Consumers are on track to get one thing from Congress in response to last year’s massive Equifax Inc. hack: free freezes of their data held by the credit-reporting companies, the Wall Street Journal reported. The bipartisan agreement, set to be approved in the Senate by next week as part of a broader banking bill, would require credit-reporting companies to let consumers block access to their credit reports to potential lenders without paying a fee. Freezing access to credit data is a crucial measure consumers can take if they want to protect themselves from identity theft. Credit-reporting firms are mixed about the measure, which would erode a source of revenue, while consumer advocates worry it doesn’t go far enough to give people more control over their data. The provision would set a single national standard for credit freezes. Currently, 42 states allow credit-reporting firms to charge for the service unless an individual was a victim of identity theft. Eight states and the District of Columbia mandate waiver of the fees under all circumstances.
Seventeen Senate Democrats joined with Republicans yesterday to advance a bipartisan regulatory relief bill for the banking industry, an early sign that the bill can clear the Senate in the coming days, the Washington Examiner reported. The Senate voted 67-32 to end debate on a motion to proceed to the bill, more than the 60 votes needed for that procedural vote. S. 2155 would be the most significant legislative revision to the Dodd-Frank financial reform law since former President Barack Obama signed it in 2010. Nevertheless, it is much more modest than the wholesale replacement of Dodd-Frank sought by President Trump and House Republicans. The most significant provision of the bill is an increase in the size threshold at which banks are subjected to stricter oversight by the Federal Reserve. Today, banks with more than $50 billion in assets face the tougher regulation. The Crapo bill would raise the threshold to $250 billion, providing relief for regional banks like Suntrust and Fifth Third Bank.
Zombie debts have come back with a vengeance. Debt buyers pull these expired obligations out of cold storage and often use abusive and illegal tactics to collect. Zombie debts generally started out as legitimate obligations that had been settled, paid off, discharged in bankruptcy or rendered uncollectible because of various state statutes of limitation. However, these uncollectible bills are often repackaged with other delinquent loans and sold into the secondary market, generally for pennies on the dollar. Buyers of this debt then attempt to collect on all of it -- including the expired obligations -- bringing the expired debts back from the dead. "By all rights, this is debt that should have been extinguished, but it continues to come back to life," said Rowan Tepper, senior analyst at RewardExpert, which recently completed a study of zombie debt complaints that had been filed with the Consumer Financial Protection Bureau going back to 2011. This analysis found that complaints about zombie debts have soared in recent years, jumping 66 percent in the first nine months of 2017 compared with the same period the year before. However, the chance of being pursued by back-from-the-dead debt varies dramatically based on where you live. In several states zombie debts are running rampant, according to RewardExpert's research.
Equifax Inc. said that more U.S. consumers were affected by its massive data breach last year than originally disclosed, the Wall Street Journal reported. The company said yesterday that it identified around 2.4 million Americans whose names and partial driver’s license information were stolen. The company in a statement said the consumers affected “were not in the previously identified” population of cyberattack victims. That brings the total number of U.S. consumers whose personal information was compromised by the breach to 147.9 million, up from 145.5 million previously. This is the second revision to the numbers that the company has made since disclosing the breach in September. Equifax had initially said approximately 143 million Americans had been affected.
U.S. regulators are considering changes to the “Volcker rule” Wall Street has sought for years that would make it easier and cheaper for banks to comply and allow them more leeway in trading and investing, Reuters reported. Part of the Dodd-Frank reform law passed after the 2007-09 financial crisis, the Volcker rule aimed to prevent banks, such as Goldman Sachs and JPMorgan Chase, from making risky market bets while accepting taxpayer-insured deposits. The rule forced many Wall Street banks, which before the crisis could gamble on their own account across various assets, to restructure their businesses, including overhauling their trading operations and hiving off billions of dollars’ worth of investment vehicles. Yet banks and some of their customers say that the rule, which runs to more than 1,000 pages, is too much of a burden for the financial industry by limiting banks’ ability to facilitate investments and hedges for investors and depressing trading volumes in some assets. Modifications being considered include: scrapping the presumption that short-term trades are proprietary unless banks prove otherwise, making it clearer which types of funds banks are banned from investing in, permanently exempting some foreign funds from the ban, and anointing a lead regulator to oversee the rule’s enforcement.
