Press Releases

WASHINGTON – Today U.S. Sens. Mark R. Warner (D-VA) and John Kennedy (R-LA), members of the Senate Banking Committee, introduced the Securities Fraud Enforcement and Investor Compensation Act, bipartisan legislation that would give the Securities and Exchange Commission (SEC) power to seek restitution for Main Street investors harmed by securities fraud.

The bill would give the SEC a broader range of tools to seek compensation for investors who’ve lost money to Ponzi schemes and other investment scams. It also extends the window of time for which the SEC can pursue a claim on an investor’s behalf from five years to ten.

“As Bernie Madoff demonstrated, financial fraudsters can sometimes go on for years, even decades, before they finally get caught. They shouldn’t be able to rip off investors just because some arbitrary five-year window has expired,” said Sen. Warner. “This bill will give the Securities and Exchange Commission more time and additional tools to seek restitution for everyday Americans who fall victim to investment scams.”

 “Investors who are scammed by con artists like Bernie Madoff and Allen Stanford lose their life savings. All too often, the victims of financial fraud aren’t wealthy people,” Sen. Kennedy said. “They’re middle class Americans who lose every penny they set aside for their retirements. Because of a narrow window of time for recouping stolen investment dollars, fraudsters are actually incentivized to keep the shell game going for decades. This bill addresses that problem.”

 

Background:

On June 5, 2017, the Supreme Court in Kokesh v. Securities Exchange Commission ruled that the SEC only has five years to bring disgorgement claims against bad actors to try to compensate harmed Main Street investors. Although the SEC strives to bring cases as soon as possible, sometimes well-concealed frauds are not discovered for many years. (As an example, Bernie Madoff was able to defraud investors for decades before his investment fund was revealed as Ponzi scheme in 2009.) Under the Kokeshprecedent, clever fraudsters can manage to retain any ill-gotten gains from outside the five-year window.  

The implications of the Kokesh ruling limiting the SEC’s enforcement window to five years have been significant. The SEC’s 2018 enforcement report noted that “the court’s ruling in Kokesh may cause the Commission to forgo up to approximately $900 million in disgorgement, of which a substantial amount likely could have been returned to retail investors.” The Securities Fraud Enforcement and Investor Compensation Act addresses this problem by expanding the range of tools available to the SEC to pursue compensation for scammed investors, subject to a 10-year statute of limitations.

Today, the SEC typically compensates harmed investors by bringing disgorgement claims, which allow the SEC to recoup any ill-gotten profits from the perpetrator and turn them over to the investor. Sometimes, the profits are small, and the compensation can represent just a small fraction of the overall loss to the investor as a result of the fraud. Under the terms of the bill, the SEC would retain the power to bring disgorgement claims for up to five years, but would also gain the authority to file claims of restitution, which would increase the amount of compensation available to make whole harmed investors. Rather than limiting the compensation to just the profit margin of the perpetrator, as with a disgorgement claim, restitution would allow the SEC to recover from fraudsters and refund investors the full amount of their losses, up to ten years after the fact.

Bill text is available here.

 

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WASHINGTON – U.S. Sens. Mark R. Warner and Tim Kaine (both D-VA) joined Sen. Jack Reed (D-RI) and the entire Senate Democratic Caucus in calling for the Consumer Financial Protection Bureau (CFPB) to protect U.S. military personnel and their families from predatory lenders. In a letter addressed to CFPB Director Kathleen Kraninger, the Senators urged CFPB not to cease checking for compliance with the Military Lending Act (MLA) in the Bureau’s routine lender examinations.

“When the CFPB was making every effort to protect servicemembers and their families, its own routine examination of one payday lender uncovered a violation of the MLA, where loans at rates higher than 36% were being extended to more than 300 active-duty servicemembers or their dependents,” the Senators wrote. “We urge you to continue these examinations in order to pursue the clear bipartisan goals of supporting military readiness, saving taxpayer money, and protecting our servicemembers and their families from predatory lenders.”

They concluded, “The CFPB should not have to be persuaded to stand up for consumers, especially military consumers and their families who simply do what’s right when asked to protect and defend our nation.  We urge you to do your duty and carry out the CFPB’s mission by standing with servicemembers and their families and ensuring that they receive all of the MLA protections they have earned.”

The MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and credit gouging. The law caps at 36% the annual interest rate for an extension of consumer credit to a servicemember or their dependents. It also strengthens military readiness by helping to preventing unnecessary servicemember separations caused by predatory lending. According to the Department of Defense (DOD), losing a servicemember due to personal issues, such as financial instability, costs taxpayers and DOD more than $58,000 per separated servicemember. In their letter, the Senators also requested that the bureau provide a full justification of its decision put servicemembers at risk. 

Sens. Warner and Kaine have previously pressed the administration on this issue, and have been outspoken advocates for Virginia’s active duty military personnel, veterans, and their families. In February, they wrote to the Secretaries of the U.S. Navy, Army, and Air Force, requesting information about military housing contracts with private companies after allegations surfaced of health hazards for military families. They also called on the VA in November to resolve payment issues that threatened to displace veterans from their homes.

Full text of the letter is below and a copy can be found here.

 

Hon. Kathleen Kraninger

Director

Consumer Financial Protection Bureau

1700 G St. N.W.

Washington, D.C. 20552

 

Dear Director Kraninger:

 

We write to request that you fulfill the Consumer Financial Protection Bureau’s (CFPB) mission by including compliance with the Military Lending Act (MLA) in the Bureau’s routine lender examinations, as was its practice prior to November 2018.  In short, we urge you to stand up to predatory lenders and stand with servicemembers and their families.

 

In 2006, Republicans and Democrats set aside partisanship and worked across the aisle to enact the MLA, which not only caps at 36% the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents, but also strengthens military readiness by preventing unnecessary servicemember separations caused by predatory lending.  According to DOD, losing a servicemember due to personal issues, such as financial instability, costs taxpayers and DOD more than $58,000 for each separated servicemember.

 

Indeed, when the CFPB was making every effort to protect servicemembers and their families, its own routine examination of one payday lender uncovered a violation of the MLA, where loans at rates higher than 36% were being extended to more than 300 active-duty servicemembers or their dependents.  We urge you to continue these examinations in order to pursue the clear bipartisan goals of supporting military readiness, saving taxpayer money, and protecting our servicemembers and their families from predatory lenders.

 

The CFPB’s existing statutory authorities are more than sufficient to justify including MLA compliance in routine examinations, and to our knowledge, the CFPB’s authority in this regard has never been challenged.

 

As explained by the Consumer Federation of America in its November 1, 2018 legal analysis - Missing in Action? Consumer Financial Protection Bureau Supervision and the Military Lending Act - the relevant statutory provisions give the CFPB more than one basis for including the MLA in CFPB examinations.

 

For instance, one such provision, Section 1024(b)(1)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, explicitly states that the CFPB “shall require reports and conduct examinations on a periodic basis…for purposes of…detecting and assessing risks to consumers and to markets for consumer financial products and services.”  Charging servicemembers and their families more than 36% interest for loans is clearly a risk to consumers and indeed, DOD has stated that “high-cost debt can detract from mission focus, reduce productivity, and require the attention of supervisors and commanders.”  Therefore, the CFPB is authorized under Section 1024(b)(1)(C) to conduct examinations for this purpose. 

 

When Office of Management and Budget Director Mick Mulvaney removed MLA compliance from CFPB examinations, he argued that “such a broad statutory reading offers little to restrain the Bureau from supervising for compliance with a wide variety of other laws.”  To be clear, based on the plain text of Section 1024(b)(1)(C), Congress specifically intended this broad statutory reading.  In the aftermath of the worst financial crisis in decades where safety and soundness regulators failed to keep a watchful eye over Wall Street and predatory lenders, Congress provided the CFPB with broad powers to protect consumers – with an explicit focus on servicemembers and their families – so that risks could be spotted before they caused irreparable harm.  In short, the CFPB continues to have all the authority it needs to include the MLA as part of its routine lender examinations.  There is no law that prevents you from doing so.  

 

The CFPB should not have to be persuaded to stand up for consumers, especially military consumers and their families who simply do what’s right when asked to protect and defend our nation.  We urge you to do your duty and carry out the CFPB’s mission by standing with servicemembers and their families and ensuring that they receive all of the MLA protections they have earned.  Please provide a full justification of the current CFPB leadership’s decision to put servicemembers at risk by failing to do its duty no later than Friday, March 8, 2019.

 

Sincerely,

 

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WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Ranking Member of the Senate Banking Subcommittee on Securities, Insurance and Investment, released the following statement after the Securities and Exchange Commission (SEC) adopted a transaction fee pilot for National Market System (NMS) stocks to test the effects of “maker-taker” fee models on order routing and execution quality. The pilot program will create two test groups, one that bans rebates and linked pricing with another that tests a fee cap of $0.0010: 

“I’ve long urged the SEC to take the step it has taken today, and I’m heartened to see the SEC adopt this pilot.  It’s time we get this data to better understand stock exchange transaction-based fees and rebates so we can make sure our market structure is benefiting Main Street investors.”

Under the maker-taker pricing model, securities exchanges pay rebates to brokers that send bids and offers not intended for immediate execution, in the hopes of incentivizing liquidity in the market. Brokers who immediately execute their orders pay fees, which offset the rebates paid to brokers who create liquidity by not immediately executing their orders. However, this model has come under Congressional scrutiny after a 2013 study found evidence it created a conflict of interest for brokers – who may be incentivized to send orders that generate the largest rebate for the broker, rather than the best trade for the client. 

Since 2014, Sen. Warner has been raising concerns about the “maker-taker” model. In April 2016, Sen. Warner and Sen. Mike Crapo (R-ID) wrote to the SEC expressing support for a pilot program to study the effects of rebates on U.S. equity markets.  In July 2017, Warner wrote to newly-appointed SEC Chairman Jay Clayton and called for “…pursuing the full elimination of [maker-taker] rebates.” 

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WASHINGTON – Today, U.S. Sen. Mark R. Warner (D-VA) sent another letter to Federal Trade Commission (FTC) Chairman Joseph J. Simons pressing the leader of the agency to use the authorities granted to it by Congress to protect American businesses and shoppers from digital advertising fraud, which reached $7.4 billion in 2016 – costs that are later passed on to consumers in the form of higher prices. Today’s letter follows an earlier Oct. 25 letter urging the FTC to do more to respond to the prevalence of digital ad fraud, in light of inaction by major industry players like Google to voluntarily curb the problem.

