WEDNESDAY MAY 12, 2021 VOL. 186 No. 90 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Umpqua fined 5 $1.8 million over leasing unit’s collection practices Changing behavior The FDIC said Financial Pacific Leasing, The percentage of new loans at OneMain Financial that are a subsidiary of the Oregon bank, charged closed without a visit to a branch has soared since the early undisclosed fees to borrowers, made days of the pandemic excessive collection calls and disclosed information about customer debts to third parties. Page 6 See story on page 5 % of new loans Sterling Bancorp is moving 6 past its mortgage woes 50% Less than two years after shutting down its biggest business amid fraud allegations, 46% 40% 44% the Michigan company has sold branches, settled a shareholder lawsuit and returned 30% to profitability under turnaround specialist 34% 33% Thomas O’Brien.Page 6 20% Amex pushing beyond cards 10% 7 to woo small businesses 13% 11% is trying to differentiate 9% 0% itself from other card networks by making loans through its bank and incorporating 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 accounts payable services and lending Source: The company technology it inherited with its acquisitions of Acompay and Kabbage. Page 7

 companies bringing dailybriefing Small building 8 back huge points offers 3 bitcoin services The country’s largest banks are pulling out to keep customers all the stops to lure customers to take on new It’s not 2008, but bank CEO First Foundation and Suncrest are among credit cards again, after retreating from such 1 hearings could still get testy the community banks developing platforms deals during the COVID-19 pandemic. Page 8 The heads of the biggest banks have a that let clients buy, sell and hold increasingly chance to tout the industry’s community popular digital assets. The goal is to JPMorgan, Deutsche Bank said outreach during the pandemic. But they avoid losing business to cryptocurrency 9 among firms sued by 1MDB can also expect tough questions about the exchanges. Page 4 Malaysia’s 1MDB and a former unit have Paycheck Protection Program as well as filed suits against firms including JPMorgan what banks are doing to address climate Storefront lender Chase and Deutsche Bank as the nation change, racial inequities and other hot- 4 OneMain pushes seeks to recover assets worth more than $23 button issues. Page 2 further into digital billion linked to the scandal-plagued state- After more than 100 years of mostly in- owned investment fund. Page 9 New OCC head signals person operations, the subprime installment 2 focus on climate risks, lender is seeking to adapt to changing Distinguishing between ‘technological change’ consumer preferences — launching 10 maternity and paternity Acting Comptroller of the Currency Michael an online loan platform just before the leave is outdated Hsu said he plans to prioritize “solving pandemic and recently striking a deal to Banks’ family leave policies need to evolve urgent problems and addressing pressing acquire a financial wellness app. with a new workforce that increasingly views issues” until the Biden administration selects (See chart above.) Page 5 fathers as equal caregivers, Karsten Vagner a permanent head of the agency. Page 3 of Maven writes. Page 10 WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 2

Administration to distribute Paycheck Senate and House committees, respectively, ESG Protection Program loans and taking other have made clear they intend to keep the heat steps to mitigate the economic impact of on the industry. COVID-19, some observers said the executives At a recent conference with community It’s not 2008, have a positive story to tell about the industry’s bankers, Brown said, “People just don’t trust role in the pandemic. the largest banks.” He echoed that sentiment but bank CEO Regulators and lawmakers have in a statement to American Banker, saying, acknowledged that banks were well capitalized “For too long, this committee has done the ahead of the coronavirus pandemic that put bidding of Wall Street instead of doing its job of hearings could them in a better position to handle a distressed overseeing the banking industry.” economy. “We are going to take a close look at the risks still get testy “I don’t think there’s any doubt that they’re these megabanks pose to the economy, how in a better place than they were obviously right their influence affects the dignity of work, and By Neil Haggerty after the [2008] crisis,” a former congressional what Congress needs to do to make sure these May 11, 2021 staffer said. banks are fighting systemic racism, inequality, WASHINGTON — The industry’s track Ed Mills, a policy analyst with Raymond and climate change — rather than driving record helping consumers and the economy James, agreed that chief executives can them.” navigate the pandemic, and individual banks’ emphasize that they were part of the solution Waters said in a statement that the House policies addressing climate change and social to the coronavirus pandemic. hearing is meant to justice issues, are expected to take center stage “During a significant shock to the system, “scrutinize banks’ response to the pandemic when CEOs from the six largest institutions the banks kind of were able to be leaned upon crisis, their diversity and inclusion results, testify before Congress later this month. to support rather than the area that is being policies and practices, their wage and It has been over two years since lawmakers bailed out,” Mills said. “It is just fundamentally compensation policies, their efforts to reach held a public hearing with big-bank executives. a different place for them.” underserved communities, their response to The world is considerably different since then Still, Democrats have expanded their power climate risks, and other important issues.” thanks to the global COVID-19 crisis and in Washington since the last round of big-bank To some extent, the CEOs could find a sharper focus on racial equity following CEO hearings in 2019, taking control of the themselves caught in the middle of partisan national protests over policing. Senate in addition to the House. bickering between Democrats and Republicans The banking sector is no longer the Some lawmakers have criticized banks over companies’ focus on environmental, punching bag it was for Congress in the wake over allegations that they were providing social and corporate governance. of the 2008 financial crisis. But the CEOs of concierge services to wealthy customers when Just as progressives have applied pressure , Wells Fargo, JPMorgan Chase, Bank distributing PPP loans, and concerns continue on banks to institute changes addressing of America, Goldman Sachs and Morgan to grow about whether mortgage servicers will climate change and the racial wealth gap, Stanley are still expected to come under work cooperatively with struggling borrowers Republicans have harshly criticized banks sharp scrutiny on issues such as the Paycheck on workout options as they near the end of when they do take a position on politically Protection Program, whether they have made their forbearance periods. charged issues. Specifically, recent decisions progress on diversity and inclusion goals, and Sen. Sherrod Brown, D-Ohio, and Rep. by certain large institutions to reduce their Republican-criticized decisions by certain Maxine Waters, D-California, who chair the business with disfavored industries like guns banks to curb lending to gun and fossil fuel companies. “This isn’t a beloved industry, and there will Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 