CFPB – Page 2 – Federal Financial Analytics

5 03, 2024

FedFin on: Consumer-Financial Product Marketing Practices

Arezou Rafikian2024-03-05T16:34:22-05:00March 5th, 2024|The Vault|

The CFPB has issued a circular essentially banning digital and perhaps all other consumer-finance comparison-shopping and lead-generation tools for credit cards and other products not covered by prior orders. These activities could continue, but only as long as the comparison or lead is completely objective as the Bureau may come to judge it under complex and sometimes conflicting standards. The circular follows similar CFPB actions outside the Administrative Procedure Act even though the agency clearly intends to enforce its new approach both directly and in concert with other state and federal agencies….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

26 02, 2024

Karen Petrou: The Unintended Consequences of Blocking the Credit-Card Merger

Eliza Allen2024-04-12T09:46:02-04:00February 26th, 2024|The Vault|

There is no doubt that the banking agencies have approved all too many dubious merger applications along with charter conversions of convenience. However, the debate roiling over the Capital One/Discover merger harkens to an earlier age of thousands more prosperous small banks all operating strictly within a perimeter guarded by top-notch consumer, community, and prudential regulators. Whether this ever existed is at best uncertain. What is for sure is that all this nostalgia for a halcyon past will hasten a future dominated by GSIBs and systemic-scale nonbanks still operating outside flimsy regulatory guardrails.

The best way to demonstrate this awkward certainty is to run a counter-factual – that is, think about what the world would look like if opponents of the Capital One/Discover deal get their way. Would we quickly see a return to card competition housed firmly within a tightly-regulated system? Would the payment system be loosed from Visa and Mastercard’s grip? Would merchants see the dawn of a new era of itsy-bitsy interchange fees? Would card rates plummet and rewards stay splendiferous? I very much doubt it. Space here does not permit a detailed assessment of the analytics underlying my conclusions, so let’s go straight to each of them.

First, banning the CapOne/Discover deal would not ensure robust card competition under strict bank regulation. JPMorgan’s and American Express’ formidable stakes could grow because credit-card lending is a business dependent on economies of scale and scope vital to capital-efficiency through the secondary market. However, large banks will …

31 10, 2023

FedFin Assessment: New White House AI Policy Promises New KYC Requirements, Banking-Agency Guidance

Arezou Rafikian2023-10-31T13:33:25-04:00October 31st, 2023|The Vault|

In this report, we assess the detailed executive order (EO) issued late Monday afternoon after days of private showings of selected versions. Much in the EO’s binding provisions address near-term AI-related threats to national-security, pandemic-risk, and infrastructure vulnerabilities and much related to AI-related opportunities derive from internal procedures Mr. Biden urges the federal government to develop along with workforce protections and biomedical research. The EO also reiterates the Administration’s values and presses agencies to work still harder on voluntary industry standards that many have been drafting or disagreeing on since the White House and Congress first called attention to AI risk. What comes of these provisions in the EO remains to be seen, but the Administration has also used tools such as the Defense Production Act’s authorization for direct economic intervention to mandate an array of new AI commercial and technology safeguards.

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

30 10, 2023

Karen Petrou: How to Prevent Open Banking From Turning Into the Wild West

Eliza Allen2023-11-13T15:44:38-05:00October 30th, 2023|The Vault|

There are so many rules coming from so many directions at U.S. financial institutions that spotting key strategic challenges or opportunities is harder than ever. That more and more of these rules are longer than 1,000 pages makes C-suite impact considerations still harder to highlight. In the midst of this morass, one proposal from the CFPB on consumer-data rights may be easy to overlook, but this seemingly-petite 299-page rule is at least as consequential as the thousands of capital and CRA pages getting all the not-so-love.

Why? Quite simply, consumer data are the currency of commerce in general and retail finance in particular. The stratospheric ascent of data-driven companies such as Amazon are indisputable proof that competitors who control data quickly control consumers, mobilizing ever more powerful network effects that then crush all but the most nuanced niche providers. The CFPB is right that banks no more deserve exclusive provenance over consumer data than tech-platform companies, but requiring banks to give these data away as the Bureau plans means the crown jewels of each retail franchise are now out on the shop counter for free.

Companies far better able to make astute use of these data than all but a few banks will quickly find ways to persuade consumers to give personal information to them unless the final data rights standard has considerably more consumer protection built in than the proposal. I know it sounds odd to say that a CFPB proposal is light on consumer protections, but so it …

6 04, 2023

FedFin: Extra Equitable?

