Two major national banks, JPMorgan and Wells Fargo, are rolling out EMV chip equipped smart cards for high end credit card customers. The chip is in the upper left of the picture. Photo Credit: Channel R/Wikimedia Commons/CC-BY-SA

The nation’s largest banks are starting to compete for customers that want EMV chip-equipped credit cards. EMV chips are actually a very small integrated circuit built into a credit card, and the technology was developed by a joint venture between Europay, Mastercard and Visa. The chips provide greater security than magnetic stripe cards that are more typical in America.

International jet set wants greater utility from credit cards

A common complaint among jet set types traveling overseas and using their credit cards is that European merchants often have problems processing American credit cards that have antiquated magnetic stripes instead of EMV chip cards more common overseas, according to Bloomberg. So, in order to capitalize on the need among wealthier credit card users, Wells Fargo and JPMorgan Chase are bringing EMV chips to their high-end lines of credit cards. Wells Fargo is launching a pilot program, where about 15,000 customers will be invited to use the Wells Fargo EMV chip card sometime this summer. JPMorgan Chase is diving straight into the deep end, and will be issuing EMV cards to customers enrolled in its Palladium program for high net worth clients.

Americans have to be unique

The need to have an EMV card, also commonly called a smart card, for travelers is not a joking matter. An increasingly fewer number of merchants in Europe can still accept magnetic strip cards, and that technology gap accounted for $4 billion in losses to merchants and $447 million in lost revenue for card providers in 2008. Smart cards, according to Wikipedia, differ from magnetic stripes as smart cards use a technology called “Chip and PIN.” Chip and PIN cards use a small computer chip and integrated circuit board, about 3 by 5 millimeters in total, that stores the information of the user. Merchants carry a smart card reader, where the card is inserted and read, rather than swiped. The user simply gives their Personal Identification Number, and the sale is made. The benefit is that smart cards are less easily corrupted by thieves.

Card companies already have them

EMV chips are only one particular kind of smart card chips, developed in a joint venture between European credit card company Eurocard, MasterCard and Visa, hence “EMV.” American Express also has EMV chip equipped cards in its Express Pay line. However, the smartcard reader technology is not as widespread in America as in Europe, as the U.S. is slow to adopt technologies from other countries at times. JPMorgan intends to distribute EMV chip cards to the rest of its customers after implementing them in its credit cards for high end customers first.

Sources

Bloomberg

Wikipedia

14 financial institutions have been ordered to pay back any homeowners that were wrongfully foreclosed upon in the robosigning scandal. Photo Credit: respres/Flickr/CC-BY

Federal authorities have ordered more than a dozen large financial institutions to compensate homeowners who were victims of fraudulent foreclosures. The number of homes that were foreclosed because of robosigning have not been totaled up, and the owners of those improperly foreclosed homes will be paid for their anguish.

Largest banks in the nation to pay the price of incompetence

Federal regulators recently reached a settlement with the financial institutions involved in the robosigning scandal, in which foreclosure proceedings were improperly started against homeowners because bank officers could not be bothered to do their due diligence on the paperwork regarding the state of the homeowners’ personal loans. Part of the settlement agreement, according to Reuters, is that any homeowners who were wrongly foreclosed on have to be repaid by the bank that did it. There were 14 companies in all, according to USA Today, including lending companies Ally Financial, Aurora Bank, EverBank, HSBC, Sovereign Bank, SunTrust Banks, MetLife Bank, OneWest Bank, PNC, U.S. Bank, Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and subsidiary Citibank. Loan servicing companies MERSCORP and Lender Processing Services have also been ordered to pay back improper foreclosures. Affected homeowners will likely be contacted by these institutions in the near future to make arrangements.

Total fallout to be determined

It isn’t known yet how many people will be recompensed or how much in fines lenders will have to pay. Some government officials have been recommending up to $20 billion in fines be levied against the financial institutions involved. To further add to the headaches of these institutions, this is only from the settlement with the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Other settlements with other federal agencies are still pending as well as every state attorney general in the nation.

