Dodd-Frank News Center

CFPB Warns Against Loan Scams Following a Natural Disaster

This story appeared in Bank Digest.

The need to borrow money quickly to make needed repairs following a natural disaster can leave families susceptible to deceptive lenders, the CFPB has warned in a post on its blog. The agency pointed to home improvement loan scams in particular, urging consumers to be wary of the following warning signs:

• The contractor demands full payment up front or in cash only. The contractor has no physical address or refuses to show ID.
• The contractor requires the consumer to disclose personal financial information (perhaps to "speed up payment") to start the repair or lending process.
• The contractor steers the consumer toward a particular lender or tries to act as an intermediary between the consumer and a lender.
• The consumer is asked to sign something without enough time to review it.

Majority Leader Says House Will Move Regulatory Reform Legislation This Year

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.

The regulatory relief agenda in the House of Representatives will include repeal of specific regulations, as well as fundamental and structural reform of the federal rulemaking system through legislation like the REINS Act and the Regulatory Flexibility Improvements Act, said Majority Leader Eric Cantor (R-VA). He expects that both bills will be on the House floor in late November and early December.

Regulations from the Executive in Need of Scrutiny Act (REINS), HR 10, would require Congress to take an up-or-down, stand-alone vote on all new major regulations before they can be enforced. Major regulations are defined as those that have resulted in or are likely to result in an annual effect on the economy of $100 million or more; a major increase in costs or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or U.S. competitiveness.

CFPB Discusses Pitfalls in Co-Signing College Credit Applications

This story appeared in Bank Digest.

With colleges and universities beginning new academic years, the Consumer Financial Protection Bureau has discussed the problems that may arise if a friend or classmate asks to co-sign a credit card application or private student loan. The CFPB noted that, “While it seems like an easy way to help out a friend, co-signing any loan application is a serious contract and you’re on the hook if your friend doesn’t pay up. Not paying can tarnish your credit history.” The CFPB provided steps a person can take to avoid problems in the future and how to steer a friend or classmate in another direction.

Senate Legislation Would Expand Unfunded Mandates Reform Act to Bring SEC and CFTC Within Its Embrace

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 introduced by Senator Rob Portman (R-OH) would strengthen the Unfunded Mandates Reform Act of 1995 by bringing the SEC, CFTC and other independent federal agencies within its mandate. UMRA was a bipartisan effort to prevent Congress and federal regulators from blindly imposing major economic burdens on the private sector and on state, local and tribal governments without weighing the costs and benefits, said Senator Portman. Signed by President Bill Clinton in 1995, the Unfunded Mandates Reform Act was bipartisan legislation that basically says that regulators have to evaluate a regulation’s cost and find less costly alternatives before adopting a major rule.

Large Loan Commitment Credit Quality Improves for Second Consecutive Year

This story appeared in Bank Digest.

The credit quality of large loan commitments owned by U.S. banking organizations, foreign banking organizations and nonbanks improved in 2011 for the second consecutive year, according to the Shared National Credits Review for 2011. A loan commitment is the obligation of a lender to make loans or issue letters of credit pursuant to a formal loan agreement. Total criticized loans declined more than 28 percent, the OCC said, although the percentage of criticized assets remained high compared to pre-financial crisis levels. Loans rated as doubtful or loss--the two weakest categories--fell 50 percent. The OCC cited better operating performance among borrowers, debt restructurings, bankruptcy resolutions and ongoing access to bond and equity markets as reasons for the continued improvement. The agency also observed that approximately 60 percent of criticized assets were “poorly underwritten loans originated in 2006 and 2007.”

TARP Sales Return More than $875 Million in First Two Quarters

This story appeared in Bank Digest.

During the first six months of 2011 the Treasury received more than $886 million in gross proceeds from the disposition of 20 warrant positions through repurchases and auctions of institutions in the Capital Purchase Program, Targeted Investment Program and Asset Guarantee Program, according to the latest TARP Warrant Disposition Report. Since TARP began, the Treasury has received more than $9 billion in gross proceeds from the disposition of similar warrants. More than 75 percent of the $413 billion disbursed through TARP has been recovered, the Treasury  said.

Bernanke Says Banking System “Generally Much Healthier Now”

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

Federal Reserve Board Chairman Ben Bernanke said the U.S. banking system is “generally much healthier now,” with banks holding substantially more capital and credit availability improving.

Speaking at the Fed’s annual Economic Symposium in Jackson Hole, Wyo., Bernanke noted that credit availability does remain tight in some categories, such as small business lending, where balance sheets of potential borrowers remain impaired.

Council of Institutional Investors Urges SEC to Seek En Banc Review of DC Circuit Panel Proxy Access Ruling

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.

Noting that proxy access remains its number one priority, the Council of Institutional Investors has urged the SEC to seek a rehearing en banc of a DC Circuit panel’s recent ruling vacating the proxy access rule, Exchange Act Rule 14a-11, because it was adopted in an arbitrary and capricious manner. In a letter to the SEC, the Council said that the panel’s failure to follow established precedent provides a strong basis for the Commission to pursue a petition for rehearing before the full DC Circuit in the proxy access case. The panel’s decision does not merely delay the implementation of a critically important rule designed to benefit long-term investors and the markets, said the Council, it also imposes unnecessary costs on the Commission by requiring it to consider anew issues it already fully and reasonably examined.

Fed Study Says Regulation Not Cause of Subprime Problems

This story appeared in Bank Digest.

Neither the Community Reinvestment Act nor the affordable housing goals of the federal government sponsored housing enterprises were significant causes of the recent problems in the subprime mortgage market, according to a Federal Reserve Board staff working paper. The paper, described as "tentative," notes the existence of studies with contrary findings, but says that these studies were based on "associations between aggregated national trends" rather than empirical data. Using empirical data to look for a direct link between the applicable regulations and loan performance, the paper concludes that "with few exceptions, the evidence is scant."

Corporate Secretaries Society Urges Gradual Phase-In of SEC Conflict Minerals Disclosure Regulations

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.

In a letter to the SEC, the Society of Corporate Secretaries and Governance Professionals asked that the due diligence, disclosures and reporting required under the conflict minerals provisions of Dodd-Frank be phased-in similar to the approach taken by the SEC with respect to the introduction of required reporting on internal controls mandated by the Sarbanes-Oxley Act. A transitory phase-in would recognize the fact that the infrastructure necessary to comply with the SEC proposed regulations implementing Section 1502 of Dodd-Frank does not currently exist, said the Society, and thus would minimize the undue burden and cost imposed on companies in the near future. The Society also said that the cost of compliance with the regulations will be significantly greater than the SEC’s estimate.