This is the inaugural issue of what will be a weekly blog from our nation’s capital, updating NACBA members on the highlights of activities of interest in three main categories: Congress, regulatory agencies, and interest groups/think tanks. The format is intended to be just an overview, with links to key documents for anyone who wants to dig deeper. Some weeks there will be more to report than others. I think what you will find is that there is much going on in D.C. every day that, although not bankruptcy-specific, touches on, impacts and informs the work you do.
ON THE HILL Congress returned from its summer “recess” with a focus on completing work on a spending bill to keep the government funded when the new fiscal year starts on October 1. Details are now being worked out, and the plan is to vote as early as next week on a bill that will keep the government funded through December 9th. Once work on that bill is completed, Congress will leave again and not return until after the elections.
This week the House Financial Services Committee, on a party line vote, approved the proposed “Financial CHOICES” bill. The main purpose of the bill is to repeal and replace key provisions of the Dodd-Frank Act. Among other things, the bill would: force major changes to the leadership, funding, structure and authority of the Consumer Financial Protection Bureau; broadly curtail the regulatory authority of financial regulators; restrict federal regulators from limiting the use of pre-dispute mandatory arbitration agreements; and make major changes to the housing finance system. Read the bill text, summary and supporting documents form the Republicans here and opposition from the Democrats here and here.
Next week, the Senate Banking Committee will hold a hearing to look at the recently disclosed Wells Fargo sales practice abuses. Witnesses will include John Stumpf, Chairman and CEO, Wells Fargo & Company; the Comptroller of the Currency, and the Director of the Consumer Financial Protection Bureau; as well as the Chief Deputy of the Office of the Los Angeles City Attorney. The hearing is scheduled for Tuesday, September 20th at 10 a.m. and will be webcast on the Committee’s website.
And, Senator Warren (D-MA) is marking the 8th anniversary of Lehman Brothers’ bankruptcy with a new push to investigate — and potentially jail — more than two dozen individuals and corporations who were referred to the Justice Department for possible criminal prosecution in 2011 by the Financial Crisis Inquiry Commission.
IN THE AGENCIES The Consumer Financial Protection Bureau (CFPB) has been busy in recent days. Last week the Bureau announced it fined Wells Fargo $100 million for widespread unlawful sales practices. The Bank’s employees secretly opened accounts and shifted funds from consumers’ existing accounts into these new accounts without their knowledge or permission to do so, often racking up fees or other charges. The Bureau also revealed that Wells-Fargo had compensation programs for its employees that encouraged them to sign up existing clients for deposit accounts, credit cards, debit cards, and online banking. According to the enforcement action, thousands of Wells Fargo employees illegally enrolled consumers in these products and services without their knowledge or consent in order to obtain financial compensation for meeting sales targets.
Earlier this week, the Bureau announced that it was taking action against for-profit college chain Bridgepoint Education for deceiving students into taking out private student loans that cost more than advertised. The Bureau ordered Bridgepoint to discharge all outstanding private loans the institution made to its students and to refund loan payments already made by borrowers. Loan forgiveness and refunds will total over $23.5 million in automatic consumer relief. Bridgepoint must also pay an $8 million civil penalty to the Bureau.
As reported by our friends at NCLC, effective October 3, Department of Defense rules limit interest rates to 36%, prohibit arbitration, and provide strong private remedies for all non-purchase money, closed end credit offered to the country’s 3 million service members and their dependents, as described in this article.
FROM THE INTEREST GROUPS The Urban Institute, in a study funded by the CFPB, tested whether simple “rules of thumb,” even if they’re not as detailed as other forms of financial education, might help people improve their financial decision making. The Institute concludes: “financial decisions can be complex, and the wrong choices can lead to long-term financial strain. This complexity makes financial education difficult to deliver. Many studies have found that financial literacy classes in high schools, community colleges, and adult education spaces don’t do much to improve financial outcomes for participants. More intense one-on-one methods of financial education and behavior change, such as counseling and coaching, have shown promise, but it’s difficult to get people to participate in these time-intensive programs, and they can be expensive to administer. It turns out simple rules of thumb can help at a very low cost.”