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Tag: big banks
Joe Biden

Biden Seeks To Curb Big Bank 'Harvesting' Of Overdraft Fees

In 2022 alone, banks made nearly $8 billion off of charging overdraft fees to low-income Americans whose accounts went below zero — sometimes charging broke customers as much as $37 per overdraft. Now, a new proposed rule by President Joe Biden's administration would limit those fees to as little as $3.

The Consumer Financial Protection Bureau (CFPB) announced the new proposed rule on Wednesday, which would limit overdraft fees to as little as $3 per transaction. The CFPB says the rule — which affects banks with more than $10 billion in assets — would save approximately 23 million American households a total of $3.5 billion per year. Essentially, the rule would close a loophole banks exploited that exempted overdraft lending services from the Truth in Lending Act and other similar legislation aimed at protecting bank customers.

"Decades ago, overdraft loans got special treatment to make it easier for banks to cover paper checks that were often sent through the mail," CFPB Director Rohit Chopra stated. "Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine."

The Truth in Lending Act, which was passed in 1968, required financial institutions to disclose the full costs of providing loans to customers. At that time, many families sent checks in the mail, and were unsure of when funds would actually be withdrawn and when a cleared check would post to the account holder's balance. This occasionally resulted in an account being overdrawn, after which the bank would issue a loan to cover the difference.

In 1969, when the Federal Reserve Board of Governors was establishing guidelines for the Act's implementation, they allowed an exception in the rules for banks if a depositor "inadvertently" overdrew their account. In the 1980s and 1990s, when debit cards began replacing checks as the primary form of conducting transactions, banks started charging sky-high fees to capitalize on overdraft loans, raking in billions in extra profit. JPMorgan Chase and Wells Fargo are two of the biggest offenders — according to the CFPB, those two banks raked in roughly a third of overdraft fees reported by banks over $1 billion.

"Many banks and credit unions already provide lines of credit tied to a checking account or debit card when the consumer overdraws," the CFPB stated on its website. "The proposal provides clear rules of the road to ensure consistency and clarity."

A post to the CFPB's website established several proposed overdraft fee limits of $3, $6, $7 or $14 solely to help banks recoup costs of issuing overdraft loans rather than as a profit driver, and is soliciting public comment on the appropriate amount.

Reprinted with permission from Alternet.

Cartoon: What Can We Learn From The Titanosaur?

Cartoon: What Can We Learn From The Titanosaur?

4 Issues To Watch When Clinton And Sanders Debate Next Week

4 Issues To Watch When Clinton And Sanders Debate Next Week

By Arit John, Bloomberg News (TNS)

While next Tuesday’s first Democratic presidential debate will probably lack the name calling and sharp jabs of the Republican face-offs, there’s still potential for strong disagreements between the party’s leading contenders.

As the campaign progresses, differences between Sen. Bernie Sanders and Hillary Clinton have become increasingly clear. Sanders wants to break up the big banks, Clinton does not. Clinton has called for a no-fly zone over Syria, but Sanders has sided with President Barack Obama against the idea. Sanders voted for a bill that protected gun manufacturers and sellers from liability after deadly shootings, which Clinton appears willing to use against him.

And on Monday, news that a deal has been reached on the Trans-Pacific Partnership surfaced another point of contrast: While Sanders was quick to condemn the mega-trade deal, Clinton has remained silent.

Here’s a closer look at the differences between the two candidates:

TRANS-PACIFIC PARTNERSHIP

The announcement that the United States, Japan and 10 other Pacific Rim countries reached a final agreement on the controversial Trans Pacific-Partnership trade deal brought immediate condemnation from labor unions, the environmental movement and Sanders, an opponent of trade deals throughout his time in public office. In a statement, the senator said he is “disappointed but not surprised by the decision to move forward on the disastrous” agreement and promised to do all he can in the Senate to defeat it.

Clinton’s reaction has been silence. Opposing the trade deal puts her at odds with her former boss, Obama. Supporting it, however, might damage her support among unions, who oppose the deal. As AFL-CIO President Richard Trumka wrote in a statement, “rushing through a bad deal will not bring economic stability to working families.”