Sen. Warner noted that in large part because of enforcement decisions made by the FTC, Google has come to dominate the digital ad market, but has done little to crack down on fraud. Google was the only major social media company absent for a September hearing in the Senate Intelligence Committee, on which Sen. Warner serves as Vice Chairman.

Sen. Warner today criticized the FTC’s failure to take action, writing, “As long as Google stands to profit from the sale of additional advertisements, the financial incentive for it to voluntarily root out and address fraud remains minimal. It was thus enormously discouraging to read your own response to my [Oct. 25] letter, which did nothing to address the inaction of major industry stakeholders in curbing these abuses. Instead, your letter appeared to suggest that your authority to address deceptive and unfair practices does not apply to this conduct; rather, your letter portrays the FTC as successfully addressing online fraud through workshops and education campaigns. Neither suggestion inspires confidence in the FTC’s efforts as digital ad fraud has continued to proliferate.”

“In recent congressional testimony, you have urged Congress to provide the FTC with additional authority related to promoting competition and consumer protection in the digital age. Increasingly, I am not convinced the Commission is adequately utilizing the authority it already has to crack down on fraud and other misbehavior,” Sen. Warner added. “The FTC is the agency explicitly empowered to address fraud and deceptive practices, and Section 5 of the Federal Trade Commission Act was written in broad terms precisely for this purpose. Since 1938, Congress has given your agency broad enforcement authority to protect consumers and expects you to use it. I would like to sit down with you in the next month to discuss how the FTC can ensure it does the job Congress intended it to do.” 

The full text of today’s letter is available here, and also appears below.

In October, Sen. Warner wrote a letter to the Federal Trade Commission (FTC) Chairman Joseph Simons expressing concern following a report published by Buzzfeed detailing continued prevalence of digital advertising fraud and inaction by Google to curb these efforts. AccordingBuzzfeed, this scheme has generated hundreds of millions of dollars in fraudulent advertising revenues, with operations spanning more than 125 Android apps and websites. The FTC’s November response can be found here. 

In July 2016, Sen. Warner and Sen. Chuck Schumer (D-NY) wrote to then-FTC Chairwoman Ramirez calling on the agency to protect consumers from the growing digital ad fraud phenomenon. Since then, reports have estimated that digital ad fraud has only grown to $7.4 billion in 2017 – and projected to rise to $10.9 billion by 2021.

 

The full text of today’s letter follows:

 

December 6, 2018

 

The Honorable Joseph J. Simons

Chairman

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, D.C. 20530

 

Dear Chairman Simons,

 

On October 25th, I wrote to you to express grave concerns with the growing phenomenon of digital ad fraud, and in particular my frustration with the ways that large intermediaries have turned a blind eye to, and in certain cases helped enable, this fraud. This letter followed concerns Senator Schumer and I raised in a 2016 letter to your predecessor about the negative economic impact of ad fraud on end users, advertisers, and publishers. I was deeply disappointed by your November 19th response, which failed to substantively address any of the concerns that I have been raising for two years now regarding the Federal Trade Commission’s failures to crack down on digital advertising fraud.

 

The digital advertising market has come to be largely dominated by one company,  in part because of enforcement decisions by the FTC.  The FTC’s failure to act has had the effect of allowing Google to structure its own market; through a series of transactions, the company has accomplished a level of vertical integration that allows it in effect to act as the equivalent of market-maker, commodities broker, and commodities exchange for digital advertising – in the process creating a range of conflicts of interest. While the company controls each link in the supply chain and therefore maintains the power to monitor activity in the digital advertising market from start to finish, it has continued to be caught flat-footed in identifying and addressing digital ad fraud. As we’ve seen in other contexts – such as the rampant proliferation of online disinformation – major platforms including Google have often proved unwilling to address misuse of their platforms until brought to the wider public’s attention by Congress or media outlets. As long as Google stands to profit from the sale of additional advertisements, the financial incentive for it to voluntarily root out and address fraud remains minimal.

 

It was thus enormously discouraging to read your own response to my letter, which did nothing to address the inaction of major industry stakeholders in curbing these abuses. Instead, your letter appeared to suggest that your authority to address deceptive and unfair practices does not apply to this conduct; rather, your letter portrays the FTC as successfully addressing online fraud through workshops and education campaigns. Neither suggestion inspires confidence in the FTC’s efforts as digital ad fraud has continued to proliferate.

 

In recent congressional testimony, you urged Congress to provide the FTC with additional authority related to promoting competition and consumer protection in the digital age.  Increasingly, I am not convinced the Commission is adequately utilizing the authority it already has to crack down on fraud and other misbehavior. The FTC is the agency explicitly empowered to address fraud and deceptive practices, and Section 5 of the Federal Trade Commission Act was written in broad terms precisely for this purpose. 

 

Since 1938, Congress has given your agency broad enforcement authority to protect consumers and expects you to use it. I would like to sit down with you in the next month to discuss how the FTC can ensure it does the job Congress intended it to do.   

 

Sincerely,

 

Mark R. Warner

United States Senator

 

 

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WASHINGTON — U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Banking Committee, released the following statement after the Senate voted to advance the nomination of Kathy Kraninger to head the Consumer Financial Protection Bureau (CFPB):

“Director Mulvaney has been a disaster for consumers as head of the Consumer Financial Protection Bureau. He has dramatically reduced enforcement against banks and other financial institutions, weakened the law that protects servicemembers and their families from predatory lending, and rendered the Office of Fair Lending and Equal Opportunity quite toothless, to name just a few examples. 

“In her hearing before the Senate Banking Committee, Ms. Kraninger testified that she ‘cannot identify any action’ that Director Mulvaney ‘has taken with which I disagree.’ The CFPB is responsible for making sure that banks and big corporations can’t rip off American consumers. It should have a Director who shares that mission.”

 

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WASHINGTON- U.S. Senators Amy Klobuchar (D-MN), Mark Warner (D-VA), Chris Coons (D-DE), and Richard Blumenthal (D-CT) pressed Facebook CEO Mark Zuckerberg to respond to reports that the company used contractors to retaliate against or spread intentionally inflammatory information about their critics. Since the 2016 election, both the government and Facebook internal investigations have revealed that the company failed to adequately protect the data of its 2.2 billion users. Recent reports—including one from the New York Times—allege that Facebook has taken significant steps to undermine critics, including hiring partisan political consultants to retaliate and spread intentionally inflammatory information about people who have criticized Facebook, which, if not properly disclosed, may have campaign finance implications.

“We are gravely concerned by recent reports indicating that your company used contractors to retaliate against or spread intentionally inflammatory information about your critics,” the senators wrote. “In addition, the staggering amount of data that Facebook has collected on both its users and people who have not subscribed to or consented to use of the platform, raises concern that the company could improperly or illegally use its vast financial and data resources against government officials and critics seeking to protect the public and our democracy.”

“Both elected officials and the general public have rightfully questioned whether Facebook is capable of regulating its own conduct.” 

Russia attempted to influence the 2016 presidential election by buying and placing political ads on platforms such as Facebook, Twitter, and Google. The content and purchaser(s) of those online advertisements are a mystery to the public because of outdated laws that have failed to keep up with evolving technology. The Honest Ads Act, led by Klobuchar, Warner, and the late Senator John McCain (R-AZ) and cosponsored by Coons and Blumenthal, would prevent foreign actors from influencing our elections by ensuring that political ads sold online, including social media platforms like Facebook, are covered by the same rules as ads sold on TV, radio, and print.

 

The full text of the letter can be found below:

 

Dear Mr. Zuckerberg:

 

We are gravely concerned by recent reports indicating that your company used contractors to retaliate against or spread intentionally inflammatory information about your critics.  

Since the 2016 election, both the government and your own internal investigations have revealed that your company failed to adequately protect the data of its 2.2 billion users. Your company also failed to implement protocols to prevent manipulation by foreign adversaries working to undermine America’s political system. Both elected officials and the general public have rightfully questioned whether Facebook is capable of regulating its own conduct.  

According to recent reports, your company hired contractors to retaliate and spread intentionally inflammatory information about people who have criticized Facebook, which, if not properly disclosed, may have campaign finance and other potential legal implications. In addition, the staggering amount of data that Facebook has collected on both its users and people who have not subscribed to or consented to use of the platform, raises concern that the company could improperly or illegally use its vast financial and data resources against government officials and critics seeking to protect the public and our democracy.

In light of these concerns, we respectfully request you answer the following questions:

 

1.      To your knowledge, did your company hire any entity – including, but not limited to research firms and contractors – to collect or find information to be used in retaliation against people who criticized Facebook, including elected officials who were scrutinizing your company?

 

2.      Did your company hire any entity – including, but not limited to research firms and contractors – to spread negative or intentionally inflammatory information in retaliation against people who criticized Facebook, including elected officials who were scrutinizing your company?

 

3.      Did your company – or any entity affiliated with or hired by your company – ever use any of the vast financial and data resources available to Facebook in retaliation against people who criticized Facebook, including elected officials who were scrutinizing your company?

 

4.      Did your company – or any entity affiliated with or hired by your company – ever seek to conceal information related to foreign interference with the 2016 U.S. election from the public or government investigators? 

 

5.      Did your company – or any entity affiliated with or hired by your company — ever contact any media outlets with negative or misleading information, or suggest, promote, or amplify negative or misleading social media about your critics, including elected officials scrutinizing your company?

 

6.      How much money have you expended or paid other entities to collect, find, spread or amplify information about people who have criticized Facebook, including elected officials scrutinizing your company? Has any of that spending been publically disclosed?

 

7.      Some of us have requested that the Deputy Attorney General expand the scope of the Department of Justice’s existing investigations to include the latest reports that Facebook hired contractors to retaliate and spread negative information about people who criticized the company. If the Department’s investigation is expanded to include this recent report, will you commit to co-operating with any investigation into this matter? 

 

Thank you for your prompt attention to this request.

 

Sincerely,

 

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WASHINGTON — U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence, and U.S. Sen. Marco Rubio (R-FL), a member of the Committee, urged Canadian Prime Minister Justin Trudeau to reconsider Huawei’s inclusion in any aspect of Canada’s 5G development, introduction, and maintenance. A letter from the two Senators to the Prime Minister follows comments made by Head-Designee of the Canadian Center for Cyber Security Scott Jones regarding Huawei. 

