Industry and Regulation

Dec. 2, 2022: Industry and Regulation

OCC May Stiffen Penalties with Revised Guidance

Courtesy of Dan Ennis, BankingDive

Updates to the agency’s policy manual make new categories with elevated fine totals for violations by the largest banks and change the factors that beget leniency.

Policy revisions the Office of the Comptroller of the Currency (OCC) unveiled Tuesday could indicate the agency will assess larger penalties against banks for misconduct and tie in restrictions on lenders’ business activities. Some of the most impactful changes come to the penalty “matrix” the regulator uses to assess the severity of a violation. For one, the OCC created new categories based on asset size. Read More

CPFB Raises Ceiling for Allowable Charges Under Fair Credit Reporting Act

Courtesy of CUToday

That threshold dictates what consumer reporting agencies are allowed to charge consumers who request their information file after their guaranteed free file disclosure in a 12-month period. The maximum allowable charge for the coming year is up $1 to $14.50. The Bureau has not yet released its annual changes to asset-size exemption thresholds under the Home Mortgage Disclosure Act and Regulation Z. Read More and Download the CFPB Supervisory Highlights, Issue 28, Fall 2022 Here

Sustainable Finance Live: Is Sustainable Finance Sustainable?

Courtesy of FinExtra

Decarbonization has become a hot topic in the fintech world, with many companies monitoring both their carbon emissions and energy usage to meet ESG goals. However, greenwashing has become more prevalent in the sector along with the onset of sustainable finance. In his Keynote presentation, Is sustainable finance sustainable? House of Lords Peer, Lord Christopher Holmes spoke on how the financial industry seeks to resolve gaps in ESG data and combat greenwashing in the sector. Read More

Biden Officials to Target Nonbanks for Tougher Oversight

Courtesy of Andrew Ackerman, Wall Street Journal

The Biden administration is laying the groundwork to target nonbank firms with stricter federal oversight as regulators grow concerned about financial threats from companies operating outside of the tightly supervised banking system. The aim, the people said, would be to make it easier to label nonbank firms as systemically important financial institutions, or SIFIs, a designation that currently applies only to the nation’s largest banks and imposes extensive oversight in an effort to rein in risks to financial stability.

The coming regulatory effort reflects the administration’s intensifying focus on potential systemic risks tied to nonbanks—financial firms that include hedge funds, asset managers, insurance companies, mortgage companies and cryptocurrency exchanges. Read More

Federal Reserve Releases the Beige Book

Summary of Commentary on Current Economic Conditions by Federal Reserve District

Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis. Read and Download Files Here


Nov. 18, 2022: Industry and Regulation

Some Credit Unions Still Don’t Want the NCUA to Dictate Succession Planning

Andrew Jaeger has no immediate plans to step down as the CEO of Credit Union of New Jersey in Ewing, but that doesn’t mean he hasn’t started thinking about who might take his place. “We’re all aging, so we’re starting to take a much closer look at building strength in the future leaders of the credit union,” said Jaeger, who has led the $423 million-asset credit union for more than 33 years.

The issue of succession planning was top of mind for many credit union leaders, including Jaeger, who spoke during the CrossState Credit Union Association’s CU Reality Check conference. Jaeger said it takes time and resources to identify the right people and put a plan in place, and many smaller institutions simply don’t have those two things in ample supply. Still, Jaeger said that cannot be used as an excuse. “You need to make time for it because it’s critical,” he said.

The National Credit Union Administration agrees. The agency in January approved by a vote of 2-1 a proposed rule that would require boards at federal credit unions to establish and adhere to processes for succession planning. The NCUA has not put the issue back on its agenda yet for a final vote. An NCUA spokesman said the regulator is reviewing comments. READ MORE

Marijuana Industry Hopeful for Federal Reform During Lame-Duck Congress

Marijuana industry entrepreneurs and investors, exhausted and eager to catch a break after a difficult year of declining sales, tumbling prices, and vanishing capital, believe relief is on its way from an unlikely quarter: the U.S. Congress.

