On February 2, 2018, the Board of Governors of the Federal Reserve System (the “Board”) announced that it would restrict the growth of a national bank based on its past consumer abuses and compliance failures and its need to remedy deficiencies in its management oversight of sales practices.
The Board issued a cease and desist order pursuant to the Federal Deposit Insurance Act mandating that the Bank improve risk management, oversight, and governance. The Order restricts the Bank from growing any larger than its total asset size as of the end of 2017 until the Bank demonstrates improvement in these areas. This Order is in addition to settlement agreements the Bank entered into in September 2016 with the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC), (covered by Enforcement Watch here), in which the Bank disclosed it had opened millions of potentially unauthorized retail customer accounts. The Board also issued a letter on Friday to the Bank’s Board of Directors, informing them that its oversight role did not meet supervisory expectations, and that the Bank’s compliance breakdowns had caused substantial consumer harm.
Despite the Order, the Bank is allowed to continue operations, including making consumer loans and accepting customer deposits. Concurrent with the Board’s actions, the Bank plans on replacing three current board members by April 2018.