Costs of mortgages to increase

Banking and real estate insiders are insisting that the new legislation and increased regulatory scrutiny will increase the costs of lending a mortgage to a prospective homeowner. New Federal Reserve rules on mortgage officer compensation, according to MarketWatch, may cut into commissions for loan officers. Mortgage brokers and loan officers at lending institutions cannot receive a commission based on the interest rate at which a mortgage is lent at any longer, which analysts predict will eat into profits. The Center for Responsible Lending, a consumer advocacy group that has endorsed reform of financial products from mortgages to payday loans, insists that costs to consumers will not go up, but decreasing revenues are usually passed to consumers in the form of increased costs.

Sources

Reuters

USA Today

MarketWatch

The CEO of Chase disclosed that the federal probe into the robosigning scandal reached a settlement. Image from Wikimedia Commons.

A settlement is soon to be announced regarding the robosigning foreclosure controversy. Some of the nation’s largest mortgage lenders rubber-stamped foreclosure documents without looking at them and may have foreclosed on some people who didn’t deserve it. A legal probe into foreclosure practices has reportedly reached a settlement with those lenders.

JPMorgan exec discloses deal with some federal agencies

Chief Executive Officer of JPMorgan Chase Jamie Dimon recently disclosed that the government probe into the robosigning controversy had come to an agreement with the mortgage lenders being investigated, according to Reuters. Dimon confirmed that no fines had been levied yet, but they are likely to come. The nation’s largest mortgage lenders and servicers were the subject of a sweeping investigation by nearly a dozen federal agencies and the attorney general of every state in the union. The agreement is not complete; it is only the settlement between the financial institutions involved and the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. A settlement with all 50 state attorneys general has not been reached.

State settlements to come

The controversy stemmed from the discovery that a lot of foreclosure proceedings started when paperwork to begin foreclosures was approved in a robotic fashion, or “robo-signed,” without proper review. The resolution of the robosigning foreclosure debacle is important, as foreclosure practices may change. JPMorgan, for instance, expects to hire at least 3,000 more employees to ensure compliance with the settlement agreement, according to Bloomberg. In other words, there will be an increased amount of regulation in the mortgage industry when it comes to foreclosures, which means it will cost the lenders in the mortgage industry more to lend and service a loan. Those costs will be passed on to the consumer at some point, likely in the form of requiring more money up front to get a loan. There is also a backlog of foreclosures on the books at these banks, as they have become more skittish about foreclosing on borrowers who are delinquent in paying their mortgage.

Mortgage modification failed participants

One failure of the Obama administration and the various stimulus programs was the various mortgage modification programs that were made available through the federal government. People who were behind on their mortgages or facing foreclosure could apply for a modification. The distressed homeowner’s lender would receive an incentive payment from the government if it modified the borrowers’ mortgage on a trial basis. However, according to USA Today, not many people were helped. The goal was to keep 3 million to 4 million people in their homes; instead only about 630,000 people had their mortgages permanently modified.

Sources

Reuters

Bloomberg

USA Today

Wells Fargo and other banks are ending debit rewards programs as financial reform efforts are eating into their bottom line. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

The costs of financial reform are adding up as a potential curb on interchange fees is causing banks to cancel debit card reward programs. Financial reform legislation has caused ripple effects, and the effort to legislate fairer conditions for consumers is leading to more restrictive conditions for consumers. Lawmakers are beginning to balk at the high cost of such laws.

Interchange fee cap may deprive consumers in effort to protect them

The proposed cap on interchange fees or “swipe fees,” which merchants must pay banks to complete debit card transactions, has already led to major banks trying to save money any way possible. Free checking programs and debit card rewards have landed on the chopping block. JP Morgan Chase ended its debit card rewards program and more are following suit, according to CNN. Wells Fargo subsidiary Wachovia has stopped offering debit rewards to new customers, and Wells Fargo will do likewise on April 15. Citibank recently disclosed that the bank is “in the process of evaluating potential changes,” which means it is likely going to cut debit rewards programs for customers as well.

