CFPB Director Rohit Chopra started a war with the banking industry this week, going much further than expected by proposing to limit credit card late fees to $8. Chopra appeared alongside President Biden in unveiling the widely anticipated plan as part of the effort to crack down on so-called “junk” fees. The proposal would also end the automatic annual inflation adjustment and cap late fees at 25% of the requirement minimum payment.
But the banking industry is already fighting back. Each trade group blasted the proposal, with most calling it “extreme” and strongly hinting they will sue. “This proposal flagrantly violates federal law,” said ABA CEO Rob Nichols in a statement. With the CFPB already under legal threat, everyone thinks this will ultimately be settled by the courts. But expect it to be a subject of a lot of discussion in the months ahead.
In a letter to Alan Lane, CEO of Silvergate Capital, Senators Elizabeth Warren, D-MA, Roger Marshall, R-KS, and John Kennedy, R-LA, pressed the crypto bank on how it plans to use the $4.3 billion loan it received from the FHLB last year and whether it knew about FTX s alleged misuse of customer funds. This issue is now a preeminent one as the Federal Housing Finance Agency reviews the FHLBs’ mission.
With more Americans tapping into their 401(k)s to make ends meet, lenders and credit-card issuers are tightening lending standards and increased loan-loss provisions. Late last year, delinquencies on loans and credit cards reached historic highs, and in some cases, defaults on car loans and student loans exceeded them.
Fintechs aren’t required to meet the same regulatory exams as banks and credit unions, which has some in the industry questioning the CFPB's data-access rule saying it favors nonbank financial firms while putting consumer funds at risk.
More economists and analysts believe a reversal in Fed’s interest rate hikes may be in the offing later in 2023. The Fed raised rates another 25 bps last week, and is expected to do so again next month. What happens after that has been a topic of debate, though Chair Jerome Powell struck an optimistic tone in a press conference following the FOMC meeting, stating “the disinflationary process has started.”
In a recent press conference, Fed Chair Jerome Powell shared his views that it’s on Congress to raise the debt ceiling. Failing to do so, he said, would have impacts beyond what the central bank can control.
Companies laying off workers en masse face risks of bias lawsuits if members of protected groups are disproportionately impacted, Bloomberg Law warns. Attorneys are advising companies to run disparate-impact analyses to determine how such decisions might put them at risk of litigation.