Dodd-Frank News Center

Blog Entry Outlines CFPB Ethics Rules

This story appeared in Bank Digest.

The ethics regulations adopted by the CFPB are the subject of a recent CFPB blog entry. The blog said that existing laws and regulations were found to be inadequate to address all of the bureau's issues, although some of them were adopted. The CFPB's own regulations address issues such as outside employment, investments, credit arrangements and conflicts of interest. One difference noted between the bureau's rules and those of other agencies was that while the other agencies have prohibited classes of financial investments, the CFPB rules prohibit specific financial investments based on the businesses the bureau will regulate.

Proposal Would Establish Supervisory Authority over Nonbank Covered Persons

This story appeared in Bank Digest.

The CFPB has proposed a rule that would govern the process by which a nonbank covered person may become subject to the supervisory authority of the bureau. The proposal seeks to establish an efficient, expeditious and fair process under which the CFPB would provide a nonbank covered person a notice stating that there may be reasonable cause to determine that it is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. The proposal establishes mechanisms to provide the nonbank covered person a reasonable opportunity to respond to the notice. In order to allow a respondent to inform the bureau of actions taken and progress made to reduce the risks to consumers after the issuance of an order, the respondent would be permitted, after two years and no more than annually thereafter, to petition the CFPB director for the termination of an order. The proposal makes clear that nothing in the rule affects the relief the bureau may seek in any civil action or administrative adjudication.

Field Hearing Discusses Prepaid Card Rule

This story appeared in Bank Digest.

Following publication of a prepaid card Advance Notice of Proposed Rulemaking, the CFPB held a field hearing in Durham, N.C. (webcast), to solicit public feedback. According to CFPB Director Richard Cordray, the bureau “is asking for input on how we can make the costs and risks of prepaid cards clearer and more accessible for consumers.” Cordray added, the bureau will use the input to determine how it “should go about regulating prepaid cards to better protect consumers and to provide clear rules for prepaid providers. 

Sen. Kay R. Hagan, D-N.C., applauded the bureau for hosting the hearing, stating that whether “applying for a mortgage, paying off student loans or choosing a credit card, American consumers need and deserve products and services that are safe and transparent.”

Bank Earnings At Highest Level Since 2007; Loan Balances Slip

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

Federal Deposit Insurance Corporation-insured banks earned $35.3 billion in net income for the first quarter of 2012, the highest level seen since the second quarter of 2007, and the eleventh consecutive year-over-year quarterly improvement. Loan balances, however, fell for the first time in four quarters.

First quarter net income rose 22.9 percent from the year-earlier period, as the average return on assets rose above the one percent level for only the second time since the second quarter of 2007. Over two thirds of all banks reported an improvement in their quarterly earnings, with only 10.3 percent unprofitable in the first quarter.

CFPB Moves Toward Prepaid Card Rules

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 CFPB has issued an Advance Notice of Proposed Rulemaking as a first step in drafting regulations for general purpose reloadable cards, also referred to as prepaid cards. According to the bureau, the rules will be intended to ensure that consumers' funds are protected and that card fees and terms are clear. The ANPR applies to access methods beyond actual cards, such as cell phone applications, but not to payroll cards, non-reloadable cards, gift cards, cards linked to bank accounts or other similar access devices.

FSOC Issues Hearing Procedures for Proceedings Under Dodd-Frank Act

This story appeared in Bank Digest.

The Financial Stability Oversight Council (FSOC) has issued hearing procedures for proceedings under Title I or Title VIII of the Dodd-Frank Act. The council has invited public comment on the hearing procedures. Comments must be received within 60 days after publication of the hearing procedures in the Federal Register.

Derivatives Hearing Focuses on JPMorgan Losses

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

The Commodities Futures Trading Commission’s Division of Enforcement has opened an investigation related to credit derivative products traded by JPMorgan Chase’s chief investment office, CFTC chairman Gary Gensler told the Senate Banking Committee.

At a hearing May 22, 2012 (webcast), Gensler said he was unable to provide any specific information about the investigation, but noted that “as press reports have shown, these are credit default swap indices that are under our jurisdiction for anti-fraud and anti-manipulation.” Gensler also told the panel that under the Dodd Frank Act the CFTC will be able to regulate swap dealing activity in a bank or bank affiliate, “but currently the American public is not protected in that way.”

Oversight Democrats Call for Hearing on JPMorgan's $2 Billion Loss

This story appeared in Bank Digest.

House Oversight and Government Reform Committee Ranking Member Elijah E. Cummings, D-Md., and committee member Rep. Peter Welch, D-Vt., have sent a letter to Chairman Darrell Issa, R-Calif., requesting that the committee hold a hearing with JPMorgan Chase & Co. Chairman and CEO Jamie Dimon and other executives involved in the trading strategy that resulted in losses projected to exceed $2 billion. Cummings and Welch stressed the need to understand the nature of the trade, the potential for additional losses, the impact of the trade on the financial market, and the significance of the event on the implementation of the Dodd-Frank Act and the “Volcker Rule.”

Treasury’s Massad Responds to New York Times Column Criticizing Bailout Appraisal

This story appeared in Bank Digest.

The Treasury Department’s Assistant Secretary for Financial Stability, Timothy G. Massad, has submitted a letter to the editor of the New York Times responding to a May 19, 2012, column by Gretchen Morgenson asserting that: the Treasury Department should calculate the “opportunity cost” of what a private investor would have charged and exclude income from the Federal Reserve Board when analyzing the direct fiscal costs of its financial stability programs; and Treasury has not clearly demonstrated that those initiatives had an overall positive impact on the economy. 

GAO Recommends Strengthening CFPB’s Internal Controls and Accounting Procedures

This story appeared in Bank Digest.

The Government Accountability Office has issued a report that presents additional information on the internal control and accounting procedure issues it identified during its audit of CFPB’s fiscal year 2011 financial statements. The report also recommends actions to address those issues. The recommendations are intended to improve management’s oversight and controls and minimize the risk of misappropriation of assets, misstatements in CFPB’s accounts and financial statements, and unidentified vulnerabilities over the security of its data.