NEWS: CFPB to eliminate 'ability to repay'

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

January 24, 2019

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Changes On Deck For The CFPB's Payday Lending Rule

Could it be that the CFPB, under new Executive Director Kathy Kraninger, will be moving directly to eliminate the more controversial provisions of its payday lending rule? According to sources cited by American Banker, the CFPB will remove the controversial underwriting rules that would have forced lenders to establish a borrower's ability to repay before offering them a small-dollar, short-term lending product.

As things currently stand, lenders would have to verify a borrower's income, debts and spending habits to assess their borrowing thresholds. Lenders can avoid this stipulation if they change their loan types from payday loans that need to be repaid in full on the borrower's next payday to installment loans, which are paid over a set amount of time that is agreed to at the outset of the loan.

Proponents of the rule as it is written note that this provision can help keep consumers out of debt traps by preventing them from rolling over their unpayable payday loan every 30 days, which accrues new rounds of fees and costs. Opponents counter that the regulations will simply push a majority of short-term lenders out of business, as they will be unable to either meet the increased underwriting costs or to change their business model entirely to accommodate a different type of underwriting.

Last October, the CFPB announced it would "revisit" the rules. Sources now report that the CFPB has decided to eliminate the provision entirely. Read more at PYMNTS.COM

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Sen. Rubio introduces bill to protect low-wage workers from non-competes

U.S. Sen. Marco Rubio (R-FL) introduced legislation designed to protect low-wage or entry-level workers from non-compete agreements that limit their employment opportunities.

The Freedom to Compete Act would amend the Fair Labor Standards Act of 1938 (FLSA) to prevent employers from using non-compete agreements in employment contracts for certain non-exempt employees.

The Freedom to Compete Act would apply only to employees who do not qualify for the FLSA's minimum wage and overtime exemption for executive, administrative, professional and outside sales employees. Further, it would prohibit an employer from enforcing, or threatening to enforce, a non-compete agreement with a non-exempt employee. Additionally, Rubio's bill would prevent an employer from entering into, extending, or renewing a non-compete agreement with a non-exempt employee. The U.S. Department of Labor would enforce this legislation under the existing FLSA framework for minimum wage and overtime violations.

"Non-compete agreements that arbitrarily restrict entry-level, low-wage workers from pursuing better employment opportunities are egregious and outdated in the twenty-first century American economy," Rubio said. "My bill would empower these workers by preventing employers from using non-compete agreements in employment contracts. I hope my colleagues will join me in passing this bill so we can enhance the upward mobility of our low-wage American workers."
Read more at Financial Regulation News

New collection prohibition in New York

Effective March 29th, New York law prohibits "principal creditors" and "debt collection agencies" from making (i) any representation that a person is required to pay the debt of a family member in a way that contravenes with the federal Fair Debt Collection Practices Act and (ii) any misrepresentation regarding the family member's obligation to pay such debt. See N.Y. Gen. Bus. Law § 601-a.

"Principal creditor" includes (i) any person to whom a consumer claim is owed, due or asserted to be owed or due or (ii) any assignee for value of such person. "Debt collection agency" means a person engaged in business, the principal purpose of which is to regularly collect or attempt to collect debts (i) owed or due or asserted to be owed or due another or (ii) obtained by, or assigned to, such person that are in default when obtained or acquired by such person.

While the New York legislature passed the new law to address legal obligations of a deceased debtor's family member with respect to the deceased's debts, the language of the statute is not so limited. The new law applies to any representation made to a debtor's family member regarding the family member's obligation to pay the debtor's debt, regardless of whether the debtor is alive or dead. Read more at DREHER TOMKIES LLP

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New Financial Services Chair Plans Robust Oversight of Financial System

Rep. Maxine Waters (D-CA), the new chair of the House Financial Services Committee, recently outlined a full-bodied agenda that seeks to protect consumers, safeguard investors and prevent another financial crisis.

In terms of setting the committee's agenda, Waters, who has served on the committee since 1991, thus sets a sharp deviation from that of the previous chairman, Rep. Jeb Hensarling (R-TX), who retired last year at the end of the term.

