1 More Threat to Bank of America's Earnings

On Friday, multiple media sources reported that Bank of America is nearly an $800 million deal with the Consumer Finance Protection Bureau over abusive credit-card practices.

Apr 5, 2014 at 9:15AM

G

Just when you thought Bank of America (NYSE:BAC) was in the clear, it's about to be hit with another large litigation-related loss.

According to multiple sources, the nation's second largest bank by assets is in talks with the Consumer Financial Protection Bureau to settle charges that it deceived customers into paying for credit protection services as a part of the credit card application process.

While the deal appears to be nearing completion, it's been in the works for some time. Bloomberg News reported last November that the two parties had begun negotiations. Additionally, it's the fifth such settlement reached with a major bank by the CFPB related to the practice.

Essentially all of the major credit card issuers have ceased the practice over the last few years. Both Capital One (NYSE:COF) and JPMorgan Chase (NYSE:JPM) led the way, stopping new enrollments in 2012 -- the former after entering into the first of such deals with the CFPB in July of that year.

In Bank of America's case, a final agreement would represent an added chapter to a private settlement it reached in July 2012. In that case, the bank agreed to reimburse affected card-credit customers between $50 and $100 depending on the specific circumstances. All told, it was expected to cost Bank of America $20 million -- click here to see a full list of Bank of America's legal settlements since 2008.

With the benefit of hindsight, that figure seems reasonable if not downright deficient. Media reports peg the current settlement at $800 million, which would amount to the largest yet from a credit card issuer in the CFPB's campaign to reign in the abusive practice.

For shareholders in Bank of America, this adds to a $9.5 billion deal announced last week between the bank and the Federal Housing Finance Agency. That case concerned claims that Fannie Mae and Freddie Mac suffered losses from toxic mortgage-backed securities purchased from Bank of America subsidiaries -- namely, Countrywide Financial.

With this in mind, it would be ridiculous to claim that $800 million doesn't matter. That's a lot of money for any bank, including Bank of America.

At the same time, however, the sooner these issues are addressed by Bank of America, the sooner it can put all of its past abhorrent practices behind it. And it's at that point that shareholders can truly expect to see a new trajectory for both earnings and the amount of capital flowing their way via higher dividends and bigger share buybacks.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. To learn about about this company, click here to access our new special free report.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America and owns shares of Bank of America, Capital One Financial, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers