Tag Archive | "regulations"

Four Trade Groups Ask Lawmakers to Instate Five-Person Board to Lead CFPB


WASHINGTON, D.C. —  Four associations representing 12,000 banks and credit unions submitted a letter to Senate leaders urging them to consider replacing the Consumer Financial Protection Bureau (CFPB)’s single-director structure with a five-person bipartisan commission next year.

The associations listed in the letter, which was sent on Wednesday to Senator Majority Leader Mitch McConnell (R-Ky.) and Minority Leader-elect Chuck Schumer (D-NY),  include the Consumer Bankers Association (CBA), the Credit Union National Association (CUNA), the Independent Community Bankers of America (ICBA), and the National Association of Federal Credit Unions (NAFCU).

“The CFPB is an independent regulatory agency that provides the sole director unprecedented authority over financial institutions, with minimal oversight,” read the letter, which was sent to Senate leaders on Wednesday. “As the sole decisionmaker, the director can promulgate regulations and levy enforcement actions that have sweeping and long-lasting effects on credit availability for consumers. The current single-director structure leads to regulatory uncertainty for consumers, industry, and the economy.”

The associations cited the recent federal appellate court decision in PHH Corp. v. CFPB D.C. Circuit Court Case as further evidence of the need to replace the bureau’s structure. In that case, the appellate court ruled the in favor of the mortgage company, deeming the the bureau’s single-director structure unconstitutional. The court also gave the president the power to remove the CFPB’s director at will, as well as direct the regulator’s activities.

“This result makes it even more apparent what a whipsaw effect the single-director model presents, inhibiting the ability for financial institutions to plan for the future, which in turn limits economic growth and hurts consumers,” the associations stated in their letter.

A five-person bipartisan board or commission would be more in line with other financial regulators and would provide a balanced and deliberative approach to supervision, regulation, and enforcement over financial institutions, the associations stated. A five-person commission would also be better suited to handle the bureau’s authority over rules and regulations within the financial industry, the letter added.

“As we approach the beginning of a new administration, it is crucial we finally put in place a governing structure at the CFPB to ensure it does not become a political weapon, something we are certain Senate leaders McConnell and Schumer can appreciate,” said CBA President and CEO Richard Hunt. “In addition, the governing structure of the agency makes the potential for abuse of power and political influence not only possible, but inevitable.”

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Compliance Summit Adds Certification Component


TAMPA, Fla. — Organizers of Compliance Summit have announced that attendees will have the opportunity to earn Certified Automotive Compliance Specialist status at the Las Vegas event, which will be held Aug. 29–30, 2016, at Paris Las Vegas, as part of the annual Industry Summit.

David Gesualdo, who serves as show chair and as publisher of Auto Dealer Today and F&I and Showroom, said the addition of a certification component was in response to demand from past attendees.

“I can’t tell you how many times we have heard, ‘I need something I can take back to the dealership,’” Gesualdo said. “That is a perfectly reasonable request and, with the help of our speakers, we are going to make it happen.”

Certification will require participation in a comprehensive, four-hour review session on Tuesday afternoon and successful completion of a written exam. The review will be given by Compliance Summit speakers and focus on the following topics:

Part 1:

  • Ethics
  • Reg Z
  • Reg M
  • Risk-Based Pricing Rule
  • Adverse Actions
  • ECOA
  • FCRA
  • Credit Applications
  • Signature Issues
  • Conditional Delivery
  • Monroney Labels
  • Addendum Stickers

Part 2:

  • Magnuson-Moss Warranty Act
  • Used Car Rule
  • Red Flags Rule
  • Safeguards Rule
  • FACT Act
  • Cash Reporting
  • OFAC
  • USA PATRIOT ACT
  • Discrimination
  • Fair Credit Policies
  • UDAP
  • EH&S Basics

Compliance Summit is a series of regional events that began in Miami in November 2014 and has made stops in Chicago, Austin and Tampa. Attendees are invited to take part in the rest of Industry Summit, which also includes two full days of sales and F&I training, at no additional cost.

To register for the Las Vegas event, visit www.dealercompliancesummit.com. Attendees who register by July 29 will enjoy a $100 discount. For more information about Compliance Summit, including sponsorship and exhibition opportunities, contact David Gesualdo via email hidden; JavaScript is required or at 727-947-4027.

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US Equity Advantage Temporarily Suspends Business in 16 States


ORLANDO, Fla. — US Equity Advantage (USEA) will temporarily suspend its biweekly loan payment service in 16 of the 50 states in which it does business at the end of September. The decision comes in response to recent regulatory changes concerning licensed money transmission and related restrictions placed on the company by its banking partners.