The entry of Chinese state-directed telecommunications companies like Huawei into the Canadian market could seriously jeopardize the relationship between U.S. and Canadian carriers, depriving North American operators of the scale needed to rapidly build out 5G networks.

The full text of the letter is below. A copy of the signed letter is available here. 

 

Dear Prime Minister Trudeau:

 

We write with grave concerns about the possibility that Canada might include Huawei Technologies or any other Chinese state-directed telecommunications company in its fifth-generation (5G) telecommunications network infrastructure.  As you are aware, Huawei is not a normal private-sector company.  There is ample evidence to suggest that no major Chinese company is independent of the Chinese government and Communist Party—and Huawei, which China’s government and military tout as a “national champion,” is no exception.

 

Based on what we know about Chinese state-directed telecommunications companies, it was troubling to learn that on September 20, 2018, the new Head-Designee of the Canadian Center for Cyber Security Scott Jones told the House of Commons Standing Committee on Public Safety and National Security that banning Huawei is not needed, in response to a question about why Canada has not come out against Huawei as other Five Eyes allies have.  Specifically, he claimed that Canada has “a very advanced relationship with our telecommunications providers, something that is different from most other countries,” adding, “We have a program that is very deep in terms of working on increasing that broader resilience piece especially as we are looking at the next-generation telecommunications networks.”

 

In contrast to Mr. Scott’s comments, however, three former senior Canadian national security officials warned earlier this year against the inclusion of Huawei in Canada’s 5G network.  One of them—Mr. Ward Elcock, former Deputy Minister of National Defence—told the Globe and Mail on March 18, 2018, “I have a pretty good idea of how signal-intelligence agencies work and the rules under which they work and their various operations,” concluding that, “I would not want to see Huawei equipment being incorporated into a 5G network in Canada.”

 

While Canada has strong telecommunications security safeguards in place, we have serious concerns that such safeguards are inadequate given what the United States and other allies know about Huawei.  Indeed, we are concerned about the impact that any decision to include Huawei in Canada’s 5G networks will have on both Canadian national security and “Five Eyes” joint intelligence cooperation among the United States, United Kingdom, Australia, New Zealand, and Canada.  As you know, Australia effectively banned Huawei, ZTE, and other Chinese state-directed companies from its nation’s 5G networks by excluding firms that “are likely to be subject to extrajudicial directions from a foreign government” and therefore pose unacceptable risks to national security.  Moreover, the United Kingdom’s Huawei Cyber Security Evaluation Centre Oversight Board’s 2018 annual report to Britain’s national security adviser found that “identification of shortcomings in Huawei’s engineering processes have exposed new risks in the UK telecommunications networks and long-term challenges to mitigation and management.”

 

Further, the strong alignment between the United States and Canada in spectrum management has meant that American and Canadian carriers in many cases share complementary spectrum holdings, jointly benefiting from economies of scale for equipment designed for regionally harmonized frequencies. The entry of suppliers such as Huawei into the Canadian market could seriously jeopardize this dynamic, depriving both Canadian and American operators of the scale needed to rapidly build out 5G networks.

 

Given the strong statements by former Canadian national security officials as well as similar concerns out of the U.S., Australia, and the United Kingdom, we hope that you will reconsider Huawei’s inclusion in any aspect of Canada’s 5G development, introduction, and maintenance.  Should you have any questions about the threat that Chinese state-directed telecommunications firms pose to your networks, we urge your government to seek additional information from the U.S. Intelligence Community.

 

Thank you for your attention to this matter.

 

Sincerely,

 

 

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WASHINGTON —U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Committee on Banking, Housing, and Urban Affairs, joined a group of 12 Senate Democrats in demanding CFPB leadership to explain how Consumer Financial Protection Bureau Policy Director Eric Blankenstein was chosen to oversee supervision, enforcement, and fair lending issues given his past racist writings.

Last week, the Washington Post uncovered a 2004 blog where Blankenstein, under an alias, posted bigoted writings on race, hate crimes, and women. In his current role as Policy Director at CFPB, Blankenstein is charged with enforcing consumer protection laws, including laws in place to prevent lending discrimination. CFPB leadership has failed to condemn Mr. Blankenstein’s writings, and failed to explain how someone with Mr. Blankenstein’s views came to be charged with fair lending responsibilities.

“Mr. Blankenstein was not hired through the competitive service process like most CFPB employees; he is one of your hand-selected political appointees. Further, you have specifically tasked him with overseeing the CFPB’s fair lending supervision and enforcement work at a time when you have decided to restructure the Office of Fair Lending and Equal Opportunity.”the Senators wrote.  “It is unclear whether his appointment is due to a failure to investigate Mr. Blankenstein’s background prior to his appointment, Mr. Blankenstein withholding information from you and the CFPB, or an informed decision on your part to ignore his public comments.”

Joining Sen. Warner on the letter are U.S. Sens. Sherrod Brown (D-OH), Catherine Cortez Masto (D-NV), Richard Blumenthal (D-CT),  Kristen Gillibrand (D-NY), Elizabeth Warren (D-MA), Ron Wyden (D-OR), Kamala Harris (D-CA), Jack Reed (D-RI), Maria Cantwell (D-WA), Edward Markey (D-MA), Robert Menendez (D-NJ), and Cory Booker (D-NJ). 

In his role as a member of the Senate Banking Committee, Sen. Warner has advocated for policies that support the well-being of diverse communities. Earlier this year, he led an effort in the Senate to urge banking regulators to take steps that would strengthen access to credit for disadvantaged communities under the Community Reinvestment Act (CRA).

Full text of the letter can be found here and below:

The Honorable Mick Mulvaney
Consumer Financial Protection Bureau
1700 G Street NW
Washington, D.C. 20552

Dear Mr. Mulvaney,

We are deeply concerned that you have placed a person with a history of racist writing at a senior position within the Consumer Financial Protection Bureau (CFPB). 

The Washington Post reported last week that Eric Blankenstein, a political appointee that you chose to oversee supervision, enforcement, and fair lending, wrote under an alias in defense of the use of racial slurs, and claimed without evidence that the majority of reported hate crimes were hoaxes. When confronted with his past writing on these and other subjects, Mr. Blankenstein acknowledged his authorship, but failed to denounce his writings. Only after an outcry from CFPB career staff did Mr. Blankenstein send a note apologizing for the “framing” and “tone” of his arguments – but he did not apologize for his defense of racial slurs, nor did he apologize for reflexively disbelieving victims of hate crimes. 

Mr. Blankenstein was not hired through the competitive service process like most CFPB employees; he is one of your hand-selected political appointees. Further, you have specifically tasked him with overseeing the CFPB’s fair lending supervision and enforcement work at a time when you have decided to restructure the Office of Fair Lending and Equal Opportunity. It is unclear whether his appointment is due to a failure to investigate Mr. Blankenstein’s background prior to his appointment, Mr. Blankenstein withholding information from you and the CFPB, or an informed decision on your part to ignore his public comments.

In order to ensure that the CFPB is fulfilling its fair lending mandate and thoroughly evaluating senior employees with fair lending responsibilities, it is critical for us to understand how someone with Mr. Blankenstein’s views was charged with this particular set of duties.

Please respond to the following requests no later than October 22, 2018.

1)      Were you personally aware of any of the writings referenced in The Washington Post article prior to hiring Mr. Blankenstein?

a.      If not, did you ask Mr. Blankenstein whether he had written anything that would reflect poorly on the CFPB or indicate that he was not an appropriate candidate for this role prior to extending an offer of employment? Did he respond verbally or in writing to any inquiry about past public statements?

b.      If so, how were you made aware of the writings? Why did you believe it was still appropriate to hire Mr. Blankenstein to oversee supervision, enforcement and fair lending?

2)      Please describe your process for identifying potential candidates for political appointment to senior CFPB positions and provide all written guidelines and procedures related to identifying potential candidates for appointment as senior CFPB officials. 

a.      Was Mr. Blankenstein recommended to you by a Member of Congress, a federal employee, or a person or entity subject to CFPB oversight?

b.      Were all established guidelines and procedures adhered to during your search for candidates to fill this position? Were any other candidates considered for this position?

3)      Please describe your process for vetting candidates for political appointment to senior CFPB positions, provide all written guidelines and procedures related to the performance of background checks or other due diligence, and specify whether such background checks include investigations into statements on social media, websites, or in other public forums.

a.      Were all established guidelines related to background checks or other due diligence adhered to in evaluating Mr. Blankenstein’s appointment? Have they been adhered to for all CFPB political appointments during your tenure?

b.      As part of any background check or other due diligence, was Mr. Blankenstein asked about past statements on social media, websites, or other public forums? If so, did Mr. Blankenstein properly disclose the above referenced writings? 

4)      Does Mr. Blankenstein have the confidence and support of the enforcement and fair lending staff he oversees? Will you further investigate Mr. Blankenstein’s past writings, and do you intend to take action if you find more troubling statements?

 

Sincerely,

 

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WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence and co-chair of the Senate Cybersecurity Caucus, released the following statement on the announcement by Facebook that it discovered a security issue affecting almost 50 million accounts: 

“The news that at least 50 million Facebook users had their accounts compromised is deeply concerning. A full investigation should be swiftly conducted and made public so that we can understand more about what happened.  

“Today’s disclosure is a reminder about the dangers posed when a small number of companies like Facebook or the credit bureau Equifax are able to accumulate so much personal data about individual Americans without adequate security measures. 

“This is another sobering indicator that Congress needs to step up and take action to protect the privacy and security of social media users. As I’ve said before – the era of the Wild West in social media is over.”  

To kick start the debate around social media legislation, Sen. Warner in July released a white paper containing a suite of potential policy proposals for the regulation of social media.


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WASHINGTON— Thanks to bipartisan legislation authored and passed into law by U.S. Sen. Mark R. Warner (D-VA), Virginia consumers will be able to freeze and unfreeze their credit files for free, beginning today. 

The free credit freezes – which experts say are one of the best tools available to protect against identity theft – are the result of a provision included in a bipartisan bill Sen. Warner wrote and introduced to boost economic growth and protect Virginia consumers. After five years of bipartisan negotiations that Sen. Warner helped lead, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law by President Trump in May. Following a series of high-profile data breaches that have exposed consumers’ personal and financial information, the bill includes a provision requiring all three major credit agencies – Equifax, Experian and TransUnion – to allow consumers to freeze their credit for no fee.