Costs of financial reform adding up

A recent estimate by the Government Accountability Office placed a price tag of $1 billion per year on the Dodd Frank Act, or the financial reform bill, according to USA Today. The creation of a totally new agency, the Consumer Financial Protection Bureau, has already caused controversy and infighting among lawmakers. The GAO estimated that federal agencies would need to hire more than 2,000 people to enforce the laws, including any the CFPB would be enforcing. Congressional Republicans have been openly critical of the agency, which some assert has too much authority. The special adviser to the president in charge of setting up the agency, Elizabeth Warren, has defended the agency, saying that the “Wall Street behemoths” that created the need for the agency should be targets, not the CFPB, according to Bloomberg. The agency will have oversight of consumer financial products from personal loans to credit cards, when it starts operations later this year.

Consumers may end up not using credit at all

The aim of financial reform laws is to prohibit trickery by financial institutions and make the use of credit safer for consumers. That is a noble aim, but it seems to be having a chilling effect on financial institutions. Debit card rewards and free checking are falling by the wayside, but banks cannot impose fees with impunity. Loan credit is likely to get tighter, though that also means banks and lenders cannot gouge customers out of the blue. However, the debate is going to be whether the loss of convenience is worth it.

Sources

CNN

USA Today

Bloomberg

Loan lenders are going to freeze foreclosure activity for the holidays, as is customary. Image: Brendel/WikiMedia Commons/CC-BY

Every year, most home loan lenders halt foreclosures through the holidays. This year, most mortgage lenders are halting foreclosure activity for Christmas, as it is customary to do so. It isn’t unusual, but a foreclosure freeze was already in effect for some lenders anyway.

Loan lenders customarily halt foreclosures

Typically, mortgage loan lenders halt all foreclosure activity from late December until after New Year’s Day, according to CNN. This year will be no exception. Freddie Mac and Fannie Mae have a freeze on foreclosing on any outstanding installment loans that either company lent or backed. Freddie and Fannie are still a long way from emerging from conservatorship, as both companies are still under the direct control of the Treasury, but auctioning a few homes would not help the troubled mortgage houses. Both are still suffering from the weight of toxic mortgages, regardless of how many emergency loans either company has received from the government.

Large lenders freezing foreclosures as well

The nation’s largest loan companies are freezing foreclosures for the holiday as well, as is the custom. JPMorgan Chase, Bank of America and Wells Fargo are all halting evictions from foreclosed properties where the people who were borrowing money lapsed on payments. However, Bank of America and JPMorgan Chase are both embroiled in the “robo-signing” controversy and cannot necessarily evict anyone to begin with. Both companies are accused of automatically signing off on foreclosures without having done the due diligence as to whether the action was legal.

Much needed reprieve

Currently, about 100,000 people lose their homes to foreclosure per month. Foreclosures have been a scourge of the real estate industry, but the bright side, if there is one, is that the rate hasn’t been accelerating lately. However, the key to fixing the real estate market is for unemployment to further decrease.

Sources

CNN

Many people think overdraft fee policies at most banks make them snakes in the grass. Image from Wikimedia Commons.

A lawsuit in California concerning Wells Fargo and its practices regarding overdraft fees concluded recently. The presiding judge, William Alsup, handed a ruling which ordered Wells Fargo to pay back a substantial sum to Californians that it had unfairly dinged for overdrafts. The judge found the bank had deliberately manipulated overdraft practices to profit heavily, and did not mince words in his decision to penalize the bank for its actions. Overdraft fees are controversial, and some contend that people are better off getting a cash advance than using overdraft protection.

