Bank of America Pays $430M for Misallocation of Customers’ Funds

Bank Of America

The country’s largest bank, Bank of America (BAC), has agreed to remit $430M in settlement cash for violating bank regulatory rules. These rules are meant to protect banking customers’ funds and safeguard investors against misleading disclosure statements for the buying and selling of securities.

Part of the settlements include $415 million, which will be paid by North Carolina-based BAC in response to allegations that the Merrill Lynch unit of the financial institution misused cash from brokerage customers from 2009 to 2012. According to the report, the money was used to finance trading activities and generate profits.

Although SEC regulations require a broker to maintain trading funds in a reserve account, Merrill Lynch did not follow suit but used the money for complex option trades. The trades, in turn, artificially reduced the amount of money that required safeguarding. The practice permitted billions of dollars to be released each week that Merrill Lynch used to finance its own trading.

According to the Securities and Exchange Commission (SEC), brokerage customers may have been “exposed to a massive shortfall . . .” if the options trades had failed. The SEC, at the same time, announced that they are charging William Tirrell with responsibility with the alleged incident. Tirrell served as the head of regulatory reporting at the stock trading firm during the trading event. Mr. Tirrell is challenging the regulator’s allegations.

In addition, Merrill Lynch has agreed, separately, to pay a $10 million SEC settlement for making misleading statements to investors when offering structured notes connected with the brokerage firm’s proprietary volatility index. The notes, which were issued by BAC, featured disclosure statements that were drafted and reviewed by Merrill Lynch.

Not only that, the Financial Industry Regulatory Authority has also fined Merrill Lynch $5 million over the said disclosure violation. According to BAC, the settlement will not impact second-quarter 2016 earnings for the bank.

Wichita Employer Warns New CFPB Bad Credit Loan Rules Would Hurt Jobs

Unemployed Man

The Consumer Financial Protection Bureau (CFPB) garnered a lot of headlines. Speaking in Kansas City, the federal watchdog agency outlined a new proposal of rules that would apply to the payday loan industry at the federal level. The move would affect the business model of payday loan stores across the country, from California to Maine.

The CFPB’s guidelines drew mixed reviews from consumer groups, anti-poverty activists, the payday loan industry and the corporate world. Some say the rules go too far, while others say they don’t go far enough, but it’s still a step in the right direction.

But can the CFPB payday loan rules affect jobs in jurisdictions across the United States? One employer in Wichita, Kansas believes they eventually will once they go into effect next year.

On Wednesday, Bill Baker of Curo Financial Technologies warned that the proposed rule could harm more than 600 employees the firm has at its Wichita office and call center. Since it limits the number of loans a person can take out in a short period of time and alter the way clients repay the loans, the changes could modify the way bad credit loan lenders such as Landmark Cash conduct business.

Ultimately, the Curo Financial Technologies executive warns it could lead to job cuts soon.

“We were disappointed with what they issued. Largely, what we in the industry believe it does is it cuts off access to short-term credit. One thing these rules can’t regulate is demand,” Baker said. “In states where prohibitive legislation has been put in for short-terms loans, we’ve seen customers turn to overdraft protection, which is far more expensive, or, worse yet, we’ve seen them turn to unlicensed lenders. Those avenues are almost always more expensive.”

He further explained that the rule proposal, which is 1,300 pages long, would turn out to be more harmful to consumers who need short-term credit to pay rent or cover an emergency. Baker noted that he’s not against federal regulations, but he doesn’t want to see credit options terminated for those who may “have nowhere else to turn.”

“Our customers understand the process and the product,” Baker said. “I think a lot of the folks making the regulations and making a lot of the comments in the media – even some consumer advocates – are people who have never had to take a short-term loan. There’s a delta between the reality and the messaging out there.”

With payday lenders earning more than $3.6 billion in fee revenue last year, critics of the industry say these businesses perpetuate poverty and help the impecunious enter into a spiral of debt. However, Baker notes that payday lenders always consider a customer’s situation.

“There’s a misnomer that we give very little consideration to a customer’s income and ability to repay,” Baker said. “We build sophisticated algorithms to predict people’s ability to repay. If we lend somebody $500 and they don’t pay us back, that’s not good for anybody.”

Beginning June 2, the CFPB is allocating the general public a 90-day window to comment on the proposal. Since it does not need congressional approval, the rules would likely go into effect as early as next year. The CFPB also warned that it will present more rules in the coming months.

It Costs Close to $250,000 to Raise A Child Today

little girl

No one can deny that raising a family is an expensive undertaking. You have to spend a lot of money on your children, normally from the time they are infants up until they graduate college. Not only do you have to figure in diapers and baby food when they are very young, you also have to calculate the costs for athletics, education and housing. The U.S. Department of Agriculture (USDA) has been keeping track of these kinds of statistics since 1960. Its current data was published in 2013.

Less Money is Spent on Basic Items

According to USDA figures, the cost of caring for a child, in and of itself, has climbed almost twice as fast as prices, overall, since the economic recession ended in 2009. The figures represent what a middle income family spends on each child in the household.

Expenses for Housing Remain about The Same

According to research, how much people in the US spend on raising kids has altered a fair amount over the last several years. While the amount of income spent on shelter (about 33%) has remained steady, spending on just about everything else has changed.

For example, parents spend much less on basic items for their children nowadays. Items or substances such as personal care products, food, clothes, toys or sports gear and accessories are all now lower in cost. That is because many goods are produced overseas, and technological advancements have been made in agriculture and manufacturing.

The Costs for Health Care Have Risen

However, that being said, parents do spend more money on services for their children. Fixed costs, for example, like health care. have increased. More money is also spent on education and child care. The average middle-income family in a two-parent household spent about 18% of its budget on child care and education in 2013, which is 2% more than it was in 1960.

The Amount of Money Spent on Each Child Per Year

Overall, studies show that a child who is born in 2013, whose expenses are covered until he or she is 18 years old, will cost parents approximately $245,340 over that period. In other words, a standard-sized family with two parents and two children will spend almost one-half million dollars for the kids in the household until the younger family members are ready to pay their own costs or reach the age of majority.