ABA President and CEO Frank Keating responded to the CFPB’s inquiry on checking account overdraft practices.
The American Bankers Association appreciates the Bureau of Consumer Financial Protection’s interest in initiating a study of customer use of overdraft protection services, before prejudging any regulatory next steps. We support a study that is data-driven, analytical and stands up to peer review. However, any CFPB study should include a survey of the entire banking industry since CFPB rules will apply to all banks. ABA member banks that offer this popular service have a track record of introducing a range of competitive features that customers value. Richard Cordray’s comments illustrate that the Bureau recognizes this competitive diversity that drives a wealth of consumer choices among banking products. We are not concerned about a study based on fact as we believe that overdraft protection is a service that customers freely elect to have, they know the fee in advance and they can opt-out of overdraft protection at anytime.
The CFPB has hosted events in New York City to begin an inquiry on checking accounts. This morning Director Richard Cordray held a roundtable with industry representatives and consumer advocates and later hosted a town hall meeting with local leaders. The CFPB is focusing on researching how overdraft practices affect consumers, how consumers can adjust their accounts to reflect their desired overdraft protection, and developing methods which will allow consumers to more easily understand the costs and risks of overdraft programs. The CFPB has developed the “penalty fee box” as a thought-starter for a proposed additional disclosure on checking account statements highlighting the amount overdrawn and the fees assessed due to the overdrawn amount. Watch the roundtable discussion and town hall meeting. View the “penalty fee box” model.
The Federal Housing Finance Agency (FHFA) yesterday submitted a plan to Congress that would shrink Fannie Mae and Freddie Mac’s role in the housing market. The plan is intended to lay a foundation for whatever housing finance system Congress and the administration eventually agree upon. The FHFA plan identified three strategic goals for the next phase of the conservatorships: build a new infrastructure for the secondary mortgage market; contract the dominant presence in the marketplace gradually, while simplifying and shrinking operations; and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages. Under the plan, the GSEs would gradually increase guarantee fee -- or G-fee – pricing. ABA has been advocating for G-fees to be more reflective of the actual cost of the guarantee. In a letter last year to Secretary Geithner and Secretary Donovan ABA President and CEO Frank Keating wrote:
The current G fees are too low – the compensation being paid for what amounts to full government backing is simply not priced correctly. Raising the G fee can do much to encourage development of the private market and to begin to repay the government for its current support. By "dialing up" the G fees in an orderly and well-detailed manner, eventually the private market will find itself in a position where it is better able to compete with the GSEs for business.
Title X, Section 1100G of the Dodd-Frank Act requires the CFPB comply with the Small Business Regulatory Enforcement Fairness Act (SBREFA), designed to ensure small businesses are given a voice in the development of new regulations and are given assistance understanding and complying with those new regulations. Under SBREFA, the CFPB must:
The CFTC will hold an open meeting to consider one final rule and one proposed rule under the Dodd-Frank Act tomorrow at 9:30 a.m. The rules to be considered are on the following topics:
The CFPB will begin an inquiry into checking accounts today, specifically the impact of overdraft programs on the consumer. To begin the CFPB will be holding a town hall meeting in New York this afternoon. As part of the Agency’s inquiry the CFPB has requested public input on a sample ‘penalty fee box’ which would provide addition disclosures on checking account statements highlighting the amount overdrawn and the corresponding fees assessed to the account.
Over the weekend, the CFPB released another round of sample mortgage disclosures for testing. It is asking the community to review several points:
AEI held an event today to discuss the constitutionality of the Cordray recess appointment. Four lawyers with experience both in government and constitutional law discussed the key constitutional issues that are essential to understanding this controversy. They also discussed the precedents from similar disputes in the past and the implications for the future, if either the president’s position or the opponents' position is ultimately upheld by the courts. Read more or view the event video. Read the paper: Understanding the Centrality of the Appointments Clause as a Structural Safeguard of Our Scheme of Separated Powers
Did you miss the recent discussion on the Volcker Rule:
The Volcker Rule: Curbing Risk or Curbing the Economy?
