June 30, 2022

ABA, Groups Seek Longer Comment Period For CFPB Card Fee ANPR

The American Bankers Association and several other trade groups requested a 60-day extension to the comment period for the Consumer Financial Protection Bureau’s unexpected advance notice of proposed rulemaking on credit card late fees and late payments. The current comment deadline is July 22, meaning that the ANPR allows only 20 working days to gather data in response, the groups said.

“The information sought in this ANPR is complex and comprehensive, requiring significant analysis and internal coordination to enable firms to provide a meaningful contribution to the public comment record in furtherance of the CFPB’s consideration of credit card late fees and late payments,” the groups said. “Many of the data points requested have not previously been requested by the CFPB and respondents require more time than has been provided to properly validate their data production methods and to actually produce what is expected to be a large volume of data.”

The groups noted that the ANPR “appears to question” an “established methodology” in place since 2010 for calculating late fees and late payments, thus “raising complex issues of regulatory continuity for commenters to consider.” Moreover, the ANPR was unexpected because the CFPB did not list this regulatory activity in its regulatory agenda, which was published the evening before the ANPR was announced, nor did the bureau submit the ANPR to the White House office that manages regulatory developments.

ABA, Trade Groups: CFPB Exceeds Authority With Exam Manual Update

In a joint white paper, the American Bankers Association, the Consumer Bankers Association, the Independent Community Bankers of America and the U.S. Chamber of Commerce detailed why the Consumer Financial Protection Bureau’s recent “update” to its UDAAP exam manual and its announcement that it would begin examining financial institutions for alleged discriminatory conduct using “unfairness” exceeds the bureau’s legal authority. The groups urged CFPB to rescind the new examination manual and explained why the bureau’s unfair, deceptive and abusive acts or practices, or UDAAP, authority cannot be used to extend the fair lending laws beyond the bounds carefully set by Congress.

Congress, the white paper explained, does not use the statutory concepts of “unfairness” and “discrimination” interchangeably. On March 16, the CFPB “conflated the concepts by announcing, via a UDAAP exam manual ‘update,’ that it would examine financial institutions for alleged discriminatory conduct that it deemed to be ‘unfair’ under its UDAAP authority,” the groups wrote. The change is “contrary to law and subject to legal challenge,” as well as potential congressional action, the groups added.

“It represents an enormous self-expansion of the CFPB’s authority that stands contrary to law and the intent of Congress,” the associations wrote, adding that the bureau has “taken the law into its own hands.” Changes “that alter the legal duties of so many are the proper province of Congress, not of independent regulatory agencies, and the CFPB cannot ignore the requirements of the Administrative Procedures Act and Congressional Review Act. The CFPB may well wish to fill gaps it perceives in federal antidiscrimination law. But Congress has simply not authorized the CFPB to fill those gaps.”

CFPB Issues Advisory Opinion On Pay-to-Pay, Convenience Fees

As part of its ongoing efforts to address so-called “junk fees,” the Consumer Financial Protection Bureau issued an advisory opinion stating that the Fair Debt Collection Practices Act prohibits debt collectors from charging “pay-to-pay” or convenience fees, which include fees imposed for making a payment online or by phone, unless those fees are expressly authorized by the agreement creating the debt or the amount of the fee is affirmatively permitted by law. The advisory opinion also states that debt collectors may violate the FDCPA when the debt collector collects pay-to-pay fees through a third-party payment processor.

Although the FDCPA typically applies to third-party debt collectors, first-party creditors may be subject to the law if applicable state law extends the FDCPA to first-party creditors, and mortgage servicers may fall under the FDCPA definition if a mortgage debt is in default at the time of a service transfer. In addition, the bureau has made clear that, under its UDAAP authority, it has supervision and enforcement authority over first-party collectors and service providers debt collection activities, even though they are not subject to the FDCPA.

The American Bankers Association has previously opposed this interpretation by the bureau. In February 2022, ABA and other financial trade organizations filed a friend-of-the-court brief with the U.S. Court of Appeals for the 9th Circuit to rebut CFPB’s argument in their amicus brief that the collection of convenience fees violate the FDCPA. ABA’s joint brief argues that the CFPB’s interpretation is contrary to the plain language of the FDCPA and that there is no basis in the broad language of this section to eliminate the freedom of borrowers and servicers to enter otherwise lawful, enforceable contracts under state law unless a state statute specially authorizes a certain fee for a certain service.

Ely: Is Rural America Set For Another Farmland Bust?

Is history about to repeat itself? In rural America it just might as the Federal Reserve moves too aggressively to push up interest rates to deflate the inflation that has erupted in recent months, analyst Bert Ely writes in the latest issue of the American Bankers Association’s Farm Credit Watch. Given how much farmland prices have risen in recent years due in part to very low interest rates, sharply higher rates could pop a farmland bubble.

The Fed’s very low rates of recent years coupled with “quantitative easing,” which has pushed down rates across the entire yield curve, have helped to inflate farmland prices as various reports have documented, Ely writes. For example, the Federal Reserve Bank of Chicago’s May 2022 AgLetter reported that its district saw a year-over-year gain of 23% in its farmland values in the first quarter of 2022.

A chart published by the Federal Reserve Bank of Kansas showed that after a slight decline in farmland prices in the middle of the last decade that bottomed about 2017, farmland prices began to experience significant annual increases. On an inflation-adjusted basis, farmland prices in the Kansas Fed’s district have hit a peak last reached in 2013 and are nearly double where they were in 2009.

