Archive for the ‘Consumer Financial Protection Bureau’ Category

The Good and Bad of a Fully Functional CFPB

Tuesday, January 17th, 2012

Over the past two weeks, copious amounts of ink have been spilled about President Obama’s “recess” appointment of Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB).  Although the Justice Department has issued a statement alleging the constitutionality of the appointment, it is inevitable that legal challenges will soon be filed and drag on for the foreseeable future. 

Since the Dodd-Frank financial reform law was passed more than a year and a half ago, I’ve heard from a number of community bankers who identify the creation of the CFPB as their single greatest concern arising from the law.  To be sure, their concerns have merit.  The CFPB’s power will not be limited to the biggest financial institutions. The rules they write have the potential to stifle product innovation and increase regulatory costs on community banks.  All of this without any oversight from Congress.

But, as in almost every story, there is some potential for good.  The naming of a Director for the CFPB means that the most abusive and unregulated entities providing financial services to consumers are now subject to the bureau’s rulemaking authority.  Payday lenders, private student lenders and other financial intermediaries who have been preying on the poor, unadvised and unsuspecting of our society will soon be reined in by the CFPB’s authority. 

The unscrupulous behavior of these entities has done more harm than good in the name of providing “service” to consumers.  If the CFPB can provide any assistance in ending or limiting the abuses they perpetuate then I believe we all have reason to celebrate.

As this takes shape community banks have an opportunity to distinguish themselves.   We know what it means to serve customers, understanding their financial needs and seeking solutions to help them meet their goals.  Community banks are built on the bedrock of long-term relationships, not short –terms profits.   

Only time will tell what the future holds for the CFPB and how the agency intends to implement “tiered regulation” and resist  the temptation to promulgate rules to fit all institutions as Director Cordray has promised. But as the banking industry looks to the uncertain future, we have the power to influence our lawmakers and the CFPB itself to enhance the bureau’s potential to do good. 

The recent appointment of Robert Cordray is the subject of a recent Op Ed IBAT is currently distributing to publications around the state.

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Posted in bank regulators, Barney Frank, CFPB, community banks, Consumer Financial Protection Bureau, Dodd bill, financial regulatory reform, IBAT, Independent Bankers Association of Texas | No Comments »

Bank of America’s $5.00 Durbin Fee

Friday, October 7th, 2011

“You don’t have some inherent right just to, you know, get a certain amount of profit, if your customers are being mistreated,” he said.  Later, he added, “this is exactly the sort of stuff that folks are frustrated by.”

Those words, spoken in response to a question posed by an ABC news correspondent about Bank of America’s decision to begin charging a $5.00 monthly debit card fee by our 44th President, sent shock waves throughout the banking community this week.  And, well, it should have.

He went on to say, “This is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go,” Obama said.  “This is exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening.  You can stop it because if you say to the banks, ‘You don’t have some inherent right just to – you know get a certain amount of profit.  If your customers are being mistreated, that you have to treat them fairly and transparently.”

Now let me say at the outset that I don’t have any warm fuzzy feelings about too big to fail Bank of America.  Every time they are held out for their lame-brained treatment of the consuming public (remember this summer’s robo-signing incident?) it hurts all banks, including community banks.  But, if you believe in our free enterprise system, then you must admit that B of A has the right to model and price their product offerings any way they want.

Senior Democratic Senator Dick Durbin from the land of Lincoln, whose infamous interchange amendment prompted the fee to begin with, couldn’t wait to pile on.  He used the announcement to offer this suggestion to B of A customers in a personal privilege speech to his colleagues on the Senate floor.  “Vote with your feet.  Get the heck out of that bank.” Is this the brave new world of civility and discourse we live in?  Did a United States Senator call, from the floor of the Senate, no less, for a run on an American financial institution?

President Obama showed a modicum of political savvy as he later followed his advisors and backed away from his earlier comments.  When asked in a subsequent news conference whether government has the right to dictate how much profit American companies make he responded, “I absolutely do not think that.  Now (B of A) has the right, but it’s not good practice.  It’s not necessarily fair to consumers.”

