NEWS: Small dollar lenders get a bad rap

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

July 11, 2019

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Small-dollar lenders get a bad rap, but here's the truth

For the 80 percent of Americans who continue to live paycheck-to-paycheck, small-dollar lending can be critical.

Loans in small amounts are generally obtained to meet the short-term needs of consumers who often do not have access to conventional credit. Unfortunately, such loans are often mischaracterized as "predatory" by those who may not fully understand them, in part because the use of a misleading metric, the Annual Percentage Rate (APR). While an appropriate cost measure for home and car loans, applying the APR metric for small-dollar loans artificially inflates the perceived cost of such products.

Approximately 91 million consumers have subprime credit scores or lack sufficient credit file information to obtain a loan. The Federal Deposit Insurance Corporation in its latest biennial survey found that about one in four households either did not have a checking or savings account or obtained most financial services outside of the mainstream banking system.

The Federal Reserve in its latest survey found that 40 percent of adults could not cover an unexpected expense of $400 without selling something. Over one-fifth of adults report they are unable to pay all of their current month's bills in full. The January 2019 Bankrate's Financial Security Index reported that only 40 percent of Americans could meet an unexpected $1000 expense through savings. Read more at FOX BUSINESS

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Is It Ever OK to Take Out a Payday Loan?

Payday loans are short-term loans with very high interest rates. In fact, the Consumer Financial Protection Bureau (CFPB) warns payday loans usually charge an APR of around 400%. Unfortunately, because the costs of payday loans are typically represented as fees you pay to borrow, many people don't realize how high the effective interest rate is.

When you're borrowing money at such a high cost, it can be almost impossible to pay back what you owe and stay out of debt. If you take a $100 loan with a $30 fee and you have to pay back $130 next payday, you may have a hard time coming up with the cash. And if you do pay it back, you may run out of money again before you get your next paycheck, necessitating that you take another payday loan.

Because of the huge expense and short repayment timeline of payday loans, many people end up having to take out another payday loan to repay their initial loan on time. This can keep happening over and over, until you become trapped in a cycle where you almost constantly have at least one payday loan.

Obviously, all of this means taking out a payday loan is very bad for your finances. In fact, the decision to take out a payday loan can have financial consequences that reverberate throughout your life for months and that even put you on the path to bankruptcy if you can't break the borrowing cycle. Read more at YAHOO FINANCE

Consumer bankers urge lawmakers to pass plain-language loan disclosures

The Consumer Bankers Association (CBA) is urging lawmakers to support the Student Loan Disclosure Modernization Act, which would require federal student loans to carry plain-language disclosures on the true cost of the loan.

In a letter to the bill's sponsors, Sens. Tim Scott (R-SC) and Joe Manchin (D-WV), CBA officials point out that private student loans offered by banks already have these disclosures. These disclosures on private loans contribute to a 98 percent repayment rate of private student loans.

"For many students and families, a college education will be one of the most important - and expensive - investments they make," CBA President and CEO Richard Hunt said. "Unfortunately, federal student loans do not carry a consumer-friendly disclosure like student loans offered by banks. Ensuring students and their families know the true cost of their loan will help them make better long-term decisions and set them up for success after graduation instead of trapping them in a debt trap set by opaque federal disclosures. This bipartisan legislation is a good first step in helping ensure borrowers have the information necessary to make informed decisions about financing higher education."
Read more at Financial Regulation News

Redefining how financial service businesses measure risk and process payments.

New, confusing W-4 form is coming for 2020

If you grumbled about the size of your tax refund or even writing a huge check for your federal income taxes in April, don't expect things to change without tinkering with a W-4.

And if you think the current W-4 form is a headache, get ready for a migraine with a new form for 2020 and beyond.

Many people still should take time now to withhold more money out of their paychecks to cover their 2019 federal income taxes. Setting aside more money now through the rest of the year can trigger a bigger refund when you file your 2019 return - or you might avoid owing money to the federal government.

If you're paid every two weeks, you could have a dozen or so paychecks ahead in 2019. It's enough to make a good dent.

Remember, not everyone was thrilled back in April.

While many did see lower tax bills as part of the Trump tax cuts, some had to hand over money for federal income taxes in April because they had begun seeing slightly more money in their paychecks last year. Read more at YAHOO BUSINESS

Lending as a Service

Featured

Dreher Tomkies LLP

At Dreher Tomkies LLP, we concentrate on the areas of banking and financial services, with an emphasis on financial services provided by creditors to consumers. Our Firm's partners have over 100 years of combined experience advising on banking and financial services matters.

Such counseling can include the rendering of advisory opinions, state law outlines and summaries, product design and development and the identification of appropriate product delivery vehicles, as well as program planning, implementation and maintenance.

