News

Glass-Steagall Revival a Tough Fit for Modern Banking, Analysts Say - ABI

New banking regulation discussions in Washington, D.C., are dredging up a Depression-era ghost that analysts say would fit poorly in the modern financial industry, Bloomberg News reported yesterday. Suggestions of reviving and revamping the Glass-Steagall Act, a 1933 law that separated commercial and investment banking, reignited after Bloomberg News reported on April 5 that National Economic Council Director Gary Cohn expressed support for such a separation during a private meeting with senators. The next day, Sen. Elizabeth Warren (D-Mass.) introduced her “21st Century Glass-Steagall Act of 2017,” with Sens. John McCain (R-Ariz.) and Angus King (I-Maine) as co-sponsors. Glass-Steagall has been off the books since 1999, when President Bill Clinton signed its repeal. Banking industry critics have pointed to the law’s demise as a culprit in the 2008 financial crisis. The 2016 GOP and Democratic party platforms espoused some version of a Glass-Steagall revival, a nod to populist sentiments among the electorate. But breaking up big banks would be applying old wisdom to a new financial system, said Aaron Klein, a Brookings Institution fellow in economic studies. The principle may be solid, he said, but the exact rule is not a good fit. Glass-Steagall also wouldn’t have addressed the entities and activities behind the last decade’s financial crisis, he added in an interview on Tuesday.


11th Circuit Clarifies FDCPA/FCCPA Issues Re Periodic Mortgage Statements After Bankruptcy

In Helman v. Bank of America, 15-13672, 2017 WL 1350728 (11th Cir. April 12, 2017) the Eleventh Circuit Court of Appeal clarified important issues regarding the use of periodic mortgage statements after a bankruptcy discharge.  In Helman thee debtor sued Bank of America after he received a periodic mortgage statements required by the Truth in Lending Act for his mortgage which he had discharged in bankruptcy. The statements he received were qualified by Bank of America in important ways, including being labeled as “FOR INFORMATIONAL PURPOSES” and containing a disclosure that Bank of America’s records indicated the debt was discharged in bankruptcy and that therefore the debtor had no personal obligation to repay the debt.  Despite these disclosures, the debtor argued that periodic statement violated the Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Collection Practices Act (FCCPA) insofar as it allegedly purported to attempted to collect a debt when no legal right existed to do so, and/or was misleading to the least sophisticated consumer because it suggested personal liability.  The district court dismissed these claims and the Eleventh Circuit affirmed. The Eleventh Circuit found that the FDCPA did not apply to Bank of America with respect to the periodic statements because Bank of America was not a debt collector. Specifically the Eleventh Circuit found that the parties did not dispute that Bank of America originated the debt at issue, and therefore Bank of America was not acting as a debt collector but rather as the original creditor seeking to collect its own debt.  However, since original creditors are not except from the FCCPA, the Court required other grounds to affirm the district court’s dismissal of that claim.  With respect to the FCCPA claim, the Court found that the periodic statement unambiguously disclosed to the debtor that it was not seeking to collect the debt from him personally but rather merely was disclosing information about the mortgage lien no real property which survived his personal bankruptcy discharge. The debtor argued that even though these disclosures were made to him, the least sophisticated consumer might be confused, including by statements qualifying the disclosures as applicable to one “currently a debtor in bankruptcy” since the debtor’s bankruptcy case was now over.


House GOP releases Dodd-Frank replacement bill, sets hearing

The new text for the bill, the Financial Choice Act of 2017, weighed in at 593 pages, far fewer than the 2010 law it is meant to supplant but longer than last year's version. The main premise of the bill is to cut back the rules imposed by the Dodd-Frank law. And for banks that opt to maintain a high level of capital, which would reduce the odds of bank failures and increase market discipline, the bill would provide for relief from several layers of regulation. Perhaps most notably, the legislation would reform the Consumer Financial Protection Bureau, which oversees financial products such as mortgages and credit cards, by scaling back its authority and ensuring that the president can fire its director at will. Last year's version took a different tack, making the bureau a five-member, bipartisan commission.


Justices Grill SEC Over Limiting Power to Make Wrongdoers Give Back Gains - ABI

The Supreme Court yesterday voiced skepticism toward a plea from Wall Street’s top cop that one of its main enforcement tools shouldn’t be subject to a federal statute of limitations, the Wall Street Journal reported today. Justices from both the conservative and liberal wings of the Court didn’t appear to accept the Securities and Exchange Commission’s view that disgorgement, or clawing back ill-gotten gains from wrongdoers, isn’t subject to a five-year limit on the government’s power that dates to 1839. Chief Justice John Roberts evoked the statement of an early chief justice, John Marshall, who said it would be “utterly repugnant” to have no expiration date on the government’s authority to go after a suspected wrongdoer. “It does seem to me we kind of have a special obligation to be concerned about how far back the government can go,” Justice Roberts said during an hour-long oral argument. The case, Kokesh v. SEC, stems from a civil lawsuit the commission filed in 2009 against Charles Kokesh, a fund manager who mostly invested in startup companies. The SEC accused Kokesh of looting $45 million from the funds to pay his and other corporate officers’ salaries and bonuses and to fund office rent. Kokesh argues that the statute of limitations should have limited the $34.9 million that a lower court decided he should pay in disgorgement.


