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CFPB Provides Sneak Peek at Regulatory Agenda
American Banker (07/03/13) Witkowski, Rachel

The Consumer Financial Protection Bureau (CFPB) released its rulemaking agenda for the upcoming year in accordance with Office of Management and Budget (OMB) regulations. The agenda is notably longer than many other agencies as it continues to expand its purview over nonbank entities and implement facets of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"We have been conducting outreach and research to assess issues in various other markets for consumer financial products and services over many months," wrote Kelly Thompson Cochran, the CFPB's assistant director of regulations. "As a result of this work, we are now beginning to consider whether regulations may be appropriate to address concerns raised about debt collection, which is the single biggest source of complaints to the federal government." The agency plans to use its massive complaint database to target areas of enforcement and has hinted that it will take a close look at prepaid cards.

The CFPB is also moving toward a final rule that would combine two mortgage forms required by the Truth in Lending Act and the Real Estate Settlements Procedure Act. The rule is expected to be issued in the fall, with implementation projected for January 2014, alongside the recently promulgated qualified mortgage and ability-to-repay rules.

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Inside the Beltway
Democrats Plan Challenge to G.O.P.’s Filibuster Use
The New York Times (07/08/13) Peters, Jeremy

The “nuclear option” – or writing the filibuster out of the rules of the U.S. Senate – has often been tossed around as a tool of last resort for frustrated majorities. Now, however, Senate Majority Leader Harry Reid is seriously considering rule changes that would do just that. Through the use of the filibuster, Senate Republicans have slowed the nomination process in the chamber to a standstill. Nominates waiting in the wings include several federal judges, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and nominees to run the Environmental Protection Agency.

“Majorities are fleeting, but changes to the rules are not and breaking the rules to change the rules would fundamentally change this Senate,” said Senator Mitch McConnell, who serves as the Minority Leader. Republicans contend that President Obama has been too quick and heavy-handed in making his appointments. They contend the controversy surrounding CFPB Director Cordray is a prime example of this. Democrats, meanwhile, argue that the president should have the ability to form the team that he believes is best fit to complete the job.

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CFPB Scrutinizing How Companies Collect Their Debts
PoliticoPro (07/10/13) Davidson, Kate

The Consumer Financial Protection Bureau (CFPB) has put companies it regulates on notice about their debt collection practices. Third-party debt collectors are subject to specific restrictions under the Fair Debt Collections Act, including prohibitions on providing false information, making misrepresentations about the size or due date of debt and making false claims about a borrower’s credit score. In a bulletin published July 10, the CFPB noted that creditors are subject to the same rules and regulations as third-party debt collection firms.

“These bulletins make clear that it doesn’t matter who is collecting the debt — unfair, deceptive, or abusive practices are illegal,” said CFPB Director Richard Cordray. The bureau began regulating the debt collection sphere in January and has already issued a $3.2 million fine to the largest company in the field, Expert Global Solutions, for alleged deceptive practices.

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CFPB Criticized during Data Collection Hearing
MarketWatch (07/09/13) Pringle, Aubrey

Steve Antonakes, the acting deputy director at the Consumer Financial Protection Bureau (CFPB), testified on July 9 before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit and took serious criticism from members for the bureau’s recent collection of consumer data. Antonakes argued that the bureau, which began collecting the data earlier this year, did not have exact numbers of how many consumers were included in their data set  and would have to report back with the figures.

“There has been a veil of secrecy around the collecting of data,” said Rep. Sean Duffy (R-WI) “The fact that you are so ill-prepared to answer questions today speaks volumes,” said Rep. Bill Posey (R-FL). Democrats on the committee argued that the CFPB needs to collect the data in order to effectively carry out its mission. Antonakes stated that the bureau is entirely data driven. The Dodd-Frank Wall Street Reform and Consumer Protection Act that created the bureau prohibits the use of personally identifiable data in many instances, and Antonakes argued that the use of such data is extremely limited and closely guarded.

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National and State News
Foreclosure Squeeze Crimps Las Vegas Real-Estate Market
The Wall Street Journal (07/09/13) Timiraos, Nick

A disturbing phenomenon is developing in the Nevada desert, as qualified home buyers are unable to purchase any of the region’s several hundred vacant and blighted homes. Industry analysts and real estate agents are calling this the Assembly Bill 284 bubble. The state law, which went into effect in October 2011, essentially freezes foreclosures in the state and allows residents to remain in their homes despite being unable to pay their bills. It also imposes harsh penalties on bank managers and loan officers if they do not ensure that foreclosures are proceeding legally. Both aspects of the law slow down the foreclosure process, resulting in a glut of vacant and ill-cared for properties.

AB 284 has reduced the area’s housing inventory, driving the price of the few homes that are available to unrealistic levels. The phenomenon has been a boon for home builders. "A.B. 284 has been great for us. It darn near eliminated the constant inflow of foreclosures on the resale market," says Robert Beville, president of a local home building company. However, what is good for the home builders in this case is generally harming the middle class, according to many economists, who fear that overreaching state laws like AB 284 create more problems than they solve.

