ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: December 12

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Mick Mulvaney's new role as consumer watchdog chief boosts outlook for payday lenders

Even for an industry that has plenty of experience battling with government regulators, the past few months have been particularly tumultuous for payday lenders.

In October, the Consumer Financial Protection Bureau unveiled a long-anticipated rule to clamp down on payday loans, which critics argue are used to prey on desperate borrowers and trap them in spirals of debt.

But the industry has plenty of powerful advocates, too, who contend the short-term financial boost offers a helping hand to millions of Americans when they need it most.

Among them is Mick Mulvaney, the former South Carolina congressman who has served as President Donald Trump's budget director since February. When the consumer watchdog's director, Richard Cordray, resigned last month, Mulvaney muscled out Cordray's handpicked successor in a legal battle to assume temporary control.

Many targets of the CFPB's scrutiny over the years breathed a sigh of relief when Mulvaney took the reins, from banks to real estate brokers. But the payday lending industry, which has generated big money back in Mulvaney's home state, may see the fastest change of fortune.

Congress still controls the ability to repeal existing CFPB rules, including the newly finalized payday lending rule. But Mulvaney has offered his support for the effort, and he's said the unilateral power of the agency director "should frighten people." Read more at POST and COURIER

With CFPB, GOP can finally make good on abolishing federal agencies

One of the most obvious means of shrinking the size of the federal government is to eliminate some of its agencies. Although many champions of limited government, including former President Ronald Reagan, have called for the shutting down of various federal agencies to reduce wasteful government spending, it hardly ever happens. The Trump administration now has a perfect opportunity to close the corrupt and ideologically partisan Consumer Financial Protection Bureau (CFPB). This is an opportunity that conservatives cannot allow our political leaders to waste.

In September of 1981, President Ronald Reagan appeared on national television to outline his plan for reducing the size and scope of the federal government. He stated: "As a third step, we propose to dismantle two Cabinet Departments, Energy and Education ... There's only one way to shrink the size and cost of big government, and that is by eliminating agencies that are not needed and are getting in the way of a solution."

For over three-and-a-half decades since President Reagan called for abolishing those two federal agencies, conservatives have continued to talk-the-talk but not walk-the-walk. Granted, abolishing a federal agency is no easy feat, but today we have a real opportunity to abolish the hyper-partisan, anti-market CFPB - the brainchild of the liberal Senator from Massachusetts, Elizabeth Warren. Read more at THE HILL

Consumer agency bureaucrats don't have authority to override the executive branch

The Consumer Financial Protection Bureau found itself mired in a palace coup around Thanksgiving, when Obama-era director Richard Cordray resigned. Contrary to normal practice at government agencies, Cordray tried to name his own successor rather than deigning to let the president do it. A court has resolved that dispute, for now - but the episode was another reminder that the CFPB is far more complicated than it ever needed to be. The CFPB is complicated because its proponents think that democracy and normal governance practices have stopped working, and that we need to suspend them to achieve good ends.

In behaving as if the bureau was his to bequeath to someone else, Cordray wasn't acting irrationally. Congress created the bureau in 2010 as part of the Dodd-Frank law, and gave it unique powers. For one, it doesn't depend on Congress for an annual budget appropriation. Rather, it receives money automatically from the Federal Reserve, an independent body with its own permanent financial resources.

For another, its director, unlike those of other executive agencies, doesn't depart with the end of a presidential administration. He or she serves five years, and can name a deputy to serve as own temporary successor if he leaves early. "Congress deliberately wrote the law this way to protect the agency from political influence from either party," Sen. Elizabeth Warren (D-Mass.) wrote last week. Read more at THE HILL

Though CFPB is in flux, compliance efforts still benefit auto finance providers

ATLANTA - Even before the wrangling over who will lead the Consumer Financial Protection Bureau intensified earlier this week, Craig Nazzaro emphasized that the heavy compliance lifting done by auto finance companies still has plenty of value.