 “Credit freezes are one of the best ways that consumers can protect themselves against identity theft that could hurt their credit scores,” said Sen. Warner. “Good credit is essential if you want to buy a house, get a small business loan, or simply apply for a new credit card. Free credit freezes give consumers a new tool to protect themselves against criminals seeking to steal their identity.”

A security freeze makes it harder for criminals to use stolen information to open fraudulent accounts or borrow money using a stolen identity. Previously, credit bureaus charged as much as $10 per bureau to place a freeze on a consumer’s credit file. A similar fee would also be charged to temporarily remove the freeze if a consumer wanted to apply for new credit.  As a result, one study by the AARP found that fewer than 15 percent of American adults have ordered a security freeze on their credit more than a year after an enormous data breach at Equifax exposed the personal information, including Social Security numbers, birth dates, driver’s license numbers and other sensitive details, of about 148 million Americans, or nearly half the U.S. population.

With the provision in the law going into effect today, the three nationwide credit agencies – Equifax, Experian and TransUnion – must each set up a webpage for requesting fraud alerts and credit freezes. To place a credit freeze on their accounts, consumers will need to contact all three credit bureaus. The Federal Trade Commission has also posted links to those webpages on IdentityTheft.gov. Freezing prevents activity that could impact a consumer’s credit score – such as fraudulent loans taken out by someone who has stolen your identity. 

Under the new law, parents can also freeze their children’s credit report. Because children generally have a clean credit slate, they are especially valuable for identity thieves; according to research, more than 1 million children were victims of identity theft last year, and two-thirds of them were age 7 or younger. Experian has estimated that one in four minors will be a victim of identity theft before reaching adulthood. 

In addition to providing free credit freezes and unfreezes, the Economic Growth, Regulatory Relief, and Consumer Protection Act included provisions to: 

  • Protect consumers’ credit by extending the duration of a fraud alert on a consumer’s credit report from 90 days to one year. A fraud alert requires businesses that check a consumer’s credit to get the consumer’s approval before opening a new account.
  • Provide free credit monitoring for all active-duty service members.
  • Protect the credit ratings of veterans wrongly penalized by medical bill payment delays by the Department of Veterans Affairs (VA).
  • Protect seniors by extending immunity from liability to certain people who disclose suspected exploitation of seniors.
  • Protect consumers from cyber security threats by requiring the Treasury Department to submit a report to Congress on the risks of cyber threats to financial institutions and the U.S. capital markets.

Sen. Warner’s bill is also providing needed relief for community banks and credit unions so they can support consumers in small and rural Virginia communities, where regulations designed for big banks have made it harder for small lenders to provide mortgages or loans to expand small businesses and family farms.                                                                                                                   

Sen. Warner has also written legislation that would hold large credit reporting agencies like Equifax accountable for data breaches involving consumer data. The Data Breach Prevention and Compensation Act, which Sen. Warner introduced along with Sen. Elizabeth Warren (D-MA) back in January, would give the Federal Trade Commission (FTC) more authority to enforce data security and assess financial penalties on credit bureaus if they fail to adequately protect consumer data against theft. The bill has been referred to the Senate Banking Committee, of which Sen. Warner is a member.

 

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WASHINGTON, D.C. – Today, U.S. Senators Tim Kaine (D-VA), David Perdue (R-GA), Mark Warner (D-VA), and Johnny Isakson (R-GA) sent a letter to the Secretary of the Army raising concerns over a recent report about lead poisonings and dangerous lead levels in housing on U.S. Army installations, endangering military families. 

“We write to you today concerned about recent reports of lead poisoning at a number of Army installations. The health and safety of our servicemembers and their families are of the utmost importance,” the Senators said. 

While the sale of lead-based paint is banned in the United States, many older homes still have the old paint on walls, which can become dangerous to children as it peels and chips. Young children are most susceptible to lead poisoning and face long-term developmental delays.

The report highlights cases of lead poisoning at on-base housing at Fort Benning, Georgia; Fort Polk, Louisiana; Fort Hood and Fort Bliss, Texas; Fort Knox, Kentucky; and a 2015 Department of Defense IG report that found lead paint hazards at Ft. Belvoir, Virginia. In the letter, the Senators ask Army Secretary Mark Esper to provide a detailed briefing about what the Army is doing to keep military families safe and what they need from Congress to address this problem. 

“We ask that you provide our offices with a detailed briefing as soon as possible outlining the immediate and long-term mitigation strategy to keep military families safe, provide medical treatment for those potentially or previously affected, make long-lasting repairs, and finally, provide legislative proposals or guidance on legislation needed to hold maintenance contractors accountable,” the Senators concluded.

 

The full text of the letter can be found here and below.

 

Dear Secretary Esper,

 

We write to you today concerned about recent reports of lead poisoning at a number of Army installations. The health and safety of our servicemembers and their families are of the utmost importance. 

 

A recent Reuters report highlighted cases of lead poisoning at on-base housing at Fort Benning, Georgia; Fort Polk, Louisiana; Fort Hood and Fort Bliss, Texas; and Fort Knox, Kentucky. This follows a 2015 DoD inspector general report that found significant lead paint hazards at Ft. Belvoir in Virginia. At Fort Benning, Reuters conducted tests at five homes using methodology designed with a Columbia University geochemist. All five homes contained hazardous levels of deteriorating lead paint with one home far exceeding the federal threshold. Fort Knox contained levels 100 times the federal threshold.  According to Reuters, records from Brooks Army Medical Center in Texas show that from 2011 to 2016 more than 1,050 small children on bases nationwide tested positive for traces of lead higher than the Centers of Disease Control’s elevated threshold.  The report also raises concerns that the Army has discouraged certified testing to identify deteriorating lead paint in base homes and that base hospitals have not properly reported incidents of children with high lead tests to state health departments. 

 

As the report points out, these on-base homes, managed and operated largely through private partnerships, are putting families and children at risk.  We ask that you provide our offices with a detailed briefing as soon as possible outlining the immediate and long-term mitigation strategy to keep military families safe, provide medical treatment for those potentially or previously affected, make long-lasting repairs, and finally, provide legislative proposals or guidance on legislation needed to hold maintenance contractors accountable.

 

Sincerely,

 

###

WASHINGTON, D.C. – U.S. Senators Mark Warner (D-VA) and Tim Kaine (D-VA) joined Jack Reed (D-RI) and 46 of their Democratic colleagues in a letter to Office of Management & Budget Director Mick Mulvaney to urge the Trump Administration to continue protecting servicemembers and their families from abusive financial practices. The Senators are asking the Trump Administration not to abandon protections established under the Military Lending Act (MLA). The MLA was passed in 2006 with bipartisan support to help safeguard active-duty military members and their families from financial fraud, predatory loans, and abusive credit practices.  Among other military consumer protections, the law caps the annual interest rate for an extension of consumer credit to a servicemember or their dependents at 36 percent.  

“The CFPB should not be abandoning its duty to protect our servicemembers and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that servicemembers and their families continue to receive all of their MLA protections,” the Senators wrote.  

This week, the New York Times reported that: “The Trump Administration is planning to suspend routine examinations of lenders for violations of the Military Lending Act, which was devised to protect military service members and their families from financial fraud, predatory loans and credit card gouging, according to internal agency documents.  Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, intends to scrap the use of so-called supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the legislation, the main consumer measure protecting active-duty service members, according to a two-page draft of the change.” 

And NPR reported that the Trump Administration is also taking aim at financial protections for members of the military by proposing to ease restrictions on “gap insurance” that could open up servicemembers to getting cheated by predatory practices when they purchase cars.

The Senators highlighted that U.S. troops face unique financial challenges and that the financial readiness of our servicemembers is directly tied to military readiness, calling on Mr. Mulvaney not to halt military lending checks or undertake measures that would potentially harm U.S. troops and their families.

“In addition, for our servicemembers, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on servicemembers, especially when they should be given every opportunity to focus squarely on their missions,” wrote the Senators.  “What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur.   No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye.  For generations, Americans have set partisanship aside and have made every effort to provide servicemembers and their families with all the resources and protections they deserve.  We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that servicemembers and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.”

The Office of Servicemember Affairs at the CFPB has handled more than 90,000 consumer complaints from servicemembers and their families and taken action to help return hundreds of millions into the pockets of servicemembers affected by harmful practices

 

The text of the letter is below:    

 

August 15, 2018

 

Mick Mulvaney                                                                     

Director                                                                                

Office of Management and Budget                                       

725 17th Street, NW                                                               

Washington, DC 20503                                                        

 

Dear Director Mulvaney:

 

We write regarding reports that the Consumer Financial Protection Bureau (CFPB) will no longer protect servicemembers and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority.  These reports are puzzling because the CFPB already possesses the authority to enforce the MLA and examine many types of lenders for the purposes of “detecting and assessing risks to consumers and to markets for consumer financial products and services.”  The CFPB should not be abandoning its duty to protect our servicemembers and their families, and we seek your commitment that you will utilize all of the authorities available to the CFPB to ensure that servicemembers and their families continue to receive all of their MLA protections.

 

By enacting the MLA, Congress sent a clear bipartisan message that high-cost lending is a clear risk to military consumers that must be addressed to also protect military readiness.  Indeed, among its provisions, the MLA caps the annual interest rate for an extension of consumer credit to a servicemember or his or her dependents at 36%.  CFPB examinations and the CFPB’s Office of Servicemember Affairs have been critical components of ensuring the detection and prevention of risks to military consumers.  Such examinations serve as the early warning system for MLA deficiencies so that they do not snowball into costly losses for servicemembers and avoidable litigation costs and penalties for lenders.

 

Given your senior role at the Office of Management and Budget, we are sure you are aware that the MLA also helps the Department of Defense (DOD) to save taxpayer funds based on the following DOD justification for its MLA rule:

 

“Losing qualified Service members due to personal issues, such as financial instability, causes loss of mission capability and drives significant replacement costs. The Department estimates that each separation costs the Department $58,250.  Losing an experienced mid-grade noncommissioned officer (NCO), who may be in a leadership position or key technical position, may be considerably more expensive in terms of replacement costs and in terms of the degradation of mission effectiveness resulting from a loss of personal reliability for deployment and availability for duty.”

 

Needlessly stopping MLA examinations altogether and choosing instead to rely on reports of MLA violations after they occurred is further perplexing given that the CFPB is already conducting lender examinations of credit products that are also subject to the MLA.  Such a policy decision would be both inefficient and irresponsible to require a CFPB examiner to ignore as part of his or her examination risks to military consumers who are protected by the MLA.  In addition, for our servicemembers, especially those who are deployed overseas facing hostile fire, it is unreasonable to place the burden of detecting and reporting MLA abuses on servicemembers, especially when they should be given every opportunity to focus squarely on their missions.  

