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Tag: consumer financial protection bureau

Biden Names 'Progressive Hero' To Top Financial Regulatory Post

By Andrea Shalal

WASHINGTON (Reuters) -U.S. President Joe Biden on Friday said he would nominate former Treasury official Michael Barr to be the Federal Reserve's top regulatory official, replacing Sarah Bloom Raskin who withdrew in March after failing to win the backing of moderate Democrats.

Barr, currently a professor at the University of Michigan Law School, was a central figure at the Treasury under President Barack Obama when Congress passed the 2010 Dodd-Frank financial reform law in the wake of the 2007-09 financial crisis, and helped create the Consumer Financial Protection Bureau (CFPB).

"Michael brings the expertise and experience necessary for this important position at a critical time for our economy and families across the country," Biden said in a statement.

The Fed vice chair for supervision is responsible for overseeing the biggest banks, determining proper capital ratios, and represents the United States in cross-border negotiations over international banking standards.

As Treasury assistant secretary for financial institutions, Barr helped shape the Wall Street post-crisis overhaul, Biden said, adding that Barr had strong support across the political spectrum. He noted that Barr had been confirmed on a bipartisan basis for the Treasury post in 2009.

However, Patrick Toomey, the top Republican on the Senate Banking Committee, criticized Barr's support of the Dodd Frank law, which Toomey said enshrined taxpayer bank bailouts. He also said the CFPB was "unaccountable" and "unconstitutional."

"For these and other reasons, I have concerns about his nomination, but I look forward to meeting and discussing these and other matters," Toomey said in a Friday statement.

The president said he would work closely with the Senate Banking Committee to move Barr's nomination forward quickly, and called on the Senate - which is evenly split with Democrats holding the tie-breaker vote - to swiftly confirm his four other Fed nominees, including Jerome Powell for a second term as chair and Fed Governor Lael Brainard for vice chair.

A vote is expected on Powell, Brainard and economists Philip Jefferson and Lisa Cook, both nominated to fill vacant Fed board seats, after the Senate returns from the Easter break.

'This Job Is Vital'

Senate Banking Committee Chair Sherrod Brown said he would support Barr's nomination and strongly urged his Republican colleagues to avoid personal attacks and back him as well.

"At a time when working families are dealing with rising prices while corporate profits continue to soar, this job is vital to ensuring the economy works for everyone," Brown said.

If confirmed Barr, who would have a vote on monetary policy issues, would arrive at the Fed as it is confronting the highest inflation in 40 years, with officials promising an aggressive series of rate hikes this year to rein in prices. The central bank is also planning to cull its $9 trillion balance sheet.

Barr will also have a lengthy to-do list on the regulatory front, including pushing ahead with climate risk tests for Wall Street banks, implementing new capital rules, and drafting new rules for cryptocurrencies and community lending.

Barr's name had been floated for another bank regulatory post, heading up the Office of the Comptroller of the Currency, but some progressives objected, citing his work with some fintech firms after leaving government.

Biden said Barr had spent his career protecting consumers, and played a critical role in creating both the CFPB and the Fed post for which he was now being nominated. He also served at the National Economic Council in the White House.

Former CFPB Director Richard Cordray has described Barr as "a progressive champion," while Senator Elizabeth Warren has called him "a hero" for his work on Dodd-Frank.

"He was instrumental in the passage of Dodd-Frank, to ensure a future financial crisis would not create devastating economic hardship for working families," Biden said.

Raskin withdrew from consideration for the top regulatory post at the Fed on March 15, a day after Democratic Senator Joe Manchin and moderate Republicans said they would not back her, leaving no path to confirmation by the full Senate.

(Reporting by Andrea Shalal; additional reporting by Michelle Price; Editing by Leslie Adler and Franklin Paul)

Banks Gouging Their Customers Face Tough New Regulation Under Biden

Junk fees and checking account overdraft fees are on the run now that President Joe Biden has appointed regulators who are looking out for bank customers instead of just bankers.

Such fees can result in a cup of coffee that costs $40 — five bucks for the java and a $35 bank overdraft fee because the debit card purchase came to pennies more than the customer had on deposit.

