Committee Majority Hearts Junk Fees
The Republican-controlled House Financial Services Committee this week voted along party lines to revoke the Consumer Financial Protection Bureau’s credit card late fees rule through the Congressional Review Act. The new rule, finalized earlier this year, would reduce the cap on late fees on credit cards from $35 to $8, saving the 45 million households that pay late fees $10 billion a year. Days before the markup, over 90 public interest groups, including Americans for Financial Reform, rallied in defense of the agency’s regulation. Said AFR’s Amanda N. Jackson:
“This new protection benefits all credit card users and rolling it back would be nothing more than a gift to big Wall Street banks. The industry makes billions off junk fees like late charges, and for too many lawmakers corrupted by its money, that’s okay.”
Regarding that money, Accountable.US has the receipts: $700,000 from bankers to Rep. Andy Barr, the Republican spearheading the attempted rollback.
The late fee rule is the subject of a lawsuit driven by the U.S. Chamber of Commerce, in a case that has generated no small measure of judicial drama. This week, a judge received permission from the governing body of the U.S. judiciary to ignore his conflict of interest, namely his holdings in Citigroup, a bank that would lose out under the rule.
The attempt to roll back the late fee rule was part of a mark up of 13 bills and resolutions, many of which threaten rules on investor protection and climate financial risk. Ranking Member Maxine Waters called out her Republican colleagues for siding with the bank lobby to undermine protections that shield everyday Americans.
BANKING AND FINANCIAL STABILITY: Executive Compensation – Judge Shopping – Ransomware
CONSUMER: Banking Junk Fees – Student Loans – Buy Now, Pay Later – Data Brokers
CAPITAL MARKETS: Money and Crime
PRIVATE MARKETS: Paying Up for Payouts – Closing PE’s Loophole – Private Equity and Healthcare – Afraid of Antitrust – Private Equity and College Admissions – Norway Says No Way
CRYPTO: Stablecoins – Bitcoin ATMs
HOUSING: RealPage – Title Insurance
CLIMATE AND FINANCE: Anti-Greenwashing – Climate Change and Predatory Loans – Insurance Crisis
POLITICS AND MONEY: Schumer and Crypto
Feedback? Reach us at afrnews@ourfinancialsecurity.org
BANKING AND FINANCIAL STABILITY
Executive Compensation.
Bank regulators from six agencies (but not the Fed!) will soon propose a measure putting guardrails on executive pay at big banks in a renewed push to complete long-outstanding provisions in Dodd-Frank. When last proposed (but never finalized) in 2016, the rule required big banks to defer their executives’ compensation until a certain period has elapsed, and allowed clawbacks to occur if their actions hurt the institution.
Judge Shopping.
The U.S. Chamber of Commerce is a plaintiff in the lawsuit against the CFPB’s late fee rule, a case that has raised concerns about the bank and business lobby’s practice of judge and forum shopping. Now, analysis from Accountable.US finds that the Chamber, when it has sued the federal government, has chosen the right-wing Fifth Circuit 63% of the time since 2017.
Ransomware.
House Financial Chair McHenry and Rep. Brittany Pettersen introduced a bipartisan bill that intends to defend “critical financial infrastructure” from ransomware attacks, centering on financial market utilities, large securities exchanges and certain fintechs on which banks rely. The legislation would provide a roadmap on how to deal with an attack, attempt to deter successful ransoms, and offer clarity and confidentiality to impacted institutions.
CONSUMER
Banking Junk Fees.
Wall Street’s favorite argument against the CFPB curbing overdraft and credit card fees is that it will force them to raise prices in other areas. Research from the Institute for New Economic Thinking calls this idea the “Lump of Profit'' fallacy. The report points out that not only is the theory nonsense, it notes that banks are not entitled to a predetermined profit level.
Student Loans.
This week, the Biden administration overturned a 32-year-old policy that previously barred incarcerated student loan borrowers from consolidating their student loans, a practice that allows borrowers to combine several loans to more easily make payments. Though this move is a win for a vulnerable population, the Student Borrower Protection Center notes that barriers still remain for incarcerated borrowers, like the inability to call servicing companies, the high cost of communication, and Internet access blacklists preventing them from accessing servicer websites.
And: The administration has also opened a public comment period related to a parcel of student loan debt relief proposals targeting borrowers who are eligible for an income-driven repayment plan, are “crushed by runaway interest,” have been in repayment for over two decades, or who have attended “low-value” programs and schools.
Buy Now, Pay Later.
Bankrate finds that over half of surveyed users of Buy Now, Pay Later (BNPL) – like PayPal Pay in 4, Afterpay and Klarna – have experienced at least one issue while using BNPL services. The most common: overspending, difficulty getting a refund, and missing payments. BNPL offerings have grown in popularity, with 39% of adults saying they’ve used at least one.
Data Brokers.
CFPB Director Chopra announced during a speech at the White House that the agency is considering rules to redefine how data brokers comply with the Fair Credit Reporting Act by designating brokers who sell data as “consumer reporting agencies.” The new approach would also ban them from selling certain types of data, such as credit reports.
CAPITAL MARKETS
Money and Crime.
AFREF supports Financial Crimes Enforcement Network (FinCEN) proposals that would require certain financial advisors (including hedge funds and private equity), venture capital firms, and family offices to follow additional anti-money laundering and anti-financial terrorism requirements.
PRIVATE MARKETS
Paying Up for Payouts.
