CFPB case hearing ahead; Amex accused of aggressive sign-up tactics

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Ouster sought

Sherborne Investors, the investment firm headed by activist investor Edward Bramson, has called on Barclays “to reverse its decision to recommend” Jes Staley for reelection as CEO at its annual meeting in May because of Staley’s “professional relationship with the late financier and convicted sex offender Jeffrey Epstein,” which has recently come under investigation by U.K. regulators. Wall Street Journal, Financial Times

Wall Street Journal

Aggressive sales

Some American Express salespeople “strong-armed business owners to increase card sign-ups,” including “misrepresenting card rewards and fees, checking credit reports without consent and, in some cases, issuing cards that weren’t sought,” according to current and former employees interviewed by the paper. “The dodgy sales tactics date to at least 2015, when AmEx was scrambling to retain Costco small-business customers after the warehouse club ended their long-running partnership. The potential revenue hit from the loss of the Costco customers was enormous, so AmEx launched an aggressive campaign to keep them. The push ushered in an era of escalating sales goals and hefty commissions that persists today.”

AmEx said it “found a very small number of cases ‘inconsistent with our sales policies,'” according to the paper. “All of those instances were promptly and appropriately addressed with our customers, as necessary, and with our employees, including through disciplinary action,” a spokesman said.

CFPB case to be heard

The Supreme Court is scheduled to hear oral arguments on Tuesday on the constitutionality of the Consumer Financial Protection Bureau’s structure, namely that the president can’t remove the agency’s director without sufficient cause. The justices are being asked to decide “whether a Democratic-led Congress exceeded constitutional boundaries in 2010 when it created” the agency. The case, the culmination of a “decadelong battle over the quasi-independence” of the agency, “could have broad consequences for the structure of the federal government.”

Meanwhile, “hundreds of homeowners have complained” to the CFPB “about problems with so-called mortgage forbearance programs. Consumer lawyers in regions hit hard by natural disasters say they have seen more homeowners who are reported delinquent to credit-reporting firms after accepting payment help. How such programs operate, and their potential pitfalls, could become even more important in light of the coronavirus epidemic. If the disease spreads throughout the U.S. and puts some Americans out of work, lenders would likely grapple with how and whether to offer assistance to borrowers.”

Supreme Court
The Supreme Court will hear arguments on the constitutionality of the Consumer Financial Protection Bureau’s structure.

Financial Times

Safe bet

Intuit’s “fundamental bet” in buying Credit Karma — “that demand for free credit scores will keep rising — looks like a sound one,” the paper says. “The U.S. consumer is in a precarious state. Debt accumulated on credit cards rose to a record in the final quarter of 2019, with total balances increasing by $46 billion to $930 billion. Moreover, the proportion of that debt classed as seriously delinquent, meaning payments were late by 90 days or more, rose to 5.32% in the fourth quarter, the highest level in almost eight years. The total household debt mountain reached $14 trillion: the twenty-second consecutive quarterly increase.”

“With so much debt outstanding and with incomes failing to rise accordingly, it is no wonder that Intuit is not the only company trying to get deeper into the financial lives of ordinary Americans.”

Saying 'no' to coal

Billionaire hedge fund manager Christopher Hohn “has promised to take action” against Barclays, HSBC and Standard Chartered “if the three banks do not stop lending money to coal-mining companies,” the paper reports. “Banks must stop the financing of new coal projects as a matter of urgency,” said Sir Christopher, “who wrote the letters in his capacity as co-founder of the Children’s Investment Fund Foundation.”

“The letters ask the three banks to publicly disclose their coal loan exposures and to re-evaluate the risks of financing fossil-fuels projects,” the paper says. The three banks “have together provided $23.9 billion in financing since 2017 to enable the expansion of coal power.”

Complaints

Senior U.K. bankers want the British government and the EU to intervene in what they call a “farcical” government-designed plan following “news that the biggest winner was handing back almost half of its £120 million prize. Banking Competition Remedies (BCR) was set up by the U.K. government to distribute £775 million of money from Royal Bank of Scotland as a condition of its state bailout in 2008. However, executives at several banks — including some that successfully bid for awards — have criticized BCR for its secrecy and reluctance to take responsibility for the program’s slow progress.”

Notably, “BCR handed out £425 million to fund investments in new banking services for business customers. However, last week Metro Bank — which received the largest award — said it would have to give back £50 million as it was scaling back its expansion plans and cutting investment in the wake of an accounting scandal.”

On a short leash

The Bank of England “has criticized Deutsche Bank for failing to improve its anti-money laundering and compliance controls, and warned this could jeopardize the German lender’s access to the U.K. after Brexit.” The central bank will “now require monthly updates, instead of the normal quarterly meetings,” from Deutsche.

“Regulators are concerned that issues are still occurring four years after Deutsche was first censured and placed under special supervision by the Financial Conduct Authority for ‘serious’ and ‘systemic’ failings in its controls against money laundering, terrorist financing and sanctions breaches.

Out of their league

The paper looks at the “rise and dramatic fall of European investment banks in the U.S.,” including HSBC, Deutsche Bank, UBS and Credit Suisse. “Europe’s lenders spent billions to crack the American market. But many have made a humbling retreat.”

Quotable

“I will be surprised if there aren’t five votes to invalidate the CFPB’s current structure.” — University of Illinois law school dean Vikram Amar, commenting on the Supreme Court’s possible decision on the constitutionality of the consumer finance agency

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