Banking Law Prof Blog

Final Guidance on Overdraft Protection Programs

FDIC has issued final guidance on Automated Overdraft Payment Programs.  The focus is on consumer protection. 

The Guidance "encourages banks to offer less costly alternatives if, for example, a borrower overdraws his or her account on more than six occasions where a fee is charged in a rolling 12-month period. Additionally, to avoid reputational and other risks, the FDIC expects institutions to institute appropriate daily limits on customer costs and ensure that transactions are not processed in a manner designed to maximize the costs to consumers, such as by processing checks from the largest to the smallest."

Bankers tell me that six overdrafts a year is a very low threshold for consumers who avail themselves of overdraft protection.  FDIC received more than 900 comment letters before finalizing this guidance.

Link to Guidance:  http://www.fdic.gov/news/news/press/2010/pr10257.html 

(ag) Nov. 30, 2010, in Consumer Protection

Comment Letters to Regulators Turn Out To Be Forged

Bloomberg reporters Silla Brush and Clea Benson note that forged comment letters highly critical of banks were sent to the Commodity Futures Trading Commission (CFTC), which is in the process of writing rules to govern derivatives trading pursuant to the Dodd-Frank regulatory reform legislation.

The letters purported to be signed by an executive of H.J. Heinz Co., a Burger King franchisee, a circuit court judge, a county sheriff and a mental health counselor.  The signatures were forged and the letters were unauthorized.

Link to story:  http://www.bloomberg.com/news/2010-11-30/forged-comment-letters-sent-to-u-s-regulators-writing-derivatives-rules.html

(ag) Nov. 30, 2010, in Financial Regulatory Reform

Explaining the Federal Reserve's Credit and Liquidity Programs

The Federal Reserve website contains an excellent section with basic explanations of the Fed's credit and liquidity programs and the Federal Reserve balance sheet.  Very helpful and easy to understand!

Link:  http://www.federalreserve.gov/monetarypolicy/bst.htm

(ag) Nov. 29, 2010, in Economy/Federal Reserve 

 

Back from India

We've arrived back in Texas after 10 days of polio inoculations in Agra, India, on behalf of the Texas Rotary Polio Team.  It was a great experience!

Consumer's Guide to Credit Reports

The Federal Reserve has published an informative "Consumer's Guide to Credit Reports and Credit Scores."  Good reference for banking law classes!

Link:  http://www.federalreserve.gov/creditreports/

(ag) Nov. 26, 2010, in Consumer Protection

Can a Credit Card Issuer Increase a Customer's Rate without a Change-in-Terms Notice?

The Supreme Court will hear oral argument in Chase v. McCoy in early December.  Although the terms of Regulation Z at issue in this case have changed, the case will have a substantial impact not only for the banking industry but also for administrative law in general. 

Chase and the credit card industry have a lot to lose financially in terms of similar lawsuits if the case goes against them.  The Supreme Court has an opportunity to address appropriate judicial deference to a federal agency's interpretation of its own regulations.  

Issue presented:  When a credit card issuer had provided a cardholder with initial disclosures that the interest rate on the card account could increase up to a stated maximum interest rate in the event of customer default, did the applicable version of Regulation Z require the issuer to provide the cardholder with a subsequent notice of a change in terms and a disclosure of the new rate? 

In the banking context, the Supreme Court’s decision in this case will inevitably be interpreted as demonstrating either a pro-consumer or pro-industry victory indicating the direction of future cases.

(ag) Nov. 22, 2010, in Supreme Court, Credit Cards, Consumer Protection

Delhi, Jaipur, and Agra

For the next week, I'm traveling in India to visit Rotary polio inoculation sites.  Rotary International and the Bill Gates Foundation have poured resources into eliminating polio worldwide and "we're this close."  Wild polio virus now exists only in India, Pakistan, Afghanistan, and Nigeria, with recent outbreaks in Congo and Tajikistan.  As long as polio exists anywhere, it could easily spread again.  Childhood inoculation is the means to drive this terrible disease from the face of the earth. 

All the Devils Are Here

Here's another informative book recommendation:  ALL THE DEVILS ARE HERE:  THE HIDDEN HISTORY OF THE FINANCIAL CRISIS by Bethany McLean and Joe Nocera. 