 

What the CFPB is reported to be contemplating is equivalent to forcing our armed forces to stop using radar, sonar, and other early warning technologies and instead react to threats as they occur.   No one would force our armed forces to do so, and the CFPB should not similarly force any of its examiners to turn a blind eye.  For generations, Americans have set partisanship aside and have made every effort to provide servicemembers and their families with all the resources and protections they deserve.  We ask no less of you and, as such, seek your commitment that you will continue the CFPB’s tradition of ensuring that servicemembers and their families receive all of their MLA protections by utilizing all of the authorities available to the CFPB.   We request that you respond with your commitment no later than Monday, August 20.

 

Sincerely,


###

 

WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence and a member of the Senate Banking and Finance Committees, joined Senate colleagues in urging the Chairmen of the Senate and House Armed Services Committees to include a Senate-passed amendment cosponsored by Sen. Warner that would reinstate penalties against ZTE in their upcoming NDAA FY2019 Conference Report. Earlier this year, intelligence leaders testified before the Senate Intelligence Committee warning that ZTE, Huawei, and other Chinese state-directed telecommunications companies have the capacity for espionage and intellectual property theft, posing clear threats to the national security, people, and economy of the United States. This week, President Trump’s Commerce Department announced an agreement to lift the ban preventing Chinese telecom giant ZTE from doing business with American suppliers.

Additionally, Senators urged the conferees to include the reforms to the Committee on Foreign Investment in the United States (CFIUS), which were a part of the recently passed Senate NDAA bill. These reforms, also known as the Foreign Investment Risk Review Modernization Act (FIRRMA), would ensure that foreign investments in the U.S. do not pose a national security risk.

Sen. Warner, a former technology executive, has long expressed concern that ZTE poses a significant threat to our national security. He recently wrote to the administration urging President Trump to re-consider a deal with the China-based company.

The text of the letter to NDAA conferees can be found here and below:

 

Dear Chairmen McCain and Thornberry, and Ranking Members Reed and Smith:

 

We write to express our strong support for measures in the Senate-passed Fiscal Year 2019 National Defense Authorization Act (FY 2019 NDAA) that would reinstate U.S. government penalties against ZTE, a Chinese state-directed telecommunications company, and modernize the Committee on Foreign Investment in the United States (CFIUS).  As you begin deliberations over the final version of the FY 2019 NDAA, we request that you include these two measures.

 

Section 6702:  Prohibition on Modification of Civil Penalties under Export Control and Sanctions Laws and Prohibition on Certain Telecommunications Equipment.

 

We strongly oppose the June 2018 deal with ZTE negotiated by the Commerce Department’s Bureau of Industry and Security (BIS) to lift the seven-year ban against the export of U.S. parts and components to ZTE.  BIS imposed this seven-year ban and other penalties against ZTE in April 2018 in response to its numerous violations of U.S. export controls and sanctions laws. 

 

We also note that our nation’s six top intelligence leaders testified before the Senate Intelligence Committee in February 2018 about their concern that ZTE, Huawei, and other Chinese state-directed telecommunications companies are beholden to the Chinese government and Communist Party, which provides the capacity for espionage and intellectual property theft, and therefore poses clear threats to the national security, people, and economy of the United States.  

 

As you prepare the Conference Report, we therefore urge you to retain—and further strengthen—Section 6702 of the Senate-passed FY 2019 NDAA, which would not only reinstate the April 2018 penalties against ZTE and prohibit the modification of any penalties against a Chinese telecommunications firm unless certain conditions are met, but also prohibit the U.S. government from using or procuring equipment from, or entering into a contract with ZTE or Huawei. 

 

Title XVII:  Foreign Investment Risk Review Modernization Act of 2018

 

We also thank you for your work protecting our national security and intellectual property by ensuring that foreign countries are not engaged in illicit behavior when investing in the United States.

 

As you are aware, the Senate version of the FY 2019 NDAA includes important reforms to the Committee on Foreign Investment in the United States that were part of the Foreign Investment Risk Review Modernization Act (FIRRMA).  Those reforms are vital to protecting our national security and preventing intellectual property theft by foreign countries—including the People’s Republic of China. 

 

As you negotiate a conference report for the 2019 NDAA, we urge you to include the Senate-passed CFIUS reforms and ensure that the final language fully addresses our national security and competitiveness concerns.  We believe that efforts to weaken the robust protections in the FIRRMA will embolden our adversaries and present threats to our national security.

 

We thank you for your leadership, and we appreciate your consideration.

 

Sincerely,

  

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WASHINGTON, D.C. – Amid concerns surrounding the accelerating pace of stock buybacks in U.S. capital markets, U.S. Senators Tammy Baldwin (D-WI), Chris Van Hollen (D-MD) and Minority Leader Chuck Schumer (D-NY) are leading their colleagues to call on U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton to open a public comment period to review the SEC’s current rules around stock buybacks, which haven’t been updated in over a decade.

In 1982, the SEC finalized rule 10b-18 which, for the first time, allowed public companies to buy back their stock without fear of being charged with stock market manipulation. Since that time, there has been a 40,000% increase in stock buybacks. The Republican tax bill has only fueled this trend. So far this year, corporations have announced more than $480 billion in stock buybacks, overwhelmingly benefiting top executives and wealthy shareholders, and leaving middle class workers behind.

In the letter to Chairman Clayton, the Senators stated, “We write with concerns about the accelerating pace of stock buybacks in U.S. capital markets. The Securities and Exchange Commission (“SEC” or “the Commission”) last updated Rule 10b-18, which governs stock buybacks, in 2003.  Since that time, there have been significant changes in executive compensation practices, shareholder activism, and investing technology. Therefore, we respectfully request that the Commission begin a process to review how companies are conducting buybacks under Rule 10b-18 and whether corporate insiders are exploiting buybacks to sell shares received as executive pay at inflated prices.”

“While we are troubled by the magnitude of stock buybacks and the consequences for employees and communities, we are even more disturbed by the dramatic increase in stock sales by corporate insiders following the announcement of a buyback. This phenomena means it is imperative that the SEC revisit the evolution of Rule 10b-18 to ensure that corporate executives are not using the rule inappropriately to enable advantageous sales of their own stock while ignoring the needs of their companies’ workers,” the Senators continued. 

U.S. Senators Sherrod Brown (D-OH), Cory Booker (D-NJ), Elizabeth Warren (D-MA), Ron Wyden (D-OR), Mark Warner (D-VA), Sheldon Whitehouse (D-RI), Kirsten Gillibrand (D-NY), Jack Reed (D-RI), Richard Blumenthal (D-CT), Edward Markey (D-MA), Mazie Hirono (D-HI), Ben Cardin (D-MD), Dianne Feinstein (D-CA), Angus King (I-ME), Brian Schatz (D-HI), Jeff Merkley (D-OR), Joe Donnelly (D-IN) and Maggie Hassan (D-NH) also signed the letter.

The full letter is available here.

An online version of this release is available here.

 

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WASHINGTON –U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence and a member of the Senate Banking and Finance Committees, today sent letters to Twitter and Google parent company Alphabet, requesting information about any data sharing agreements between the companies and Chinese vendors. The letter follows a disclosure earlier this week by Facebook that the company has partnerships with Chinese telecom companies including Huawei that allow them to access Facebook users’ non-public data. 

“Since at least October 2012, when the House Permanent Select Committee on Intelligence released its widely-publicized report, the relationship between the Chinese Communist Party and equipment makers like Huawei and ZTE has been an area of national security concern. Since then, numerous articles in the tech trade press have focused on concerns by American and allied intelligence agencies that products from Chinese device makers, such as Lenovo, have security vulnerabilities that could allow Chinese intelligence to access data stored on, or transmitted by, devices.  And the New York Times reported in 2016 that firmware found in low-end smartphone devices, such as those of Huawei and ZTE, continually transmitted local data to Chinese severs, potentially for foreign intelligence purposes,” Sen. Warner wrote to the two companies today. 

It is publicly known that Alphabet has entered into strategic partnerships with Chinese mobile device manufacturers, including Huawei and Xiaomi, as well as with Chinese technology platform Tencent. In light of Facebook’s recent revelations, Sen. Warner requested that the company provide information about those partnerships, as well as any other agreements that Alphabet may have entered into with third-party vendors based in China. A similar request was posed to Twitter. 

Sen. Warner’s letter to Alphabet CEO Larry Page is available here. His letter to Twitter CEO Jack Dorsey is available here.  

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WASHINGTON – Today, U.S. Sen. Mark R. Warner (D-VA) and a group of 15 Senators sent a letter to the Office of the Comptroller of the Currency (OCC), the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation (FDIC), urging them to take steps that would strengthen access to credit for diverse communities under the Community Reinvestment Act (CRA).

The CRA was signed into law in 1977 to provide a framework to ensure that banks serve the needs of all members of their community, regardless of their race, gender, or income. By ensuring that banks provide access to credit for low- and middle-income (LMI) communities, the CRA has helped ameliorate redlining that has disadvantaged minorities and disinvestment that has harmed urban and rural communities. As a result, the CRA has expanded homeownership to more Americans, financed more small businesses, and transformed local economies.

The Senators urged the agencies to take the opportunity to strengthen the CRA by expanding its applicability to regions and institutions that are not currently covered by the CRA and avoid proposals that could undermine the long-standing effectiveness of the law.  In addition, the Senators emphasized the need to reflect the impact of digital banking in any new regulations.

“When the CRA became law in 1977, a bank’s geographic footprint and the areas surrounding it was a good proxy for the communities served by the bank.  That no longer holds true.  A bank should be examined under the CRA for how it serves LMI communities where it has a physical footprint and in areas where the bank accepts deposits and does substantial business, and it should receive CRA credit for qualifying loans and investments made in those areas,” wrote the Senators.

The Senators also advised the federal agencies to avoid proposals that could undermine the effectiveness of the CRA.  “While we generally support expansions that benefit LMI communities, we are concerned that permitting expansions for banks with ‘less than satisfactory’ ratings undermines the only formal compliance mechanism that exists under the CRA,” the Senators warned. “Furthermore, we believe that narrowing the universe of loans with respect to which a regulator evaluates a bank’s illegal or discriminatory credit practices is inconsistent with a key finding of Congress in passing the CRA: banks must demonstrate that they ‘serve the convenience and needs of the communities in which they are chartered to do business.’”

