Tag Archives: big banks

Protecting the CFPB’s Overdraft Fee Rule

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I am a signatory to a letter being sent to the House’s Committee on Financial Services, in opposition to H.J. Res. 59 (Hill), CRA Resolution to Overturn CFPB Rule on Overdraft Lending: Very Large Financial Institutions. The letter states,

The undersigned 278 consumer, civil rights, labor, legal services and community organizations and academics write to urge you to oppose H.J. Res. 59 (Hill) and any other effort to overturn the Consumer Financial Protection Bureau’s overdraft fee rule, which will reduce most overdraft fees from $35 to $5, stop manipulative practices by big banks, improve transparency, and put $5 billion back into the pockets of everyday people and their families. The public widely views current overdraft fee practices as unfair.

The overdraft fee rule closes a paper-check era loophole that has allowed big banks to trick people into paying excessive overdraft fees and earn billions in profits off of the most vulnerable families. The rule lowers most so-called “courtesy” overdraft fees from $35 to $5, saving households that pay overdraft fees an average of $225 a year. The rule gives big banks a variety of options to cover overdrafts, including safer, more transparent overdraft lines of credit with no price limit and the same disclosure requirements as credit cards. The rule only applies to very large institutions with over $10 billion in assets, many of which have already adopted similar protections. Smaller banks and credit unions are completely exempt.

We urge you to stand with everyday people over big banks. Banks should not profit off the struggles of working families through excessive, back-end overdraft junk fees. Please oppose H.J. Res. 59.

 

Blockchain and Securitization

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image by David Stankiewicz

Deloitte prepared a report on behalf of the Structured Finance Industry Group and the Chamber of Digital Commerce, Applying Blockchain in Securitization: Opportunities for Reinvention. It opens,

The global financial system is betting on blockchain to revolutionize many aspects of its business, and we (the Structured Finance Industry Group and the Chamber of Digital Commerce) believe that securitization is one of the areas in the capital markets that could most benefit from this transformation. Janet Yellen, Chair of the Board of Governors of the Federal Reserve System, recently called blockchain “a very important new technology” that “could make a big difference to the way in which transactions are cleared and settled in the global economy.” Financial services institutions have already invested over a billion dollars in the technology, with most big banks likely to have initiated blockchain projects by the end of 2017. There are already hundreds of use cases, ranging from international payments to securities processing, while technology firms including Amazon, Google, and IBM are offering a host of blockchain services aimed at the financial industry.

Why are all of these companies investing in blockchain? This new technology has the potential to dramatically disrupt the role of intermediaries—including that of banks—in financial transactions. Traditional activities performed by intermediaries might be changed or even replaced. Blockchain can also bring significant advances in efficiency, security, and transparency to many of the financial sector’s activities.

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The Structured Finance Industry Group and the Chamber of Digital Commerce commissioned Deloitte & Touche LLP (Deloitte) to explore how blockchain might reinvent securitization—and how the securitization industry should consider preparing for this rapidly approaching future. This industry is exploring this nascent technology’s potential benefits and costs. Firm answers on blockchain’s likely use cases are not yet available, but discussions with securitization and blockchain experts have led to some key observations and insights about implications and possible paths forward. (1, footnotes omitted)

The report’s bottom line is that “[b]lockchain and smart contracts could catapult the securitization industry into a new digital age.” (2) It finds that

The technology’s potential to streamline processes, lower costs, increase the speed of transactions, enhance transparency, and fortify security could impact all participants in the securitization lifecycle—from originators, sponsors/issuers, and servicers to rating agencies, trustees, investors, and even regulators. (2)

The report provides a nice overview of blockchain basics for those who find distributed ledger technology to be mysterious. The real value of the report, however, is that it provides concrete guidance on how blockchain can be integrated in the securitization process. There is a chart on page 24 and an explanation of it on the following page that shows this in detail. This level of detail makes it much easier to visualize how blockchain can and most likely will change the nature of the business in years to come.