The Consumer Financial Protection Bureau is getting blowback from a federal judge and banking experts for tactics used in its lawsuit accusing Fifth Third Bancorp of opening phony consumer accounts.
The CFPB sued the $211 billion-asset Cincinnati bank in 2020, alleging employees opened checking, savings and credit card accounts without customers’ consent. Fifth Third customers began complaining soon after the CFPB sent them an email this March with the subject line: “Your Feedback Requested for Fifth Third Bank Lawsuit.”
Fifth Third sought an emergency intervention in federal court, saying the bureau’s actions had interfered with its customer relationships. Judge Douglas Cole of the U.S. District Court for the Southern District of Ohio put a halt in April to the mass email — first reported by Crain’s Chicago Business — that went to 18,500 customers and former employees of Fifth Third.
The clash, detailed in court filings, shows the lengths the CFPB is willing to go to litigate claims, Fifth Third and outside legal experts say. It raises concerns for other financial companies that are the targets of bureau investigations, they say.
The CFPB declined to comment on ongoing litigation.
The email asked customers and former employees of the bank to respond via a link to a four-question survey. The survey asked whether Fifth Third had ever opened an account without a customer’s consent, if customers had ever filed a complaint against the bank and why.
Some customers expressed confusion, prompting the judge overseeing the case to order the CFPB to end the survey and disable a link to it.
“I think it was a poor choice to reach out in a manner that looks to the Court to be designed to create a wedge between Fifth Third and its customers,” Cole said at a hearing conducted by teleconference in late March. “To just kind of receive an email survey like this that frankly has a lot of the hallmarks of spam, or phishing expeditions, or other things, so I’m a little surprised that CFPB would think it was a good idea.”
The CFPB has alleged that Fifth Third understated the number of fake accounts and refused to cooperate with the bureau by providing the names and contact information of former employees.
The CFPB also asked customers in the survey to choose from two statements that closely matched their belief: “I believe Fifth Third always took my best interests into account as their customer in the opening of accounts or services,” or “There were times when Fifth Third did not take my best interests into account as their customer in the opening of accounts and services.”
Though the CFPB has used email campaigns in past investigations, regulatory experts said the practice is uncommon among federal financial regulators and raises concerns.
“I’m not aware of federal banking agencies having used a regular practice of sending out unsolicited mass mailings (via email or the post office) to thousands of bank customers,” said Art Wilmarth, Jr., a professor emeritus at George Washington University Law School.
Julie Hill, a law professor at the University of Alabama School of Law, said the CFPB’s email campaign was particularly surprising because Judge Cole had already agreed to allow the bureau to conduct a sampling of 3,875 accounts.
“It’s pretty aggressive,” Hill said. “It seems rather unprecedented and also unusual [for the CFPB] to say right upfront that we’re collecting this information because we have alleged that [the bank] has done something wrong, and by the way, it would be great if you could tell us about it.”
The bank claimed the CFPB sent the mass email over the bank’s previous objections.
“Everything from the way the questions were framed to the way it was set up, it’s incredibly prejudicial,” Ryan Scarborough, a partner at Williams & Connolly defending Fifth Third, said at the hearing.
Scarborough has argued publicly that companies in the consumer bureau’s crosshairs are often too eager to reach settlements and could do better by litigating cases.
Experts said the mass email opens the CFPB to allegations that it has tainted the process.
“There is a right and a wrong way to do it,” said Lucy Morris, chair of government investigations and enforcement at the law firm Hudson Cook. “You don’t want to send out an email that suggests the company is engaged in wrongdoing.”
“The bureau doesn’t want to be accused of bias,” said Morris, a former CFPB deputy enforcement director. “There are all types of fallout from an email that went to tons of customers suggesting that something is wrong.”
In one court exchange, the judge asked CFPB Attorney Jacob Schunk how many emails the bureau had sent to Fifth Third’s customers. Schunk said he could not provide the information without getting clearance from his higher-ups.
“We’re entitled to do this because we’re the Consumer Financial Protection Bureau litigating a case against an entity, and we are able to talk to consumers as part of that effort,” Schunk told the judge. “We had asked in prelitigation discussions if Fifth Third would be willing to join the bureau and reach out to hundreds of thousands of consumers in a joint effort to find the facts. They said no. But that doesn’t mean that the bureau can’t do its job in preparing for litigation without Fifth Third’s help.”
In an exchange with another CFPB lawyer, the judge said: “I’m a little bit surprised to hear Mr. Schunk’s apparent view that, I think he said, we’re the CFPB so, essentially, we can do whatever we want.”
“The CFPB has always been different from other banking regulators because so much of its staff are enforcement attorneys, so we are seeing more investigations during the lawsuit process,” said Hill.
Regulators have spent countless hours examining high-pressure sales practices and unauthorized account openings at dozens of banks including Bank of America, JPMorgan Chase and Citigroup.
The effort began in 2016, after Wells Fargo paid $190 million to settle allegations that employees opened nearly 2 million unauthorized accounts to meet high-pressure sales goals. That settlement with the CFPB, the Office of the Comptroller of the Currency and the City of Los Angeles led to the resignation of two Wells CEOs, dozens of senior managers and staff as well as years of regulatory problems after Wells fired 5,300 employees for opening fake accounts.
Fifth Third says that the CFPB has not informed the bank of a single unauthorized account or an alleged incident of customer harm beyond the roughly 1,900 that the bank claims it has identified and voluntarily resolved.
“The CFPB’s tactic of surveying current and past customers further solidifies their lack of proof of the allegations,” said Joe Alter, a Fifth Third spokesman. “A number of courts have already dismissed civil claims regarding these allegations, and we will continue to defend ourselves vigorously against these unsubstantiated contentions.”
More than a decade ago, one unnamed whistleblower alleged Fifth Third was “becoming a ‘predatory’ financial institution.” The former employee said he came across at least one or two customers a week that had been “taken advantage of,” American Banker reported last year.
Fifth Third initially self-reported in 2015 that employees had opened unauthorized credit card accounts. Fifth Third said that it had fired or let go 96 employees for opening 1,100 unauthorized accounts from 2010 to 2016. The bank has said that the majority of phony accounts occurred in Chicago in 2010 — one year before Congress transferred enforcement authority to the CFPB. Fifth Third alleges the vast majority of bad conduct in the opening of fake accounts happened before the CFPB opened its doors in July 2011.
During the litigation, now in its third year, the CFPB flagged an additional 6,300 unauthorized accounts. Fifth Third hired an outside consultant who determined that 800 were potentially unauthorized. Fifth Third said it provided $2,600 in restitution to the 800 additional customers.
In all, the bank has said it repaid $30,000 in improper fees to nearly 2,000 customers.
Scarborough said the CFPB has been slow to conduct the sampling overseen by the judge and appears to be delaying the litigation.
“All we want to do is litigate this case on the merits, and we have not been able to do that yet because of the actions that the bureau has taken,” Scarborough said.