A couple of observations.  First, Obama has shown his true colors and zest for creating the Consumer Financial Protection Bureau (CFPB) in the first place.  Short of this country having a nationalized banking system, he wants bank product and price regulated, and he is willing to use the bully pulpit to suggest so.  That is precisely what the industry feared when the new agency was constructed in Dodd-Frank.  Only after speaking to Secretary Geithner and Acting CFPB Director Raj Date was our President reminded that the CFPB’s mission is in fact, not to regulate product and price, but to ensure financial products and fees are clearly disclosed to consumers in plain English.

Second, just what did our fearless leader and trial lawyer Senator expect would happen when they craftily inserted debit fee interchange price controls in Dodd-Frank?  The banking industry warned that such limitation would dramatically affect debit card usage and likely result in higher fees for consumers.

I certainly do not suggest that all banks will follow Bank of America’s lead and impose a monthly fee on their debit customers.  I only opine that there is inherent danger when government gets in the way of free enterprise and attempts to create winners and losers.

Our leaders should spend less time trying to interject public policy into free markets and concentrate instead on truly enabling financial institutions to fail, regardless of size, something they attempted to do in the financial reform legislation.

Bank of America doesn’t need their help in driving consumers to other financial institutions.  They seem to be doing a pretty good job of doing that all by themselves.

Posted in CFPB, community banks, Consumer Financial Protection Bureau, debit card, Dodd bill, Durbin amendment, Independent Bankers Association of Texas, Interchange, Texas Community Banking, too big to fail, wall street | 1 Comment »

The Media’s Brand New Love Affair

Thursday, August 4th, 2011

Guest blogger Shannon Phillips, IBAT Deputy General Counsel, provides his observations in this Missing Linc post.

For over a year, American media outlets have lauded the Dodd-Frank Act’s (the Act) efforts to reform financial consumer protection. In particular, the print and electronic media seem to have fallen head over heels in love with the Act’s Consumer Financial Protection Bureau (CFPB).  When the media must report on something while swooning over it, it leads to something I like to call “Reporting While Infatuated.”  RWI is a very dangerous, incurable, and possibly fatal condition that can quickly reach pandemic levels among certain members of the media. (Remember the 2008 election?)  RWI has been directly linked to media coverage that extols the virtues of the Dodd-Frank Act and the CFPB while exposing how very little many in the American media know of the Act, the CFPB, state and federal banking regulators, operations and lending laws, and consumer protection laws.  We have been pleased with the meetings we have had with representatives of the CFPB and their understanding that community bankers are not the problem, but we have likewise been dumbfounded by the misinformation we have seen from members of the media who seem to be affected by RWI.  The latest example of this RWI comes from CNNMoney. com.

CNNMoney.com reporter Blake Ellis developed an interactive graphic showing how the CFPB can help consumers dealing with complaints against various industries, including banks and credit unions, debt collection, and credit cards.  The graphic has a balloon containing the phrase “Banks & Credit Unions.”  Connected to that balloon is another balloon with the number “29,967,” which is purportedly the number of consumer complaints the FTC received about banks and credit unions in 2010.  (Which we know is not where consumers should voice complaints against banks and credit unions.)  When you put your cursor on the balloon containing that number, a story pops up about Colleen Silvey’s complaint against her bank.  The inference is that the CFPB could have helped her with her problem.  However, what Mr. Blake apparently doesn’t know is that Ms. Silvey is merely complaining about her bank following federal law. Here is Colleen’s story:

Suddenly, I started seeing fees show up here and there in my checking account. I couldn’t understand what they were for. After this happened for awhile, I got a letter in the mail from my bank saying it charges a fee for transferring money between checking and savings accounts too often. I had never been told that before. I had always put my paycheck in my savings account – where I can’t see it – and then I would transfer some to my checking account when I need to pay a bill. Don’t I have a right to put my cash where I want?

If I had Colleen’s address, this would be my answer to her:

Dear Colleen:

I saw your name and picture with a graphic showing how CNNMoney.com believes the Consumer Financial Protection Bureau could have helped you with an issue you had with your bank.  Unfortunately, CNNMoney got it wrong. First, under the facts you gave, help from the CFPB or any other federal, state, or local governmental agency was unnecessary.  Secondly, if you had an issue that warranted government help, your bank is already heavily regulated by a federal agency and possibly a state agency as well.  And each of those agencies have consumer assistance divisions.

Your complaint is unwarranted. Let me break it down one issue at a time.