CSBS Names New President, CEO

The Conference of State Bank Supervisors has appointed James Cooper to serve as its next present and CEO. Cooper has served in the role in an acting capacity since the sudden death of CSBS President and CEO John Ryan in May.

Cooper’s appointment follows a nine-year tenure at CSBS, during which he directed policy and supervision as senior vice president and more recently as executive vice president. Before joining CSBS, Cooper was deputy director at the Indiana Department of Financial Institutions from 1994 to 2013.

Fed Launches Second CECL Tool For Community Banks

To help community banks successfully implement the current expected credit loss accounting standard, the Federal Reserve has launched a second tool, the Expected Losses Estimator. The Fed launched the spreadsheet-based tool during a recent “Ask the Fed” webinar

The new tool uses a financial institution’s loan-level data and management assumptions to assist in calculating CECL allowances. The Fed previously released the Scaled CECL Allowance for Losses Estimator, or SCALE, tool to help simplify the CECL calculation for community banks.  

Article Covers The Stakes For Boards In Succession Planning

In an ABA Banking Journal Directors Briefing article that explores succession planning, boards of directors know how vital CEO succession planning is, but sometimes a stark reminder arrives to drive the point home. While a profound loss can hit like an earthquake, a bank that’s ready to pull its succession plan off the shelf and put it into action is in the best position to handle the shockwaves. 

A vacancy can occur in the normal course of retirement planning, but it also can come about because the board feels a need to make a change, a CEO unexpectedly resigns or a tragedy occurs. According to the article, “every organization, regardless of whether it’s public, private or family-controlled, has to have an emergency backup plan.” Having a plan and implementing it, however, are two different things, and it’s important to review and refresh a succession plan regularly. 

The article provides insight into how organizations can plan for the transfer of leadership, real-world succession examples and how to create a plan to best fit an organization's unique needs.  

Safe Banking For Seniors Targets Scam Prevention In New Video Series

The American Bankers Association Foundation’s Safe Banking for Seniors program now includes a new series of free videos designed to inform older Americans and their families about the warning signs of common scams seniors may face. The first three videos in the series include topics such as how scammers target seniors and how they may try to impersonate family members or the government.

Additional videos on tech support scams, sweetheart scams, money mule scams and lottery scams will be available later this summer. An additional video series about financial caregiving is planned for this fall. Banks can post the videos to their website or social channels, show them during community presentations or share with customers in one-on-one chats. The videos are available as part of the free registration in the Safe Banking for Seniors program.

Study: Bank Consumer Satisfaction With Financial Advice Dips

Facing rising household costs, a looming recession and record levels of debt, 59% of U.S. bank customers expect help to improve their financial health, but most feel that banks have room to improve, according to J.D. Power’s 2022 U.S. Retail Banking Advice Satisfaction Study.

Satisfaction with the advice and guidance provided by retail banks has fallen to 601 (on a 1,000-point scale), down 30 points from 2021, the study reported. The largest declines came from customer perceptions of the frequency of guidance about financial products and the quality of advice. “The tools banks have at their disposal aren’t always being used or, when they are, they are not used effectively,” a J.D. Power representative said.

Customer recall of specific advice content was down, according to the survey. Nearly two-thirds reported receiving advice two or more times in categories including financial planning; investment and retirement; savings, tips and information; or banking services. This was down from 70% a year ago. The only category not to see a decline was borrowing and housing. When two or more instances of advice were recalled by customers, overall satisfaction increased 52 points. Advice tailored to meet customers’ specific needs is important, the survey noted. Customers who receive personalized advice just once have higher satisfaction (697) than those who receive generic advice on five or more topics (583).  

Business Leaders Pessimistic About The Economy

According to the results of a JPMorgan Chase survey, only 19% of business leaders reported optimism about the national economy for the year ahead, the lowest percentage recorded in 12 years of survey data and down from 75% a year ago. Pessimism about the economy jumped to 51% from 10% a year ago. When it comes to the global economy, only 9% of business leaders were optimistic

Despite dim economic views, executives remained confident in their own businesses. Seventy-one percent were optimistic about their company’s performance and 55% reported feeling “upbeat” about their industry’s performance, although down from 88% and 82%, respectively, one year ago. Nearly three-quarters of survey respondents (73%) anticipated increased revenue/sales for the year ahead. However, the profit growth outlook has been hurt by higher costs, with only 57% expecting increased profits compared to 71% last year.

All of the survey respondents said they’re facing business challenges, citing the higher cost of doing business, including inflation, as their top challenge (71%) followed by labor issues (70%), including recruiting, hiring and retaining employees and labor shortages. More than 7 in 10 business leaders cited increased costs from retaining employees (77%), supply chain issues (74%) and hiring employees (71%) as the main drivers behind these increases.

More than three-quarters of businesses (76%) are raising prices, and 42% have passed along at least half of their increased costs to consumers and buyers in the form of higher prices. This trend is not expected to subside soon, as 81% of respondents said they are likely to continue to increase prices to help mitigate higher costs. Despite continued challenges, 83% expected to grow their business over the next year. While down from the 90% at the end of 2021, more businesses are planning on expanding into new global or domestic markets (63%) and bolstering product innovation (53%), including expanded or new product and service lines, compared to six months ago.

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