing investigation, especially at an independent agency that should not be reporting to him,” said Lauren Saunders, associate director of the National Consumer Law Center. “I appreciate his recognition that severe penalties are warranted when companies are caught cheating, but rules to outlaw unfair practices are also important in industries where abuses are rampant.”
With his tweet, Trump has thrust himself into two of the most contentious issues facing the banking sector this year: whether San Francisco-based Wells Fargo has paid enough for its most recent misdeeds and whether the Trump administration would significantly weaken the CFPB, a watchdog agency set up after the global financial crisis.
Trump’s tweet likely reflects the big bank, which declined to comment, will remain a political punching bag for some time. The bank has been under pressure since acknowledging last year that it had opened millions of fake accounts customers didn’t need or want. Wells Fargo has already paid nearly $200 million in fines and penalties for the incident, but some lawmakers and consumer advocates have said it should be forced to pay more.
“This shows how politically difficult it is to side with a very large bank on a policy issue. The best move politically is always to bash the biggest bank. The President fundamentally understands this,” Jaret Seiberg, financial services analyst at Cowen Research Group, wrote in a note on Friday.
“We see this as a purely political move divorced from the broader issue of whether penalties of the scale the CFPB had been contemplating are warranted.”
Complicating matters is the fact that the leadership of the CFPB was thrown into limbo last month after Cordray resigned and said his chief of staff, Leandra English, would serve as acting director. Trump appointed Mulvaney to the post hours later. Both English and Mulvaney now claim to be acting director of the agency, and a federal judge has scheduled a Dec. 22 hearing on the issue.
On Friday, dueling groups of Democratic and Republican attorneys general from several states and the District of Columbia filed friend-of-the-court briefs in support of and opposition to English’s lawsuit, respectively.
Democrats, led by D.C. Attorney General Karl A. Racine (D) and representing 18 states, including California, Illinois and New York, argued that allowing Trump’s appointment of Mulvaney to stand would undermine the bureau’s independence and violate terms of the Dodd-Frank act establishing the CFBP’s line of succession.
Racine cited the agency’s handling of more than 1 million complaints, return of nearly $12 billion to consumers, and settlements with banks, debt collectors and other financial institutions, and its recent action against allegedly predatory actions by for-profit colleges.
“The CFPB has been a crucial partner in protecting consumers in the District and elsewhere, and we won’t stand by and watch it become just another arm of an administration that has demonstrated far more affinity for corporate interests than everyday consumers,” Racine said. “We believe the law and justice are on our side.”
Separately, eight states, including Texas, West Virginia, Alabama and Arkansas, backed the president’s authority to name the acting director, citing a federal appellate court in claiming the CFPB head possess more unilateral authority than any single commission or board member in any other independent federal agency.
Staff writer Spencer S. Hsu contributed to this report.