CFPB Report May 30, 2014

Federal Reserve OIG and CFPB Announce New Website

On Tuesday, May 27, 2013, the Office of the Inspector General for the Board of Governors of the Federal Reserve System (Board) and the CFPB launched a new public website. The Inspector General for the Board and the CFPB, Mark Bialek, said the “redesign is just one example of our commitment to continuous improvement” and asserted the new site “provides greater accessibility to our information that will enhance our communication to the Board, the CFPB, Congress, and the public.”


CFPB Releases Semi-Annual Rulemaking Agenda

On Wednesday, May 23, 2014, the CFPB announced a semi-annual update to its rulemaking agenda, which sets out the Bureau’s regulatory plans. The agenda is provided by the Bureau to the Office of Management and Budget (OMB), and reflects the Bureau’s best estimate of its upcoming rulemaking activities. As such, the semi-annual update provides some additional insight into the CFPB’s plans. Highlights include: 

  • Home Mortgage Disclosure Act (HMDA) | CFPB states: Prerule Activities – 05/00/2014
  • Debt Collection Rule | CFPB states: Prerule Activities – 12/00/2014
  • Payday Loans and Deposit Advance Products | CFPB states: Prerule activities – 09/00/2014
  • Overdraft | CFPB states: “Prerule Activities” – 02/00/2015
  • Requirements for Prepaid Cards | CFPB states: NPRM – 06/00/2014; Final Rule (Regulation E) – 12/00/2014
  • Defining Larger Participants in a Market for Auto Lending | CFPB states: NPRM – 08/00/2014
  • Defining Larger Participants of the International Money Transfer Market | CFPB states: Final Rule – 09/00/2014
  • Consumer Financial Civil Penalty Fund | CFPB states: Final Rule – 10/00/2014

While this is a useful guide, it does not represent a definitive timetable. CBA believes the Bureau does not consider itself bound by the agenda and the agenda reflects the best estimate of their future plans, based on what they think at the time they submit it to OMB, and the longer the timeline, the more speculative it will be. In particular, pre-rule activity can be hard to estimate. Research, for example, can be faster or slower than expected. Pre-rule activity may also refer to the Small Business Regulatory Enforcement Fairness Act (SBREFA) process (requiring the Bureau to convene panels of small business entities prior to rulemaking) mandated by the Dodd-Frank Act. SBREFA is a joint agency process (with OMB and SBA), so it is particularly hard to predict timing.


CBA will continue to track these CFPB activities as they evolve, and will keep members informed.


CFPB Takes Action on Mortgage Disclosure Violations

On Wednesday, May 28, 2014, the CFPB entered into a consent order with RealtySouth, an Alabama real estate firm, for inadequate disclosures which could leave consumers unaware of their right to choose service providers during the home-buying process. The Bureau claimed RealtySouth violated the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks for referrals of real estate settlement services. Under the terms of the consent order, RealtySouth will pay a $500,000 civil penalty, ensure its disclosures comply with RESPA, and ensure its training materials emphasize its agents cannot require the use of affiliates.


“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray in apress statement. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”


CFPB Remarks on Financial Education at FLEC Field Hearing

On Thursday, May 29, 2014, Director Cordray offered remarks at a public field hearing of the Financial Literacy and Education Commission (FLEC), held at the U.S. Department of Treasury in Washington, D.C. Director Cordray addressed incorporating financial education in the workplace, referencing the CFPB’s work with the Office of Personnel Management (OPM) and the U.S. Department of Labor to bring financial education programs to the workplaces of federal agencies. He also discussed youth financial education and the State Engagement Project, an effort led by the Bureau to gather input from FLEC and state policymakers on resources and information to help states best determining how to incorporate youth financial education into their schools. A CFPB initiative to evaluate the issue of "consumer financial wellbeing" and how the term is defined was also referenced.

Bills Aim to Restrict Universities Relationships with Financial Institutions

On Friday May 23, 2014, Senator Tom Harkin (D-IA) and Representative George Miller (D-CA) introduced legislation which would restrict how universities are able to partner with financial institutions. Sen. Harkin, who serves as Chairman of the Senate Committee on Health, Education, Labor, and Pensions, introduced the “Protecting Aid for Students Act for 2014” (S. 2385); while Rep. Miller, the Ranking Member of the House Committee on Education and the Workforce, introduced the “Curbing Abusive Marketing Practices with University Student Debit Cards Act - CAMPUS Debit Cards Act” (H.R. 4714).


