U.S. Bank Cut Off Customer Due to CFPB Pressure, Suit Alleges

By Chris Bruce

July 27 — A “recorded call” shows that U.S. Bank ended an account relationship with an Ohio payments company for fear of reprisal by federal regulators, a court filing said ( Cons. Fin. Protection Bureau v. Nationwide Biweekly Adm'n Inc., N.D. Cal., No. 15-cv-02106, brief filed 7/26/16 ).

The June 26 filing by Nationwide Biweekly Administration, Inc. said U.S. Bank ended its relationship with Nationwide after the Consumer Financial Protection Bureau (CFPB) employed “back-room pressure tactics.”

Nationwide, the defendant in a 2015 CFPB lawsuit alleging unfair, deceptive and abusive practices by the payments company, said the CFPB’s alleged pressure was part of “Operation Choke Point,” a Justice Department initiative aimed at banks that do business with companies viewed as high risks for fraud and money laundering.

Nationwide, based in Xenia, Ohio, transfers funds from consumers to their mortgage servicers. The CFPB sued Nationwide in 2015, saying the company Nationwide misrepresented savings and costs associated with its services.

Nationwide counterclaimed in June 2016, saying the CFPB is unconstitutional and that its actions are unlawful. Among other points, Nationwide, citing Choke Point, also asked Judge Richard Seeborg for an order barring the CFPB “from abusing its regulatory authority over financial institutions to improperly interfere with Counterclaimant’s banking relationships.”

Nationwide said it has become a Choke Point target, saying the government “forces the termination of banking relationships without any legal process and without any judicial review.”

The CFPB responded weeks later, asking the court to dismiss the counterclaim, saying Nationwide failed to state “a plausible claim that the Bureau targeted Nationwide via its banks.”

The latest filing by Nationwide came July 26, saying CFPB pressure is “the only plausible explanation” for a decision by U.S. Bank and others to end their relationships with Nationwide.

Among other points, Nationwide said that in a June 2015 conversation, a Nationwide employee spoke with two U.S. Bank representatives about the termination of Nationwide’s account. The U.S. Bank representatives, according to Nationwide, said the CFPB “has long arms,” “unlimited resources,” and can do “whatever it wants.”

They said, according to the Nationwide filing, that “just between the three of us,” U.S. Bank had bad experiences with the CFPB and the bank runs “the other way.” The representatives, according to Nationwide, also said Nationwide had been a good customer and they “felt sick” about closing the account.

That, according to Nationwide, is enough for the court “to make the reasonable inference that CFPB was involved in Operation Choke Point and CFPB has utilized Operation Choke Point tactics in this case to pressure and coerce the banks to terminate their relationships with Nationwide.” Nationwide asked the court to deny the CFPB's motion to dismiss its counterclaim.

A U.S. Bank spokesman did not immediately respond to a request for comment July 27. A spokesman for the CFPB declined to comment.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

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