Judges on a federal appeals court panel Thursday appeared hesitant to overrule President Trump and install the deputy director of the Consumer Financial Protection Bureau as the agency's temporary leader. But two of the three judges from the U.S. Court of Appeals for the D.C. Circuit indicated they had a problem with the person Trump selected to take the position, Mick Mulvaney, because he also heads the White House Office of Management and Budget. The 2010 law that created the bureau as an independent federal agency specifically said OMB should not have oversight or jurisdiction over it. That raised the possibility that the legal battle over the future of the watchdog agency could end with Mulvaney's removal as acting director — a move that would be cheered by Democrats and consumer advocates who have complained about his public opposition to the bureau's existence. But Mulvaney would not be supplanted as they want by Deputy Director Leandra English, who brought the suit to remove him after his appointment by Trump last fall. Under such a ruling, English might be elevated to acting director for at best a day or so until Trump simply named another person to serve as acting director, pending appointment of a permanent director needing Senate confirmation. Or the administration might appeal such a ruling to the full appeals court.
The acting head of the Consumer Financial Protection Bureau vowed to continue policing lending discrimination yesterday, a day before his first semiannual report to Congress on the CFPB, the Wall Street Journal reported. Mick Mulvaney, who has been interim director since November, will use today’s and Thursday’s sessions before lawmakers to outline his strategies for overhauling the bureau and his regulatory agenda for the coming months. Mulvaney said in remarks prepared for his testimony that enforcement and supervision of lending-discrimination rules will remain part of the CFPB’s powerful enforcement division, which will soon be renamed to reflect its updated role. “This will make enforcement and supervision more efficient, effective and accountable,” Mulvaney said of his fair-lending policy in the remarks. The announcement comes two months after Mulvaney removed the CFPB’s Office of Fair Lending and Equal Opportunity from the bureau’s enforcement division and placed it under his direct control. The bureau said at the time that the fair-lending group would focus on advocacy, coordination and education, without explaining what would happen to the sizable team of enforcement and supervision experts in the group. Mulvaney’s testimony clarifies that the fair-lending division has essentially been split, with advocacy under the director’s control but enforcement and supervision remaining under the enforcement division.
The number of retailers defaulting on loans hit a record high in the first quarter of 2018, a new report shows, affirming many chains in the sector are still struggling under suffocating debt loads and changing business needs, CNBC.com reported. There were 28 total defaults by corporations in the latest period, Moody's Investors Service found, compared with 23 defaults during the same period a year ago. "Stresses in the retail sector have weighed on the operating earnings of department stores, discount stores and drug stores in particular," said Sharon Ou, vice president and senior credit officer at Moody's. CNBC reported last month that Moody's is expecting retailers' maturities to spike in 2019, meaning many significant debts are coming due. Companies on that list with loans to pay include Sears, Neiman Marcus and Guitar Center. These companies are also targeted as ones that could struggle to refinance or fund their loans.
The acting director of the Consumer Financial Protection Bureau (CFPB) asked a House committee Wednesday to rein in the agency’s power to police the financial sector. Mick Mulvaney, who is also the White House budget director, urged the House Financial Services Committee to impose several new restrictions on the bureau. He said lawmakers need to take control of the agency’s funding, make his successors fire-able at will by the president and install an inspector general, among other things. "It's not accountable to you. It's not accountable to the public. It's not accountable to anybody but itself," Mulvaney said of the CFPB, telling lawmakers to “take back authority as the legislature of the country.” Republicans showered praise on Mulvaney’s efforts to pull back the CFPB, an agency they’ve long accused of violating the law and abusing its powers to wage a crusade against financial institutions.
Credit card networks are finally ready to concede what has been obvious to shoppers and merchants for years: Signatures are not a useful way to prove someone’s identity. Later this month, four of the largest networks — American Express, Discover, Mastercard and Visa — will stop requiring them to complete card transactions, the New York Times reported. The signature, a centuries-old way of verifying identity, is rapidly going extinct. Personal checks are anachronisms. Pen-and-ink letters are scarce. When credit card signatures disappear, handwritten authentications will be relegated to a few special circumstances, like sealing a big transaction like a house purchase. Card signatures won’t vanish overnight. The change is optional, leaving retailers to decide whether they want to stop collecting signatures.
