USAA Banking Faces Cease-and-Desist Order Over Regulatory Failures

The Office of the Comptroller of the Currency (OCC) has issued a cease-and-desist order against USAA Federal Savings Bank, compelling the institution to rectify numerous systemic failures that have persisted for several years.

The bank has been ordered to address weaknesses in areas ranging from risk management and consumer compliance to internal audits and fraud prevention.

The OCC’s action comes after the regulator identified persistent deficiencies in USAA’s operations, many of which have been flagged in previous supervisory letters dating back to 2019. Despite multiple warnings, USAA failed to fully resolve these critical issues, prompting the latest order.

According to the OCC, the bank’s inability to adequately address these problems has resulted in unsafe and unsound banking practices, putting both customers and the broader financial system at risk.

The OCC’s concerns with USAA are wide-ranging. The regulator’s order cites issues across several crucial operational areas, including risk management, consumer protection, internal audits, and suspicious activity reporting.

The bank has been criticized for inadequate risk governance, particularly with respect to consumer compliance and fraud monitoring. USAA’s failure to comply with consumer protection regulations has raised alarms, particularly regarding how the bank handles customer complaints, billing practices, and disclosures.

The bank’s internal audit functions have been found lacking, with insufficient attention paid to potential vulnerabilities in both its operational systems and compliance protocols. The OCC has mandated an overhaul of these functions to ensure a more robust framework for detecting and addressing potential issues before they escalate.

The bank has also been found deficient in its reporting of suspicious activities, which is a critical function in ensuring the integrity of the financial system. By failing to meet regulatory standards in this area, USAA exposed itself to potential regulatory penalties and reputational damage.

The OCC’s order restricts USAA from introducing new products or services without first obtaining regulatory approval. This move is designed to prevent the bank from expanding its operations while it remains in non-compliance with fundamental regulatory standards.

In response to the OCC’s action, USAA has pledged to take immediate steps to rectify the deficiencies identified in the order. A spokesperson for the bank stated that USAA is committed to resolving the issues and continues to meet or exceed the regulatory requirements for capital, liquidity, and credit ratings.