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Bank watchdog faces headwinds if GOP gains House majority
The Consumer Financial Protection Bureau faces a bumpy road ahead if the GOP gains an expected majority in the U.S. House of Representatives in the Nov. 8 midterm elections.
Republican lawmakers have voiced sharp opposition to the watchdog agency's power over the banking industry for years. Those complaints have only strengthened since CFPB Director Rohit Chopra took over in October 2021 and implemented an aggressive regulatory and enforcement agenda. Among other actions, Chopra has targeted junk fees, increased the power of the agency's examiners, launched numerous lawsuits against banks and other financial companies, and partnered with state regulators on enforcement actions.
While that agenda will not change under a House GOP majority, the agency may face a hostile Congressional environment as lawmakers attempt to slow down its work, former CFPB officials and analysts told S&P Global Market Intelligence.
"There's going to be enhanced scrutiny of everything the CFPB does," Jonathan Engel, co-leader of the enforcement and investigations practice within the banking services group at law firm Davis Wright Tremaine and a former CFPB enforcement attorney, said in an interview. "It's going to be a major distraction if you're trying to move enforcement or regulation forward."
Since taking the helm, Chopra has sued, fined or otherwise targeted some of the nation's biggest financial institutions, including Wells Fargo & Co., Bank of America Corp. and TransUnion. But if the GOP gains a majority in the House, the agency could face hostile hearings and potential legislation regarding its oversight and structure.
"There won't just be hearings, but hostile hearings," said Bert Ely, principal at bank consultancy Ely & Co. Inc. "They will beat up on the agency in the hope that the agency will back off."
One Republican representative warned of the oversight the CFPB would face if the GOP gains a majority in the House.
"We will perform rigorous oversight of the Bureau to stop its politically based attacks on U.S. companies," Rep. Blaine Luetkemeyer, R-Mo., ranking member on the House Financial Services Subcommittee on Consumer Protection and Financial Institutions, said in a statement provided to Market Intelligence.
The CFPB began prepping for increased Congressional oversight in July, when the agency announced in an internal memo that it ramped up hiring in its newly created Office of Oversight, American Banker reported.
Source: S&P Global Market Intelligence
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Digital asset firms pour millions into mid-terms
In an effort to gain influence in Washington amid increased regulatory scrutiny, digital asset firms and employees have contributed $73 million into the 2022 midterm elections, a huge increase compared to the $13 million poured in the 2020 election cycle, The Wall Street Journal reported, citing data from the research group OpenSecrets, which tracks political donations.
The cryptocurrency industry has spent $15 million on lobbying in the first nine months that ended Sept. 30, which is more than what was spent cumulatively in the last eight years, according to the report.
Source: S&P Global Market Intelligence
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Wholesale CBDC would speed up cross-border payments
The Federal Reserve Bank of New York issued a report on the Phase I results of Project Cedar, a multiphase research effort to develop a technical framework for a theoretical wholesale—as opposed to retail—central bank digital currency.
Phase I of Project Cedar examined the potential application of blockchain technology to enhance cross-border payments. The 12-week experiment found that wholesale cross-border digital currency transactions supported by blockchain technology can deliver safe payments in less than 15 seconds, with transactions that were settled either simultaneously or not at all.
In a speech discussing the Project Cedar results, New York Fed Head of Markets Michelle Neal said that while the Fed has made no decision on whether or how to issue a U.S. CBDC, it has the potential to offer significant benefits to efficiency and financial inclusion. Neal said a CBDC would need to protect against cyber and operational risks, safeguard the privacy of sensitive data, minimize risks of illicit financial transactions, and avoid disintermediating the financial services system.
ICBA opposes the creation of a U.S. CBDC, arguing that it would disintermediate community banks and pose privacy risks without improving on superior payment alternatives, such as FedNow. ICBA in September released polling conducted by Morning Consult indicating consumers support a regulatory framework for digital assets and are skeptical of the creation of a U.S. central bank digital currency.
Source: ICBA
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2023 pricing for FedNow, other services
The Federal Reserve Board announced 2023 pricing for payment services the Federal Reserve Banks provide to depository institutions, such as the check clearing and ACH transactions, and for the FedNow Service.
Overall, the Reserve Banks estimate that the price changes for 2023 will result in a 2.9% average price increase. The Fed said the Reserve Banks expect to fully recover 100.2% of actual and imputed expenses in 2023.
The Fed also released 2023 pricing for FedNow. Pricing includes:
- A customer credit transfer and return fee of $0.045 per item, discounted to $0.00 in 2023 per RTN per month for customer credit transfers up to 2,500 transactions.
- A FedNow participation fee of $25 per RTN per month, discounted to $0 per RTN per month in 2023.
- A Request for Payment fee of $0.01 per item.
- A Liquidity Management Transfer fee of $1 per transfer.
The Fed approved the 2023 private-sector adjustment factor of $23.7 million for Reserve Bank priced services. The PSAF is an allowance for income taxes and other imputed expenses that would have been paid and the return on equity that would have been earned if the Reserve Banks' priced services were provided by a private business.
Source: Federal Reserve
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$1 billion + in potential ransomware payments in 2021
U.S. banks made the highest ever potential ransomware-related payments of over $1 billion in 2021, more than double from the year before, CNN reported, citing data from the Treasury Department's Financial Crimes Enforcement Network. Most of the payments made in the second half of 2021 were accounted for by five hacking tools tied to Russian hackers, according to the report.
Source: S&P Global Market Intelligence; CNN
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Banks making ‘notable’ progress on reaching unbanked
Banks have made “notable” progress in expanding access to banking services to unbanked households, FDIC Acting Chairman Martin Gruenberg said.
In public remarks, Gruenberg cited a recent FDIC survey that found nearly 96% of U.S. households were banked in 2021 despite economic challenges posed by the COVID-19 pandemic. The estimated 4.5% of U.S. households lacking a bank or credit union account is the lowest national unbanked rate since the FDIC survey began in 2009.
The results also demonstrate that much work remains to ensure all Americans have meaningful access to a banking relationship. He noted that 2.1% of White households were unbanked last year, compared with 11.3% of Black households and 9.3% of Hispanic households.
The historically low unbanked rates could undermine policymaker arguments touting proposals such as postal banking, Federal Reserve retail deposit “FedAccounts,” and a U.S. central bank digital currency as tools to access unbanked households.
Source: FDIC
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USDA renews manufactured housing pilot
The USDA Single Family Housing Guaranteed Loan Program renewed its Manufactured Housing Pilot Program for two years. The USDA extended the pilot program, which is designed to support financing existing manufactured homes through the USDA’s 502 loan programs, through Nov. 4, 2024.
Source: USDA
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Strengthen rules governing Zelle
Sen. Elizabeth Warren, D-Mass., is urging the Consumer Financial Protection Bureau to strengthen rules governing peer-to-peer payment platform Zelle following her investigation that indicated "rampant fraud" on the platform and banks' failure to repay affected customers, CNBC reported. "My investigation, which is based on previously non-public information obtained from the banks that own and run the platform, shows that Zelle is increasingly becoming a tool of bad actors who use the platform to defraud consumers, while the big banks that own Zelle do little to stop them or provide recourse to their consumers," Warren wrote in a letter to CFPB Director Rohit Chopra.
Source: S&P Global Market Intelligence
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With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2022.
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