always be issues and topics that will provide for Phone 212-803-8200 AmericanBanker.com attacks in public settings like this hearing,” said Isaac Boltansky, director of policy research at Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 Compass Point Research & Trading. Managing Editor Dean Anason 770.621.9935 The six CEOs — Jane Fraser of Citi, Brian Reporters/Producers Moynihan of BofA, Charlie Scharf of Wells Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 Fargo, Jamie Dimon of JPMorgan Chase, Washington Bureau Chief Joe Adler 571.403.3832 David Solomon of Goldman Sachs and James Executive Editor, Technology Miriam Cross 571.403.3834 Gorman of Morgan Stanley — will testify before Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 the Senate Banking Committee on May 26 and BankThink Editor Rachel Witkowski 571.403.3857 the House Financial Services Committee on John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 May 27. Hannah Lang 571.403.3855 After spending the past year facilitating Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 government-mandated loan forbearance Digital Managing Editor requests from borrowers facing financial Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 hardships, working with the Small Business

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 3 and fossil fuels drew a GOP outcry. narrative to tell about the customers who were The CEOs could also face new pressure to able to keep their businesses open or stay in OCC weigh in on voting reform laws advanced by their homes as a result of the industry’s efforts. states such as Georgia that critics say will make “The banks have been a key source of it difficult for Black voters and other minorities support to the economy during this time,” New OCC to cast ballots. said Kevin Fromer, president and CEO of the “The whole ‘woke CEO’ issue has become a Financial Services Forum. “Their participation head signals popular conservative battle cry these days,” the in the PPP, the banks were involved in former congressional staffer said. “Whether facilitating about nearly $69 billion in PPP Republicans are not happy with banks not loans to roughly 850,000 small businesses. … focus on doing business with fossil fuel companies or They continue to provide and actually increase guns … and then you’re going have Democrats the provision of credit in various forms to their climate risks, wanting them to take a strong stand on the customers of all sizes.” voting rights issues.” Richard Hunt, president and CEO of the Sen. Kevin Cramer, R-North Dakota, Consumer Bankers Association, agreed that ‘technological a member of the Banking Committee, the industry helped keep the economy afloat. introduced a bill in March intended to penalize “Without the willingness of a well- change’ banks that curb lending to energy producers capitalized banking industry to partner with and other industries. The legislation would the federal government, the success of these By Brendan Pedersen prevent institutions that deny fair access federal relief programs would not have been May 10, 2021 from using Federal Reserve discount window possible, nor would the significant progress WASHINGTON — The Office of the programs. of our nation’s ongoing recovery,” Hunt said. Comptroller of the Currency’s newly installed Cramer said he met in Apriil with Dimon, “I hope these efforts are at the forefront of interim leader will focus on “solving urgent the JPMorgan Chase CEO, to discuss the the discussions before the House Financial problems and addressing pressing issues” until proposed measure. Services and Senate Banking committees.” the Biden administration selects and the Senate “I am very encouraged by my meeting But after Democrats won control of the confirms a permanent head of the agency, with Mr. Dimon,” Cramer said in a statement. White House and Senate, the role banks play acting Comptroller Michael Hsu said Monday. “I believe he has a good understanding of in narrowing racial equities in the financial On his first day at the helm of the agency, my concerns regarding financial institutions system and curbing the financial risks Hsu signaled that under his watch the OCC categorically discriminating against legally associated with climate change could also be will address how banks are confronting operating industries, and he seems to clearly at the forefront. climate change and the pace of technologial recognize working to reduce our carbon Some analysts expect progressive development, among other issues, and conduct footprint does not mean shutting down Democrats to push the bank CEOs to commit a full review of regulatory standards. America’s fossil fuel industry and ruining our to improving their workforce diversity “The review will take into account a full economy in the process. I look forward to and lending to minority communities and range of views, both external and internal,” Hsu working with him and his peers on those and minority-owned businesses. wrote in a message to employees. “I want to other mutual goals.” Boltansky said a focus on the Paycheck make sure that we distinguish the forest from Some observers said the big-bank CEOs Protection Program could force the bank CEOs the trees, that changed circumstances due could draw praise from members of the two to respond to criticism that the program aided to the pandemic are considered, and that all committees for the steps they took to address many companies that did not need the support alternatives are evaluated.” the economic impact of the pandemic, such as much as others. It remains unclear just how long Hsu will as offering deferred loan payment options to There will be a fair amount of time spent on hold the title of acting comptroller. The White customers and committing funds to vulnerable PPP oversight broadly,” he said. “You can find House has yet to announce who will lead the communities. a number of areas where the banks could have OCC on a permanent basis. A source close to the financial services and should have done better.” Hsu suggested a focus on making sure banks industry said that the big banks are more Fromer said that the big banks can cater to those most affected by COVID-19, and optimistic about appearing before Congress point to many PPP successes, including said he believes the industry should be engaged this year than they have in the past, because a substantial portion of loans distributed with climate change risks. banks were in a position of strength and were through the program that went to businesses “The pandemic has had a disproportionate able to help consumers and small businesses in underserved communities. impact on vulnerable communities, especially weather the coronavirus crisis. “Nine out of 10 loans went to businesses communities of color and rural communities, “We expect the vast majority of the focus to with 20 employees or less,” Fromer said. “About and the recovery threatens to leave many of be on how banks worked to support the ‘real 35% of those loans were made in majority- them even further behind,” Hsu wrote. “Climate economy’ through the pandemic,” the source minority census districts, so I think large banks’ change poses new risks and challenges said. “How did they show up for consumers, for performance in terms of reaching a variety of for banks, and we need to make sure they our communities and our small businesses?” different parts of the country and the focus on understand those risks and are capable of Banks believe that they have a positive the very smallest businesses was good.” managing them.”

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Hsu indicated he plans to examine trends in preparing to offer an actively managed bitcoin and MassMutual, have been investing in “technological change and digitalization” and fund, CoinDesk reported last month. Morgan bitcoin. combat “complacency about risk-taking.” Stanley has said it is launching access to three “We’ve reached this adoption cycle where “The 1,200 national banks and federal funds that will enable ownership of bitcoin. this disruptive asset, which was really a store savings associations that the OCC supervises Goldman Sachs has created a cryptocurrency of value, has become mainstream,” he said. are facing more change now than at any point desk that trades bitcoin-linked derivatives, About 20% to 30% of the U.S. population is in recent memory,” Hsu wrote. “The OCC has according to an internal memo reported invested in bitcoin, he said. a well-earned reputation for having strong by CNBC on Friday. And U.S. Bancorp is At Suncrest, President and CEO Ciaran examiners, an excellent policy shop, and sharp developing the ability to offer digital asset McMullan regularly gets inquiries from lawyers, supported by a team of dedicated custody to institutional investors. customers asking about cryptocurrency. professionals who enable effective operations.” Many others are in the consideration and “It always felt like that could be a business “We are going to need to build off of that development phase, according to industry opportunity for us,” he said. to adapt to today’s challenges and a rapidly observers. All are working to stay relevant and The pandemic caused the $1.3 billion- changing environment,” Hsu added. keep customers from leaving for a nonbank asset bank to accelerate a range of fintech financial services provider that can meet initiatives it had been considering, including their cravings for crypto. something in the digital asset space. BITCOIN “We reached out to FIS, our core From skeptics to believers technology partner, and were excited to Three years ago, executives at the $7.1 hear they were working on a cryptocurrency Small banks billion-asset First Foundation were bitcoin custodial platform with NYDIG,” McMullan skeptics, just like much of the industry. said. “That immediately felt like a good entry building bitcoin “We were kind of unsure when everyone point into the cryptocurrency sector for a started talking about it,” Chief Operating bank of our size.” Officer Lindsay Lawrence said. “In the The idea was an easy sell internally. services beginning, a lot of us looked at it more as a “Bitcoin is becoming more mainstream currency and not really as an alternative asset and less volatile with a lot more held in to keep class.” corporate treasuries these days,” McMullan But the company’s CEO began reading said. He personally made a bitcoin investment about bitcoin and hearing people say, “if through NYDIG to understand its platform customers you’re not already getting into this, you might and was impressed. The bank may start with a already be too late,” Lawrence said. custodial service through which it would buy, By Penny Crosman A new chief financial officer who joined the sell and hold bitcoin for existing customers. May 10, 2021 company last June, Kevin Thompson, turned “For Suncrest, we see this as a way to Deposit flight to Coinbase and other out to be a so-called crypto hodler. Bitcoin be innovative and responsive to changing cryptocurrency exchanges has helped enthusiasts’ misspelling of the word “hold” customer needs and the changing persuade community bankers who were once dates back to 2013, when a bitcoin investor demographics in our customer base,” skeptical of crypto to embrace it. posted an entry titled “I AM HODLING” in a McMullan said. “In the long term, we see Two small California banks, First bitcoin forum. it as a good potential noninterest-income Foundation Bank in Irvine and Suncrest Bank Then Lawrence analyzed how much of business line.” in Visalia, are with the help of technology the company’s deposit base had left to go to McMullan says consumers will be well partners quietly building the capability for Coinbase. It was in the millions of dollars. served by banking organizations’ bringing customers to buy, sell and hold bitcoin. “Whether we wanted to admit it or not, it a level of trust to the sector and “helping Account holders would be able to manage was happening,” Lawrence said. customers to avoid the myriad fake or and monitor their crypto holdings alongside After First Foundation announced an fraudulent crypto schemes that are out there.” their checking, savings and other traditional investment in the New York cryptocurrency bank products. software company NYDIG in April, wealth What’s involved They’re among dozens of small banks that management clients started telling their A newish crop of service providers offer are realizing how popular bitcoin has become financial advisors they were glad to hear it to take care of bitcoin for banks: They’ll buy and working with partners to let customers because they have bitcoin worth millions of it, store it and sell it. The group includes buy it. In December, the $1.4 billion-asset dollars in their portfolios. includes NYDIG, Avanti Bank and Kraken Quontic Bank in New York launched a bitcoin “From what we’ve read and seen, a lot Bank in Wyoming and Coinbase, which is rewards debit card. The $1.5 billion-asset Blue of people would feel more comfortable incorporated in Delaware. Ridge Bankshares in Charlottesville, Virginia, participating and purchasing bitcoin if it Some are working with banks’ major core in February began letting cardholders went through their bank because they trust banking software providers to integrate with purchase and redeem bitcoin at 19 ATMs. the banks,” Lawrence said. their software, so that banks’ customers can Those efforts coincide with initiatives Thompson noted that many large, public buy and sell bitcoin straight from their mobile by much larger banks: JPMorgan Chase is companies, including Tesla, Square, PayPal banking apps and online banking sites,

