Dodd-Frank News Center

FTC Staff Comments on CFPB Proposed Prepaid Card Rules

This story appeared in Bank Digest.

In a comment submitted to the Consumer Financial Protection Bureau, FTC staff expressed support for protecting users of general purpose reloadable (GPR) cards and for the CFPB's proposal to solicit information about the costs and benefits of extending additional protections to these cards. The FTC noted that the FTC Act protects consumers using GPR cards from unfair or deceptive practices, but such consumers currently are not protected by certain federal laws that apply to different types of payment cards, such as credit and debit cards. GPR card users may not understand that these protections are lacking.

Clearing House Submits SCCL Study to Fed

This story appeared in Bank Digest.

The Clearing House Association has provided the Fed with a study on the single counterparty credit limit (SCCL) as proposed by the Fed in implementing Sec. 165(e) of the Dodd-Frank Act. The study draws on data collected from 13 commercial banks representing a majority of the 10 largest U.S. banking organizations by assets, including the U.S. operations of two large foreign banks, three of the largest U.S. custody banks and two large regional banks. The letter stated that, “Given the presence of these firms in all of the primary credit markets, we are confident that the results of this study are representative of the impacts of the proposed SCCL rules on the U.S. financial markets.” The Clearing House also noted that it strongly supports an organization-wide SCCL, including a 25-percent concentration limit as statutorily required by the Dodd-Frank Act. “We recognize that implementing the SCCL is a complex undertaking and we submit this study to assist in your ongoing analysis of this issue.”

Fed Finalizes Rule on Supervision of Financial Market Utilities

By J. Preston Carter, J.D., LL.M., Editor, Financial Privacy Law Guide, CCH Federal Banking Law Reporter, State Banking Law Reporter and Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Federal Reserve Board has finalized a rule, Reg HH--Financial Market Utilities (12 CFR 234), that establishes a regulatory regime for financial market utilities that the Financial Stability Oversight Council has deemed to be systemically important. Financial market utilities (FMUs) are entities such as payment systems, central securities depositories and central counterparties that provide the essential infrastructure to clear and settle payments and other financial transactions. Under the Dodd-Frank Act, the FSOC can deem such an entity to be systemically important if its failure or a disruption of its activities could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system.

Fed Finalizes Swipe Fee Fraud-Prevention Rule

This story appeared in Bank Digest.

The Federal Reserve Board announced that it has finalized a rule under which card issuers that implement qualifying fraud-prevention standards will be able to seek permission to charge an extra 1 cent per transaction in “swipe fees”—the fees that debit card networks can charge for processing transactions. If an issuer meets these standards and wishes to receive the adjustment, it must certify its eligibility to receive the adjustment to the payment card networks in which it participates. The final rule amending Reg II—Debit Card Interchange Fees and Routing (12 CFR 235) revises provisions that are currently in effect as an interim final rule issued in June 2011.

President Obama Issues Veto Message on House-Passed Regulatory Freeze Legislation

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and Author of Jim Hamilton's World of Securities Regulation.

The Obama Administration has issued a veto message on the Red Tape Reduction and Small Business Job Creation Act , H.R. 4078, which would prohibit any federal agency from taking any significant regulatory action until the Secretary of Labor reports that the Bureau of Labor Statistics average of monthly unemployment rates for any quarter after the enactment of the Act is 6 percent or less. H.R. 4078, which passed the House by a vote of 245-172, would also require the SEC to conduct a more thorough cost-benefit analysis of proposed regulations.

According to the Administration's Statement of Policy, H.R. 4078 would undermine critical public health and safety protections, introduce needless complexity and uncertainty in agency decision-making, and interfere with agency performance of statutory mandates. The Administration is committed to ensuring that regulations are smart and effective, that they are tailored to advance statutory goals in the most cost-effective and efficient manner, and that they minimize uncertainty. But H.R. 4078  would impede the ability of federal agencies to protect public health, welfare, safety, and our environment, as well as to promote economic growth, innovation, competitiveness, and job creation.

