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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
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November 13, 2018
2018 edition: 90 / 104
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Decision Cloud is a black box platform, which allows users to build decision waterfalls, utilizing Insight's services, as well as a plethora of third party vendor services.
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Markets soar after midterm election results signal gridlock - something businesses won't mind
Gridlock is good. And bipartisanship could be even better.
That was the message Wednesday from Wall Street, where the stock market soared after the uncertainty of the contentious midterm election ended with the most widely expected result: a Democratic takeover of the House and Republicans retaining the Senate majority.
A divided Congress probably means a stalemate for the next two years on major policy matters. And that was just fine with investors, who pushed the Dow Jones industrial average up more than 500 points - as well as for businesses that already have received a large tax cut and sweeping relaxation of regulations under President Trump and a Republican congressional majority.
But Trump and House Democratic Leader Nancy Pelosi (D-San Francisco) raised the prospect of working across the political aisle on rebuilding America's crumbling infrastructure - a high priority of corporate America - and even a possible deal to provide more tax cuts targeted at the middle class.
"So it really could be a beautiful, bipartisan type of situation," Trump said Wednesday.
Despite Trump's contention last week that Democratic victories would lead to a stock market crash, the Dow gained 545.29 points, or 2.1%, to 26,180.30 after a broadly based daylong rally.
The Standard & Poor's 500 index had a similar percentage jump while the technology-heavy Nasdaq composite was up about 2.6%. Read more at LOS ANGELES TIMES
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Maxine Waters' oversight agenda after Dems' midterms win
With control of the House of Representatives, Democrats now control the House Financial Services Committee, which will almost certainly be chaired by Maxine Waters. Waters has been on the committee for 28 years, which means that if anybody can get things done, she can. What can we expect under her gavel?
Be smart: With Republicans controlling both the Senate and the White House, don't expect a raft of progressive legislation in the next two years. But Waters doesn't just have an aggressive oversight agenda - she also has subpoena power, and she won't be afraid to use it.
Wells Fargo recently admitted that 545 of its customers lost their homes after being improperly denied loan modifications that would have lowered their mortgage payments. With the Consumer Financial Protection Bureau rendered otiose by Republican control, expect Waters to step into the breach and start taking names.
Deutsche Bank is deeply intertwined with both Donald Trump and Russian money laundering; it has much to fear from Waters. Go deeper.
Also on Waters' list of priorities: housing, flood insurance and payday lenders.
What else is happening: The midterm elections changed the business landscape with both ballot measures and with new oversight in the House. Minimum-wage increases passed in Missouri and Arkansas, both of which were states where Republican lawmakers refused to make such a change on their own. Those statewide increases come on top of many city-level hikes. Read more at AXIOS
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Bureau of Consumer Financial Protection Needs to Rewrite Payday Loan Rule
Last week, I wrote a blog post on how the Bureau of Consumer Financial Protection could go about narrowly rewriting the payday loan rule. This would allow the rule to easily avoid being struck down by the courts under "arbitrary and capricious review," while still significantly reshaping the law.
As I noted, however, the Bureau could also rewrite the entire rule if it sought to do so. As the Supreme Court confirmed in the case Motor Vehicle Manufactures Association v. State Farm, "An agency's view of what is in the public interest may change, either with or without a change in circumstances. But," the court continued, "an agency changing its course must supply a reasoned analysis."
The reasoned analysis on behalf of rewriting the payday loan rule is rather straightforward. The research underlying the payday rule is deeply flawed, to the extent that the entire rule is unfounded. As I highlighted in comments to the Bureau, the flaws include the fact that the Bureau:
Did not base its rulemaking on the consumer complaints portal or any empirical survey data concerning consumer sentiment.
Failed to design an appropriate and representative study of the small-dollar loan market.
Read more at Competitive Enterprise Institute
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CFPB's Payday Lender Rule Rewrite Justifies Implementation Delay
Payday lenders don't have to start complying with the Consumer Financial Protection Bureau's industry rules in August 2019, when they were originally set to take effect, a federal judge ruled.
