A Case for Free-Market Bank Regulation

By Anthony W. Hager

 

Bank of America (BAC) has rescinded its plan to charge customers a $5 monthly debit-card fee. Shall we praise bank regulators for their swift action in preventing the exorbitant charge? Well, no. Then we'll credit politicians for legislating against greedy, big-bank profiteering, right? Wrong again. The free market drove BAC to drop the debit-card fee.

 

Several banks have floated similar debit-card fees — some already assess the monthly charge — and each met the same fate as BAC. Customers informed their financial institutions that they would rather pull their assets than pay the fee. Banks responded in predictable fashion. Banks need customers in order to remain solvent; therefore they heed their customers' complaints and outrage, whether or not they are reasonable. That's the free market in action. Unpopular fees and programs are abandoned just as surely as profits are taken. Everything depends on what the market will bear.

 

The $5 debit-card charge was never a product of free-market capitalism. It was the result of political machinations, most notably on the part of Senator Dick Durbin. Durbin's amendment to the Dodd-Frank bank reform legislation placed an arbitrary cap on debit-card interchange fees, which banks impose on retailers for each swipe of a customer's card.

 

Banks collect this fee to maintain their electronic networks, retailers distribute the fee among their customers, and customers enjoy the convenience of cashless transactions… (Read more)

 

Source: Mises.org

Federal Reserve Board proposes phase-in period for most savings and loan holding companies to file regulatory reports

The Federal Reserve Board is proposing a two-year phase-in period for most savings and loan holding companies (SLHCs) to file Federal Reserve regulatory reports with the Board and an exemption for some SLHCs from initially filing Federal Reserve regulatory reports.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, supervisory and rulemaking authority for SLHCs and their nondepository subsidiaries transferred from the Office of Thrift Supervision (OTS) to the Board on July 21, 2011. On February 3, 2011, the Federal Reserve Board sought comment on its notice of intent to require SLHCs to submit the same reports as bank holding companies, beginning with the March 31, 2012, reporting period.

After consideration of the comments received on the notice of intent, the Federal Reserve Board proposes to exempt a limited number of SLHCs from initial regulatory reporting using the Federal Reserve's existing regulatory reports and a two-year phase-in period for regulatory reporting for all other SLHCs. Exempt SLHCs would continue to submit Schedule HC, which is currently a part of the Thrift Financial Report, and the OTS H-(b)11 Annual/Current Report.

The Federal Reserve Board will accept comments on the proposal through November 1, 2011.

For media inquiries, call 202-452-2977.

Funds Availability and Payment of Interest

The purpose of this letter is to provide information about two provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd Frank Act) that became effective on July 21, 2011. The Dodd-Frank Act revised funds availability requirements and removed restrictions on the payment of interest on demand deposit accounts. Details related to each provision are discussed below.

Funds Availability:

Section 1086 of the Dodd-Frank Act amended the Expedited Funds Availability Act to require depository institutions to make the first $200 of funds deposited into an account by certain checks available for withdrawal on the business day after the banking day the deposit is received. Previously, depository institutions were required to make the first $100 available on the business day after such a deposit.

The Federal Reserve Board (Board) recently proposed revisions to Regulation CC, including the changes described above. See 76 Fed. Reg. 16862 (Mar. 25, 2011). While Regulation CC has not yet been finalized, supervised institutions will nevertheless be expected to comply with applicable statutory requirements.

Payment of Interest on Demand Deposit Accounts:

Section 627 of the Dodd-Frank Act repealed Section 19(i) of the Federal Reserve Act (12 USC 371a) and eliminated the statutory authority under which the Board had established Regulation Q. Regulation Q, which prohibited member banks from paying interest on demand deposit accounts, has been repealed. See 76 Fed. Reg. 42015 (July 18, 2011). Member banks are now able, but are not required, to pay interest on demand deposit accounts. If a member bank decides to pay interest on some or all of its demand deposit accounts after July 21, 2011, it will need to notify affected customers that the account is no longer eligible for full (unlimited) deposit insurance coverage as a noninterest-bearing transaction account.

