Consumer Financial Protection Bureau Director Richard Cordray will testify on Wednesday before the House Financial Services Committee for “The Semi-Annual Report of the Bureau of Consumer Financial Protection.” Click here for more details.
For more on the CFPB, do not miss the “What Is the CFPB, and Why Do I Care?” at ABI’s Annual Spring Meeting. Click here to register.
Dodd-Frank gave the Federal Deposit Insurance Corp. authority to take over and oversee the reorganization of so-called systemically important financial institutions whose failure could pose a risk to the economy. However, no one can be sure the FDIC will follow its resolution strategy, which leads many to believe Dodd-Frank will be bypassed in a crisis, according to a Wall Street Journal commentary on Friday. The solution is not to break up the banks or turn them into public utilities. Instead, the commentary says that a step further than Dodd-Frank should be taken: Make big-bank failures feasible without tanking the economy by writing a process to do so into the bankruptcy code through a new amendment — a “chapter 14.” Chapter 14 would impose losses on shareholders and creditors while preventing the collapse of one firm from spreading to others. It could be initiated by the lead regulatory agency and would begin with an over-the-weekend bankruptcy hearing before a pre-selected U.S. district judge. After the hearing, the court would convert the bank’s eligible long-term debt into equity, reorganizing the bankrupt bank’s balance sheet without restructuring its operations.
This is the first of two features concluding that Justice Scalia’s opinions were not inherently adverse to the interests of debtors and the bankruptcy system generally.
Republicans on the House Financial Services Committee voiced criticism at a hearing yesterday examining the Consumer Financial Protection Bureau’s upcoming rules governing payday lenders, MorningConsult.com reported. The vast majority of questions from both Republicans and Democrats at the well-attended hearing were directed at the sole CFPB official on the panel, Acting Deputy Director David Silberman. The CFPB’s proposed rule, which will be final soon, creates an “ability to repay” standard for people seeking unsecured, short-term cash. The rule would mandate that lenders “verify the consumer’s income, major financial obligations, and borrowing history to determine whether there is enough money left to repay the loan after covering other major financial obligations and living expenses.” Silberman defended the bureau’s rule-making process, saying that CFPB officials had done due diligence to ensure that all perspectives, including those of the payday lending industry and their customers, had informed their decision. The payday lending rules, which could be finalized in the next several weeks, will focus on preventing “abusive and predatory practices,” Silberman said.
The House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing today at 1 p.m. ET titled “Short-term, Small Dollar Lending: The CFPB’s Assault on Access to Credit and Trampling of State and Tribal Sovereignty.” Click here for the witness list and the committee memo on the hearing.
Two leading Senate Democrats yesterday introduced a bill that would strictly limit the use of arbitration, a process used to resolve legal disputes that is often stacked against consumers, the New York Times reported today. The bill, introduced by Senator Patrick J. Leahy (D-Vt.) and co-sponsored by Senator Al Franken (D-Minn.), would prevent civil rights cases, employment disputes and other crucial lawsuits from being forced into arbitration, where judges and juries have been replaced by arbitrators who commonly consider the companies their clients. “Legal fine print tips the scales against us,” Leahy said. “It is forcing consumers into private arbitration, denying us of our constitutional right to protect ourselves in court.” Regulators and lawmakers have been pushing to prevent companies, large and small, from inserting arbitration clauses in contracts.
