#Chopra

22 04, 2024

Karen Petrou: Credit-Card Surcharges: One Inflationary Culprit the CFPB Could Catch

2024-04-22T09:29:18-04:00April 22nd, 2024|The Vault|

One could go on – indeed many do – about whether inflation is showing enough signs of a slow-down to warrant lower interest rates.  I’ve said before that lower rates won’t have the housing-affordability benefits advocates expect, but this doesn’t address the underlying issue of just how hot inflation may be running.  I’m not sure if anyone – including the Fed – really knows, but battles on my neighborhood listserv validated by growing data make clear that federal data overlook one hidden price hike driving more and more Americans flat-out crazy:  credit-card surcharges that are nothing but shadow price hikes of as much as four percent.

In fact, card surcharges are the epitome of the “junk” fees the CFPB has vowed to quash.  The credit-card late fees the Bureau lambasts are due to consumer sins of omission or commission – i.e., consumers have the ability – I would say obligation – to keep their card debt within amounts they can honor as well as the choice to pay on time.  How much should be charged for paying late is obviously a point of discussion, but that consumers have a duty to pay on time is indisputable.

In sharp contrast, card surcharges are often unavoidable and ill-disclosed.  The neighborhood listserv is something of a group rant, but it does include interesting illustrations of hidden credit-card surcharges that are often – think car-repair shops – meaningful and material add-on prices discovered only after the fix, quite literally, is in.

D.C. is an …

22 04, 2024

M042224

2024-04-22T09:33:25-04:00April 22nd, 2024|6- Client Memo|

Credit-Card Surcharges: One Inflationary Culprit the CFPB Could Catch

One could go on – indeed many do – about whether inflation is showing enough signs of a slow-down to warrant lower interest rates.  I’ve said before that lower rates won’t have the housing-affordability benefits advocates expect, but this doesn’t address the underlying issue of just how hot inflation may be running.  I’m not sure if anyone – including the Fed – really knows, but battles on my neighborhood listserv validated by growing data make clear that federal data overlook one hidden price hike driving more and more Americans flat-out crazy:  credit-card surcharges that are nothing but shadow price hikes of as much as four percent.

m042224.pdf

12 04, 2024

Al041524

2024-04-12T16:37:57-04:00April 12th, 2024|3- This Week|

The CFPB Stand-Off

On Tuesday, the HFSC Financial Institutions Subcommittee holds yet another hearing which Republicans hope will so embarrass the CFPB that their decades-long quest to redesign or even kill it gains traction ahead of critical litigation and the national election.  The nominal topic of the hearing is the Bureau’s financial audit, and Republicans will surely make as much of it as they can to damage Director Chopra’s leadership.  However, the real target is the Bureau’s race to finalize a series of substantive actions ahead of its own political challenges should litigation and the election go against it.  The most immediate rule on the GOP’s firing line is the credit-card late-fee standard (see FSM Report CREDITCARD37), a rule now enmeshed in court decisions and challenges of unprecedented intricacy that nonetheless appear likely leading to a near-term injunction blocking the rule as lenders devoutly desire.

Al041524.pdf

8 04, 2024

GSE-040824

2024-04-08T15:25:01-04:00April 8th, 2024|4- GSE Activity Report|

Discounting Discount Points

It wasn’t hard for us to forecast that, after NEC Director Brainard endorsed CFPB Director Chopra’s jihad against mortgage “junk fees,” that the discount points that received particular opprobrium would be moved up the priority ladder for federal restriction.  A Friday CFPB report makes clear that this is indeed very much in the works.  We expect new standards to mandate additional protections for borrowers through more complex disclosures, sharp restrictions on comparison-shopping and lead-generation sites, and maybe even a UDAAP edict requiring that discount points be in a borrower’s best interest based on the likely break-even point.

GSE-040824.pdf

3 04, 2024

DAILY040324

2024-04-03T17:21:51-04:00April 3rd, 2024|2- Daily Briefing|

Bowman Wants Policy Review, Fed-Operational Improvements Ahead of New Liquidity Regs

Turning from mergers to the Fed’s lender-of-last-resort role, Gov. Bowman today argues that new liquidity policies require careful review before any new rules are adopted.

Fed Treads Carefully in New Global Money-Tokenization Project

The BIS today announced a new program exploring ways in which tokenizing central-bank and bank money for wholesale transactions on programmable platforms would benefit the monetary system.

Powell Defends Independence, Mandate Limits

In remarks today on monetary policy and Fed independence, Chair Powell was at pains to emphasize that climate risk was outside the Federal Reserve’s mandate.

FHFA Treads Cautiously Towards FHLB Reform

Issuing a minor ruling regarding Puerto Rico cooperatives, FHFA today also laid out its 2024 priorities following last year’s report on the Home Loan Bank System.

Barr Stands by CRA Rule

Responding to questions about the court injunction on the CRA rule, FRB Vice Chair Barr today stated  that the rules are restated expectations within the boundaries of the Act and Congress intended the agencies to update the 1977 law.

Chopra: Merger Approval Requires Affirmative, Additive Community Benefit

Building on his comments when the FDIC board voted 3-2 to issue its merger proposal (see FSM Report MERGER15), CFPB Director Chopra today doubled down on the view that bank mergers should only be approved if there is demonstrable community benefit over an extended period of time.