CFPB Offers Clarification to Proposed Data Collection Update - DS News

In fall of 2015, the CFPB introduced new data reporting requirements which are set to take effect next year under the 1974 Home Mortgage Disclosure Act (HMDA), updating existing rules which will make lenders provide information on property value, the terms of the loan, the term of prepayment penalties and the duration of teaser or introductory interest rates. The HMDA was intended to address problems faced by minorities in gaining access to a mortgage, and requires lenders to collect data from the purchase, home improvements, and refinancing and report that data to federal regulators.  However, the increased amount of data which the CFPB has required lenders to report has led increased complications. Several lenders and trade groups have asked for clarification on the definition and reporting requirements for new HMDA reporting categories, such as “loan purpose” the unique identifier for the originator of the loan.


Banking Fails to Meet Needs of Most Valuable Consumer Segment - The Financial Brand

The 50+ generation of consumers is the most financial challenged in history. Numbering more than 110 million in America alone, they are confronting a future of complex options and less financial confidence than any previous generation. With most either entering retirement, or already in a post-employment phase, decisions this generation makes today will impact not only their life, but the financial lives of their children who may be forced to support them.  Although the 50+ segment represents only 35% of the entire U.S. population, they control more than half of the nation’s investable assets. The people in this generation are heavy users of almost all financial services, holding balances in their accounts that are coveted by banks, credit unions, insurers, financial planners and wealth managers. They are also the fastest growing segment of digital product users, becoming comfortable with the online and mobile solutions that other generations already depend on.  Most importantly, the 50+ generation is a huge segment with significant needs that are currently unfilled. And with future generations (including Millennials), not having faced these challenges to date, but directly impacted by the outcome of their parent’s financial decisions, meeting the needs of the 50+ consumer has the potential of impacting the banking loyalty of their children.


Republicans propose drastic overhaul of Dodd-Frank and CFPB - DS News

The updates to the leading Republican effort to replace the Dodd-Frank Wall Street Reform and Consumer Protection Act are out, which include possible changes to the leadership structure of the top housing agencies.
A memo first came out on potential plans reportedly from House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, back in February, revealing an even more aggressive version of the Financial CHOICE Act.
That memo showed that the Consumer Financial Protection Bureau was facing some of the most dramatic changes under the updated Act.  Previously, the CHOCIE Act 1.0 proposed leadership changes for not only the CFPB, but the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and the National Credit Union Administration as well.  But looking over the new summary of the CHOICE Act 2.0, the language walks back a lot of the initial CHOICE Act 1.0 proposals.


Commentary: The Trillion-Dollar Credit Card Question - Bloomberg News

After years of packing on debt, more American consumers are struggling to pay their credit-card bills.  Credit card charge-offs have been rising steadily, posting their biggest surge since 2015 in February. Lenders from Capital One Financial Corp. to Discover Financial Services have ratcheted up loan-loss provisions and reported increasing delinquencies. This has raised concern among analysts and investors alike, especially when paired with the fact that card loans outstanding just surpassed $1 trillion for the first time since the financial crisis.  The consequences could be significant for some lenders, especially private-label card companies including Synchrony Financial and Alliance Data Systems Corp., which both report earnings next week. These firms are likely to be canaries for broader weakness among consumers because they cater to subprime borrowers unlike, say, American Express Co. or JPMorgan Chase & Co.


Judiciary Seeks Bankruptcy Judgeships, Warns of “Crisis” - ABI

Warning that federal bankruptcy courts face a “debilitating workload crisis” in Delaware and eight other districts, the U.S. Judicial Conference urged Congress to authorize four new bankruptcy judgeships and convert 14 temporary judgeships into permanent positions, according to a press release on Friday. In a letter on April 3 to Congressional leaders, the Conference said that all 14 temporary judgeships are scheduled to lapse May 25, posing a particularly heavy impact on Delaware’s federal bankruptcy court. “These bankruptcy courts would face a serious and, in many cases, debilitating workload crisis if these temporary judgeships were to expire,” wrote James C. Duff, as secretary of the Judicial Conference. “The U.S. Bankruptcy Court for the District of Delaware, for example, would be crippled as five of their six authorized judgeships are temporary, all with the risk of expiring in 2017.” Other affected court districts are the Middle and Southern Districts of Florida, the Eastern District of North Carolina, the Eastern District of Virginia, and the Districts of Maryland, Michigan, Nevada and Puerto Rico.


House Votes to Create New Bankruptcy Rules for Banks - ABI

The House of Representatives voted yesterday to add a new section to the bankruptcy code just for banks, a measure meant to allow banks to fail without needing taxpayer bailouts or setting off a crisis, the Washington Examiner reported yesterday. The lower chamber passed the Financial Institution Bankruptcy Act of 2017 on a voice vote, a week after the bill cleared the Judiciary Committee also on a voice vote. Speaking on the House floor Wednesday, committee chairman Bob Goodlatte of Virginia said that the legislation "will better equip our bankruptcy laws to resolve failing firms, while also encouraging greater private counter-party diligence in order to reduce the likelihood of another financial crisis." The bill would set out a specific set of rules to help authorities sort out which creditors are owed in the event of a bank bankruptcy, in an effort to reduce the panic and uncertainty that can accompany these events. The House has passed the legislation in previous Congresses, but the Senate has not acted on it.