InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Trade Organizations Express Opinions on Proposed Legislation Regarding PACE Financings
On April 24, various trade associations submitted a joint letter to U.S. Representatives Brad Sherman (D-CA) and Edward Royce (R-CA) expressing their opinions on the legislators’ recently-introduced bill, the Protecting Americans from Credit Entanglements (PACE) Act of 2017 (H.R.1958). The PACE Act of 2017 would, among other things, require specific consumer disclosures for Property Assessed Clean Energy (PACE) financings—a financial product that allows homeowners to pay for energy-efficient retrofitting (such as solar panels and high-efficiency air conditioners) through their property tax assessments. More than 30 states currently have PACE programs. The proposed legislation and its companion bill, S. 838, introduced by Sen. Tom Cotton (R-AR) in the Senate, would subject PACE financing originators and sales personnel to TILA requirements.
GAO Publishes Study Examining Fintech Industry Regulation
On April 19, the U.S. Government Accountability Office (GAO) published a study examining four “subsectors” within the fintech industry—marketplace lenders, mobile payments, digital wealth management platforms, and distributed ledger technology (also known as blockchain)—and highlighting the types of products and services offered and how they are regulated. The report, Financial Technology – Information on Subsectors and Regulatory Oversight, is the first in a series of planned reports on fintech, following a request by Congress for a review of issues related to the industry. From July 2016 to April 2017, GAO reviewed agency publications, guidance, final rulemakings, initiatives, and enforcement actions, and also conducted interviews with representatives from the federal prudential regulators, state supervision agencies, and trade associations in order to compile the findings in the report. The report provides an overview of the technologies associated with each subsector, identifies primary users of the products and services, notes potential benefits and risks, and highlights industry trends and current regulations and oversight. Notably, GAO stated it made no recommendations in this report.
Legislation Proposed to Create Consistent Financial Data Reporting Standards Across Federal Agencies
On March 16, Congressmen Darrell Issa (R-Calif.) and Jared Polis (D-Colo.) introduced the Financial Transparency Act of 2017 (H.R. 1530), a bipartisan bill intended “to amend securities, commodities, and banking laws to make the information reported to financial regulatory agencies electronically searchable.” Specifically, H.R. 1530 would require the Treasury Department to disseminate data standards for all financial regulatory agencies, while directing each agency to transform its regulatory reporting regime from disconnected documents into standardized, searchable data. The bill further provides that any information required by other laws to be public must be published as open data, and includes specific directives for the SEC to improve that agency’s existing data reporting regime.
Additional details concerning the proposed measure are explained in a summary prepared by www.datacoalition.org. U.S. Representative Randy Hultgren (R-IL)—one of the bill’s co-sponsors and current Vice Chairman of the House Subcommittee on Capital Markets, Securities and Investment—has also promoted the legislation in an op-ed for The Guardian, entitled How to stop the next Bernie Madoff.
House Subcommittee Holds Hearing to Discuss the Impact of Regulations on Access to Credit
On March 28, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing that examined recent trends in lending and how the current regulatory climate impacts the availability of credit for consumers and small businesses. According to a memorandum issued prior to the hearing by the House Financial Services Committee, the hearing sought to address the decline in “[l]ending by community financial institutions . . . since the passage of the Dodd-Frank [Act].” Specifically, the memo notes that in the six years prior to the Dodd-Frank Act, small bank lending was more than 150 percent above large bank lending. In the more than six years after Dodd-Frank, small bank lending has been nearly 80 percent below large bank lending. A witness list for the single-panel hearing (along with links to prepared remarks submitted by each witness) included the following stakeholders:
- Scott Heitkamp, President and Chief Executive Officer, ValueBank Texas, on behalf of the Independent Community Bankers of America;
- Holly Wade, Director, Research and Policy Analysis, National Federation of Independent Businesses;
- J. David Motley, President, Colonial Companies, on behalf of the Mortgage Bankers Association; and
- Michael Calhoun, President, Center for Responsible Lending.
In a press release issued by the Financial Services Committee following the hearing, majority members of the subcommittee identified the “Key Takeaways from the Hearing,” as (i) “Dodd-Frank has left Americans with fewer choices, higher costs and less freedom”; (ii) “Financial institutions are exiting entire lines of business, limiting the availability of products and services for consumers”; and (iii) “[t]he Financial CHOICE Act will increase access to credit for consumers and capital for small businesses.”
An archived webcast of the hearing may be accessed here.