Nazzaro, who is of counsel in the Atlanta office of Nelson Mullins Riley & Scarborough, made the point before a federal judge scheduled a hearing as the court conflict continues since Richard Cordray departed the CFPB at the end of November.

"I believe the controls that were put in place by the auto finance companies will remain valuable in the future," Nazzaro said in a message to SubPrime Auto Finance News. "While the new director can have an immediate effect on the supervision and enforcement activities of the bureau, he cannot immediately repeal any rules and/or regulations.

"Those within the industry that have conformed to all guidance and/or updated their practices to be in line with various enforcement actions and continue to do so will remain positioned to be less of a CFPB target," he continued. "I would caution against those in the industry who believe that a new director means that compliance with existing regulations can be relaxed. Remember that the CFPB is staffed with examiners and staff attorneys who believe in the bureau's mission. That approach cannot be turned around on Day One. Read more at AUTO REMARKETING

CFPB's Mick Mulvaney Taking a Closer Look at CFPB Investigations

ACA International welcomes news that Consumer Financial Protection Bureau Acting Director Mick Mulvaney intends to review more than 125 active investigations during a 30-day moratorium he placed on regulations.

Mulvaney, who also serves as the director of the Office of Management and Budget (OMB), said he is reviewing the investigations to "make sure that we are not going beyond the mandate, that we are not abusing our position, and that we are not getting in the way of the proper functioning of the financial services and capital markets," according to The Washington Times.

Despite heavy criticism, under former Director Richard Cordray, the CFPB brazenly pursued a "regulation by enforcement" strategy. By skirting its rulemaking obligations, debt collectors and other entities regulated by the CFPB have been forced to rely on enforcement actions to try and decipher CFPB interpretations of lawful behavior. This stands in contrast to a rulemaking where an agency proposes a rule and obtains feedback through notice and comment before adopting regulations.

ACA has been highly critical of the CFPB's regulation by enforcement approach and welcomes recent efforts to ensure the CFPB is operating within its statutory authority. Going forward, instead of relying on enforcement actions to develop de facto regulations, the CFPB needs to clearly outline the rules of the road using proper procedural mechanisms and expressly state what it views as unfair, deceptive or abusive acts or practices in the debt collection context. 

Read more at ACA INTERNATIONAL

Payday lender going public as new sheriff takes over at CFPB

Curo Group is looking to raise about $100M with the sale of 6.7M shares at hoped-for range of $14-$16 each. Prospectus here

Coincidence or not, the filing came earlier this week, just days after the resignation of the crusading Richard Cordray at the CFPB, with the president then installing CFPB-skeptic Mick Mulvaney at the helm.

Over the last five sessions a group of payday lenders and other former or potential CFPB targets have been partying: World Acceptance (NASDAQ:WRLD) is up 12%, OneMain Holdings (NYSE:OMF) up 4%, Santander Consumer (NYSE:SC) 5%, PHH Corp. (NYSE:PHH) 3.6%, Enova (NYSE:ENVA) 6.6%, Ezcorp (NASDAQ:EZPW) 8%. Read more at SEEKING ALPHA

Why Adding Visibility to Customer Repayments Matters. by Noah Fitzgerald, CPP

Businesses that extend credit or terms to their customers take on an inherent risk. You provide a service, loan, product or goods without getting partial or complete payment at time of delivery with the expectation that the customer will pay you on time in the future. The reality is, when a business extends credit to a consumer they are investing in that consumer's ability to repay for the service or product they received.

This model of extending credit has been around for years, but over the past decade the rate of repayment defaults has climbed sharply. Today, the average repayment default on a payday loan is over 20%, 50% on high interest online installment loans, upwards of 33% on vehicle title loans, and 12% on high risk vehicle loans. These payment defaults not only cost the business loss of revenue and operational expenses, but have significant impacts to the consumer. In a recent study performed by the CFPB, the average default customer incurs total fees of over $185 in bank penalties, of which 36% have their bank accounts closed by the depository institution. In these scenarios, both the customer and the business lose. The customer loses their access to banking services while the business loses their principal and interest revenue with no ability to collect.

