Richard's Rapid Fire - October 11, 2019 | Consumer Bankers Association

October 11, 2019

CBA Board Chairman Nitin Mhatre of Webster Bank's colleagues Alice Ferreira, SVP, Corporate Communications & Public Affairs (L) and Kelly Raskauskas, VP, External Relations (R) visited with the CBA family this week. Here they are pictured with a framed photo of our leader Nitin.

Cajun Thoughts: FED TAKES STEPS TO RIGHT-SIZE REGULATIONS We appreciate the Fed's vote this week to tailor prudential regulatory standards consistent with the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act. Regulations should be tailored for the strength of our industry and adjust as necessary to balance oversight with ensuring banks can continue meeting consumer needs, fostering economic growth and ensuring financial stability. Details below ... CONSTITUTIONAL OR NOT CONSTITUTIONAL? We expect to learn today whether the Supreme Court will hear the CFPB constitutionality case. The potential of a court ruling that could install a director, removeable at-will, would bring increased confusion. When regulatory stability is eroded by changing political dynamics, consumers suffer from financial institutions’ inability to rely upon a consistent regulatory environment. The CFPB leadership structure circus continues! ... WANT TO STRENGTHEN CRA? MODERNIZE IT This week I penned an op-ed featured in American Banker discussing why modernizing the Community Reinvestment Act is needed. Through CRA, banks are currently investing nearly $500 billion annually into communities across the country. Modernizing CRA will give banks more clarity as to which investments will count – allowing for them to do more, not less. It will also help ensure CRA investments reach those communities most in need. We do not advocate, and would not support, changes to CRA that would undermine its value to the communities our banks serve. We appreciate the OCC leading the way and hope the other regulators will join in this generational opportunity … U.S. SMALL BUSINESS OPTIMISM DROPS, UNEMPLOYMENT LOW According to data released on Tuesday, the National Federation of Independent Business’ optimism index declined 1.3 points to 101.8 in September– the third drop in four months and near the lowest level of President Trump’s term. Also, unemployment in the U.S. declined to 3.5% in September, the lowest rate since December 1969, the Labor Department said. Employers hired 136,000 workers, suggesting the economy is still strong despite headwinds from a global economic downturn … CFPB STUDENT LOAN COMPLAINTS TIED TO POLICY A survey of student loan complaints filed with the Bureau revealed many were tied to federal policy decisions often out of the control of student loan servicers. The survey by the American Enterprise Institute also revealed the complaints database may inflate the number of complaints against servicers. It is important to remember, about 90% of all student loans (including nearly all of those serviced by private contractors) are issued by the federal government. It is time to right-size federal student lending.

CBA IN-PERSON COMMITTEE MEETINGS

Small Business Banking Committee: Chair Richard Foster, Frost Bank & Vice Chair Matthew Dickson, Bank of the West

The committee heard from Jim Baxley, Paul Clarkson and Coley Schuler of nCino on redefining small business banking digital offerings, met with Grady Hedgespeth, Alan Ellison and Jeff Swartz of the CFPB on Section 1071 of the Dodd Frank Act, and began planning forum sessions for CBA LIVE. The committee also discussed how fraudulent activity is impacting the small business space and stressed the importance of training and retaining top small business bankers.

D.C. DOWNLOAD

Fed Board Finalizes Bank Tailoring Rules: The Federal Reserve Board of Governors yesterday voted to tailor prudential regulatory standards consistent with the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act, S. 2155.

The vote establishes a regulatory regime that will categorize banks with greater than $100 billion in assets into one of four buckets:

Category 1, domestic G-SIBs;
Category 2, total assets ≥ $700 billion or ≥ $75 billion in cross-jurisdictional activity;
Category 3, total assets ≥ $250 billion or ≥ $75 billion in non-bank assets, weighted short-term wholesale funding, or off-balance sheet exposure; and
Category 4, other firms with total assets of $100 billion to $250 billion.

Each of these buckets includes a set of associated regulatory requirements, which is the most stringent for the G-SIBs in Category 1 and is steadily tiered downward until the regional banks in Category 4.

We appreciate the Fed taking steps to right-size regulations, as recommended in the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act.

Since the financial crisis, the nation’s largest banks have more than doubled their capital levels and all passed annual stress tests. Regulations should be tailored for the strength of our banking industry and adjust as necessary to balance oversight with ensuring banks can continue meeting consumer needs, fostering economic growth and ensuring financial stability.

Additional information on the Fed's vote is available here.

Compass Point's Isaac Boltansky summarizes the proposed requirements as outlined by the Fed's October 2018 proposal in the chart below:

CBA Writes House Leadership on CFPB Consitutionality Case, Need for Bipartisan Commission: CBA wrote Republican and Democratic Leadership of the House of Representatives this week regarding the possibility of the Supreme Court hearing the Seila Law vs. CFPB case. The potential of a court ruling that could install a director, removeable at-will, would bring increased confusion. A lack of certainty and long-term consistency in leadership at the Bureau adversely affects consumers, our economy and the financial services industry.

