The news: The Securities and Exchange Commission (SEC) has charged JPMorgan, UBS, and online broker TradeStation with having deficient customer identity programs. Elsewhere, the Consumer Financial Protection Bureau (CFPB) has fined U.S. Bank for opening unauthorized accounts.
Identity verification: The SEC said customer identification programs at JPMorgan, UBS, and TradeStation each violated the Identity Theft Red Flags Rule, or Regulation S-ID from January 2017 to October 2019. Regulation S-ID seeks to protect investors from the risk of identity theft.
All three FIs agreed to cease and desist from future violations, to be censured, and to pay fines of $1.2 million, $925,000, and $425,000 respectively.
Unauthorized accounts: The CFPB issued a $37.5 million consent order against U.S. Bank for allegedly using customers’ credit reports without permission to open unauthorized bank accounts in their names.
The bigger picture: The incidents reflect broader occurrences in the industry, like Wells Fargo’s account opening scandal, and TD Bank’s recent customer abuse allegations. But it’s surprising that these events continue to occur at such big financial institutions.
The big takeaway: The recurring scandals and breaches of customer trust will eventually have long-term effects on banks. Reputation is key to maintaining customer relationships, and customers are paying attention now more than ever to how banks are treating them. With the proliferation of neobanks and the entrance of Big Tech and super apps into the banking space, customers have plenty of choices when deciding who manages their money. And some of these players have the advantage of already having gained customers’ confidence from interactions in other aspects of their lives.