CFPB Monthly Complaint Report Focuses on Credit Cards; 2016 Annual Report to Congress Highlights FDCPA Activities
On March 28, the CFPB released its monthly complaint report highlighting consumer complaints as of March 1 of this year. The report states that the Bureau has handled approximately 1,136,000 consumer complaints across all categories, of which 10 percent (116,200) relate to credit cards. A few of the most common findings raised by consumers are: (i) issues with fraudulent charges—both with respect to being billed for charges not initiated by them and experiencing difficulties having charges removed even after a dispute has been resolved in their favor; (ii) issues regarding reward program requirements and benefits; and (iii) issues regarding identity theft complaints, specifically with respect to “credit card accounts being fraudulently opened in their name even after an alert was placed on their credit file.” The report discloses that credit card complaints, along with complaints regarding debt collection practices, constituted the most prolific category of consumer complaints in February 2017. Credit reporting complaints and mortgage complaints are the second and third most common complaints, respectively. As previously reported in InfoBytes last month, student loan complaints continued to show the greatest increase year-over-year for the same three month time period of December to February—551 complaints from 2015/2016 versus 2,913 complaints in 2016/2017.
Furthermore, the report’s geographic spotlight this month, Massachusetts, represented 1.8 percent of the total number of complaints nationally handled by the CFPB, and while debt collection complaints were “significantly lower” than the national average (20 percent as compared to 27 percent), the rate of mortgage complaints was roughly at the national average.
Also this month, on March 6, the CFPB submitted to Congress its sixth annual report summarizing its efforts to administer the FDCPA and highlighting the work done by the CFPB and the FTC, both of whom “work closely to coordinate” FDCPA enforcement actions (see prior InfoBytes coverage on FTC letter summary). The report discusses consumer complaints and debt collection enforcement activity, amicus briefs filed in FDCPA-related cases, consumer education efforts, and initiatives regarding rulemaking, research, and policy. FDCPA examinations performed in 2016 “identified a number of violations of the law …including false representations made by debt collectors to consumers, unlawful fees charged by debt collectors, and illegal disclosure of debts to third parties.” Furthermore, the examinations “also found instances in which debt sellers sold accounts for collection that did not properly reflect that the accounts were discharged in bankruptcy, were fraudulent, or had already been paid . . . Additionally . . . [i]n the cases that were concluded in 2016, $39 million was paid in restitution for consumers who were impacted by illegal debt collection practices and $20 million in civil penalties.”
FTC Commissioners Testify Before Senate Committee on Enforcement Efforts to Combat Fraud
On March 21, Federal Trade Commission (FTC) Acting Chairman Maureen K. Ohlhausen and Commissioner Terrell McSweeny testified before the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Consumer Protection, Product Safety, and Data Security to describe the agency’s law enforcement work to combat fraud. The testimony noted that in the past year, the agency obtained judgments of more than $11.9 billion to consumers “harmed by deceptive and unfair business practices” and received more than three million consumer complaints. Commissioner Terrell McSweeny noted that the “top three categories of complaints were debt collection, impostor frauds, and identity theft,” and that for the first time “imposter scam complaints . . . surpassed the number of identity theft complaints.” FTC Acting Chairman Maureen K. Ohlhausen also presented testimony and emphasized two populations in particular—military consumers and small businesses—both of whom are attractive targets for fraudsters, and for whom the agency actively works with to provide fraud recognition tools to prevent future victims. Also discussed at the hearing was the creation of the Office of Technology Research and Investigation to help the agency “keep abreast of technology changes affecting consumers” as well as the agency’s fraud prevention and education outreach initiatives that impact “tens of millions of people and businesses each year.”
FFIEC Releases Joint Report to Congress on Reducing Regulatory Burdens
On March 21, member agencies of the Federal Financial Institutions Examination Council (FFIEC) announced the release of their Joint Report to Congress: Economic Growth and Regulatory Paperwork Reduction Act (the Report), which details their review of rules affecting financial institutions and the effect of regulations on smaller institutions. The review—required by the Economic Growth and Regulatory Paperwork Reduction Act to be conducted at least once every ten years—included the participation of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration, and included the consideration of more than 230 written and 130 oral comments from financial institutions, trade associations, and consumer and community groups, as well as numerous comments obtained at outreach meetings.
