USAA Bank Fined $85 Million by Federal Regulators for 'Violations of Law'

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U.S. money is counted.
(U.S. Marine Corps/Enrique S. Diaz)

USAA Federal Savings Bank must pay the U.S. government an $85 million fine after regulators found failures in the company's compliance risk management and information technology risk programs.

The decision, announced Oct. 14, was made by the Office of the Comptroller of Currency (OCC), a U.S. Treasury bureau tasked by law with overseeing banks.

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USAA Federal Savings Bank is part of USAA, which has about 13 million military and veteran-affiliated members.

"The OCC took this action based on the bank's failure to implement and maintain an effective compliance risk management program and an effective information technology risk governance program," the announcement states. "These deficiencies resulted in violations of law, including but not limited to violations of the Military Lending Act and the Servicemembers Civil Relief Act."

USAA Bank's problems with risk management and compliance processes and technology were first announced in an OCC consent order in early 2019. At that time, USAA Bank agreed to a series of steps and deadlines to address the problems, detailed in a 21-page report. No penalty was levied at that time.

The newly announced fine, USAA Bank officials said in a fact sheet on their website, is related to how the bank addressed those issues.

"USAA Bank has worked closely with the OCC, our primary banking regulator, since the original agreement was announced and will diligently continue to do so until these issues are resolved," the fact sheet states.

USAA Bank "engaged in violations of law, including but not limited to violations of the Military Lending Act and the Servicemembers Civil Relief Act [SCRA]," according to the new OCC consent order and "engaged in unsafe or unsound practices and violations of law, which were part of a pattern of misconduct."

A separate OCC report, conducted in 2019 but released early this month, dropped the bank's Community Reinvestment Act performance evaluation rating from "satisfactory" to "needs to improve."

That report found evidence of 546 violations of the SCRA, including "failure to provide SCRA protections to military reservists, wrongful repossessions of vehicles, and the filing of inaccurate affidavits in default judgment cases." It also found evidence of "54 violations of the Military Lending Act for using remotely created checks to collect past due amounts from members who were covered borrowers."

The SCRA and Military Lending Act (MLA) give military members a variety of financial protections, such as capped interest rates and contract protections.

In its fact sheet USAA Bank detailed some of its SCRA and MLA violations, noting that "these issues do not reflect an effort to avoid providing benefits and/or protections. Noncompliance occurred because USAA's compliance, risk management and technology capabilities, processes and expertise did not keep pace with our growth or regulatory expectations."

For example, it said, incorrect interest rates were given to members who went on active duty for less than 30 days. And one MLA issue related to contract disclosures in three products USAA Bank no longer offers.

"We are resolving these issues and providing remediation to potentially impacted members. We are working diligently to address our challenges by hiring the right expertise and improving systems and processes," according to the bank.

"Strengthening our risk and compliance programs is the top priority at every level of USAA, including senior management and the Board. We will do what it takes to resolve our deficiencies. We are focused on delivering world-class advice and experiences that meet your needs, are easy and simple to use, and are compliant," the fact sheet states.

-- Amy Bushatz can be reached at amy.bushatz@military.com.

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