As one book reviewer suggests, a better title might be "All Here Are Devils," because "there is no one involved in the debacle—Wall St. moguls, Washington polls, government regulators, rating agencies, unscrupulous lenders, or unqualified borrowers—who is free from blame." -- Jack Goodstein:  http://www.seattlepi.com/books/430310_148539-blogcritics.org.html 

(ag) Nov. 20, 2010, in Economy

More Stress Testing - The Stick and the Carrot

The Federal Reserve is requiring a new round of stress testing for the nation's 19 largest banks.  Plans analyzing various scenarios must be filed by Jan. 7, 2011  (the day after Epiphany -- coincidence, I think not).  The bad news: Banks that don't pass the stress tests will have to raise more capital.  The carrot:  Banks that pass the tests can increase the dividend they pay to shareholders -- the people who really count. 

Link to today's story: http://news.yahoo.com/s/ap/us_fed_banks;_ylt=AnN8HUNpEFgrdT5BRM8MpzyReZd4;_ylu=X3oDMTJtMjc4OXFhBGFzc2V0Ay9zL2FwL3VzX2ZlZF9iYW5rcwRjY29kZQNjZWJuYmUEY3BvcwMyBHBvcwMyBHNlYwN5bl90b3Bfc3RvcmllcwRzbGsDZmVkb3JkZXJzbmV3

(ag) Nov. 17, 2011, in Economy 

Mortgage Irregularities Threaten the Mortgage Market According to Congressional Oversight Panel Report

AP Writer Marcy Gordon reports today on the Congressional Oversight Panel report:  

"The disarray stemming from flawed foreclosure documents could threaten major banks with billions of dollars in losses, deepen the disruption in the housing market and hurt the government's effort to keep people in their homes . . . .Revelations that several big mortgage issuers sped through thousands of home foreclosures without properly checking paperwork already has raised alarm in Washington. If the irregularities are widespread, the consequences could be severe, the Congressional Oversight Panel said in a report issued Tuesday. . . .Financial firms that service a total $6.4 trillion in mortgages are involved, according to the new report. Big banks including Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc.'s GMAC Mortgage have suspended foreclosures at some point because of flawed documents.Federal and state regulators, including the Federal Reserve and attorneys general in all 50 states, are investigating whether mortgage companies cut corners on their own procedures when they moved to foreclose on people's homes."

Link to story:  http://news.yahoo.com/s/ap/20101116/ap_on_bi_ge/us_foreclosure_mess_watchdog;_ylt=AkakmLAC45Zh3ImTGwCAjvXv5rEF;_ylu=X3oDMTJwNjBvM2t0BGFzc2V0A2FwLzIwMTAxMTE2L3VzX2ZvcmVjbG9zdXJlX21lc3Nfd2F0Y2hkb2cEcG9zAzUEc2VjA3luX21vc3RfcG9wdWxhcgRzbGsDcmVwb3J0Zm9yZWNs

(ag) Nov. 16, 2010, in Economy, Lending Issues

Quantitative Easing - Can't Live with It and Can't Live without It

For all the complaints about quantitative easing, Reuters posted a disturbing article today entitled "Stocks Edge Lower as Fed Concerns Offset M&A."

The article quotes John Canally, an investment strategist and economist at LPL Financial:  "There's been concern that the quantitative easing is going to be scaled back. There is certainly the skepticism and uncertainty over QE 2 out there."

Link:  http://news.yahoo.com/s/nm/20101115/bs_nm/us_markets_stocks

(ag) Nov. 15, 2010, in Economy

Tax Code Reform? Bitter Medicine for Everyone - But Necessary

Commentary about the Bowles-Simpson tax reform proposals is more rhetoric than analysis.  The best starting point to grasp this extensive report is the outline prepared by the Bipartisan Deficit Commission itself.  Check out the slides outlining the Co-Chair's Plan, released on Thursday.

Link to slides:  http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf 

(ag) Nov. 15, 2010, in Congress/General Banking 

When Good Computers Go Bad

One thing no one wants to hear:  "The motherboard is fried."  BUT, I think I've recovered all documents and I'm back, after purchasing a new computer.  Not a good couple of days!

