Issue three of our weekly update, designed to keep NACBA members abreast of any significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks during the week.
ON THE HILL After weeks of “talks,’ Congress approved a short-term funding bill to avoid a government shutdown at the start of the new fiscal year on October 1. The bill, which was signed into law by President Obama, funds the federal government through Dec. 9 and, in addition to funding government programs, also provides funds to combat the Zika virus and sends $500 million to Louisiana and other states facing natural disasters. The weeks-long funding fight was resolved after a bipartisan deal was worked out by House Speaker Paul Ryan (R-WI) and Minority Leader Nancy Pelosi (D-CA) to ensure that Flint, Michigan’s water crisis is addressed in the lame duck session. Both chambers have adjourned and plan to be back in session in mid-November.
But before they left….The House Ways and Means Committee last week approved the bipartisan H.R. 5204, The Stop Taxing Death and Disability Act, sponsored by Rep. Peter Roskam (R-IL), which protects families from being hit with a large tax bill when federal student loans are forgiven due to death or disability You can read a copy of the bill here.
Senators Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), and Dick Durbin (D-IL) introduced legislation to help Americans burdened by the costs of illness or injury. The Medical Bankruptcy Fairness Act of 2016 (S. 3385) would make the bankruptcy process more forgiving for those driven to insolvency by health care-related debt or loss of income. You can read about it on Senator Whitehouse’s website.
Wells Fargo remains in the “hot seat” after a grilling last week in the Senate Banking Committee. In the wake of that hearing, Senate Banking Committee Democrats this week submitted additional questions to the bank. Among other things, lawmakers are requesting basic information on the precise dates of when Stumpf, Wells Fargo’s board of directors, and Carrie Tolstedt, who led the firm’s community banking unit, learned that thousands of the bank’s employees were defrauding customers nationwide, as well as questions on state-by-state data for affected customers, steps that the bank is taking to repair damage to credit scores, and timelines of interactions with regulators. Yesterday, it was the House Financial Services Committee’s turn to question Mr. Stumpf. He faced blistering questions from both sides of the aisle for over four hours.
Wells Fargo faced additional scrutiny late last week when leading Democratic Senators, including Patrick Leahy (D-VT), Sherrod Brown (D-OH), Dick Durbin (D-IL), Al Franken (D-MN), Richard Blumenthal (D-CT) and Elizabeth Warren (D-MA), sent a letter to Wells Fargo, urging the bank to end its use of forced arbitration in consumer contracts.
And finally, 104 House Democrats sent a letter to the Consumer Financial Protection Bureau (CFPB) encouraging the agency to strengthen their payday lending rules. You can read the story and the letter here.
IN THE AGENCIES The CFPB filed a lawsuit in federal district court against the credit repair company Prime Marketing Holdings, LLC, which allegedly charged consumers a series of illegal advance fees as well as misrepresented the cost and effectiveness of its services. The CFPB is seeking to halt the company’s harmful conduct and to obtain relief for consumers, including refunds of fees paid to the defendant. The Bureau also released a consumer advisory with tips for consumers who are working to improve their credit history or who are dealing with credit repair services. You can read the lawsuit and blog on how to avoid credit repair scams.
The Department of Education announced late last week that it is stripping the powers of one of the nation’s largest accreditors of for-profit schools. The Accrediting Council for Independent Colleges and Schools, or ACICS, has been under scrutiny for continuing to accredit colleges whose students had strikingly poor outcomes.
The Education Department also announced that the three-year federal student loan default rate dropped half a percentage point, to 11.3 percent, for students who entered repayment in fiscal year 2013. This marks the third straight year that the default rate has decreased – for the 2010 fiscal year, the rate was 14.7 percent. The rates are based on the percentage of borrowers who defaulted within three years of repayment. Default rates for public and for-profit colleges dropped in the latest numbers, while defaults among nonprofit college students increased slightly, from 6.8 percent to 7 percent. Meanwhile, nine for-profit colleges and one nonprofit school, mostly small cosmetology schools, could lose access to federal loans after large portions of their students defaulted during the last three years. Default rates at those schools either exceeded 40 percent or were higher than 30 percent for three straight years.
In more bad news for Wells Fargo, the institution reached a settlement with the Department of Justice (DOJ) to pay more than $4.1 milliom for repossessing 413 cars belonging to protected service members without getting a court order. Under the settlement, Wells Fargo is to pay each service member $10,000, plus any lost equity in the vehicle with interest; must repair credit of those affected; and will pay a $60,000 civil penalty. The settlement covers repossessions that occurred between Jan. 1, 2008 and July 1, 2015.
FROM THE INTEREST GROUPS The Bipartisan Policy Commission (BPC) has a new paper out on the post-crisis financial regulatory structure: “Americans have a safer financial regulatory system than before the crisis, but there are some less-than-optimal outcomes and unintended consequences of post-crisis reform that warrant attention, and also regulatory gaps that remain or have emerged since the crisis.” The three main categories of unintended consequences are migration and cessation of activities, binding constraints leading to cliff effects, and regulatory fragmentation leading to duplication and conflict” Read more.