Judge Lee Yeakel of the U.S. District Court for the Western District of Texas said Nov. 6 that payday lenders should not be forced to get ready for the new rules because the CFPB said on Oct. 26 that it plans to file in January a revised proposal to the first-of-their kind federal rules. The revision will also include a proposal to delay the implementation date for the new rules, the CFPB said.
Yeakel said these coming changes justify reversing his earlier opposition on delaying the rule's effective date while litigation launched by the Community Financial Services Association of America and the Community Service Alliance of Texas was still alive.
"Upon reconsideration, and given the information in the October 26 joint report, the court concludes that to prevent irreparable injury a stay of the Rule's current compliance date of August 19, 2019, is appropriate," Yeakel wrote in the order, referring to a joint status report filed by the parties to the litigation.
The litigation is stayed pending the outcome of the CFPB's rule revision process.
Read more at BLOOMBERG LP
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What Do the Midterms Mean for Financial Services?
Now that the Democrats have taken the House, things are going to change for the House Financial Services Committee. To start with, Jeb Hensarling, the Republican chairman of the committee for the past six years, has retired. Hensarling was perhaps the most committed free-market and limited government voice on the committee, working to rein in the enormous government footprint in the housing market, bring accountability to the Bureau of Consumer Financial Protection, privatize government flood insurance, and drastically reform the structure of the banking system. While it is certain that no Democrats will support that agenda, it is also less than clear how many Republicans on the committee are committed to taking up those tough legislative fights.
For now, the chairmanship of the House Financial Services Committee falls to Rep. Maxine Waters (D-CA), one of President Trump's most vocal opponents. Rep. Waters is sure to stymie any significant pieces of free-market legislation, such as those included in Hensarling's Financial CHOICE Act, which passed the House this past session. She is also likely to advance legislation and investigations aimed at undoing some important financial reforms. For example, Rep. Waters introduced the so-called "Consumers First Act," which would reassert Democrats' control over the Republican-led Bureau of Consumer Financial Protection.
The current acting director of the Bureau, Mick Mulvaney, has launched a tremendous transformation at the agency. He has thrown out dubious enforcement actions and sought to rewrite disastrous new regulations. He has abolished duplicative departments within the Bureau, added additional ones to improve its rulemaking process, abolished the ideologically slanted Consumer Advisory Board
Read more at Competitive Enterprise Institute
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COLORADO Passes 36% Payday Loan Rate Cap. by Alan S. Kaplinsky, Ballard Spahr
By an overwhelming vote (approximately 1,4270,000 million to 433,000), Colorado voters passed Proposition 111, a ballot initiative that places a 36 percent APR cap on payday loans. The question presented to voters was:
Shall there be an amendment to the Colorado Revised Statutes concerning limitations on payday lenders, and, in connection therewith, reducing allowable charges on payday loans to an annual percentage rate of no more than thirty-six percent?
As described on the Colorado Secretary of State's website, Proposition 111 "would restrict the charges on payday loans to a yearly rate of 36 percent and would eliminate all other finance charges and fees associated with payday lending."
Colorado's Attorney General has indicated that at least half of all retail lenders closed their doors following the enactment of legislation in 2010 that restricted payday loan fees to an average APR of about 120%. We suspect that Proposition 111 will have a similar effect, with only the most efficient operators remaining that can rely on sheer volume, sophisticated underwriting, and other product structures available under the Colorado Consumer Credit Code.
According to American Banker, the passage of Proposition 111 makes Colorado the fifth state to impose rate caps on payday loans through a voter referendum. The other states to have done so are South Dakota, Ohio, Arizona, and Montana. Read more at NATIONAL LAW REVIEW
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COLORADO: Alternatives expected to sprout up now that Colorado payday lenders are capped
Colorado voters, by the widest positive margin of any state ballot measure this year, agreed to cap the costs on payday loans at 36 percent a year, a rate some lenders argue is too low to stay in business but which backers argued was necessary.
"This lending product is so predatory," said Corrine Fowler, who ran the successful campaign behind Proposition 111. "Financially, people are not better off when taking the loans. It's just immoral, unjust and wrong."
