P2P lenders faces challenges; Student debt relief scams

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Family matters
Rep. Sean Duffy, R-Wis., a member of the House Financial Services Committee and “a frequent critic of the Consumer Financial Protection Bureau,” said he is resigning from Congress, effective Sept. 23. The five-term congressman “said he had recently learned that his ninth child, who is due in late October, will have some health problems that will require more time and care.”

Duffy, who was elected to Congress in 2010 as part of the Tea Party wave, was the ranking member of the financial services panel’s subcommittee on Housing and Insurance, which oversees the National Flood Insurance Program and the Federal Housing Administration.

“During his tenure on the Financial Services Committee, Duffy routinely pushed to restructure the Consumer Financial Protection Bureau, and introduced legislation as recently as last year to make the agency’s guidance process more transparent and prevent the CFPB from going after institutions that rely in good faith on guidance,” American Banker reports. Wall Street Journal, New York Times, Washington Post, American Banker

Wall Street Journal

Scam alert
Soaring student debt, now nearly $1.5 trillion, and the record number of defaults, have created “fertile ground for companies that promise to help stretched borrowers by navigating the maze of federal programs that can reduce or forgive debts for those who qualify, such as public-service workers or people on low incomes. Regulators, including the Federal Trade Commission and the Consumer Financial Protection Bureau, share oversight of such companies. One issue they face is the sheer number of small firms offering these services, many using several names.”

While some of these operations are above board, "there is nothing they offer that borrowers can’t get free," the paper says. Others "are outright scams or make promises to borrowers that are illegal."

GSE reform
The Trump administration is expected to release its plan for reforming Fannie Mae and Freddie Mac shortly after Labor Day. The plan “hopes to put the companies on more-solid financial footing and return them to private-shareholder ownership,” but “making those changes remains politically, technically and legally difficult, and prior efforts have all sputtered.”

Financial Times

Survival of the fittest
The flat, and in some spots inverted, yield curve and a slowing economy “have hammered banks stocks in recent months,” but their problems “pale in comparison to challenges confronting the peer-to-peer or ‘marketplace’ lenders — the start-ups that have set out, over the past decade or so, to upturn the banking industry. Banks’ structural advantages remain a massive barrier for the upstarts,” whose “challenges will be even greater in a recession, as investors naturally shy away from riskier loans and towards the safety of insured deposits,” the paper says.

“However, there may be a bright spot for the loan marketplaces. Those that manage to survive the next downturn, whenever it comes, may be able to consolidate the market, gaining scale and spreading their marketing costs across a larger revenue base. And if they can prove that they can lend profitably through a recession, they should come out the other side with more investor confidence and, as such, a lower cost of capital.”

The gap widens
“Despite a high-profile three-year government campaign to close the gender gap,” the number of women in the senior ranks of the U.K.’s financial services industry fell last year, due to an increase in the number of male applicants.

Going long
Deutsche Bank is combining its treasury markets and investment operations “to put its excess cash reserves to work as European lenders become increasingly squeezed by negative interest rates.” “What we are seeking to do is to offset the drag of parking cash at the central bank in a negative rate environment, for example by buying a bond that pays more than cash,” treasurer Dixit Joshi said. “Additionally, the bank will start investing some of the surplus cash in longer dated assets that could earn even more, between 100 and 120 basis points more than it currently earns.”

Washington Post

Deutsche’s misdeeds
The Securities and Exchange Commission’s charges against Deutsche Bank, which the bank settled last week for $16 million, include “numerous alleged violations by the bank of the 1977 Foreign Corrupt Practices Act.” The agency said Deutsche “provided jobs to relatives of foreign government officials in an attempt to influence the officials to steer business to the bank.”

In one case, “a senior executive at a Russian state-owned entity asked the bank to hire his son, who also wanted to work in Deutsche’s London offices. A London-based Deutsche human resources employee flagged the move as ‘the classic [nepotism] situation that we have every year’ but was overruled.”

Quotable

“With much prayer, I have decided that this is the right time for me to take a break from public service in order to be the support my wife, baby and family need right now.” — Rep. Sean Duffy, R-Wis., announcing his plan to resign from Congress on Sept. 23

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