#UDAAP

20 04, 2023

GSE-042023

2023-04-20T15:30:53-04:00April 20th, 2023|4- GSE Activity Report|

From Plans To Purpose

FHFA yesterday proposed a sweeping rule that would codify Sandra Thompson’s equitable- and fair-housing standards in a rule that any future FHFA director would have to work a lot harder to reverse.  Indeed, not only would new plans become a mandatory part of the GSEs’ mission, but violations of them  by Fannie or Freddie or any other fair-lending, equity, or related standard by all of the housing agencies could be sanctioned as unfair or deceptive acts or practices (UDAP), a page from the CFPB’s rulebook that affords a far greater scope to call an action discrimination and then punish it at even greater legal and reputational cost.  Even if spared new plans – and that’s a big if – Home Loan Banks would also be brought into a far more exacting equity construct far beyond current adherence to statutory AHP requirements.

GSE-042023.pdf

12 04, 2023

DAILY041223

2023-04-12T17:20:45-04:00April 12th, 2023|2- Daily Briefing|

Hill Charts Different FDIC Course

In remarks today, newly-confirmed Republican FDIC Vice Chairman Travis Hill for the first time lays out his thinking ahead of a raft of FDIC decisions in SVB’s wake.

CFPB UDAAP Policy Now Effective

The Federal Register today includes the CFPB’s policy statement expanding the scope of the Bureau’s UDAAP framework, which is now effective upon this publication.

Scott Lays Out Housing Plan

In conjunction with advancing his Presidential campaign, Senate Banking Ranking Member Scott (R-SC) late yesterday announced his new federal housing framework via planned legislation, the Renewing Opportunity in the American Dream (ROAD) to Housing Act.

Basel Turns to Capital, LCR Revamp

The Basel Committee’s head, Pablo Hernández de Cos, today spoke out strongly against regulatory liberalization, implicitly criticizing the U.S. tailoring rules and urging jurisdictions to adhere tightly to Basel’s “multi-metric” standards given their proven value in the recent crisis.

Daily041223.pdf

7 04, 2023

Al041023

2023-04-07T11:58:48-04:00April 7th, 2023|3- This Week|

The CFPB Lays an Egg

Okay, maybe that’s not the most objective way even before Easter to let you know that one of our in-depth analyses last week was of the CFPB’s new policy defining the “abusive” in unfair, deceptive and abusive acts or practices (UDAAP).  But, as we noted in our assessment (see FSM Report UDAP8), the Bureau’s policy reaches far, deep, and sometimes perhaps indiscriminately into consumer-finance activities that may err only by falling short of the Bureau’s apparently-altruistic view of the only appropriate course of action for consumer-finance companies.  We shall see what comes of this policy – even though it’s final, it’s also out for comment as well as sure to be linked into pending litigation protesting the Bureau’s practice of setting rules by administrative fiat.  We also expect Republicans to launch the kind of Congressional Review Act repeal announced last week for the Bureau’s controversial small-business reporting rules.  But, as we noted, CRA resolutions may well pass the Republican House and even divided Senate, but they will surely not be enacted into law in the wake of a Presidential veto.

Al041023.pdf

6 04, 2023

UDAP8

2023-04-06T16:36:20-04:00April 6th, 2023|1- Financial Services Management|

Abusive Consumer-Finance Practices

Following its usual practice of setting standards by edict, the Bureau of Consumer Financial Protection has laid out an extensive framework that brings a wide range of consumer-finance actions and inactions within the scope of enforcement sanctions governing acts or practices that are not only unfair or deceptive, but also abusive.  As a result, consumer-finance providers and the third parties on which they often rely have considerably more legal and reputational risk even as consumers may be better insulated from actions that disadvantage or even harm their financial prospects.  Much of the new policy requires providers to protect the most vulnerable of any possible consumer for all aspects of a product or service, structuring all aspects of product offerings, pricing, marketing, infrastructure, and long-term provision to a consumer’s advantage as the Bureau defines it.

UDAP8.pdf

6 04, 2023

FedFin: Extra Equitable?

2023-04-06T16:36:29-04:00April 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.…

5 04, 2023

DAILY040523

2023-04-05T16:55:56-04:00April 5th, 2023|2- Daily Briefing|

FDIC Joins CFPB Targeting UDAP

The FDIC today published Consumer Compliance Supervisory Highlights showing that UDAP violations related to NSF representment constituted the second highest number of total citations and were by far the largest number of serious citations in 2022.  The FDIC reiterates August guidance that third-party arrangements related to re-presented items may present numerous risks.  We note that the FDIC’s UDAP focus is new under Chairman Gruenberg and comes at a time when the CFPB is expanding the reach of its own UDAAP enforcement powers with a focus in part on overdrafts and NSF practices.

IMF Staff Highlight New Systemic Risk: Geopolitical Stress

At a panel event today, IMF staff reported that their model-based study in the IMF’s global financial stability report found that geopolitical risks and global fragmentation gravely threaten financial stability by weakening interconnectivity between geopolitical blocs.  Their model found that increased fragmentation results in reduced cross-border banking between blocs, higher lending costs, substantial diversification losses among G7 countries, and reduced bank profitability.  Staff also drew a link between the war in Ukraine and the recent banking crisis, arguing that the war’s inflationary pressures led to an aggressive monetary policy reaction, revealing bank vulnerability to interest rate risk.

