Dodd-Frank News Center

Auto Lenders to Refund $6.5 Million to Servicemembers for Deceptive Practices

This story appeared in Bank Digest.

U.S. Bank and its nonbank partner, Dealers' Financial Services, have been ordered to return approximately $6.5 million to servicemembers following a deceptive practices determination by the Consumer Financial Protection Bureau. According to the bureau, the companies developed a joint program that engaged in deceptive marketing and lending practices in violation of the Truth in Lending Act and the Dodd-Frank Act  while providing subprime auto loans to tens of thousands of active-duty military members.

The Military Installment Loans and Educational Services (MILES) auto loans program misrepresented the true costs and coverage of add-on products financed along with the auto loans, according to the CFPB. The MILES program required servicemembers to repay their auto loans using the military allotment system, which deducts payments directly from a military member's paycheck, without properly disclosing all associated fees and the way the program worked. The examination also found that the MILES program deceived servicemembers by understating the cost and scope of certain add-on products, such as a service contract, marketed and sold in connection with the loans.

Too Big to Fail Examined by Financial Services Committee

This story appeared in Bank Digest.

The Financial Services Committee held a hearing June 26, 2013, entitled "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts." The hearing focused on Titles I and II of the Dodd-Frank Act and examined whether these provisions achieve the objective of eliminating the possibility of taxpayer-funded support of large, complex financial institutions.

While some, such as committee Chairman Jeb Hensarling (R-Texas), felt designating a financial firm as a systemically important financial institution is the same as too big to fail, others, such as former Federal Deposit Insurance Corp. Chairman Sheila Bair, strongly disagreed. According to Bair, Dodd-Frank has abolished the implicit and explicit too-big-too-fail policies that were in effect before its enactment. Bair's testimony indicated there is more work to do, however, such as ensuring that large, complex financial institutions have sufficient long-term debt at the holding company level.

Student Loan Market Examined by Banking Committee

This story appeared in Bank Digest.

In an effort to find solutions for the troubled student loan market, the Banking Committee held a hearing June 25, 2013, to hear supervisory approaches and regulatory perspectives. The Consumer Financial Protection Bureau has estimated the size of the private student loan market to be about $150 billion as of year-end 2011. Since 2007, student debt has risen significantly, with student loans now second only to first mortgages as the largest category of consumer loans.    

The regulators discussed their efforts to balance sound lending principles with appropriate measures to avoid default. They emphasized the importance of focused oversight to ensure that institutions participating in the private student loan market operate in a safe and sound manner and in compliance with applicable federal consumer protection laws. John C. Lyons, Office of the Comptroller of the Currency Senior Deputy Comptroller, noted that, although national banks and thrifts have a long history of participation in the private student loan market, they are not dominant players and their current portfolio holdings of private student loans represent just 3 percent of the total $966 billion in student loans outstanding.

TARP Tracker Announced

This story appeared in Bank Digest.

The Treasury Department’s Office of Financial Stability has announced the availability of an enhanced TARP tracker that is intended to make it easier for the public to see how Troubled Asset Relief Program funds have been disbursed, who has received them and on what terms, and how much has been recovered to date.

Guilty Plea Announced in Bank Fraud Case

This story appeared in Bank Digest.

Gary Patton Hall Jr., Tifton, Ga., former President and CEO of Tifton Banking Company, Tifton, Ga., entered a plea of guilty on June 20, 2013, to conspiracy to commit bank fraud. Hall admitted that he conspired with others to obtain money, funds, credits, assets, securities, and other property of the Tifton Banking Company while carrying on a practice of replacing non-performing loans with new loans to make the bank appear financially stronger than it was. The actions caused monetary losses of approximately $2.8 million.

Hall continued these illegal activities even during the time that the bank applied for and received $3.8 million in Troubled Asset Relief Program assistance. On Nov. 12, 2010, the bank was closed by state and federal banking regulators and taken into receivership. The TARP funds were lost as a result of the bank’s failure. Sentencing is currently set for Sept. 30, 2013.

OCC Finalizes Lending Limits

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency has finalized a rule implementing Section 610 of the Dodd Frank Act, which amends the statutory definition of "loans and extensions of credit" to include credit exposures arising from derivative transactions, repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions. The rule finalizes an interim rule published in June 2012 that consolidated the lending limit rules applicable to national banks and savings associations.

Under the final rule, a temporary exception period is extended for three months so that compliance with the Section 610 provisions will not be required until Oct. 1, 2013.

Legislation Addresses Dodd-Frank Concerns

This story appeared in Bank Digest.

The House Financial Services Committee has marked up and approved four bills dealing with mandatory audit firm rotation, exemption of private fund advisers, the Dodd-Frank pay ratio requirement, and the Department of Labor and Securities and Exchange Commission adoption of fiduciary standards for brokers and advisers. Committee Chairman Jeb Hensarling (R-Texas) said that the bills are targeted, pragmatic, and hopefully bipartisan fixes to some provisions of the Dodd-Frank Act that many committee members may feel are unnecessary or unduly burdensome.

OIG Questions Process for Paying Mortgage Proceeds to Fannie Mae

This story appeared in Bank Digest.

The Federal Housing Finance Agency Office of the Inspector General has referred to information developed during a criminal investigation to raise a potential weakness in the way loan servicers pay mortgage loan proceeds to Fannie Mae. The servicer in question was collecting payments made during trial modifications under the Home Affordable Mortgage Program, the OIG said, but holding the funds in suspense accounts and, if permanent modifications were denied, returning the funds to the homeowners. The money should have been paid to Fannie Mae. According to the OIG, the weakness "may be systemic throughout the industry."

Waters Calls for SIGTARP Investigation into Claimed HAMP Eligibility Misconduct

This story appeared in Bank Digest.

Financial Services Committee Ranking Member Maxine Waters, D-Calif., has asked the Special Inspector General for the Troubled Asset Relief Program to look into claims that Bank of America instructed its employees to mislead consumers who were eligible for assistance under the Home Affordable Modification Program. Documents recently filed in litigation asserted that Bank of America directed employees to mislead consumers and obstruct their modification efforts in order to maximize the bank's fees. According to Waters, Bank of America has received more than $992 million in incentive payments under HAMP.

Swaps Transition Period Requests Granted

This story appeared in Bank Digest.

In January 2013, the OCC provided guidance on requests for a transition period pursuant to section 716(f) of the Dodd-Frank Act, which prohibits providing federal assistance to swaps entities. Based on requests it received, the agency has granted transition periods to Bank of America, N.A., Citibank, N.A., HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., Morgan Stanley Bank, N.A., U.S. Bank N.A., and Wells Fargo Bank, N.A.

In each case, the OCC found that a significantly shorter or no transition period could result in disorderly termination or divestiture of swaps activities and considerable disruption to swaps markets and financial markets that could weaken lending and result in a similar negative impact on job creation and capital formation.

• Bank of America
• Citibank
• Wells Fargo
• HSBC
• JPMC
• Morgan Stanley
• U.S. Bank