Daily040324.pdf

26 03, 2024

DAILY032624

2024-03-26T16:39:52-04:00March 26th, 2024|2- Daily Briefing|

CBO Flags Long-Term Fiscal Risk to Financial Stability

CBO’s latest long-term fiscal forecast now includes a financial-stability warning absent from the Fed’s recent analysis (see Client Report SYSTEMIC97) and FSOC’s annual report (see Client Report FSOC29): the rising U.S. debt burden.

Chopra Expands CFPB Attack to Card Rewards

Undaunted by a CBA audience suing him on many actions, CFPB Director Chopra today gave a rousing defense of his agency’s credit-card late fee rule (see FSM Report CREDITCARD37), making clear he will vigorously defend it in the courts.

CFPB/FTC Press for More Tech-Finance Enforcement

Building on the Bureau’s recent efforts to limit AI use in comparison-shopping and other consumer-finance applications (see FSM Report CONSUMER56), the CFPB joined the FTC today in issuing a statement coordinating federal and state enforcement efforts against generative AI in particular and digital consumer-finance products more generally.

HFSC, AG Republicans Press SEC on Crypto-Custody Standards

HFSC Chair McHenry (R-NC) and House Ag Chair Thompson (R-PA), alongside 46 Republican members today sent a letter to SEC Chair Gensler calling for clarification the position on special purpose broker dealer’s (SPBD) ability to custody non-security digital assets, the agency’s willingness to address SPBD non-compliance, the regulatory classification of ETH, and the SEC’s position regarding Prometheum’s custody services announcement.

Daily032624.pdf

21 03, 2024

DAILY032124

2024-03-21T17:00:13-04:00March 21st, 2024|2- Daily Briefing|

FDIC Plans Merger Squelch

Both the policy and politics of the FDIC’s proposed merger policy follow that of its 2022 RFI (see FSM Report MERGER9), a very stringent approach to bank-merger review that split the FDIC 3-2 on party lines.  We will shortly provide clients with an in-depth analysis of the proposed approach, approved on a 3-2 vote.  It tracks much in the OCC’s proposal (see FSM Report MERGER14) but is still more stringent in several key areas.  Notably, it does not rely on qualitative financial-stability considerations, instead setting a $100 billion threshold for additional scrutiny.

Chopra Wants Far Tougher Bank-Merger Policy

CFPB Director Chopra elaborated today on his comments at the FDIC meeting, saying that he thinks the proposal is fine as far as it goes but that federal policy should go considerably further to curtail bank consolidation.  Actions he advocates include hard caps on bank growth and size (presumably meaning a limit on organic growth as well as via acquisition) and a roll-back of the systemic exemption in failing-bank acquisitions to block any future JPM/FRC-style transactions.

Daily032124.pdf

15 03, 2024

Al031824

2024-03-15T17:23:21-04:00March 15th, 2024|3- This Week|

Answered Prayers?

Banks have been asking regulators for years – decades? – to update 1995 merger guidance.  So the banking agencies are beginning to do, but not exactly as banks would have liked to see it done.  Although Sen. Warren (D-MA) thinks the OCC’s proposed merger policy is too soft, our analysis (see FSM Report MERGER14) and that of many others finds it a formidable barrier to all but the simplest, smallest transactions.  Now comes the FDIC.  As the schedule below makes clear, it plans on Thursday to issue a proposal based on its 2021 RFI (see FSM Report MERGER9).  We doubt any bank-merger policy influenced as strongly by CFPB Director Chopra will be a bank merger policy banks will like any better than the OCC’s, although some compromises may have to be made if Republican members of the FDIC board are willing to contemplate at least some of what Mr. Chopra, surely seconded by Chair Gruenberg, wants done.

Al031824.pdf

14 03, 2024

DAILY031424

2024-03-14T16:33:10-04:00March 14th, 2024|2- Daily Briefing|

Bipartisan Senators See More ILC Charters

Led by Sen. Romney (R-UT), bipartisan senators generally from states with large ILC presence or interest urged the agency to advance pending ILC charters and consider new ones.  The Senators oppose regulatory actions that may “target” ILC charter applications, expressing concerns about delays in the FDIC’s decision process.

Global Supervisors Target Mortgages, BNPL, Fintech as Top NBFI Systemic Priorities

An FSI report today recommends a holistic approach to regulating NBFI retail lenders, urging a policy mix increasing NBFI oversight.  This may well be right, but it will take statutory change in nations such as the U.S. to achieve it.

New Open-Standard-Setting for Open-Banking Set for Stringent Eligibility Standards

CFPB Director Chopra now states that the open-banking regulation regarding consumer data rights (see FSM Report DATA4) will be finalized in the fall, with proposed new standards for standard-setters released ahead of time so that the final rule addresses both issues.  Mr. Chopra is concerned that some forms of standard-setting organizations “weaponize” data to enhance their competitive position.

Daily031424.pdf

14 03, 2024

CREDITCARD37

2024-03-14T15:57:19-04:00March 14th, 2024|1- Financial Services Management|

Credit-Card Late Fee Regulation

Following a very controversial proposal, the CFPB has finalized credit-card late-fee restrictions in a final rule that does not differ significantly from the proposal on its key point:  elimination of the manner in which inflation adjustments are now made by credit-card lenders when it comes to late fees.  The rule will sharply curtail issuer revenue related to these fees, likely affecting the market as a whole rather than the large issuers expressly covered by the new rule.  Although the Bureau did not go as far as proposed in several areas, its core late-fee standard could lead lenders to raise interest rates, curtail rewards, reduce high-risk exposures, or otherwise redesign products with adverse implications for borrowers who meet their monthly-payment requirements in a timely fashion.

CREDITCARD37.pdf

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