The letter is available here.

California AG Unveils Proposed Regulations Under CCPA: On Thursday, California Attorney General Xavier Becerra released the office’s proposed regulations implementing the California Consumer Privacy Act (CCPA). The law provides consumers with new rights on the use of their personal information.

As part of the rulemaking process, the Attorney General’s (“AG”) office will hold four public hearings in early December to allow interested person to present comments, either orally or in writing, on the proposed regulations.

The AG’s office will also accept written comments on the proposed regulations until December 6. CBA will review the proposed regulations and plans to submit comments to the AG’s office.

More information on the law is available here.

CFPB Releases Semi-Annual Report: This week, the CFPB released their semi-annual report to Congress in advance of Director Kraninger’s upcoming testimony before the House Financial Services & Senate Banking Committees.

The report covers the Bureau’s activities from October 1, 2018 to March 31, 2019, including Director Kraninger’s nationwide listening tour and her focus on using all four tools at the Bureau’s disposal – education, regulation, supervision, and enforcement – to protect consumers and prevent consumers.

The report also highlighted issues faced by consumers in shopping for consumer financial products and services, noting matters surrounding natural disasters and credit reporting, first-time homebuying servicemembers, and insights on paying bills.

For natural disasters and credit reporting, the Bureau found in 2017, roughly 8.3% of consumer credit included a FEMA assistance comment code at least once. This estimate is comparable to FEMA estimates disasters affected roughly eight percent of U.S. residents in 2017.
On first-time homebuying servicemembers, the Bureau found the share of first-time homebuying servicemembers using VA mortgages increased, from 30 percent before 2007 to 63 percent in 2009. Among non-servicemember first-time homebuyers there was a parallel increase in the use of FHA and USDA mortgages. However, whereas non-servicemembers’ reliance on FHA/USDA mortgages declined after 2009, servicemembers’ reliance on VA loans continued to increase, reaching 78 percent by 2016.
The Bureau also published a research brief, Consumer Insights on Paying Bills, examining the common challenges related to bill payment. The Bureau touched on a 2015 national survey on financial well-being that showed 43% of people reported covering expenses and bills in a typical month is somewhat or very difficult.

The Bureau also reported on their budget through the second quarter of fiscal year 2019, noting the Bureau had spent $281,851,000, 54% of which was spent on employee compensation for the 1,452 Bureau staff on roll. So far for fiscal year 2019, the Fed has provided the Bureau with $295,700,000 in funds.

Finally, the Bureau outlined the various enforcement actions and supervisory activities it had conducted during the time period, and highlighted consumer complaints by products received from the complaint database. CBA will be touching on many of the issues raised in the report in our letter for the record for Director Kraninger’s testimony, and look forward to further engaging with the Bureau moving forward.

CBA on White House Executive Order on Guidance: This week, President Donald Trump signed an Executive Order on the use of regulatory guidance that limits federal agencies’ use of guidance and also requires input in some instances. While guidance can be a useful tool in clarifying complex rules and regulations, it should not be used as a shortcut to implement new ones. Over the years, some regulatory heads have used the guidance process to achieve ideological goals which often limit choices for American consumers.

It is unfortunate a few individuals pushed the envelope instead of playing by the book and following the Administrative Procedure Act. CBA hopes there can be a balance in the future which allows beneficial guidance while still allowing for smart, efficient regulation.

CBA’s full statement is available here.

INDUSTRY NEWS

Sallie Mae Launches Credit Cards Targeting Younger Market: Sallie Mae this week unveiled three new credit cards specifically designed to promote and reward financial responsibility among college students and young adults in post-graduate life. Of note, the Sallie Mae Accelerate card is the only cash back credit card offering a bonus when cardholders apply rewards to pay off student loans. As an additional offering, Sallie Mae automatically enters Sallie Mae Ignite and Accelerate cardholders to “Swipe Away $10K Sweepstakes” – the chance to win $10,000 to pay down student loans where one winner is selected each month for a year.

Learn more about the credit cards here and check out CBA’s recommendations for student lending reforms here.

Bank of America to Continue Pittsburgh Retail Expansion: While a lender in Pittsburgh for many years, Bank of America entered the retail banking space last fall with the opening of its first branch in Upper St. Clair. The bank’s local visibility has considerably increased in western Pennsylvania since then and the long-term plan is to further grow the Pittsburgh market along with 25 to 30 additional markets across the nation.

Citizens Bank Looks West: Citizens Bank Looks West: Providence, Rhode Island-based Citizens Bank recently opened a regional operation office in Los Angeles, Calif., and has already signed 100 corporate clients in California. The bank is one of many looking for business outside of its market area with the intention to follow large clients to newer markets and seek more growth elsewhere. Learn more here.