View from CBA November 22, 2013

OCC and FDIC Guidance on DAP

There is a phrase in Washington, D.C. called the “Beltway Bubble” that applies to people who have lived in the area too long and have lost touch with everyday America. Usually, this term applies to Members of Congress. I am beginning to believe it can apply to regulators who do not understand the economic plight many families face on a daily basis. In fact, a BankRate.com survey found 76 percent of American families live paycheck-to-paycheck. 

As you may remember, the FDIC annually publishes a study on the number of un/under banked which encourages banks to assist in lowering these numbers. They correctly believe it is better for consumers to participate within a heavily regulated industry – not a fly-by-night, so-called “business.” This makes the OCC and FDIC’s final decision on deposit advance products an even greater disappointment. The rule issued Thursday (November 21, 2013) will severely impact a large percent of Americans living paycheck-to-paycheck who may not have the means to provide for their families in times of financial hardship.

Further, this will discourage banks from entering a market utilized by a number of consumers. Without this well regulated and popular product, consumers will be sent into the arms of under regulated, or in some cases unregulated, payday lenders, pawnshops and others outside the traditional banking system (think Tony Soprano) looking to make astronomical short-term gains off of cash-strapped consumers. The OCC and FDIC should be encouraging consumers to stay inside the transparent and sound banking system. As we know from other products and industries, just because a product is eliminated, does not mean the consumer demand is too.  

TILA-RESPA Merger Concluded

The CFPB concluded the long and difficult process of merging the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures on November 19, 2013, as required by the Dodd-Frank Act. CBA had been involved in efforts to simplify these forms from the beginning and believes these changes will help consumers comparison shop for mortgage loans from various providers. We are pleased the CFPB decided to require all lenders to use these forms, which means consistency for consumers. There should not be different sets of standards which could lead to confusion and uncertainty amongst consumers. Moving forward, we hope to see the CFPB apply this same methodology to other areas of their jurisdiction.

CFPB Marketing Study

The CFPB issued a report on November 18, 2013 analyzing the amount of money spent on providing financial education to consumers. The report claimed that financial institutions spend $17 billion a year on marketing, while $31 million was spent on education. CBA’s retail banks are deeply committed to educating their customers and working with the CFPB to improve financial literacy. Banks know the importance of their consumer relationships, which includes informing their customers of the products and services available. However, as every government agency should know, it is not about the amount of money spent, but the quality and effectiveness of the program. 

Lititz, PA to New York, NY

On November 20, 2013 I traveled over to Lititz, Pennsylvania to meet with Susan Bergen at Susquehanna Bank. They were interested to learn about CBA’s actions in D.C. and retail banking, as well as the regulatory forecast.

I was in New York City, November 21-22, 2013, where I met several reporters covering the banking sector and we touched on a number of issues, including today’s regulatory environment, how millennials are influencing banking and the emergence of Bitcoin.

In addition, I was glad for the time with our sponsors, including Paul Kadin of AOL, one of CBA’s newest members, and separately with Dave Kaytes, Rich Spitler, and Katie Davis of CBA’s premier sponsor Novantas on sponsorship and research possibilities. AOL and Novantas both provided keen insights on various developments in the retail banking industry. 

Also, while in New York City, I attended the Clearing House’s Annual Conference. Speakers included FDIC Chairman Marty Gruenberg and CFPB Director Richard Cordray. There was a great panel on emerging trends in the banking industry, which included Richard Davis, Chairman, President and CEO, U.S. Bancorp, Brian T. Moynihan, CEO, Bank of America, and Bill Demchak, President and CEO, PNC Financial Services Group. 

News and Notes

Congratulations to Wells Fargo CEO John Stumpf on being named American Banker Magazine’s Banker of the Year.

American Banker has a great write up on Tayfun Tuzun, who is the new chief financial officer at Fifth Third Bancorp.

Larry Chattoo, Assistant General Counsel/Senior Vice President - Regulatory and Public Policy at Bank of America, participated in a CFPB Field Hearing in Boston, MA on TILA/RESPA. Larry is a member of our CFPB Committee and is helping to coordinate our CFPB Forum at CBA LIVE.