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01/20/2017

Bureau Blog articles

The CFPB has posted two articles on its Blog: one announcing easy-to-remember guidelines to help people reduce credit card debt and the other on understanding the overdraft “opt-in” choice.

01/20/2017

Financial services company pays $500K for impeding whistleblowers

The SEC has announced that Seattle-based financial services company HomeStreet Inc. has agreed to pay a $500,000 penalty to settle charges that it conducted improper hedge accounting and later took steps to impede potential whistleblowers. In addition, HomeStreet’s treasurer, Darrell van Amen, agreed to pay a $20,000 penalty to settle charges that he caused the accounting violations.

01/20/2017

Western Union pays $586M for fraud and money laundering

The Federal Trade Commission has announced that the Western Union Company, a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Federal Trade Commission, the Justice Department, and the U.S. Attorneys’ Offices of the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania and the Southern District of Florida. In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering program and aiding and abetting wire fraud. The forfeited money will fund restitution payments to consumers who were harmed by the company's unlawful actions.

In a related action, FinCEN announced it has issued a consent assessment of a civil money penalty of $184 million against Western Union Financial Services, Inc. (WUFSI). WUFSI consented to FinCEN’s determination that prior to 2012, WUFSI willfully violated the Bank Secrecy Act’s anti-money laundering (AML) requirements by failing to implement and maintain an effective, risk-based AML program and by failing to file timely suspicious activity reports (SARs). FinCEN’s penalty is in conjunction with the actions by the U.S. Department of Justice (DOJ) and the U.S. Federal Trade Commission (FTC), and will be satisfied by Western Union's forfeiture to the U.S. Treasury.

For further details on this story, see "Western Union forfeits $586M for AML violations and consumer fraud," in our Penalties pages.

01/20/2017

Conversion to federal charter booklet revised

OCC Bulletin 2017-5 announces the issuance of a revision of the “Conversions to Federal Charter” booklet of the Comptroller’s Licensing Manual. The revised booklet replaces the “Conversions” booklet issued in April 2010.

01/20/2017

Board amends Regulations A and D

The Federal Reserve Board has published two final rules in the January 23, 2017, Federal Register.

  • Amendments to Regulation A (12 CFR Part 201), at 82 FR 7635, to reflect the Board's approval of an increase in the rate for primary credit at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Board's primary credit rate action.
  • Amendments to Regulation D (12 CFR Part 204), at 82 FR 7636, to revise the rate of interest paid on balances maintained to satisfy reserve balance requirements (“IORR”) and the rate of interest paid on excess balances (“IOER”) maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORR is 0.75 percent and IOER is 0.75 percent, a 0.25 percentage point increase from their prior levels.

These amendments take effect on January 23, 2017.

01/20/2017

CFPB sues TCF National Bank for overdraft opt-in practices

The Consumer Financial Protection Bureau has announced it brought suit against TCF National Bank, Sioux Falls, South Dakota (per FDIC records -- the CFPB press release lists the headquarters in Wayzata, Minnesota), for tricking consumers into costly overdraft services. The Bureau alleges that TCF designed its application process to obscure the fees and make overdraft service seem mandatory for new customers to open an account. The CFPB also believes that TCF adopted a loose definition of consent for existing customers in order to opt them into the service and pushed back on any customer who questioned the process. The lawsuit seeks redress for consumers, an injunction to prevent future violations, and a civil money penalty.

As described in the Bureau's complaint, TCF relied on overdraft fee revenue more than most other banks its size and recognized early on that the opt-in rule could negatively impact its business. In late 2009, Bank management estimated that approximately $182 million in annual revenue was “at risk” because of the opt-in rule. Through consumer testing, the bank determined that the less information it gave consumers about opting in, the more likely consumers would opt in.

The Bureau’s complaint alleges that TCF’s strategy also consisted of bonuses to branch staff who got consumers to sign on. For example, in 2010, branch managers at the larger branches could earn up to $7,000 in bonuses for getting a high number of opt-ins on new checking accounts. After the bank phased out the bonuses, certain regional managers instituted opt-in goals for branch employees. Staff had to achieve extremely high opt-in rates of 80 percent or higher for all new accounts. While the bank’s official policy was that an employee could not be terminated for low opt-in rates, many employees still believed they could lose their job if they did not meet their sales goals.

The Bureau alleges that the bank’s strategy worked and that by mid-2014, about 66 percent of the bank’s customers had opted in, a rate more than triple that of other banks. According to the Bureau’s complaint, the chief executive officer of the bank even named his boat the “Overdraft.” TCF’s senior executives were so pleased with the bank’s effectiveness at convincing consumers to opt in that they had parties to celebrate reaching milestones, such as getting 500,000 consumers to sign up.

The Bureau's complaint alleges that TCF violated the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. TCF National Bank reported total assets of $21 billion as of 9/30/16, with 360 retail branches across Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona, and South Dakota.

01/19/2017

Fed Board adjusts maximum CMPs

The Federal Reserve Board has announced that it has finalized a rule adjusting the Board's maximum civil money penalties, as required by law. In November 2015, a law was passed that requires all federal agencies to adjust their maximum civil money penalty limits annually for inflation, rather than every four years as previously required. The maximum civil money penalty limits depend on several factors, including the severity and type of violation. Additionally, the law dictates the annual adjustment formula for federal agencies. The new penalty amounts apply as of January 15, 2017.

01/19/2017

Industrial production and capacity utilization report

The Federal Reserve Board has released G.17 industrial production and capacity utilization data for December 2016. Industrial production rose 0.8 percent in December after falling 0.7 percent in November. For the fourth quarter as a whole, the index slipped at an annual rate of 0.6 percent. In December, manufacturing output moved up 0.2 percent and mining output was unchanged. The index for utilities jumped 6.6 percent, largely because of a return to more normal temperatures following unseasonably warm weather in November; the gain last month was the largest since December 1989. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average.

01/19/2017

November TIC data

The Department of the Treasury has released Treasury International Capital (TIC) data for November 2016. The sum total in November of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $23.7 billion. Of this, net foreign private inflows were $25.2 billion, and net foreign official outflows were $1.5 billion. Foreign residents increased their holdings of long-term U.S. securities in November; net purchases were $13.3 billion. Net purchases by private foreign investors were $12.2 billion, while net purchases by foreign official institutions were $1.1 billion. U.S. residents decreased their holdings of long-term foreign securities, with net sales of $17.5 billion.

01/19/2017

Bureau publishes Bulletin on production incentives

The CFPB published in the January 18 Federal Register its November 28, 2016, Compliance Bulletin 2016-03, "Detecting and Preventing Consumer Harm from Production Incentives." The bulletin compiles guidance that has previously been given by the CFPB in other contexts and highlights examples from the CFPB's supervisory and enforcement experience in which incentives contributed to substantial consumer harm. It also describes compliance management steps supervised entities should take to mitigate risks posed by incentives.

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UDAAP Reality Check

We will explore what makes a practice unfair or deceptive by digging into what regulators and the courts have had to say.

Stop That Payment!

Bankers must understand the differences between the use of their systems' stop payment functionality and the actual right to stop payment

Penalties View All

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