The members of the FFIEC described several joint initiatives, including actions taken to:
- Simplify regulatory capital rules for community banks and savings associations;
- Streamline reports of condition and income (Call Reports);
- Increase the appraisal threshold for commercial real estate loans; and
- Expand the number of institutions eligible for less frequent examination cycles.
In addition, the Report also described actions taken by each agency to “update rules, eliminate unnecessary requirements, and streamline supervisory procedures.”
Rep. Emmer (R-Minn) Reintroduces Financial Stability Oversight Council Reform Act
Representative Tom Emmer (R-Minn) has reintroduced the Financial Stability Oversight Council Reform Act (H.R. 1459), which is intended to increase oversight, transparency, and accountability by subjecting the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) to the regular congressional appropriations process. The proposed legislation—which has been referred to the Committee on Financial Services—would also provide for certain quarterly reporting requirements for the OFR, including an “annual work plan” subject to public notice and comment.
House Bill Focuses on Collection of Debts Owed to Federal Agencies
In February, Rep. Mia Love (R-Utah) introduced the Stop Debt Collection Abuse Act of 2017 (H.R. 864)—legislation seeking to extend the scope of the Fair Debt Collection Practices Act (“FDCPA”) to cover the activities of private debt collectors working on behalf of federal government agencies. Specifically, the proposed bill expands the definition of debt subject to the FDCPA to cover obligations—including loans, overpayments, fines, past-due penalties, and late fees—owed to a federal agency. Under the proposed new law, a debt collector includes any person who regularly collects debts currently or originally owed or allegedly owed to a federal agency. Moreover, the bill also requires that any fees charged by private debt collectors seeking to collect debt owed to a federal agency are limited to: (i) reasonable amounts in relation to the actual costs of the collection; (ii) fees authorized by a contract between the debt collector and the federal agency; and (iii) amounts not greater than 10 percent of the amount collected by the debt collector. H.R. 864, which is currently pending before the House committee on Financial Services, is co-sponsored by Keith Ellison (D-Minn.), French Hill (R-Ark.), and Emanuel Cleaver II (D-Mo.).
President Trump Hosts “National Economic Council” Listening Session with CEOs of Small and Community Banks
On March 9, President Trump met with 11 community bank CEOs at the White House seeking the bankers’ input on which regulations may be crimping their ability to lend to consumers and small businesses. The meeting included representatives from the Independent Community Bankers of America (ICBA), and the American Bankers Association (ABA), as well as nine bank executives from across the country. Treasury Secretary Steven Mnuchin, National Economic Council Chairman Gary Cohn, and White House Chief of Staff Reince Priebus also were present.
The President started the meeting by noting that “[n]early half of all private-sector workers are employed by small businesses” and that “[c]ommunity banks are the backbone of small business in America” before announcing his commitment to “preserving our community banks.” Following the President’s brief opening remarks, the attendees had the opportunity to introduce themselves and share specific examples of how excessive regulatory burdens affect their ability to serve their customers, make loans and create jobs at the local level. Proposals, such as the ICBA’s Plan for Prosperity, also were discussed.
Following the meeting, ABA President and CEO Rob Nichols released a statement “commend[ing] President Trump for meeting with community bankers to hear the challenges they face serving their clients.” He described the meeting as “an important step” toward re-examining the “highly prescriptive rules” that have created a “regulatory environment” in which “mortgages don’t get made, small businesses don’t get created and banks find it more difficult to make the loans that drive job creation.” The ICBA also issued a post-meeting Press Release, in which their Chairman, Rebeca Romero Rainey, explained that among the items discussed at the meeting was the ICBA’s “Plan for Prosperity”—a “pro-growth platform to eliminate onerous regulatory burdens on community banks” that “includes provisions to cut regulatory red tape, improve access to capital, strengthen accountability in bank exams, incentivize credit in rural America and more.” The ICBA Chairman also confirmed that the Association “looks forward to continuing to work with President Trump, his administration and Congress to advance common-sense regulatory relief that will support communities nationwide.”
Also weighing in was House Financial Services Committee Chairman Jeb Hensarling (R-TX), who issued a press release praising the President for “listening to the concerns of community bankers who have been buried under an avalanche of burdensome regulations as a result of Dodd-Frank.” Chairman Hensarling also took the opportunity to tout the Financial CHOICE Act, his bill that would make sweeping amendments to the Dodd-Frank Act. According to Chairman Hensarling, GOP members on the Financial Services Committee are “eager to work with the President and his administration this year to fulfill the pledge to dismantle Dodd-Frank and unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”