Costs, including fees and interest for those short-term loans of $500 or less, averaged around 129 percent and could reach above 200 percent. And that was after major reforms in 2010 took them down from more than 500 percent of the original amount.
Colorado consumers are expected to save $50 million a year in borrowing costs. But will they be able to get a short-term loan once the measure takes effect Feb. 1?
A Federal Reserve survey in May found that 40 percent of adults said they couldn't cover an unexpected expense of $400 or more in cash. Payday loans, while onerous and even usurious, did meet short-term needs, including covering the mortgage or rent, auto loan payments and utility bills. Read more at THE DENVER POST
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An Executive Spotlight Interview with Jeremy Poehler, CEO of National Debt Holdings
Q: Tell about the origins of National Debt Holdings and your inspiration behind it.
Mr. Poehler: In 2010, I started a collection agency and began purchasing debt. Through this process, I developed relationships with several debt sellers. Eventually, I had an interest to do it myself, so I closed the collection agency and focused on debt portfolios. In 2011, National Debt Holdings was born.
Q: How has your company vision evolved from Day one to today?
Mr. Poehler: When we began, we were extremely small and self-funded. We were doing business with much smaller groups. Every year since 2011, we've grown. Throughout the years, we've maintained good relationships with debt buyers and debt sellers. Our focus has always been on honesty and respect. That's how we have made steady growth, by keeping our compass steady. We are still self-funded, but we are growing.
Q: What do you see as your biggest accomplishment since you started NDH?
Mr. Poehler: My biggest accomplishment would be our continuous growth. Every year, I do something better than the year before. It's gratifying to see the positive results of the hard work we are doing. We aren't done growing yet; I want to keep improving and developing.
Q: What is your favorite part of your job?
Mr. Poehler: Everything; I just love everything. I often have conversations with friends who don't want to go to work. They dread the end of the weekend. For me, it doesn't matter whether I am working in the office or at home, there is no part of my job that I don't enjoy. I get excited and look forward to Mondays. I truly love everything and every day. Read more at NDH
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Pew Charitable Trusts to host event on Ohio payday lending law. by Ballard Spahr LLP
This afternoon, Pew Charitable Trusts will host an event in Washington, D.C.focusing on Ohio's Fairness in Lending Act. Enacted in July 2018, the Act places new limitations on payday loans including an interest rate cap, a limit on the total cost of a loan, and other structural restrictions. The Act is viewed as a significant victory for consumer advocates with the potential to be followed through legislation in other states or through ballot initiatives. (Last week, Colorado voters passed a ballot initiative that places a 36 percent APR cap on payday loans.)
At the event, Ohio legislators from both sides of the aisle, business leaders, advocates, and researchers will discuss the Act. According to Pew's description of the event, the topics will include a discussion of strategies "to advance meaningful reform in other states with payday loans."
Read more at NATIONAL LAW REVIEW
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What the midterm results mean for your finances
Now that Congress is divided between Democrats and Republicans, most consumer-related legislation is likely to be stalled.
Here's what you should be on the lookout for regarding taxes, investing and debt.
With Congress now split between Democrats and Republicans, consumer-related legislation is likely to be caught in the crosshairs.
"You shouldn't expect much coming out of Washington that will directly affect your personal finances," said Ric Edelman, chairman of financial education and client experience at Edelman Financial Engines.
At stake are regulations around lending, student debt servicing and financial protections, and whether Republicans will be able to successfully pass their second round of tax cuts.
In the meantime, many people are already benefiting from a bull market, strong GDP growth, low unemployment, low inflation and recent gains in wages, Edelman said. "We could argue that Washington being gridlocked is good news for the economy," he said. "Wall Street loves predictability."
However, just 38 percent of Americans said their finances have improved since the 2016 election, according to a recent report by Bankrate.
The majority of those polled said they were doing about the same financially or were worse off. Bankrate surveyed more than 1,000 adults in September. The margin of error is 3.72 percent.
Read more at CNBC
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Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.
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Fresh Take on Improving Productivity through Financial Wellness by David Kilby
Businesses are perpetually concerned about improving worker productivity. Sometimes the answers involve technology, automation or process changes - fixes that are not always employee-friendly. Couple that with the astonishing research showing that 75 percent of American workers cannot come up with $1,000 cash in an emergency and are spending hours of work time worrying about a solution. Here's an original, and fresh, answer to an old problem.
David Kilby's The New Productivity Engine, (available from Amazon) outlines a different approach that can dramatically increase productivity and quickly solve financial problems, resulting in improved employee satisfaction and retention. Subtitled The compelling impact of financial wellness in the workplace, Kilby uses lively and believable real-life stories (rather than plodding textbook models) to showcase his innovative tactics. He cites national academic and business studies and media in his research. There are many visuals that demonstrate the challenge and solution.
"Employers in the U.S. are losing over $300 billion a year in productivity," Kilby states, quoting notable sources. "Over forty five percent of employees spend an average of two to three hours work day hours a week on personal finances." In the book, he cites ordinary problems like coming up with money for household bills, car repairs, emergency medical needs and sudden home repairs that can occupy workers' minds, effectively talking them off the clock. "Financial wellness programs can help stem that loss while engaging and stimulating employees at the same time. It can also eliminate 401(k) raids, difficult conversations about employer advances and other high cost, non-responsive solutions. It's a win-win for everyone." Read more at BUSINESS WIRE
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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.
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Most Americans aren't financially healthy despite booming economy, survey finds
The economy is growing, unemployment is low and, lately, workers are starting to see some wage gains.
But a new survey from USC and the nonprofit Center for Financial Services Innovation makes the case that, despite an overall healthy-looking economy, many Americans are struggling to save, pay bills and remain on firm financial footing.
The survey, called the Financial Health Pulse, found that only 28% of American households are financially healthy, meaning they are in control of their spending, are saving money, don't have too much debt and are planning for the unforeseen.
An additional 55% are financially coping - struggling in a few areas, but doing OK in others - while 17% are classified as financially vulnerable, meaning they are struggling with most aspects of their financial lives.
Jennifer Tescher, CFSI's chief executive, said the goal of the survey, which the group plans to do annually, is to get a sense of how Americans are doing without relying on the kind of high-level economic data that policymakers typically focus on.
"There's this rosy-eyed view of what's going on in the economy that does not comport with what's going on on Main Street," she said. "There's a significant disconnect between the data and people's lives." Read more at LOS ANGELES TIMES
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First Party Creditors Should Carefully Consider the Upcoming Debt Collection Rules. by Bradley Arant Boult Cummings LLP
On October 17, 2018, the Bureau of Consumer Financial Protection (BCFP), formerly known as the CFPB, announced that it plans to issue a Notice of Proposed Rulemaking (NPRM) for the Fair Debt Collection Practices Act (FDCPA) by March 2019. The NPRM will likely have a dramatic impact on collection practices for debt collectors. But, what about first party creditors? Did the Supreme Court's decision in Henson v. Santander Consumer USA, Inc. obviate the necessity for first party creditors to comply with the BCFP's debt collection rules?
Impact of Henson
In mid-2017, the United States Supreme Court issued a significant decision in Henson regarding the universe of companies subject to potential liability under the FDCPA. In a unanimous decision authored by Justice Neil Gorsuch, the Supreme Court held that companies that buy defaulted debts are not "debt collectors" under the FDCPA because they are not, by definition, "collect[ing] or attempt[ing] to collect . . . debts owed or due . . . another," under 15 U.S.C. §1692a(6).
A cursory review of Henson might suggest that first party creditors, even when buying debts in default, are not subject to the FDCPA and therefore would likely not be subject to any rulemaking under the FDCPA. The Supreme Court in Henson, however, refused to consider the plaintiffs' arguments that Santander was a debt collector because it allegedly regularly attempts to collect debts and because it is allegedly engaged in a business "the principal purpose of which is the collection of any debts." Since the Supreme Court's decision in Henson in 2017, these two aspects of the definition of debt collector in the FDPCA have become the primary battleground for consumer litigation Read more at JDSUPRA
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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
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