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 5 though the banks still won’t touch the bitcoin and keep them informed and involved every themselves. step of the way,” he said. “This is new for all SUBPRIME LENDING Even though the Office of the Comptroller of us, banks and regulators, and we want to of the Currency gave national banks the do it carefully and thoroughly. That said, we power to offer custody of digital assets, have found our regulators to be very open to Storefront questions linger about what that means, he working with us on this to make sure we all said. get it right.” lender “There’s not enough regulatory clarity for First Foundation executives have met with many banks to act as a custodian, definitely their regulators multiple times about bitcoin, not at a state level,” said Patrick Sells, head and they will continue to do so. OneMain of bank solutions for NYDIG. “Obviously the “There will be lots of dialogue because OCC has ruled, but for many states it is not we’re all educating one another throughout pushes further so clear.” this process,” Lawrence said. “On top of With FIS, NYDIG is launching a bitcoin that, we do have to look at NYDIG from a trading platform that lets people buy and vendor due diligence perspective, just like into digital sell bitcoin the way they might in PayPal or we would with any other third party. If we Square’s Cash App. Banks that opt to use the were just plugging in credit cards, that’d be By Polo Rocha trading platform will set and keep the fees easy because the world is comfortable with May 10, 2021 customers are charged and will pay a monthly credit cards. But this is scary — it’s different. The subprime installment lender OneMain software-as-a-service subscription to NYDIG. And whenever there’s something new, that’s Financial, whose first branch opened before Banks will be able to set controls on their where the partners you select are important.” the 1918 flu pandemic, historically did most of customers’ use of the platform, Sells said. A Partly due to the regulators’ concerns, “our its business in person. bank might not allow customers to invest motto here right now is crawl, walk, run,” That changed quickly in 2020, with what 100% of their money in bitcoin, for instance. Lawrence said. “As much as I want to sprint proved to be a well-timed rollout of an online It might set daily or monthly limits. and do everything, we’ve got to ease into it to lending platform just before the COVID-19 Sells compares NYDIG’s crypto services to get everybody that comfort level.” pandemic forced the world into lockdown. Zelle, a payment app banks offer within their The regulators are asking some deep and Now OneMain is adding more digital tools own apps but that’s provided by a third party. thoughtful questions, Thompson said. through a recent agreement to acquire a “It makes it easy for banks, and it helps “They also understand that this is financial wellness app called Trim, which helps greatly reduce some of the risks,” Sells said. technology that is being widely adopted, but customers shrink their bills, automate savings Banks do still have to consider third-party they want to ensure that it’s implemented and cancel subscriptions. The nonbank lender vendor management risk and reputation risk. correctly,” he said. “I believe long term it is also rolling out a credit card later this year. They need to convince their bank regulators makes sense to have cryptocurrency under The goal for OneMain — whose 2.3 million that this is a good idea. And they have to make the umbrella of the regulatory system, customers make it the largest installment some technology changes to accommodate because we in the banking system are really lender in the U.S. — is not to become a digital- the work with cryptocurrency partners. good at the [know-your-customer, anti- only lender. That is the approach that newer First Foundation uses a Fiserv core system money-laundering] processes and want to fintech competitors, such as Upstart, Prosper called Precision that is being integrated with bring that discipline to this new technology.” and , have adopted. NYDIG’s software. In addition to handling bitcoin custody Rather, OneMain is committed to offering The fact that NYDIG is going to store and and the integration work with core bank customers an in-person experience through secure customers’ bitcoin gives the bank and software providers, NYDIG has been writing its more than 1,500 branches in 44 states — but its regulators comfort. First Foundation hopes model compliance documents banks could also giving them the option of completing some to go live with this by the end of the year. use as a guideline, Sells said. or all of the process online or by phone. “We don’t want to rush it because we want Another risk banks face in offering bitcoin “Our future is not a digital pure play,” CEO to make sure we do it right, and we want to be is the chance that the price could plummet Doug Shulman said in a recent interview. “Our thoughtful,” Lawrence said. and their customers could lose money. future is to be the leading nonprime lender At Suncrest, McMullan expects the bitcoin First Foundation will warn customers of and have an omni-channel experience, which service to require minimal technology work this. allows the customer to do business with us the on the bank’s part because of the partnership “We need to make sure the customers way they want to do business.” between NYDIG and Suncrest’s core provider, understand that this is an investment, that OneMain may have trailed its digital- FIS. you can lose your money if you’re not careful,” only competitors some years ago, Shulman Lawrence said. “It’s going to be important acknowledged. While the company was Getting regulators comfortable for us to set expectations because it’s not investing heavily in back-end capabilities, it Working through regulatory compliance FDIC-insured. It is different. It’s the same did not launch a full digital experience for challenges has been critical for Suncrest, conversation we have to have with our clients borrowers until last year. McMullan said. when they do go to the investment side of the “It was either prescience or good luck, but “We plan to work closely with our regulators house.” we had the ability to start originating digitally at

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 6 the beginning of 2020,” Shulman said. will turn to OneMain for their next loan. The agency also alleged that FinPac made The behavior of OneMain customers has Later this year, OneMain will launch a credit excessive collection calls even after customers since shifted heavily, with 46% of its new card aimed at both existing customers and had asked for the company to stop, and loans closing without a branch visit in the first new prospects, including those who might not disclosed information about customer debts quarter, up from 13% in the first quarter of 2020. qualify for larger OneMain loans. The card, to third parties. OneMain’s net income rose to $413 million in which will run on Mastercard’s network, will FinPac also “advised borrowers FinPac the first quarter, up from $32 million a year ago, “reward good payment habits and reinforce would report delinquencies on commercial when a massive buildup of reserves to prepare credit building behaviors,” Shulman said. debt to the consumer reporting agencies, for possible loan losses weighed on earnings. OneMain declined to share more details prior when its policy and practice was not to report OneMain was not “starting from zero” to the card’s launch. such delinquencies to the consumer reporting in investing in digital capabilities, but it has The company has hired Nick Clements, agencies,” the FDIC said in a press release. been more aggressive lately in adapting to formerly of LendingTree and Barclaycard, to As part of the enforcement order, Umpqua consumers’ shifting preferences, said Jefferies run the credit card business. agreed to pay the fine without admitting or analyst John Hecht. At the same time, he added, “It makes sense for a company like OneMain denying the violations. maintaining a branch network gives people that has lots of longstanding relationships with “We promptly and thoroughly addressed who prefer in-person experiences an option borrowers to say, ‘Hey, look, you’re familiar the FDIC’s findings in relation to our and is a critical source of marketing to new with our installment loan product, but you subsidiary, Financial Pacific Leasing (FinPac), customers. know, we can offer you some revolving credit and are confident the critical issues have Even consumers who do not use OneMain products too,’ ” said Hecht, the Jefferies analyst. been successfully resolved,” the bank said in a branches may see the company’s signs and do statement. a Google search, Hecht noted. “And then they facilitate the loan process online.” ENFORCEMENT OneMain is one of numerous traditional MORTGAGES subprime lenders that are trying to find the optimal mix on physical and digital distribution Umpqua Bank channels. Other examples include Oportun, Sterling which announced plans in February to close fined $1.8 136 retail locations, and the tax-prep chain H&R Bancorp is Block, which offers a limited menu of financial products and plans to reduce its physical million over footprint over time. moving past OneMain offers installment and auto loans leasing unit’s ranging between $1,500 and $20,000, with a its mortgage maximum annual percentage rate of 36%. It focuses on consumers who typically have credit collection scores below 700, which may shut them out of woes traditional bank loans. practices Evansville, -based OneMain By John Reosti emerged from the 2015 merger of two By Brendan Pedersen May 07, 2021 storefront lending chains: Springleaf Financial May 10, 2021 Sterling Bancorp in Southfield, Michigan, and OneMain Financial, which was previously WASHINGTON — Umpqua Bank in is closer to turning the corner from lingering owned by Citigroup. Roseburg, Oregon, was ordered to pay nearly issues tied to a defunct mortgage program. Shulman was commissioner of the Internal $2 million by the Federal Deposit The $3.7 billion-asset company, which has Revenue Service from 2008 to 2012 before Corp. stemming from allegedly “unfair and been dealing with fallout from alleged fraud in joining OneMain in 2018. He said the Trim deceptive” debt collection practices of a what once was its biggest business line, earned acquisition will help customers improve their leasing subsidiary. $2.3 million in the first quarter after losing financial health by helping them negotiate their The $30 billion-asset bank, which is owned about $27 million over the prior five quarters. cable bills, for example. by Umpqua Holdings Corp., was fined $1.8 Sterling, under CEO Thomas O’Brien, Adding Trim’s employees will also give million by the FDIC and voluntarily paid an has also announced a few branch sales and OneMain more expertise to build new digital additional $1.6 million in restitution to nearly the resolution of a class-action lawsuit that tools for customers, he added. 17,000 customers. The agency announced the followed the abrupt shutdown of its tarnished The acquisition could help OneMain collect settlement on Monday. Advantage Loan Program. more customer transaction data, which it Financial Pacific Leasing, a subsidiary The developments have provided some would then be able to use for underwriting specializing in commercial equipment optimism for those who cover the company. and marketing. The financial wellness app financing, charged undisclosed fees to “Following a couple quarters of [losses], the also figures to lead to higher levels of customer borrowers with past-due accounts, according first-quarter’s positive results were a welcome engagement, increasing the chances that users to the FDIC. sight,” Ben Gerlinger, an analyst at Hovde

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Group, wrote in a Monday client note. “undoubtable,” though the company’s program allowed borrowers to compete with “We believe Sterling is sitting on its starting $72 million loan-loss allowance should be all-cash offers on terms that recognized the blocks for what is likely to be a 12-month leg sufficient to cover any losses. cultural preferences.” of” improved investor returns, Gerlinger The legal focus tied to the Advantage Seligman said it comes as “no surprise” added. Loan program also seems to be shifting away to him that Advantage Loans continue to O’Brien, who joined Sterling last June, said from the company and more toward former perform well. the company is making progress on several executives and employees. “When I was an advisor to the bank, fronts. It should be able to scale back its legal The Department of Justice recently charged defaults were virtually unheard of,” he wrote fees and reduce the elevated liquidity on its Sterling’s former managing director of in the email. “I believe the foreclosure rate is balance sheet over the second half of the year. residential lending with conspiracy to commit literally zero.” Settling the shareholder lawsuit “puts one bank and wire fraud. The Justice Department O’Brien, who said Sterling is cooperating more impediment in the rear-view mirror,” claims that Yihou Han accepted falsified with investigators, added in an interview that O’Brien said Monday during a conference call. documents and financial histories that Han’s indictment document “speaks for itself.” He said a review of past transaction activity, resulted in mortgages for individuals involved He said during the conference call that the mandated as part of a formal agreement with in money-laundering and tax-evasion Justice Department “has begun to take action the Office of the Comptroller of the Currency, schemes. against certain individuals and we anticipate is nearing completion. Han made nearly 1,300 Advantage Loans that effort will continue.” “That’s been an expensive proposition for totaling $684 million between 2011 and 2019, Han’s indictment can be viewed as a sign the bank and the company,” O’Brien said. generating $3.4 million in commissions, that “the formal investigation has moved Sterling’s legal and professional fees for the according to the indictment. Overall, Sterling beyond the bank and squarely to the bad first quarter totaled $8.8 million, or 41% of made about $5 billion of Advantage Loans, actors,” Gerlinger wrote in his note. noninterest expenses. Those fees totaled $32.6 according to court documents. “While still fairly early, we continue to million last year. Han’s lawyer did not respond to a request believe Sterling is likely to see a meaningful “It’s our expectation that the second half [of for comment. update regarding its government 2021] will start to see the gradual diminution Though Han is the only Sterling employee investigations” in the second half of 2021, of these extraordinary expenses,” O’Brien said. identified in the indictment, the Justice Gerlinger added. Sterling, which had roughly $1.1 billion of Department implicated several former cash on its balance sheet on March 31, should executives, including a claim that the bank’s have more chances