The CFPB is requesting feedback from small businesses that make mortgage loans and conduct mortgage closings by establishing a Small Business Review Panel. The CFPB is required to comply with the Small Business Regulatory Enforcement Fairness Act (SBREFA), by forming a panel to discuss and respond to small business inquires and issues in regards to new regulations and compliance. The CFPB began combining mortgage loan disclosure forms in May 2011, attempting to integrate two federally required mortgage disclosures into a single form demonstrating the costs and risks of the loan in a clear format for borrowers. The CFPB has conducted one-on-one testing of the forms in 9 cities across the country, and has received more than 27,000 comments from the public, including industry, through online forms. The SBREFA panel will be given an overview of the proposals under consideration, a fact sheet summarizing the Small Business Review Panel process, and a list of questions and issues the CFPB will seek input on. The panel will provide CFPB with feedback on the benefits and burdens of complying with the proposals and may suggest alternatives that would minimize those burdens. The CFPB plans to formally release a proposed rule for comment in July. Read an overview of the proposals under consideration. Read the fact sheet summarizing the Small Business Review Panel process. Read the list of questions and issues on which the CFPB will seek input.
Tuesday
ABA President and CEO Frank Keating, during a CNBC television network interview yesterday, discussed some of the regulatory-burden challenges facing community banks. The interview focused mainly on a new Second Market pilot program to provide secondary-market liquidity for private community bank shareholders. Keating also worked in the fact that community banks are dealing with many challenges, including the regulators' higher capital requirements and the limitations of the SEC's 500-shareholder threshold.
You see ... an attack over ... the last number of months, not only of 6,600 pages of Dodd-Frank [regulations], but also limitations on small-bank income -- the limitation, for example, on interchange fees and overdraft fees. So there are head winds. The banks are largely healthy, but small communities in America need community banks. if the community bank closes, the town closes, and that should be worrisome to all of us.
ABA bankers filled both the panels and the audience yesterday at the FDIC Future of Community Banking Conference in Arlington, Va. The bankers echoed themes ABA officers emphasized last month when they met with Acting FDIC Chairman Martin Gruenberg to pledge support for the conference and the agency's ongoing effort to examine community banking's future. Those themes included the disproportionately heavy impact the Dodd-Frank Act, new capital standards, and other compliance and regulatory demands are having on community banks. Such burdens are making it difficult for community banks to serve their local markets and stay in business, and they are factors driving increasing industry consolidation, many bankers said. The FDIC will stage a series of similar events throughout the country in the coming months. Read the conference agenda and speakers’ remarks.
The House Financial Services Committee after approving an ABA-supported bill H.R. 4014, protecting confidential bank examination information provided to the CFPB, approved by voice vote H.R. 1838. H.R. 1838 - introduced by Rep. Nan Hayworth (R-N.Y.) – would eliminate the Dodd-Frank Act’s swaps “pushout” requirement, and clarify that taxpayer funds would not be used to prevent the receivership of any FDIC-insured swaps entity resulting from swaps activities. H.R. 3606 and H.R.2308 were also approved by voice vote yesterday with amendments which will address businesses’ access to capital markets and require cost-benefit analyses for SEC regulations. Read more about the approved rules and amendments.
In a comment letter this week, ABA and five other organizations suggested improvements to the prototype integrated mortgage disclosure forms issued in the seventh and eighth rounds of the CFPBs "Know Before You Owe" project. The letter suggested, among other things, how to shorten the forms, make them more consistent, clarify nomenclature and remove useless items. The letter also suggested the CFPB engage a cross-section of large, mid-size, and small lenders to pilot-test the forms in real-world transactions before they are finalized and implemented.
We also urge the CFPB to test the latest forms across the full range of product types through varying lenders and settlement service providers in different areas of the country.
The CFTC is requesting comments on a proposed rule for banks and nonbank financial companies which would restrict propriety trading and relationships with hedge funds and other covered funds. Specifically the CFTC is seeking comments concerning the potential impact the proposed rule may have on banking entities and the businesses in which they engage. Comments are due April 16th, 2012. Read more. The CFPB has issues a final rule for Regulation C, Home Mortgage Disclosure (HMDA), which will exempt certain depository institutions from collecting data in 2012. The exemption threshold will be adjusted so deposit institutions with assets of $41 million or less, previously $40 million, as of December 30th, 2011 will be exempt for collecting data in 2012. The rule will be effective February 15th, 2012. Read more. The CFTC is requesting comments on the provisions of the CFTC’s final rulemaking on “Provisions Common to Registered Entities” as required by the Dodd-Frank Act. The CFTC would collect comments on the industry filings by publication of documents related to the filings and a request for comments on the CFTC’s public Web site. Comments are due April 2nd, 2012. Read more.