“Students work hard to get themselves through college, and federal student aid is intended to help them do just that. Their financial aid should go towards the cost of college, not to banks through unjust and often hidden fees,” said Sen. Harkin in a press statement.


“Many of today’s college students are being strong-armed into using financial products that are endorsed by their university. These products often carry unnecessarily high fees that chip away at students' federal grants and loans, which should be helping pay for classes, not lining the pockets of banks. In reality, these ‘preferred’ products aren’t preferable at all,” Rep. Miller said in a media release.


The introduction of the legislation came as the U.S. Department of Education failed to reach consensus in a negotiated rulemaking on how federal student aid is disbursed onto financial products such as debit cards and prepaid cards.


CBA’s Campus Product Working Group continues to focus on this and related issues.

OCC Announces Actions to Respond to International Peer Review Recommendations

On Wednesday, May 28, 2014, the OCC announced changes designed to strengthen the supervisory process and the examining force of the nation’s largest financial institutions. The agency says it will expand the organization, functions, and responsibilities of its large bank lead expert program to improve horizontal perspective and analysis, systemic risk identification, quality control and assurance, and resource prioritization. To strengthen the examining force, the OCC will establish a formal, regular rotation program for all examiners. The agency also will formalize an enterprise risk management framework, developing a risk appetite statement, creating a decision-tree process, and enhancing the OCC’s existing National Risk Committee framework and processes.


“The changes announced today will enhance the agency’s expert supervision of the nation’s largest and most complex financial institutions,” said Comptroller of the Currency Thomas Curry. “Facilitating the sharing of information and knowledge among examiners across institutions and rotating examiner assignments will allow us to provide a fresh and broader perspective to the examination of each large institution.”

FDIC Releases First Quarterly Banking Profile for 2014

On Wednesday, May 28, 2014, the FDIC released its Quarterly Banking Profile, providing a status of the banking industry. Although the industry earned $37.2 billion in profits, this was the second time in the last three quarters in which banks and thrifts saw a decline in year-over-year profits (7.6 percent). Highlights from the report include:



  • Net income fell by $3.1 billion from the same time last year to $37.2 billion, which can be attributed largely to a sharp reduction in mortgage originations – an almost 50 percent decline in mortgage revenue – and trading revenue ($1.4 billion, or 18.3 percent). Last year’s second quarter increase in medium- and long-term interest rates continued to affect year-to-year comparisons due to diminished demand for mortgage refinancing.
  • Even with net income down, 54 percent of banks reported increased earnings compared to this time last year.
  • Net interest income increased by $361 million (0.3%) with over two-thirds of banks reporting year-over-year growth, but only seven of 20 largest banks reporting an increase.

Loan Performance

  • Loan loss reserves are at a six year low and have declined for the 16th consecutive quarter to $132.3 billion.
  • Loan loss provisions are $7.6 billion, down $3.3 billion (30.3%) from this time last year. This is the 18th consecutive quarter that loan loss provisions have seen a year-over-year decline.
  • Net charge-offs (NCO) fell below pre-crisis levels, declining year-over-year for the 15th consecutive quarter by $5.5 billion (34.8%), which represented the lowest quarterly NCO total since 2007Q2.
  • Noncurrent loan balances fell to $195.1 billion, a 5.8 percent improvement from the last quarter.

Industry Health

  • The amount of both banking institutions and employees were down, with the industry losing 79 reporting institutions from the last quarter through merger or failure, while adding no new charters. The year-over-year decline is even more dramatic, with 316 fewer banks and thrifts.
  • Institutions on the “Problem List” decreased from 467 to 411, which is less than half of its peak.

FDIC Chairman Martin Gruenberg said, "[A]sset quality continues to improve, loan balances are trending up, fewer institutions are unprofitable, and the number of problem banks continues to decline. However, industry revenue has been affected by narrow margins, modest loan growth, and a decline in noninterest income as higher interest rates have reduced mortgage-related activity and trading income fell."