July 11, 2003

REGULATORY RELIEF BILL PASSES JUDICIARY COMMITTEE REVIEW

The House Judiciary Committee passed regulatory relief legislation by voice vote on July 9. The Financial Services Regulatory Relief Act (H.R. 1375) was passed by the House Financial Services Committee on May 20. The legislation, sponsored by Rep. Shelley Moore Capito (R-W.Va.), would streamline regulatory compliance to counterbalance additional requirements placed on banks by the USA Patriot Act. Some of the provisions in the bill would allow regulators to adjust the exam schedule of healthy institutions, modernize regulators' recordkeeping requirements, give banks more flexibility in paying dividends and streamline the merger application process.

The bill also includes a CSBS-supported provision to allow states hosting a branch of an out-of-state bank to examine the branch but not charge fees for the examination.

WHITE HOUSE ANNOUNCES TREASURY NOMINEES

The White House announced on Wednesday that it will nominate Susan C. Schwab as Treasury Deputy Secretary and Kenneth H. M. Leet as Treasury Under Secretary for Domestic Finance. Leet will replace Peter Fisher, who submitted his resignation to President Bush on July 9 and will leave in October. Treasury Secretary John W. Snow praised Fisher's performance, saying his expertise in financial markets had been invaluable in the aftermath of the Sept. 11 terrorist attacks and in the management of the nation's debt during shifting economic times.

Leet is the managing director of the Investment Banking Division at the Goldman Sachs Group, Inc. Earlier in his career Leet was a principal at Odyssey Partners and served as a lending officer at Manufacturers Hanover Trust. He has a bachelor's degree from Brown University and M.B.A from Harvard Graduate School of Business.

Schwab will replace Kenneth Dam who left in February. Schwab is dean at the school of public affairs at the University of Maryland. Previously, she served as the director of corporate business development at Motorola Inc. and as an assistant secretary at the Commerce Department. Schwab has a bachelor's degree from Williams College, a master's degree from Stanford University and a Ph.D. in from George Washington University.

More information about the nominees may be found in Treasury's press release.

SUPREME COURT ACCEPTS CREDIT CARD CASE

The U.S. Supreme Court has agreed to hear a credit card case during its fall term. The case, Pfennig vs. Household Credit Services, Inc., involved a lawsuit brought by a credit card customer who alleged that a fee for providing credit over her credit card's limit was not properly disclosed as a finance charge under the Truth in Lending Act. The Federal Reserve's Regulation Z excludes fees for exceeding a credit limit from the definition of finance charge, and a lower court had dismissed the lawsuit. However, the U.S. Court of Appeals for the 6th Circuit ruled that the over-limit fee "falls squarely within the statutory definition of a finance charge" and therefore was not open to interpretation by the Federal Reserve. The court said that the bank knowingly allowed its customer to exceed her credit limit and charged a fee, which was "by definition a finance charge." However, the 6th Circuit said the bank was entitled to immunity from civil liability because it had followed Regulation Z. For more information, click here.

AROUND THE STATES

California: A new state law in California aimed at curbing identity theft went into effect on July 1. The law requires companies that maintain electronic databases and do business in the state to alert customers whenever "unencrypted personal information was or is reasonably believed to have been acquired by an unauthorized person." The law gives California consumers broader power to sue for failure to provide such alerts.

Georgia: Georgia Commissioner of Banking and Finance David G. Sorrell announced three staff appointments this week, as follows: George A. Reynolds, Senior Deputy Commissioner; Grace Lurry, Deputy Commissioner for Supervision; and Robert M. Braswell, Deputy Commissioner for Mortgage.

Washington: The Washington State Department of Financial Institutions will hold public meetings during July at eight locations in Washington to inform owners and operators of businesses commonly known as "money transmitters" and "currency exchangers" about a new law taking effect later this year. The Uniform Money Services Act requires all companies offering money transmitter or currency exchange services to be licensed and examined by the DFI. The meetings are being conducted by DFI to allow a public review of rules drafted by the agency to implement the new law. Meetings will be held in Tumwater, Seattle, Yakima, Pasco, Spokane, Wenatchee, Mount Vernon, and Tacoma.

Correction: In last week's CSBS Examiner, we reported on the recent CSBS reaccredidation of the Pennsylvania Department of Banking. A William Schenck III is Pennsylvania's Secretary of Banking, not William S. Schenck, as stated in the article. We apologize for this mistake.

CRAIG HERROLD TO SERVE AS CSBS SERT CHAIRMAN

CSBS named a new State Examiner Review Team (SERT) chair. Craig Herrold, Director of Examination, Supervision & Enforcement with the Pennsylvania Department of Banking, was appointed chair by CSBS Technology Committee Chairman David G. Sorrell, Georgia Commissioner of Banking and Finance. As SERT chair, Herrold will represent the state banking departments on an interagency Applied Technology Group. He has been with the Pennsylvania Department for 12 years, and currently serves as Director of Examination, Supervision and Enforcement. The outgoing chair, Harold Carney with the Georgia Department of Banking and Finance, served in this capacity for four years and has agreed to remain an active member of the SERT group.

