Posted by Anthony Demangone
With Halloween just a few days away, I thought I'd share some news and items that might be considered spooky.
Elizabeth Warren. If you have any doubt about how Ms. Warren views the financial services industry, watch this video. But I think you really can see her true colors when she answers a question regarding the fact that some institutions are instituting account fees to try to compensate for lost revenue due to all of the new regulations. You can jump to that specific question and answer by scrolling down and clicking the fifth hyperlink below the video. Here's a transcript.
Question: I have a question that came in a couple of seconds ago from Allen G. The banking industry is try to offset lost revenues due to new regulations - Credit CARD (Act), overdraft - by charging consumers additional fees on checking and other products. What are your thoughts on what the industry is doing?
Ms. Warren's Response. You know, I have to say this...it really does amaze me. There was a major financial institution that sent out a letter to its shareholders in the last quarter. And the letter said, in effect, I'm paraphrasing - but only slightly - the new laws, because remember - we've already gotten some new law in place, the card law for example, that eliminate some of the worst practices on credit cards. These new laws that have come into place under the current leadership have cost us $650 million this quarter. And you know, I had this moment when I read that and I thought, hmmm, one company $650 million that they say that these new laws outlawing these bad practices cost them, I kind of read that the other way. That's $650 million that stayed in the hands of American families. $650 million from just one company on just a few bad practices that were banned thanks to the work of the current Congress, thanks to the work of Carolyn Maloney, who was one of the persons who really lead the efforts on this. Thanks to the work of President Obama. So here's my view on the card, or any other creditor, that somehow they are entitled to certain level of revenue, particularly a level of revenue set in a time when, you know, when it was kind of an anything-goes world, I'm just not there. Instead, my view is let's see what a competitive market brings us. There may be a period of time when some of the larger financial institutions to squeeze out every last nickel - to push harder on fees in one place because they can't do them in another, but over time, I'll tell you where this Agency (CFPB) is driving - we are striving toward a consumer market in which products are easier to read, easy to see what the costs are and easy to make comparisons. As we push toward that, the room for anyone within the financial services industry to make their money by squeezing you here and squeezing you there through tricks and traps - that's going to go away. And I want to be clear -I think there are some banks that will be glad to see that day come and I think they'll do very well competitively. And banks that don't like it are the ones that eventually customers like you will make the difference on whether or not they survive.
ODP. Here's a news story regarding a bank that was ordered to refund $32 million in overdraft fees and pay a $1 million civil money penalty to the OCC. Here's the OCC press release, which links to the official documents. It is a reminder of what can happen when you play fast and loose with the rules at the expense of consumers. Here's what the OCC said:
The settlement is based on the OCC’s conclusion that the bank engaged in unfair or deceptive practices that violated the Federal Trade Commission Act. Specifically, the bank assessed excessive amounts of overdraft fees and improperly assessed recurring fees, or “continuous overdraft fees” against certain consumers. In addition, in its marketing brochures the bank emphasized the free or low cost features of certain accounts while omitting information about costly features such as overdraft protection. The bank’s marketing also suggested that certain accounts were well-suited for consumers who had previous difficulty in managing their bank accounts, while omitting information about the high-cost features of its overdraft protection.
FDIC lawsuits. Here's a scary blog post regarding the FDIC possible getting ready to launch a "tsunami" of lawsuits against the officers and directors of failed banks. (Bank Lawyer's Blog.) NCUA rarely does this, although they do have one suit going against officers and directors of U.S. Central. If this waive of litigation takes place, I wonder what it will do to the cost and requirements involved with D&O insurance?
Killer bees. There has been a sighting of large bees near Arlington, Virginia. Be careful. Very, very careful.
Have a happy and safe Halloween, everyone!