Dodd-Frank News Center

Fed Finalizes “Swipe Fee” Limit Rule

This story appeared in Bank Digest.

The Federal Reserve has finalized a rule implementing a provision of the Dodd-Frank Act calling for limits on “swipe fees,” the fees that debit card networks can charge for processing transactions. The rule also sets limits on network exclusivity arrangements and routing restrictions. The limit will apply only to issuers that have assets of $10 billion or more, when combined with all of their affiliates. 

According to the Fed's initial proposal, the average swipe fee currently is 44 cents per transaction; however, based on the Dodd-Frank Act requirement that the fee be “reasonable and proportional to the cost insured by the issuer with respect to the transaction,” the Fed proposed a limit of only 12 cents. Under the final rule, the maximum fee will be 21 cents per transaction plus the product of multiplying the value of the transaction by 5 basis points. According to the Fed, this would result in a swipe fee of about 23 cents on a $39 transaction, which was said to be the average amount of a debit card transaction. The rule does not specify a maximum fee that can be generated by this calculation.

CFPB Launches Second Round of Mortgage Disclosure Reform

This story appeared in Bank Digest.

As part of its Know Before You Owe, project, the CFPB is seeking comments on a second round of mortgage disclosure forms. . Both consumers and mortgage industry participants may comment on the forms using an electronic feedback form on the CFPB's website

In the first round, the CFPB provided two prototype forms—Ficus Bank and Pecan Bank—with different version of a front page or “shopping page.” In this second round, the model forms—Redbud Credit Union and Dogwood Credit Union—have different information on the back page which deals with closing costs. The different information provide alternative approaches to showing closing costs, so that the CFPB can focus in on how much detail is helpful to consumers

Senate Democrats Warn Against GOP Proposed Cuts to SEC

This story appeared in Bank Digest.

Senators Jack Reed, D-R.I., Charles E. Schumer, D-N.Y., Dick Durbin, D-Ill., and Robert Menendez, D-N.J., have urged the House Republican leadership to give the Securities and Exchange Commission the resources it needs “to prevent another financial crisis and fight financial crime across the country.” In a letter to House appropriators, the senators criticized the Republican plan for the SEC as unacceptable and counterproductive. The senators urged House leaders to work with the Senate to provide full funding for the agency in the final appropriations bill. “With our markets and economy still struggling to recover from the worst financial crisis in 80 years, this is hardly the time to handcuff the primary cop on the beat in our financial markets,” the senators wrote in the letter.

Committee Democrats Call for Implementation of Dodd-Frank Reforms

This story appeared in Bank Digest.

Financial Services Committee Ranking Member Barney Frank, D-Mass., along with Maxine Waters, D-Calif., Stephen Lynch, D-Mass., and Joe Courtney, D-Conn., called for implementation of reforms in Dodd-Frank Act in a joint statement. “The lack of transparency--particularly in derivatives markets--was a major cause of the recent crisis and remains a clear and present danger to the financial system,” the representatives said in the statement. “Sadly, even with another potential financial disruption demonstrating the clear need for more openness and accountability, Congressional Republicans continue their efforts to delay, defund, and defang these and other provisions that will make our markets safer and our regulators more effective.”

GAO Releases Report on Financial Literacy Program Certification

This story appeared in Bank Digest.

The Government Accountability Office has released a report to Congress on the feasibility of a process for certifying financial literacy providers. The report, mandated by the Dodd-Frank Act, concludes that a federal process for certifying financial literacy providers appears to be feasible, but also would pose challenges. In preparing the report, the GAO reviewed relevant literature, focusing on evidence-based evaluations of financial literacy programs or approaches and conducted interviews in the federal, nonprofit, private and academic sectors. The agency also examined the lessons learned from the approval processes of the Trustee Program and HUD. According to the report, federal certification would require financial and staff resources for administering the process. Moreover, most financial literacy stakeholders with whom GAO spoke cited additional concerns, including the potential cost and administrative burden to certified entities, the challenge of creating a single process for certifying such a diverse field and skepticism that certification would improve the quality of financial education providers. Further, the lack of consensus about which financial literacy strategies and approaches are most effective would make certification challenging, the report concluded.

