Warren asks bank regulator to reject TD deal after reporting customer abuse

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

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Lawmakers led by Senator Elizabeth Warren have asked a major regulator to block the Toronto Dominion Bank’s $13.4 billion takeover of a US regional bank 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 organization, alleging that TD used tactics similar to those of Wells Fargo. Fake accounts scandal.

TD, a Toronto-based bank with 1,100 branches in the US, is seeking regulatory approval to acquire Tennessee-based First Horizon. The mega deal, announced in February, is part of TD CEO Bharat Masrani’s push to expand into Southeast America. Banks have been swept by a wave of consolidation in recent years as lenders seek to expand, cut costs and invest in financial technology to compete with megabanks such as JPMorgan Chase and Bank of America.

“As TD Bank seeks approval from your agency to increase its market share and become the sixth largest bank in the United States, the OCC must closely examine any ongoing wrongdoing and prevent any merger until TD Bank is held accountable for its abusive practices,” Warren said.

In a letter to Michael Hsu, acting controller of the OCC, Warren said TD used a points and reward system to incentivize workers to open customer accounts and opt for overdraft protection, and workers could lose their jobs if they don’t meet targets.

Workers have been instructed to create four new accounts for each customer — checking, savings, internet and debit card — and open the accounts even if the consumer declines an option, according to the Capitol Forum.

That was one of several strategies the news organization cited, including concocting reasons to contact consumers such as fraud alerts in hopes of persuading them to open more accounts, opening new accounts rather than simply replacing lost debit cards, and faulting key aspects of overdraft programs to encourage adoption. . The report said there have been problems with branches along TD’s US presence, from Florida to Maine.

CNBC was unable to independently confirm details of the Capitol Forum report, which cited current and former TD Bank employees as well as other sources.

‘Unsubstantiated’ allegations

In a four-paragraph response a bank spokesperson provided to CNBC, TD said the allegations in the Capitol Forum article were “unfounded.”

“Our business is built on the foundation of ethics, integrity and trust,” the bank said. “At TD Bank, we put our customers first and take pride in our culture of delivering legendary customer experiences. As part of routine and ongoing monitoring, TD Bank has not identified systematic sales practice issues at any time.”

The bank said it carefully manages its compensation practices and “strongly” objects to accusations of “systematic sales practice issues, or any other claims alleged in the article.”

“Finally, we strongly disagree with the article’s characterization of the information presented as facts related to TD Bank’s fraud procedures,” 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 the previous leadership, had already exposed TD misconduct in 2017 as part of the industry sweep after the Wells Fargo scandal emerged the previous year.

The report alleged that former acting comptroller Keith Norica — a Trump administration appointee whose law firm later represented TD in multi-billion dollar transactions — chose to reprimand TD privately, rather than fine the company or make its findings public.

Norica declined to comment on the Capitol Forum, but her employer, white-shoe law firm Simpson Thacher and Bartlett, told the news agency that Norica had been disqualified from all matters relating to TD while she headed the regulator.

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

Andrew Harrier | Bloomberg | Getty Images

“The decision by the OCC under Mr. Norica to allow the rampant fraud and abuse of TD Bank to go unpunished, even after the agency’s disturbing findings in its investigation of the bank, likely undermines the authority of the OCC and puts consumer financing at risk,” Warren said. She added that the Biden administration has stated that it will closely scrutinize bank mergers.

The Economic Coordination Committee did not immediately respond to a request for comment.

Aside from seeking to block the acquisition of First Horizon, lawmakers have 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 United States Representatives Katie Porter, Al Greene and Jesus Garcia.

TD said in February that it expected the First Horizon acquisition to be completed by the first fiscal quarter of 2023, subject to approval by US and Canadian regulators. The deal will be canceled if it is not closed by February 27, 2023, according to the bank.

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