OCC, FDIC propose CRA overhaul; PayPal sues CFPB over prepaid rule

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CRA overhaul proposed

The Comptroller of the Currency and the Federal Deposit Insurance Corp. proposed an overhaul of the Community Reinvestment Act that the OCC says “will boost lending and make existing requirements more transparent,” the Wall Street Journal reports. “The proposed overhaul would more precisely define the types of lending and other activities that qualify under the act and redefine the geographic areas where they occur. If successful, it would allow regulators to see more easily if lending matches up with deposits. Banks would still be required to lend in lower-income neighborhoods near their branches, but under the new rules they would also be examined based on areas where they have significant deposits.”

But the plan also sets up “a potential break with the Federal Reserve, which is considering a separate overhaul.” However, “officials at all three regulators say they hope they can ultimately agree on a plan.”

“The proposal, which covers more than 200 pages, would make a number of changes, including allowing banks to take credit for lending to relatively poor individuals, small businesses and rural areas even when they don’t have a branch nearby,” the New York Times says. “And even large loans — such as a $500,000 mortgage in an area where the average mortgage size is $1 million — could be classified as low- or moderate-income. Banks could also get credit for making loans to hospitals and other large institutions that do not currently qualify.”

“The proposal is potentially another big win for the banking industry, which has argued for years that 1977’s Community Reinvestment Act was outdated and didn’t account for the popularity of online banking,” the Washington Post says. “Under the proposal, the industry would gain new flexibility when attempting to comply with the law aimed at stamping out redlining, in which banks either refused to lend to people in minority neighborhoods or charge those borrowers more.”

“The long-awaited proposal to modernize the Community Reinvestment Act would seek to make grading simpler and more transparent while allowing banks to spread loans and investments across a broader geographic area,” American Banker reports.

“The proposal is an important step in modernizing CRA, but it is not the final one,” Comptroller of the Currency Joseph Otting writes in American Banker.

Wall Street Journal

PayPal sues

PayPal is suing the Consumer Financial Protection Bureau, “alleging that its new rule [on prepaid cards] has hampered the company’s ability to offer credit products and has created confusion among users of its popular digital-payment services PayPal and Venmo. The regulation imposes complex requirements on issuers to disclose fees and other terms of services, while placing limits on their ability to offer credit products to customers. While the rule’s primary aim is to improve consumer protection for prepaid payment cards, it also extends to digital wallets, any financial products capable of holding cash balances directly on cards or electronic devices,” the paper says.

“The Bureau’s most basic error was ignoring the critical differences between digital wallets and prepaid products,” PayPal said in its complaint filed in U.S. District Court in Washington, D.C. “The resulting regulatory regime is fundamentally ill-suited to PayPal digital wallets and is likely to mislead or confuse consumers.”

AML orders lifted

The Fed Thursday lifted consent orders against JPMorgan Chase and U.S. Bancorp over what it said were weak anti-money laundering controls.

N.Y. Fed appointments

The New York Fed named Lorie Logan, a longtime executive, as manager of its asset portfolio, while Daleep Singh, a former Treasury Department economist, will run the bank’s markets group. “Ms. Logan will oversee the central bank’s $4 trillion securities portfolio and open market operations, advising on and implementing Fed officials’ interest rate decisions," the paper says. "Mr. Singh will be responsible for management of the bank’s broader range of market operations, services and activities — everything from analyzing global market developments to serving as the fiscal agent of the U.S. Treasury.”

Where’s the money?

The world’s central banks “are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. They don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery," the paper reports. "The puzzle is especially perplexing since societies and companies are going cashless, given the boom in payments by cards and cellphone apps. Bankers aren’t just hunting down cash to satisfy their own curiosity. If central banks don’t know how much cash is out there, they could print too much currency and risk inflation.”

Financial Times

Pushing back

The Swiss National Bank warned Thursday “against the politicization of monetary policy with climate change activism. Just weeks after Christine Lagarde floated the possibility of the European Central Bank taking a more active approach in combating climate change, the SNB rejected the notion that its financial clout should be used for anything other than monetary policy,” the paper says.

“The main task of the central bank is to conduct monetary policy,” SNB chairman Thomas Jordan said “in unscripted remarks that warned strongly against any politicization of the SNB’s balance sheet. The bank has faced mounting calls for the huge gains to its reserves that have flowed from its rate policy to be channeled for political purposes.”

Megan Greene, a senior fellow at the Harvard Kennedy School, seems to agree. “For all the talk, it’s not clear what action central banks can or should take” about climate change, she writes in an op-ed. “Climate change poses a clear risk to financial stability and economic growth, which fits squarely under the purview of supervisors. But the role for monetary policy is limited.

“While it’s a good thing central bankers acknowledge the dangers of climate change, it’s also important they recognize what they can and cannot do about it. Perhaps they can find ways to finance the fight. But they have no real policy role. Their job is to contain the fallout.”

Fine print

An HSBC program to provide “no fixed address” bank accounts to homeless people in the U.K. “has been criticized for requiring potential customers in central London to travel to a single branch offering the service in the capital’s financial district.” Despite advertisements in all 12 inner London boroughs, the accounts are only offered at the bank’s Bishopsgate branch in the city of London.

HSBC said the billboards were “more about raising awareness of the scale of the problem than anything else.”

One strike

Part of the late Paul Volcker’s legacy “also includes the post-crisis financial regulation that bears his name — the ‘Volcker rule’ prohibiting banks from proprietary trading, making market bets with their capital. Here, Mr. Volcker’s impact remains more ambiguous, and contentious,” the paper states. “Close to a decade after it was enacted as part of the Dodd-Frank reform law, regulators continue to tinker with the rule, amid claims it has been too complicated and that many of its aims have been achieved by other means.”


“We worked very hard to try to get aligned with the OCC on a proposal, and my hope is that we can still do that. I don’t know whether that will be possible or not.” — Federal Reserve Chair Jerome Powell, commenting on the CRA overhaul proposal that was approved by the OCC and the FDIC but not the Fed, which is reportedly working on its own proposal

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CRA Compliance Payments Enforcement actions Climate change Volcker Rule Career advancement