Headed into the brief “lame duck” session of Congress – the period between this past Monday, when Congress reconvened after the midterms, and Jan. 3, when the new Congress is seated – there’s hope among industry insiders that this slim window offers the best opportunity during President Joe Biden’s first term to pass substantive federal marijuana reform.

Lobbyists and Washington DC insiders agree the lame-duck session represents the best opportunity. The problem: The chances are slim, and the votes might not be there in the Senate. Roughly 50 marijuana-related bills are circulating in Congress – including Democratic and Republican visions of federal legalization plus bills to lift restrictions on cannabis research and allow MJ to be shipped via the U.S. mail. READ MORE

New Survey Shows Gen Z Apprehensive About the Path to Homeownership

Homeownership continues to be something to strive for among “Generation Z,” the demographic cohort following Millennials, according to a new survey from Freddie Mac (OTCQB: FMCC). This survey of respondents finds that the attitudes of Gen Z adults (ages 18-25) are largely positive when it comes to the idea of homeownership, though they are increasingly leery of the obstacles they may face. One in three Gen Z adults (34%) say homeownership at any point seems out of reach financially—which rises slightly to 35% of Black respondents and more to 50% of Hispanic respondents. When this survey was last fielded in 2019, 27% of Gen Z adults said homeownership is out of reach financially.

Gen Z adults identified the following as the top five hurdles to homeownership:

  • Saving for a down payment (39%)
  • Not having a sufficient credit history (27%)
  • Unstable job situation (27%)
  • Student loan debt (22%)
  • Credit card debt (11%)

Like the 2019 survey, Gen Z adults prefer homeownership over renting and believe owning a home provides more privacy (96%), is something to be proud of (95%), and allows for more control and independence (92%). READ MORE

Credit Card Balances See Biggest Spike in More Than 20 Years

Credit card balances in the third quarter jumped 15% over the same period last year — the biggest annual increase in more than two decades, New York Fed researchers reported today.

Why it matters: The spike reflects feverish rebound spending during a period of decades-high inflation, as well as added pressure on younger borrowers and borrowers with lower income.

The big picture: The upswing points to yet another dataset reverting to pre-pandemic patterns.

Amid a still strong labor market with government assistance programs now largely gone, “it’s clear” that debt trends are shifting back to previous rates, New York Fed researchers said.

Two things to watch: The upcoming holiday season may boost balances even more this quarter.

  • And the status of the White House’s student loan forgiveness plan, which has been tied up in the courts.
  • If it goes through, the researchers expect student loan delinquencies to be lower than they were pre-pandemic. If payments resume, younger borrowers may see greater credit pressures than older borrowers. READ MORE

Total Household Debt Reaches $16.51 Trillion in Q3 2022; Mortgage and Auto Loan Originations Decline

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit . The Report shows an increase in total household debt in the third quarter of 2022, increasing by $351 billion (2.2%) to $16.51 trillion. Balances now stand $2.36 trillion higher than at the end of 2019, before the pandemic recession. The report is based on data from the New York Fed’s nationally representative Consumer Credit Panel.

Mortgage balances rose by $282 billion in the third quarter of 2022 and stood at $11.67 trillion at the end of September, representing a $1 trillion increase from the previous year. Credit card balances also increased by $38 billion. The 15% year-over-year increase in credit card balances represents the largest in more than 20 years. Auto loan balances increased by $22 billion in the third quarter, consistent with the upward trajectory seen since 2011. Student loan balances slightly declined and now stand at $1.57 trillion. In total, non-housing balances grew by $66 billion. READ MORE


Nov. 11, 2022: Industry and Regulation

Debt Financing Eclipses Equity in US Marijuana Cultivation and Retail Fundings

Cannabis Debt Financing in 2022: Lower equity prices and more financially stable cannabis companies are causing a shift to debt financing as the preferred method to raise funds in 2022. Capital raises in the U.S. marijuana industry are down nearly 65% this year versus 2021, but lower stock prices and more creditworthy cannabis companies mean debt financing is now the preferred method to raise funds for the first time in years.