In addition to Sen. Warner, the letter was signed by Sens. Tim Kaine (D-VA), Cory Booker (D-NJ), Sherrod Brown (D-OH), Catherine Cortez Masto (D-NV), Elizabeth Warren (D-MA), Doug Jones (D-AL), Amy Klobuchar (D-MN), Bob Menendez (D-NJ), Kirsten Gillibrand (D-NY), Dianne Feinstein (D-CA), Brian Schatz (D-HI), Chris Van Hollen (D-MD), Gary Peters (D-MI), Ron Wyden (D-OR), and Debbie Stabenow (D-MI).

The full letter text is found below and here.

 

The Honorable Jerome H. Powell
Chairman 

Board of Governors of the Federal Reserve System

550 17th Street, NW

Washington, D.C. 20552                                

                        

The Honorable Joseph M. Otting

Comptroller of the Currency

400 Seventh Street SW

Washington, D.C. 20219        

 

The Honorable Martin J. Gruenberg

Chairman

Federal Deposit Insurance Corporation

20th Street and Constitution Avenue, NW

Washington, D.C. 20551

                                                                                  

Dear Chairman Powell, Comptroller Otting, and Chairman Gruenberg:

For over 40 years, the Community Reinvestment Act (CRA) has been critical in encouraging depository institutions (banks) to serve the credit needs of rural and urban low- and moderate-income (LMI) individuals, small businesses, and communities.  The CRA requires federal banking regulators to regularly assess each bank’s delivery of credit to LMI communities and consider that assessment when evaluating a bank’s application to expand.  In doing so, the CRA has helped ameliorate redlining that has disadvantaged minorities and disinvestment that has harmed urban and rural communities. 

We understand that your agencies are considering publishing an advance notice of proposed rulemaking that could suggest significant changes to the implementation of the CRA.  We hope that you take this opportunity to strengthen the CRA, broaden its applicability to more regions and institutions, and avoid proposals that could undermine the continuing effectiveness of the CRA.

A strong CRA continues to be needed.  Black homeownership rates fell by 5 percent from 2001 to 2016 even as white homeownership rates fell by only 1 percent.[1]  Meanwhile, Hispanic homeownership has declined 5 percent from its 2007 peak.[2]  Access to credit for minority-owned businesses remains challenging.  Black-owned companies apply for credit at a rate that is 10 percentage points higher than white-owned companies, and Hispanic-owned companies do so at a 7 percent higher rate.  But the approval rates for black-owned companies are 19 percentage points lower than white-owned companies and 6 percent lower for Hispanic-owned companies.  Forty percent of black-owned companies and over 20 percent of Hispanic-owned companies that did not apply for financing did not apply because they thought they would not be approved, compared to 14 percent of white-owned firms.[3]

A substantial body of evidence shows the significant positive contribution the CRA has made to LMI communities, helping all communities benefit from increased access to credit and economic growth.  One 2017 study found that the CRA increases credit activity by 9 percent and the number of “credit visible” individuals in the community by 7 percent.[4]  Another 2017 study linked the CRA to increased small business lending activity in LMI communities.[5]   Benefits have also flowed to smaller metropolitan and rural areas; a recent analysis shows that community development financing by banks headquartered in Appalachia reached $8.8 billion from 2007 to 2010.[6]  What the CRA does not do is also important: studies have demonstrated that the CRA does not increase delinquencies or foreclosures and did not contribute to the subprime crisis.[7] 

Some changes to the implementation of the CRA are long overdue.  For example, there is a need to reflect technology’s significant and continuing transformational effect on the delivery of banking services.  In a memorandum dated April 3, 2018, the Department of the Treasury (Treasury) recommends updating the definition of a bank’s CRA assessment area to better account for the range of delivery channels that banks offer.  When the CRA became law in 1977, a bank’s geographic footprint and the areas surrounding it was a good proxy for the communities served by the bank.  That no longer holds true.  A bank should be examined under the CRA for how it serves LMI communities where it has a physical footprint and in areas where the bank accepts deposits and does substantial business, and it should receive CRA credit for qualifying loans and investments made in those areas. 

A related phenomenon is that as bank branch footprints shrink due to a variety of causes—including the increased adoption of digital banking—rural areas increasingly rely on internet banking to deliver access to credit or branches far from their community.  To ensure the CRA is an effective tool against rural disinvestment, banking regulators should reassess whether scoping guidance for examiners should encourage the classification of more rural communities as full scope assessment areas instead of limited scope assessment areas.

Another area that we and Treasury agree deserves renewed consideration is the inclusion of bank affiliates’ performance under the lending test.  Under current regulations, a bank can choose whether its affiliates’ loans are included in its CRA performance assessment.  This can lead to strategic behavior by banks, who are incentivized to include affiliates’ loans when it benefits their CRA performance and exclude them when it harms CRA performance.  A bank should not have the discretion to exclude from CRA evaluation loans made by its affiliates; all loans made by a bank’s affiliates should be included in the bank’s CRA evaluation.

The digitization of banking also means that it is appropriate to re-evaluate the CRA’s service test, which assesses the number and types of investments made and services provided by a bank to LMI communities in its assessment area.  Clearly, physical branches are no longer the only way for banks to deliver access to credit.  Although technology has certainly helped expand access to credit through alternative delivery systems, studies continue to show that physical branches still provide a significant boost to access to credit to their surrounding community.  For example, a 2014 study found that, even in crowded markets, a branch closing results in 13 percent fewer small business loans, and the effect is concentrated in low-income and high-minority neighborhoods.[8]  We urge you to keep in mind that although digital banking has increased access to credit for many, branches continue to be important, particularly for LMI communities, due to the information-intensive and relationship-specific credit production in those areas compared to higher income areas.

One suggestion included in the Treasury memorandum that gives us pause is the recommendation that the other banking regulators adopt two recent Office of the Comptroller of the Currency (OCC) policies: one permits banks to open or acquire branches even if a bank has a “less than satisfactory” CRA rating, provided that the applicant demonstrate that the expansion benefits the communities it serves, and the other limits the effect illegal or discriminatory credit practices can have on a bank’s CRA rating.  While we generally support expansions that benefit LMI communities, we are concerned that permitting expansions for banks with “less than satisfactory” ratings undermines the only formal compliance mechanism that exists under the CRA: the prospect that the banking regulators will deny those banks’ expansion applications.  To put this in context, banks have received “Satisfactory” or “Outstanding” grades in 98 percent of CRA examinations since 2010.[9]  We believe that limiting exceptions to this enforcement mechanism is likely to result in more benefits to LMI communities through increased CRA compliance than would be achieved by occasionally approving applications from poor performing banks when the expansion would provide increased benefits to LMI communities.  Furthermore, we believe that narrowing the universe of loans with respect to which a regulator evaluates a bank’s illegal or discriminatory credit practices is inconsistent with a key finding of Congress in passing the CRA: banks must demonstrate that they “serve the convenience and needs of the communities in which they are chartered to do business.”[10]

The recent Treasury memorandum suggests a number of other sensible updates to CRA regulations, such as permitting banking regulators to preclear community development financings as qualifying investments and making those determinations public, and improving the objectivity and comparability of CRA exam performance metrics.  

Thank you for your attention to the CRA, one of the most important tools we have for inclusive access to credit and economic growth. 

Sincerely,

 

###



[1] Laurie Goodman, Alana McCargo, & Jun Zhu, A closer look at the fifteen-year drop in black homeownership, Urban Institute (Feb. 13, 2017), https://www.urban.org/urban-wire/closer-look-fifteen-year-drop-black-homeownership.

 

[2] Richard Fry & Anna Brown, In a Recovering Market, Homeownership Rates Are Down Sharply for Blacks, Young Adults, Pew Research Center (Dec. 15 2016),http://www.pewsocialtrends.org/2016/12/15/in-a-recovering-market-homeownership-rates-are-down-sharply-for-blacks-young-adults/.

[3] Federal Reserve Bank of Cleveland & Federal Reserve Bank of Atlanta, 2016 Small Business Credit Survey, Report on Minority-Owned Firms (Nov. 2017), at 7-17, https://www.clevelandfed.org/~/media/content/community%20development/smallbusiness/2016%20sbcs/sbcs%20minority%20owned%20report.pdf?la=en

 

[4] Kristin F. Butcher & Ana Patricia Muñoz, “Using Credit Reporting Agency Data To Assess the Link Between the Community Reinvestment Act and Consumer Credit Outcomes,” 19Cityscape 2, 97-98 (2017).

 

[5] Raphael W. Bostic & Hyojung Lee, “Small Business Lending Under the Community Reinvestment Act,” 19 Cityscape 2, 81 (2017).

 

[6] Josh Silver & Archana Pradhan, National Community Reinvestment Coalition; Spencer M. Cowan, Woodstock Institute, Access to Capital and Credit in Appalachia and the Impact of the Financial Crisis and Recession on Commercial Lending and Finance in the Region (July 2013), at 138, https://www.arc.gov/assets/research_reports/AccessToCapitalAndCreditInAppalachia-July2013.pdf.

 

[7] See, e.g., Robert B. Avery & Kenneth P. Brevoort, The Subprime Crisis: Is Government Housing Policy

to Blame?, Board of Governors of the Federal Reserve System (2011), https://www.federalreserve.gov/pubs/feds/2011/201136/201136pap.pdf; Glenn Canner & Neil Bhutta, Staff Analysis of the Relationship Between the CRA and the Subprime Crisis, Board of Governors of the Federal Reserve System (Nov. 21, 2008), https://www.federalreserve.gov/images/20081203_analysis.pdf.

[8] Hoai-Luu Q. Nyugen, Do Bank Branches Still Matter? The Effect of Closings on Local Economic Outcomes (Dec. 2014), at 3, http://economics.mit.edu/files/10143

 

[9] Ben Horowitz, Fair lending laws and the CRA: Complementary tools for increasing equitable access to credit, Federal Reserve Bank of Minneapolis (Mar. 8, 2018),https://minneapolisfed.org/publications/community-dividend/fair-lending-laws-and-the-cra-complementary-tools-for-increasing-equitable-access-to-credit.

[10] 12 U.S.C. § 2901(a)(1). 