Leading banking groups yesterday called on House leaders to accept Senate-passed legislation easing financial rules adopted after the 2008 economic crisis, the Associated Press reported. Each chamber has already passed its own legislation on scaling back Dodd-Frank, but lawmakers disagree on how to move forward and pass a final version this year. The bank groups weighing in yesterday would seemingly give senators more leverage in the negotiations. In a letter to House Speaker Paul Ryan and Minority Leader Nancy Pelosi, the American Bankers Association said that it supports the desire among House Republicans to do more than what was passed in the Senate, but it believes the Senate bill will "make a very real difference to community banks across the country." The group called on the House to "move on" the Senate bill quickly and take up other House proposals later. State banking associations made a similar plea, calling on the House "to immediately take up and pass" the Senate bill.
Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim margins spur banks and private equity owners to cut off funding, Bloomberg News reported. Summit Financial Corp., a Plantation, Fla.-based subprime car finance company, filed for bankruptcy late last month after lenders including Bank of America Corp. said it had misreported losses from soured loans. And a creditor to Spring Tree Lending, an Atlanta-based subprime auto lender, filed to force the company into bankruptcy last week, after a separate group of investors accused the company of fraud. Private equity-backed Pelican Auto Finance, which specialized in “deep subprime” borrowers, finished winding down last month after seeing its profit margins shrink. The pain among smaller lenders has parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming. In both cases, rising interest rates helped trigger more loan losses. “There’s been a lot of generosity and not a lot of discretion on the part of lenders and investors,” said Chris Gillock, a banker at Colonnade Advisors, which advises companies on subprime auto investments. “There’s going to be more capitulation.”
Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau (CFPB), is firing back at Sen. Elizabeth Warren (D-Mass.) after she questioned his actions and leadership of the bureau, The Hill reported. Mulvaney told Warren in a letter the CFPB made public yesterday that he has a different take on what is actually happening at the bureau and suggested that her frustrations are a consequence of the Dodd-Frank Wall Street reform law, which she spearheaded. Mulvaney, a former Republican congressman who is also the director of the Office of Management and Budget, said he too was frustrated with what he perceived to be a lack of responsiveness, transparency and accountability at the bureau when he was a member of Congress and sat on the House Financial Services Committee.
The New York Federal Reserve will launch a benchmark U.S. rate today to potentially replace Libor, and market participants hope it will prove more reliable after a long and complex switchover, Reuters reported. The New York Fed will begin publishing the Secured Overnight Financing Rate (SOFR), the first step in a multi-year plan to transition more derivatives away from the London interbank offered rate (LIBOR), which regulators say poses systemic risks if it ceases publication. Analysts have struggled to explain a recent jump in LIBOR, which has reached nine-year highs even as bank credit quality is seen as solid. Increased short-term Treasury issuance and declining demand for credit due to tax reforms are deemed the most likely factors. A decline in interbank lending has reduced the robustness of the rate, which is sometimes estimated rather than based on actual transactions. SOFR is based on the overnight Treasury repurchase agreement market, which trades around $800 billion in volume daily.
Consumers could find it easier to get small loans for emergency car repairs and other unplanned expenses under Trump administration plans to prod more banks to make short-term loans, the Wall Street Journal reported. “We have a big market, we have a market that is unfulfilled,” said Comptroller of the Currency Joseph Otting. “When you don’t have an alternative in that space, what happens is people have a tendency to fall to the lowest common denominator,” such as check-cashers, pawnshops and liquor stores, he said. The move signals a shift from the Obama administration, which earlier this decade pressured banks to scrap their short-term lending programs. Those regulators viewed small loans by banks with suspicion because of concern about high interest rates and perceived repayment risks. The Office of the Comptroller of the Currency, which oversees national banks, will “clarify” its position on installment loans that can help consumers with immediate cash needs such as buying “a piece of equipment [or] a family emergency,” Otting said.