Please distribute this letter to supervised institutions in your district. If you have any questions, please contact Brian Fink, Supervisory Consumer Financial Services Analyst, (202) 912-7878, or Paul Robin, Manager, Oversight and Policy, at (202) 452-3140.

Sincerely,

Sandra F. Braunstein

Director

Division of Consumer and Community Affairs

Click here to see the attached proposal (10 MB PDF)

Board issues interim final rule establishing regulations for savings and loan holding companies

The Federal Reserve Board on Friday issued an interim final rule establishing regulations for savings and loan holding companies (SLHCs). The rule will take effect once itispublished in the Federal Register, which is expected soon.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, supervisory and rulemaking authority for SLHCs and their nondepository subsidiaries transferred from theOffice of Thrift Supervision (OTS) to the Board on July 21, 2011. Last month, the Board sought comment on a notice identifying regulations previously issued by the OTS that the Federal Reserve will continue to enforce. The interim final rule issued Friday implements thetransfer of those regulations from the OTS to the Board.

The Board on Friday also issued an Order delegating to staff and to the Reserve Banks the authority to take certain actions with respect to SLHCs.

The Board will accept comments on the interim final rule through October 27, 2011.

For media inquiries, call 202-452-2955.

U.S. Domestic and International Financial Reform Policy: Are G20 Commitments and the Dodd-Frank Act in Sync?

By Daniel E. Nolle

Abstract:  The Dodd-Frank Act of 2010 is the keystone policy response directed at reforming U.S. financial system activities and oversight in the wake of the 2007-2009 financial crisis. The United States also has financial system reform policy commitments in the international arena, including in particular by virtue of its membership in the G20. This analysis considers U.S. policy initiatives related to a core dimension of financial system reform: risks posed by systemically important financial institutions ("SIFIs"). It provides a comparison of SIFI policy initiatives and timetables under both the Dodd-Frank Act and the G20 agenda, as reflected in the ongoing work plan of the Financial Stability Board (FSB), and poses the question "Are U.S. domestic and international financial system reform commitments in sync?" While finding that, fundamentally, the answer is "yes," the detailed comparison yields two caveats with potential policy implications.

First, the two agendas differ in their relative emphasis on the coverage of both banks and nonbanks. The G20/FSB focus, at least over the near-term, is bank-centric compared with the Dodd-Frank Act, which consistently addresses both bank and nonbank financial firms. Second, implementation of Dodd-Frank Act provisions is subject to long-established U.S. law mandating that there be sufficient opportunity for public input into the rulemaking process, whereas the G20/FSB process has been less systematic and transparent on public consultation and feedback. The lesser emphasis on transparency and public input characterizing the G20/FSB policy development process may be attributable in part to the somewhat more rapid pace of the G20/FSB agenda relative to corresponding Dodd-Frank Act timelines. These observations may be relevant to the current debate over the speed and scope of Dodd-Frank Act implementation measures, and to the discussion about the future international competitiveness of U.S. banks and nonbank financial firms.  (Read the full paper)

Consumer Financial Protection Bureau Ready to Help Consumers on Day One

Consumer Agency Hits the Ground Running

WASHINGTON – The Consumer Financial Protection Bureau (CFPB) hit the ground running this week, launching functions and issuing a variety of required rules and reports that represent important steps in making the CFPB operational and effective from the start.

“Two years ago, the consumer agency was just barely an idea. A year ago it became law. And this week, the CFPB will open its doors and begin to make a difference in the marketplace,” said Elizabeth Warren, Special Advisor to the Secretary of the Treasury on the CFPB. “This agency is ready to be a cop on the beat for American families – and I couldn’t be prouder.” 

Today, the CFPB is sending introductory letters to the CEOs of the depository institutions – generally large banks and their bank affiliates – that are subject to CFPB supervision. These letters, which outline the agency’s approach to supervision and examination, mark the beginning of the CFPB’s regular communications with the institutions it supervises. In addition, the CFPB’s Enforcement team is ready to begin enforcing federal consumer financial laws, when necessary.  The CFPB’s Consumer Response Center began accepting credit card complaints today on its newly redesigned website, ConsumerFinance.gov, and through a toll-free number. It will also refer distressed homeowners to housing counselors via the Homeowner’s HOPE Hotline. Over the coming months, the agency will expand its Consumer Response Center to handle complaints about other consumer financial products and services under its jurisdiction.