Dreher Tomkies LLP also provides advice regarding all aspects of the purchase and sale of receivables, the negotiation of credit programs among financial institutions, retailers and others, securitizations and participations of receivables, litigation and amicus briefs in connection with credit issues, creditor representation in bankruptcy and legislative and regulatory solutions.

We frequently assist in long-term strategic planning, issue identification and the implementation of plans for financial institutions, other types of clients and their affiliates with respect to providing financial services on an interstate and nationwide basis.

We have substantial experience in assisting bank holding companies and diversified financial services companies in rationalizing and consolidating their diverse consumer lending operations. Read more at Dreher Tomkies LLP

We are a revolutionary merchant service and technology firm servicing the debt repayment industry.

54% of Americans Aren't Equipped to Handle a Financial Emergency

Financial emergencies can happen to anyone at any time. Your car could break down, a pipe could burst in your home, or you could find yourself in the hospital with a seemingly never-ending series of bills to follow. That's why having emergency savings is so important. Yet 54% of Americans aren't equipped to handle a financial emergency, according to KeyBank's Financial Wellness Review, which captured data from over 35,000 U.S. adults.

How much should we all have in emergency savings ? Ideally, enough money to cover at least three months of essential living expenses, and more ideally, enough to pay for six months of necessary bills. Yet over half of Americans don't have enough money to cover an emergency at that level. If you're one of them, it's imperative that you work on building some cash reserves -- before you're forced to borrow money and rack up debt to cover a financial shock you never saw coming.

Boosting your savings
If your savings aren't looking particularly healthy, you must prioritize your emergency fund above all else. Otherwise, you could get stuck racking up some serious credit card balances in an effort to keep up with unplanned expenses that can't wait.
Read more at NASDAQ

Say "yes" to thin-file and no-hit borrowers with REAL alternative data and a fully compliant, AI-powered score, customized for your business.

MaxDecisons Inc.

Maxdecisions, inc. launches Enterprise A.I. & Machine Learning Services - Maxdecisions A.I.

MaxDecisons Inc., a leader in direct mail marketing, analytics, and predictive modeling, today announces the official launch of Artificial Intelligence and Machine Learning as a service for the entire financial sector. "MaxDecisions, A.I." is now in general release for all our clients.

After 2 years of intense development in MaxDecisions, Inc's R&D Lab led by Stephanie Ma, MaxDecisions has rolled out the long-awaited Artificial Intelligence and Machine Learning models, model development processes and automation. This enables our clients to take advantage of the latest technology, technique, and algorithms to compete in today's market.

We have developed, redeveloped several generations of artificial neural network and machine learning models in our R&D Lab in the past two years to perfect not only the accuracy and robustness of our models but also independently developed a new process of A.I. model development and training process.

As the financial industry including banks, special financing companies such as patient financing, home improvement, and private student loans matures the technology and methods must evolve as well to take advantage of the data sets made available to the financial sector. MaxDecisions, Inc. deep domain knowledge in banking and lending underlines our research and development efforts. These new algorithm and techniques are finally made ready for our clients to improve their fraud detection, credit risk management, and direct response marketing.
Read more at MAXDECISIONS

Payliance: Powerful Payment Processing Technology

FCC presses for automatic, default blocking of 'robocalls'

There's a crack-down on those annoying, incessant calls that never seem to stop from telemarketers and scammers. The FCC is now opening the door for phone companies to automatically block so-called 'robocalls' before ever reaching your number. Washington Correspondent Alana Austin gets to the bottom of this issue disturbing so many consumers.

"Unbelievable calls all the time," complained Mazen Fares.

Fares' phone rang all the time, sometimes the person on the other line would be aggressive, demanding personal information. Then the calls started bombarding his entire family.

"It was crazy," Fares said.

After thousands of unwanted calls over a few years, Fares felt so frustrated he went to the Consumer Protection Firm for help.

"Theses calls are just draining on the phones and draining us," said attorney Amanda Allen, at the Consumer Protection Firm. Read more at KOTA TV

Alternative Credit Reporting

Featured

MicroBilt

No one knows alternative credit like we do.

For over 35 years MicroBilt has been helping business assess and manage risk. We were a pioneer in the now exploding alternative credit data space and as such have refined our products and services to deliver true business value.

At our core, we believe that any successful company needs access to the right information to make the smartest decisions possible.

Over the years, MicroBilt has invested heavily in acquiring best-in-class data. We've built sophisticated systems for keeping our data fresh and accurate and powerful predictive models for making decisions around lending, leasing, collections and risk management.

