"...mergers will continue to shape the structure of the banking industry in the U.S...[and] may signal the beginning of a process for building a truly national banking franchise."

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Michael E. Staten

Robert W. Johnson
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SEPTEMBER 2004   

Privacy and Sharing of Information by Affiliates
   

Last year's passage of the Fair and Accurate Credit Transactions Act (FACT Act) was supposed to have resolved the issue of limits on the sharing of a customer's personal information across affiliates of a financial services firm. Specifically, the FACT Act preempted states from placing limits on such "affiliate sharing" and created a uniform federal standard that would, at once, promote customer privacy and allow companies (and their customers) to benefit from the coordinated use of customer information across affiliates. But, this preemption has been upended by a recent California federal court decision that upheld a state law that explicitly limits the sharing of information across affiliates by requiring that companies give customers the right to prohibit such sharing.

Continued Improvement in
Credit Card Account Performance
Monthly credit card loan performance indices reported by Moody's Investors Services continued a positive trend in June.... The 30+ day delinquency rate measure marked its eleventh consecutive month of year-over-year improvement—the last four of which have shown double digit improvement.

Bankruptcy Filings Gradually Diminish
In its recent report on bankruptcy filing trends through the second quarter of 2004, the Administrative Office of the U.S. Courts confirmed that, for the first time since 2000, bankruptcies declined during a 12 month period.

Subprime Mortgage Lending Growing Rapidly
The pace of mortgage loan originations may have slowed in the prime market due to rising interest rates, but the subprime market roared ahead during the first six months of 2004.

Global Credit Card Trends
As U.S. credit card markets have reached saturation, many issuers have shifted marketing emphasis to overseas opportunities.... Here are two updates.

Bank of America and GM Offer Cobranded Debit Card
One of the most successful cobranded card rollouts of all time was the General Motors Mastercard product launched in the early 1990s.... Now, GM has forged a new partnership with Bank of America to launch a cobranded reward program for a debit card product.

Loans to Borrowers in Bankruptcy Chapter 13
The 1.5 million U.S. households filing for personal bankruptcy every year offer a sizeable niche market for lenders—if they could just figure out who was least likely to get into financial trouble again. Apparently, First Hallmark Mortgage Corp has found a way to tap this market.

Low-Doc Subprime Loans
The end of the mortgage refinance boom has sent many lenders scrambling to maintain loan origination volumes. That, in turn, has pushed more lending resources into the subprime market where some lenders are courting higher risk borrowers with origination and underwriting practices once reserved solely for prime borrowers.

Toyota Financial Set to Expand U.S Consumer Lending
By gaining approval in August from the Federal Deposit Insurance Corp to set up a bank in the U.S., Toyota Financial Services corporation has embarked on a plan to gradually roll out a range of consumer financial services, including credit cards and unsecured loans.

Merger Activity in the U.S. Banking Industry
A recent Federal Reserve Bank of San Francisco Economic Letter examines the increase in large bank interstate merger activity in the United States. In 2004, the mergers of Bank of America with FleetBoston and J.P.MorganChase with Bank One will create institutions with more than $1 trillion in assets each—joining Citigroup as the only trillion dollar banking organizations in the U.S.

Kerry-Edwards Plan For Retail Financial Services
The Democrats unveiled an aggressive plan for regulating retail financial services as part of Senator John Kerry's presidential campaign.... The campaign signaled an intent to launch new regulatory initiatives aimed at allegedly "predatory" lending practices across the range of consumer loan products.

Privacy and Sharing of Information by Affiliates
Last year's passage of the Fair and Accurate Credit Transactions Act (FACT Act) was supposed to have resolved the issue of limits on the sharing of a customer's personal information across affiliates of a financial services firm. Specifically, the FACT Act preempted states from placing limits on such "affiliate sharing" and created a uniform federal standard that would, at once, promote customer privacy and allow companies (and their customers) to benefit from the coordinated use of customer information across affiliates. But, this preemption has been upended by a recent California federal court decision.

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