Editor's note: Morning Scan will not publish on Thursday, Nov. 26 or Friday, Nov. 27 in observance of the Thanksgiving holiday. We'll be back on Monday, Nov. 30.

Wall Street Journal

In-house lawyers at the Consumer Financial Protection Bureau had proof the Federal Reserve and the Federal Deposit Insurance Corp. were eagerly awaiting its report on Ally Financial. That nugget was included in the House Financial Services Committee report, released on Tuesday, that slammed the CFPB for taking "misguided and deceptive" actions in securing legal settlements from auto lenders for alleged discriminations against minorities. American Banker's coverage of the House committee's report can be read here.

Ally had asked its banking regulators for permission to convert to a financial holding company; the conversion would be a linchpin in its effort to exit from federal government control by holding an IPO to raise capital. But the ongoing probe by the CFPB into Ally's alleged discrimination against minority borrowers in its indirect auto lending business was the holdup. The Fed and FDIC would not approve Ally's request to form a holding company if the CFPB found Ally had violated lending laws.

The Fed had suggested a finding of a fair-lending violation against Ally would "most likely result in the denial of holding company status." The Fed had also suggested if Ally took "prompt and robust corrective action," it would help Ally's cause. The FDIC also said it would be more likely to award the rating that Ally needed to convert to a holding company if Ally agreed to a settlement.

Knowing this, the CFPB relied on its disparate-impact methodology to extract a $98 million settlement agreement from Ally. It used the methodology, despite internal acknowledgements that it was flawed. CFPB Director Richard Cordray approved the plan by signing his initials to a report. American Banker has previously covered the CFPB's use of the disparate impact theory in a three-part series. Those stories can be seen here: part one, part two, part three.

Fintech disruptors are confused about regulation. The founders of startups in the financial technology realm don't know who regulates them, don't know what laws apply to them and don't have the staff to comply with regulations. That's the assessment of Bruce Wallace, chief digital officer at the $42 billion-asset SVB Financial Group in Santa Clara, Calif. Wallace also said since the number of fintech startups has grown, as has the amount of money invested in these companies, concern about regulation increased.

Additionally, if banks are struggling to understand and comply with new regulations like Dodd-Frank, the Durbin amendment and the Foreign Account Tax Compliance Act, how do you think thinly staffed (the fintech euphemism is "nimble") startups feel? And regulators themselves have indicated an interest in learning more about developments in the financial technology sector. Alternative lending and marketplace lending are the most likely areas for regulatory pressure, Wallace said.

The Fed plans to raise minimum capital requirements for banks to pass stress tests. That's going to hurt banks' ability to meet financial-performance targets, "Heard on the Street" said. In the line of fire is return on equity, for which banks try to post at least a 10% return. The Fed is likely to include the so-called GSIB surcharge in the requirements, or impose an additional surcharge. Banks had thought any surcharge would be excluded from calculations. Now that a surcharge is probably going to be part of the stress-test equation, banks are likely to shrink, the column predicts.

New York Times

The founder of Internet Archive Federal Credit Union is giving up. IAFCU opened in 2012, but regulators wouldn't let it offer debit cards or online banking, and it could only offer loans of $5,000 or less. So be it, said founder Brewster Kahle. He continued with his plan to start a new kind of credit union, which would try to help low-income immigrants in New Brunswick, N.J., and provide banking services to bitcoin companies that couldn't get any help from traditional banks.

Regulators continued to hound him, however. In 14 months, IAFCU has been subjected to 11 separate examinations. Kahle estimates his CU has spent 187 hours in August dealing with regulators, versus 61 hours dealing with its own customers. Kahle has decided to throw in the towel; he'll attempt to give his credit union charter to a nonprofit group in New Jersey.

The paper has a Q&A. with Margaret Keane, CEO of Synchrony Financial. The interview focuses on Keane's early life and her philosophies on leadership and hiring, and deals very little with the business of Synchrony.

Elsewhere ...

TechCrunch: The tech news site has a lengthy story on Rocket Mortgage, the new mobile mortgage app developed by Quicken Loans. The story is a glowing review of Rocket Mortgage and goes so far as to call it the "iPhone moment" of the mortgage industry. Read American Banker's coverage here.

Krebs on Security: Hilton Hotels has acknowledged a credit card breach. The data breach occurred over a 17-week period, either in November and December last year, or April and July of this year. Data stolen includes cardholder names, payment card numbers, security codes and expiration dates; no addresses or personal identification numbers were taken.

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