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Consumer-Watchdog Settlements Reach Four-Year High - The Wall Street Journal

Consumers harmed by financial firms got back $777 million through actions by the Consumer Financial Protection Bureau during the last fiscal year, the largest amount in four years, the Wall Street Journal reported. The amount included settlements of a few significant long-pending investigations, which were among the 22 enforcement cases the CFPB announced during the fiscal year ended Sept. 30, the agency said. That represented an uptick from 12 cases and $344 million in restitution in the previous fiscal year, during which the Trump administration curbed the activities of the CFPB. The trend came as CFPB Director Kathy Kraninger approached her first year on the job amid criticism from Democrats that the bureau has been too friendly to the financial industry. Kraninger, a career government worker, took over the CFPB in December 2018 from Mick Mulvaney, who now serves as President Trump’s acting chief-of-staff. Many of the large cases settled last year were started by Obama-era officials before President Trump installed Mick Mulvaney as acting director in November 2017. Among them was a July settlement with Equifax Inc. over its 2017 data breach, which resulted in the credit reporting company’s pledge to return $425 million to consumers. The bureau’s settlements with ITT Education Services Inc., a now defunct for-profit college, and CU Connect CUSO LLC, a lender that targeted its students, were a result of an investigation initiated in 2014. The two agreements brought a combined $228 million in loan forgiveness. The Wall Street Journal


Six-Figure Parent Loans: When College Dreams for Students Mean Nightmarish Debt for Family - ABI

The federal government’s Parent PLUS program helps make attending college a reality, closing the gap between the cost of college and what the student receives in grants and other loans. But while it may sound like a lifeline, the Parent PLUS Loan program can cause economic complications for families, USA Today reported. The loan program was introduced in the 1980s as a way for middle- and upper-income parents to help their children pay for college while keeping their assets liquid. It has since become more popular among lower-income parents. That's possible because the program does not check the ability to repay, considering only the borrower's credit history. When parents borrow, the debt can weigh down families for generations. But the burden falls particularly hard on low-income black families. Few white families with low incomes take out the loan – 10 percent of white Parent PLUS borrowers earn $30,000 or less. Comparatively, 40 percent of black Parent PLUS borrowers have incomes that low. ABI


Fed Eases Post-Crisis Rules for Domestic, Foreign Banks - ABI

The U.S. Federal Reserve yesterday unveiled a final package of rules easing capital and liquidity requirements for domestic U.S. and foreign banks that was originally introduced following the 2007-2009 global financial crisis, Reuters reported. The changes, which should reduce the compliance burden and free up funds for U.S. Bancorp, Capital One and PNC Financial, among others, mark another win for the industry after the Fed also relaxed rules on derivatives trades and banks’ annual health checks. Yesterday’s package stems from bipartisan legislation passed by Congress in May 2018 that rewrote parts of the 2010 Dodd-Frank financial reform law. That 2018 law ordered the Fed to reduce the burden on community and regional lenders, but progressive Democrats and consumer groups are likely to criticize the central bank for giving larger banks too much leeway with its final changes. Randal Quarles, the Fed’s top regulatory official, said the package allows the Fed to more closely tie stricter rules to risks and retains the toughest requirements for the largest firms. ABI


Mortgage Costs Outpaced by Drop in Interest Rates - ABI

Interest rates have been plummeting, but the cost of taking out a mortgage hasn’t fallen as fast, the Wall Street Journal reported. Since the end of June, the Treasury yield has fallen about 0.4 percentage point, but the average mortgage rate has dropped less than a tenth of a percentage point. The gap between the two rates is near its highest in more than seven years, according to an analysis by Dow Jones Market Data. The average 30-year fixed rate for a mortgage was 3.65 percent last week, according to mortgage company Freddie Mac. That is among the lowest average rates this year, but it has bounced up and down in recent months. Mortgage executives, traders and investors tend to watch the spread between the 10-year Treasury yield and the 30-year mortgage rate as a barometer of the mortgage market’s health. The spread blew out as the market imploded in 2008, when Treasury yields plummeted but lenders were slower to adjust mortgage rates. More recently, the difference has signaled that borrowers’ relatively strong appetite for mortgages is outpacing the industry’s ability to make them. Many lenders scaled back last year as mortgage demand dropped, so the current demand is stretching their capacity. ABI