Judge orders $230 million in restitution

According to Forbes, Federal judge William Alsup ordered Wells Fargo to pay $230 million to customers it has charged overdraft fees. Depending on the amount of the overdraft, a single overdraft fee can carry an APR far higher than a payday loan. The judge also highlighted that Wells Fargo had a practice of clearing the largest charges first, which guaranteed that customers would lapse into overdraft and be charged $35, even if customers overdrew their accounts by a few dollars.

You can bank on high fees

Wells Fargo also didn’t extend the option for customers to decline a transaction that would put them into overdraft. The decision highlighted documents from the bank that demonstrate the bank establishing covert lines of credit for checking accounts, guaranteeing transactions wouldn’t be declined and the account holder would be charged. The judge also cited that internal communications from Wells Fargo proved the motive was explicitly to profit from overdraft fees. The bank generated $1.4 billion from 2005 to 2007 in California alone. The interest rate on overdraft fees can be higher than if a person were to get a personal loan to float them.

Overdraft practices overhauled

There are new rules in place concerning overdraft practices, and other credit from banks such as credit cards. The Federal Reserve instituted a rule that mandates banks give customers the option of enrolling in overdraft protection, according to CNN Money. Overdraft fees generate more than $38 billion in income for banks annually.

Further Reading

Forbes

CNN Money

Wells Fargo is going to be chopping 3,800 jobs along with the Finance Division. Image from Flickr.

After acquiring Wachovia Bank and taking heavy losses from subprime mortgages, Wells Fargo has announced that it will be shutting down its Finance Division. This move will chop about 3,800 jobs from the 14,000 person division. Wells Fargo will still offer line-of-credit loans and other financial products — just not through a separate division.

Wells Fargo Finance Division

In existence for the last 100 years, the Wells Fargo Finance Division has been separate from Wells Fargo banking services. The Finance Division has been responsible for providing small loans, large loans, auto financing and mortgages. The Finance Division currently holds about $24.7 billion in real estate loans, and all but $1.5 billion is considered subprime. The division lost about 4.62 percent of value in the first quarter, which is about on-level with other major lenders.

The Wells Fargo merger with Wachovia

In 2008, Wells Fargo started a merger with smaller lender Wachovia Bank. This added branches for the conglomerate bank but also brought on additional liabilities. There are about 6,600 branches of Wells Fargo/Wachovia banks and an additional 2,200 Wells Fargo Home Mortgage offices. The takeover of Wachovia was forced by government regulators, who wanted to ensure that Wachovia bank would not fail. Formally, Wachovia was dissolved on March 20, 2010.

Wells Fargo to continue lending

Though Wells Fargo is shutting down its Finance Division, it has announced that the bank will still provide services for customers who are borrowing money. Auto loans and fast personal loans will now be offered inside Wells Fargo branches. The company does still intend on offering mortgages, but rather than subprime offerings, FHA-backed loans will be the focus. These federally backed housing loans are less likely to default, in theory. The current $14.7 billion in auto loans and $7.6 billion in unsecured personal loans will continue to be serviced by the company. The move is intended to cut operating costs and “streamline operations.”

Money management online

Banks are offering customers pie charts and amortization schedules to get a clear view of their money. The reasoning is that customers who are more in control of their money will see banks as more viable financing tools. That means when they need loans or new retirement account, they will be more likely to work with the bank that offers them online tools to manage money.

Michael Upton, senior VP at Bank of America, (see http://www.msnbc.msn.com/id/35018578/) said, “The more informed customers are about their financial lives, the better customers they make for us in the long term.” Many banks today are taking their online model from Mint.com. Mint is a website that offers consumers the ability to merge data from various sources and give a clear picture of their finances. It gained a huge popularity and industry insiders were watching closely the capabilities the website offered.

Online banking on the rise

Industry analysts are showing that about 60 million people do some type of online banking in the US. The number using personal finance management tools is much smaller, but banks are hoping to turn that around. Although right now less than half of all US banks offer personal finance management, smaller banks and credit unions are quickly moving into the online territory. They understand how important it is to offer additional services, and they know how much focus consumers are putting on their own personal finances now. Upton added, “The recession was a good lesson for people who didn’t prioritize their savings. Now a good number of consumers are changing their ways.”

