CFPB plans big Wells fine; New CEO, same problems for Deutsche

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Busy day at the CFPB: The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency are planning to impose a record fine of as much as $1 billion against Wells Fargo, according to a Reuters report picked up by many media outlets. The fine would “would fulfill [President] Trump’s vow to come down hard on the country’s third-largest lender,” it said, and “could burnish [acting CFPB director Mick] Mulvaney’s image as a tough regulator even as his agency has dropped cases against at least two payday lenders.” Mulvaney's view of some of the CFPB's staff may have softened ever so slightly, but he still sees others in the agency as "activists."

Not that payday lenders are particularly happy with the agency. On Monday, the Community Financial Services Association of America, the main industry trade group, and the Consumer Service Alliance of Texas sued the CFPB in federal court in Texas to stop a rule the lenders say will put them out of business. The rule imposes tough restrictions on small-dollar loan providers. Mulvaney has said he plans to review the rule, but the industry is worried that any changes won’t be done in time before the regulation goes into effect in August 2019. Wall Street Journal, Washington Post, American Banker

Meanwhile, Comptroller of the Currency Joseph Otting, in a speech to the Independent Community Bankers of America, said his agency plans to be more responsive to “our customers, which are the banks.” He provided details on how he plans to relax banking regulations to cut compliance costs and make it easier for banks to comply with the Community Reinvestment Act. Wall Street Journal, American Banker

No easy job: New Deutsche Bank CEO Christian Sewing, who was named Sunday to replace John Cryan, “will find it much easier to change the tone of leadership than the bank’s destiny,” the Wall Street Journal says. Sewing, who had headed up the German bank’s retail operation, “promises to be more decisive and demanding. Unfortunately, the banking industry is changing more rapidly than a bureaucratic behemoth like Deutsche can probably match. As it pursues more costly and painful restructuring, fitter rivals will pull further ahead.”

Sewing’s role, according to the Heard on the Street column, is to “make Deutsche Bank safer and more profitable, in part by shrinking it.”

The pressure is now on Deutsche Bank’s chairman Paul Achleitner, who was behind “the messy sacking of chief executive John Cryan and the rushed appointment” of Sewing, the Financial Times says. Maybe the third time [picking a CEO] will be the charm for Achleitner.

But don’t cry for Cryan. He’s likely to get €7 million in severance after being fired less than three years into his five-year contract.

Focused on finance: Leucadia National is looking to emphasize its financial services business after announcing plans to sell the majority stake in its meat business and its interest in an auto dealership group. The company also plans to change its name to Jefferies Financial Group, after its investment banking and capital markets unit. The deals “complete Leucadia’s transformation from a highly diversified, but relatively random, group of assets before the combination with Jefferies into a financial-services company with clear focus and drive,” the company said. Wall Street Journal, Financial Times

Wall Street Journal

Slower growth: Consumer lending is waning, according to Federal Reserve data. Total consumer loans outstanding rose by just 3.3% annually in February, down from the 4.9% pace in January and 6.0% in December. For full year 2017, consumer loan growth slowed to 5.4% from 6.8% the previous year. The slowdown may be due to lenders being more cautious in response to rising delinquencies, or consumers paying down debt.

But that tells only part of the story. Bank loans to nonbank lenders, which lend that money to subprime customers, grew six-fold between 2010 and 2017 to a record high of $345 billion, making them “one of the largest categories of bank loans to companies,” the paper reports. “Banks say their new approach of lending to the nonbank lenders is safer than dealing directly with consumers with bad credit and companies with shaky balance sheets. Yet the relationships mean that banks are still deeply intertwined with the riskier loans they say they swore off after the financial crisis.”

Ant growing: Ant Financial Services, the Alibaba affiliate that operates the Alipay mobile payments network and one of China’s largest non-bank lenders, is looking to raise $9 billion that could increase its overall value to $150 billion. That would make it more valuable than Goldman Sachs, Paypal and BlackRock.

Financial Times

He’s back: Upgrade, the online lending company started by Lending Club founder Renaud Laplanche, will soon begin offering consumer lines of credit with the flexibility of a credit card. The product presents a “frontal challenge to a credit card industry that has already become intensely competitive.”

We will survive: “The rise of cryptocurrencies, contactless cards and mobile payments has led to predictions that we are at the dawn of a cashless society — but much of the world is still tied to physical transactions," the paper says, by way of introducing a video on “Why the ATM will survive.”


“We do not take lightly that we are suing our federal regulator. However, we have long said we are pursuing all options with regard to the CFPB’s harmful small-dollar lending rule, and one of these options was litigation.” — Dennis Shaul, CEO of the Community Financial Services Association of America, on its lawsuit against the agency.

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