New CBA Chair Urges Fair Treatment of Overdraft Fees, Student Loans

Tim Wennes begins a one-year term as chairman of the Consumer Bankers Association starting next week.

Wennes is West Coast president and head of retail banking and wealth markets for MUFG Union Bank, the Japanese-owned institution that recently went through a major reorganization.

Over the last three years, the CBA has positioned itself as a pointed and persistent thorn in the side of the Consumer Financial Protection Bureau. Last month CBA President Richard Hunt accused the CFPB's student loan ombudsman of activity "unbecoming of a serious regulator."

In an interview Wednesday, Wennes struck a less combative note. He spoke about the need for "continued discourse" and "having an open dialogue" with the CFPB.

But Wennes also made clear that the CBA is prepared to fight new regulatory initiatives in areas such as overdraft fees and private student loans.

Below is a condensed and edited transcript of the interview.

CBA recently launched a website called Private Student Loan Facts. Do you think that people in Washington don't understand key things about the private student loan market?

TIM WENNES: I think that is certainly true. And I think we want to make sure that those that can influence the policy understand that more access to student lending is needed.

I think 90% of student lending is government-backed. There is a place for private student loans, and we think that our members have done this in a reasonable fashion.

There's something like a trillion dollars of student loan debt outstanding. And obviously, as you pointed out, the vast majority of that is federal student loans. A lot of people say, 'Wow, we need to cut back on the amount we're taking on as a country in order to finance higher education.' Do you not see it that way?

Speaking on behalf of the CBA, I think we would say that choices are important. And there are certainly places where we want to make sure that individuals who desire to get an education are able to get an education. We want to provide those sources or alternatives.

I don't know if the CBA has an official position on the aggregate level of student debt and some of the challenges that are out there.

There was a recent report stating that deposit account fees are currently at their lowest level since 1942, as a percentage of total noninterest income. There's now talk about further restrictions on overdraft fees. Are you concerned that CFPB is going to squeeze that revenue source more than it already has?

We have some concerns that there may be regulations that take away some of the choices for consumers, who need or benefit from access to smaller-dollar, short-term credit. And so we're doing our best to make sure the CFPB has as much information as possible as they're contemplating decisions.

People who've been pushing for regulation in overdraft say that these rules were meant to restrict practices that they saw as not being fair to consumers, such as high-to-low reordering of transactions. Do you think the actions that the regulators have taken in overdraft have made the marketplace fairer for consumers?

Some of the initiatives around opt-in, I think certainly where it enhances transparency and understanding, I think we all support those things.

When there's other things we worry about, it's when specific numerical limits or other restrictions are placed. Particularly when you've got customers who've opted into a certain program, product or service, and done so consciously, I think we should assume that they've done that because they want to, and that's the best option available to them.

There's obviously some overlap between how consumers use overdraft protection and other forms of small-dollar credit, like payday loans. Does it make sense for CFPB to look at all those things together?

I think it'd be beneficial for them to look at them together.

That being said, I don't know if they all could be addressed in one activity, right? It's a broad set of products. There are some similarities, but also some differences. When you make some decisions in one, there are consequences or impacts to others. So to the extent that things are promulgated in the banking area, or restrictions are applied, that could push people to other products or services.

In July Union Bank was renamed MUFG Union Bank, and your U.S. branch banking management and operations of Bank of Tokyo Mitsubishi were integrated within MUFG Union Bank. What factors led you to make those changes?

Really, two factors were driving that. One is, internally there's some positive synergy to us bringing together what was historically our corporate and investment banking activities focused through the branch, and our commercial and corporate banking activities that take place at Union Bank.

In addition, this positions us very well to comply with the new enhanced prudential standards for foreign banks, which will come into effect in 2016.

What impact will your customers feel from these changes?

For the majority of our customers and our employees, this is really business as usual. We continue to go to market in our retail and wealth management segments as Union Bank. And for our large corporate and investment banking clients, [we are] going to market as MUFG.

There are certain customer segments where there'll be some product enhancements or benefits, but overall for our customers this is really business as usual.