Dodd-Frank News Center

Agencies tell Warren, Brown that Wells Fargo has not satisfied consent order obligations

This story appeared in Bank Digest.                                   

Senators Elizabeth Warren (D-Mass) and Sherrod Brown (D-Ohio) have released new letters from the Federal Reserve Board, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau in response to inquiries they sent the regulators in March 2019 regarding Wells Fargo.

In separate letters sent to the OCC and CFPB and to the Fed, the senators had expressed concern about Wells Fargo's apparent unwillingness to compensate customers harmed by the bank's illegal auto-lending practices, despite an obligation to do so under its settlement with the OCC and CFPB, and urged the agencies to use their enforcement tools to remove then-CEO Tim Sloan. The senators' letter to the Fed also cited a recent Securities and Exchange Commission fine for overcharging retail mutual fund investors and urged the Fed to refrain from lifting Wells Fargo's growth restriction until Sloan was replaced.

According to Warren's press release, the agencies said in their response letters that Wells Fargo has not satisfied its obligations under existing consent orders, which require the bank to remediate customers harmed by its wrongdoing and impose reforms to end the bank's unlawful activity.

Cummings and Warren release GAO report on credit reporting agency regulation

This story appeared in Bank Digest.                                     

House Oversight and Reform Committee Chairman Elijah Cummings (D-Md) and Sen. Elizabeth Warren (D-Mass) have released the findings of a Government Accountability Office report that focuses on federal regulation of consumer credit reporting agencies and makes recommendations for actions to improve oversight and better protect consumers. They released the report in advance of a hearing of the House Oversight and Reform Subcommittee on Economic and Consumer Policy to examine the GAO's recommendations, as well as efforts by the Federal Trade Commission and the Consumer Financial Protection Bureau to oversee consumer reporting agencies' handling of consumer data.

According to an Oversight and Reform Committee press release, Cummings and Warren requested the report in September 2017, shortly after credit reporting agency Equifax publicly announced that the company had allowed a massive data breach that ultimately affected more than 145 million Americans. The release said the GAO recommended that the FTC be given stronger civil penalty authority to enforce laws that protect consumer data and that the CFPB improve its oversight and supervision of CRAs.

Banking Committee holds hearing on CFPB's report to Congress

This story appeared in Bank Digest.                                     

The Senate Banking Committee held a hearing entitled "The Consumer Financial Protection Bureau's Semi-Annual Report to Congress" on March 12, 2019.

The committee received the testimony of Consumer Financial Protection Bureau Director Kathy Kraninger on the Bureau's most recent semiannual report, which "outlines the CFPB's significant work between April 2018 and September 2018, including rulemakings and supervisory and regulatory activities," according to a prepared opening statement by Committee Chairman Mike Crapo (R-Idaho). Crapo said the report "also provides insight into what the CFPB plans to undertake in the coming work period."

Brown comments on regulatory decisions

This story appeared in Bank Digest.                                   

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has issued statements on several recent regulatory decisions involving: (1) the countercyclical capital buffer, which requires big banks to set aside extra capital to absorb potential loan losses in the event of an economic downturn; (2) a proposed rewrite of the Volcker Rule; and (3) proposed interpretive guidance from the Financial Stability Oversight Council that would change the process for designating nonbank financial companies as systemically important financial institutions.

Regarding the Federal Reserve Board's decision to keep the countercyclical capital buffer at its current level of 0 percent, Brown said he was disappointed with the decision and added, "Banks are doing well, but there are certainly growing risks in the economy. Now is exactly when the buffer should be used to make sure that the banks have enough capital for those eventual bad times."

Commenting on a potential revision of the proposed Volcker Rule rewrite, Brown said it was "no surprise that when Wall Street banks complained that the proposed rewrite of the Volcker Rule wasn't weak enough, Trump regulators went to work watering it down further."

Finally, Brown said the FSOC's new proposed guidance "ignores the damage done to our financial system during the last crisis and the risks still posed by shadow banks and other financial institutions. FSOC is no longer protecting financial stability or taxpayers."

Democrats urge CFPB to include compliance with Military Lending Act in examinations

This story appeared in Bank Digest.                                     

The entire Senate Democratic Caucus has sent a letter to Consumer Financial Protection Bureau Director Kathleen Kraninger requesting that she "fulfill the Consumer Financial Protection Bureau's (CFPB) mission by including compliance with the Military Lending Act (MLA) in the Bureau's routine lender examinations, as was its practice prior to November 2018."

According to a press release by Sen. Jack Reed (D-RI), one of letter's leaders, the MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and credit gouging, but the CFPB has discontinued the supervision of regulated entities for compliance with the MLA.

In their letter, the senators said, "The CFPB's existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB's authority in this regard has never been challenged." The senators also asked Kraninger to provide a justification for the Bureau's current practice of not examining for compliance with the MLA.

