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Banking News

Justice Department Formally Ends ‘Operation Choke Point’ August 18, 2017

In a letter to House Judiciary Committee Chairman Bob Goodlatte (R-Va.) on Wednesday, a Department of Justice official formally confirmed that the agency has ended the controversial Operation Choke Point initiative, which under the Obama administration sought to curtail legal but politically disfavored businesses by working through bank regulators to pressure financial institutions to end customer relationships with those businesses.

“All of the Department’s bank investigations conducted as part of Operation Choke Point are now over, the initiative is no longer in effect, and it will not be undertaken again,” wrote Assistant Attorney General Stephen Boyd. “The Department will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities.”

ABA has long opposed Choke Point, successfully urging the FDIC to end its participation in the initiative and supporting legislation to prevent similar activities in the future. However, many financial institutions had been concerned about serving Choke Point-targeted businesses without a clear statement from DOJ that the initiative has been dropped. Read the letter.

J.D. Power: Lavish Credit Card Rewards, Bonuses Drive Consumer Satisfaction August 18, 2017

Generous rewards and sign-up offers, especially in super-prime customer segments, have helped drive up consumer satisfaction with credit cards, according to a J.D. Power study released yesterday. Customer satisfaction was at 802 out of 1,000, the highest score in the study’s history. Cash-back rewards cards saw the highest satisfaction levels, while airline and store-branded cards had the lowest levels of satisfaction in the study.

The study also showed that regional banks’ credit card offerings are increasingly competitive with large nationwide card issuers; regionals’ share of the active bank credit card market has grown 24 percent since the end of 2014. The satisfaction gap between nationwide issuers and regional banks has narrowed to 10 points, J.D. Power said -- and Birmingham, Ala.-based Regions Bank scored higher than any of the nationwide Visa or Mastercard issuers studied.

American Express and Discover took home the top scores of 835 and 827, respectively. Among large Visa or Mastercard issuers, Capital One was first at 808, followed by Barclaycard at 806. Had USAA Federal Savings Bank -- whose membership criteria meant J.D. Power left it out of the rankings -- been included, it would have scored 871. Regions Bank was the top-rated regional issuer at 814, followed by BB&T with a satisfaction rating of 797.

“It’s a really good time to be a credit card customer,” said J.D. Power’s Jim Miller. “Overall satisfaction is up across the board, and growing numbers of card companies and regional banks are coming to the market with new products that offer rich sign-up bonuses, increased cash-back rewards and new benefits.” Read more.

B of A Survey: Mobile Banking Becomes Further Embedded in Consumer Lives August 18, 2017

Nearly two-thirds -- 62 percent -- of respondents to a recent Bank of America survey say they now use a mobile banking app, up 14 points from two years prior. The bank’s fourth annual survey showed that consumers’ dependence on mobile to meet their banking needs is steadily increasing, particularly among the millennial generation (those aged 18-35). Three-quarters of millennials reported using a mobile banking app, while two-thirds of Gen Xers said they do, along with 47 percent of baby boomers and 40 percent of seniors.

Fifty-five percent of respondents said they use their bank’s mobile app to have 24/7 access to their account information. Other top reasons cited for downloading their bank’s app were mobile check deposit (44 percent), reducing branch trips (29 percent) and paying bills (28 percent).

Consumers are growing more comfortable using their banks’ mobile app during big financial decision or planning moments. Forty-four percent said they use it while planning a vacation; 29 percent said the same for saving for college or buying a car; 28 percent said they use their app for retirement planning and 24 percent said they use it when planning for a house purchase. Read more.

CFPB Data Shows Growing Numbers with High Student Debt Levels August 17, 2017

The percentage of student loan borrowers leaving school with at least $20,000 in student debt has doubled from 20 percent to 40 percent from a decade ago, according to data released by the Consumer Financial Protection Bureau yesterday. The percentage of borrowers owing $50,000 or more tripled in that time -- rising from 5 percent to 16 percent.

The study also found that an increasing number of borrowers are unable to cover the interest on their loans when making their monthly payments. Today, 30 percent of borrowers have not paid down their balances after five years in repayment, compared with 16 percent in 2008. Of those, more than 60 percent are delinquent. The number of borrowers who reported repaying their loans in full after five years fell from 50 percent to 41 percent, while 12 percent of borrowers’ saw their debt grow in the first five years of repayment, up from 8 percent in 2008.

As student debt burden continues to increase for both young people and their parents, ABA is leading the way in encouraging banks to offer student loan repayment plans as an employee benefit through its endorsed provider, Gradifi. The CFPB study noted the advantages of such repayment plans -- for example, “with a 10-year, $30,000 loan at 6 percent interest, an employer paying $100 a month will save the borrower more than $11,000 over the life of the loan,” the CFPB said. View the CFPB’s study. Learn more about Gradifi.

Fed Divided Over Timing of Next Rate Hike August 17, 2017

The Federal Open Market Committee was divided over when it will next raise the target federal funds rate, which they decided to hold at 1 to 1.25 percent, according to minutes from the FOMC’s July 25-26 meeting. “Some” FOMC members expressed uncertainty about inflation, saying that the committee “could afford to be patient” in deciding when to raise rates, while others said the labor market has neared full employment and a delay in raising rates “would likely be costly to reverse” or “could lead to an intensification or financial stability risks or to other imbalances that might prove difficult to unwind.”

The committee also said its plans to begin reducing the Fed’s balance sheet will be “formally announced next month.” The balance sheet is swollen with $4.5 trillion in securities purchased as part of quantitative easing programs between 2008 and 2014.

FOMC members said they expect continued economic growth and job gains in the near term, and agreed that the timing and size of future rate hikes “would depend on their assessment of realized and expectation economic conditions.” Read the FOMC minutes.

ABA: Fiduciary Rule Remains ‘Deeply Flawed’ August 8, 2017

The Department of Labor’s final fiduciary rule is “deeply flawed in several critical areas” that prevent it from functioning properly, ABA said in a comment letter yesterday. The letter came in response to a DOL request for information on the rule as part of an ongoing review ordered by President Trump.

Among other things, the definition of who is considered a fiduciary under the rule is unclear, resulting in confusion among financial institutions and ultimately, harm to retirement investors, ABA said. The association urged DOL to either rescind or significantly revise the rule to provide a sharpened, targeted definition of “fiduciary” that would establish discernible boundaries and increase certainty about compliance.

Along with the letter, ABA included the results of a recent survey on the fiduciary rule that shows that banks are already re-evaluating and reducing -- and in some cases, eliminating -- their offerings to retirement customers. For example, 30 percent said they have eliminated or reduced the number of retirement products or services they offer, while 38 percent noted that customer relationships have been “fragmented” as a result of the bank no longer being able to provide holistic financial advice.

When it came to compliance, more than 80 percent of banks surveyed said they were sometimes or often unable to determine with certainty whether they are in compliance with the fiduciary rule, and two-thirds believe it will increase their liability and litigation risk under the Employee Retirement Income Security Act and the Internal Revenue Code. Sixty-three percent noted that customer accounts with $25,000 or less have been most affected by the rule.

ABA has long advocated for major changes to the fiduciary rule to ensure that it does not negatively affect the services available to bank customers. The association will continue to provide feedback to the DOL as it continues its review of the rule. Read the letter.

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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.