With an eye to the needs of the small and medium-sized enterprises often left out of the big data game, MicroBilt has also structured our products to be right-sized for your business. With MicroBilt you can customize the products you need, and how much you want to spend. And all of our products are provided through a single, simple, access portal.

Whether you're working in originations or debt collection, screening a potential hire or tenant, planning for growth or keeping up with regulatory requirements, MicroBilt can be your partner, providing the insight and information you need to protect your business, grow your bottom line, and keep your company running smoothly.
Read more at MICROBILT

We are a revolutionary merchant service and technology firm servicing the debt repayment industry

SYNTHETIC IDENTITY FRAUD IN THE U.S. PAYMENT SYSTEM
A Review of Causes and Contributing Factors

The U.S. payment system faces dynamic, persistent and rapidly escalating threats as technological developments in cybercrime make it easier than ever to commit payments fraud. Since 2015,
the Federal Reserve has collaborated with a wide array of industry stakeholders to advance U.S. payments security. This is consistent with the approaches described in our paper, Strategies for Improving the U.S. Payment System: Federal Reserve Next Steps in the Payments
Improvement Journey.

Late in 2018, the Federal Reserve launched an initiative to raise awareness and encourage action on the growing problem of synthetic identity payments fraud in the United States. Through primary and secondary research and industry dialogue, we seek to improve understanding of the issue, create a greater sense of urgency about addressing it, and promote industry action to both identify and mitigate this type of fraud. Read the report at Federal Reserve

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

CFPB 2019 fair lending report highlights alternative scoring models. John L. Culhane, Jr. Ballard Spahr LLP

The CFPB's annual fair lending report covering its 2018 activities was published in today's Federal Register. While most of the report recycles information about which we have previously blogged, it does contain the following noteworthy information:

In September 2018, the CFPB held a symposium to address the issue of access to credit for consumers who are "credit in visible" - that is, those without an established i t history with the three national credit reporting agencies - and who therefore cannot be scored by most traditional credit scoring models. In conjunction with the symposium, the Bureau released its third "Data Point" report focused on "credit invisibles." In our blog post about that report, we commented that the CFPB should encourage alternative scoring models that enable underwriting decisions to be made with respect to "invisible" consumers, and should refrain from heavy-handed application of the disparate impact theory with respect to such models. (That theory could, theoretically, be used to attack scoring models that approve members of protected classes proportionately less, but the business justification of the model's ability to predict repayment performance should cause the Bureau to refrain from asserting it in this context.)

In addition to discussing the symposium and Data Point report in the section on "Access to Credit," the new fair lending report discusses conducting supervisory reviews of alternative credit scoring models. It comments that "[t]he use of alternative data and modeling techniques may expand access to credit or lower credit cost and, at the same time, present fair lending risks."
Read more at JD SUPRA

Alt Data is the key to compete effectively

Hourly employees face greater hurdles to save - nearly half have no emergency funds

Hourly employees can face a lot of challenges: fluctuations in weekly hours, unpredictable long-term schedules and limited benefits. Those hurdles are not just an inconvenience, they can affect financial stability.

Forty percent of hourly workers do not have anything saved up in case of an emergency. And just over 75% report having less than $500 saved, according to Branch, a company that runs a mobile platform for hourly workers. The company recently polled 3,000 people who work as hourly employees in a number of industries, including retail, restaurants and healthcare.

Millennials may be particularly vulnerable because, unlike baby boomers, a significant number of these employees entered the workforce and started to build savings following the financial crisis, Branch CEO Atif Siddiqi tells CNBC Make It.
Read more at CNBC

Introducing AI Lift, the AI-powered credit risk web service that leverages uncorrelated alternative data to identify the 20-30% of today's thin-file and no-file borrowers ready to be creditworthy customers.

Big banks view consumer trust as an advantage over challengers

As waves of fintech startups rise up to challenge legacy banks, incumbents are finding their high levels of consumer trust to be a chief advantage, CNBC reports. "Customers trust legacy banks to keep their money safe, but they're slightly unsure of fintechs keeping their money safe," Amelia Nicholls, chief of staff at RBS' digital standalone bank Bo told CNBC.

Incumbents have several other advantages over their challengers beyond trust, including:

Low customer acquisition costs. Big banks already enjoy huge customer bases: Chase, for example, reported over 50 million digital customers alone as of Q1 2019. And incumbents have a high degree of brand recognition, something upstarts in the space sorely lack. Combined, these two advantages mean that when consumers are searching for financial services providers, incumbents are likely top of mind, and may even be recommended via word of mouth from friends and family who are current customers.
Better ability to cross-sell customers to other products. Banks offer a wide array of financial services and have the opportunity to cross-sell their products to existing customers.