FDIC Leadership, CFPB Initiatives, Customer Attrition: This Week's Top Stories

Thanks Rob,

The story about customer attrition should be required reading for every bank's C-Suite. 

The real story is "value".   To provide value to people managing their money today the classic checking, savings, and term deposits need to be enhanced with the next generation of deposit accounts that provide the combination of convenience, flexibility, and yield that is appropriate in this new interest rate and technology environment.  If you are still using the same products that worked with ultra-low interest rates and/or before technology eliminated the vast majority of the friction in moving money you are in harm's way.  Your competition sees you as easy targets.

Read the horrifying inside scoop of the Titan submersible, and learn why nobody wants to buy a new car. We're also sad to share that Joey Chestnut won't be able to participate in Nathan's annual hot dog eating contest-an event he's won 16 times-due to a sponsorship conflict. Here's what else you might want to read this week:

"FDIC Culture Hearing Turns to Partisan Sparring"

Republicans continued to push for FDIC Chair Marty Gruenberg's immediate resignation Wednesday during a House Financial Services Committee hearing on the agency's workplace culture. Gruenberg was not present at the hearing. Democrats countered that other FDIC officials, including past Republican chairs, shared the blame.

One of the more dramatic moments came after Rep. Al Green, D-TX, argued the next FDIC chair should be a woman, an idea he said would be hard for Republicans to embrace. Rep. Bill Huizenga, R-MI, responded that the former Republican head of the FDIC, Jelena McWilliams, is a woman, but current FDIC board member and acting OCC Comptroller Michael Hsu (who was present at the hearing) ousted her in a coup.

Yesterday, the White House nominated Christy Goldsmith Romero, a derivatives regulator at the CFTC, to lead the FDIC.

"CFPB Proposes to Ban Medical Bills From Credit Reports"

The move would help protect consumers' credit scores, ban lenders from making loan decisions based on medical data, and prevent debt collectors from coercing payments for inaccurate medical bills, the bureau says. "Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans," CFPB Director Rohit Chopra argued in a release announcing the proposal.  

"Chopra Fends Off New Line of Attack on CFPB Funding in Senate"

The CFPB chief touted the bureau's proposal to remove medical debt from credit scoring during this week's Congressional oversight hearings. He also highlighted the bureau's efforts on open banking and the elimination of junk fees, and he pushed back against Republican lawmakers' notion that the CFPB should only receive funding if the Fed earns a profit.

"Give Them a Reason to Stay: The Importance of Managing Attrition"

Customer attrition at community banks has increased in recent years after declining steadily between 2010 and 2020. More customers switching financial institutions means more opportunities to win business, though competition for that business is fierce. One expert offers his suggestions to banks for growing new relationships while keeping the customers they have.

"What Are the Tech Solutions to Zelle Fraud and Scam Resolution?"

Zelle scams are a hot-button issue, and with Congress holding more hearings on the topic, it appears likely banks will have to do more to detect and prevent fraud on the platform. Artificial intelligence solutions, coupled with employee training, could help. To learn more, check out this Banking with Interest episode with American Banker's Penny Crosman (who wrote the article).

"Stung by Past Mistakes, a Wary Fed Takes Its Time"

Fed Chair Jerome Powell is being cautious when it comes to rate policy given recent difficulties in predicting inflation and GDP growth, WSJ wrote. On Wednesday morning, the latest monthly CPI print showed core prices (excluding energy and food) rose 3.4% year-over-year. Later that afternoon, the FOMC decided to maintain the current fed funds rate. The most recent Fed dot plot indicates the central bank will cut rates once in 2024, down from three cuts a couple months ago.

"Is Banking Consumer Behavior Not Changing at All? One Report Suggests So"

When it comes to banking habits, many American consumers aren't interested in change. Sixty-four percent prefer to pay bills manually, according to the results of a recent survey, which also found that 55% are living paycheck to paycheck-though how people define that varies-and 25% don't have a credit card.

"Funding Fears Transform Into Profitability Woes"

Relying on high-cost wholesale funding and managing liquidity risks are ratcheting up margin pressures on banks. The percentage of unprofitable community banks rose to 5.2% by the end of 2023, up from 3.5% at the end of 2022, according to the FDIC's 2024 Risk Review.

"Why Illinois' Budget Bill Has Bankers Sounding the Alarm"

The Illinois state legislature recently passed a novel budget bill prohibiting the collection of swipe fees on sales taxes, excise taxes, and tips for certain transactions. Bank groups claim it creates an unworkable arrangement, because all banks whose customers visit the state will be affected.

"The World is Going Cashless. Get Over It."

Digital payments will soon dominate, and traditional currency and payments will go the way of the dinosaur, this "futurist" argues. One of the biggest reasons for going cashless will be the costs of cash, he says. To his credit, he offers plenty of data to back up his claims.

"Andreessen-Backed Fintech's Meltdown Shows Bank Middlemen Risks"

Following the collapse of the fintech Synapse, a former go-between for banks and other fintechs, $85 million of depositors' money is missing. The episode is a "poster child" for the risks of the banking as a service model, says Bloomberg Law's Evan Weinberger.