Top of the Agenda
Industry, Consumer Groups Discuss the Future of the Community Reinvestment Act
On October 29, the Penn Institute for Urban Research and Wharton Public Policy Initiative hosted a symposium for policymakers to assess “The Future of the Community Reinvestment Act” (CRA). The symposium addressed CRA reform with two-panel discussions – one on the data and empirical analysis informing CRA changes and the other on policy implications and alternatives. BPI economist Paul Calem and SVP and Associate General Counsel Dafina Stewart participated in the event, along with representatives from the Urban Institute, FDIC, National Community Reinvestment Coalition, National Association of Affordable Housing Lenders, New York University and Boston College.
Calem presented research showing that large banks have kept pace with non-banks and community banks in lending to low- and moderate-income neighborhoods, despite shifts in Federal Housing Administration and GSE backed loans to nonbanks. The data also suggest that the share of loans going to low- and moderate-income borrowers has been stable — they are not being crowded out by gentrification. Stewart discussed the changes the banking industry would like to see in a revised regulatory framework for the CRA. These changes include making the CRA regime more transparent and objective, improving the performance evaluation process, and revisiting how assessment areas are determined and evaluated. BPI has previously submitted a comment letter with principles for modernizing CRA.
5 Stories Driving the Week
1. Debate over ILC Loophole Intensifies
The industrial loan company (ILC) debate is once again heating up as some in the technology industry are seeking to take advantage of a regulatory loophole that may lead to the mixing of banking and commerce. Following a congressionally imposed moratorium on ILC charters that ended in 2013 and a general period of limited de novo applications, commercial entities are once again submitting ILC applications, including Japanese e-commerce company Rakuten, Inc. BPI and the American Bankers Association filed a comment letter on the application and noted substantial concerns with mixing banking and non-financial businesses, including the protection of consumer data privacy. “Some tech companies and other nonbanks are looking to exploit the ILC loophole that allows them to evade important regulatory protections for consumers as well as the financial system,” Greg Baer, BPI President and CEO, said in a statement. “It is imperative that policymakers maintain the longstanding separation of banking and commerce as well as ensure consistent regulatory treatment.” This week, Politico reported on technology companies’ recent efforts to move into financial services.
2. Agencies Approve Proposal to Eliminate Initial Margin Requirement for Inter-Affiliate Non-Cleared Swaps
In Case You Missed It
15 Community Banks Join the Clearing House’s Real-Time Payments Network
The Clearing House announced on October 29 that 15 small institutions have joined its RTP network. The Federal Reserve announced plans to build a competing system, which is scheduled to debut in 2024. American Banker reported that the small banks were joining the RTP network to assist workers in receiving their pay and payments faster and for its flat fee structure. Also on October 31, Mike Lee, Senior Vice President of Government Affairs for BPI, participated in a panel discussion hosted by the American Action Forum on “The Federal Reserve and Real-Time Payments.”
Financial Industry Leads the Way on Diversity and Inclusion
Banks and insurance companies are leading the way on overall workplace diversity, according to a ranking by The Wall Street Journal’s research analysts. The Wall Street Journal studied the diversity and inclusiveness in the S&P 500 based on 10 metrics. “The financial sector earned high marks versus other industries in categories such as age diversity among senior management, ethnic diversity in the workforce, and number of diversity and inclusion programs in place,” the Journal reported.
America’s Middle Class Is Getting Hooked On Debt With 100% Rates
On October 29, Bloomberg reported on the increase in online installment loans. In just a span of five years, online installment loans have gone from being a relatively niche offering to a red-hot industry. “Non-prime borrowers now collectively owe about $50 billion on installment products, according to credit reporting firm TransUnion. In the process, they’re helping transform the way that a large swathe of the country accesses debt,” according to Bloomberg.
HUD, DOJ Reach Agreement on False Claims Act prosecutions
The Department of Housing and Urban Development and the Justice Department signed a memorandum of understanding on setting guidance on how to evaluate False Claims Act cases. Politico reported on the guidance and noted that “both banks and consumer advocates have pressed the Trump administration for clear guidance from the two departments on how violations of the law would be handled going forward.” Many banks have exited Federal Housing Administration lending programs following a series of enforcement actions.
- 11/05/2019 — Hudson Institute Hosts “Securing America’s Financial Borders” Event with BPI’s Angelena Bradfield as Panelist
- 11/06/2019 — CFPB Hosts Section 1071, Small Business Lending, Symposium
- 11/14/2019 — Fed’s Clarida Delivers Keynote Remarks at Cato Monetary Policy Conference
- 11/14/2019 — AEI Event Titled “Can the Federal Reserve manage the next economic crisis?”
- 11/19/2019 — The Clearing House + BPI 2019 Annual Conference: The Clearing House and BPI will host the 2019 Annual Conference from November 19 to 21. The event provides a forum for the industry’s leaders to examine the changing dynamics of the bank regulatory and payments landscapes with two and half days of high-level keynote speakers, in-depth expert panels, and networking. Registration ends today.
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