The Biden administration is reviving the Consumer Financial Protection Bureau, the brainchild of Sen. Elizabeth Warren that Trump and his cronies tried to shut down.

Before Trump, and now under Biden, the board is recovering for consumers many times its annual budget. Under Trump CFPB enforcement shriveled as $1 fines for bank misconduct became common.

In a much more tentative way, the Office of the Comptroller of the Currency may be recovering some regulatory backbone after being weakened under the predatory banker Stephen Mnuchin when he was Trump’s Treasury Secretary.

Ending Junk Fees

These two agencies are pushing to end junk fees and reduce overdraft fees. The Comptroller has even proposed specific reforms on overdraft fees.

A dozen large banks, recognizing the days of easy profits from gouging customers with junk and overdraft fees were unlikely to survive a Biden administration, reduced or eliminated them last year, the trade publication American Banker reported. Its reporting showed “how quickly a longtime mainstay of the consumer banking business has fallen into disfavor.”

If you haven’t heard about that, it’s not surprising. The actions have gained hardly any mention in America’s major news organizations with a few exceptions.

For decades I’ve noted that newspaper business pages and cable financial news channels typically report on banking issues through the eyes of bankers instead of the vastly larger audience of bank customers.

The nonprofit National Consumer Law Center has long been at the forefront in working for policies that reduce or eliminate overdraft and junk fees. Center lawyer Chi Chi Wu says that fees for overdrafts or insufficient funds on deposit “are one of the leading reasons that people are unbanked, either because past overdrafts put the consumer on an account screening lists that prevent them from opening new accounts, or because the fees make it too costly to maintain an account.”

Account screening can also be seen as an anti-consumer measure designed to give banks an excuse to reject service. It’s a key factor in the public banking movement to make low-cost banking services universal.

Whitewashing Banking History

Sadly, the banking industry is busy trying to erase the real history of its price gouging, dishonest mortgage lending, and reckless risk-taking as banks mixed the staid business of retail banking (checking and savings accounts; auto, credit card, and mortgage loans) with the risky but often more profitable businesses of underwriting stocks and bonds, trading securities and commodities and insurance.

A revealing example of this comes from the web pages of the Consumer Bankers Association which has a mildly Orwellian name. The trade group is not about consumers, but retail banks that serve them. You can get a flavor of its real interest from articles it reprints. For example: Fewer People Are Paying Overdraft Fees and Banks are Hurting.

Orwellian is a strong term, but then note this February 10 announcement, paying close attention to the words “understand” and “attack.”

“The Consumer Financial Protection Bureau (CFPB) last month launched a new initiative to better understand fees charged by banks and other financial institutions, with a specific emphasis on overdraft fees. The launch marked the latest attempt by the CFPB to attack the banking industry with extreme rhetoric…”

Using understanding and attack as synonyms is not just Orwellian, it's Trumpian.

Actual Banking History

Here’s some perspective on why a federal agency dedicated to protecting consumers from predatory banking practices would be interested in such fees:

Overdraft fees per American adult averaged $687 in 2008 (the equivalent of $915 in today’s money) with a total cost to bank customers of almost $200 billion in today’s money. Fewer than 10 percent of bank customers incur more than 90 percent of bank overdraft fees, most of them poorly paid workers.

Those fees have now fallen 77 percent to $158 per American, the Consumer Bankers Association says, a burden still borne mostly by the poorly paid. But the association focuses on how this “hurts” banks, not the consumers they exist to serve.

Here’s another association claim that would make Orwell smile: “America’s leading banks engage in rigorous underwriting practices.”

“Arts and Crafts”

Failure to underwrite mortgages, including the brazen fabrication of documents in “arts and crafts” rooms at Countrywide Mortgage to justify mortgages to unqualified buyers, was half the reason for the Great Recession in 2008. The other half was dishonest ratings by Wall Street. Journalist Michael Hudson was onto this as early as 2005 while most news reports praised the glories of mortgage lenders who were neck-deep in fraud against their customers and buyers of mortgage-backed securities.

