'Costs are costs': Comments of week
May 26, 2017 8:30 AM
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Readers weigh in on a proposal for encouraging small bank installment loans, a firm that uses AI to reduce false alarms, what security improvements are needed for sharing customer data, and more.
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On a proposal to streamline regulatory guidance on bank-issued installment loans by allowing monthly payments of up to 5% of a borrower’s monthly income:
“The 5% rule is a back end into a rate cap which harms higher risk borrowers. Banks could do this now without OCC forcing a rate. They don't because the cost of a $300 loan is the same as underwriting a $10,000 loan. Costs are costs. Banks have to charge what they need to cover costs. A modified Card Act guidance with pay downs and payment plans are consumer protections that would allow banks to be a market disruptor.”
Related article:How OCC can help banks disrupt the payday loan industry
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On what regulatory guidance is needed, or not needed, for banks to make affordable small-dollar loans:
“I don't know of a regulation that prevents banks from making a payday type loan. For example, the OCC safety and soundness standards (12 CFR 30) include underwriting standards that only say an institution should establish and maintain prudent credit underwriting practices commensurate with the types of loans it makes. And the ability to repay rule applies to mortgages. Other than examiner ‘moral suasion,’ what's the hang up?"
Related article:How OCC can help banks disrupt the payday loan industry
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On a startup’s ambition to use artificial intelligence to cut down on false positives in anti-money-laundering efforts:
“Very promising, and could lead to a decline in de-risking, but will watch closely to see if it really does avoid pitfalls of current software. For example, news scans could turn up Islamophobic blogs — some innocent, legitimate nonprofit organizations have gotten caught up in that web.”
Related article:Regtech startup’s mission: Find real terrorists, avoid false alarms
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On the Trump administration’s opposition to legalizing marijuana:
“Interesting to see how the Justice Department and the Trump Administration is doing all it can to stop the cannabis industries-both medicinal and recreational. Banks are constantly being harassed by regulators and other agencies to stop banking this business entity. Yet the citizens of this country are being ravaged by prescription opiate addiction. Yet no one is going after the drug companies or forcing banks to stop providing financial services to these companies. Shameful.”
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On the need to rethink security measures before banks share data with fintech companies through application programming interfaces:
“I'm glad you wrote about APIs as requiring due diligence BEFORE they are implemented and that they require work to maintain/protect. I'm under the impression that people view access to data as a right and not a relationship (between two companies). No customer or transactional data should be handed over or forgotten about without thorough legal, technical and security consideration.”
Related article:Open banking is inevitable. Let’s rethink data security, too
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On Trump administration projections that the government will forgo $35.3 billion in tax revenue over the next decade due to the credit union income tax exemption:
"Large credit unions have consciously and proactively converted themselves into ‘tax exempt’ commercial banks. Since they are now commercial banks, it’s time to regulate them and tax them accordingly. I'm glad to see the budget projections telling the real story and showing the real cost. Small credit unions can thank their overly aggressive big credit union cousins for the extra scrutiny."
Related article:Trump budget gives small banks ammo against credit union tax exemption
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A retort to an argument that the Financial Choice Act would have tied regulators’ hands in punishing Wells Fargo over its phony accounts scandal:
“The question should really be where was the OCC's oversight (or lack thereof) during this time. Let's tone down the why are the ‘Republicans opposed to consumer protection’ rhetoric and focus on why the previous administration did not have even one year of 3% GDP growth. Perhaps too much regulation?”
Related article:Would Wells scandal have come to light with a defanged CFPB?
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