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Banking News

House Votes to Overturn CFPB's Arbitration Rule July 26, 2017

House lawmakers yesterday voted to overturn the Consumer Financial Protection Bureau’s controversial final arbitration rule by a vote of 231 to 190, exercising their authority under the Congressional Review Act to reject new federal regulations within 60 legislative days of publication in the Federal Register.

Leading the effort in the House were House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Rep. Keith Rothfus (R-Pa.), and other members of the House Financial Services Committee. A similar measure has been introduced in the Senate by Banking Committee Chairman Mike Crapo (R-Idaho).

The rule -- which was finalized earlier this month -- drastically limits the use of mandatory arbitration clauses for financial products and services, which are frequently used by banks of all sizes to manage the unpredictable costs of class action lawsuits and ensure prompt resolution of disputes. ABA previously pointed out that this could impose a significant burden on customers whose claims cannot be resolved through class actions, as it would require them to go to court for minor, non-systemic disputes.

ABA President and CEO Rob Nichols welcomed yesterday’s action, calling it a win for consumers. “In class-action lawsuits, the spoils go overwhelmingly -- and sometimes exclusively -- to a small group of highly motivated trial lawyers who specialize in filing a large volume of often frivolous litigation,” Nichols said, adding that overturning the rule “is critical to ensuring the bureau doesn’t provide trial lawyers with a regulatory windfall at consumers’ expense.” Read ABA's statement.

Labor Department Seeks Comments on Stalled Overtime Rule July 26, 2017

The Department of Labor yesterday released an anticipated request for information on the Obama administration’s final overtime rule, which would have doubled the salary needed for employees to be exempt from overtime pay. That rule, which was to be effective on Dec. 1, 2016, was stalled at the last moment by a preliminary injunction from a Texas federal district court that remains in place while litigation continues.

The RFI -- to be published in the Federal Register this morning -- is widely seen as a first step in a possible rewrite of the rule, and it raised a number of broad issues including how a new salary level should be calculated, whether there should be multiple salary levels and whether the duties tests should change. DoL also sought input on how employers made personnel changes to comply with the rule, as well as their responses to the injunction.

Comments on the RFI are due by Sept. 25. Just as the American Bankers Association reached out to its members, state bankers associations and other groups to collect data in opposition to the final rule, the association is again seeking input from members on the overtime rule’s impact. This gives the banking industry the opportunity to build upon the previous concerns ABA has raised, such as how this rule is particularly harmful to community banks and those with branches in rural areas. Read the RFI. Read ABA's comment letter.

Task Force Report Points to Real-Time Payments by 2020 July 24, 2017

The Federal Reserve’s Faster Payments Task Force on Friday formally released its long-awaited recommendations for accelerating real-time payments in the United States with a goal of real-time payment ubiquity by 2020. The 10 recommendations cover governance issues, payments infrastructure and the sustainability and evolution of the payments system.

Specifically, the task force called for a voluntary, industry-led governance framework; a shared set of payments rules, standards and baseline requirements; and changes to Fed regulations to ensure they are up to date and reflect the goal of faster payments. For infrastructure, the group called for an inclusive working group to develop a “directory design for solutions to interoperate in the faster payments system,” for the Fed to develop enhanced 24/7/365 settlement mechanisms and for the Fed to explore its appropriate operational role in faster payments.

To ensure faster payments remain secure, ubiquitous and technologically up-to-date, the task force recommended shared methods of fraud detection and information sharing, broad education and advocacy programs to promote adoption, more research to address gaps in cross-border payments and continued investigation of emerging technologies.

ABA welcomed the recommendations, which ABA VP Steve Kenneally said “emphasize market competition and industry-led development, not top-down government mandates.” Kenneally is a member of the task force, which also included more than 70 ABA member bankers -- including five who served on the task force’s steering committee. Read the report.

Lawmakers Introduce ABA-Backed Legislation to Undo Arbitration Rule July 21, 2017

Members of the House and Senate yesterday introduced legislation that would block the Consumer Financial Protection Bureau’s controversial arbitration final rule from taking effect. The action is permitted under the Congressional Review Act, which gives Congress the ability to reject new federal regulations within 60 legislative days of publication in the Federal Register.

Leading the effort were Senate Banking Committee Chairman Mike Crapo (R-Idaho), House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Rep. Keith Rothfus (R-Pa.), and other members of the House Financial Services and Senate Banking Committees.

The CFPB’s final arbitration rule prohibits customers from waiving their ability to participate in class action suits and limits drastically the use of mandatory arbitration agreements for financial products and services. With such restrictions in place, arbitration is likely to disappear from financial services contracts, and could result in burdens on customers whose claims cannot be resolved through class actions, instead requiring them to go to court for minor, non-systemic disputes.

ABA and the state bankers associations have been vocal in their opposition to the rule, and ABA President and CEO Rob Nichols applauded lawmakers for taking the next step to block it from taking effect. He noted that in moving forward with the “misguided” rule, the CFPB undermined its own data, which showed that customers fare far better in arbitration than in class action lawsuits.

“In reality, the vast majority of disputes get resolved quickly and amicably without the need for arbitration or legal action,” Nichols said. “If arbitration disappears, the bureau will force consumers to navigate an already overcrowded legal system where the only winners will be trial lawyers. We think our customers deserve better, and we urge lawmakers in both chambers of Congress to overturn this anti-consumer rule as soon as possible.” Read ABA's statement.

ABA Urges Bankers: Write to Senators to Keep Momentum on Reg Reform July 19, 2017

With momentum building in Congress for regulatory reform -- but dwindling time left on the 2017 legislative calendar -- ABA reminds all bankers to contact their senators and urge action on meaningful regulatory relief. More than 7,000 messages to Congress have already been sent.

The House passed the sweeping Financial Choice Act in June, and the onus is now on the Senate to take action. Grassroots engagement by bankers is essential to keeping up momentum on Capitol Hill over the August recess. ABA's Grassroots Action Center makes it easy for all bankers to send messages to their senators. Write your senators now.

ABA also encourages bankers to plan now to host a lawmaker visit during the recess. Hosting a senator or representative in a branch or bank office as part of Take Your Lawmaker to Work Week provides a firsthand look at how banks operate, allows legislators to meet the customers the bank serves and helps them experience the value banks bring to their communities. Host a bank visit.

FDIC’s Revised Exam Appeal Guidelines Reflect ABA-Advocated Changes July 19, 2017

The FDIC yesterday issued revised guidelines to expand banks’ rights to appeal exam decisions and improve consistency with other agencies’ appeal processes. Specifically, the revised guidelines allow banks to appeal a determination of compliance with an existing formal enforcement action and a determination to initiate an informal enforcement action. They also modify when formal enforcement actions become unappealable and provide additional Supervision Appeals Review Committee appeal rights.

In response to comments from ABA, the FDIC clarified that material supervisory determinations include decisions to initiate formal enforcement actions. FDIC also expressly stated that matters requiring board attention are material supervisory determinations that may be appealed under the guidelines. ABA acknowledged that today’s revised guidelines are a positive step forward, but continues to support efforts to establish an independent appeals option to financial institutions, along with safeguards to protect against retaliation. Read the revised guidelines.

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FS-ISAC Security Update

FS-ISAC Security Information Available to ABA Members

ABA members can now access FSā€ISAC security threat information via the FS-ISAC Weekly Risk Summary Report, designed for community institutions to deliver timely and actionable information on significant security threats.

Click here to access the most recent Weekly Risk Summary Report.