The CFTC will be holding a public meeting on February 23rd at 9:30 a.m., to consider two final rules and a proposed rule under the Dodd-Frank Act.
The CFPB has released a Streamlining Regulations Feedback Web Tool to more easily allow submissions of suggestions for streamlining regulations recently inherited by the CFPB from other financial agencies. The CFPB is requesting suggestions to identify which provisions of these transferred regulations should be made the highest priority for updating, modifying, or eliminating because they are outdated, unduly burdensome, or unnecessary. Submit your comments to the CFPB. ABA has developed a “Prior Agency Rule vs. CFPB Republished Rule Chart” to give you access to the consumer financial protection rules both before and after they were transferred to the CFPB on July 21, 2011. View the ABA comparison chart.
The CFPB announced a proposed rule to include debt collectors and consumer reporting agencies under its nonbank supervision program. The proposal would require all debt collectors and credit reporting agencies deemed as “large participants” to be subject to the same supervision process as banks. The Dodd-Frank Act created the CFPB and gave it the authority to supervise “large participants,” which the CFPB is still working to define. A definition by rule must be initial issued by July 2012. The proposed rule would give the CFPB authority to supervise debt collectors with more than $10 million in annual receipts from debt collection activities and consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities. Read the proposed rule.
The House Financial Services Committee this morning approved, by voice vote, ABA-supported bill HR. 4014 by Rep. Bill Huizenga (R-MI) intended to ensure the protection of confidential information. ABA wrote to the Committee yesterday in support of the legislation, noting that it would rectify an oversight “by providing the same express rules regarding privilege of information for the Bureau as those already established for the other federal banking supervisors.” ABA also urged the Committee to approve legislation H.R. 1838 which would eliminate the “pushout” requirement in the Dodd-Frank Act. The bill, which the Committee also is considering this morning, would keep banks from having to form separate affiliates to conduct some swaps, allowing them to continue to offer “one-stop shopping” for customers who want it, ABA explained. H.R. 1838 also would prevent the creation of “competitive imbalances between U.S. banks and…foreign banks.”
A collection of non-bank corporations, including Boeing and General Electric, wrote a letter to regulators urging them to consider changes to the Volcker Rule. The companies wrote of concerns the proposed Volcker Rule would restrict their ability to raise capital and manage risk. The letter requested the agencies study the unintended consequences of the proposed rule and craft policies to avoid them.
The extensive and granular infrastructure created by the 298-page draft rule runs the risk of restricting financial institutions from providing businesses with the beneficial market making and underwriting functions that are needed to raise debt, issue equities and manage risk.
Chairman Ben Bernanke spoke today at the FDIC sponsored Future of Community Banking Conference about the important role community banks play in supporting the health of the economy as well as challenges these institutions face. Bernanke acknowledged community bankers concerns regarding the changing regulatory environment and specifically the Dodd-Frank Act. Recognizing community bankers fears Dodd-Frank regulations would sooner or later trickle to their institutions, Bernanke stated:
Congress enacted the Dodd-Frank Act largely in response to the "too big to fail" problem, and that most of its provisions apply only, or principally, to the largest, most complex, and internationally active banks. Community banks express concern that the more stringent requirements for larger institutions will eventually find their way to smaller firms; that, however, is not our intent, and we will work to ensure that it does not happen.
ABA has developed the “Prior Agency Rule vs. CFPB Republished Rule Chart” to give bankers access to the consumer financial protection rules both before and after they were transferred to the CFPB on July 21, 2011. The chart contains side-by-side links to the pre-transfer federal agency rules and the corresponding new rules the CFPB republished with technical and conforming changes to reflect the transfer of authority. View the chart. Track additional CFPB changes at ABA’s cfpBureau Watch page.