Banking regulators on Wednesday handed down an $85 million penalty against USAA Federal Savings Bank for unsound banking practices.

The Office of the Comptroller of the Currency (OCC) fined the bank for violations of the Military Lending Act and the Servicemembers Civil Relief Act (SCRA). The bank also failed to implement and maintain an effective compliance risk management program and information technology risk governance program, according to a statement from the regulator. 

The penalty follows a recent OCC review that downgraded the bank’s rating on compliance with the Community Reinvestment Act (CRA) to “needs to improve.” The bank’s previous overall rating was “satisfactory.”

The CRA is a law intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.

The Military Lending Act and the SCRA protect active-duty military members, their spouses, and dependents from unfair lending practices and provide protections for service members on issues such as rental agreements, security deposits, prepaid rent, and eviction.

An OCC review of the bank concluded that the bank’s distribution of loans by income level of geography for home mortgage loans was “adequate,” but was “poor” for consumer loans. The bank received an “outstanding” CRA rating on the investment test, a “high satisfactory” for service, and a “low satisfactory” for lending.

The bank, which has roughly $100 billion in assets, is in the process of remediating these violations, the OCC stated, in keeping with a consent order the bank entered into with the OCC in January 2019.

A company spokesman said USAA was working to address the problems by hiring “the right expertise and improving systems and processes,” and cooperating with the OCC. 

“Simply put, we have fallen short of our high standards and those of our members and our regulators,” stated Wayne Peacock, USAA president and CEO. “As we grew quickly over the last decade, we never wavered from our commitment to serve members. However, we did not sufficiently invest in the capabilities and expertise necessary to meet regulatory requirements and evolving business needs.

“We have been working diligently and investing substantial resources to address the gaps. This is our most urgent and fundamental priority and is essential to serve members with excellence, now and in the future.”

Of the 12 banks rated in September on the OCC’s performance evaluations for CRA, 10 were considered satisfactory, and one outstanding. Only USAA Federal Savings Bank received a “needs to improve” rating.

In March 2019, Forbes listed USAA Bank as the top-rated bank in the United States on its first-ever World’s Best Banks list. USAA was ranked the best among 60 U.S. banks based on a survey of 40,000 customers around the world.

USAA is a financial supporter of the San Antonio Report. For a full list of business members, click here.

Shari Biediger

Shari Biediger

Shari Biediger is the business beat reporter at the San Antonio Report.