Equity financing had dominated cannabis capital raises since at least 2018. But so far this year, debt funding has dominated, according to data collected by New York-based cannabis capital, M&A and strategic advisory firm Viridian Capital Advisors. To be sure, debt financing in the U.S. marijuana industry is down by 39.9% compared to last year from January to October, according to Viridian data. READ MORE

Wells Fargo Under Pressure from CFPB to Pay Over $1B Fine

Wells Fargo is under pressure from the U.S. Consumer Financial Protection Bureau (CFPB) to pay more than $1 billion to settle a slew of investigations into customer mistreatment, Bloomberg News reported, citing people familiar with the matter.

The fourth-largest U.S. bank declined to comment on the report, while the CFPB did not immediately respond to a Reuters request for comment. Last week, Wells Fargo revealed that it was in talks with CFPB to settle “a number” of probes, including for automobile and mortgage lending as well as consumer deposit accounts.

The regulator’s demand reflects its escalating frustration with the bank, the news report said on Friday. The potential fine comes after the bank posted $2 billion in operating losses related to litigation, customer remediation, and regulatory matters in the third quarter and took a 31% hit to its third-quarter profit last month. READ MORE

CFPB Issues Guidance to Address Shoddy Investigation Practices by Consumer Reporting Companies

When consumer reporting companies and furnishers fail to investigate disputed information, consumers are left paying higher interest rates and face greater difficulty finding housing, employment.

The Consumer Financial Protection Bureau (CFPB) issued a circular to affirm that neither consumer reporting companies nor information furnishers can skirt dispute investigation requirements. The circular outlines how federal and state consumer protection enforcers, including regulators and attorneys general, can bring claims against companies that fail to investigate and resolve consumer report disputes. The CFPB has found that consumer reporting companies and some furnishers have failed to conduct reasonable investigations of consumer disputes and to spend the time necessary to get to the bottom of inaccuracies. These failures can affect, among other things, people’s eligibility for loans and interest rates, for insurance, and for rental housing and employment. READ MORE

October Inflation Report: A Third of US Consumers Now Struggle to Pay Bills

Inflation has begun to show signs of slowing month after month but remains at levels not seen since 1981. Half of consumers say inflation has soured their outlook on their economic future, and nearly a third say paying bills is getting more difficult.

The impact of inflation has been detrimental to the recovery of an economy still reeling from COVID-19. Things once considered economic certainties, such as salaries keeping up with inflation and the ability to travel affordably from one part of the country to another, are now called into question. In “Consumer Inflation Sentiment: Inflation’s Long Consumer Spending Shadow,” an independently produced PYMNTS report, we surveyed 2,467 United States consumers to see how inflation is changing how Americans perceive their futures and examine the long shadows cast by inflation on the nation’s economy. READ MORE

One Woman’s Mission to Save Credit Unions by Championing Diversity

In March 2022, when Renée Sattiewhite sat on stage during a conference in Washington, D.C., she didn’t know who was in the audience — or how much her help meant to that person.

The woman in the audience had been trying to start a credit union in North Minneapolis, “in what we call Ground Zero for George Floyd and Philando Castile. For years we had been trying to do this, and because of the heart of one person on that stage it is closer to reality, and that would be Renée Sattiewhite,” the woman said. “I picked up the phone and called her and explained my journey. Ground Zero for this project is riddled with payday lenders and fringe bankers. There was no cavalry coming.” READ MORE

Federal Reserve Board Invites Public Comment on a Proposal to Publish a Periodic List of Depository Institutions That Have Access to Federal Reserve Accounts—Often Referred to as “Master Accounts”— and Payment Services

The Federal Reserve Board on Friday invited public comment on a proposal to publish a periodic list of depository institutions that have access to Federal Reserve accounts—often referred to as “master accounts”—and payment services. The proposal would result in a transparent and accessible source of this information for the public.

In August, the Board adopted final guidelines that establish a transparent, risk-based, and consistent set of factors for Reserve Banks to use in reviewing requests to access these accounts and payment services. The proposal issued today would build on the transparency of the guidelines by requiring Reserve Banks to periodically disclose which depository institutions have access to their accounts and payment services. READ MORE

Federal Reserve Supervision and Regulation Report

The report summarizes banking conditions and the Federal Reserve’s supervisory and regulatory activities, in conjunction with semiannual testimony before Congress by the Vice Chair for Supervision.