To enable the CFPB to perform its functions under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the agency will publish the following:

•A final list of the regulations of the transferor agencies that will be enforceable by the CFPB, as required by Section 1063(i) of the Dodd-Frank Act.

•A series of interim rules to create records and information procedures. These include rules to implement the Privacy Act and the Freedom of Information Act, and to establish a process by which parties may seek testimony or records from the CFPB for use in litigation. Also included are confidentiality rules, required by the Dodd-Frank Act, describing how the CFPB will treat information it obtains.

•An interim rule, implementing Section 1052 of the Dodd-Frank Act, concerning the CFPB’s conduct of investigations of potential violations of any provision of federal consumer financial law. The rule includes procedures for issuing civil investigative demands for information and responding to such demands. This rule is based on similar rules issued by the prudential regulators, the Federal Trade Commission, and the Securities and Exchange Commission. The Bureau also intends to establish and make public procedures that will typically allow companies and individuals against whom it intends to bring charges to comment on those proposed charges before they are filed.

•An interim rule providing for a fair and expeditious process for the resolution of administrative enforcement actions, as required by Section 1053(e) of the Dodd-Frank Act. The rule sets forth procedures for the CFPB to conduct administrative enforcement proceedings. These procedures govern the filing of administrative charges, pre-hearing procedures, the conduct of hearings, the entry and appeal of recommended decisions, and final decisions and orders of the CFPB. This rule is based on similar rules of practice issued by the prudential regulators, the Federal Trade Commission, and the Securities and Exchange Commission.

•An interim rule specifying procedures for state officials – such as attorneys general – to notify the CFPB of actions or proceedings they undertake to enforce Title X of the Dodd-Frank Act, as required by Section 1042(c) of the Act. This rule will help to ensure that the CFPB is aware of actions being initiated under Title X and that the law is being enforced in a consistent and efficient manner.

In addition, the following reports were required by Congress and issued by the CFPB this week:

•A report examining the differences between credit scores sold to consumers and scores used by lenders to make credit decisions. The report covers the process of developing credit scoring models, why different scoring models may produce different scores for the same consumer, how different scoring models are used by creditors in the marketplace, what credit scores are available to consumers for purchase, and ways that differences between the scores provided to creditors and those provided to consumers may disadvantage consumers. The report is required by Section 1078(b) of the Dodd-Frank Act.

•A report that recommends principles for maximizing transparency and disclosure of exchange rate information for consumers making remittance transfers, and examines the incentives and challenges related to using remittance data in credit scores. The report is required by Section 1073(e) of the Dodd-Frank Act.

•A report on three plans pertaining to the CFPB staff: (1) a training and workforce development plan, including an identification of skill and technical expertise needs, a description of the steps taken to foster innovation and creativity, and a leadership development and succession plan; (2) a workplace flexibilities plan covering items such as telework, flexible work schedules, and parental leave benefits; and (3) a recruitment and retention plan that includes provisions on targeting highly qualified applicant pools with diverse backgrounds, streamlined employment application processes, and the collection of information to measure indicators of hiring effectiveness. The report is required by Section 1067(b) of the Dodd-Frank Act.

The rules and notices will be published in the Federal Register, and all of the documents – including the CFPB reports – will be available online at consumerfinance.gov.

Consumer Financial Protection Bureau Releases Report on Issues Facing Users of International Money Transfers

Report Recommends Principles for Informing Consumers About Exchange Rates; Examines Potential Use of Remittance Data in Credit Scores

WASHINGTON – A report released today by the Consumer Financial Protection Bureau (CFPB) recommends principles for maximizing consumers’ ability to receive and use exchange rate information when making remittance transfers, and examines the incentives and challenges related to using remittance data in credit scores.

