Law and regulation

The Justice Department handed down its third bank settlement under Operation Choke Point Thursday, bringing a civil complaint against Plaza Bank of Irvine, Calif., for failing to report a payment processor's relationship with fraudulent merchants.

Commerzbank has been ordered to pay a total of $1.45 billion in penalties, fire employees and install an independent monitor after it cleared transactions for entities in Iran and Sudan and facilitated payments for a Japanese company accused of accounting fraud.

The Justice Department has come under fire in recent months for its efforts to root out consumer fraud through banks, but Operation Choke Point appears to be gaining new momentum.

There is a leadership void in payments innovation. The Fed has the ability and the historic precedent to take up the mantle.

Two foreign-owned banks — Santander and Deutsche Bank — failed the Fed's stress test. Two other foreign banks that failed last year, HSBC and RBS Citizens, passed this year.

Citigroup Chief Executive Michael Corbat will still have a job tomorrow (and probably several days after that). The bank's capital distribution plan was approved by the Federal Reserve on Wednesday, undoubtedly to the delight of shareholders who were surprised by last year's rejection.

JPMorgan Chase, Morgan Stanley and Goldman Sachs were each forced to resubmit their capital plans in order to pass the Fed's CCAR stress test, while Bank of America was publicly faulted for weaknesses in its capital planning process. While some saw that as a bad sign, others contended the banks appear more comfortable in pushing the limits of the stress testing process.

Banks and other financial companies are engaging in disturbing new overdraft practices, violating fair lending laws related to mortgages and being too aggressive in how they collect student loan debt, the Consumer Financial Protection Bureau said Wednesday.

Policymakers should stop assuming that homeownership is always better than renting and recognize the economic circumstances that young people will live with for the foreseeable future.

Small-business lending will be crucial to the future of the American economy. But community banks' ability to make loans to friends and neighbors they know depends in part on a supportive regulatory environment.

Fannie Mae selected a chief internal auditor with an "inherent conflict of interest" and the mortgage giant's process for filling the position was faulty, according to a watchdog report to be released Wednesday.

The finance industry faces a steep, uphill battle in trying to convince the Consumer Financial Protection Bureau that the long-standing use of arbitration agreements is beneficial for consumers.

WASHINGTON — President Obama has directed the Department of Education and other agencies to institute changes meant to improve student loan servicing in an initiative the White House calls "a student aid bill of rights."

The Department of Justice announced a $4.9 million settlement Tuesday with CommerceWest Bank of Irvine, Calif., over charges that the bank knowingly worked with a third-party processor making illegal withdrawals from consumer bank accounts.

The Consumer Financial Protection Bureau needs to improve its practices related to employee diversity and the inclusion of women, according to a report issued this week by the Office of the Inspector General of the Federal Reserve.

Banks can expect to incur higher costs in several areas during the implementation of a settlement agreement to improve the accuracy of credit reports. But they might benefit in the long run by getting better information on borrowers.

A coalition of midsize banks is preparing to oppose a bill eliminating a key Dodd-Frank Act threshold unless the language is further tweaked.

Federal Reserve Chair Janet Yellen, who has voiced concern over proposals to increase congressional influence over U.S. monetary policy, will meet with the powerful chairman of the Senate Banking Committee on Tuesday.

Thomas Depping would have been content to keep making small-business loans through his Houston-area bank, but regulatory pressure led him to give up his charter and form a nonbank lender with the same business model.

Lawmakers supported the credit union tax exemption at an industry conference on Tuesday, downplaying efforts to take another look at the issue this year as part of comprehensive tax reform.