Regulation and Deregulation of Industry

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      F.D.I.C. Says Banks Need to Keep a Record of Their Fintech Customers

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      Banks holding customer funds for money management apps should keep track of customers’ identities and balances, the agency says.When a banking software company collapsed this spring, thousands of people keeping cash in online money management apps found themselves cut off from their own money for months. On Tuesday, the Federal Deposit Insurance Corporation proposed new rules designed to prevent that from happening again.Customers often choose to put money they would otherwise hold in a bank checking account into an online app. Some apps offer higher interest rates on deposits than traditional banks do, while others offer customers new saving and investing plans or small loans ahead of their paydays.But money that customers send to online financial companies almost always ends up in a brick-and-mortar bank — and sometimes it is pooled into a single account. Customers often do not know which bank has their money.Banks are under no obligation to keep track of the identity of fintech customers. The federal bank regulator’s proposal would require the banks to pay more attention.Traditional banks holding funds for fintech customers would have to know each person’s identity and keep daily tabs on their balances. They would have to make sure that, no matter what happened to the other companies in the chain linking customers to their funds, the banks had a record of those funds and could share their identities and balances with regulators.This change would also help if a bank at the end of one of those long chains of software companies were to fail, the regulators said on Tuesday. At present, it is hard for the F.D.I.C. to determine whose money is covered by the $250,000 deposit insurance guarantee.Senior F.D.I.C. officials said in a briefing held for journalists on Tuesday that while they had been contemplating such rules for years, the collapse this spring of Synapse Financial Technologies, which operated banking software for online lenders, provided a good real-world example of how customers could be harmed.When Synapse filed for bankruptcy and shut down its services, it said it had only $2 million in cash on hand. But customers who had funds at the online lenders Synapse supported were collectively cut off from $300 million of their own money. The F.D.I.C. said it had received more than 1,000 customer complaints related to Synapse since May.The banks that take deposits from fintech customers are often small institutions trying to grow. Their managers could complain about having to meet new record-keeping requirements. Regulators said on Tuesday that any new requirements would apply narrowly to banks taking the kinds of deposits that could get lost in a chain of software companies.There are other methods smaller banks use to swap deposits and increase their customers’ deposit insurance coverage that would not be affected by the new proposal, the regulators said.The proposal made Tuesday was the first step toward putting the new rules in place. Regulators now want banks and other members of the public to provide feedback to help shape it. More

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      The Sunday Read: ‘The For-Profit City That Might Come Crashing Down’

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      Tanya Pérez and Diane Wong and Listen and follow ‘The Daily’Apple Podcasts | Spotify | Amazon Music | YouTube | iHeartRadioIf Próspera were a normal town, Jorge Colindres, a freshly cologned and shaven lawyer, would be considered its mayor. His title here is “technical secretary.” Looking out over a clearing in the trees in February, he pointed to the small office complex where he works collecting taxes and managing public finances for the city’s 2,000 or so physical residents and e-residents, many of whom have paid a fee for the option of living in Próspera, on the Honduran island of Roatán, or remotely incorporating a business there.Nearby is a manufacturing plant that is slated to build modular houses along the coast. About a mile in the other direction are some of the city’s businesses: a Bitcoin cafe and education center, a genetics clinic, a scuba shop. A delivery service for food and medical supplies will deploy its drones from this rooftop.Próspera was built in a semiautonomous jurisdiction known as a ZEDE (a Spanish acronym for Zone for Employment and Economic Development). It is a private, for-profit city, with its own government that courts foreign investors through low taxes and light regulation. Now, the Honduran government wants it gone.There are a lot of ways to listen to ‘The Daily.’ Here’s how.We want to hear from you. Tune in, and tell us what you think. Email us at thedaily@nytimes.com. Follow Michael Barbaro on X: @mikiebarb. And if you’re interested in advertising with The Daily, write to us at thedaily-ads@nytimes.com.Additional production for The Sunday Read was contributed by Isabella Anderson, Anna Diamond, Sarah Diamond, Elena Hecht, Emma Kehlbeck, Tanya Pérez, Frannie Carr Toth and Krish Seenivasan. More

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      Navient Reaches $120 Million Student Loan Settlement With Consumer Watchdog

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      The company has been banned from servicing federal student loans and must pay $100 million to harmed borrowers, as well as a $20 million penalty.Navient, formerly one of the nation’s largest student loan servicers, reached a $120 million settlement with federal regulators on Thursday to resolve claims that it misled federal student loan borrowers and mishandled their payments for years.The Consumer Financial Protection Bureau said the deal would permanently ban the company from managing federal student loans and require it to pay $100 million in restitution to affected borrowers along with a $20 million penalty.The consumer watchdog’s suit had accused Navient of failing borrowers at every step of repayment: Among other misdeeds, it said the company steered borrowers away from more affordable income-driven repayment plans and into forbearance, which padded its own profits and forced borrowers to pay more than they had to.“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said Rohit Chopra, the director of the consumer agency. “By banning the notorious student loan giant from federal student loan servicing and ensuring the wind down of these operations, the C.F.P.B. will finally put an end to the years of abuse.”During a media call, agency officials said borrowers who were eligible for restitution payments did not need to do anything — the C.F.P.B. would mail checks to “hundreds of thousands” of federal student loan borrowers, after it analyzed which consumers were due payments. It’s unclear how long that will take. (The agency also warned borrowers to beware of scammers who might try to use C.F.P.B. imagery to steal money or private information.)The settlement closes the book on two related legal actions that date back to 2017, when the consumer protection agency and two state attorneys general — later backed by a coalition of attorneys general in 27 other states — sued Navient.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      After Fierce Lobbying, Regulators Soften Proposed Rules on Banks