Thus, there have been several rules put forth from multiple regulatory bodies. NACHA (the governing body of the ACH network) has tightened the limits on acceptable ACH returns and most recently, the CFPB (Consumer Financial Protection Bureau) has placed strong regulations on financial service providers focused on repayments. These rules and regulations are intended to place the onus on the business to reduce the negative impact on consumers. So, how can a business counteract payment default losses, reduce the effect on consumers, and protect their investment, while fully complying with regulations?

Today, there are a wide range of financial technologies (fintech) which provide companies access to data that can potentially eliminate these issues. At Merchant Boost, we have stayed at the forefront of this fintech revolution, packaging a suite of services, called Repayment Boost. With this suite we are able to provide businesses with visibility into a consumer's available bank account balance in real-time. Merchant Boost's COO, Jesse Berger stated, "This technology enables businesses to verify funds availability prior to submitting payment, to mitigate NSF issues. This allows the business to better service their customer, reduce payment performance issues, like ACH Returns or rejected payments, improve regulation compliance, and ultimately sustain the profitability of each customer."

For businesses to survive, they must adapt to changes in the market, consumer needs, regulations, economy and the evolutions in technology. Those that embrace and leverage technology, like Repayment Boost, will not only better serve their customers, but improve profitability and promote the sustainability of the business. Read more

To learn more about our comprehensive solutions, visit:  http://www.merchantboost.com

Most high school students graduate without personal finance course.

Only five states require a one semester financial literacy course to graduate

Article recommended by David Kilby, President at FinFit

Only 16 percent of American teenagers are required to take a personal finance course to graduate from high school, according to research from Net Gen Personal Finance (NGPF), a non-profit financial education organization.

The group reached that conclusion after studying the graduation requirements of more than 11,000 U.S. high schools that serve more than 13 million students.

High school personal finance courses generally teach students the basics of money management. Students learn the importance of having a budget and how to create one, the importance of interest rates and why you shouldn't carry a credit card balance, and the need to pay bills on time.

Tim Ranzetta, NGPF's founder, says the research reveals a gulf between what parents and students want and what is happening in high schools in America.

"Most surveys indicate that 90 percent or more of parents believe financial education should be taught in schools," he told ConsumerAffairs. "We've also found that personal finance is usually listed by high school students when asked 'what do you wish you learned in high school?'"

But Ranzetta says only one out of six American teens attend a school requiring a one semester course in financial literacy to graduate. In low-income communities, he says only one in 12 students have that requirement.

Social justice issue

To Ranzetta, it's a social justice issue. He says students who most need the knowledge required to effectively manage money aren't getting it.

"When one looks at the billions in bank fees from mismanagement of checking accounts, the $1.5 trillion in student loans, and the financial struggles of millennials, it amazes me that there isn't more urgency to increase access to these important skills," he said. Read more at CONSUMER AFFAIRS

Make Sure 'Collection Companies' Aren't Making Up Your Debt

The calls can keep coming and get aggressive when collection agencies are working to get people who are behind on their bills to pay up.

Tiffany Schunn panicked when her mom and dad told her a man called saying Tiffany was about to get sued over a bill she hadn't paid. She immediately called the number back.

The caller told her that she had taken out a payday loan of $300 back in 2010 and never paid it back.

Tiffany said she only took out one payday loan in her life and that was when she was in college and it was repaid immediately.

She got calls at her house and work telling her this was a recent payday loan, but Tiffany swore it wasn't hers.

"I said, 'I want to see documentation that I signed requesting a loan.' They said, "We can't give you that,"' said Schunn.

The Consumer Fair Debt Collection Practices Act requires that information be provided. It also forbids collection agencies from calling you at work, but only if you tell them to stop. That's something Tiffany said she did.

We tried to get to the bottom of the calls but that was complicated.

The first call claimed the collection agency was Fi-ber Financial of Georgia but we found no company under that name is registered in that state.

Tiffany also got another email and it gave this physical address for the company on the email, but it's really just a mailbox at a UPS store. Read more at NBC

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