Financial Crisis News Center

Frank Responds to Statements on Proposed Consumer Protection Agency

This story appeared in Bank Digest.

House Financial Services Committee Chairman Barney Frank, D-Mass., has released a memo intended to correct what he termed “inaccuracies” about the authority of the proposed Consumer Financial Protection Agency. Contrary to some press reports, small banks, credit unions and retailers would not be exempt from the agency's rules, Frank said. He also noted that the agency would have power over businesses such as payday lenders and check cashers that currently are not federally regulated.

Fed Adopts Final Credit Card Rules

This story appeared in Bank Digest.

The Federal Reserve Board has adopted amendments to Reg. Z—Truth in Lending (12 CFR 226) that are intended to protect consumers from what are felt to be abusive practices by credit card issuers. The rules implement provisions of the Credit CARD Act by finalizing an interim rule that took effect Aug. 20, 2009, and they also implement Credit CARD Act provisions that take effect Feb. 22, 2010. In addition to adopting these final rules, the Fed has withdrawn proposed amendments to Reg. Z and to Reg. AA —Unfair or Deceptive Acts or Practices (12 CFR 227) as they are no longer necessary. The amendments are effective Feb. 22, 2010, although compliance with some provisions is not mandatory until July 1, 2010.

Banks Notified of Tenant Foreclosure Exam Procedures

This story appeared in Bank Digest.

National banks have been notified by the Office of the Comptroller of the Currency of new examination procedures for the Tenants Protection Act of 2009, which requires notices and other protections to tenants in the event of a foreclosure.

American Bankers Association Opposes Consumer Financial Protection Agency and Pre-Funded Dissolution Fund

This story appeared in Jim Hamilton's World of Securities Regulation.

While generally supporting reform of financial regulation, the American Bankers Association opposes the creation of a new federal Consumer Financial Protection Agency. In a letter to Senate Banking Committee Chair Christopher Dodd and Ranking Member Richard Shelby, the association also said that a pre-funded dissolution fund to help resolve failing financial firms would be inconsistent with ending the too big to fail doctrine since a pre-funded approach is, effectively, a too big to fail fund. The ABA believes that funding the costs of dissolving failed financial firms should be done after the fact. The bill passed by the House pre-funds a dissolution fund with assessments on financial institutions.

New Supervisory Insights Discusses Interest Rate Risk Management

This story appeared in Bank Digest.

The lead article in the Winter 2009 Issue of the FDIC's Supervisory Insights addresses the need to maintain a strong, effective interest-rate risk management program that helps mitigate excessive exposure, especially in the current low rate environment. Other articles discuss achieving Community Reinvestment Act goals and customer information risk assessments.

CCH Briefing Paper Examines House Legislation

The CCH Editorial Staff of banking and securities law analysts has authored a detailed overview titled, "House Passes Wall Street Reform Act." From the introduction:

On December 11, 2009, the U.S. House of Representatives passed legislation to restructure the financial services regulatory system, the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), by a vote of 223-202. As discussed below, the sweeping array of reforms includes the Financial Stability Improvement Act, which would create a systemic risk regulator, strengthen regulation of depository institutions and bank holding companies, improve the asset-backed securitization process, and provide for an enhanced dissolution authority. The legislation also would create a Consumer Financial Protection Agency, reform the over-the-counter derivatives market, subject hedge funds to stricter scrutiny, impose new corporate governance mandates, adopt heightened requirements for credit rating agencies and expand regulatory enforcement powers. Among other measures, the legislation features expansive consumer mortgage protections and creates a Federal Insurance Office.

Download the briefing paper

House Passes Financial Regulatory Reform Act - ABA Opposes CFPA

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The House of Representatives, by a vote of 223 to 202, passed a broad financial regulatory reform package December 11 which includes the creation of a Consumer Financial Protection Agency (CFPA), while giving the government new powers over large financial institutions that pose a systemic risk to the economy.

House Speaker Nancy Pelosi, D-Calif., said the House bill “says to Wall Street very clearly, ‘the party is over’.”  Treasury Secretary Tim Geithner said the administration looks forward to working with Congress to strengthen key provisions of the bill as it moves toward final passage. Senate consideration of financial reform legislation is expected to extend into next year.

Gov. Duke Discusses Shape of Future Housing Finance System

This story appeared in Bank Digest.

Addressing the Federal Reserve Bank of Chicago's Mortgage Foreclosure Policy Conference, Fed Governor Elizabeth A. Duke outlined her ideas for a future housing finance system. According to Duke, such a system should be evaluated on four criteria: consumer protection, transparency, simplicity and alignment of incentives. Based on these, she discussed several aspects of such a system:

• Lending practices should include better consumer protection and disclosures and more financial education.
• Secondary markets would benefit from better access to information, standardized contracts and simplified structures.
• Servicers need contracts that provide clear guidance and incentive structures that lead to transparency and certainty in loan modifications.
• Fannie Mae and Freddie Mac need to operate in a defined manner.

OTS Guides on TILA Changes

This story appeared in Bank Digest.

The OTS has provided guidance on changes to the Truth in Lending Act (TILA) made by the Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009 and the Credit CARD Technical Corrections Act of 2009. According to the agency, TILA now states that a creditor may not treat a payment on a credit card account under an open-end consumer credit plan as late for any purpose, unless the creditor has adopted reasonable procedures designed to ensure that each periodic statement is mailed or delivered to the consumer at least 21 days before the payment due date. This correction was effective Nov. 6, 2009.

Frank Op-ED Calls for “Comprehensive Solution to Combustible Markets”

This story appeared in Bank Digest.

In advance of consideration of H.R. 4173, “The Wall Street Reform and Consumer Protection Act,” by the House the Representatives, the Financial Services Committee has released a November 2009, Boston Globe Op-ED piece authored by Committee Chairman Barney Frank, D-Mass. The Frank Op-ED highlighted the need for regulating derivatives and citing the American International Group as “the poster child for the combination of reckless behavior and failed oversight.”