SYRIA

Last week Clinton joined a handful of Republican presidential candidates who have called for a no-fly zone over Syria. “I personally would be advocating now for a no-fly zone and humanitarian corridors to try to stop the carnage on the ground and from the air,” Clinton told Boston’s WHDH-TV. Supporters of the no-fly zone say it would protect Syrian civilians from bombs being dropped by Syrian President Bashar Assad. But critics, including Sanders, disagree. Enforcing the no-fly zone “could get us more deeply involved in that horrible civil war and lead to a never-ending U.S. entanglement in that region,” Sanders said in a statement Saturday.

The divide highlights one of the issues that separates Clinton from the rest of the Democratic field: She tends to take a harder line on international affairs than most of her competitors. Last year, in an August interview with The Atlantic, Clinton said the failure to arm moderate Syrian rebels left a power vacuum for the Islamic State to fill. The interview reopened the debate begun in her 2008 race for the Democratic presidential nomination against Obama over whether Clinton is too hawkish for Democrats. Meanwhile, when the Senate voted to arm moderate rebels in September 2014, Sanders was one of 22 senators to vote against the measure.

GUN CONTROL

In reaction to last week’s deadly school shooting in Oregon, Clinton called for the repeal of the Protection of Lawful Commerce in Arms Act, which shields gun manufacturers and sellers from legal liability when their products are used to commit crimes. This is one issue on which Clinton is more in line with the Democratic Party’s liberal base than Sanders. In 2005, Clinton voted against protecting gun makers and sellers from legal liability; Sanders voted in favor. While Sanders has voted for gun control measures like banning semiautomatic assault weapons and mandating instant background checks, his vote to protect gun makers and sellers has not gone over well with his base, nor has his vote against the 1993 Brady bill, which mandated a five-day waiting period on gun purchases.

In July, Sanders was questioned over his vote for the law that Clinton wants repealed after survivors of the Aurora, Colo., movie theater shooting tried to sue ammunition manufacturers — their lawsuit was dismissed partially due to the Protection of Lawful Commerce in Arms Act, which Sanders voted for. Sanders said that a gun manufacturer is no more responsible for a gun murder than a hammer company would be if someone used their hammer as a murder weapon.

BREAKING UP THE BANKS

While Sanders often says that banks that are too big to fail are too big to exist, Clinton has been careful not to lay the blame for the economic crisis on the doorsteps of large financial institutions. In July, Sanders co-sponsored a bill to reinstate Glass-Steagall, the law that kept commercial and investment banks separate. That same week Alan Blinder, an economist advising Clinton’s campaign, told reporters that renewing Glass-Steagall would not be part of her economic platform.

During a press conference soon after he co-sponsored the bill, Sanders declined to criticize Clinton’s views, and told reporters they would have to ask her what she supports. “Now you’ll have to ask Hillary Clinton about her view of whether she thinks we should break up these large financial institutions,” he said. “And you’ll have to ask for her views about whether we should re-establish Glass-Steagall.”

Next week, he might get the chance to ask her himself.

Photo: Round one starts Oct. 13. DonkeyHotey/Flickr

Republicans In Congress Begin New Effort To Water Down Dodd-Frank Law

Republicans In Congress Begin New Effort To Water Down Dodd-Frank Law

By Jim Puzzanghera, Los Angeles Times (TNS)

WASHINGTON — Boosted by their November election gains, congressional Republicans have launched a new effort to weaken, bit by bit, a law that dramatically expanded federal oversight of the financial system after the Great Recession.

On Wednesday, the Republican-controlled House is expected to pass a package of bills making changes to the 2010 law, known as Dodd-Frank, which also created a powerful new agency to protect consumers.

The law was enacted over nearly unanimous opposition from Republican lawmakers. Many despise Dodd-Frank almost as much as they do Obamacare because they believe it’s an overreaction to the 2008 financial crisis and an unnecessary burden on business.

Now with a Senate majority too, Republicans no longer have to worry about Democrats stopping attempts to chip away at the law’s hundreds of regulations, though President Barack Obama’s veto pen looms in the White House.

“The truth is Dodd-Frank was not chiseled in stone. Nobody brought it down to us from Mount Sinai,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX), who is leading the effort to change the law. “Congress would be negligent in its duties if we did not continually monitor and fix Dodd-Frank’s unintended consequences.”