Credit union advocates met with President Trump yesterday to rally White House support behind a bill to loosen Dodd-Frank Act financial rules, The Hill reported. Trump hosted top credit union CEOs and lobbyists this afternoon, including representatives from the Credit Union National Association (CUNA) and the National Association of Federally-Insured Credit Unions (NAFCU). The advocates pressed Trump on a bipartisan Senate bill to loosen Dodd-Frank rules, attendees said. While the bill from Sen. Mike Crapo (R-Idaho) is focused on exempting dozens of banks from stricter federal oversight, it also rolls back restrictions on lending across the financial sector. The Senate is expected to vote on the bill within the next two weeks.
Robust economic growth has increased the confidence of Federal Reserve officials that the economy is ready for higher interest rates, according to an official account of the central bank’s most recent policymaking meeting in late January, the New York Times reported. The Fed did not raise its benchmark interest rate at the meeting on Jan. 30 and 31, but the account reinforced investor expectations that the Fed would raise rates at its next meeting in March. The account said that Fed officials have upgraded their economic outlooks since the beginning of the year and listed three main reasons: the strength of recent economic data, accommodative financial conditions and the expected impact of the $1.5 trillion tax cut that took effect in January. The Fed is seeking to raise rates gradually to maintain control of inflation without impeding an economic expansion that is nearing the end of its ninth year, one of the longest stretches of continuous economic growth in American history.
The Supreme Court ruled yesterday that anti-retaliation protections under the Dodd-Frank Act only kick in when a whistleblower has reported the stock and investment fraud to the Securities and Exchange Commission (SEC), The Hill reported. In a unanimous decision, the court said the text of the law written by Congress following the financial crisis in 2011 defines a "whistleblower" as someone who provides information relating to a violation of the securities law to the commission. The case centered on Paul Somers, a former employee for Digital Realty Trust Inc. who was fired after he reported alleged securities violations to his senior management, but not the SEC. Somers and his attorney argued that his employment should have been protected under the Dodd-Frank rule. But in delivering the opinion of the court, Justice Ruth Bader Ginsburg said that the core of Dodd-Frank’s whistleblower program is to aid the SEC's enforcement work by “motivating people who know of securities law violations to tell the SEC.” And while Dodd-Frank provides whistleblowers with monetary rewards when they provide actionable information about financial fraud, Ginsburg said that Congress recognized that might not be enough of an incentive to encourage employees who are fearful of employer retaliation to come forward to report that information to the government. “Congress therefore complemented the Dodd-Frank monetary incentives for SEC reporting by heightening protection against retaliation,” she wrote.
The Trump administration recommended retaining the government’s power to seize and unwind a failing financial firm in a crisis, departing from some conservative Republican lawmakers and endorsing a plank of the 2010 Dodd-Frank financial law, the Wall Street Journal reported. The Treasury Department, in a report yesterday, called for changes to correct what it described as “serious defects” around how and when orderly liquidation authority (OLA) would be used. As expected, it said that the authority should be retained as a tool for the government if a huge financial firm were on the brink of failure. “Treasury shares many of the concerns raised by critics of OLA,” the report said, adding the authority is “a far preferable alternative to destabilizing financial contagion or ad hoc government bailouts.” The report also recommended changes to the bankruptcy code to make it easier for such a failure to be resolved in bankruptcy court, without the government taking over the failing firm.
The Trump administration is looking to clarify when Americans can discharge student loans in bankruptcy, responding to concerns that more borrowers will be stuck under huge debt burdens for years, the WSJ Pro Bankruptcy reported. Since 1998, federal law has prohibited Americans from discharging student loans made by the federal government, except in extremely rare circumstances. Congress expanded the prohibition to cover private student loans in 2005. Only borrowers who file for bankruptcy and prove an “undue hardship” in repaying their loans are permitted to have their loans expunged. Congress never defined “undue hardship,” leaving it to bankruptcy judges to decide case by case. They set a high bar. Very few borrowers have had their loans expunged in bankruptcy, and student-borrower advocates say many others don’t even try. The Education Department, in a public notice set to be released today, said that it was considering whether to clarify what factors should be considered in determining whether borrowers meet the threshold for undue hardship.