Warren Stephens, CEO of Stephens Inc. (a company that is an annual presenter at our Annual Meeting every year), discussed the impact of regs and rules out of Dodd-Frank and how they could impact access to credit in a recent WSJ op-ed.

“The Consumer Finance Protection Bureau has restricted—and will further restrict in the future, I believe—credit availability to people on the lower end of the credit rankings. Without access to properly priced loans, these people will not be able to buy the goods they need and want. This lack of credit will further depress demand and production.”

Stephens discusses the importance of “middle market” private and public companies, and how they are key to rebuilding our economy. Companies like our very own CFSA Members are of the 100,000 in ‘Middle America’ and who contribute to the revenues between $25 million and $1 billion. And like Stephens says, as part of Middle America, our Members contribute to the 40 percent of the U.S. GDP and the 32 million jobs.

A recent Wall Street Journal article is reporting that some small and regional U.S. banks are prohibiting unhappy customers from taking their complaints to court or joining class-action lawsuits. Instead, financial institutions are requiring them to resolve disputes through arbitration, a process that may not be in the best interest of consumers. A few key highlights from the article:

The Dodd-Frank financial-overhaul law requires the newly formed Consumer Financial Protection Bureau to examine mandatory-arbitration agreements, but doesn’t set a specific time frame for the agency to do so.

“We need more scrutiny over these things and make sure they are fair to consumers,” said Susan Weinstock, a project director at Pew.

…

“What the banks have done with these arbitration programs is buy themselves immunity with respect to complaints about their consumer practices,” said Bruce Rogow, a lawyer at Alters Boldt Brown Rash & Culmo in Miami, which is involved in the overdraft cases.

All of this comes on the heals of the CFPB launching its online credit card complaint form when the Bureau stood up July 21, and the mystery that still remains regarding how consumers will file complaints about other financial products.

When it comes to the payday advance, and CFSA Members, we want to make sure customers have a way to communicate with our Member Companies. You can either click here to fill out our complaint form, or send us an e-mail at LoanQuestions@CFSAA.com. Please note that our complaint form only applies to CFSA Member Companies.

The Senate Banking Committee is planning on holding a hearing next week to start the confirmation process on Richard Cordray, President Obama’s pick to run the CFPB.

According to the Wall Street Journal:

The Cordray bid… is likely to face a contentious battle in the Senate, where Republicans have vowed to block the nomination unless the White House agrees to revamp the bureau’s structure. Republicans want the bureau to be run by a commission instead of a single director, among other things. They fear that the bureau has broad powers over the financial industry without much congressional scrutiny and oversight.

An interesting perspective coming from Senator Richard Shelby re: the president’s decision to go with a different CFPB director nominee.

Many on the left are disappointed that the president did not choose the Bureau’s most vocal advocate, Elizabeth Warren, who currently serves as an assistant to the president and adviser to the Treasury secretary. Republicans, on the other hand, are focused on the key issue: Regardless of who runs it, will the bureau be sufficiently accountable to the American people?

When discussing Obama’s unwillingness to listen to the GOP’s “proposed three commonsense reforms,” Shelby said this:

As a result, Mr. Cordray’s nomination is dead on arrival in the Senate and will remain so until these reasonable changes are made. The law allows the administration to delay the bureau’s start date for an additional six months. I encourage President Obama to exercise this option and come to the negotiating table.

There are ‘No Plans for Bans‘, according to yesterday’s House Committee on Oversight and Government Reform hearing.

As the Wall Street Journal reports, White House adviser Elizabeth Warren said yesterday that the CFPB isn’t seeking to ban certain financial products, addressing Republicans’ questions about the scope of the consumer-watchdog agency set to open its doors this time next week.

Here’s a play-by-play of Warren and and Rep. Dennis Ross:

Ross: “Can you name any product, service, or transaction, not already illegal that is unfair, deceptive, or abusive within the meaning of the Dodd-Frank Act.”