Regulators Update Online Banking Security Guidelines

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

Federal regulators, responding to an “increasingly hostile” online environment, are concerned that online banking customer authentication methods and controls, implemented in response to recommendations made in 2005, have become less effective.

The Federal Financial Institutions Examination Council issued a supplement June 28, 2011, to its original 2005 guidance, noting that there have been “significant changes” in the threat landscape.

CFPB Discusses AMTPA Amendments

This story appeared in Bank Digest.

The CFPB has issued a bulletin noting that, on July 21, 2011, amendments to the Alternative Mortgage Transaction Parity Act take effect pursuant to Sec. 1083 of the Dodd-Frank Act. The amendments affect what laws will apply to mortgage loans issued by state chartered or licensed lenders. The Dodd-Frank Act amended AMTPA's definition of “alternative mortgage transaction.” As of July 21, 2011, AMTPA will no longer operate to preempt certain general state restrictions on mortgage transactions, including restrictions on prepayment penalties or late charges. Also, as of the effective date, the authority for issuing regulations to implement AMTPA will transfer from the Office of the Comptroller of the Currency, National Credit Union Administration and Office of Thrift Supervision to the CFPB.

Housing Finance Reform Focus of Treasury Department Speech

This story appeared in Bank Digest.

In remarks before the Policy Summit on Mortgage Finance Reform in Washington, D.C, Treasury Under Secretary Jeffrey A. Goldstein discussed the future of housing finance. He noted that “to get the job done on housing finance reform, we are committed to working with Congress,” and “we want to get this done right and in a reasonable time.” Goldstein added, the Obama administration supports a housing finance market that provides liquidity and capital to support affordable rental options and help alleviate the burdens that many low-income households face. He noted, however, that private credit markets have generally underserved multifamily rental properties that offer affordable rents, preferring to invest in high-end developments instead. On the other hand, Fannie Mae and Freddie Mac developed expertise in profitably providing financing to the middle of the rental market, where housing is generally affordable to moderate-income families. “As we wind down the GSEs, maintaining funding to this segment of the market, including through private channels, is critical.”

Bair Discusses Challenges Posed by “Short-Termism”

By John M. Pachkowski, J.D., Editor, CCH Federal Banking Law Reporter and Bank Digest; Author, Anti-Money Laundering and Bank Secrecy: Compliance and the USA PATRIOT Act; co-Author CCH Financial Privacy Law Guide and Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

In her last speech as Federal Deposit Insurance Corp. Chairman, Sheila C. Bair discussed the “pervasive short-term thinking” that helped to bring about the financial crisis. Bair delivered her remarks before the National Press Club in Washington, D.C. She noted that short-termism refers to the long observed tendency—which we all share, to one degree or another—to unduly discount outcomes that occur far in the future; that “part of our tendency toward short-termism appears to be biological;” it “also grows out of the institutional rules that govern our behavior;” and “short-termism also holds sway in the realm of politics.”

Legislation Repealing Pay Ratio Provision of Dodd-Frank Passed Out of House Financial Services Committee

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and Hedge Funds and Private Equity: Regulatory and Risk Management Update.

Legislation repealing a provision of Dodd-Frank that would require public companies to disclose their median annual total compensation of all employees was reported favorably out of the House Financial Services Committee to the full House. The Burdensome Data Collection Relief Act, HR 1062, would remove Section 953(b) of Dodd-Frank, which directs the SEC to adopt rules requiring disclosure of the median of the compensation of the company’s employees and the ratio between the median of the annual total compensation of the employees and the annual total compensation of the issuer's chief executive officer. The vote was 33-21. The legislation has the support of the Society of Corporate Secretaries and Governance Professionals.