Investors are demanding more equity contributions from PE, as firms struggle to fundraise. Buyout firms are putting up an average of 5% equity (but ranging as high as 20%) in their acquisitions, up from 2% last year. To raise the cash required quickly, some executives have taken out high-interest loans collateralized by their own personal assets.
Closing PE’s Loophole.
Senate Banking Chair Brown introduced the Carried Interest Fairness Act, a bill that would generate an estimated $6.5bn in tax revenue a year by mandating PE and hedge funds pay their fair share. The legislation takes aim at carried interest income tax rate, which currently allows PE managers to pay only 23.8% capital gains tax instead of the 40.8% they’d normally have to pay for the same amount of wage income.
Private Equity and Health Care.
More research from the Private Equity Stakeholder Project found that private equity-owned and venture capital-backed healthcare entities made up a large portion of bankruptcies in the industry.
U.S. Acute Care Solutions is seeking to acquire several hospitals in the Baltimore area, a move that would have generally gone unnoticed but has garnered increased attention due to private equity’s recent shortcomings, namely the Steward crisis in Massachusetts. Doctors would only come forward with their concerns under anonymity due to fear of management retribution, who recall previous work experiences with USACS that forced them to spend less time with patients in the name of “metrics and efficiency.”
Afraid of Antitrust.
The Department of Justice is scrutinizing whether some private equity firms withheld information from antitrust investigators to prevent their deals from being blocked. While no specific firms were named, KKR previously disclosed that the DOJ was examining the accuracy of its merger notifications in 2021 and 2022, and that the firm had received a grand jury subpoena over the filings’ accuracy.
Private Equity and College Admissions.
The pandemic changed the college admissions process, with many schools forgoing the requirements for exams such as the SAT or ACT. The organizations behind these tests have struggled financially, and private equity is taking advantage of the situation. ACT Inc. had been a non-profit organization, but became for-profit after years of losses and was then acquired by Nexus Capital Management. The acquisition raises concerns about transparency in an industry over a million students rely on for admissions each year.
Norway Says No Way.
The world’s largest sovereign wealth fund, Norway’s $1.6trn Government Pension Fund Global, has opted not to invest in private equity, a step back from its recommended 5% allocation to PE last year.
CRYPTO
Stablecoins.
Sens. Lummis and Gillibrand have released a stablecoin bill that seeks to create a regulatory framework for fiat- or asset-backed crypto tokens, like Tether or USD Coin. In broad strokes, the Lummis-Gillibrand Payment Stablecoin Act allows banks and nonbank trusts to issue stablecoins through “dedicated subsidiaries,” sets capital and reserve requirements, allows state regulators to authorize and supervise stablecoin trust companies under $10bn dollars in issued coins, provide the Fed the power to police firms larger than $10bn, guide the FDIC to create a “regulatory regime” addressing the failure of stablecoin firms, and ban algorithmic stablecoins.
Bitcoin ATMs.
Bitcoin teller machines (BTMs): physical kiosks where users can convert their cash into cryptocurrency. Their numbers have grown five-fold over four years, and the devices have been popping up disproportionately in areas with majority Black and Latino residents, charging fees ranging as high as 22% per transaction, Bloomberg found. A payments specialist at the KC Fed likens them to a predatory payday lender, and some researchers call the BTM industry practitioners of “predatory inclusion.” The provider, Bitcoin Depot, offers local businesses monthly payouts to install and keep the BTMs.
HOUSING
RealPage.
RealPage, the property software company embroiled in a lawsuit alleging it enabled a cartel of landlords across the country to orchestrate an illegal rent-fixing scheme, has hired a group of lobbyists to promote “housing and algorithm” issues on the Hill, according to research by the Revolving Door Project.
Title Insurance.
Eighteen House Democrats pushed back against a Biden administration suggestion to reform title insurance – considered by the CFPB to potentially be junk fees – on federally backed mortgages.
CLIMATE and FINANCE
Anti-Greenwashing.
AFREF and allies call on the SEC to finalize a rule that would strengthen the disclosure requirements for ESG-focused investment funds. The agency’s proposed rule would direct environmentally minded funds to either disclose the carbon footprint and weighted average carbon intensity of their portfolios, or acknowledge that they don’t consider greenhouse gasses at all. The coalition urged the agency to require these funds to disclose between one and five methodology-backed metrics of their choosing, in line with investors’ desire for more information on greenhouse gas emissions.
Climate Change and Predatory Loans.
Payday lenders often fill the gaps in poorer, underbanked areas. Many communities have no access to enough of their money without these lenders. These lenders are taking advantage of climate change: For example, paying your AC bills during deadly heat waves may require access to money early. Lenders charge a fee, and 20% of a paycheck could be gone just on fees for a loan, leaving nothing left over.
Insurance Crisis.
Another example of the insurance crisis has emerged after a recent trip the North Carolina Insurance Commissioner made to meet with Outer Banks homeowners, where many along the Atlantic coast face rising sea levels and insurance companies who do not want to assume the risk posed by climate change.
POLITICS and MONEY
Schumer and Crypto.
The American Prospect lowlights Senate Majority Chuck Schumer for his frequent support of Wall Street in its congressional battles. The latest example, they write, is his attempt to help the crypto industry shirk regulations on stablecoins by attaching legislation to an unrelated bill. The publication cites AFR’s previous analysis, which found that an earlier iteration of similar legislation in the house was too light-touch on stablecoin regs.