Ally Bank 2014 Annual Report Download - page 21

Table of Contents
Ally Financial Inc. • Form 10-K
9
investigating potential claims under the False Claims Act (FCA) related to representations made by us in connection with investments in Ally
made by the United States Department of the Treasury pursuant to the Troubled Asset Relief Program in 2008 and 2009 regarding certain
claims against Residential Capital, LLC or its subsidiaries at that time. We are engaged in ongoing discussions with the DOJ with respect to
legal and factual aspects of their investigations. Further, at the request of the DOJ, we have entered into an agreement to voluntarily extend
the statutes of limitations related to potential FCA claims.
We have separately received subpoenas and document requests from the SEC that include information covering a wide range of
mortgage-related matters.
Automotive Subprime Matters
In October 2014 we received a document request from the SEC in connection with its investigation related to subprime automotive
finance and related securitization activities. Separately, in December 2014, we received a subpoena from the DOJ requesting similar
information. We are currently cooperating with both the SEC and DOJ with respect to these matters.
CFPB
Further, in December 2013, Ally Financial Inc. and Ally Bank entered into Consent Orders issued by the CFPB and the DOJ pertaining
to the allegation of disparate impact in the automotive finance business, which resulted in a $98 million charge in the fourth quarter of 2013.
The Consent Orders require Ally to create a compliance plan addressing, at a minimum, the communication of Ally’s expectations of Equal
Credit Opportunity Act compliance to dealers, maintenance of Ally’s existing limits on dealer finance income for contracts acquired by Ally,
and monitoring for potential discrimination both at the dealer level and within our portfolio of contracts acquired across all dealers. Ally
formed a compliance committee consisting of certain Ally and Ally Bank directors to oversee Ally’s execution of the Consent Orders’ terms.
Ally is required to meet certain stipulations under the Consent Orders, including a requirement to make future payments should certain
remediation targets not be attained.
Each of the matters set forth above may result in material adverse consequences including without limitation, adverse judgments,
significant settlements, fines, penalties, injunctions, or other actions.
Our ability to execute our business strategy may be affected by regulatory considerations.
Our business strategy for Ally Bank, which is primarily focused on automotive lending and growth of our direct-channel deposit
business, is subject to regulatory oversight from a safety and soundness perspective. If our banking supervisors raise concerns regarding any
aspect of our business strategy for Ally Bank, we may be obliged to alter our strategy, which could include moving certain activities, such as
certain types of lending, outside of Ally Bank to one of our nonbanking affiliates. Alternative funding sources outside of Ally Bank, such as
unsecured funding in the capital markets, could be more expensive than funding through Ally Bank and could adversely affect our business
prospects, results of operations, and financial condition.
We are subject to capital planning and systemic risk regimes, which impose significant restrictions and requirements.
As a BHC with $50 billion or more of consolidated assets, Ally is required to conduct periodic stress tests and submit a proposed capital
action plan to the FRB annually. The proposed capital action plan must include a description of all planned capital actions over a nine-quarter
planning horizon, including any issuance of a debt or equity capital instrument, any capital distribution, and any similar action that the FRB
determines could have an impact on Ally’s consolidated capital. The proposed capital action plan must also include a discussion of how Ally
will maintain capital above the minimum regulatory capital ratios and above a Tier 1 common equity-to-total-risk-weighted assets ratio of 5
percent, and serve as a source of strength to Ally Bank. The FRB will either object to a proposed capital plan, in whole or in part, or provide
notice of non-objection to Ally. The failure to receive a notice of non-objection from the FRB would prohibit us from paying dividends and
making other capital distributions. Refer to Business — Certain Regulatory Matters for further details.
In addition, in February 2014, the FRB issued a final rule to implement certain of the enhanced prudential standards mandated by
Section 165 of the Dodd-Frank Act for large bank holding companies such as Ally. The final rule generally became effective on January 1,
2015. Among other things, the final rule requires Ally to maintain a sufficient quantity of highly liquid assets to survive a projected 30-day
liquidity stress event and implement various liquidity-related corporate governance measures and imposes certain requirements, duties and
qualifications for Ally’s risk committee and chief risk officer. These enhanced prudential standards could adversely affect our business
prospects, results of operations and financial condition. Additionally, the FRB has stated that it will issue, at a later date, final rules to
implement certain other enhanced prudential standards mandated by Section 165 of the Dodd-Frank Act, including single counterparty credit
limits and an early remediation framework. Once implemented and adopted, these rules could adversely affect our business prospects, results
of operations and financial condition.