All this is documented in the report of the Financial Crisis Inquiry Commission. From page 23 of its report:

“This report catalogues the corrosion of mortgage-lending standards…. Many mortgage lenders set the bar so low that lenders simply took eager borrowers’ qualifications on faith, often with a willful disregard for a borrower’s ability to pay. Nearly one-quarter of all mortgages made in the first half of 2005 were interest-only loans. During the same year, 68 percent of ‘option ARM’ loans originated by Countrywide and Washington Mutual had low- or no-documentation requirements.”

By the way, no error has ever been found in the inquiry commission report.

Keep all this in mind as the Consumer Finance Protection Board and the Comptroller move to make new regulations that protect customers from the worst behavior by bankers.

David Cay Johnston is the Editor-in-Chief of DCReport. He is an investigative journalist and author, a specialist in economics and tax issues, and winner of the 2001 Pulitzer Prize for Beat Reporting.

Reprinted with permission from DCReport

Despite Pandemic Pressures, Big Banks Screwed Consumers On Overdrafts

Reprinted with permission from Daily Kos

Last year was a difficult one for millions of people in the United States.

It was not so difficult for big banks, and one of the ways the banks raked in revenue was by hitting struggling people with overdraft fees.

During the final quarter of 2020, when the coronavirus pandemic was battering the country, JPMorganChase, Bank of America, and Wells Fargo each took in more than $300 million in overdraft fees alone. Those fees are slapped on people who are by definition struggling, and banks often use strategies to maximize the number of fees people pay, like ordering transactions so that the biggest amounts go through first, which lets them charge fees on more, smaller transactions. And it's no thanks to the banks that it wasn't much, much worse—COVID-19 relief from the government protected many people from the worst.

Around one in three checking accounts has at least one overdraft a year, and five percent of checking account holders have 20 or more overdrafts a year, accounting for more than 60 percent of overdraft fees. In 2020, the average overdraft fee was over $33. Many of these fees are triggered by debit card transactions for less than $25 that are repaid within three days.

This is an ongoing story—bank overdraft fee policies have been terrible for years. But it took on new dimensions during the pandemic, with sky-high unemployment creating a financial emergency for so many people.

"Banks could've capped overdraft fees for a certain number of months, or had no fees during the pandemic, but they didn't want to give up a dollar of overdraft revenue in any formal way," Rebecca Borné, senior policy counsel at the Center for Responsible Lending, told The American Prospect's Alexander Sammon. "So what we see now is a return to business as usual, where our largest banks each took over a billion dollars out of the checking accounts of people during one of the worst years in our history. It's a gobsmacking amount of money."

It would have been much worse without COVID-19 relief bills, from the CARES Act to the American Rescue Plan. Check out how Google trend data on searches for "overdraft" tracked the passage of those laws:

OverdraftandGoogleSearches1.png

After each round of relief payments, you see searches for "overdraft" drop. Because the banks weren't interested in going easy on people being hammered by a once-in-a-century pandemic and the accompanying economic devastation.

Consider it one more reminder that what we need are regulations and laws to protect consumers. There are two prime ways that could happen on this issue. Early in the pandemic, Sens. Cory Booker (D-NJ) and Sherrod Brown (D-OH) proposed legislation to crack down on overdraft fees during the COVID-19 emergency, banning them altogether for the duration of the emergency and preventing banks from reporting overdrafts to credit reporting agencies—but that didn't get passed. Booker and Rep. Carolyn Maloney (D-NY) have other legislation on overdraft abuses more generally, but as always, there's that Senate filibuster problem blocking progress.

Under President Biden, though, the Consumer Financial Protection Bureau (CFPB) could do a lot more protecting consumers than the agency did under Donald Trump. Biden's nominee to head the CFPB, Rohit Chopra, hasn't yet been confirmed, but he's known as a strong consumer advocate. He could regulate the practice, which is extraordinarily abusive even in non-pandemic times.

The Long List Of Trump Appointees That Biden Should Fire — Immediately

Reprinted with permission from DailyKos

Here's something to ponder along with your dream team picks for President-elect Joe Biden's Cabinet and top officials: Who should he fire first? There are just so many options, and you can thank Republicans for the fact that Biden will be able to jettison some folks, fast. As David Dayen reminds us, the Republican case to try to gut President Obama's Consumer Financial Protection Bureau (CFPB), a case that went all the way to the Supreme Court, means that the odious Trump director can be canned summarily by Biden. Because, as they say, elections have consequences.

