SDBA eNews: January 22, 2015

In This Issue

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Hensarling Added as Summit Keynote Speaker


House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has been added as a keynote speaker at the ABA Government Relations Summit, March 23-25 in Washington, D.C. Hensarling joins “Meet the Press” host Chuck Todd on the speaker roster for the largest gathering of banking industry leaders in the nation’s capital.

Bank employees and directors are invited to register for free. Directors are especially encouraged to attend, as their roles in their hometowns position them well to explain to lawmakers the value banks bring to local economies.

ABA also encourages bankers to bring younger bank employees with them to introduce them to advocacy early. This year’s Summit will include the second annual Emerging Leaders Forum and an orientation to make the most of a Capitol Hill visit. Register now.


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Questions/Comments

Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

Supreme Court Lets Interchange Decision Stand


The Supreme Court on Tuesday declined to hear a challenge by the retail industry to the Federal Reserve Board’s debit interchange fee cap rule. The court’s decision leaves in place a D.C. Circuit Court of Appeals ruling from March 2014 upholding the Fed’s rule. The appellate court had reversed a 2013 lower court decision that would have required even lower debit interchange fee caps than the Fed’s rule calls for.

“The Supreme Court has reached the right result, but we shouldn’t lose sight of the fact that the underlying policy -- the Durbin Amendment -- has not accomplished its goal of lowering prices for consumers,” ABA President and CEO Frank Keating said. “The Durbin Amendment has significantly harmed consumers and financial institutions. At the end of the day, American consumers have paid the price for the efforts of big-box retailers to line their pockets at their own customers’ expense.”

In the 2013 decision, a federal district judge said the Fed violated congressional intent in the Dodd-Frank Act by setting the interchange fee cap too high and failing to allow merchants to choose multiple unaffiliated PIN and signature networks for each card transaction they process.


Obama Touts 'Middle-Class Economics,' Defends Dodd-Frank


President Obama sounded an optimistic note on the economy during his State of the Union address Tuesday night, pitching Congress on middle-class-focused plans to improve access to community college and simplify the tax code. “We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together,” Obama said.

Touting the Dodd-Frank Act’s “new tools to stop taxpayer-funded bailouts,” as well as the growth of the Consumer Financial Protection Bureau, Obama threatened a veto should Congress pass any additional fixes to Dodd-Frank.

The president also emphasized the importance of protecting America’s critical infrastructure. “We are making sure our government integrates intelligence to combat cyber threats, just as we have done to combat terrorism,” he said. “I urge this Congress to finally pass the legislation we need to better meet the evolving threat of cyber-attacks, combat identity theft, and protect our children’s information.” Read the State of the Union address.


ABA Wins Fixes to TILA-RESPA Mortgage Disclosures


The Consumer Financial Protection Bureau on Tuesday finalized ABA-advocated changes to its TILA-RESPA integrated mortgage disclosure requirements, which take effect on Aug. 1, 2015. The first change would give creditors three business days to issue a revised version of the new Loan Estimate form after locking in a customer’s interest rate.

The rule originally included a same-day requirement, which ABA was concerned would be too restrictive. In its proposed rule, the bureau put forth a one-business-day timeframe. However, ABA noted that without additional time to issue the revised form, creditors might have locked in rates only before noon on any given day. ABA sought a full three business days.

Responding to specific concerns about the longer settlement times for construction loans, the second change would add language to the Loan Estimate informing construction borrowers that they might receive a revised Loan Estimate if their loan takes more than 60 days to settle. In finalizing the rule, after ABA’s urging, the bureau provided more specific direction on the disclosure.


OCC Supportive of Community Bank Collaboration, Notes Risks


The OCC last week issued a paper that is generally supportive of efforts by community banks to collaborate in ways that generate cost efficiencies or leverage specialized expertise. The agency noted several risks in collaboration, however, that bankers must keep in mind.

“The OCC supports community banks in exploring opportunities to achieve economies of scale,” the agency said. “Through collaboration, community banks can potentially achieve better outcomes of less costly services, greater range of services, and increased expertise.”

As examples, it cited banks sharing back-office functions such as data processing, internal audit, records management and procurement. Community banks have also shared functions such as human resources management. Compliance provides another opportunity for sharing resources due to increasing complexity of rules on mortgage lending and Bank Secrecy Act requirements.

The paper highlighted the authorities national banks and thrifts have to set up structures for collaboration and emphasized the importance of complying with antitrust laws in making any arrangements. “The OCC believes that when conducted with appropriate strategic planning, strong risk management, and effective oversight, collaboration can help community banks thrive,” the agency concluded. Read more.


ABA Pushes Back on CFPB Military Lending Study


ABA on Friday pushed back against the Consumer Financial Protection Bureau’s study of “high-cost credit” extended to service members and their families. In a letter to the Defense Department, which has proposed to expand limitations on credit under the Military Lending Act, ABA cautioned the Pentagon not to rely on the CFPB’s study.

The bureau’s study -- released days after the comment period on the DoD proposal had closed -- does not even meet the CFPB’s evidence-based standards for its own rulemaking, ABA said. For example, the bureau asserts that service members are more likely to use deposit advances but does not test this assertion against other variables at the CFPB’s disposal.

“Ultimately, it is service members of all ranks and their spouses and dependents who will suffer if a rule is promulgated on such a faulty basis as the points raised in the Bureau’s recent materials,” ABA concluded. “These families will lose access to valuable mainstream products that will help them manage their finances as effectively as do members of the general population.”


VISA Modifies Account Recovery Program


Visa last week announced several immediate changes to its Global Compromised Account Recovery program, which helps card issuers recover operating costs and fraud losses after a data breach. GCAR will now allow recovery for all Visa-branded magnetic stripe cards put at risk in a breach without regard to what network processed the transaction that put the card at risk.

Visa said that it will cover costs related to one card replacement every six months, versus the old rule of only one per year. However, Visa raised the threshold for a breach to be covered by GCAR from 15,000 to 30,000 eligible accounts and from $150,000 to $300,000 in total recoveries for all eligible issuers.

The company also announced that it is “researching operating expenses incurred by clients of various sizes to determine the actual costs to payments system participants. This information will be used to re-evaluate Visa’s current operating expense recovery.” ABA has worked for the past year with the card networks to provide such data and to make the case for greater reimbursements, particularly for lower-volume issuers. Read more. For more information, contact ABA’s Molly Wilkinson.