USEA officials said the company has a robust commitment to ethical business practices led by a full time compliance officer whose department actively works to meet all regulatory issues in the marketplace, including adherence to state money transmission licensing in all 50 states.

“Due to evolving regulatory oversight, we are ending a business process that has allowed us to offer our biweekly loan payment services in states where we do not hold licenses,” CEO Robert Steenbergh said. “Our company remains strong despite this temporary situation. It affects less than one percent of our customers and nonetheless, we continue to operate in more states than any of our competitors.

“Our goal remains to serve customers in all 50 states, and we envision completing the necessary licensing requirements to do so in the near future,” he added.

In anticipation of the Sept. 30 deadline, USEA stopped accepting new enrollments from the affected states on Sept. 5. The company will continue its biweekly loan payment service to existing customers through the end of the month and is developing information and assistance to help them temporarily convert responsibility for their auto loan payments in an efficient and thoughtful manner.

During the loan service suspension, these customers can continue to take advantage of the company’s other AutoPayPlus benefits including several free financial planning tools launching later this month that will make it easier for customers to automate their bill payments, organize their finances, monitor their credit, and create a budget and savings plan for the future.

The affected states are: Alabama, Alaska, Arkansas, California, Colorado, Idaho, Mississippi, Nebraska, Nevada, New York, Oregon, South Dakota, Texas, Utah, Wyoming and also Washington, D.C.

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Democrats Reintroduce Auto Safety Reform Bill


Washington — A group of House Democrats is reintroducing sweeping auto safety reform legislation a year after General Motors Co. recalled 2.6 million vehicles now linked to at least 57 deaths, reported The Detroit News.

Rep. Jan Schakowsky, D-Ill., is reintroducing a measure that would dramatically hike the National Highway Traffic Safety Administration’s auto safety budget by at least $100 million by 2017 by imposing a $3 fee on all new car sales that would rise to $9 by 2018. The bill is backed by Rep. Frank Pallone, D-N.J., and at least four other Democrats, her office said.

Despite withering criticism of NHTSA and congressional hearings into GM’s delayed recall, as well another round of hearings into millions of defective Takata air bags, the prospects for sweeping auto safety reform legislation are hazy. Many auto industry officials think it is unlikely major reforms are approved. In 2010, after harsh criticism of NHTSA after Toyota Motor Corp. recalled millions of vehicles, Congress considered but never voted on major auto safety legislation.

The bill would require auto dealers to repair recalled used cars before selling them and require disclosure of recalls and the status to prospective buyers. It would also give NHTSA sweeping new authority to get unsafe vehicles off the road immediately for “any condition that substantially increases the likelihood of serious injury or death if not remedied immediately.”

The bill would require NHTSA to create new regulations, including new standards for passenger motor vehicles to reduce the number of pedestrian and cyclist injuries and fatalities. NHTSA would also have to research the development of safety standards to improve the crash worthiness and survivability for back-seat passengers.

The Alliance of Automobile Manufacturers, the trade group representing major automakers, didn’t immediately comment.

The measure would bar automakers from conducting regional recalls limited to high humidity areas or places where road salt is used.

The bill requires that a remedy for a defective vehicle be provided without charge, regardless of when the motor vehicle or replacement equipment was purchased. Under the current law, remedies are not required without charge for vehicles or equipment purchased more than 10 years before a recall.

On Thursday, a Senate panel approved a bill to allow for additional compensation for auto sector whistleblowers, but Republicans have shown no interest in taking up broader auto safety legislation. Rep. Fred Upton, R-St. Joseph, chairman of the House Energy and Commerce Committee, has held hearings and met with automakers and others, but hasn’t proposed any reforms.

The Democrats’ bill would eliminate the $35 million cap on fines for most delayed auto safety recalls. The Obama administration has called for hiking it to $300 million per delay.

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Pushing Employers to Offer Better Retirement Plans


While business owners have always had a fiduciary obligation to ensure their retirement plans benefit their employees, a new federal rule will put even more onus on employers to decide if the costs involved are reasonable as required by the 1974 federal law, the Employee Retirement Income Security Act.

Issued in February, the Department of Labor’s Employee Benefits Security Administration’s new regulations are designed to shed light on how much employees are paying in retirement plan fees and investment fund expenses. They take effect this summer: By July 1, pension plan providers must send disclosure to employers; by Aug. 30, employers (or the plan provider, if the employer designates) must send disclosures to employees.