AROUND THE AGENCIES

FDIC: The Federal Deposit Insurance Corporation on Thursday issued its quarterly Letter to Stakeholders, a report on the agency's priorities and activities for the second quarter of 2003. FDIC Chairman Don Powell noted that the agency has focused on stability of the industry and the insurance funds, sound policy positions and stewardship of the Corporation. "We also remain hopeful that by year-end, deposit insurance reform legislation will be a reality," he said. To view the letter, click here.

FDIC: FDIC announced on Thursday that it has published a Korean version of its Money Smart financial education curriculum. Since the program was introduced in July 2001, more than 100,000 people have completed the course. FDIC introduced a Spanish version of the program in 2002 and a Chinese version in March 2003. The agency plans to offer a Vietnamese version later this year. More info...

FRB: The Federal Reserve announced last week that is has published a Spanish version of two consumer brochures. They are the: "Consumer Handbook on Adjustable Rate Mortgages" and "What You Should Know about Home Equity Lines of Credit." Both publications are available on the agency's Web site. For more information, click here.

FTC: The Federal Trade Commission filed a complaint on Wednesday against Electronic Financial Group, Inc. in Waco, Texas, and its principals for providing assistance to fraudulent telemarketers seeking to drain funds from consumers' checking accounts. FTC alleged that the company processed transactions through the automated clearing house network for numerous fraudulent telemarketers and engaged in deceptive marketing of its own advance-fee debit cards -- the First Freedom Financial card and the AmeriOne card. FTC noted that the National Automated Clearing House Association's operating rules prohibit the processing of ACH transactions on behalf of merchants engaged in outbound telemarketing to consumers when the merchants have no existing relationship with the customers. FTC also charged the company with deceptively marketing a debit card as a credit card and charging consumers an advance fee of between $80 and $100 as well as a $9.95 monthly service charge. More info...

FTC: On July 3, the Federal Trade Commission shut down a fraudulent business opportunity involving mini automated teller machines. FTC alleged that Merchant Payment Solutions and its principal, Steven Todd Knight, deceptively marketed and sold mini-ATM business opportunities to consumers through a Web site and toll-free number starting in late 2001. FTC said the company claimed that consumers could earn up to $450 a month by placing a mini-ATM in a location that 500 people per month would visit. Instead, consumers lost significant sums of money in this venture. The proposed settlement calls for the company to pay more than $22,000 in consumer redress. For more information, click here.

THE WEEK AHEAD

July 14
The Women in Housing and Finance Regulatory Task Force holds a brown bag lunch to discuss the role of payday lending in today's financial services industry. Speakers include Helen Howell, Washington State Director of Financial Institutions; Steven Fritts, FDIC Associate Director for Risk Management Policy; and William M. Webster IV, Chairman and CEO, Advance America. - 12 noon, OFHEO, Marianne Wright Conference Room, 1700 G Street NW.

July 15
FDIC is holding a regulatory burden relief banker outreach session in Denver, CO. Colorado State Bank Commissioner Richard Fulkerson will provide the welcoming remarks.

July 15
The House Financial Services Committee will convene for Federal Reserve Board Chairman Alan Greenspan's semiannual report on monetary policy. - 10 a.m., 2128 Rayburn Building.

July 16
The FDIC hosts a symposium on the Future of Banking: The Structure and Role of Commercial Affiliation. - 8:30 a.m. to 1:30 p.m., National Press Club.

July 16
The Senate Banking Committee will convene for Federal Reserve Board Alan Greenspan's semiannual monetary policy report to Congress. - 10 a.m., 538 Dirksen Building.

July 16-17
CSBS holds its annual strategic planning meeting. - Hotel Willard.

July 17
The Senate Banking Committee will hold a hearing on "Regulatory Oversight of Government Sponsored Enterprise Accounting Practices." - 10 a.m., 538 Dirksen Building.

July 17
The House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises will hold a hearing on H.R. 2575, the Secondary Mortgage Market Enterprises Regulatory Improvement Act. - 10 a.m., 2128 Rayburn Building.

CLOSING COMMENTS

"Massachusetts has proven its ability to protect investors as demonstrated by the $16 million that our Securities Division has returned to them. We would hope that the federal government would not prevent that effort. State regulators are the early radar in the regulatory system. Given recent abuses, now is not the time to diminish enforcement." - Massachusetts Secretary of the Commonwealth William Galvin, commenting on provision in a bill, the Securities Fraud Deterrence and Investor Restitution Act of 2003 (H.R. 2179) that would curtail states' ability to take enforcement actions against Wall Street firms that defraud investors. The bill was advanced on Thursday by the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.