FSOC Hearing Focuses on Dodd-Frank and LIBOR

By John M. Pachkowski, J.D., Editor, CCH Federal Banking Law Reporter, Coordinating Editor, 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 a Senate Banking Committee hearing (webcast) on the annual report submitted by the Financial Stability Oversight Council, Sen. Richard Shelby, R-Ala., cited economic statistics from the report and noted “If the Council wanted to understand why unemployment is high and mortgage lending is constrained, an examination of Dodd-Frank would have been a good place to start. More fundamentally, the Council’s report overlooks the serious structural flaws in our regulatory system, which Dodd-Frank only made worse.” He added, “Unfortunately, Dodd-Frank … solidified the close relationships between regulators and big banks by maintaining their pre-existing prudential regulators. In contrast, the regulator for the smallest banks, the OTS, was abolished. It also protected the big banks from bankruptcy by creating a new resolution mechanism to ensure that large institutions do not fail.” Shelby further stated, “To add insult to injury, the very same regulators that missed the warning signs were then closely consulted on how to draft Dodd-Frank. In fact, staff from the very same agencies that failed us were detailed to Congress to help write the bill. This is the type of thing that outrages the American people, but is sadly business as usual in Washington.” He concluded, “Secretary Geithner is no stranger to bank bailouts or bank regulation. He has played a key role in financial regulation for the past two decades. However, recent news reports about his handling of alleged LIBOR manipulations suggest that he, too, may have tempered his response to what can be characterized as a significant problem within the banking industry.”

House Passes Regulatory Freeze Legislation That Also Imposes Added Rulemaking Duties on SEC, Including 404(b) Impact

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and Author of Jim Hamilton's World of Securities Regulation.

The House of Representatives passed with a bi-partisan vote of 245-172 the Red Tape Reduction and Small Business Job Creation Act , H.R. 4078, to prohibit any federal agency from taking any significant regulatory action until the Secretary of Labor reports that the Bureau of Labor Statistics average of monthly unemployment rates for any quarter after the enactment of the Act is 6 percent or less. H.R. 4078 would also require the SEC to conduct a more thorough cost-benefit analysis of proposed regulations.

Brown Pushes for SAFE Banking Act

This story appeared in Bank Digest.

With the nation's six largest Wall Street banks controlling assets equal to 64 percent of U.S. gross domestic product, Sen. Sherrod Brown, D-Ohio, emphasized the importance of legislation he introduced in May 2012 that would place size and leverage limits on the nation's largest financial institutions. According to Brown, the Safe, Accountable, Fair & Efficient (SAFE) Banking Act of 2012 “would hold Wall Street accountable, prevent future bailouts, and protect American homes, jobs, pensions, and businesses.”

Brown pointed to comments by former Citigroup Chairman and CEO Sanford “Sandy” Weill, who told CNBC on July 25 that we should “split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail.”

According to Brown, “Sanford Weill is one of many banking industry experts who have observed that too big to fail is often too big to manage. Allowing Wall Street megabanks to grow so large and over-leveraged that their downfall would send ripples throughout our entire economy isn't fair to taxpayers and it isn't fair to mid-sized and community banks who don't enjoy the implicit guarantee from the Treasury Department that comes with too big to fail status.”

Legislation Requiring Fed Audit Passes House

This story appeared in Bank Digest.

The Federal Reserve Transparency Act of 2012, H.R. 459, was approved by the House of Representatives by a vote of 327 to 98 on July 25, 2012. The legislation would allow for audits of the Federal Reserve Board's balance sheet, which contains currently unaudited monetary policy operations and lending to foreign central banks but would make no changes to the Fed's independent reporting and decision-making authority. It would require a one-time audit to be completed by the Government Accountability Office and a report submitted to Congress.

Former Senator Opines on Dodd-Frank

This story appeared in Bank Digest.

The Financial Services Committee has reported on a blog post by former Senator Ted Kaufman, D-Del., in The Hill stating that he feels it is clear that “Dodd-Frank, however good its intentions, has not and will not protect us against another meltdown.” Kaufman noted that, prior to the financial crisis, the largest banks' assets amounted to 43 percent of the U.S. economy, and by the end of 2011 that number had increased to 56 percent. He said this is why Sen. Sherrod Brown, D-Ohio, has reintroduced the amendment they wrote before Dodd-Frank passage, which would place size limits on banks and restrict any one bank's assets to 10 percent of U.S. gross domestic product. “Solutions such as reinstating Glass Steagall or enacting Brown Kaufman are clearly available and desperately needed,” Kaufman asserted.