Suddenly, I started seeing fees show up her and there in my checking account I couldn’t understand what they were for.  After this happened for awhile…

It sounds like you noticed several of these fees from your bank without doing anything.  If you ever don’t understand something on your online account or on your bank statement—particularly if it is costing you money—don’t hesitate, contact your bank immediately.  You have an obligation to take care of your personal finances.  You are not fulfilling your obligation when you don’t act on something you don’t understand.  If you bank at an Orlando-area community bank, you could have simply called your bank and they would’ve gladly explained the fees to you and how to avoid them.  If you bank at one of the too-big-to-fail banks, your inaction is understandable because getting someone to help is nearly impossible.

I got a letter in the mail from my banking saying it charges a fee for transferring money between checking and savings accounts too often.

If you reread the letter you received from your bank, I think you’ll find that it did not say that you were charged fees for transferring money between checking and savings too often.  It said that you were charged fees for making too many transfers FROM SAVINGS to checking.  The limitation on transfers from your savings and checking account is not a restriction created by your bank, it is a restriction created by federal law.  And it doesn’t restrict transfers from checking to savings. Specifically, it is found in Regulation D (12 CFR 204.2):

“The term ‘savings deposit’ also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account…from which…the depositor is permitted or authorized to make no more than six transfers and withdrawals, or combination of such transfers and withdrawals, per calendar month or statement cycle  (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution….”

Your bank is required to ensure that no more than the permitted transfers are made. According to federal law, a bank can either prevent the excess transfers or adopt procedures to monitor the transfers and contact customers who exceed the limits on more than an occasional basis.  If a customer continues to exceed the limit after they were contacted, the bank must: (1) close the account, (2) place the funds in another type of account, or (2) take away the transfer capacity.  Additionally, most banks, to show that they are serious about discouraging exceeding the transfer limit, will charge the depositor a fee for each transfer that is over the limit.  Your bank has legally chosen to monitor transfers, charge them a fee to discourage the practice, and notify the customer when it happens on more than an occasional basis.

I had never been told that before.

I bet you had been told this before.  I can say with near certainty, that your savings account contract addresses the limitations on transfers and withdrawals.  You should have also received a disclosure of the fees.  My guess is that you didn’t read your account contract or fee disclosure. (Don’t worry; I think most depositors don’t read these.) Regulation DD requires your bank to disclose the fees charged on your account.  This is another federal law.  Here is what it says in relation to disclosing fees in the account disclosures:

(b) Content of account disclosures. Account disclosures shall include the following, as applicable:

…snip…

(4) Fees. The amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed.

So, if you can dig up the account contract and the account disclosures your bank gave you when you opened up your accounts and any disclosures and account amendments that you received after you opened it, I think you’ll find that you were told about the transfer limitation and the fees.

I had always put my paycheck in my savings account – where I can’t see it – and then I would transfer some to my checking account when I need to pay a bill.

Because you can certainly “see” how much you have in your savings account, I assume that what you mean is that you put the money in savings so you are not tempted to spend it. I can understand why you’d want to use this method, and transfer money from savings to checking every time you have a bill to pay. Unfortunately, regardless of where you bank, federal law is going to prohibit you from doing this, and the bank is likely going to charge you a fee if you do. If they don’t charge you a fee, they still will have to ensure that you don’t exceed the transfer limitation in federal law.  You’re going to have to find another money management technique. Your community banker will likely have some ideas.

Don’t I have a right to put my cash where I want?

Yes, Colleen, you do have a right to put your cash where you want. But, as I state above, federal law is going to restrict the number of transfers from your savings account.   I am glad that you chose to put it in a bank. I hope you chose a community bank, but if you didn’t, I encourage you to open an account at a community bank.

I’m sure your bank could have set things straight. If not, then each banking regulator has employees on staff to assist consumers. If your bank is a national bank, call the Comptroller of the Currency at (800) 613-6743. If it is a state bank, call the FDIC at (877) 271-3342 or you can call the Florida Office of Financial Regulation at (800) 848-3792.

Your bank was simply following federal law, and didn’t do anything for a consumer to complain about.  You did not have an issue that the Consumer Financial Protection Bureau could have assisted with.  However if you did have an issue that required assistance, there are already banking regulators who could have assisted you.

In the future, before CNNMoney.com and Mr. Ellis writes an article complaining about banks mistreating their customers, we hope they consult with a banker, a regulator, or a banking association .  And, in the future, if you ever have a problem with your bank, I hope you first contact your bank, and then if you and your bank can’t resolve the matter, contact your bank’s regulator.