Study: Banks Will Replace 200,000 Workers With Robots by Next Decade - Observer

While workers across all job sectors may someday have to compete with machines for their daily bread-winning wage work—the dystopian near-future upon which ex-Silicon Valley executive Andrew Yang is basing his presidential campaign—no industry in America is spending more on ways to eliminate the human factor than banks. Using machines like ATMs to deal with the public rather than other human beings is an example of a “technological efficiency,” one of the labor-saving shortcuts the banking industry is spending $150 billion a year to develop, as Bloomberg reported. Observer


Federal Government Has Dramatically Expanded Exposure to Risky Mortgages - ABI

The federal government has dramatically expanded its exposure to risky mortgages, as federal officials over the past four years took steps that cleared the way for companies to issue loans that many borrowers might not be able to repay, the Washington Post reported. Now, Fannie Mae, Freddie Mac and the Federal Housing Administration guarantee almost $7 trillion in mortgage-related debt, 33 percent more than before the housing crisis, according to company and government data. Because these entities are run or backstopped by the U.S. government, a large increase in loan defaults could cost taxpayers hundreds of billions of dollars. This risk is the direct result of pressure from the lending industry, consumer groups and political appointees, who lobbied for the government to intervene when homeownership rates fell several years ago. Starting in the Obama administration, numerous government officials obliged, mistakenly expecting that the private market ultimately would take over. In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to data from the Urban Institute. Taxpayers are shouldering much of the risk, while a growing number of homeowners face debt payments that amount to nearly half of their monthly income, a threshold many experts consider too steep. Roughly 30 percent of the loans Fannie Mae guaranteed last year exceeded this level, up from 14 percent in 2016, according to Urban Institute data. At the FHA, 57 percent of the loans it insured breached the high-risk echelon, jumping from 38 percent two years earlier. ABI


Fed Adds $63.5 Billion to Financial System in Repo Transaction - ABI

The Federal Reserve Bank of New York added $63.5 billion to the financial system yesterday, using the market for repurchase agreements, or repo, to relieve funding pressure in money markets, the Wall Street Journal reported. Banks asked for $63.5 billion in overnight reserves, all of which the Fed accepted, offering collateral in the form of U.S. Treasury and mortgage securities. In the repo market, borrowers seeking cash offer lenders collateral in the form of safe securities — frequently Treasury bonds — in exchange for a short-term loan. The term of these loans can be as short as overnight. The Fed began offering repo loans two weeks ago after a shortage of available cash in the financial system led repo rates to climb as financial companies scrambled for overnight funding. The actions marked the first time since the financial crisis that the Fed had taken such actions. ABI


Millennials More likely to Report Losing Money to Fraud than Older Generations, New FTC Data Spotlig

Millennials are 25 percent more likely to report that they have lost money to fraud than consumers aged 40 and over, according to a new Federal Trade Commission analysis of consumer complaint data.   The FTC’s latest Consumer Protection Data Spotlight shows that millennials—those ages 20-39—are twice as likely to report losing money to online shopping fraud than those 40 and over. Online shopping fraud reports include complaints about items that are never delivered or are not as they were advertised. Millennials reported losing $71 million to online shopping fraud—out of the nearly $450 million they reported losing to all types of fraud—in the last two years. Federal Trade Commission


Trump Administration Scaling Back Rules Meant to Stop Corporate Inversions - Bloomberg

The Treasury Department said on Thursday that it was rolling back regulations issued under the Obama administration that were enacted to prevent American companies from moving their official residence abroad to reduce their tax bills, the New York Times reported. The regulations are no longer necessary, Trump administration officials say, because of changes made in the tax overhaul that President Trump signed in 2017. The changes reduced taxes on American companies and included provisions meant to discourage these so-called inversions. In an inversion, an American company merges with a foreign firm and becomes its subsidiary, effectively moving its headquarters abroad for tax purposes. The previous regulations, issued over the course of President Barack Obama’s second term, were credited by many tax analysts with reducing inversions. Business groups criticized the regulations, and the U.S. Chamber of Commerce sued to block one set of the rules, calling them “unauthorized and unlawful.” Treasury Secretary Steven T. Mnuchin in a news release referred to the 2017 law, the Tax Cuts and Jobs Act, saying that it “leveled the playing field for American businesses.” Bloomberg