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      A top Federal Reserve official said that blowback to proposed rules on capital requirements led him to “relearn the lesson of humility.”Regulators on Tuesday watered down an effort to layer new oversight on banks to protect against losses, which led to a fierce outcry from big banks and their lobbyists.The new standards, known as “Basel III endgame,” had been debated for years. They would have raised the amount of capital banks were required to maintain, funds intended to ensure stability and provide a financial cushion. Banks argued that the stricter rules would force them to crimp lending.The newly proposed rules will largely erase extra requirements on banks with between $100 billion and $250 billion in assets. It also slashes in half the capital reserve requirements on the largest, so-called systematically important lenders.Michael S. Barr, the Federal Reserve vice chair who is no favorite of the bank lobby, acknowledged the blowback in a speech laying out the changes: “Capital has costs, too,” he said in a speech at the Brookings Institution in Washington. In its statements pushing against the rules over the years, the banks’ main lobbying organization has said that “capital isn’t free.”“Life gives you ample opportunity to learn and relearn the lesson of humility,” Mr. Barr said.This is a developing story. Check back for updates. More

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      Naked Emperors and Crypto Campaign Cash

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      Once upon a time there was an emperor who loved being fashion-forward. So he was receptive to some fast-talking tailors who promised to make him a suit out of new, high-technology fabric — a suit so comfortable that it would feel as if he were wearing nothing at all. “Fortune favors the brave,” they told him.Of course, the reason the suit was so comfortable was that it didn’t exist; the emperor was walking around naked. But the members of Congress who made up his retinue didn’t dare tell him. For they knew that the tailors deceiving the emperor controlled lavishly funded super PACs that would spend large sums to destroy the career of anyone revealing their scam.OK, I changed the story a bit. But it’s one way to understand the remarkably large role the crypto industry is playing in campaign finance this year.Bitcoin, the original cryptocurrency, was introduced 15 years ago and was promoted as a replacement for old-fashioned money. But it has yet to find significant uses that don’t involve some sort of criminal activity. The crypto industry itself has been racked by theft and scams.But while crypto has thus far been largely unable to find legitimate applications for its products, it has been spectacularly successful at marketing its offerings. Cryptocurrencies, which are traded for other crypto assets but otherwise mainly seem suited for things like money laundering and extortion, are currently worth around $2 trillion.And in this election cycle the crypto industry has become a huge player in campaign finance. I mean huge: Crypto, which isn’t a big industry in terms of employment or output (even if you posit, for the sake of argument, that what it produces is actually worth something), accounts for almost half of corporate spending on political action committees this cycle.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Congress Presses Health Insurance Regulators on ‘Troubling’ Billing Tactics

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      Lawmakers are zeroing in on MultiPlan, a firm that has helped insurers cut payments while sometimes leaving patients with large bills.Lawmakers on Tuesday called on health insurance regulators to detail their efforts against “troubling practices” that have raised costs for patients and employers.In a letter to a top Labor Department official, two congressmen cited a New York Times investigation of MultiPlan, a data firm that works with insurance companies to recommend payments for medical care.The firm and the insurers can collect higher fees when payments to medical providers are lower, but patients can be stuck with large bills, the investigation found. At the same time, employers can be charged high fees — in some cases paying insurers and MultiPlan more for processing a claim than the doctor gets for treating the patient.The lawmakers, Representatives Bobby Scott of Virginia and Mark DeSaulnier of California, both Democrats in leadership positions on a House committee overseeing employer-based insurance, highlighted MultiPlan as an example of “opaque fee structures and alleged self-dealing” that drive up health care costs. In their letter, they pressed the department for details on its efforts to enforce rules meant to promote transparency and expose conflicts of interest.MultiPlan’s business model focuses on the most common way Americans get health coverage: through an employer that “self-funds,” meaning it pays medical claims with its own money and uses an insurance company to process claims. Insurers such as Aetna, Cigna and UnitedHealthcare have pitched MultiPlan’s services as a way to save money when an employee sees a provider out of network.In many cases, MultiPlan uses an algorithm-based tool to generate a recommended payment. Employers typically pay insurers and MultiPlan a percentage of what they call the “savings” — the difference between the recommendation and the original bill.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Americans Growing Worried About Losing Their Jobs, Labor Survey Shows

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      The New York Fed’s labor market survey showed cracks just as Jerome H. Powell, the Fed chair, prepares for a closely watched Friday speech.Americans are increasingly worried about losing their jobs, a new survey from the Federal Reserve Bank of New York released on Monday showed, a worrying sign at a moment when economists and central bankers are warily monitoring for cracks in the job market.The New York Fed’s July survey of labor market expectations showed that the expected likelihood of becoming unemployed rose to 4.4 percent on average, up from 3.9 percent a year earlier and the highest in data going back to 2014.In fact, the new data showed signs of the labor market cracking across a range of metrics. People reported leaving or losing jobs, marked down their salary expectations and increasingly thought that they would need to work past traditional retirement ages. The share of workers who reported searching for a job in the past four weeks jumped to 28.4 percent — the highest level since the data started — up from 19.4 percent in July 2023.The survey, which quizzes a nationally representative sample of people on their recent economic experience, suggested that meaningful fissures may be forming in the labor market. While it is just one report, it comes at a tense moment, as economists and central bankers watch nervously for signs that the job market is taking a turn for the worse.The unemployment rate has moved up notably over the past year, climbing to 4.3 percent in July. That has put many economy watchers on edge. The jobless rate rarely moves up as sharply as is has recently outside of an economic recession.But the slowdown in the labor market has not been widely backed up by other data. Jobless claims have moved up but remain relatively low. Consumer spending remains robust, with both overall retail sales data and company earnings reports suggesting that shoppers continue to open their wallets.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More