 If you have any questions about anything I’ve said, please do not hesitate to call.

Sincerely,
Shannon Phillips

Cc: Blake Ellis, CNNMoney

Yes, if I were going to write a letter to Colleen, that is what it would say.

The views expressed in this blog belong to the author and do not necessarily represent the views of IBAT, its Board, or its members.

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Posted in CFPB, Compliance, Consumer Financial Protection Bureau, Dodd bill | 1 Comment »

The Corner Office | IBAT’s August 2011 vlog

Thursday, August 4th, 2011

 

Watch the third edition of IBAT’s monthly video blog (vlog): The Corner Office.

YouTube blocked? Download the video file.

Posted in community banks, Compliance, Consumer Financial Protection Bureau, Dodd bill, IBAT, Independent Bankers Association of Texas, Texas Community Banking | No Comments »

Sweet and Sour Sausage

Thursday, June 24th, 2010

There’s an old saying:  “There are two things you never want to see being made, legislation and sausage.”  Having watched almost every moment of the House and Senate conference committee coverage on Financial Reform live on C-Span, I have to concur.

I know what you must be thinking:  “Get a life,” right?  Fact is, financial reform legislation has been my life since it was first introduced in the House last summer.  Watching the men and women who hold all the cards in shaping the future of our industry and pretend to know something about the banking industry is comical.  Pretending that this bill will somehow prevent the next banking crisis is even more comical.  Not that it is really funny…because it is not.  It is sad.  But one has to laugh just a little bit to keep the senses from overloading with frustration and despair.

I am not even going to pretend that I know where things will finally end up for community banks when the final gavel is dropped and the bill is referred back to each respective chamber for a final vote.  At this writing, things are about as fluid as the BP oil gusher polluting our sacred Gulf.

This much I know is certain:  the final product will be encased with both sweet and sour ingredients for community banks, the consequences of which we will not really know for a very long time.

I have been at this game long enough to know that, as with any massive piece of legislation, it is unreasonable to expect that you can win on every issue in which you have a vested interest.  But IBAT is always in it to win.  After all, community bankers deserve to win, having entered the fray as innocent victims, not bad actors.  And we have won a share.  Of the 26 major issues we have been following, 15 have been resolved to our satisfaction, six have not and another five still hang in the balance.

Despite our important gains, it will be very difficult to stand up and support this final monstrosity with the souring smell lingering from the interchange debate…a debate where our elected officials have determined that the big box stores and other retailers should be given price consideration for riding along the payments railroad.  I can’t wait to get my rebate from Home Depot or Walmart, how about you?  The interchange issue is an issue that never received one hour of public hearings in the House or Senate until it was included in the Senate language.  I simply cannot remember a single federal issue that IBAT expended more time and money on, only to come up on the short end of the final resolution.

Consumers lose big time, too.  Just hide and watch as the industry has to reduce or eliminate lucrative rewards programs tied to debit card usage.  Just wait until such time the Starbucks down the street refuses to accept that debit card for that $3.95 cup of Joe because they have now set a $10.00 minimum purchase requirement.

I am certain that financial reform legislation will be passed in this Congress.  Chairmen Frank and Dodd have vowed to have a bill on the President’s desk before the first bottle rocket lifts off on July 4.

But the sausage making won’t stop there.  In many ways it will just be the beginning for us.  I remember the fallout from the infamous Gramm-Leach-Bliley bill passed many years ago.  We spent the last eight years cleaning up the intended and unintended consequences from that debacle, just as we will with this one.

I think I will stick with the ribs on the ol’ barbie this Independence Day.  I have had enough sausage for awhile.

Posted in CFPA, CFPB, community banks, Consumer Financial Protection Agency, Consumer Financial Protection Bureau, debit card, Dodd bill, Durbin amendment, Gramm-Leach-Bliley, IBAT, Independent Bankers Association of Texas, Interchange, Main Street, Texas Community Banking | No Comments »

The “Rest of the Story” on the Dodd Bill

Monday, May 17th, 2010

We’ve received a number of calls and emails from bankers regarding the present status of the financial reform bill in the Senate, and the strategies being pursued by various trade associations.  Guest blogger Steve Scurlock, IBAT Executive Vice President, provides his observations in this Missing Linc post.