Each year, consumers in the United States send tens of billions of dollars to family members, friends, businesses, and others abroad through remittance transfers – electronic transfers from U.S. senders to recipients in foreign countries. This report, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), analyzes two subjects related to remittance transfers: the transparency and disclosure to consumers of exchange rates used in remittance transfers, and the potential for using remittance histories to enhance the credit scores of consumers.

“International money transfers can be a vital link to family members and friends abroad,” said Elizabeth Warren, Special Advisor to the Secretary of the Treasury on the CFPB. “Information about exchange rates has the potential to help remittance senders make smarter choices about which services best meet their needs. And if remittance histories can improve the predictiveness of credit scores, then supplementing credit files with remittance data may give some consumers new opportunities to establish a credit history.”

Remittance Transfers and Exchange Rates

The Dodd-Frank Act will require remittance transfer providers to disclose, in most circumstances, the exchange rates they use and other information at the time that consumers request remittance transfers and when they pay for those transactions. The Board of Governors of the Federal Reserve System has proposed rules to implement those and other new requirements related to remittance transfers. The CFPB will assume responsibility for issuing final disclosure rules and will review comments received by the Board following the close of the comment period on July 22.

The CFPB’s report  recommends that, with respect to exchange rates, policymakers and other stakeholders observe four principles for enhancing consumers’ ability to receive and use exchange rate information:  (1) design, test, and use disclosures to maximize consumer comprehension; (2) facilitate consumers’ comparisons of remittance offerings; (3) adapt disclosures to the growing variety of channels that consumers use to initiate remittance transfers; and (4) couple information about exchange rates with an indication or estimate of the combined effects of fees and the exchange rate.

The report finds that implementation of some of the Dodd-Frank Act’s new requirements related to remittance transfers – including mandatory disclosures of the exchange rate used – could shed light on any need for additional exchange rate transparency measures. The CFPB also recommends that any additional transparency measures be evaluated and considered together with the range of mechanisms for increasing the competitiveness of the remittance transfer market, or promoting other consumer protection goals.

Remittance Transfers and Credit Scores

Credit files do not routinely include remittance data. If remittance histories can help assess or predict the credit risk that consumers pose to lenders, adding such data to credit files could produce a change in the credit scores of some remittance senders.

If remittance histories are predictive of credit risk, the addition of remittance data might also allow credit scores to be generated for some consumers who are otherwise unscorable.

To use remittance histories in credit scores, market participants would need to adjust their business systems and processes to adapt to and make use of the new data. If remittance histories are predictive, then any remittance-based credit scores that were developed might have particularly positive implications for some consumers born outside of the United States. These consumers send a large proportion of remittance transfers. Earlier research suggests that certain foreign-born individuals may be disproportionately likely to have credit histories that are insufficient to generate credit scores. In other cases, existing credit data may overestimate the credit risk such individuals pose to lenders. But the actual impact of any remittance-based credit score would depend on the business model, the scoring model, the data used, and the individual. In some cases, credit scores might increase; in other cases, they might remain the same or decrease.

The report discusses the potential for remittance histories to inform credit scores, and describes planned CFPB research regarding the relationship between remittance histories and credit scores. A critical question for this research will be the extent to which remittance histories can be used to predict the credit performance of those without a credit score or to improve credit scores’ predictiveness with respect to other consumers.

Consumer Financial Protection Bureau Report Examines Differences Between Credit Scores Consumers and Lenders Receive

Consumers May Be Unaware of Variety of Credit Scores Available

WASHINGTON – The Consumer Financial Protection Bureau (CFPB) released a report today examining the differences between credit scores sold to consumers and scores used by lenders to make credit decisions.

“The consumer bureau’s mission is to bring transparency to the consumer financial markets so families can compare products and choose the ones that are right for them,” said Elizabeth Warren, Special Advisor to the Secretary of the Treasury on the CFPB. “One way consumers have tried to empower themselves is by knowing their credit scores. We are assessing whether purchasing a credit score provides a consumer with the information he or she needs. ”

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) required the CFPB to study the differences between credit scores consumers purchase and those creditors use to make credit decisions. The CFPB’s report covers the process of developing credit scoring models, why different scoring models may produce different scores for the same consumer, how different scoring models are used by creditors in the marketplace, what credit scores are available to consumers for purchase, and ways that differences between the scores provided to creditors and those provided to consumers may disadvantage consumers.

