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uk: payday lending plans November 25, 2013

Posted by Bradley in : consumers , add a comment

The UK government plans to cap the cost of payday loans in amendments to the Financial Services (Banking Reform) Bill. According to the Chancellor of the Exchequer:

It’s all about the government being on the side of hardworking people.

cfpb: payday lending enforcement and final rule on mortgage disclosure November 20, 2013

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The CFPB announced an enforcement action against Cash America International, Inc with respect to its payday lending practices which includes refunds to customers, a fine of $5m for the violation and for destroying records before the investigation and promises with respect to future compliance. I have been feeling grim because I will be discussing McKenzie Check Advance v Betts in class tomorrow, and this is a step in the right direction. The CFPB also announced new rules on mortgage disclosures. There’s lots of information about this rule on the CFPB website, including a blog post which explains how the final rule is different from the proposed rule, a report on the study of old and new mortgage disclosures, and a page for consumers. Much more user friendly than the usual sort of financial regulation rule announcement.


more eu (non?) transparency issues November 19, 2013

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Euractiv shows that it isn’t just with respect to conflict minerals that the EU is having difficulty in trying to enhance transparency. The Commission’s proposals in early 2013 (but foreshadowed in 2011) to increase disclosure with respect to social and environmental matters met some organized opposition. The European Council touched on the issue in May in the context of addressing tax evasion (measures on this may be more likely):

The proposal amending the Directives on disclosure of non-financial and diversity information by large companies and groups will be examined notably with a view to ensuring country-by-country reporting by large companies and groups

Here’s what the Euractiv article says about this:

“It is strange that they have pulled back on what leaders agreed so recently,” said another source on condition of anonymity. “There is some suggestion that it was very late at night [at the summit] when the leaders made their pledge, and not all of them understood what they were agreeing to!” the source continued.

conflict minerals in the news November 15, 2013

Posted by Bradley in : financial regulation , add a comment

The 6th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains has been meeting in Rwanda. Meanwhile, it seems that there is some uncertainty about how the EU will be regulating conflict minerals. And the DC Circuit will hear the National Association of Manufacturers’ appeal of the rejection of its challenge to the US rules (here is a link to NAM’s latest brief in the case filed this week).

judge rakoff on the downside of corporate deferred prosecution agreements November 13, 2013

Posted by Bradley in : financial regulation , add a comment

There’s a lot more than this in the article (at zerohedge) which suggests that the government’s role in creating the conditions which propagated the financial crisis helps to explain why we haven’t been seeing criminal prosecutions of senior financiers. But part of the story Judge Rakoff tells is of a prosecutorial environment which focused more on corporate than on individual responsibility:

if your priority is prosecuting the company…Early in the investigation, you invite in counsel to the company and explain to him or her why you suspect fraud. He or she responds by assuring you that the company wants to cooperate and do the right thing, and to that end the company has hired a former Assistant U.S. Attorney, now a partner at a respected law firm, to do an internal investigation. The company’s counsel asks you to defer your investigation until the company’s own internal investigation is completed, on the condition that the company will share its results with you. In order to save time and resources, you agree. Six months later the company’s counsel returns, with a detailed report showing that mistakes were made but that the company is now intent on correcting them. You and the company then agree that the company will enter into a deferred prosecution agreement that couples some immediate fines with the imposition of expensive but internal prophylactic measures. For all practical purposes the case is now over. You are happy because you believe that you have helped prevent future crimes; the company is happy because it has avoided a devastating indictment; and perhaps the happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched…. Just going after the company is ..both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility.

Meanwhile, the SEC just announced its first deferred prosecution agreement with an individual. And, as Brandon Garrett and David Zaring note here, the UK has adopted a regime for deferred prosecution agreements which differs in some important respects from the US approach:

Britain’s impending adoption of the agreements, on the other hand, exemplifies the cautious embrace offered by good administrative law.
Britain’s proposed program comes with a code governing its use, and a requirement that a court conclude that the agreement is both “in the interests of justice” and “fair, reasonable, and proportionate.” Moreover, the proposal itself has been opened for comment from the public.

eu consultation on evaluation November 12, 2013

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The EU Commission seeks input on its consultation on evaluation by February 25, 2014. The document explains that a part of the purpose of evaluation is about transparency:

EU stakeholders and citizens have a right to ask the Commission to give an account of what was done and achieved, not least because tax payers’ money is being used to develop and fund the various interventions. This entitles citizens, stakeholders and parliamentarians to hold the administration to account and to see more clearly whether previous promises have materialised and if not what the likely reasons were and what aspects deserve special attention. Transparency can also help to increase trust, as institutions that are transparent and self-critical tend to be more trusted than institutions which do not produce realistic and objective, detailed and full assessments of the performance of their actions. By publishing evaluation findings, the Commission is publicly taking responsibility for its actions, acknowledging how an intervention is performing and inviting further feedback.