As strange as this may sound, I’ve always been a fan of Kurt Vonnegut, with his bizarre sense of imagination and very unique writing style.  He refers in one of his books to “peepholes,” and how the same situation or event can be perceived differently based upon the perspective of those watching events unfold.

Consider the following observations on the current state of play with the Dodd bill, (S. 3217) as being through my “peepholes…”

The American public is mad at “banks”, and our industry has very much become a political target.  There has been plenty of bad behavior over the years, primarily among the largest banks, both commercial (or “traditional” or whatever) and investment, to incite this anger.  And this economic crisis is the latest in a long saga.  The only possible silver lining?  Community banks are finally being seen as the “good guys” by the lawmakers, the press and the public.  In this environment, we’re pretty happy not to be perceived as “one industry.”  Can’t really imagine how aligning with the giant banks (most of whom have substantial investment banking operations as well) and their ample baggage benefits community banks in the present environment.

Case in point is the Durbin amendment on interchange.  We, along with every other banking trade group, fought this thing as hard as we could.  We spoke with “one voice” . . . community banks, big banks and yes, even credit unions.  I would submit that the abuses of some in the industry no doubt contributed to the passage of this awful amendment, the latest example being the rush by some of the large issuers to raise interest rates and change terms on credit card agreements prior to effective dates of the CARD Act.  The $10 billion exemption is obviously an unworkable scenario and really no exemption at all, but the promise that these provisions wouldn’t impact small institutions was apparently enough to persuade a number of Senators to jump on and support this horribly misguided “consumer” amendment.  Once again, community banks are caught up in the backwash of a “fix” for a problem we neither created nor in which we participated.

By all indications from a wide array of insiders and experts, financial reform legislation is going to pass in some form.  There are Democratic majorities in both Houses of Congress and a Democratic President.  We are in an election year.  The Republicans cannot afford to be painted as the party of Wall Street going into the November elections.

The public and the politicians aren’t mad at Main Street and community banks.  But they’re plenty upset with the antics of Wall Street and the biggest banks in the country.  The Dodd bill went to the Senate floor by unanimous consent (there were no objections) not because of a particular position on the part of any trade association, but because of a political reality that something had to be done, especially in light of the (coincidentally timed?) Goldman charges, the hyper-charged political climate and clamoring by the press and constituents.

We have a choice.  First, we can recognize reality and work to make a bill as good as it can be.  There are some very positive provisions for community banking in the bill, and they didn’t happen by accident.  The change in insurance assessments is a huge win for community banks.  Not for the big banks, who will soon begin to pay their fair share, but for community banks.  Finally addressing too-big-to-fail is a huge win for community banks, who have dealt with an unlevel playing field for way too long in so many areas.  IBAT remains strongly in support of both of these provisions and can do so because we represent our members and only our members.

Or in the alternative, we can just be against moving forward at all.  It’s infinitely easier and sells well to “just say no.”  But in the end, if “no” isn’t a viable option, what exactly has been accomplished?

There is plenty to hate in this bill for everyone.  Please know that the large institutions have substantially more to hate, as is evidenced by recent rhetoric and attacks seeking to lay blame on community banking organizations.

IBAT is on record as being opposed to the passage of the House version, and have made our serious concerns very clear to both our Senators as well.  We have maintained throughout the process, however, that there are some significant changes that need to be made to present law, especially as it relates to community bank competitiveness and fair treatment.  The too-big-to-fail keep getting bigger, the investment banks keep doing what they’ve always done and the community banks get MOUs and C&Ds . . . and more and more regulations and burdens to deal with.

We have great apprehension regarding a number of provisions in both bills, with the CFPA/B at the top of the list.  Unless otherwise directed by the IBAT Board, I don’t see a position other than continued opposition without some very meaningful changes.  We will continue to work with our national association, which has done a remarkable job representing their only constituency, community banks, and others who share our passion to protect community banking interests in this very messy process.

Posted in CARD act, CFPA, CFPB, community banks, Consumer Financial Protection Agency, Consumer Financial Protection Bureau, Dodd bill, Durbin amendment, financial regulatory reform, Goldman Sachs, IBAT, ICBA, Independent Bankers Association of Texas, Main Street, S3217, Texas Community Banking, too big to fail, wall street | No Comments »