The House Committee on Financial Services held an oversight hearing of prudential regulators including the Board of Governors of the Federal Reserve System (the Fed), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the OCC. The leadership of these prudential regulatory agencies testified before the Committee and discussed their role in addressing various issues within the financial services industry.
The Senate Committee on Banking, Housing, and Urban Affairs conducted a hybrid hearing to hear from the leadership of the federal prudential regulatory agencies, the Fed, the NCUA, the FDIC, and the OCC.
The U.S. Department of the Treasury (Treasury), in consultation with the White House Competition Council, released a report entitled “Assessing Impacts of New Entrant Non-bank Firms on Competition in Consumer Finance Markets.” The report finds that, “while concentration among federally insured banks is growing, new entrant non-bank firms, in particular “fintech” firms, are adding significantly to the number of firms and business models competing in core consumer finance markets and appear to be contributing to competitive pressure. While these fintech firms are enabling new capabilities, they are also creating new risks to consumer protection and market integrity, such as risks related to data privacy and regulatory arbitrage. To protect consumers in these rapidly changing markets and enable sustainable competition, among other recommendations, the report calls for enhanced oversight of the consumer financial activities of non-bank firms.”
Sen. Elizabeth Warren (D-MA) and Sen. Dick Durbin (D-IL) sent a letter to former FTX CEO Sam Bankman-Fried and current CEO John Jay Ray III concerning the trading platform’s collapse and its impact on consumers.
Relatedly, Rep. Raja Krishnamoorthi (D-IL), Chair of the House Oversight and Reform Subcommittee on Economic and Consumer Policy, sent a letter to Mr. Bankman-Fried and Mr. Ray regarding FTX and its impact.
The House Committee on Financial Services and Senate Committee on Banking, Housing, and Urban Affairs are planning to hold hearings in December on FTX.
Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer discussed the Office of the Comptroller of the Currency’s (OCC) ongoing efforts to ensure its regulated institutions provide fair and equitable credit services in remarks delivered on behalf of Acting Comptroller Michael J. Hsu at the CRA & Fair Lending Colloquium in Las Vegas. The remarks included a discussion of agency initiatives to identify and address discriminatory lending practices, addressing fair lending in advanced analytics, and reducing barriers to financial inclusion. His remarks are available here.
The Consumer Financial Protection Bureau (CFPB) issued two reports on the tenant background check industry. The reports describe how errors in these background checks contribute to higher costs and barriers to quality rental housing. Read the Tenant Background Checks Market Report here and the Consumer Snapshot: Tenant Background Checks here.
The House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hybrid hearing on the impact of US capital flows to foreign adversaries around the world.
Acting Comptroller of the Currency Michael J. Hsu discussed the risks of crypto assets to consumers during remarks before the U.S. Department of the Treasury’s Financial Literacy Education Commission (FLEC). In his remarks, the Acting Comptroller emphasized the OCC’s careful and cautious approach to including crypto assets within the banking system.
The Federal Trade Commission (FTC) published a Consumer Alert on imposter scams targeting veterans and servicemembers. The alert detailed that the banking scam is tricking veterans (and current servicemembers) into sharing sensitive personal or financial information.
The CFPB released a new Supervisory Highlights report on legal violations identified during the CFPB’s supervisory examinations in the first half of 2022. The report details key findings across consumer financial products and services, including how consumer reporting companies and data furnishers continued to violate the Fair Credit Reporting Act (FCRA) by failing to promptly address and update incorrect information on credit reports. The report also highlights instances where mortgage servicers charged impermissible fees when homeowners went to make their mortgage payments.
President Joe Biden tweeted that “junk fees” such as banking overdraft fees and excessive credit card late fees are illegal.
The CFPB announced an effort to work with industry and other agencies to develop a new data set to better monitor the auto loan market.
Public Company Accounting Oversight Board (PCAOB) Chair Erica Williams delivered remarks on international cooperation and audit regulation. Williams stated that “our inspections team is constantly adjusting to stay responsive to new and emerging risks and issues around the world – whether it’s SPACs and de-SPAC transactions, cryptocurrencies, or how firms are addressing the effects of supply chain disruptions and rising costs.”
Secretary of the Treasury Janet Yellen delivered a statement on recent crypto asset market developments. Secretary Yellen said that the recent failure of FTX and its impact demonstrate the need for more effective oversight of crypto asset markets.
The White House officially nominated Martin Gruenberg, currently the Acting Chair of the FDIC, to serve as Chair of the FDIC. If confirmed, he would also be serve a new term on the FDIC’s Board of Directors. Acting Chair Gruenberg has been serving on an expired Board term for almost four years.
The FSB and Network for Greening the Financial System (NGFS) published a joint report outlining initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks. The report draws lessons for effective scenario analysis and sketches out a global perspective. It has been sent to G20 Leaders ahead of the Bali Summit.
Two notable events dominated headlines last week: the U.S. midterm elections and the downfall of and fallout surrounding FTX International (FTX), the global crypto asset trading platform, and its affiliated companies. Essentially, following the announcement last week that $500 million in FTX’s native crypto asset FTT would be liquidated after a leaked balance sheet of Alameda Research, former FTX CEO Sam Bankman-Fried’s trading firm, showed that much of its reserves were held in the form of FTT tokens. A financial run on FTX quickly ensued, with investors seeking to withdraw $5 billion from the platform. This caused a liquidity crisis that led to discussions regarding FTX’s potential sale. Matters worsened upon the news that approximately $10 billion in customer funds were transferred to Alameda Research, an FTX-affiliated trading firm. Today, FTX announced it, FTX.US, and Alameda Research filed for voluntary Chapter 11 proceedings in the United States, and its CEO Sam Bankman-Fried resigned.
Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, released a statement that “ it is clear that there are major consequences when cryptocurrency entities operate without robust federal oversight and protections for customers.”
House Financial Services Committee Ranking Member Patrick McHenry (R-NC), stated that the recent events show the necessity of Congressional action to develop a clear regulatory framework for the digital asset ecosystem, including trading platforms.
Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, stated that the recent collapse “is a loud warning bell that cryptocurrencies can fail,” and that the “cryptocurrency market’s continued turmoil is why we must think carefully about how to regulate cryptocurrencies and their role in our economy.”