Financial Reform News Center

Bernanke Cautious on Possible Mortgage Principal Reduction

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Reduction of mortgage principal resulting from a potential major settlement between the country’s largest lenders, state attorneys general, and the Obama administration “certainly has some advantages,” but a lot depends on how it is structured, as well as the other alternatives under consideration, Federal Reserve Board Chairman Ben Bernanke said Jan. 25, 2012.

CFPB Announces ROAM Database Partnership

This story appeared in Bank Digest.

Officials from the CFPB, Department of Defense, and Federal Trade Commission and the New York Attorney General have announced the development of a database to combat consumer financial frauds directed at military members, veterans and their families. The Repeat Offenders Against Military (ROAM) Database will track completed enforcement actions against companies and individuals who repeatedly scam military personnel. “As a former Ohio Attorney General, I know how frustrating it is to expose a scam and then see it take root in another state. The ROAM database will help law enforcement crack down on frauds that cross state lines,” said CFPB Director Richard Cordray at a press conference. “ROAM is a huge step forward in our mission to improve consumer protection for the military community.”

Garrett Applauds Passage of Swaps Bill by Agriculture Committee

This story appeared in Bank Digest.

Rep. Scott Garrett, R-N.J., Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, applauded passage of the Swap Execution Facility Clarification Act (H.R. 2586) by the House Agriculture Committee with wide bipartisan support. Introduced by Garrett in July 2011 and passed by the Financial Services Committee in November, the bill would require the Commodities Future Trading Commission and the Securities and Exchange Commission to finalize swap execution facilities rules that allow the swaps market to “evolve towards the best form of execution over time.”

CFPB Begins Third Round of Settlement Disclosure Tests

This story appeared in Bank Digest.

As part of its “Know Before You Owe” initiative, the CFPB has released two new settlement disclosure prototypes (Butternut Bank and Hemlock Bank) that will be used in a third round of consumer testing. The prototypes were developed through feedback received in earlier testing rounds. In the latest round of testing, consumers will be asked to compare the two disclosure prototypes to the disclosure a mortgage applicant would receive at the time of applications, the CFPB stated in a post on its blog. To evaluate the prototypes, consumer testers are asked to consider the following questions: 

Walsh Discusses Securitization and Derivatives at Securities Industry Conference

This story appeared in Bank Digest.

Acting Comptroller of the Currency John Walsh on Jan. 24, 2012, addressed members of the American Securitization Forum Annual Conference on issues related to Dodd-Frank Act rulemaking in the areas of securitization and derivatives. Walsh noted that the rulemaking goal of the agencies “must be to strike a balance that meets the objectives of Dodd-Frank, while enabling financial firms to continue conducting business in a manner that is safe, sound, and profitable; ensuring appropriate monitoring and management of risk; promoting healthy and liquid markets; and supporting a strong and growing economy.” He also remarked on the status of the Dodd-Frank rulemaking process, especially the “Volcker Rule” proposal. On that matter, Walsh said, “As the interagency group drafted the proposal, it became clear that this rule could have a significant impact on securitizations; so we wrote more than two dozen questions directly related to securitization, asking commenters to supply us with additional information.”

TARP Executive Compensation Rulings Report Issued

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Office of the Special Inspector General for the Troubled Asset Relief Program has released its evaluation of the process designed by the Office of the Special Master for TARP Executive Compensation (OSM) to set pay packages and OSM's decisions on compensation for the top 25 employees at the companies that received exceptional assistance under TARP. Under this evaluation, SIGTARP assessed the criteria used by OSM to evaluate and make determinations on each company's executive compensation and whether OSM consistently applied criteria to all seven companies.

Obama Targets Large-Scale Financial Fraud, Risky Mortgage Lending

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

President Barack Obama said he will direct the Attorney General to establish a Financial Crimes Unit of investigators to work with U.S. attorneys in going after large-scale financial fraud. The president also announced he would expand investigations into the abusive lending practices and packaging of risky mortgages that created the housing crisis.

In his January 24, 2012 State of the Union speech, Obama noted that some financial firms violate major anti-fraud laws “because there’s no real penalty for being a repeat offender.” He urged lawmakers to pass legislation that makes the penalties for fraud count.

Cordray Says His Appointment “Valid,” Committed to Moving Forward

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Consumer Financial Protection Bureau Director Richard Cordray told Congress that his recess appointment earlier this month was “valid,” and that he will now move forward with the rulemaking responsibilities assigned to the new agency.

Appearing January 24, 2012 before a House Oversight and Government Reform subcommittee, Cordray was asked by the full committee chairman Rep. Darrell Issa, R-Calif., if he had looked at ways in which, if his appointment was ultimately ruled to be invalid, the work that he is currently overseeing would remain intact. “In other words, do you have a plan B?” Issa asked.

Final Rule to Increase Transparency and Reliability of Remittance Transfers

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau adopted a final rule that will increase protections for consumers who transfer money internationally. Under the new rule, which implements Section 1073 of the Dodd-Frank Act, remittance transfer providers will generally be required to disclose the exchange rate and all fees associated with a transfer so that consumers know exactly how much money will be received on the other end. The rule also requires remittance transfer providers to investigate disputes and remedy errors.

Payday Lenders to Get CFOB Attention

This story appeared in Bank Digest.

“[T]he Bureau will be giving payday lenders much more attention,” CFPB Director Richard Cordray told a Birmingham, Ala., field hearing. According to Cordray, the bureau's information is that about 19 million American families use payday loans, paying lenders more than $7 billion in fees each year. These borrowers tend to have fewer assets, less income and lower net worth than average, he said, and are disproportionately likely to be members of racial minorities. Cordray stressed that the CFPB still is gathering information on short-term lending and has not yet reached any conclusions on what regulations might be needed. The bureau is aware that payday loans can provide a necessary source of credit, but also is aware of illegal or abusive practices it intends to stop.