NEWS: Quarterly CFPB Report

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

December 12, 2019

Quarterly Consumer Credit Trends: Public records, credit scores, and credit performance

This is part of a series of quarterly reports of consumer credit trends produced by the Consumer Financial Protection Bureau using a longitudinal, nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies. This ninth report looks at the National Consumer Assistance Plan (NCAP) public records provision's effects on the relationship between credit scores and consumers' credit performance for consumers that had a civil judgment or tax lien removed from their credit report and those that did not.

INTRODUCTION
Credit scores are widely used as an indicator of consumers' relative creditworthiness. The ability of scores to accurately distinguish individuals' creditworthiness depends in large part on the accuracy and completeness of the information underlying the scores. Inaccurate credit reports
can prevent consumers from getting credit that they need and can lead to consumers getting credit for which they have a relatively high likelihood of default. Inaccurate credit reports can also create costs for lenders, who benefit from accurate assessments of risk when conducting underwriting and pricing.
Read at Consumer Financial Protection Bureau

Supreme Court rules debt collection lawsuit statute of limitations starts when violation occurs

The US Supreme Court ruled 8-1 Tuesday that the one-year filing deadline for a Fair Debt Collection Practices Act (FDCPA) lawsuit is determined from when the alleged violation occurs, not when it is discovered.

The petitioner in this case, Kevin Rotkiske, was originally sued by debt collectors who received a default judgment after Rotkiske failed to respond. Rotkiske was unaware of the suit against him until applying for a mortgage, as all notices were sent to a previous mailing address. Rotkiske then filed suit against the debt collectors under the FDCPA.

The FDCPA permits private civil actions against debt collectors who engage in certain prohibited practices. According to the statute, an FDCPA action must be brought "within one year from the date on which the violation occurs."
Read more at JURIST.ORG

KRANINGER MARKS FIRST YEAR AS DIRECTOR OF THE CONSUMER FINANCIAL PROTECTION BUREAU

WASHINGTON, D.C. - Today, Consumer Financial Protection Bureau Director Kathleen L. Kraninger made the following statement regarding her Dec. 11 one year anniversary leading the Bureau:

"It is an honor and privilege to serve and protect American consumers," said Director Kraninger. "In this last year we've greatly enhanced consumer protection by harnessing the resources provided by Congress to be more effective and comprehensively utilized." "I commend the Bureau employees who work tirelessly to achieve our mission. We will continue to use all of our tools to not only go after bad actors that break the law, but also to prevent harm in the first place by building a culture of compliance throughout the financial system. This culture of compliance can only be built by having smart and clear rules of the road as well as a robust supervisory examination process. I look forward to our continued work in the next four years on behalf of American consumers."
Read at CFPB

Big tech banking plans may pose risk to financial stability: FSB

The efforts of big tech firms like Amazon and Google to get into banking poses risks to the financial system, according to a new report by the Financial Stability Board.

The international regulatory group, which monitors and makes recommendations about the global financial system, acknowledged that tech companies' financial activities could bring benefits, like the potential for innovation, diversification and efficiency in the provision of financial services. Those included being able to help with financial inclusion to reduce the number of unbanked and underbanked populations.

But those benefits might come with a significant downside risk, the FSB warned. Those included "risks that stem from leverage, maturity transformation and liquidity mismatches, as well as operational risks including those that might arise from potential shortcomings in governance, risk and process controls," the report said.
Read more at AMERICAN BANKER

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The Bank Account Validation Suite

Bank Account Validation (BAV), a comprehensive suite of instant and near real-time data services, assists financial institutions with identity validation, fraud detection, compliance and risk. The suite offers the ability to establish account ownership, current balance, status and the funds availability of a consumers' bank account. Financial institutions use the BAV suite in application, underwriting and ongoing customer management, to improve their payment processing KPI's and ensure regulatory compliance.

Account Validation

A financial institution needed to find an alternative method to provide consumers and businesses with a secure, convenient capability to validate bank accounts during their enrollment process. Incorporating the Bank Account Ownership Validation service enabled the financial institution to reduce many manual, ad hoc processes of verifying ownership, and confidently mitigate administrative concerns with ownership of bank accounts supplied from their customers.
Get the product sheet at VALIDIFI

Lenders differ on 84-month loans. Automotive

Doomsayers are bemoaning a spike in seven-year car loans, predicting dire consequences for lenders and the national economy from trapping consumers in auto debt for so long. A recent Wall Street Journal article gave added prominence to those fears.

But while 84-month loans have risen from a small base in the aggregate, they are not climbing at all lenders across the industry. Instead, the uptick in 84-month loans seems to stem from a few confident auto financing players intent on increasing market share. Auto lenders' views on those loans - and the volume they hold in their portfolios - vary greatly depending on risk appetites, underwriting practices and alternative data policies.

Lenders who support, or at least tolerate, longer loans believe that improvements in underwriting metrics and the use of alternative data makes calculating the risk of these loans easier now than ever before. Those who avoid 84-month loans say they are bad for consumers.
Read more at AUTOMOTIVE NEWS

LENDING: ACCEPT ALL FORMS OF PAYMENT AND KEEP THE LOANS FLOWING

Payliance supports many forms of lending, including installment, marketplace, merchant cash advance, payday and lease-to-own. Payliance consults with you to implement cost-effective, streamlined payments solution that meets the unique specifications of your product design and operational model.

