News
The CFPB is expected to release rules early this year that will allow it—for the first time—to exercise the authority it was given under the Dodd-Frank Act to regulate payday loans. The CFPB says state laws governing the industry often fall short and that fuller disclosures of the interest and fees may be needed. Although Dodd-Frank bars the CFPB from capping interest rates, the CFPB has a number of options, including deeming industry practices unfair, deceptive or abusive to consumers. The agency is also considering tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or encouraging states or lenders to lower rates.
A report by the Pew Charitable Trusts finds a close relationship between bank overdraft fees and customers closing checking accounts. The report compares the experiences of high frequency overdrafters, who incur more than four debit card overdrafts a year, and those of low-frequency overdrafters, who paid one to three overdraft penalties. High-frequency overdrafters paid an average of $95 in total fees for their last negative balance, nearly twice the $51 low-frequency overdrafters paid. But for both groups, overdraft charges increased the odds account holders would close their accounts and become unbanked; overdraft fees have caused one-quarter of low-frequency and one-third of high frequency overdrafters to close a checking account.
Spring Bank is supporting the growth of small businesses and startups in the Bronx through a partnership with the Business Outreach Center, a CDFI-certified small-business development organization. In the summer of 2014, Spring Bank wrote a letter of credit to help the Business Outreach Center secure the lease for the Bronx Business Incubator, a new space for entrepreneurs to conduct business, engage in workshops and network with peers. “[A] majority of small businesses get their first loans from community banks," said Demetris Giannoulias, founder and chairman of Spring Bank. "It's fun to meet people and hear them talk passionately about something that they're working on and to be able to be a part of it. That's the great thing about being a banker."
A new study by the National Federation of Community Development Credit Unions examines the financial needs of very low income consumers. Many very low income consumers interviewed for the report contrasted the simplicity of dealing in cash to the surprise fees and delayed payments they experienced at financial institutions. They expressed a fear of institutions in general and a general sense that they “didn’t belong there.” The report stresses the importance of relationships and guidance in serving very low income consumers. It also cautioned against product promotion, which is often perceived as a sales pitch and can undermine trust in a banking relationship.
OneUnited Bank and the African American Film Critics Association last week presented “Money on My Mind: Film & TV Industry,” a celebrity panel discussing behind-the-scenes career opportunities in the television and film industry for African-Americans. Panelists at the Los Angeles event also discussed the recent increase in black films that have been both green-lit and experienced box office success. OneUnited Bank hopes the event will advance its goal of building long-term wealth in the black community. “It is amazing how many unsung careers there are in the business of entertainment outside of being an actor," said President and COO of OneUnited Bank Teri Williams. “The bank is steadfast in its commitment to helping urban communities find any and all growth opportunities.”
David Reiling, chairman and CEO of St. Paul-based Sunrise Banks spoke at a roundtable on equity crowdfunding with the Minneapolis/St. Paul Business Journal. "I view [equity crowdfunding] differently than a contrary type of view where this is just a competitor... [T]he fact is that when you look at it from complementary view, these small and medium businesses do not have the same type of access to capital that large ones do. And that’s a glaring need... From a banker’s point of view, you have to take an optimistic view of this and figure out how you can be relevant in this space. We need to adopt some methodology around crowdfunding where we might see a lower return for the bank, but a higher return in terms of community building and social purpose."
A new proposal by the CFPB could allow community banks and credit unions to make "qualified mortgages" more easily. Under current rules, lenders with less than $2 billion in assets and fewer than 500 first-lien loans originations per year can attain QM status if loans are held in portfolio, even if a loan's debt-to-income ratio exceeds QM's normal limit of 43%. The proposal would expand that advantage to more banks by raising the origination limit to 2,000 loans. It would also exclude loans that a bank keeps in its portfolio from the amount that counts against the limit. In addition, any institution not in an urban area would be recognized as "rural." CDFI banks will continue to be fully exempt from the ATR-QM rule.
Kat Taylor, CEO of Beneficial State Bank, has been selected to become one of six Social Impact Fellows at Berkeley's Haas School of Business. The six fellows will serve as mentors to students, speak on panels, attend special events and provide their expertise to programs, centers and the faculty. "These fellows share one thing in common: they are changing the world with their deep and meaningful work connected to social impact and we are honored to welcome them to Haas,” said Laura Tyson, director of the Institute for Business and Social Impact at Haas. In addition to her work at Beneficial, Taylor is the founding director of the TomKat Ranch Educational Foundation, an organization dedicated to sustainable food production.
The CDFI Fund has announced a series of workshops to prepare CDFIs and other prospective program participants for the upcoming CDFI Bond Guarantee Program application round. The workshops will provide details on the program and the various ways to participate, including information on the review and evaluation of applications. The first session, for existing and potential qualified issuers, is scheduled for February 26 at 9:00 AM. The second, for interested program participants and potential eligible CDFI applicants, is scheduled for February 27. Registration is required and will be honored on a first come first serve basis. Registration for both sessions closes at 5 p.m. EST on February 20, 2015.
For the first time, the FDIC has publicly released guidelines for how examiners should instruct banks to cut off accounts for risky customers suspected of violating the law, a major point of contention in the controversy over the Justice Department's "Operation Choke Point" probe. FDIC staff are required to use a formal, written process in cases where examiners find banks aren't managing the risks of account activity. All recommendations for termination of deposit accounts must be approved in writing by an FDIC regional director. The guidelines come after months of criticism from Republican lawmakers, who allege regulators have been too aggressive in pressing banks to avoid controversial customers such as payday lenders and gun dealers.