Consumer reporting agencies (CRAs) compile and maintain files on consumers that are used to produce credit reports. Credit scores are numerical summaries of the comparative credit risks of default; they are calculated based on information contained in credit files and credit reports. These scores are important because they are used to make credit-granting decisions, to identify prospects for credit offers and solicitations, to make decisions about raising or lowering credit limits on credit cards, and to set terms for mortgages or other loans, among other uses.

While most credit scores are purchased by lenders and other users to assess consumers’ credit risk, consumers can also purchase credit scores when they obtain their free annual credit reports, when they request copies of their credit reports directly from CRAs, or when they enroll in “credit monitoring” services that offer credit reports and scores for a monthly subscription fee. The credit scores available for purchase by consumers may vary from the score used by a lender for a variety of reasons, including:

•Use of different scoring models;

•Lenders and consumers may not use the same CRA;

•Data in the consumer’s credit reports change between the time the consumer purchases a score and the time the lender obtains the score;•A consumer and a lender  could possibly access different reports from the CRA, if they were to use different identifying information about the consumer;The report discusses the general lack of information about credit scoring. One survey shows that many consumers do not know that a credit score represents the risk of not repaying a loan. Furthermore, many consumers do not know that credit scores they buy may not use the same credit scoring models that are most widely used by lenders.

Consumers who are unaware of the variety of credit scores available in the marketplace may purchase a score believing it to be their “true” score. The most significant adverse impact on a consumer from score differences would likely occur if the credit scores the consumer buys give a substantially different impression of his or her credit risk than credit scores that a lender would use.

As a follow-up to the report, the CFPB is obtaining data from each of the three nationwide CRAs, and credit scores from the CRAs and Fair Isaac Corporation widely used by lenders and consumers to compare the variations between the credit scores sold to lenders and those sold to consumers. To help educate consumers, the CFPB also plans to post advice on its website about how to obtain and maintain a good credit score.

Federal Reserve and FTC issue final rules to implement the credit score disclosure requirements of the Dodd-Frank Act

The Federal Reserve Board (Board) and the Federal Trade Commission (FTC) on Wednesday issued final rules to implement the credit score disclosure requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. If a credit score is used in setting material terms of credit or in taking adverse action, the statute requires creditors to disclose credit scores and related information to consumers in notices under the Fair Credit Reporting Act (FCRA).

The final rules amend Regulation V (Fair Credit Reporting) to revise the content requirements for risk-based pricing notices, and to add related model forms that reflect the new credit score disclosure requirements. The Board is issuing these final rules jointly with the FTC.

The final rules also amend certain model notices in Regulation B (Equal Credit Opportunity), which combine the adverse action notice requirements for Regulation B and the FCRA, to reflect the new credit score disclosure requirements

The rules under Regulations V and B are effective 30 days after the date of publication in the Federal Register, which is expected soon.

For media inquiries, call 202-452-2955.

Fed issues rule on standards for debit card interchange fees

The Federal Reserve Board on Wednesday issued a final rule establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. This rule, Regulation II (Debit Card Interchange Fees and Routing), is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Debit card interchange fees are established by payment card networks and ultimately paid by merchants to debit card issuers for each electronic debit transaction. As required by the statute, the final rule establishes standards for assessing whether debit card interchange fees received by debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction will be the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. This provision regarding debit card interchange fees is effective on October 1, 2011.

The Board also approved on Wednesday an interim final rule that allows for an upward adjustment of no more than 1 cent to an issuer's debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the interim final rule. If an issuer meets these standards and wishes to receive the adjustment, it must certify its eligibility to receive the adjustment to the payment card networks in which it participates. Comments on the interim final rule are due by September 30, 2011. The fraud-prevention adjustment is effective on October 1, 2011, concurrent with the debit card interchange fee limits. The Board will re-evaluate this adjustment in light of feedback received during this comment period.

When combined with the maximum permissible interchange fee under the interchange fee standards, a covered issuer eligible for the fraud-prevention adjustment could receive an interchange fee of up to approximately 24 cents for the average debit card transaction, which is valued at $38.

