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Financial Regulators and Dog Piles
Financial Regulators and Dog Piles

JURIST Guest Columnist Julie A. Hill of The University of Alabama School of Law, discusses the Financial Choice Act and duplicative enforcement of financial regulations …

After the L.A. Times revealed that Wells Fargo employees opened millions of unauthorized consumer accounts, the bank faced multiple investigations and fines. The Consumer Financial Protection Bureau (CFPB) fined Wells Fargo a record $100 million. The Office of the Comptroller of the Currency (OCC) assessed a $35 million penalty. Wells Fargo paid $50 million to the City and County of Los Angeles. All of these penalties are on top of the $3.2 million Wells Fargo refunded customers and a $142 million class action settlement. Wells Fargo’s SEC filings indicate that it is still facing investigations from “Federal, state and local government agencies, including the United States Department of Justice, the United States Securities and Exchange Commission and the United States Department of Labor, and state attorneys general and prosecutors’ offices.”

While it may be hard to summon much sympathy for a bank that made more than $21 billion in 2016 and incentivized its employees to open phony accounts, Well Fargo’s experience illustrates the overlapping structure of banking regulation. Because multiple regulators have jurisdiction over the same conduct, banks can face multiple investigations and multiple punishments for the same conduct. Federal regulators like the CFPB, the OCC, the Federal Reserve, the FDIC, and the SEC operate independently from one another. Thus, each regulator can make its own evaluation of the bank’s conduct and assess its own penalty.

The benefit of overlapping regulatory authority is that a bank’s troubling conduct is less likely to escape scrutiny. Even if one regulator is asleep at the switch, other regulators are likely to notice and take corrective action. Indeed, Congress’s passage of Dodd-Frank Act and creation of the CFPB was motivated in part by a belief that consumer protection had fallen through the regulatory cracks.

But overlapping regulatory authority is not without costs. For regulators, duplicative enforcement efforts drain government resources. For banks, parallel investigations are expensive. Banks must devote resources to responding to each regulator’s request for documents and information. When regulators discover wrongdoing, it is not uncommon for each to assess its own monetary penalty. Especially in the wake of a financial crisis, no regulator wants to be seen as lax. When each regulator piles on sanctions without regard for punishments imposed by other regulators, banks might be over punished.

Regulators can lessen the cost of overlapping jurisdiction through cooperation and coordination. Dodd-Frank itself instructs the CFPB to coordinate the supervision and examination of very large financial institutions with other banking regulators. The CFPB, OCC, Federal Reserve, and FDIC have entered a memorandum of understanding covering examinations of very large financial institutions. In essence, the regulators agreed to cooperate when monitoring banks for compliance with consumer protection laws.

Curiously once regulators turn their attention from examination to enforcement, the mandate to coordinate and cooperate becomes less clear. The memorandum of understanding does not “limit or modify in any way the CFPB’s or any Prudential Regulator’s authority to engage in, or bring, supervisory, enforcement, or other actions, under applicable laws or to interpret those laws.”

A recent report by Department of the Treasury recommends that regulators “consider coordinating enforcement actions such that only one regulator leads enforcement related to a single incident or set of facts.” However in an administrative environment where authority and independence often equal funding, regulators sometimes have little incentive to cooperate.

Of course, Congress could require that regulators coordinate and cooperate during enforcement matters. Treasury has recommended “that Congress expand [the Financial Stability Oversight Counsel’s (FSOC)] authority[.]” In particular, Congress could give FSOC “the authority to appoint a lead regulator on any issue on which multiple agencies may have conflicting and overlapping regulatory jurisdiction.”

Congressional Republicans have also identified regulatory coordination of enforcement efforts as a priority for reform. On June 8, 2017, the House of Representatives passed a bill containing a provision requiring regulator cooperation and coordination in enforcement. Section 391 of the Financial Choice Act of 2017 instructs banking regulators to establish “policies and procedures” to “minimize duplication of efforts with other Federal or State authorities when bringing an administrative or judicial action against an individual or entity.” It instructs that when more than one regulator has authority to bring an enforcement action, the regulators should “establish a lead agency to avoid duplication of efforts and unnecessary burdens and to ensure consistent enforcement, as necessary and appropriate and in the public interest.”

Most commentators (see here, here, here, here, and here), however, give the Financial Choice Act little chance of passing the Senate. The lengthy legislation, billed by Republicans as the repeal of Dodd-Frank, contains many provisions that are unlikely to gain support from Senate Democrats. Instead, the legislation may be the opening statement in a renewed debate about optimal financial regulation.

While many debates about financial regulation will be politically charged, some reforms should gather bi-partisan support. Regulatory cooperation and coordination in enforcement actions is one of them. Regulators already coordinate examination and monitoring of banks. Regulators also sometime coordinate enforcement efforts. For example, the CFPB, OCC, and Los Angeles officials were all parties to same consent order covering Wells Fargo’s unauthorized accounts. There is little harm then in Congress clarifying that regulatory coordination and cooperation is expected in all bank enforcement actions.

Julie A. Hill, is a professor at the University of Alabama School of Law. She is a recognized expert on financial institution regulation. Her scholarship has appeared in the Washington University Law Review, Indiana Law Journal, the Wisconsin Law Review, and other respected publications. In 2015, the University of Alabama awarded Professor Hill the President’s Faculty Research Award.

Suggested citation: Julie A. Hill, Financial Regulators and Dog Piles, JURIST – Academic Commentary, Jun. 29, 2017,

This article was prepared for publication by Kelly Cullen, a JURIST Section Editor. Please direct any questions or comments to him at

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