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OMB Chief Mulvaney Is Making The World Safe For Loan Sharks

Reprinted with permission from DC Report.

The trade group for the payday loan industry, which profits from interest rates as high as 950% a year imposed on the poorest among us, is planning to hold its annual conference this year at Trump’s golf resort near Miami.

The industry will have a lot to celebrate at the four-day conference in April of the Community Financial Services Association of America, which spent $460,000 on federal lobbying in 2017. The Consumer Financial Protection Bureau, our nation’s independent agency that is supposed to be a watchdog for consumers, recently announced that the bureau will reconsider a rule that could have cut industry revenue by two-thirds.

The bureau also ended an investigation into an installment lender whose PAC gave at least $4,500 in campaign donations to Mick Mulvaney, the former South Carolina congressman who is now the acting head of the bureau. The bureau also dropped a lawsuit in Kansas against four payday lending companies that charged interest rates of 440% to 950%.

“Mulvaney is inviting financial predators to help him dismantle consumer safeguards,” said Bart Naylor of Public Citizen.

Much of the payday loan rule was supposed to take effect in August 2019. It required payday lenders to determine whether the borrower could actually repay the loan with interest within 30 days while still paying basic living expenses like rent and car expenses. The loans are often due within two weeks and have annual interest rates of about 390%.

Our nation has more payday loan stores than McDonald’s restaurants – nearly 18,000. They make about $46 billion in loans each year and collect more than $7 billion in fees. Researchers estimate that about 12 million people, many who can’t get other credit, borrow from payday lenders each year.

Big banks such as Wells Fargo finance eight major payday lenders. The banks can borrow money at 0.5% from the Fed and then lend it to the payday lenders.

The rule also limited the number of times a borrower could rollover a loan. Payday loans are frequently structured with balloon payments. Borrowers unable to repay the full amount can rollover the loan, racking up hundreds of dollars in fees while still owing the original amount of the loan.

“One payday loan often leads to another payday loan and so on into a debt trap,” said Christopher Peterson, a law professor at the University of Utah who advised the bureau on the payday loan rule. “…The average borrower is taking out eight of these loans per year.”

Trump appointed Mulvaney to be acting head of the bureau, replacing Richard Cordray who resigned in November. Cordray appointed Leandra English as acting director. She has sued Trump and Mulvaney to try to block Mulvaney from running the agency. The lawsuit is pending.

Mulvaney has asked for no money to fund the agency in the second half of 2018 and has told bureau staffers to show “humility and prudence” and to not “push the envelope.”

Elizabeth Warren Won’t Let Trump Gut The Consumer Financial Protection Bureau

Mitch McConnell may have cut her off on the Senate floor, but Elizabeth Warren refuses to be silenced. Two days after becoming an internet meme, the Massachusetts senator sat down with Attn to discuss an underreported, but no less pressing Trump scandal.

“What Donald Trump wants to do is fire one of the most important financial cops and then say to the American people, you keep walking down this dark alley and, you know, what happens is what happens,” Warren revealed.

The cop in question is Consumer Financial Protection Bureau director Richard Cordray. Cordray’s term ends in July 2018, but Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, is encouraging Trump to “immediately fire” the director.

“The Consumer Financial Protection Bureau, which didn’t even exist before the financial crisis, [prevents Americans from being] cheated on mortgages and credit cards and the things that ultimately blew up our economy,” Warren explained.

The CFPD was created by the Dodd-Frank financial reform act and specifically helped combat home mortgage scams. Now that Trump wants to scrap the legislation, Republicans such as Rep. Hensarling, Sen. Mike Lee of Utah, and Sen. Ben Sasse of Nebraska say Cordray must go.

“The financial services industry, the giant banks figured out, ‘Whoa, there’s money to be made here… by selling, lyin’ and cheatin’ scammin’ mortgages,’ and that’s what they did,” Warren said.

“They sold them in big numbers and for a little while it was, you know, like a sugar high,” she continued. “Housing prices went up, the economy went crazy, and then of course it all blew up. And they not only cost people their homes and cost them their financial security, they cost millions of people across this country their jobs and their savings. They really created the economy that made it so hard for young people to come in and get good and decent jobs and be able to move ahead.”