The agency, which oversees about 708,000 private pension plans with nearly $3 trillion in assets and 72 million participants, is requiring plan providers to inform employees of “direct and indirect compensation certain service providers receive in connection with the services they provide.” It applies to defined benefit and defined contribution plans, such as 401(k)s, but not to SEPs, SIMPLEs, IRAs, or individual retirement annuities. (IRAs are not covered by ERISA. And since SEPs/SIMPLEs can be rolled over to any IRA provider, the reasoning goes that they should get their disclosures from the financial institutions receiving the rollover, not from their employer plans.)

Employers need to be aware of their new responsibility. “Although service providers are required to disclose their fees, it is up to the plan sponsor to make certain that the fees they are being charged are reasonable for the services they are receiving,” Rich Rausser, senior vice president at Pentegra Retirement Services in White Plains, N.Y., writes in an e-mail. “There are only two ways for the small business owner to do this: one, benchmark their plan against other plans, which may be challenging for a small business owner to do on their own; or two, seek quotes from other service providers in order to gauge the reasonableness of the fees they are paying for plan services.”

Frank Armstrong, the president and founder of Investor Solutions in Coconut Grove, Fla., says the transparency will be a “blessing,” not a burden, for small business owners. The independent registered investment adviser, who says he manages $120 million in pension plan assets, believes both employers and employees will benefit: “From a small business owner’s perspective, this will enable him to offer better plans at lower costs because he’ll have the data [from plan providers] for the first time. He’s been operating without the information he really needs to make the decisions up until now,” Armstrong says.

Currently, many small business owners turn their pension administration duties over to mutual funds, insurance companies, and third-party record keepers, some of which administer the plans at no cost to the employer. But the true costs can come in fees and expenses to the employee that can drastically reduce retirement savings over time, Armstrong says, adding that some plans suffer from excess costs, undisclosed conflicts of interest, and sustained underperformance.

“The average employee is paying for the entire cost of the plan and its administration, and they’re being grossly overcharged,” he says. Many employees have no idea they’re paying 3 percent or more of their total assets in fees and expenses, he says. If that cost could be cut in half, the amount of money accumulated by the time the individual retires could be boosted by 40 percent or more. “This [disclosure requirement] is the best thing to happen to the 401(k) since its inception,” he says.

Information that is typically buried in a mutual fund prospectus, such as performance benchmarks, loan fees, and distribution fees, will now be provided annually in a comparative chart, says Kevin Wiggins, an ERISA attorney with Pittsburgh law firm Thorp, Reed & Armstrong and a former member of the ERISA Advisory Council, a 15-member panel that advises the labor secretary on Employee Retirement Income Security Act matters.

In addition, participants will receive quarterly statements that show the expenses that were taken out of their accounts during the previous quarter. Those statements will arrive by Nov. 14 under the new rules. “I suspect at first that most individuals will take a good look at” their statements, Wiggins says. “But after a while they may just glance at them or ignore them completely.”

Armstrong suggests that small business owners look over the disclosure documents closely and replace plans that are overcharging and underperforming. If they don’t, newly empowered employees could take legal action. “Ignore this at your peril. It only takes one employee to figure out they’re paying 3 percent or 5 percent a year and that isn’t right. The bar association will be happy to jump on that and get settlements,” he says. Consider independent advisers who are non-commission and willing to sign on as plan fiduciaries—taking some of the legal liability off the business owners, he adds.

One more item for employers’ checklists: Those that have union employees should consider explaining the new disclosures to the union, Wiggins says: “There’s a chance that once they start seeing these [expenses on their quarterly statements], they’ll want to bargain over who should pay them: the employees or the plan sponsor.”

Wiggins surmises that as employers shift to lower-cost plans, the plans’ service providers will be looking for ways to hang on to their fees. One way they can do that is through revenue sharing, which is like a commission paid by a mutual fund to those who distribute the fund to the market. “I’m seeing consultants and record keepers tell plan sponsors to pick mutual funds that pay more revenue-sharing,” which can be used to offset the employer’s costs to administer the plan, he says. “Courts have said that an employer should not consider how an investment will benefit the employer. Instead, the decision has to be based on what is the best investment for participants. If an administrator or an employer picks a mutual fund to reduce the employer’s expenses, that’s an issue because the employer could be considered to be using plan money to benefit the employer.”

This article was written by Karen E. Klein and published in Bloomberg Businessweek magazine.

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