Waters set forth a long list of priorities, including protecting investors from abusive financial practices, ensuring that strong safeguards are in place to prevent another financial crisis, encouraging responsible innovation in financial technology, promoting diversity in the financial services sector and ensuring that small businesses have fair access to the financial system.

In general, the House Financial Services Committee oversees Dodd-Frank issues, the SEC, monetary policy, banking, housing and insurance issues, as well as international finance.

In a Jan. 16 speech before the Center for American Progress, Waters explained that an ongoing priority of hers will be to ensure that the Consumer Financial Protection Bureau remains strong, pledging to work "diligently to undo the damage that [former acting director] Mulvaney has wrought during his time at the Consumer Bureau."
Read more at National Association of Plan Advisors

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Federal Reserve Board explores consumer financial conditions, concerns

The Federal Reserve Board of Governors has introduced an article series featuring consumer financial condition and concern analysis.

Consumer & Community Context breaks down the experiences of traditionally underserved and economically vulnerable households and neighborhoods.

"Our objective is to share insights and provide context for the complex economic and financial issues that affect individuals, communities and the broader economy," Eric Belsky, director of the Board's Division of Consumer and Community Affairs, said.

The overarching goal of the initiative, according to officials, is to increase public understanding. The series will be published periodically, and each issue will have a theme.

The first issue will address student loans and includes articles on the impact rising student loan debt levels may have on homeownership rates among young adults and the relationship between the amount of student loan debt and individuals' decisions to live in rural or urban areas. Series contributing authors are employees of the Federal Reserve Board or the Federal Reserve System. Read more at Financial Regulation News

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How to Leverage Intelligence to Help Online Lenders

In this blog post, learn about 3 major topics that leading online lenders were discussing at this year's show.

3 Hurdles For Online Lenders
What made this year's conference different? Here's our list.

1. Fraud is getting worse.
Online lenders have no uncertainty about this next point: fraud operators are more crafty, diligent, and costly than ever before. Part of the problem is that all those headline-making data breaches of recently years have leaked torrents of identity data, which fraud operators are now putting to good use. And fraud operators, thwarted by the widespread adoption of EMV chips, are looking for new targets, including online lending, for adding to their ill-gotten gains. Among the realizations here: lenders need better IT defenses as well as identity intelligence that is more accurate and less hackable that the knowledge-based approaches that sufficed in simpler times.

2. The big credit bureaus have more data, but lenders are seeking alternatives.
Read more at ACCELITAS

National Debt Holdings is a professional Receivables Management Company that partners with creditors to purchase and/or manage receivables at all stages of the account life cycle.

What Is the Difference Between a Credit Lock and a Credit Freeze?

You may have heard about credit freezes and credit locks and wondered "What is the difference?" Good question! A credit lock or credit freeze both block access to your credit report, preventing anyone from using a credit report to open a new account in your name, such as a credit card or loan. Freezing or locking your credit are part of the protection options TransUnion offers to help you manage your credit and safeguard your identity.

So how do you decide whether to freeze or lock? It really depends on your personal preference.

Lock
Locking your credit is one of the many great features available to you when you subscribe to a TransUnion product solution:
TrueIdentity, is a FREE product that makes it easy to lock and unlock your credit with a simple swipe, and is accessible whenever you need it, in a mobile app or online. TrueIdentity was recently awarded the best Identity Protection Service Provider award by Javelin. It is packed with lots of other great features such Instant Alerts that are sent if anyone tries to access your credit report.
Read more at TRANSUNION

Accelitas is an alternative data resource that delivers the power of AI to reach more underserved consumers and deliver predictive insights that are customized to your business.

When Does It Make Sense to Take Out a Title Loan?

Transunion claims that 3.21% of unsecured personal loans were delinquent in Q2 2018, down majorly from peak levels of 5.05%. But the personal loan sector is rapidly increasing, rising 17.5% in Q2 2018 to $125.4 billion. The number of accounts rose to 19.5 million, and we're seeing a major surge in loans from FinTech companies, credit unions and banks.

When a person can secure a personal loan the traditional way, it often makes sense to go to a bank or credit union. Terms are more favorable, and you'll be working with a lender that won't charge exorbitantly high interest rates.