Warren became the Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau in September 2010, but was not nominated to direct the agency for fear she would not pass confirmation. President Obama nominated Cordray instead 10 months later.

According to Warren, the agency functions as “a cop on the beat, to [provide] a level playing field” and “Donald Trump just started the process to try to gut the rules.”

Watch:

Alexandra Rosenmann is an AlterNet associate editor. Follow her @alexpreditor.

IMAGE: U.S. Senator Elizabeth Warren (D-MA) shows company documents to Wells Fargo CEO John Stumpf during his testimony before a Senate Banking Committee hearing on the firm’s sales practices on Capitol Hill in Washington, U.S., September 20, 2016. REUTERS/Gary Cameron

Clinton Expected To Hit Wells Fargo In Speech On ‘Bad Corporate Actors’

 

WHITE PLAINS, N.Y. (Reuters) – U.S. presidential candidate Hillary Clinton on Monday will unveil a plan to make it easier for consumers to take legal action against “bad corporate actors,” citing Wells Fargo & Co and Mylan Pharmaceuticals, according to a campaign official.

While campaigning in Ohio, the Democratic nominee will explain how she would, if elected on Nov. 8, curb the prevalence of contractual clauses that require consumers, employees and other individuals to resolve legal disputes in private arbitration proceedings instead of in courts, her campaign said. Mandatory arbitration clauses sometimes require that claims be pursued on an individual basis instead of on behalf of a class of similarly situated individuals. Consumer advocates say this makes it prohibitively expensive to take legal action.

Clinton will call on the U.S. Congress to give agencies such as the Federal Trade Commission, the Federal Communications Commission and the Department of Labor the authority to restrict the use of arbitration clauses in consumer, employment and antitrust agreements, according to a preliminary plan reviewed by Reuters.

Clinton will also discuss how she believes that the Consumer Financial Protection Bureau and other agencies already have the authority to curb the use of such clauses under the 2010 Dodd-Frank Act. The planning document said she would urge the Securities and Exchange Commission to exercise its authority to make related rules authorized by the financial reform law. Wells Fargo is expected to be in the crosshairs when Clinton discusses how she would curb mandatory arbitration clauses.

For years, the bank’s employees opened as many as 2 million checking, savings and credit card accounts without the customers’ permission in order to meet sales quotas. Wells Fargo reached a $190 million settlement with federal regulators earlier this month.

When Wells Fargo chief John Stumpf testified before Congress recently about the unauthorized accounts, he said he did not expect the bank to waive a clause signed by its customers in order to open their authorized accounts. The clause said they would arbitrate disputes instead of suing Wells Fargo in court.

Democratic lawmakers in Congress, including Senator Elizabeth Warren of Massachusetts, have called on Wells Fargo to toss out the mandatory arbitration clause and allow customers to sue.

Clinton is also expected to criticize Mylan for sharply raising without justification the price of EpiPens, which deliver life-saving drugs to those with allergies. The criticism will be part of a larger push to curb excessive market concentration and encourage competition that benefits consumers, her campaign said.

(Editing by Lisa Von Ahn)

IMAGE: Democratic presidential nominee Hillary Clinton boards her campaign plane in Charlotte, North Carolina, United States October 2, 2016.  REUTERS/Brian Snyder

Senators Push Wells Fargo CEO On Pay Clawbacks After Bogus Accounts

By Patrick Rucker and Dan Freed

(Reuters) – U.S. Senate lawmakers excoriated Wells Fargo & Co’s chief on Tuesday for his oversight of the bank as it opened 2 million bogus customer accounts, potentially laying the groundwork for new rules and reviving questions of whether banks are “too big to fail.”

Chief Executive Officer John Stumpf told the Senate Banking Committee on Tuesday that customers who had bogus accounts opened in their name will be made whole and compensated for any damage to their credit rating, but some Democratic senators called for his resignation.

Under fire, Stumpf said he has told his managers to do “whatever it takes” to make customers whole, refunding fees or compensating them for damage to their credit ratings. But he stood behind the former executive who ran the unit that oversaw many of the practices, and at times downplayed the scope of the affair.

