Richard's Rapid Fire - April 22, 2016

Judge Dings CFPB for Stepping “Well-Outside” Its Authority

The CFPB was dealt another blow this week when a D.C. District Court Judge ruled the Bureau had stepped “well-outside” its authority.  Judge Richard Leon put a stop to the Bureau’s investigation into a for-profit accreditation organization and dismissed the related enforcement action.  The court found the CFPB acted outside its jurisdiction because Accrediting Council for Independent Colleges and Schools (ACICS) was involved in the accreditation process of for-profit schools, not the business of consumer financial products or services.  Judge Leon wrote, “Put simply, this post-hoc justification is a bridge too far!  As ACICS has repeatedly and accurately explained, the accreditation process simply has no connection to a school’s private student lending practices.”  He concluded his decision with a piece of advice for the Bureau:  "Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress."  This is another example of why a bipartisan commission is needed at the CFPB, and I sincerely hope it is the last one we get before we finally make a commission law.

 

CFPB Study Could Provide Insight into Small-Dollar and Overdraft Rulemaking

On Wednesday, the CFPB released a study which found attempts by online lenders to debit payments from a consumer's checking account add significant costs to online payday loans.  Per the study, half of online borrowers are charged an average of $185 in bank penalties due to a failed debit attempt by the lender. The CFPB also reported one third of online borrowers charged a bank penalty ended up having their account closed because the repeated attempts to collect the debt failed.  Clearly, the Bureau is trying to shore up its arguments to include online payday lending, and perhaps overdraft, in their upcoming rulemaking.  We at CBA expect the agency to propose a small-dollar rule in mid-May and to start the overdraft rulemaking process by late summer.

 

Earnings Reports Show Good News From Retail Side

Bank’s Q1 earnings reports continued to roll in this week.  When looking at the retail sides of the banks, things seem to be performing better.  Alternatively, the slumping energy sector, coupled with stalled investment portfolios, proved to be problematic for a number of institutions.  The Financial Times’s Alistair Gray reported on the nine percent revenue drop at the six largest U.S. banks—the steepest year-over-year decline in total revenue in five years.  He also noted key cost cutting measures failed to offset the revenue decline at these banks, resulting in a net income drop of 24 percent year-over-year to $18 billion.  Given the presidential election and turmoil in both the European and Asian markets, it will be interesting to see how the year unfolds.

 

Consumer Confidence Falls  

For the fourth consecutive month, consumer confidence in the economy continued to decline. This time, consumers cited a slowing economy and lower wage gains. According to the University of Michigan's preliminary index, consumer sentiment is down from 91 to 89.7 over the past month.  Good thing it is only April. 

 

PNC Financial Services Selects Joe Belew Award Recipient

CBA members are committed to delivering financial services that meet the needs of their customers. At CBA LIVE: Leadership Unplugged, we were pleased to honor PNC Financial Services with the Joe Belew Award for their unwavering commitment to financial inclusion. This week, Troy Ransdell, Michelle Floden and Deborah Williams of PNC presented its $5,000 prize to the Executive Director of Volunteers of America Mid-States (VOA), Jennifer Hancock. In an effort to promote financial inclusion, PNC partners with VOA to provide monthly financial education workshops. Congratulations to both organizations on awards well deserved!

Troy Ransdell, Michelle Floden and Deborah Williams of PNC Financial Services presenting the bank's 2016 Joe Belew Award prize to Jennifer Hancock of Volunteers of America Mid-States.

 

Three Things to Know to Be In the Know

Exit Polls Find High Distrust of Wall Street

Say goodbye to your neighborhood bank branch

M&T’s Wilmers upbeat about WNY economy

 

CFPB Crystal Ball: What's to Come?

  • Final Prepaid Rule – ETA within 6 weeks
  • Proposed Arbitration Rule – ETA within 6 weeks
  • Proposed Small Dollar Lending Rule – ETA within 6 weeks
  • SBRFA Panel on Overdraft – ETA July/August

 

Lagniappe

Former CBA board member David Bohne was named CEO of Broadway Bank. Previously, David served CBA member USAA Federal Savings Bank for eight years.  We wish David all the best!

Bill Hippensteel was named Executive Vice President, Director of Product Development at Commerce Bank. Bill is a current faculty member at CBA’s Executive Banking School.

René Jones will now oversee mortgage and consumer lending at M&T Bank. René will continue in his role as Vice Chairman, but will relinquish his title as CFO to Darren King.  Darren currently serves as head of M&T’s Retail and Business Banking division.

 

CBA's Mike Allen instructing 30 Comerica students on MarketSim during CBA OnSite Education in Detroit, Michigan.

 

CBA's OnSite Education team was in Atlanta, Georgia this week instructing 30 SunTrust students on the fundamentals of banking.