In the last few weeks, Republicans watered down key parts of Dodd-Frank by attaching provisions to so-called must-pass bills — one funding most of the federal government and another reauthorizing an important terrorism risk insurance program that had expired. Obama signed the bills despite his opposition to their changes in Dodd-Frank.

The maneuver provided an early road map to how the new Republican-controlled Congress might try to make long-sought changes to financial regulations over Obama’s objections.

Liberal Democrats, led by Sen. Elizabeth Warren (D-MA) and Rep. Maxine Waters (D-CA), are rallying to stop the effort.

They nearly derailed the government funding bill last month because it contained a provision that eased Dodd-Frank restrictions on bank trading of financial derivatives — the type of complex investments that helped trigger the financial crisis.

Liberals’ anti-Wall Street fervor was highlighted this week when investment banker Antonio Weiss withdrew his nomination to a senior Treasury Department position because of opposition from Warren and others who objected to his Wall Street background.

“We’ve already seen that the new Republican Congress is going to aggressively attack the Dodd-Frank act,” said Warren, who was an outspoken advocate for the legislation. She launched the law’s Consumer Financial Protection Bureau before winning a Senate seat in 2012.

“The risk of another financial crisis remains too high, and we should be strengthening financial reforms, not rolling them back to benefit Wall Street,” she said.

The proposed changes before the House now include a controversial two-year delay in implementing part of the so-called Volcker Rule, which bars banks from making risky investments. The changes are necessary, supporters say, to avoid saddling businesses with heavy-handed regulations.

The White House said Obama would veto the bill because “the administration has strong concerns with any provisions that would weaken key consumer and investor protections and elements of financial oversight.”

Most Democrats have vowed to keep the law intact.

“We have seen this movie before,” said Sen. Sherrod Brown (D-OH). “We will keep seeing it over and over again.”

But some changes are needed, said Francis Creighton, executive vice president of government affairs at the Financial Services Roundtable, an industry trade group. He argued that Democrats are overreacting to sensible and relatively small-scale fixes.

“Sometimes we’re trying to do things that will actually make the system work better,” he said. “We’re not always twisting our mustache, doing this villainously.”

The delay in the Volcker Rule, for instance, is necessary to avoid pushing banks into getting rid of some assets in a “fire sale” fashion, Creighton said. The legislation in the House would extend an existing delay in implementing the rule to 2019 from 2017.

Republicans note some of the Dodd-Frank changes have bipartisan support.

The legislation that includes the Volcker Rule delay, called the Promoting Job Growth and Reducing Small Business Burdens Act, garnered 35 Democratic votes last week when Republicans unsuccessfully tried to pass it in an expedited procedure that required a two-thirds vote.

The focus liberals have put on changes to Dodd-Frank in recent weeks has made it tougher for Democrats to support the Republicans, said former Rep. Barney Frank (D-MA).

“I’ve talked more about the bill in the last couple of months than in years, and that’s a good thing,” said Frank, who led the effort to pass it in the House in 2010. “It’s now become a national issue again and I’m very confident the public will become very angry” if Republicans continue to attack it.

The biggest mistake Republicans could make would be to try to weaken the Consumer Financial Protection Bureau, which is popular with the public, Frank said.

The bureau has a director, who is appointed by the president to a five-year term, and is funded directly by the Federal Reserve, which means Congress can’t cut its budget.

Republicans complain the agency is too powerful and want to replace the director with a five-member commission and subject its funding to the congressional appropriations process. The House has approved legislation in the past to make those changes, but the bills have died in the Senate.

It’s unclear whether Senate Republicans now will be able to pass Dodd-Frank changes. If they do, Obama will veto them, said Treasury Secretary Jacob J. Lew.

Republicans could then try to force Obama’s hand by including the changes in must-pass bills. Last week, for instance, they added to the terrorism risk insurance bill a provision to exempt agricultural and energy companies from requirements to post collateral when trading derivatives.

Warren and other supporters of Dodd-Frank have called such maneuvers legislative hostage-taking.

“If we fail to challenge this cynical strategy now, it will only encourage Republicans to pull our financial regulations apart piece by piece,” Warren told her colleagues last week. But an attempt to remove the provision from the bill was defeated 66-31.

Photo: House GOP via Flickr