to redeploy deposits. “founder and majority shareholder … provided B-TO-B PAYMENTS The company built the liquidity to support oversight over the management of [Sterling] buybacks of Advantage Loan mortgages from including its residential loan programs.” outside investors. The indictment alleges that Han worked Amex pushing The company discontinued the low- closely with other senior executives to develop documentation mortgage program in late and expand the Advantage Loan program. She beyond cards 2019 after discovering alleged fraud and firing became managing director of lending in 2018 several employees. and, around the same time, began attending Sterling expects to repurchase a block of sales meetings “during which the Advantage to woo small Advantage Loans, ranging from $150 million Loan program’s performance was discussed,” to $160 million, this quarter and a smaller the indictment claims. businesses $30 million portfolio next year. The company Scott Seligman founded Sterling Savings bought back $88 million of mortgages last year. and Loan Association, a predecessor bank, in By Robin Arnfield “Those who were taking us up on our 1984. Family trusts tied to the Seligman family May 10, 2021 [buyback] offer have pretty much raised their still own more than half of Sterling’s stock, American Express wants to bring more of hands,” O’Brien said. even after selling $115 million of stock as part its technologies and services to the small- Repurchased Advantage Loans have of the company’s 2017 initial public offering, business market to expand its base beyond performed in line with Sterling’s other according to regulatory filings. those companies that use only its payment mortgages, O’Brien said. While Seligman declined to discuss the cards. “There might be some slow pays and there Justice Department’s investigation, he said Small and midsize businesses are an might be, obviously, just regular performing the Advantage Loan program was created important segment for Amex, accounting for loans,” O’Brien said. “For the most part, the to provide financing opportunities to the 21% of its total global loan mix and 34% of its nonaccrual percentages have been no worse Chinese American community. total global card member receivables in the than what we’ve seen at the bank.” “We built a culture of trust and service with first quarter. Steve Squeri, Amex’s chairman With the outlook on the defunct mortgage a minority community that had a language and CEO, said in the New York company’s program improving, O’Brien is focusing more barrier and a cultural approach to debt … that earnings call that growth in its commercial on Sterling’s $448 million of construction made it difficult for them to get credit,” he business has been and will continue to be and commercial real estate loans. He said wrote in a Thursday email. “This is a culture driven primarily by small and medium-size increased charge-offs in that portfolio are that generally abhors debt. The Advantage enterprises.

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“A key element of our longer-term growth survey of businesses of all sizes in Australia, aren’t tied to a card to midmarket companies,” strategy is to deepen our relationships with Canada, Japan, Mexico, the U.K and the U.S. Henry said. To be eligible for merchant current SME customers and attract new Nearly half (47%) of surveyed businesses said financing, businesses need to accept Amex clients by offering a range of supplier payment they plan to automate or further automate cards, with the repayments being recouped and cash-flow management solutions, both their process of receiving payments from from their card receivables. on and beyond the card, giving business business customers over the next 12 months, “We leverage the data we hold about our owners more tools to help them manage their while 45% of surveyed businesses plan to clients’ Amex card transactions and their businesses,” Squeri said. automate or further automate their supplier noncard payments taking place through Amex isn’t alone in this effort, but it counts payments over the next year. our B2B systems plus the fact that we’ve on its bank charter to make the process more Environmental Landworks Co. worked conducted KYC on them,” said Henry. “So seamless. with Amex to automate its accounts payables. we enable them to connect and do business “The three major U.S. card networks “Nowadays, more and more things are with each other through platforms such have each been prioritizing B2B solutions automated, so wherever a business can as American Express One AP, and we can and expanding beyond card rails now for introduce automation, they should do so,” also provide them with insights into their several years,” said Steve Murphy, director said Mindy Stewart, office manager and transactions.” of Mercator Advisory Group’s commercial payroll accountant at the Golden, Colorado- Amex, Visa, and Mastercard offer their and enterprise payments advisory group. based company. business clients the ability to make cross- “The key difference is that Amex is a closed- The timing of these efforts stems in part border payments to foreign suppliers through loop scheme and drives distribution through from COVID-19 lockdowns, Henry said. their networks. But, unlike Amex, Mastercard its end-to-end network ownership. Amex “Accounts staff couldn’t go to their office and Visa have both augmented their noncard also has a bank and can offer loan funding and write and mail paper checks. So during cross-border payments capabilities through and supply chain finance, whereas Visa and the pandemic we saw big growth in digital acquisitions, Mercator’s Murphy said. Mastercard distribute through their core solutions.” “Mastercard’s 2016 acquisition of Vocalink bank clients and try to provide value-add In addition to its AP automation positioned it to be a direct player in real-time services in cards and increasingly outside of technology, Amex works with enterprise payments and expand its account-to-account cards.” resource planning, procurement and transfer capabilities through Mastercard The three card networks all aim to enhance accounting platform providers such as Bill. Send,” Murphy said. “Visa is expanding its their B2B relevance by doing similar things com, Coupa, Sage Intacct, MineralTree Visa B2B Connect cross-border payments but in different ways, according to Murphy. and SAP Concur to enable SME clients to network that has a blockchain architecture “Mastercard offers the Mastercard B2B reconcile invoices and purchase orders with but utilizes fiat currencies and existing in- Hub through a partnership with AvidXchange payments. market payment systems. It bought cross- for automated payables,” he said. “It’s Amex offers SMEs the same tools it offers its border payments service Earthport in 2019 building out the Mastercard Track business global corporate clients to pay suppliers who and is expanding its Visa Direct account-to- information exchange and directory for can be either on or off the Amex network. By account transfer service.” buyers and suppliers that is