 Warner Leads Effort to Urge Banking Regulators to Strengthen Credit Access for Low-Income Communities

WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Banking Committee, released the following statement after President Trump signed his regulatory reform bill, S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, into law:

“The bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act will provide meaningful relief to Main Street. It will roll back unnecessary and burdensome regulations on credit unions and small community banks while ensuring that larger banks remain subject to the rules I helped put in place after the financial crisis. This bill is the result of years of tough negotiations between Democrats and Republicans and will help small lenders provide mortgages and other credit to hardworking Virginians and small businesses. While this bill does not include everything Democrats wanted nor everything Republicans wanted, I’m proud of my colleagues for putting differences aside, finding common ground, and working together to pass this sensible, bipartisan bill into law.”  

The legislation is the result of bipartisan negotiations among Warner, Banking Committee Chairman Mike Crapo (R-ID), and Banking Committee members Sens. Joe Donnelly (D-IN), Heidi Heitkamp (D-ND) and Jon Tester (D-MT).

The legislation was endorsed by a number of Virginia banking institutions including the Virginia Bankers Association (VBA) and the Virginia Association of Community Banks (VACB).

 

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WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Banking Committee, released the following statement after the House passed S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, sending the bill to the President’s desk: 

“The bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act will provide meaningful relief to Main Street. It will roll back unnecessary and burdensome regulations on credit unions and small community banks while ensuring that larger banks remain subject to the rules I helped put in place after the financial crisis. This bill is the result of years of tough negotiations between Democrats and Republicans and will help small lenders provide mortgages and other credit to hardworking Virginians and small businesses. While this bill does not include everything Democrats wanted nor everything Republicans wanted, I’m proud of my colleagues for putting differences aside, finding common ground, and sending this sensible, bipartisan bill to the President’s desk for signature.” 

The legislation is the result of bipartisan negotiations among Warner, Banking Committee Chairman Mike Crapo (R-ID), and Banking Committee members Sens. Joe Donnelly (D-IN), Heidi Heitkamp (D-ND) and Jon Tester (D-MT).

 

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Mulvaney, who serves on a temporary basis as the head of the Consumer Financial Protection Bureau (CFPB), not to undo or weaken the CFPB’s payday lending rule.

The rule would require lenders to determine upfront whether or not a borrower can afford to pay back a loan without having to take out another loan. The rule represents an important step in reining in predatory business practices by payday lenders nationwide that are designed to exploit the financial hardships facing millions of hardworking families.

“The payday lending rule’s purpose is pretty simple: lenders should figure out whether a borrower is able to pay back a loan so that consumers don’t get caught up in a revolving cycle of debt,” said Sen. Warner during his questioning of Director Mulvaney.

Congress created the CFPB to protect Americans from unfair, deceptive and abusive lending practices. Predatory lenders often target hardworking borrowers who find themselves in need of quick cash—often for things like necessary car repairs or medical emergencies—by charging them excessive interest rates and hidden fees that trap them in long-term cycles of debt. Nearly 12 million Americans use payday loans each year, incurring more than $9 billion annually in fees. The CFPB developed the payday lending rule over the course of five years and reviewed more than 1 million public comments. 

Last month, Sen. Warner also wrote to Director Mulvaney urging him not to repeal the payday lending rule.

The full transcript of Sen. Warner’s exchange with Director Mulvaney follows:

Warner: I want to talk to you about the payday lending rule. Now, I think the payday lending rule’s purpose is pretty simple—and I think actually most Americans regardless of side would agree on this—that lenders should figure out upfront whether a borrower is able to pay back a loan and to make sure that consumers don’t get caught up in a revolving cycle of debt by folks that don’t have the same kind of regulatory oversight that our traditional lending institutions do. Now, you’ve been in this job a few months, acting in this job. Did you order the Bureau to engage in a rule making process to reconsider the rule on payday lending?

Mulvaney: Yes sir.

Warner: And how would revoking the rule or changing it help consumers, particularly consumers who are living paycheck to paycheck?

Mulvaney: Senator, I don’t automatically conclude that making an indication to revisit the rule assumes that we will be revoking the rule or even changing the rule. I have the right under the statute to revisit the rules, which I'm doing, but we have not arrived at any preconceived notions of outcomes. That would violate the Administrative Procedures Act, which we have not done.

Warner: But sir, my understanding is this rulemaking took a number of years. It was a subject of a great deal of scrutiny. I believe there was industry input as well as consumer input and, I guess, I really wonder why in your first few months of coming into this acting role that this would rise to the top of a priority that would say we need to relook at the practices of payday lenders, which I think most folks would agree is a last resort financial tool and one that was absolutely appropriate for this Bureau to take on.

Mulvaney: Again I think was appropriate for it to take on. Although I think you could make the argument that the statute simply says you have to supervise this industry, which may not include regulating, different story for another day perhaps. But why was it at the top of the list? Because it was the last thing the previous Director did on his way out the door. There was a bunch of public criticism as to, or questions, as to whether or not it had been rushed. So for a variety of reasons, I thought it was entirely appropriate in my role as acting Director to do that the very first thing. In fact, I think I did it the first or second day I was there.

Warner: Mr. Mulvaney, I think there was a great deal of work that went on and I think the previous Director took those actions because of an ongoing need that people on both sides the aisle had discussed for a long time. I was disappointed you took that as your first action.

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WASHINGTON — U.S. Sens. Mark R. Warner and Tim Kaine (both D-VA) joined a group of 41 Senators in a letter to Consumer Financial Protection Bureau (CFPB) Acting Director Leandra English and Office of Management and Budget (OMB) Director Mick Mulvaney urging them to end any efforts to undermine and repeal the CFPB’s payday lending rule. The rule represents an important step in reining in predatory business practices by payday lenders nationwide that are designed to exploit the financial hardships facing millions of hardworking families.

“We understand that the CFPB is delaying the rule by granting waivers to companies who would otherwise be taking steps to begin complying with the rule, and that the Bureau may be offering the payday loan industry an opportunity to undermine the rule entirely. We view these actions as further efforts to undermine the implementation of this important consumer protection rule,” the Senators wrote.    

Congress created the CFPB to protect Americans from unfair, deceptive and abusive lending practices. Predatory lenders often target hardworking borrowers who find themselves in need of quick cash—often for things like necessary car repairs or medical emergencies—by charging them excessive interest rates and hidden fees that trap them in long-term cycles of debt. Nearly 12 million Americans use payday loans each year, incurring more than $9 billion annually in fees. The CFPB developed the payday lending rule over the course of five years and reviewed more than 1 million public comments. 

“The CFPB’s role in serving as a watchdog for American consumers while making our financial markets safe, fair, and transparent continues to be of critical importance. To this end, we urge you to end any efforts to undermine and repeal this critical consumer protection,” the Senators continued.

The letter also called into question efforts at the CFPB to dismiss ongoing enforcement actions against predatory lenders, calling such actions antithetical to the CFPB’s mission of serving as a watchdog for American consumers. 

Other Senators joining Sens. Warner and Kaine in signing the letter include U.S. Sens. Dick Durbin (D-IL), Jeff Merkley (D-OR), Sherrod Brown (D-OH), Kamala Harris (D-CA), Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Ed Markey (D-MA), Mazie Hirono (D-HI), Dianne Feinstein (D-CA), Catherine Cortez Masto (D-NV), Jeanne Shaheen (D-NH), Kirsten Gillibrand (D-NY), Ron Wyden (D-OR), Brian Schatz (D-HI), Martin Heinrich (D-NM), Tina Smith (D-MN), Ben Cardin (D-MD), Tammy Duckworth (D-IL), Bernie Sanders (I-VT), Patty Murray (D-WA), Maggie Hassan (D-NH), Cory Booker (D-NJ), Tom Udall (D-NM), Chris Coons (D-DE), Sheldon Whitehouse (D-RI), Angus King (I-ME), Patrick Leahy (D-VT), Tom Carper (D-DE), Gary Peters (D-MI), Debbie Stabenow (D-MI), Chris Murphy (D-CT), Amy Klobuchar (D-MN), Tammy Baldwin (D-WI), Joe Donnelly(D-IN), Michael Bennet (D-CO), Doug Jones (D-AL), Jack Reed (D-RI), Maria Cantwell (D-WA), Bob Casey (D-PA), and Bill Nelson (D-FL).

Full text of the letter is available here and below: 

Leandra English
Acting Director, Consumer Financial Protection Bureau
1700 G Street N.W.
Washington, D.C., 20552

Mick Mulvaney
Director, Office of Management and Budget
725 17th Street N.W.
Washington, D.C., 20503

Dear Ms. English and Mr. Mulvaney:

We write to express concern regarding the announcement that the Consumer Financial Protection Bureau (CFPB) will begin the process of reconsidering and eventually repealing the Bureau’s recently finalized Payday, Vehicle Title, and Certain High-Cost Installment Loans rule, also known as the “payday lending rule.”  We view this action as well as the dismissal of ongoing enforcement actions against predatory lenders as antithetical to the CFPB’s mission.

Research has shown that short-term payday loans trap consumers in high-interest debt for long periods of time and can result in serious financial harm, including increased likelihood of bankruptcy. Nearly 12 million Americans use payday loans each year, incurring more than $9 billion in fees. While short-term loans may help families facing unexpected expenses, predatory short-term loans with interest rates exceeding 300 percent often leave consumers with a difficult decision: defaulting on the loan or repeated borrowing. According to the CFPB, nearly 80 percent of payday loans are renewed within 14 days, and at least 27 percent of borrowers will default on their first loan. The CFPB also found that nearly 20 percent of title loan borrowers have had their vehicles seized by the lender when they are unable to repay this debt. The majority of all payday loans are renewed so many times that borrowers end up paying more in fees than the amount they originally borrowed.  This predatory business model exploits the financial hardships facing hard working families, trapping them into long-term debt cycles. 

The recent financial crisis, during which Americans lost more than $19 trillion in household wealth demonstrated clearly the need for a federal agency whose sole mission is to protect American consumers in the financial marketplace.  Congress created the CFPB, granting it the authority to crack down on these types of predatory lending practices. 

After conducting a five-year study and reviewing more than 1 million public comments, the CFPB used this vested authority to issue a rule in October 2017 requiring payday and car title lenders to ensure that consumers have the ability to repay each loan and still manage to meet their basic living needs and major financial obligations without needing to borrow again over the next 30-day period. This commonsense requirement is coupled with protections that provide consumers with reasonable repayment options common with other types of credit. 