 

Democrats write to CFPB opposing changes to payday loan rule

This story appeared in Bank Digest.                                   

Senators Jeff Merkley (D-Ore), Dick Durbin (D-Ill), and Sherrod Brown (D-Ohio) have led a group of 47 senators in writing to Consumer Financial Protection Bureau Director Kathleen Kraninger to oppose the CFPB's proposal to revise its payday loan rule to eliminate underwriting requirements.

In their letter, the senators said, "Currently under the Payday Rule, lenders will be required to verify a borrower's income, debts, and other spending in order to assess a borrower's ability to remain current and repay credit, and provide an affordable repayment plan for borrowers who take out more than three loans in succession."

They went on to say, "Repealing this rule provides a green light to the payday lending industry to prey on vulnerable American consumers. In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance--an individual should not be offered a predatory loan that they cannot pay back." The senators asked for answers to several questions regarding the effect of the proposed changes.

CFPB moves to eliminate payday lenders' underwriting obligations

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau is proposing amendments to its 2017 final rule governing "Payday, Vehicle Title, and Certain High-Cost Installment Loans" that would allow lenders to extend short-term, high-cost loans to consumers without needing to satisfy regulatory underwriting requirements. In addition to proposing to eliminate the underwriting requirements, the Bureau is proposing to extend the Aug. 19, 2019, compliance date of the rule's mandatory underwriting provisions until Nov. 19, 2020, which would enable the CFPB to eliminate the requirements before they take effect.

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) issued a statement saying, "Eliminating these common sense protections will result in millions of hardworking families trapped in a cycle of debt and poverty." Similarly, House Financial Services Committee Chairwoman Maxine Waters (D-Calif) said she was "deeply troubled by the Consumer Bureau's proposal to gut a much-needed rule that would have reined in payday lenders and ensure consumers can afford to pay off their loans."

But House Financial Services Committee Ranking Member Patrick McHenry (R-NC) said the Bureau's "announcement on an updated payday lending rule and extended comment period will allow all stakeholders another chance to weigh in and establish new underwriting criteria. Most importantly, it will give consumers the opportunity to make their own decisions on credit availability needs for themselves and their families."

Portman introduces bill to create separate inspector general for CFPB

This story appeared in Bank Digest.                                   

Senator Rob Portman (R-Ohio) has introduced legislation to create a dedicated, Senate-confirmed inspector general for the Consumer Financial Protection Bureau. Several Republican senators served as original cosponsors of the bill.

According to Portman's release, the CFPB currently shares an IG with the Federal Reserve Board, but unlike most major agency IGs, the Fed's is a "designated federal entity IG" hired by the Fed Chairman, rather than one appointed by the President with the advice and consent of the Senate.

Portman issued a statement saying, "Installing a dedicated, Senate-confirmed internal watchdog at the CFPB will provide greater transparency and accountability at the CFPB. Given the vast powers of this large bureaucracy and the CFPB's insulation from congressional oversight, it is critical that it have an independent IG to ensure robust oversight."

Senators request update on FSOC's progress in reforming nonbank designation process

This story appeared in Bank Digest.  

Senators Thom Tillis (R-NC), Mike Rounds (R-SD), Tom Cotton (R-Ark), and David Perdue (R-Ga) have written a letter to Treasury Secretary Steven Mnuchin requesting an update on the progress being made by the Financial Stability Oversight Council to reform the systematically important designation process for nonbank financial companies in accordance with recommendations the Treasury Department made in a November 2017 report.

The Dodd-Frank Act established the FSOC with the authority to determine that certain nonbank financial companies would be supervised by the Federal Reserve Board and subject to enhanced prudential standards.

In their letter, the senators said Treasury "should prioritize the enactment of reforms recommended in its report as soon as possible" and that the FSOC must make "fundamental changes to the way in which it operates." They went on to say, "Particularly troubling is its history of flawed designations that have subjected individual companies to inappropriate and burdensome regulation by the Federal Reserve." The senators asked for answers to several questions on the implementation of the recommended reforms.

Perdue introduces bill to provide relief from costs of 'duplicative capital buffers'

This story appeared in Bank Digest.                                   

Senator David Perdue (R-Ga) has introduced a bill (S. 3682) intended to provide relief from financial regulatory burdens and extra costs that are passed down to small business owners, farmers, and consumers. According to Perdue's press release, after the 2008-2009 financial crisis, federal bank regulators increased the amount of capital held by banks for certain "risky" activities. This included the supplemental leverage ratio (SLR), which requires banks to hold a certain amount of capital.

But according to the release, the SLR did not account for the initial margin that customers pay, and as a result, duplicative capital buffers were built as banks had to hold additional capital aside. The cost of this trapped capital was ultimately passed on to the end users, such as farmers and business owners.