expanding into automating and streamlining payment terms, This article originally appeared in a payments network. Visa collaborates with corporate buyers can deal with a wider range PaymentsSource. Billtrust on a Business Payments Network of SME suppliers. “Many of the suppliers to further automate the cash cycle process paid through our buyer-initiated payments through receivables. “ platform are SMEs,” Henry said. CONSUMER LENDING In going beyond its client base for payment Because it handles their B2B payments, cards, American Express hopes to build Amex is able to leverage its knowledge of relationships with more small businesses. its SME customers’ transactions to offer Credit card The American Express One AP accounts financing, working capital and business payable automation platform enables U.S. loans. companies businesses to pay suppliers using Amex Kabbage, the U.S. small-business lending cards, virtual cards, paper checks and ACH platform Amex acquired in 2019, is an transfers. Amex acquired the platform, which example of Amex’s one-stop-shop strategy. bringing back was originally called Acompay, from Acom In the first quarter, Amex began rolling out Solutions in 2019. Kabbage, which includes a digital business huge points “We’re marketing the platform to existing checking account and working capital Amex business clients as well as to companies solutions, to its clients with annual gross which don’t have a relationship with us, to revenue of under $2 million a year. offers help them automate their AP department,” Amex wants to replicate Kabbage’s one- said Dean Henry, Amex’s executive vice stop-shop approach in the midmarket By Bloomberg News president for business financing and supplier company sector. May 10, 2021 payments. “We can provide merchant financing or A 125,000-point sign-up bonus. Credits In March and April, Amex conducted a 12-, 24- or 36-month business loans that for Equinox personal training. An exclusive

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 9 airport lounge with cold brew on tap. February. And it’s a far cry from the measly 57 to be identified discussing nonpublic The country’s largest banks are pulling out million that were mailed during the depths of information. all the stops to lure customers to take on new the pandemic in June. At least two suits were filed in London, credit cards again, after retreating from such “This year we’re certainly returning to a according to publicly available court records. deals during the COVID-19 pandemic. more normalized level of competition,” Roger Deutsche Bank’s Singapore branch faces Call it the return of the rewards war for Hochschild, chief executive of Discover a lawsuit, while 1MDB separately sued credit cards: American Express is dangling Financial Services, said in an interview. “But Citigroup’s head of commodities research Ed the 125,000 point-bonus — a $2,500 value we feel really good.” Morse alleging professional negligence, the that’s one of the largest ever offered — in Danny Funaro, a law student who lives filing shows. front of some new applicants for its higher- in Brooklyn, said he’s seen more credit card JPMorgan declined to comment while end Platinum card. It’s also offering perks for offers coming his way as he nears graduation. Deutsche said it hasn’t been served any virtual personal-training sessions through He ticks them off: Discover, Citigroup, papers on 1MDB and isn’t aware of any basis the luxury gym chain Equinox. JPMorgan JPMorgan. Almost all of them come with for a legitimate claim. The banks were named Chase is now offering $120 in credits toward a some sort of sign-up bonus, typically valued earlier on Monday by the Edge newspaper. Peloton Interactive membership. Capital One at $300 or $500, he said. New York-based Morse didn’t respond to an Financial is planning to open its first-ever “There’s some fine print that I never email seeking comment outside business airport lounge for certain cardholders this actually read about how to get that,” Funaro hours, and Citigroup couldn’t immediately summer along with a 100,000-point bonus of said. “I’ve been getting them almost daily. comment. its own. It’s been pretty wild. It’s clearly trying to get The court proceedings mark Malaysia’s A year ago, when the COVID-19 pandemic people to get a credit card — and get a credit continuing efforts to recover billions of sent unemployment soaring, card issuers card now.” dollars allegedly siphoned from 1MDB by slashed incentives as they pulled back on people connected to the country’s former signing up new customers, fearing people prime minister. Over much of a decade, wouldn’t be able to pay their bills and forcing LAWSUITS 1MDB has become shorthand for one of the banks to swallow losses. world’s most daring heists — a conspiracy Instead, with an influx of cash from the that spawned probes in Asia, the U.S. and government and payment moratoriums on JPMorgan, Europe. student loans and other bills, people have Authorities have spent years tracking been diligently paying their credit card Deutsche funds that allegedly flowed from 1MDB into balances and setting aside more in savings. high-end art and real estate, a super yacht The losses banks feared never materialized. and, ironically, the hit Hollywood movie “The Even delinquencies — a harbinger of future Bank said Wolf of Wall Street,” chronicling an earlier era write-offs — remain near an all-time low. of financial crimes. Consumers are slowly starting to travel to be among The government has had a string of recent again and looking to accrue credit-card successes, the most high-profile coming last points, which are often used to buy flights or year when Goldman Sachs Group reached a book hotels. People seem ready to plan big firms sued by $3.9 billion pact with Malaysian authorities trips and get back on the road: Mastercard, the to resolve probes into the Wall Street giant’s country’s second-largest payment network, 1MDB role in the scheme. Goldman’s overall tab for said it has noticed spending with U.S. airlines additional settlements with authorities in the double in recent weeks compared with levels By Bloomberg News U.S., U.K. and Hong Kong swelled to more at the beginning of the year. May 10, 2021 than $5 billion. At Synchrony Financial, the country’s Malaysia’s 1MDB and a former unit have In March, Deloitte PLT agreed to a largest issuer of store-branded credit cards, filed suits against firms including JPMorgan 324-million ringgit ($80 million) settlement the firm opened 5 million new accounts in the Chase and Deutsche Bank as the nation seeks with the Malaysian government to resolve first three months of the year, a 3% increase to recover assets worth more than $23 billion all claims related to the firm’s audit of 1MDB from the same period a year ago. It was the linked to the scandal-plagued state-owned and SRC between 2011-2014. The deal also first uptick since the onset of the pandemic. investment fund. came less than a week after Malaysian lender “What we’re really seeing is the consumer 1MDB, whose full name is 1Malaysia AMMB Holdings Bhd. agreed to a $699 willingness to again look for credit,” Development, and SRC International filed million settlement over its role in dealings Synchrony Chief Financial Officer Brian a combined 22 civil suits against a slew of linked to 1MDB. Wenzel said in an interview. entities and individuals for various alleged American consumers only have to check wrongdoings including fraud and conspiracy ‘Pursuing wrongdoers’ the mail to see evidence of banks’ renewed to defraud the fund, the Finance Ministry A Malaysian court is currently hearing interest. Card issuers mailed 257 million said on Monday. Among those named were an appeal by ex-Prime Minister Najib Razak credit card offers in March — down 14% JPMorgan and Deutsche Bank, according to a to overturn his conviction and 12-year jail compared with a year earlier but up 23% from person familiar with the matter who declined sentence linked to the 1MDB scandal that