EW: “Congressman, can I start by saying we have not been in effect for a year…”

More commentary about the accuracy of being in effect for a year…

EW: “Congressman, I can recall no product … I have had no discussions with my team about a particular product.”

Ross: “Don’t you think that’s one of the most important things though? It’s a power to ban…”

EW: “…Congressman, I appreciate the advice. But actually, no. I think that what we should be doing is concentrating on places where we can best make changes in the marketplace.”

Ross: “So then it would be okay if we just revoked the power?”

EW: “…We have priorities. And our first priority in rulemaking is around TILA/RESPA forms. We are trying to reduce regulatory burdens at the same time that we’re trying to increase the understanding for consumers so that they can make good product choices.”

Rep. Dennis Ross yields his time to Rep. Trey Gowdy, who then asks Warren about whether or not the CFPB should ban payday lenders:

Gowdy: “Payday lenders have a bad reputation for taking advantage of people, no one should expect to be treated well by them. Do you know who said that?

EW: “Probably me.”

Gowdy: “So that would be one group that should be banned?”

EW: “Congressman, there’s a lot of space between banning a product and making a product clearer to consumers.”

…

Gowdy: “So you do not think payday lenders should be banned?”

EW: “The statue is unambiguous and we have no authority to engage in usury caps.”

Gowdy: “That wasn’t my question. Do you think payday lending should be banned.”

EW: “Congressman, payday lending is one of the areas that will be under our jurisdiction.”

Gowdy: “Do you think it should be banned Professor Warren?”

…

Gowdy: “Should they be banned?”

EW: “Or to make better. We have a whole agency and we have a whole process to work on this. We have a lot of different tools available at the Consumer Financial Protection Bureau. One of the advantages we have is that it’s possible to work on multiple fronts at once.”

Raj Date, one of the CFPB director candidates being floated around, said at a conference earlier this week that the agency’s policymaking process would be fact-driven.

“We have a lot of tools,” he said. When the bureau does write rules, it will be through a very deliberative, fact-based process, Mr. Date said.

He added that he sees a lot of room for new research on consumer finance and that new data will help drive policy decisions. Last month, the bureau hired Harvard University economist Sendhil Mullainathan, a leading behavioral economist, to serve as the agency’s assistant director for research.

The demand for short-term credit is there, and there’s no hiding it. According to recent research, nearly half of Americans say that they definitely or probably couldn’t come up with $2,000 in 30 days.

The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable.

One thing to consider, according to the research, is that “financial fragility is not limited to low-income groups.”

“The more surprising finding is that a material fraction of seemingly ‘middle class’ Americans also judge themselves to be financially fragile, reflecting either a substantially weaker financial position than one would expect, or a very high level of anxiety or pessimism. Both are important in terms of behavior and for public policy.”

In the Wall Street Journal today, John Walsh, Acting Comptroller of the Currency said this:

“The bottom line here is that community banks that have encouraged customers to become overly reliant on this product to manage their cash flow will need to find other sources of revenue to offset an almost certain decline in the income they have been generating from overdraft protection fees.”

Check out the full story here.

The CFPB was formed following the financial collapse under the guise of regulating “too big to fail” banks that created the problem in the first place.  Unfortunately, the bureau’s regulations have had the greatest effect on small financial institutions that in no way contributed to the problem.  The Wall Street Journal explains the difficult situation small banks are facing:

Small financial institutions on Wednesday told U.S. lawmakers they’re struggling to comply with a slew of new regulations mandated by last year’s financial overhaul, and they worry they’ll be strangled further by new rules issued by the new consumer watchdog agency, the Consumer Financial Protection Bureau.

We certainly feel small banks’ pain.

President of the Federal Reserve Bank of Atlanta says this in today’s Wall Street Journal:

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said that it was likely that an oversight group would be formed to better identify how links in the financial markets can fuel a crisis.

——————

Mr. Lockhart said he remains against the idea of creating a new consumer-protection agency. He also said that he expected to see steps on aiding Fannie Mae and Freddie Mac in the coming months.