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Lending Discrimination Case at Supreme Court in Settlement Talks
Bloomberg News (07/05/13)

A case that was accepted by the Supreme Court on June 17 is headed to settlement talks, according to representatives for Mount Holly, N.J. and the local citizens group its facing. The township is being sued by a group of citizens over plans to demolish a neighborhood that is predominantly inhabited by minorities. The case centers on the theory of disparate impact, which finds discrimination through disproportionate affects on minorities, not intent.

Both sides have asked for and received a 25-day extension to submit arguments to the Supreme Court regarding the case. The outcome could have a widespread impact, as the Consumer Financial Protection Bureau and Obama Administration have used the disparate impact theory to fine many large financial institutions claiming that they discriminated against certain consumers while providing auto and home loans.

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Payroll Cards Are under Scrutiny by New York’s Attorney General
The New York Times (07/02/13) Silver-Greenberg, Jessica

N.Y. Attorney General Eric  Schneiderman, has sent letters seeking information to approximately 20 employers in the state seeking information about how the companies use pre-paid debit cards to compensate their employees, according to sources familiar with the investigation. Some of the companies include McDonalds, Wal-Mart and Walgreens.

According to individuals briefed on the matter, Schneiderman is investigating whether employers that compensate employees via pre-paid debit card in lieu of paper check are properly disclosing the fees associated with the cards to their employees. Consumer advocates and employee groups argue that the fees can range anywhere from $0.50 to $2.50 to use the cards in certain situations and employees are not given the choice of another payment method. Moreover, many employees claim they were automatically enrolled in the pre-paid card compensation program.

Industry analysts note that pre-paid cards are an excellent alternative for low-wage earners who do not have access to traditional bank accounts. More often than not, the fees associated with the cards are far less than those charged by predatory check cashing stores, thus making the pre-paid compensation model a safe and reliable option for workers.

The AG’s office is focusing on whether employers are forcing workers to take their pay in the form of the cards, as well as the fee structure associated with the cards – this phase of the investigation will come later. “We are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees’ take home pay,” said Schneiderman.

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State of Auto Lending Seen as Stable; Delinquencies at Near-Record Lows
Automotive News (07/10/13) Henry, Jim

A new study by FICO and the Professional Risk Managers’ International Association shows that the auto lending sphere remains a stable source of credit. Nearly all of the respondents noted that the expected delinquencies in auto loans to increase or decrease, but only by a fraction. More than half said they believe the rate of delinquencies will remain unchanged year over year. This news comes as U.S. credit bureaus announced recently that auto delinquencies are near record lows.

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Swipe-Fee Battle Moves to States as U.S. Banks Fight Surcharges
Bloomberg (07/09/13) Dougherty, Carter

An estimated $40 billion in swipe fees are at stake as the battle over credit surcharges now continues state by state. Earlier this year, retailers were for the first time permitted to recoup interchange fees – those charged to merchants by credit card companies to process payments – by passing that percentage charge onto the consumer. This change resulted from a class action settlement between Visa/Mastercard and a coalition of merchants that argued that the credit card servicers were inappropriately fixing the fees.

Now, state governments are moving to protect consumers against merchants charging an additional one to three percent on top of their purchase. A new law in Utah passed this year bans swipe fees, and New Jersey may soon follow suit. Numerous other states are considering legislation or have included it on their agendas.

Consumer advocates argue that consumer choice should govern how and where people shop while merchant groups argue that banks should not be able to levy fees with no say whatsoever from the individuals actually selling the products. Credit card industry analysts note that consumers are averse to surcharges of any type and thus will choose not to use credit cards if a surcharge is in place in a particular store.

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U.S. Regulators Place GE Capital, AIG under Additional Supervision
The Washington Post (07/09/13) Douglas, Danielle

The Financial Stability Oversight Council (FSOC) voted to extend stricter supervision over nonbank companies GE and AIG, whom they deem critical to the financial system. Previously, large companies such as hedge funds, insurance giants and private equity firms have escaped federal oversight. The interagency working group expanded supervision broadly, claiming that the companies simply expose the economy to too much risk. “These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis,” said Treasury Secretary Jack Lew, who chairs the council.

Neither GE nor AIG fought the council’s decision, which they learned of in the beginning of June and were given 30 days to appeal. Prudential Financial, which was also named systemically important, appealed. The FSOC noted that GE stood out as one of the largest creditors in the U.S. economy and thus was instrumental in the continued flow of dollars. AIG, as the third largest insurer, required additional oversight due to the risk it would incur if a large number of policyholders cashed out at the same time.

GE Capital indicated that it was prepared for the designation. “We have strong capital and liquidity positions, and we are already supervised by the Fed,” said GE Capital spokesman Russell Wilkerson.

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July 11, 2013

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