How the larger banks fit in

Interestingly, bigger banks are not moving as quickly to utilize personal finance tools. It’s the smaller banks that are integrating them. The reason for this is that larger institutions have more elaborate features, and the ability to combine account data could take considerably longer to implement. For customers using large banks to watch their money now, it involves combining systems from serial mergers. That’s a large task for any institution to take on. For example, Wells Fargo has a “My Spending Plan” tool that categorizes spending and has a budgeting script. It only is able to pull date from the bank’s accounts though, which some say limits its usefulness to the consumer. That’s because it is common for people to have a dozen or more accounts with various banks, brokers, and credit card companies. “Consumers want to simplify their financial lives,” said Mark Schwanhausser, a senior analyst with Javelin Strategy and Research. “There’s a screaming need for someone to come through and help them organize, and pull all that account data in one place.”(see http://www.msnbc.msn.com/id/35018578/)

The next step in banking

Schwanhausser said that to serve the customer more, banks need to make their personal finance tools more prominent to the user. Consumers watching their money now want a much more diverse and flexible resource. In today’s high-tech world, it’s crucial that banks keep up. Offering finance tools that are customizable and draw all account information to form a complete picture of finances is the next step to serving banking customers.

Need money now? Apply HERE!

Image from Flikr.

Thanks to the sub-prime mortgage crisis and all it entailed, most people in the U.S. now know that when a house is foreclosed or reclaimed, it becomes the property of the bank that holds the mortgage papers. Apparently, Wells Fargo Senior Vice President Cheronda Guyton got confused about what “property of the bank” means.

It’s odd that she didn’t understand the company policies about reclaimed property because Cheronda Guyton was responsible for the foreclosed commercial properties division. A Cheronda Guyton picture shows that the high-level seemed to think that Wells Fargo property was her property. She was caught throwing a party in a $12 million Malibu mansion that the owners had been evicted from.

What does this have to do with Bernie Madoff?

So do people who own a $12 million home in Malibu get kicked out of it? Turns out, the couple that owned the property got mixed up in the whole Bernie Madoff Ponzi scheme business. CBS says “they were financially devastated by Bernard Madoff’s fraud scheme.”

They had completed their personal loan application for their home mortgage with Wells Fargo, and when they suddenly needed money to pay off huge debts, they signed their property over to the bank. There was a stipulation in the couple’s agreement with Wells Fargo that the bank was required to keep the home off the market for awhile. Nonetheless, the couple had to move out.

Curious circumstances

So Cheronda Guyton knew the owners had gotten the boot but that the house couldn’t be sold. So what did she do? Bollywood91.com says she moved in! CBS news says she “stayed there,” which is a tad more vague, but one thing we know is that she turned this pricey property into a party house. Neighbors complained that she was throwing parties in a home that was supposed to be empty, and the Los Angeles Times caught wind of it.

After the Cheronda Guyton picture confirmed she was throwing parties and staying at the property, and after working for Wells Fargo for 17 years, she got canned. But whatever for? A Wells Fargo spokeswoman says that squatting in company property is against company policy. The bank also says it’s apparent from the Cheronda Guyton picture that she was the only employee involved in this incident.

‘”We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members,” the bank said in a statement.

Cheronda Guyton picture not published

Though it has been widely reported that there is photo evidence in the form of a Cheronda Guyton picture from a party at her house, the photo isn’t making the rounds on the Internet — yet. I suppose if the Cheronda Guyton picture only exists as a hard copy or on a digital camera somewhere, it is possible that it could stay that way.

However, I think we all know better than that. I’m sure this Cheronda Guyton picture will surface online soon. At this moment I can’t find any photos of her at all, let alone the incriminating one, but give it time.