Top banking news this month: December 2022

December 30, 2022 1:55 PM

NCUA Chairman Rodney Hood, pictured during virtual testimony before the Senate Banking Committee in 2020.

In this month's roundup of American Banker's favorite stories: a deep-dive into how 2022 accelerated the decline of overdraft fees, Zelle's plan for addressing fraudulent transactions, the National Credit Union Administration opens the doors for fintech and credit union partnerships for lending and more.

Click here to read last month's roundup of banking industry news.

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Judge's report hammers three ex-Wells Fargo executives

Article by Kevin Wack

Three former high-level Wells Fargo executives may be forced to pay millions of dollars in penalties after a judge assigned them significant culpability for the bank's fake-accounts scandal.

In a report made public on Dec. 7, Administrative Law Judge Christopher McNeil recommended stiff penalties for former Chief Auditor David Julian, former Community Bank Group Risk Officer Claudia Russ Anderson and former Executive Audit Director Paul McLinko.

The three executives will be ordered to pay a combined $18.5 million in civil money penalties if the judge's recommendations are adopted by acting Comptroller of the Currency Michael Hsu. In addition, both Julian and Russ Anderson would be banned from working in the banking industry.

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Five types of risks that threaten bank-fintech partnerships

Article by Catherine Leffert

As banks continue to enter into partnerships with fintechs, the risks as well as the benefits of these arrangements are becoming clearer. The meltdown of FTX and Alameda Research is the latest example of what can go wrong when a less-regulated company is tied to the regulated financial industry, a topic that regulators like the Office of the Comptroller of the Currency have been sounding alarms about throughout the year.

Banks have been increasingly teaming up with financial technology companies to streamline processes like payments, underwriting and app development. Some banks offer banking-as-a-service to fintechs, letting the third parties take advantage of banks' charters and deposit insurance while providing more nimble services to consumers.

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10 biggest financial data breaches of 2022

Article by Carter Pape

Criminals have many means of stealing money and information from consumers, from scamming consumers directly to stealing their information from companies that hold it for them. For many cybercriminals, the quickest way to get a massive amount of valuable data is by targeting financial institutions.

Cybersecurity firm Flashpoint said in recently released data that the financial sector experienced the second highest number of data breaches in 2022, globally, behind government. U.S. banks were hit hardest, followed by institutions in Argentina, Brazil, and China.

This year, the number of consumer records leaked in breaches globally exceeded 254 million, according to Flashpoint. In the U.S. alone, data from the Maine attorney general indicates that around 9.4 million consumers across the country were affected by data breaches against financial companies.

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How 2022 hastened the decline of overdraft fees

Article by Allissa Kline

What started as a trickle of overdraft-fee policy changes in 2021 became a flood in 2022 as a growing number of large and midsize banks made their policies more consumer-friendly.

The list includes megabanks like Citigroup, which this year became the largest U.S. bank to eliminate overdraft fees entirely, and Wells Fargo, which recently launched a new small-dollar loan program to help customers avoid overdraft charges.

It also includes regional banks such as Charlotte, North Carolina-based Truist Financial, which dropped all fees tied to transactions that get rejected because the customer lacks sufficient funds, as well as charges for overdraft protection transfers.

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How hard will it be for Zelle to refund for fraud?

Article by John Adams

One of Zelle's planned responses to the threat of fraud connected to its network is to form a new and universal refund program for victims. But making that happen may pose a huge challenge in its own right.

In theory, it sounds simple. The policy would standardize reimbursement policies in 2023, so that if a bank finds that a user was tricked into a false P2P transfer on Zelle, the receiving bank's account would send the funds back to the victim's bank to reimburse the consumer. The program would cover fraudulent transfers, but would not cover erroneous payment due to typos or products purchased in error.

The details are where this gets complicated. The step that involves the receiving bank returning a disputed payment could also include a requirement that the bank cover at least part of the cost of the return, according to Trace Fooshee, a strategic advisor in Aite-Novarica's Fraud & AML practice.

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In cross-border payments, the disrupted have become the disruptors

Article by Kate Fitzgerald

Fintechs turned cross-border payments into a hotbed of innovation over the last five years. Now the card networks and banks are responding with disruptions of their own.

It's not just the competitive threat from fintechs developing faster, cheaper and more transparent cross-border payment options. The changing economy is now adding urgency for legacy cross-border providers to modernize their services.

The overall cost of using the correspondent banking model, which remains the status quo for bank-initiated cross-border payments, is increasing as interest rates climb and the expense and complexity of regulatory compliance rises.

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Are banking-as-a-service vendors partly to blame for banks' fintech problems?

Article by Penny Crosman

Several banks that forged banking-as-a-service partnerships with fintechs over the past few years are in talks with their regulators. The regulators say some of these partnership agreements were made with insufficient due diligence around the fintechs' business models and their ability to comply with existing rules.

But while the banks are in the hot seat, some industry participants believe banks should not shoulder all the blame for these sometimes hastily arranged partnerships. Third parties that connect banks to fintechs, providing matchmaking services and technology, are creating a systemic risk and perhaps should take some responsibility, critics say. These third parties are sometimes called banking-as-a-service vendors, sometimes BAAS platform providers, sometimes simply "connectors." Synapse and Treasury Prime fit in this category, though there are differences between them.

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NCUA clears path for more credit union-fintech lending partnerships

Article by Ken McCarthy

The National Credit Union Administration board voted unanimously to advance a proposed rule that would loosen existing regulations and allow credit unions to participate in or purchase more member loans from fintech companies.

The current regulations only allow a federal credit union to purchase loans made to its members from any source if those loans amount to less than 5% of the purchasing credit union's unimpaired capital and surplus.

Board member Rodney Hood said there are several exceptions to the cap, "but they are cumbersome to understand and impose a high regulatory burden."

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Rooting out wrongdoing in PPP loans

Article by Jackie Stewart

There's that saying about roads and good intentions, and the Paycheck Protection Program is perhaps one of the best examples of this.

In the early days of the country's grappling with COVID-19, businesses deemed nonessential closed their doors and Americans were encouraged to stay home. Those steps sent the unemployment rate skyrocketing.

Congress acted quickly to try and ensure that as many people kept receiving a paycheck as possible. Thus, the CARES Act was born, and within that piece of legislation was the PPP, which was administered by the Small Business Administration.

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Lake Michigan Credit Union Workers Alliance

'We aren't being recognized': Workers' union bid at one financial institution

Article by Frank Gargano and Polo Rocha

Employees of a Lake Michigan Credit Union branch are preparing for a union organizing fight with upper management, part of what they hope will boost the momentum for organizing across the banking industry.

Members of the LMCU Workers Alliance notified executives of the $11.8 billion-asset institution in Caledonia, Michigan, of their intent to unionize with the Communications Workers of America in a letter on Dec. 12. The CWA is a national organization that represents those working not only in the communications industry but also in health care, public service, education and more.

As part of the campaign, employees of LMCU's South Division Avenue branch in Wyoming, Michigan, filed a petition with the National Labor Relations Board to organize an election and officially register with a national organization.

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