Federal regulators hit USAA Savings Bank with yet another order to fix ‘unsafe practices’

Federal regulators have slapped San Antonio-based USAA’s banking unit with an order demanding that it fix “unsafe and unsound” policies, marking the government’s third attempt since 2019 to force such changes.

The U.S. Office of the Comptroller of the Currency (OCC) said Wednesday that it’s ordered USAA Federal Savings Bank to fix longstanding regulatory shortfalls related to its management, earnings, information technology, consumer compliance, internal audits and reporting of suspicious activity.

OCC officials said some of the bank’s violations have been on the agency’s radar since at least 2019. What’s more, the new order includes parts of prior OCC orders from 2019 and 2022 for which USAA has yet to come into compliance.

In a statement emailed to the Current, USAA said it’s working with regulators to improve the deficiencies and better serve customers, which it calls “members.”

USAA is one of San Antonio’s largest corporate employers. The business provides insurance, banking and other financial services to military personnel, veterans and their families.

“Although our progress has not been consistent or swift enough, the bank is well-positioned to complete this work,” USAA said. “With a stronger foundation in place to prevent and mitigate risk, we will continue to enhance our capabilities and processes to ensure we consistently serve our members with excellence.”

Under the latest OCC order, USAA must submit an action plan showing how it will comply with federal banking rules, and it’s also required to develop risk plans for its problem areas. The feds have also limited the bank’s ability to introduce new products and services as well as add new incentive-based compensation for staff.
USAA Federal Savings Bank’s ongoing regulatory woes were the subject of an investigation this fall by the Current and industry publication American Banker. The publications found that the bank repeatedly failed to make investments needed to satisfy regulators and some longtime members as it briskly grew its customer base. 

Amid those regulatory penalties and meager profits, USAA has shuffled key executives and resorted to cost-cutting layoffs. Company CEO Wayne Peacock is expected to retire this spring after five years in the post.

“Independently, these various violations could be understood, but collectively, they show a pattern that raises concerns,” Mark Williams, a Boston University finance professor and a former bank supervisor at the Federal Reserve, told the Current and American Banker for their joint story. “There’s something more fundamental.”

The statement USAA issued Wednesday said the OCC’s latest order confirms that the bank has made progress in addressing earlier concerns by banking regulators. The company also said it’s financially healthy and has the “highest possible ratings” from agencies S&P, Moody’s and AM Best.

“Our focus is on getting this right for USAA and our members,” the statement said.

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This article appears in Dec 11-17, 2024.