In accordance with the statute, issuers that, together with their affiliates, have assets of less than $10 billion are exempt from the debit card interchange fee standards. To assist payment card networks in determining which of the issuers are subject to the debit card interchange fee standards, the Board plans to publish by mid-July and annually thereafter lists of institutions that are above and below the small issuer exemption asset threshold. Also, the Board plans to annually survey the networks and publish a list of the average interchange transaction fees each network provides to its covered and exempt issuers. This information should enable issuers, including small issuers, to more readily compare the interchange revenue they would receive from each network.

The final rule prohibits all issuers and networks from restricting the number of networks over which electronic debit transactions may be processed to less than two unaffiliated networks. The effective date for the network exclusivity prohibition is April 1, 2012, with respect to issuers, and October 1, 2011, with respect to payment card networks. Issuers of certain health-related and other benefit cards and general-use prepaid cards have a delayed effective date of April 1, 2013, or later in certain circumstances.

Issuers and networks are also prohibited from inhibiting a merchant's ability to direct the routing of the electronic debit transaction over any network that the issuer has enabled to process them. The merchant routing provisions are effective on October 1, 2011.

Image courtesy of Wikimedia commons

Consumer Financial Protection Bureau Seeks Public Input On Key Element Of Nonbank Supervision Program

Notice and Request for Comment on Statutory Requirement to Define ‘Larger Participant’ in Certain Consumer Financial Markets

WASHINGTON – The Consumer Financial Protection Bureau (CFPB) today announced the release of a Notice and Request for Comment seeking public input on a key element of the agency’s nonbank supervision program: the statutory requirement to define who is a “larger participant” in certain consumer financial markets.

Last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) charged the CFPB with ensuring that both banks and nonbanks comply with federal consumer financial laws. Historically, banks, thrifts, and credit unions have been subject to examinations by federal regulators, but other types of companies providing consumer financial services generally have not. Today, there are thousands of such companies that are not banks, and these nonbanks’ products form a significant portion of the consumer financial marketplace.

“Consumers deserve the peace of mind that financial companies -- both banks and nonbanks -- are following the rules,” said Elizabeth Warren, Special Advisor to the Secretary of the Treasury on the CFPB. “The CFPB will be able to examine companies that have never been subject to federal oversight to ensure that no one is gaining an unfair advantage by breaking the law.  This will ultimately create fair competition, better product offerings, and more transparent markets for consumers.”

The Dodd-Frank Act authorizes the CFPB to examine all sizes of nonbank mortgage companies, payday lenders, and private education lenders. Generally, before CFPB begins its nonbank supervision program in other markets, the Act requires that the agency first define by rule who is “a larger participant of a market for other consumer financial products or services.” The CFPB must issue an initial “larger participant” rule no later than July 21, 2012 -- one year after the designated transfer date.

To prepare for this eventual rulemaking, the CFPB is seeking public input through a Notice and Request for Comment, which identifies six markets for potential inclusion in an initial rule: debt collection; consumer reporting; consumer credit and related activities; money transmitting, check cashing, and related activities; prepaid cards; and debt relief services. The larger participant rule will not impose substantive consumer protection requirements.  Instead, the rule will enable CFPB to begin a supervision program for larger participants in certain markets.

The general issues discussed in the Notice include: 

·         What criteria to use to measure a market participant;

·         Where to set the thresholds for inclusion;

·         Whether to adopt a single test to define larger participants in all markets (measure the same criteria and use the same thresholds), or instead use tests tailored for specific markets;

·         What data are available to be used for these purposes;

·         What time period to use to measure the size of a market participant; 

·         How long a participant should remain subject to supervision after initially meeting the larger participant threshold, even if subsequently falling below the threshold; and

·         What consumer financial markets to include in the initial rule. 

Public comments on the questions listed in the Notice will help the CFPB develop a proposed initial rule defining large participants. The CFPB is committed to principles of open government and to maintaining a robust dialogue with stakeholders and the public.  The Notice and Request for Comment is available online, and contains information about how to submit responses.