Arezou Rafikian2023-04-06T16:36:29-04:00April 6th, 2023|The Vault|

FHFA, Fannie, and Freddie yesterday updated the sometimes-controversial equitable-finance plans FHFA approved last year. Notably, Fannie’s new plan no longer focuses exclusively on Black households, a feature that garnered vitriolic Wall Street Journal criticism and negative Republican reactions. Freddie’s plan delays and may even back away from efforts to set MI and title insurance pricing.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

8 02, 2023

FedFin on: Credit-Card Late Fee Regulation

Arezou Rafikian2023-02-09T09:43:39-05:00February 8th, 2023|The Vault|

Following on a controversial advance notice of proposed rulemaking, the CFPB has now released an NPR setting specific standards for credit-card late fees that also eliminates the inflation adjustments established by the Federal Reserve when implementing the 2009 credit-card law. The NPR also seeks comment on still more stringent late-fee restraints and limits on some or all of the other penalty fees now charged by some credit-card issuers. When issuing the ANPR, the Bureau also noted that it plans to advance other initiatives under its “junk-fee” standards, likely starting with those pursuant to ….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

25 01, 2023

FedFin on: Negative Option Marketing

Arezou Rafikian2023-01-25T16:14:16-05:00January 25th, 2023|The Vault|

Using one of its controversial edicts to set what some consider a new rule, the CFPB has opined that negative-option or “subscription” marketing of consumer-financial products or services may be unfair, deceptive, or abusive (UDAAP) and thus subject to significant sanction for both the provider and any third parties with which it works. Although the circular does not prohibit negative-option marketing, these sanctions and the sometimes-vague nature of stipulated safeguards may lead some financial companies…..

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

23 01, 2023

Karen Petrou: How the CFPB Plans to Rule by Registry

Eliza Allen2023-01-23T11:09:36-05:00January 23rd, 2023|The Vault|

Last week, we provided clients with an in-depth analysis of the CFPB’s latest nonbank registry as well as a hard look at its impact on mortgage securitization. Any nonbank subject to the CFPB will find its legal arsenal much depleted by the registry’s requirements, a point already well understood by opponents. Far less noticed but of still greater consequence to all consumer-finance companies is another implication of the Bureaus actions here and in another recent registry proposal: even where the CFPB has little to no regulatory authority, it will deploy its formidable ability to gain public attention to make unbearable the reputational risk of any practice it abhors.

Justice Brandeis is often quoted as saying that sunshine is the most powerful disinfectant and Director Chopra clearly plans to cast companies under a scorching sun. That is works was demonstrated by his decision to detail the ways in which he believes overdraft fees support predatory earnings at considerable cost to vulnerable consumers. That most banks charged overdraft fees in strict compliance with current rules made enforcement action at best a challenging route to reform. Rewriting the rules would have gotten the Bureau where it wanted to go, but only over at least a year of wrangling. Set out in the merciless sun by Mr. Chopra and Congressional Democrats, many banks decided that the political and reputational risk of continuing overdraft fees was just too high.

Overdraft reform thus proved easy to say and then to do. So it is …

19 01, 2023

FedFin on: Form-Contract Registry

Arezou Rafikian2023-01-19T16:53:19-05:00January 19th, 2023|The Vault|

Building on its proposed nonbank registry related to enforcement orders, the CFPB is now also proposing a public registry requiring posting of provisions in consumer-finance contracts the agency believes threaten consumer legal or free-speech rights when issued by supervised nonbanks. The agency’s concern is based on its view that consumers generally have no ability to understand and alter the agreements presented to them as take-it-or-leave-it propositions with no choice other than a signature or an “agree” box to click. Further, many contractual terms are decided between originators and third parties – e.g., credit reporting agencies, loan servicers, and debt collectors – over which the consumer has no power of choice or ability. The registry is thus also intended to capture these sub-contracts determining back-end consumer risk, a move with considerable implications for proprietary relationships with these third-party providers. Much in the new standards strikes at….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

21 12, 2022

FedFin on: Nonbank Enforcement-Order Registry

Arezou Rafikian2022-12-21T16:54:37-05:00December 21st, 2022|The Vault|

The CFPB is proposing to create a public registry of certain enforcement actions that would initially cover nonbanks (including BHCs) with a goal of drawing public and enforcement-agency attention to what the Bureau’s director calls “serial offenders.” …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…