Senators question credit bureau model; Yellen (again) on 'appropriate' regs

Receiving Wide Coverage ...
Equifax, day two: Former Equifax CEO Richard Smith endured a second day of testimony on Capitol Hill Wednesday, this time before the Senate Banking Committee. But the hearing was as much about the data breach at the company as it was about the credit bureau business model, which came in for some serious questioning by the lawmakers, who "asked whether a large overhaul is needed for both private sector and government activities," according to the Wall Street Journal.

"Senators repeatedly raised a key point," the Journal noted. "Consumers don't choose to share their data with these firms nor do they receive compensation for it, even though companies like Equifax profit by gathering it and selling it to lenders and other companies." Sen. Michael Crapo, R-Idaho, the committee chairman, said Congress needs to address "the collection and use and protection of personally identifiable information that is being collected by the government, by the private sector and others." Wall Street Journal, American Banker here and here

Smith also faced questions about the $7 million contract it recently received from the IRS to help prevent fraud even after the hack was revealed. "Can you explain to the American people, not just as consumers who have been exposed and breached here, but as taxpayers, why in the world should you get a no-bid contract right now?" asked Sen. Ben Sasse, R-Nebraska. "Smith responded that he didn't know the specifics of the contract but that he thought it was for work the company was already doing and that the contract was just being renewed," according to the Washington Post.

At Tuesday's hearing before the House Energy and Commerce Committee, Smith "threw down a gauntlet of sorts" to TransUnion and Experian to join Equifax in offering free credit file locks for life to consumers. "It's time we change the paradigm and give the power back to the consumer to control who accesses his or her credit," Smith said.

"Experian's response came about six hours later," reports the New York Times Your Money columnist Ron Lieber. "Go pound sand."

Wall Street Journal
Lighter burden: Federal Reserve Chair Janet Yellen again said she supported bank regulations that aren't unduly burdensome, particularly for smaller banks, "underscoring her potential flexibility on post-crisis financial regulation as President Donald Trump weighs whether to nominate her for a second term," the Journal reported. It’s not the first (or second, or third …) time she’s said this.

"The Fed has been working hard to ensure that its regulation and supervision of banks are tailored appropriately to the size, complexity and role different institutions play in the financial system," Yellen said at a community banking conference in St. Louis. "For community banks, which by and large avoided the risky business practices that contributed to the financial crisis, we have been focused on making sure that much-needed improvements to regulation and supervision since the crisis are appropriate and not unduly burdensome."

Refunds coming: Wells Fargo said it will refund money to customers who wrongfully paid fees for mortgage lock extensions. About 110,000 customers paid a total of $98 million in fees between September 16, 2013, and February 28, 2017, although the bank said it expects the refunds to be lower than that because "a substantial number of those fees were appropriately charged." The bank said refund checks will start going out by the end of the year.

Financial Times
Banks join blockchain venture: Four banks are joining a project to build a blockchain-based global system to handle trade finance. Bank of Montreal, Caixabank, Erste Bank and Commerzbank are joining the venture, called Batavia, which was launched by UBS and IBM last year and hopes to start testing in early 2018. "The consortium said the system was designed to be used by many banks, vendors and regulators to reduce the time and cost of providing trade finance for cross-border transactions," the FT reports.

Quotable
"You realize to many Americans right now that it looks like we're giving Lindsay Lohan the keys to the mini bar." — Sen. John Neely Kennedy, R-La, to former Equifax CEO Richard Smith, in reaction to the recent IRS decision to hire the credit bureau despite the recent data breach.