We stand with a majority of our constituents in supporting the final rule and oppose efforts to repeal or undermine the final rule, which protects consumers from predatory payday, title loan, and high-cost installment lenders.  Bipartisan polling shows that the CFPB’s action to curb predatory lending reflects the will of the vast majority of Americans. According to a 2017 survey, 73 percent of Americans support the CFPB’s rule requiring payday lenders to make sure that consumers have the ability to repay before extending a loan.

We understand that the CFPB is delaying the rule by granting waivers to companies who would otherwise be taking steps to begin complying with the rule, and that the Bureau may be offering the payday loan industry an opportunity to undermine the rule entirely. We view these actions as further efforts to undermine the implementation of this important consumer protection rule.  

We are also troubled by the CFPB’s recent enforcement actions related to payday lending.  The CFPB recently decided to drop a lawsuit filed by the Bureau in 2017 against four payday lending companies in Kansas. These companies were being sued for flouting state laws by running illegal payday lending operations, including charging interest rates between 440 percent and 950 percent. The CFPB also is reportedly halting, without any explanation, a nearly four-year CFPB investigation into allegations that a South Carolina-based payday loan company engaged in deceptive lending practices. 

The CFPB’s role in serving as a watchdog for American consumers while making our financial markets safe, fair, and transparent continues to be of critical importance. To this end, we urge you to end any efforts to undermine and repeal this critical consumer protection. 

Sincerely,

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 WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence, issued the following statement on reports from the New York Times and the Guardian  that Cambridge Analytica misused the data of millions of Facebook users:

"This is more evidence that the online political advertising market is essentially the Wild West. Whether it's allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it's clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency. This is another strong indication of the need for Congress to quickly pass the Honest Ads Act to bring transparency and accountability to online political advertisements."

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WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Ranking Member of the Senate Banking Subcommittee on Securities, Insurance and Investment, today applauded the Securities and Exchange Commission (SEC)’s announcement of a new pilot program placing restrictions on “maker-taker” pricing models for stock exchange transaction fees. For years, Sen. Warner and lawmakers from both parties have pressed the SEC to study and reconsider the pricing model, which has been shown to create conflicts of interest that prevent the average investor from receiving the best price on trades.

“This pilot program is an important step towards reforming a broken system and eliminating conflicts of interest that hurt ordinary investors. I am hopeful this study will produce data that will help Congress and the SEC craft needed reforms,” Sen. Warner said. “I’m glad the SEC has finally acted on the concerns I have been voicing along with my colleagues on this issue for several years.”

Under the maker-taker pricing model, securities exchanges pay rebates to brokers that send bids and offers not intended for immediate execution, in the hopes of incentivizing liquidity in the market. Brokers who immediately execute their orders pay fees, which offset the rebates paid to brokers who create liquidity by not immediately executing their orders. However, this model has come under Congressional scrutiny after a 2013 study found evidence it created a conflict of interest for brokers – who may be incentivized to send orders that generate the largest rebate for the broker, rather than the best trade for the client.

Since 2014, Sen. Warner has been raising concerns about the “maker-taker” model. In April 2016, Sen. Warner and Sen. Mike Crapo (R-ID) wrote to the SEC expressing support for a pilot program to study the effects of rebates on U.S. equity markets.  In July 2017, Warner wrote to newly-appointed SEC Chairman Jay Clayton and called for “…pursuing the full elimination of [maker-taker] rebates.” 

According to the SEC, the proposed pilot would subject stock exchange transaction fee pricing, including “maker-taker” fee-and-rebate pricing models, to new temporary pricing restrictions across three test groups, and require the exchanges to prepare and publicly post data.

 

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WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Banking Committee, released the following statement after the Senate voted 67-31 to pass S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act:  

“The bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act that the Senate passed today will provide meaningful relief to Main Street. It will roll back unnecessary and burdensome regulations on credit unions and small community banks while ensuring that larger banks remain subject to the rules I helped put in place after the financial crisis. This bill is the result of years of tough negotiations between Democrats and Republicans and will help small lenders provide mortgages and other credit to hardworking Virginians and small businesses. While this bill does not include everything Democrats wanted nor everything Republicans wanted, I’m proud of my colleagues for putting differences aside, finding common ground, and passing this bipartisan legislation. The House of Representatives should move swiftly to take up and pass this sensible, bipartisan bill.”

 

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WASHINGTON – Today, U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence, issued the following statement in response to the Federal Election Commission (FEC)’s announcement that commissioners have approved a Draft Notice of Proposed Rulemaking on two proposals dealing with disclosure rules for online political advertisements:

“While I applaud the FEC for moving forward today, my hope was that the simple and overdue act of strengthening these disclaimer rules would have been completed by now. The Commission’s current plan, which contemplates yet another round of comments, means rules concerning online political ads remain woefully behind the commonsense standards we apply to political ads on TV and other media – just as the country begins the primary season for the upcoming 2018 mid-term elections.

“Congress must recognize that our current laws are simply not adequate to deal with the national security threats we face from foreign adversaries like Russia, and other bad actors. While no one law alone will completely protect our democracy, updating our election laws is a simple and important start. Bipartisan legislation like the Honest Ads Act is needed to bring true parity between digital political ads and ads running on broadcast, satellite, and cable services.”

Russia attempted to influence the 2016 presidential election by buying and placing political ads on platforms such as Facebook, Twitter and Google. However, Americans had no way of knowing who was behind the ads, because, unlike radio and television ads, the FEC has exempted large swathes of online ads from general requirements to include disclaimers about who is responsible for the content.

In November 2017, Senator Warner led a number of his colleagues in calling on the FEC to take immediate action to improve transparency for political advertisements online. That effort followed Senator Warner’s introduction in October 2017 of the Honest Ads Actbipartisan legislation that would prevent foreign actors from influencing our elections by ensuring that political ads sold online are covered by the same rules as ads sold on TV, radio, and satellite.

According to the FEC, the public will now have 60 days to provide comments on two alternative proposals, one Republican-sponsored and one Democrat-sponsored, to amend FEC regulations concerning disclaimers on public communications on the internet that contain express advocacy, solicit contributions, or are made by political committees.

 

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WASHINGTON – Today, the Senate voted 67-32 in favor of starting debate on S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, bipartisan legislation to grow the economy and protect consumers that was negotiated in part by Sen. Mark R. Warner (D-VA). Today Sen. Warner called for swift passage of the legislation, which will provide targeted relief for community banks and credit unions so they can improve access to capital and increase economic prosperity in the Commonwealth.

The legislation addresses some of the unintended consequences of the Dodd-Frank Act in order to make it easier for smaller community banks and credit unions to lend to Virginia businesses and families, which is good for households and the economy.

“The Senate is on the verge of passing major bipartisan legislation aimed at providing relief for small community banks, credit unions, and the customers they serve. As someone who helped put together the Dodd-Frank legislation, I know there are areas where we can help improve access to capital for consumers, farmers, and small businesses so they can grow the economy and create jobs,” said Sen. Warner. “Virginia’s community banks and credit unions did not cause the financial crisis, and they should not be held back by regulations intended for the big banks. I look forward to seeing the Senate pass this package of bipartisan measures that will provide relief for Main Street, strengthen consumer protections, and keep Wall Street accountable.”

Following the 2008 financial meltdown, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to crack down on the worst Wall Street abuses and institute strict regulations to prevent another crisis. Sen. Warner played an important role in negotiating and drafting major portions of this legislation, which created new safeguards to protect our financial system and hold Wall Street accountable.

However, as with any major reform, the law also had some unintended consequences. Virginia has lost over a quarter of its community banks and nearly a third of its credit unions since Dodd-Frank was passed. In some cases, the law resulted in unnecessary and burdensome regulations on credit unions and small community banks that made it harder for them to lend money to help local businesses grow and create jobs.

“As a credit union, we have to adhere to the same regulations as large banks do.  But we have to do it with a much smaller base – we only have 10,000 members and 20 employees – adhering to the same regulations that a behemoth like Bank of America has to adhere to,” said Lisa Lambrecht, President & CEO of Entrust Financial Credit Union in Henrico County. “I wish the federal government would understand that these one-size-fits-all regulations don’t work for credit unions. You have to remember; credit unions were formed to fill that gap that the larger established financial system was not serving.”

“In the rural areas, the larger institutions across the whole country have reduced their branches. The smaller banks have held their own, but we’re operating with 2000 less community banks a day than we were 12, 15 years ago. That’s over one fourth of community banks are gone — and I think a primary reason for that is regulatory fatigue,” said Lyn Hayth, President & CEO of the Bank of Botetourt. 

“Every dollar we spend on increased compliance really doesn’t go to our capital. And if we could put that extra dollar into our capital, we could lend it back out into the community on a tenfold basis. So, our hope is that regulation can be decreased, and that we are able to take that capital that we save and invest it back into our communities,” said Alice Frazier, President & CEO of Bank of Charles Town in Middleburg. 

“I think that community banks are the backbone of our country, and many of our rural markets. And not just our rural markets – but I think we serve a vital role to the growth of the economy,” said Mark Hanna, President of Farmers & Merchants Bank in Timberville.

The Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155) ensures that small lenders can provide mortgage and other credit to hardworking Americans, helping them and their families grow and start businesses. The bill also institutes several important consumer protections:

  • Allows consumers to get one free year of fraud alerts, which will help consumers who have been impacted by situations like the Wells Fargo scandal or whose identities or personal information has been stolen.
  • Unlimited free credit freezes and unfreezes, which helps consumers impacted by data breaches like the Equifax hack that compromised the personal information of approximately 145 million Americans.
  • Provides free credit monitoring for all active-duty servicemembers.
  • Protects the credit ratings of veterans wrongly penalized by medical bill payment delays by the Department of Veterans Affairs (VA). This measure would prohibit medical debt from services received through the Choice Program and other VA community care programs from being reported to credit reporting agencies for one year. In addition, it would establish a dispute process for veterans seeking to remove adverse actions already on their report.
  • Prevents mortgage companies from immediately kicking tenants out of their rentals if the landlord is foreclosed upon.
  • Encourages banks to report suspicious behavior if seniors could be getting financially scammed.
  • Allows seriously delinquent private student loan borrowers a one-time offer to remove negative reporting from their credit reports after making a series of on-time payments.

The legislation was introduced in November after years of bipartisan negotiations among Sen. Warner, Senate Banking Committee Chairman Mike Crapo (R-ID) and Banking Committee members Senators Joe Donnelly (D-IN), Heidi Heitkamp (D-ND) and Jon Tester (D-MT). It is also co-sponsored by Sen. Tim Kaine (D-VA).