There’s a caution in the document about relying on stakeholder views:

It is important to understand that evaluation should not be based only on stakeholder views. It always implies a careful analysis of stakeholders’ arguments and a double-checking against the arguments of other stakeholder groups and, where possible, against information from independent third parties or official statistics. To capture the “end-user perspective” in an evaluation, it needs to be carefully checked whether to rely on data and arguments by organised stakeholder groups at national or European level is sufficient, or whether it would be better to reach out directly to final beneficiaries or end-users (by interviewing a representative sample of individuals – consumers, farmers, travellers, students, business owners, etc.) which we hoped would benefit from a policy or have had to bear its cost. Likewise, quantitative data should always be complemented with and double-checked against qualitative information from other sources (interviews, etc.). This means for instance that an evaluation should not just present an econometric model, its results and limitations, but should always seek to get further confirmation by asking stakeholders in how far and why the results make sense to them.

the ombudsman and stakeholders November 12, 2013

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The EU Ombudsman has published a critical decision with respect to the European Banking Authority’s 2011 appointment of the Banking Stakeholders Group (this is the appointment of the group prior to last month’s announcement of a new Banking Stakeholders Group).
The decision states:

the Ombudsman is conscious of the difficulties inherent in combining geographical, gender and interest representation criteria with the need to ensure that the members chosen are competent, particularly in view of the fact that, as stated above, the EBA had no previous experience of carrying out this task. Finally, the Ombudsman takes the view that it was reasonable of the EBA to have confined its selection of BSG members from among those who had expressed an interest in appointment following a call for expression of interest from potential stakeholders. This approach complied with Article 37 (3) of the Regulation and the requirement laid down therein, according to which, “members of the Banking Stakeholder Group shall be appointed by the Board of Supervisors, following proposals from the relevant stakeholders”

Nevertheless, the Ombudsman did find instances of maladministration. For example:

the Ombudsman finds that, in the absence of any convincing explanation, by deciding to appoint 9 out of the 10 members of the “industry” category by selecting representatives from “old” Member States, the EBA did not comply with the requirement to ensure “to the extent possible”, “an appropriate geographical balance and representation of stakeholders across the Union”. It thus committed an instance of maladministration.

Choosing all five consumer stakeholders from “new” Member States and only one employee stakeholder member were other instances of maladministration.The Ombudsman also wrote that identifying entities as user stakeholders which were:

clearly not retail users of the services provided by the financial/banking sector, but rather providers of services to the latter (accounting and audit firms, credit-rating agencies) cannot be considered to be in line with the Regulation.

payday loans – a policy problem on both sides of the atlantic November 6, 2013

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The CFPB invites the submission of complaints about payday loans starting today (and the Pew Charitable Trusts published a report last week on payday lending). Meanwhile, the UK Business, Innovation and Skills Committee yesterday held an evidence session on the regulation of pay-day loan companies (a follow-up to the Committee’s 2012 report).

next round of ttip negotiations November 4, 2013

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In Brussels November 11-15. There’s a stakeholder briefing (register by emailing your name(s) and the name of the organisation to TRADE-TTIP-EVENTS@ec.europa.eu by Friday 8 November at 12:00 CET):

The European Commission will organise a briefing session for stakeholders during the second round of the negotiations on Friday 15 November. Non-governmental organisations, consumer groups, trade unions, professional organisations, business and other civil society organisations will have the opportunity to exchange views with chief negotiators of both sides.

Meanwhile the CBI’s report, which focuses on the necessity of the UK’s continuing involvement in the (somewhat adjusted) EU is based on the importance of increased global competitiveness:

British business is clear that the best way to be outward facing and globally competitive in the modern era is to continue to use and influence the EU as a base from which to build trading links and maximise interdependence with economies all over the world, whilst reforming the EU to ensure that it allows the UK to realise this global future. Attempting to reverse the process of increasing interdependence and return to a system of bilateral ad hoc arrangements will not create and keep the jobs the UK needs in order to maintain and improve living standards for all its citizens or enhance its standing as a global leader.