WASHINGTON (Reuters) – A senior Democratic senator on Tuesday raised concerns that a federal regulator probing allegations that Fifth Third Bancorp (FITB.O) employees created phony accounts may be conflicted because one of its staffers previously worked at the bank.
On Monday, the U.S. Consumer Financial Protection Bureau (CFPB) charged Fifth Third with creating fake accounts between 2008 to 2016, in a case that echoes San Francisco-based lender Wells Fargo’s own recent scandal.
Fifth Third has said fewer than 1,100 accounts were affected, resulting in less than $30,000 in improper customer charges and that the CFPB’s suit was “unnecessary and unwarranted.”
During a Senate Banking Committee hearing on Tuesday, Democratic lawmaker Sherrod Brown grilled CFPB Director Kathy Kraninger over her decision to appoint Leonard Chanin, who was deputy general counsel at Fifth Third from March 2017-March 2019, according to his LinkedIn account, as her part-time acting deputy.
Chanin is currently deputy to the chair of the Federal Deposit Insurance Corporation (FDIC), Jelena McWilliams, who was previously his colleague at Fifth Third when she was its chief legal officer from January 2017 until May 2018. Chanin is splitting his work week between the FDIC and CFPB.
Chanin could not immediately be reached for comment. A spokeswoman for the FDIC declined to comment. Neither Chanin nor McWilliams has been accused of wrongdoing.
Brown raised concerns about potential conflicts of interest the CFPB may face and quizzed Kraninger on what she knew of Chanin and McWilliams’ own knowledge of the misconduct.
“FDIC Chair Jelena McWilliams would have known about the fake accounts. She was legal officer at Fifth Third for a couple-year period. Leonard Chanin was also her deputy at Fifth Third before he became deputy at FDIC. He would have known about the bureau’s fake-account investigation of Fifth Third,” said Brown, who is the top Democrat on the committee.
“Did you know about his role in the fake account scandal at Fifth Third when you hired him?” he asked Kraninger.
Kraninger said she knew Chanin had worked at Fifth Third, but declined to comment further, citing an ongoing investigation and privacy issues.
From “at least” 2008 to 2016, Fifth Third staff opened accounts without customers’ consent, was aware of the misconduct for years and failed to stop it, the CFPB said in civil charges filed in a U.S. District Court in Illinois on Monday.
The CFPB is one of several agencies under the Trump administration that has been accused of being too cozy with the industry it oversees.
Reporting by Katanga Johnson and Chris Prentice in Washington; editing by Michelle Price and Dan Grebler