In answer to a question, he declined to commit to setting aside mandatory arbitration agreements that prohibit clients from suing Wells Fargo. The Consumer Finance Protection Bureau has proposed a ban on such clauses that prohibit class-action lawsuits.

Earlier this month, the lender agreed to pay $190 million in penalties and customer payouts to settle the case involving the creation of credit, savings and other accounts without customers’ knowledge. About $5 million will directly go to customers, many of whom might have paid a small fee on the unwanted accounts.

The revelations are a severe hit to Wells Fargo’s reputation. During the financial crisis, the bank trumpeted itself as conservative, in contrast to its rivals.

Besides potential criminal charges against the company and its executives, Wells Fargo may face pressure from shareholders to change its practices on executive pay and governance.

The scandal also renewed debate over whether U.S. banks are “too big to fail” and need closer government oversight to prevent a massive collapse.

Lawmakers could use the fraud settlement as a springboard for new rules on executive pay, including clawbacks of compensation, and limits on forced arbitration.

Wells Fargo has said its board will assess whether to cancel or claw back any incentive compensation paid to a now-retired executive at the center of the scandal, Carrie Tolstedt.

Democratic Senators Jeff Merkley of Oregon and Elizabeth Warren of Massachusetts called for Stumpf to resign, with Warren saying Stumpf should give back his salary and be criminally investigated.

“You should resign. You should give back the money you took while this scam was going on, and you should be criminally investigated,” Warren said.

The bank’s board of directors is examining what action it should take against company executives, Stumpf told the committee.

“I accept full responsibility for all unethical sales practices,” Stumpf said, adding later, “I apologize to all of the American people and our customers, and I will make it right.”

Lawmakers said the phony bank accounts might have hurt customer credit ratings, increased the cost of a mortgage or car loan. New credit card applications and consumer borrowing trends can weight on an individual’s credit.

“WHERE WAS MANAGEMENT?”

Wells Fargo has acknowledged bank employees “inappropriately opened” the customer accounts and that about 5,300 employees were fired over five years.

Former bank employees say they were under intense pressure to add accounts for each customer.

Abuses were found as early as 2011, Stumpf said, but bank executives only realized the scale of the problem early last year.

At that time, Stumpf said, managers came to recognize how a pattern of creating phony accounts could be used to boost unwarranted fees.

“It never dawned on us that there could be a cycle,” the CEO said.

“It just sort of begs the issue of where was management,” said Senator Sherrod Brown of Ohio, the senior Democrat on the panel.

Brown said employees were caught “forging signatures, and stealing identities, Social Security numbers, and customers’ hard-earned cash, so as to hang on to their low-paying jobs and make money for the high-paying executives at Wells Fargo.”

Thomas Curry, the Comptroller of the Currency, said the agency is considering action against individual Wells Fargo executives who may have violated laws or regulations.

The U.S. Attorney’s Offices in Manhattan and in San Francisco are investigating Wells Fargo, a person familiar with the matter said last week.

While Democratic lawmakers were the most outspoken in their attacks, Republicans also grilled Stumpf.

Louisiana Senator David Vitter pressed the CEO on how customer fraud could persist for years and thousands of employees could be fired before the head of the bank got involved.

“Why isn’t this crystal clear proof that an entity as big as Wells is not only too big to fail but it’s too big to manage and too big to regulate?” Vitter asked.

Stumpf said the widespread abuse was “a problem of focus and not of size.”

Stumpf appeared before the congressional panel with a bandaged right hand. He suffered an injury playing with his grandchildren, according to the bank.

Wells Fargo shares rose 2 percent to $46.94.

(Reporting by Patrick Rucker in Washington and Dan Freed in New York; Writing by Nick Zieminski; Editing by Linda Stern and Jeffrey Benkoe)

Photo: U.S. Senator Elizabeth Warren (D-MA) shows company documents to Wells Fargo CEO John Stumpf during his testimony before a Senate Banking Committee hearing on the firm’s sales practices on Capitol Hill in Washington, U.S., September 20, 2016.   REUTERS/Gary Cameron