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the latest s e c on da r y m a r k e t a na ly t ic s se r v ic i ng Or ig i nat ion SECONDARY MARKET FDIC-Insured Banks Report Earnings Growth in Q2 More and more banks are showing promise following the crash. I Agency Reminds Credit Reporting Firms of Consumer Obligations CFPB lays out the process for handling consumer credit disputes. T he Consumer Financial Protection Bureau (CFPB) is putting on notice companies that furnish information to credit reporting firms, reminding them that they are responsible for investigating consumer disputes forwarded to them. Under the Fair Credit Reporting Act (FCRA), consumer reporting agencies are required to notify their information suppliers when a consumer disputes the accuracy or completeness of their information; it is then the furnisher's task to conduct an investigation and review all relevant information provided, including any documents submitted. In a new bulletin, the bureau specifically lays out its expectations of how furnishers should comply with the FCRA's requirements and what their obligations are. According to the release, credit information suppliers are to maintain a system capable of receiving complaints and supporting documentation and must investigate the concerns. Following that, they are to report 60 | The M Report the results of the investigation to the consumer reporting agency that sent the dispute and must modify, delete, or permanently block disputed information that is found to be incomplete or inaccurate (as well as any information that cannot be verified). "Credit reports play a critical role in the lives of consumers," said CFPB director Richard Cordray. "Given the importance of these reports, consumers need to know that their documents are being reviewed when they dispute what they believe is a mistake on a report. Today's bulletin helps ensure that the right people will be doing just that." The agency also noted it is continuing its work on improving e-OSCAR, the electronic system used by Equifax, TransUnion, and Experian to send information regarding consumer disputes to furnishers. In a December 2012 report, the bureau observed that the e-OSCAR system does not provide a means for credit reporters to forward documents submitted by consumers—an issue now addressed in an upgrade. ncome at financial institutions insured by the FDIC rose during the second quarter, and fewer institutions failed or are on the brink of failure, according to a report released by the agency. Total net income at FDICinsured institutions increased 22.6 percent year-over-year to $42.2 billion in the second quarter, according to the report. More than half—53.8 percent—of the institutions experienced a rise in income over the second quarter. Income has been on the rise at FDIC-insured institutions for the past 16 quarters, according to the FDIC. Twelve FDICinsured banks failed during the second quarter. While this is up from just four in the first quarter, the year-to-date total—20 banks—is down significantly from the 40 banks that failed over the same period last year, the FDIC reported. Also, the number of "problem banks" declined from 612 at the end of the first quarter to 553 at the end of the second quarter. "The trends we have seen in recent quarters continued in the second quarter," said FDIC chairman Martin J. Gruenberg. "Asset quality continues to recover, loan balances are trending up, fewer institutions are unprofitable, the number of problem banks is down, and the number of failures is significantly below levels of a year ago," he said. The percentage of unprofitable banks declined from 11.3 percent in the second quarter of last year to 8.2 percent in the second quarter of this year. Noninterest expenses declined 1.4 percent in the second quarter, while noninterest income rose 11.1 percent. Interest income fell by 1.7 percent over the quarter. The amount banks held for loan losses drifted down 39.6 percent from the second quarter of last year. The total loan balances held by FDIC-insured institutions rose by 1.8 percent. Residential real estate loan balances decreased over the quarter. Home equity loan balances decreased 1.8 percent, while "The trends we have seen in recent quarters continued in the second quarter." —Martin J. Gruenberg, FDIC other residential real estate loans declined 1.2 percent. On the other hand, nonresidential real estate loan balances increased 1 percent over the second quarter. Rising interest rates led to an 89.1 percent decline in unrealized gains on securities portfolios at FDIC-insured banks over the second quarter. This decline will not be felt immediately but will impact future earnings, according to the FDIC. Despite the largely good news last quarter, "industry revenue growth remains weak, reflecting narrow margins and modest loan growth," Gruenberg said.