FEATURES OF OUR LENDING INDUSTRY SOLUTIONS

ACH, eCheck, RCC, and Debit Cards
Smart Re-Presentment
State Licensed, Retail and Online
Big-Time Databases
Full Stack APIs
Fully Customizable

Read more at PAYLIANCE

Student Loans A Lot Like The Subprime Mortgage Debacle, Watchdog Says

Mike Calhoun is a man on a mission. He's flying around the country, warning state lawmakers and prosecutors, sounding the alarm at conferences and with members of Congress.

He did the same thing back before the housing market crash, warning then about reckless subprime loans. "We projected over 2 million subprime mortgage foreclosures, and the response was we were ridiculed by the industry," he says.

Of course, Calhoun was right. In fact, the wave of defaults and foreclosures was even worse and drove the economy into the worst recession in generations.

Back then, he was watching the number of risky mortgages grow and grow. Now he's watching student loans, "and there are a lot of similarities," he says. "You've had an absolutely explosive growth in the amount of student debt. In 15 years it's gone from about $300 billion to now $1.6 trillion." Read more at NPR.ORG

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Giving back and making a difference - two things that are special to us.
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Office of the Comptroller of the Currency Report Highlights Key Risks for Federal Banking System

Summary
The Office of the Comptroller of the Currency (OCC) reported credit, operational, compliance, and interest rate risks are key themes for the federal banking system in its Semiannual Risk Perspective for Spring 2019.

Highlights from the report include:

Credit quality is strong when measured by traditional performance metrics, but successive years of growth, incremental easing in underwriting, risk layering, and building credit concentrations result in accumulated risk in loan portfolios.
Operational risk is elevated as banks adapt to a changing and increasingly complex operating environment. Key drivers for operational risk include persistent cybersecurity threats as well as innovation in financial products and services, and increasing use of third parties to provide and support operations that are not effectively understood, implemented, and controlled.
Compliance risk related to Bank Secrecy Act/Anti-Money Laundering (BSA/AML) is high as banks remain challenged to effectively manage money laundering risks.

Gundlach on why negative rates could be 'fatal' to banks in the long term

Billionaire bond king Jeffrey Gundlach says that negative interest rates will cause long-term problems for the banking system.

Earlier this year, negative-yielding debt worldwide peaked at nearly $18 trillion, but has since retreated to around $11.5 trillion. With major central banks flooding markets with cheap liquidity to help sustain growth, investors are effectively paying governments to hold safe-haven debt - a dynamic that economists warn isn't sustainable.

"It's one of these things that [policymakers] view as a short-term solution, knowing that over the long-term it's devastatingly bad," the CEO of $150 billion DoubleLine Capital said in a recent wide-ranging interview with Yahoo Finance.
Read more at YAHOO FINANCE

Six tips to consider when you're offered a retail store credit card

For shoppers looking to take advantage of holiday sales, many department stores and large retailers now offer their own credit cards. These cards typically provide additional discounts and frequent shopper rewards when used exclusively at their stores or with affiliate retailers. Many cards may also include special no-interest or deferred-interest offers on purchases made during a promotional period.

Retail store credit cards can seem like a harmless way to gain additional savings, especially as you're checking out at the register. If the card is not used wisely, however, signing up could have a financial impact that lasts well beyond the holidays

Before you start your holiday shopping this year, be prepared with the pros and cons so you can make an informed decision when the offers come.
Read more at CFPB

Operators of Phantom Debt Scheme Permanently Banned From Debt Collection under Settlement with FTC

The operators of a scheme that conned consumers into paying non-existent debts will be permanently banned from the debt collection business and from misleading consumers about debt in a settlement with the Federal Trade Commission.

The FTC filed a complaint against Global Asset Financial Services Group, LLC in February, alleging that the operators of the company falsely claimed to be attorneys or affiliated with attorneys to pressure consumers into making payments on debts they did not owe, and threatened to take legal action against consumers if they did not pay.

In May, four of the defendants-Global Asset Financial Services Group, LLC, Ankh Ali, Aziza Ali, and Kenneth Moody-agreed to settle the charges against them. This week, the remaining defendants, Omar Hussain, David Carr, Jeremy Scinta, and nine companies controlled by the three men, also agreed to settle the charges against them.
Read more at Federal Trade Commission

Banks should apply customer data more smartly to instill greater trust

Financial institutions are often strong on security, but they should consider boosting user experience by proving they know their customers' preferences.

The digital environment is anonymous - not by intention, but by its very nature. The last 25 years of transformation have been characterized by an increasing appetite to leverage the digital channel to optimize growth for business, with an increasing desire for security against an equally determined fraudster community. Without security and trust, all the efforts to leverage the channel for businesses or consumer efficiency become an exercise in futility.

Trust should not be taken for granted or assumed. Trust in business is often evident by how willing consumers are to share personal information for some perceived benefit - either security, convenience or personalization.
Read more at BANKING DIVE

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