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MAY 12, 2021 AMERICANBANKER.COM PAGE 10 brought down his government in 2018. than an office Ping-Pong table or free lunch. need to navigate the right balance between Najib, and the fugitive financier Jho Low They want substantive benefits, including working and parenting. LGBTQ+ family- and his family are among individuals named those that help them grow their families. In building is also on the rise. 77% of LGBTQ+ in the civil suit. Low, whom prosecutors a Care.com study, 83% of millennials shared millennials are either already parents or are have accused of orchestrating the fraud, has that they would leave their job for one with considering having children, a 44% increase previously professed his innocence. better family and lifestyle benefits. A Deloitte over their LGBTQ+ elders. “We have not received the summons,” study found that 50% of employed adults Simply put, universal paid leave is the best Najib’s lawyer Farhan Shafee said. “We also with access to employer benefits said that if way to provide inclusive benefits for every found out from the press.” M. Purvalen, a they were given the choice, they would pick family configuration. It allows parents to lawyer representing Jho Low’s mother, said more parental leave time over a pay raise at take leave regardless of their gender, sexual he has not been approached to represent the work. orientation, or how they came to be a parent. Low family in this suit. There is a real opportunity to meet this It’s also good business — businesses that have “The Government’s recovery efforts are growing segment of the workforce where they implemented better paid leave policies have now focused on pursuing other wrongdoers are, and paid family leave is one key place to reaped the benefits of stronger employee who have caused losses to 1MDB and or SRC do that. As we revisit our policies, we need to recruitment, retention and reduced turnover during the execution of their duties, as parties be thoughtful about our approach, applying costs. directly or indirectly involved in 1MDB and or an equity and inclusion lens to ensure all Many companies struggle with retaining SRC’s various operations and transactions,” families’ needs are being met. women specifically, and despite many Finance Minister Tengku Zafrul Abdul Aziz Some 114 million people in the U.S. still advances, 43% of women leave the workforce said in a statement. don’t have access to a single day of paid within one year of having a child, while 74% The specific allegations against Deutsche family leave, but for the companies that do of them report that they “love their careers.” Bank and JPMorgan weren’t immediately offer paid leave, we often use language that There are many factors that can contribute clear. Deutsche Bank helped 1MDB raise excludes much of our workforce. Distinctions to this, but we know that in heterosexual more than $1 billion in 2014. JPMorgan in between “primary caregivers” and couples, the more parental leave fathers take, 2017 was reprimanded by Swiss regulators “secondary caregivers” or “maternity leave” the more likely mothers are to return to work over its handling of money transfers related and “paternity leave” disproportionately full time. Creating equitable family leave to 1MDB in previous years. impact LGBTQ+ families, and also hurt policies allows parents to share caregiving Deutsche Bank’s shares reversed gains and working mothers and impact family responsibilities from the beginning and also were down 1% at 1:22 p.m. in Frankfurt. structures—perhaps for years to come. sets the stage for a more equitable division of In the past couple of years, many labor in the future, which will continue to pay companies have abandoned distinctions dividends throughout an employee’s tenure BANKTHINK between “maternity leave” and “paternity at the company. leave” and instead delineate paid leave Some banks and financial institutions benefits by determining if the parent is a are leading the pack. Bank of America, for Distinguishing “primary caregiver” or “secondary caregiver.” example, offers 16 weeks of paid parental Unlike “maternity leave” and “paternity leave and up to an additional 10 weeks between leave,” primary caregiver language has the of unpaid leave, regardless of gender or pretense of gender neutrality, and therefore “primary” or “secondary” caregiver status. seems like a more progressive and inclusive Goldman Sachs made headlines in 2019 maternity framework. when it announced 20 weeks of paid leave However, primary caregiver language to all parents, regardless of their gender or and paternity is rife with its own contradictions — what parental status. More banks should follow if you’re talking to a same-sex couple? Or suit and evolve their policies to create a adoptive parents? Or a heterosexual couple corporate culture where employees — and leave is who is striving for a more equal balance of dads, in particular — feel empowered to take caregiving responsibilities? While primary the leave offered to them. outdated caregiver policies don’t assign a gender to As employers, we understandably focus the employee, it assumes a traditional — and on designing benefits for our employees. But By Karsten Vagner increasingly outdated — family structure when we consider the full family unit, and May 10, 2021 where one partner assumes the majority how what we offer our employee impacts this Our workforce is changing. As millennials of the caregiving responsibilities lightly unit, we will be more successful. become the largest generation in the U.S. supported by the other partner. — and the largest group of new parents — In some families, it may be easier to Karsten Vagner is vice president of people at benefits and policies have to adapt to their delineate primary versus secondary Maven. q values in order to attract and retain the best caregivers. But as we know, modern families talent. don’t all look the same. 78% of millennial © 2021 Arizent and American Banker. Research shows that millennials want more families are dual-career households, and will All rights reserved.

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