Supreme Court Justices Speak

Texas Tech University School of Law proudly presents:

SANDRA DAY O’CONNER DISTIGUISHED LECTURE SERIES
Friday, November 12, 2010
5:00 p.m., Lubbock Memorial Civic Center

ANTONIN SCALIA, Associate Justice
The Supreme Court of the United States
and
STEPHEN BREYER, Associate Justice
The Supreme Court of the United States

Introduction by Arthur R. Miller
University Professor, NYU School of Law

Paper Jams Can Be Hazardous To Your Financial Health

From the American Banker's "Security Watch:"

Reporter Daniel Wolfe calls this a "Paper Caper"

"A California man is alleged to have come up with a novel way to steal cash from an automated teller machine: by causing a paper jam.

Many crooks set up skimming devices to read data from ATM cards as they are swiped, and others have stolen the entire machine to crack it open by force.

The San Francisco man is accused of stealing cash from ATMs by clogging their cash slots with napkins.

The suspect allegedly used napkins to block at least two ATMs from dispensing cash, The San Francisco Examiner reported Nov. 4 on its crime blog, and then unjammed the machine after frustrated customers failed to withdraw cash.

If the customer did not figure out that the cash dispenser was blocked, the cash would be left behind for the perpetrator to retrieve later, the Examiner reported."

(ag) Nov. 10, 2010, in Banking, Enforcement

 

KB Homes, White Collar Crime, and Sentencing Issues

Is white collar crime truly "victimless"?  OR do we all pay the price?  Just ask the people in Houston, TX, who lost pension funds and jobs, and those who depended on Enron for support in the local economy, or taxpayers who essentially bailed out Wall Street executives.

Is there a two-tiered justice system?  One for those convicted for "gun-and-drug" related crime and another for "respected" corporate executives?

KB Homes' Bruce Karatz was convicted in a stock back-dating scheme and will be sentenced today.  One possibility for him is "house arrest" in his 24-room mansion.

My reaction:  ????

Link to story:  http://marketplace.publicradio.org/display/web/2010/11/10/am-kb-homes-scandal-sheds-light-on-sentencing-standards-/

(ag) Nov. 10, in Enforcement

White Collar Crime Doesn't Pay (or does it?)

Check out GlaxoSmithKline's payment of $750 Million to settle civil and criminal claims arising out of a pharmaceutical manufacturing plant in Puerto Rico that produced contaminated drugs.  To cover up the problem, company representatives systematically lied to the FDA.  In this case, as in so many others, a corporate decision not to comply with legal requirements is simply a cost-of-doing-business decision.

Here's a video clip about the Glaxo settlement:  http://legalbroadcastnetwork.com/the-lbn-blog/2010/10/27/glaxo-agrees-to-750-million-fine-for-sale-of-bad-products-ny.html

(ag) Nov. 9, 2010, in Enforcement

U.S. Supreme Court Hears Mandatory Arbitration Case

The U.S. Supreme Court will hear oral argument today in AT&T MOBILITY LLC V. CONCEPCION.
DECISION BELOW: 584 F.3d 849
QUESTION PRESENTED:
Whether the Federal Arbitration Act preempts States from conditioning the enforcement
of an arbitration agreement on the availability of class-wide arbitration.

(ag) Nov. 9, 2010, in Consumer Protection

25 Most Powerful Women in Banking

Just ran across this Wall Street Journal list of the "25 Most Powerful Women in Banking for 2010."  Quite interesting!

LInk:  http://blogs.wsj.com/deals/2010/09/27/the-25-most-powerful-women-in-banking-2/

(ag) Nov. 8, 2010

WHAT? The Dodd-Frank Bill says That?

We know that the 2,300+ page Dodd-Frank Bill contains some surprise provisions.  The one highlighted in this link is NOT in the bill -- but it very well could have been!

Link to The Onion's satirical comment and photo ("Banking Reform Measure Prevents Chick-Fil-A from Calling Itself a Bank":  http://www.theonion.com/articles/banking-reform-measure-prevents-chickfila-from-cal,18393/

(ag) Nov. 8, 2010