But when all else fails, there are also fast title loans which can be a good option for anyone with bumps and bruises on their credit.

When it Makes Sense to Get a Title Loan
Title loans are secured because you're putting your title up as collateral for the loan. Since the lender has less of a risk, interest rates are often favorable compared to an unsecured loan. A lot of borrowers opt for a title loan when:

Traditional lenders will not supply the loan
Funds are needed quickly and they need fast approvals
Your vehicle is worth 2 - 4 times you're requested loan amount Read more at EQUITIES

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GAO says CFPB needs process for prioritizing financial risks to consumers

The Consumer Financial Protection Bureau needs a process for prioritizing financial risks to consumers, the U.S. Government Accountability Office (GAO) found in a recent report.

The CFPB initiated a process in 2015 to use market data and other information to set policy priorities. The bureau collected and monitored routine market data and other market intelligence from a variety of sources to identify emerging risks that require attention. One of the sources is the CFPB's complaint database. However, it ended the process in 2017 and has not determined if it will continue to use it. The GAO report said the bureau "currently lacks a systemic, bureau-wide process for prioritizing financial risks to consumers and considering how it will use its tools ... to address them."

The GAO acknowledged the bureau's efforts to retrospectively assess significant rules, including the remittance rule, ability-to-repay (ATR)/qualified mortgage rule, and Real Estate Settlement Procedures Act (RESPA) servicing rule. Read more at Financial Regulation News

Survey examines impact of shutdown on small businesses

An OvationMR survey has determined small business owners attitudes regarding the government shutdown are splintered based on whether or not the action impacts their business.

OvationMR officials said the survey involved 825 small business owners, partners, and executives between Jan. 18-21, 2019, as a means of assessing how they are being affected. Respondents were employed full-time or self-employed at organizations with 50 or fewer employees and with less than $10 million in revenue.

The analysis revealed 55 percent of small business leaders indicated the government shutdown does not impact their business while 14 percent said the shutdown is having a major impact on their business. A majority of small business leaders said they are following the shutdown closely (51 percent), think it could have been prevented (87 percent) and estimate that it will last another month (53 percent). Fifty-one percent of those impacted by the shutdown blame President Trump and the Republicans while 41 percent blame the Democrats in Congress. More respondents characterized Trump's most recent offer as political posturing (48 percent) rather than as a serious offer (36 percent). Read more at Financial Regulation News

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FACTS ABOUT SMALL-DOLLAR LOANS

Small-dollar loans are available and highly regulated in 35 states
Approximately 12 million households use small-dollar loans each year
The average fee for a single payment small-dollar loan is $15 per $100 of the loan.
The monthly payment for an installment loan depends on the term of the loan.
96% of borrowers find small-dollar loans useful
Only 1.5% of all consumer complaints submitted to the CFPB concern small-dollar loans - far below other financial products like mortgages, credit cards, and student loans
CFPB complaints about small-dollar loans consistently fell for 22 straight months
CFPB and Better Business Bureau (BBB) data indicates that a majority of complaints about small-dollar loans are likely related to scams, not regulated lenders
Nearly half of Americans cannot afford a $400 unanticipated expense

Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.

MaxDecisions, Inc. promotes Nicole Houston to Chief Executive Officer

Nicole Houston was instrumental in growing MaxDecisions, Inc.'s business and client base since 2016. She along with Founder Timothy Li and Co-Founder Henry Wang built an Analytics as a Service organization spanning all North America.

With over 50+ client base cross all credit spectrum of consumer finance and specialty-financing companies, Nicole expanded MaxDecision's revenue by 300% year over year.

"On behalf of the entire team at MaxDecisions, we stand behind Nicole's leadership and vision to grow our business in 2019 and beyond. I've worked with Nicole for the past 5 years and she is absolutely brilliant in her ability to organize, grow and expand our business." says ex-CEO of MaxDecisions Inc. Timothy Li. "Nicole is a natural leader and has earned the respect of our industry. She will join an elite class of leaders in the FinTech industry going forward. I firmly believe that she is the one to advance our goals with our employees and clients in mind".