Receiving Wide Coverage ...

Overzealous Overdrafts: As if it weren't tough enough to be a commercial banker these days, the Consumer Financial Protection Bureau is taking aim at account overdraft fees—a $32 billion source of industry revenue. In a report released early Tuesday, the agency criticizes U.S. banks for everything from confusing consumers with overdraft fee rules to reordering transactions to increase the fees individual customers pay, the Wall Street Journal reports. "What is marketed as overdraft protection can, in some instances, put consumers at greater risk of harm," Richard Cordray, the CFPB's acting director, told reporters during a heads-up briefing prior to the report's official release. "Consumers need to be able to control their costs and expenses, and they deserve clarity on those issues," he added. Cordray said the consumer bureau is not making a policy recommendation per se but will continue to examine the issue, the Washington Post said. The CFPB found that heavy users of overdraft coverage pay about $900 a year more than consumers who don't incur overdraft fees. The bureau over a year ago put out a request for information and began studying how the banks it supervises were charging the fees. Banks with less than $10 billion in assets were excluded from the study. The CFPB's just-released report zeroes in on the big banks, which usually charge higher overdraft fees than smaller banks. At banks with more than $25 billion in assets, the median overdraft fee was $35 at the end of 2012, the Journal says, citing statistics from Moebs Services. Banks with less than $100 million in assets charged a median price of $25. Even so, community banks are even more heavily reliant on overdraft fees to generate revenues than are their larger rivals, the CFPB said, citing industry research. The bureau's latest scrutiny of overdraft fees comes three years after a Federal Reserve crackdown, which prohibited banks from allowing customers to automatically overdraft checking accounts and incur high fees in the process. The move was portrayed at the time as seeking to prevent consumers from getting hit with $35 overdraft fees for $3 lattes. Bad publicity and the 2010 regulatory squeeze have prompted many big banks to reduce their reliance on overdraft fees and encourage customers who rack up a lot of them to take their business elsewhere, the Journal says. Since 2007, nearly 24 million checking-account customers have switched from big banks to small banks and credit unions, it adds, quoting Mike Moebs, chief executive of Moebs. "They've lost checking accounts and they've lost them on purpose," he said. Wall Street Journal, Washington Post, Politico, American Banker

Springtime for Bank M&A?: Lest there was any doubt about whether the Fed's loose money policy has rekindled animal spirits comes news that subprime lender Springleaf Finance Corp. is talking with banks about a possible initial public offering. The unit of Fortress Investment Group (FIG) in May started sounding out I-bankers at Citigroup (NYSE:C), Bank of America (BAC) and Credit Suisse (CS), the Journal reports, citing people familiar with the discussions. Based in Evansville, Ill., Springleaf lends to consumers with sub-pristine credit histories for car and home repairs and purchases of other goods. It employs about 3,600 people at more than 850 branches. Springleaf was acquired by Fortress from AIG in 2010 and suffered large losses afterward. However, last month it managed to sell $300 million of junk bonds in an offering that was $50 million oversubscribed. The reported IPO talks come amid signs of a heartbeat in the bank M&A market as well. Yesterday came word that Union First Market Bankshares (UBSH) has agreed to buy StellarOne Corp. (STEL) for about $445 million in stock, one of the largest bank deals this year. Mergers and acquisitions "activity has been anemic since the 2008-2009 recession, compared to the periods after the prior two recessions," RBC Capital Markets analyst Gerard Cassidy wrote in a research report Monday that was quoted by the Journal. "We believe M&A activity will pick up for targets with less than $20 billion in assets, especially for targets with less than $2 billion in assets," but remain muted for larger deals, he said. Wall Street Journal, American Banker

Financial Times

U.S. officials are targeting virtual currencies due to fears that Americans are using them to evade taxes, opening a new front in the crackdown on the world of Bitcoin and its brethren as well as tax fraud. "Clearly the increasing use and misuse of cyber-based currency and payment systems to anonymously transfer illicit funds as well as hide unreported income from the IRS is a threat that we are vigorously responding to," Victor Lessoff of the Internal Revenue Service told the Financial Times. Lessoff, director of an IRS unit that investigates cyber threats, was expanding on remarks made at a conference run by New York University on Friday.

New York Times

Commercial banks are profiting handsomely by collecting fees for enabling shady merchants to prey on consumers. That's the gist of a Times story profiling what it describes as the "crucial role" Zions Bank of Salt Lake City played in a health care scam that involved wrongly debiting the account of an elderly victim. That case reportedly is part of a far larger problem in which banks are said to frequently ignore warnings of potential fraud and aid and abet unscrupulous marketers. The Times says its conclusions were drawn from reviews of hundreds of filings in connection with civil lawsuits brought by federal authorities and a consumer law firm against Zions. Justice Department officials told the Times they are considering civil and criminal actions against a number of banks for allowing tainted money to flow through branches, for failing to safeguard against suspicious merchants, and for originating transactions on behalf of businesses that they know make unauthorized withdrawals from customer accounts, the Times reports, citing "people with direct knowledge of the matter" (most likely plaintiffs' attorneys and/or leakers for a DOJ much in need of positive publicity). "You can't close your eyes anymore to the fraud that you are allowing to happen," Michael Blume, the director of the consumer protection branch at the Justice Department said. "Banks are in business to make a profit. Unfortunately, this is a moneymaking operation at consumers' expense."

In the "There are no new stories, only new reporters" department, the Times has the latest version of the oft-told tale of brokers pulling out the stops to remove unsightly disciplinary blemishes from their records with the Financial Industry Regulatory Authority. The self-regulatory organization's BrokerCheck online database has long been considered by those in the know to be about as reliable as Internet banner ads for weight-loss products. The Times' latest yarn involves a Wells Fargo (WFC) broker in Naples, Fla., in need of making nine customer complaints go away. Some things never change. For a gander at version of a broker-tidying story from four years ago that this scribe had the pleasure of editing, and that had the saving grace of a TV-star villain named Bambi, click here.

Elsewhere ...

Bloomberg: Rare is the Wall Street analyst who stamps "sell" on a research report, and research chief Charles Peabody of Portales Partners LLC is one of only four analysts among the 34 who track Citigroup urging clients to dump the banking giant. Peabody's big concern is that the bank may lose $5 billion to $7 billion in regulatory capital this year if the dollar gains against the yen, euro and currencies in emerging markets, which provide about half the bank's profit. That would be its worst translation loss in five years, exceeding the $3.5 billion deficit in 2011. "Those currency risks are worth taking if the high-growth prospects are there," said Peabody, who Bloomberg reports predicted the mortgage market's plunge as early as January 2005. "But if global growth falters, then those risks get magnified and growth doesn't offset the currency risks."

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