Warren calls on banking regulator to reject TD deal after customer abuse report

Sen. Elizabeth Warren, D-Mass., speaks during the Senate Armed Services Committee hearing on security in Afghanistan and the South and Central Asia regions, in the Dirksen Building, Tuesday, October 26 2021.

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Lawmakers led by Senator Elizabeth Warren have asked a key regulator to block The Toronto-Dominion Bank’s acquisition of a regional U.S. bank for $13.4 billion over allegations of customer abuse.

In a letter sent Tuesday to the Office of the Comptroller of the Currency obtained exclusively by CNBC, Warren cited a May 4 report from Capitol Forum, a Washington-based investigative news group, which alleged that TD had used similar tactics. to those of Wells Fargo. Scandal of fake accounts.

TD, a Toronto-based bank with 1,100 branches in the United States, is seeking regulatory approval for the acquisition of Tennessee-based First Horizon. The massive deal, announced in February, is part of TD CEO Bharat Masrani’s push to expand into the southeastern United States. Banks have been on a wave of consolidation in recent years as lenders seek to gain scale, cut costs and invest in fintech to compete with megabanks such as JPMorgan Chase and Bank of America.

“As TD Bank seeks your agency’s approval to increase its market share and become the sixth largest bank in the United States, the OCC should closely examine any ongoing wrongdoing and block any mergers until that TD Bank be held accountable for its abusive practices,” said Warren, D-Mass.

TD used a points system and bonuses to incentivize workers to open customer accounts and opt in for overdraft protection, and workers could lose their jobs if they didn’t meet their goals, Warren said. in a letter to Acting Comptroller of the Currency Michael Hsu.

Workers were tasked with creating four new accounts for each customer — checking, savings, online and a debit card — and opened accounts even if a consumer declined any of the options, according to the Capitol Forum report. .

It was one of several strategies cited by the news agency, including fabricating reasons such as fraud alerts to call consumers in hopes of convincing them to open more accounts, open new accounts rather than simply replacing missing debit cards and misrepresenting key aspects of overdraft. programs to encourage their adoption. Problems existed at branches throughout TD’s U.S. footprint, from Florida to Maine, according to the report.

CNBC could not independently confirm the details of the Capitol Forum report, which cited current and former TD Bank employees and other sources.

“Unsubstantiated” allegations

In a four-paragraph response provided to CNBC by a spokesperson for the bank, TD said the allegations in the Capitol Forum article were “without merit.”

“Our business is built on ethics, integrity and trust,” the bank said. “At TD Bank, we put our customers first and pride ourselves on our culture of delivering legendary customer experiences. Through regular and ongoing monitoring, TD Bank has at no time identified any systemic issues with sales practices.

The bank said it carefully manages compensation practices and “vehemently” opposes accusations of “systemic issues with sales practices, or any other claims alleged in the article.”

“Finally, we strongly disagree with the article’s characterization of the information presented as facts regarding TD Bank’s fraud proceedings,” the bank said. “At TD Bank, protecting the security of our customers’ accounts and personal information is a top priority.”

Swept under the rug?

The Capitol Forum report also alleged that the OCC, under previous leadership, uncovered TD’s misconduct in 2017 as part of an industry sweep after the Wells Fargo scandal came to light the previous year.

The report alleged that former acting comptroller Keith Noreika — a Trump administration appointee whose law firm went on to represent TD in multibillion-dollar deals — chose to privately reprimand TD, rather than impose a fine on the company or publish its findings publicly.

Noreika declined to comment to the Capitol Forum, but his employer, the law firm Simpson Thacher & Bartlett, told the press that Noreika had been recused from all TD-related matters while he headed the regulator.

Acting Comptroller of the Currency Keith Noreika speaks during a Senate Banking Committee hearing in Washington, DC, U.S., Thursday, June 22, 2017.

Andre Harrer | Bloomberg | Getty Images

“The OCC’s decision, under the leadership of Mr. Noreika, to allow rampant fraud and abuse at TD Bank to go unpunished, even after the agency’s troubling findings in its own investigation of the bank, has the potential to undermine the authority of the OCC and put consumers’ finances at risk,” Warren says. She added that the Biden administration has said it will take a closer look at bank mergers.

The OCC did not immediately respond to a request for comment.

In addition to asking that the acquisition of First Horizon be blocked, lawmakers asked the OCC to release the findings of its 2017 investigation into TD and reconsider whether sanctions should be imposed on the company. The letter was signed by Warren and Reps. Katie Porter, D-California, Al Green, D-Texas and Jesus Garcia, D-Ill.

TD said in February it expects the First Horizon acquisition to close by the first quarter of fiscal 2023, subject to U.S. and Canadian regulatory approvals. The deal will be void if not completed by February 27, 2023, according to the bank.

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