Daily040523.pdf

3 04, 2023

DAILY040323

2023-04-03T17:05:54-04:00April 3rd, 2023|2- Daily Briefing|

BIS: Banning Capital Distributions Proved Good for Banks, Borrowers

If macroeconomic or market conditions worsen, it seems likely that anxious regulators will look to preserve bank capital and turn to the ban on capital distributions briefly in place at the height of the Covid crisis.  A new BIS study of the impact these restrictions had on the EU at the time is thus a timely guide to regulatory thinking under new leadership at the White House, Fed, OCC, and FDIC.

CFPB Loads Its UDAAP Bazooka

The CFPB today released what to our initial review appears an explosive new policy statement even though the agency asserts that it sets no new policy.

BIS Study Finds Retail CBDCs May Counter Financial Shocks

Supporting its overall goal of two-tier CBDC, the BIS released a model-based working paper today finding that the introduction of a retail CBDC that is perfectly substitutable with bank deposits in an open, large economy (i.e., the U.S.) could lower real interest rates and be an effective tool for countering financial shocks.

Why MMFs Beat Bank Deposits

new FRB-NY post uses recent evidence to confirm an earlier study that MMFs are more responsive than bank deposits to monetary-policy tightening.  Indeed, the data are striking, with MMF rates since March of 22 matching fed funds moves by 97 percent versus an only eight percent match for three-month CDs.

Daily040323.pdf

9 03, 2023

DAILY030923

2023-03-09T16:52:09-05:00March 9th, 2023|2- Daily Briefing|

Barr Emphasizes Steep Barriers to Bank Crypto, Retail CBDC

In remarks today, FRB Vice Chair Barr reiterated that banks should take an extremely cautious approach when engaging with cryptoassets or counterparties and stressed the need to include stablecoins within the regulatory perimeter.  For the first time, the Fed made it clear that, while it is open to DLT, smart-contract, and similar payment-system innovations, it is dubious that any will have near-term benefits and all require careful regulatory design.

Expected Battle Lines Form Over CFPB Future

As predicted, today’s HFSC Subcommittee hearing on the CFPB was a partisan and raucous session, with Republicans focusing most strongly on legal and constitutional issues around the Bureau’s funding and enforcement authority and Democrats defending both its legality and effectiveness.  Much will come of this in terms of HFSC and floor votes, but we expect no statutory change in this Congress under this President.

Hill Sets Table for Bipartisan Crypto Action

Today’s Digital Assets Subcommittee hearing was considerably more conciliatory than the CFPB session earlier today, with Chairman Hill (R-AR) making clear in his opening statement that he is not launching a partisan attack against the SEC, the banking agencies, or the White House.  He hopes instead to press bipartisan legislation, thanking former Chair Waters (D-CA) for her work on stablecoins and emphasizing the need not only for new law there, but also across the array of pending digital-asset questions.

Daily030923.pdf

3 03, 2023

DAILY030323

2023-03-03T17:07:43-05:00March 3rd, 2023|2- Daily Briefing|

Senate Dems Demand Bank, Service-Provider Regulation of EWS

Regardless of recent bank changes to Zelle policy, Senate Banking Democrats yesterday sent a letter to the heads of the banking agencies urging them to examine the customer reimbursement and AML practices of banks using Zelle and for the Fed and OCC also to monitor Early Warning Services (EWS).

SEC Custody Bulletin Under Renewed Attack

Senate Banking Member Lummis (R-WY) and HFSC Chairman McHenry (R-NC) late yesterday sent a letter to top banking regulators taking serious issue with an SEC accounting bulletin requiring custodians to recognize digital assets on their balance sheets.

Biden Backs CFPB Late-Fee Proposal

President Biden today reiterated his commitment to targeting “junk fees” in a proclamation announcing this week as National Consumer Protection Week.  The statement highlights overdraft fees as unfair and endorses the CFPB’s NPR (see FSM Report CREDITCARD36) cutting credit card late fees to $8.

Daily030323.pdf

27 02, 2023

DAILY022723

2023-02-27T16:39:49-05:00February 27th, 2023|2- Daily Briefing|

FRB-NY:  CRA Now Makes No Measurable Difference

As the banking agencies wrestle with their still-unfinished CRA rule (see FSM Report CRA32), the Federal Reserve Bank of New York today released a staff report concluding that the law has little to no impact on like-kind household credit in target areas.  Using data available only to the Fed, the report finds that banks largely meet CRA in target areas by acquiring existing mortgage loans, not making new ones.

SCOTUS Re CFPB Has Broad Ramifications

In a case with significant implications not only for the CFPB, but also other financial agencies, the Supreme Court today agreed to review the Fifth Circuit’s decision invalidating CFPB funding via transfers from the Federal Reserve’s income rather than annual Congressional appropriation.

CFPB Puts A Repeat Offender Out Of Business

Wielding the hammer Director Chopra claimed when he announced his campaign against repeat offenders, the CFPB today used the powers it argues derive from its authorizing law (see FSM Report CONSUMER14) to put a nonbank mortgage lender out of business.  In this case, RMK Financial was found to have persistently violated a 2015 agreement under consumer-finance laws and rules to mislead veterans about the terms of their VA and FHA mortgages.

Daily022723.pdf

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