Notice and Request for Comment: http://www.consumerfinance.gov/notice-and-comment/defining-larger-participants-in-certain-consumer-financial-products-and-services-markets/.

Federal Reserve proposes rules under Regulation B to clarify data collection compliance requirements for motor vehicle dealers

The Federal Reserve Board on Monday issued a proposed rule under Regulation B to clarify that motor vehicle dealers temporarily are not required to comply with certain data collection requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) until the Board issues final regulations to implement the statutory requirements. The Board believes that implementing rules are needed to ensure data are collected and reported in a consistent and standardized way.

The Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require creditors to collect and report information concerning credit applications made by women- or minority-owned businesses and by small businesses. Although the Consumer Financial Protection Bureau (CFPB) generally will have the authority to issue rules to implement this provision of ECOA, the Board retains authority to issue rules for certain motor vehicle dealers. The CFPB previously announced that creditors are not obligated to comply with the data collection requirements until the CFPB issues detailed rules to implement the law. Consistent with the CFPB's determination, the Board is issuing a proposed rule to clarify that this approach also applies to motor vehicle dealers that are subject to the Board's jurisdiction.

Public comments on the proposed rules must be submitted by July 29, 2011.

Agencies Adopt a Final Rule to Establish a Risk-Based Capital Floor

Three federal banking regulatory agencies adopted a final rule that establishes a floor for the risk-based capital requirements applicable to the largest, internationally active banking organizations. The rule, finalized by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, is consistent with the requirements of Section 171 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

A banking organization operating under the agencies' advanced approaches risk-based capital rules is required to meet the higher of the minimum requirements under the general risk-based capital rules and the minimum requirements under the advanced approaches risk-based capital rules.

The rule also provides limited flexibility to establish appropriate capital requirements for certain low-risk exposures that, in general, are not held by insured depository institutions, but may be held by depository institution holding companies or nonbank financial companies supervised by the Federal Reserve Board.

The final rule will be effective 30 days after publication in the Federal Register; publication is expected soon.

Media Contacts: 

Federal Reserve Board  Barbara Hagenbaugh  202-452-2955 

FDIC  David Barr  202-898-6992 

OCC  Dean DeBuck  202-874-5770 

Federal Reserve seeks comment on annual capital plan reviews

The Federal Reserve Board is seeking comment on a proposal to require top-tier U.S. bank holding companies with total consolidated assets of $50 billion or greater to submit annual capital plans for review.

The aim of the capital plan review, which builds on the Comprehensive Capital Analysis and Review (CCAR) conducted earlier this year, is to ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks and that permit continued operations during times of economic and financial stress. Institutions would be expected to have credible plans to have sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions. Boards of directors of the institutions would be required each year to review and approve capital plans before submitting them to the Federal Reserve.

The Federal Reserve would evaluate institutions' plans to make capital distributions, such as increasing dividend payments or repurchasing or redeeming stock, as part of the capital plan reviews. In some cases, such as when institutions' capital plans have been rejected by the Federal Reserve, firms would be required to receive approval from the Federal Reserve before making capital distributions.

The proposal would institutionalize the recently completed CCAR exercise. The CCAR involved a forward-looking analysis of the capital plans at the 19 largest U.S. bank holding companies. The CCAR followed the Supervisory Capital Assessment Program (SCAP), a standardized stress test led by the Federal Reserve in 2009.

As of March 31, the most recent available data, 35 U.S. bank holding companies had assets of at least $50 billion. According to the proposal, the level of detail and analysis expected in each institution's capital plan would vary based on the company's size, complexity, risk profile, and scope of operations. The Federal Reserve plans to finalize the proposal later this year and to begin the annual capital plan reviews in early 2012.

The proposed capital plans would complement a number of components of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the development of enhanced prudential standards for large firms and required stress tests. As the Federal Reserve implements the Dodd-Frank Act, it is expected that the company-run Dodd-Frank stress tests will serve as one component of institutions' capital plans.

The Federal Reserve requests comments on the capital plan review proposal, which will be published soon in the Federal Register, by August 5, 2011.

For media inquiries, call 202-452-2955.