ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

FACTORTRUST RELEASES NEW WHITE PAPER REGARDING

ABILITY TO REPAY (ATR) INSIGHT UNDER NEW CFPB PROPOSED RULE

Research Unveils Importance of Alternative Data When Considering 

Underbanked's True Ability to Repay

ATLANTA (August 10, 2016) - In an effort to continue educating the market about the importance of alternative data in assessing a consumer's true Ability to Repay (ATR), FactorTrust, The Alternative Credit Bureau, releases a white paper today designed to shed light on the ATR issue, specifically considering the CFPB's Proposed Rule. The company remains a reliable resource and innovator for lenders looking to comply with the anticipated regulation.

The CFPB's Proposed Rule is expected to require lenders to take new steps to ensure consumers can repay short-term loans, vehicle title loans, deposit advance products, certain installment loans and open-end loans. For each loan, lenders will have to take into account the consumer's income, major financial obligations and borrowing history, while considering a 30-day "cooling off period" between loans.

It's clear, based on the analysis of FactorTrust's research outlined in the white paper, that this rule will greatly affect a large portion of Americans. National experts agree that 21 percent of U.S. households - over 50 million consumers - are underbanked . Because credit sources are limited to the underbanked, this population is one of the groups which most often seeks out smaller loans for emergency needs.

"In light of the recent CFPB Proposed Rule, FactorTrust has been studying closely the potential impact to the underbanked industry and how lenders can best adapt their practices for continued success," says Greg Rable, CEO, FactorTrust, "In this white paper, we simulated key metrics outlined in the CFPB Proposed Rule on a large and robust recent population of loan applicants and borrowers found in our comprehensive covered loan database. Our goal was to draw meaningful insights that will help lenders immediately start to prepare."

Key highlights in the FactorTrust's white paper, include:

* Optimizing with Alternative Data: 31 percent of applicants would be eligible to borrow after considering the "cooling off" period and residual income requirements. However, applicant eligibility could reach as high as 40 percent, if lenders use alternative data to optimize underwriting decisions and dynamically adjust loan amounts, accommodating limited residual income.

* Housing: Underbanked consumers who own their own homes live in geographies where housing costs are roughly $154 per month lower than the national average. Underbanked consumers who rent live in geographies where rent costs are $26 per month lower than the national average.

* Timing: The fourth quarter experiences the highest rate of consumers falling within the "cooling off period," which is the time when demand for consumer loans is highest.

"It is more important than ever for lenders to blend alternative credit risk and capacity scores to help them adjust their offerings and analyze a consumer's ATR. Lenders can trust alternative credit data to approve more loans to underbanked consumers who need them, while maintaining business growth and adhering to the CFPB's rules," says Rable.

To download the white paper go to http://go.factortrust.com/cfpb-atr-white-paper.

About FactorTrust

FactorTrust, The Alternative Credit Bureau, is relentlessly dedicated to proven analytics and clean credit information that provides lenders opportunities to grow more revenue, meet compliance regulations and serve more consumers with more credit options. At the core of FactorTrust is alternative credit data not available from the Big Three bureaus and analytics and risk scoring information lenders need to make informed decisions about the consumers they want. FactorTrust Alternative Credit Data and Analytics accurately predicts risk and ability to repay of near and non-prime consumer loans in real-time and enables financial service companies an opportunity to uncover creditworthy prospects that are not surfacing via traditional credit sources. 113 million U.S. adults have credit scores below 700. Headquartered in Atlanta, the experienced FactorTrust team of predictive analytics specialists, statisticians and financial industry experts has delivered unique data and valuable insight to lenders throughout the U.S. for 10 years. For more information on the quarterly FactorTrust Underbanked Index or the company itself, visit www.FactorTrust.com.

Payday Loan Limits May Cut Abuse but Leave Some Borrowers Looking

CANTON, Ohio - This city of 73,000 is known for a few things - the Pro Football Hall of Fame, the presidential library of William McKinley, a lively downtown arts scene.

But in banking circles, it has gained a more distinct reputation: Canton is a nexus of the payday lending industry, in which people who have trouble making ends meet from one paycheck to the next take out high-interest loans from specialty lenders.

On 30th Street, a half-dozen payday lending outlets surround a popular shopping center, and at lunchtime they draw a steady crowd of customers. At the Advance America shop, Martin Munn stopped in recently with his young daughter to do his biweekly banking: Nearly every payday, he cashes his check, pays off his last loan in full and takes out a new one against his next paycheck. The amount he borrows varies, but it is typically around $500, for which he pays a fee of $73 - a 380 percent annual interest rate.

The woman who manages the store, Tanya Alazaus, greeted Mr. Munn with a smile. The shop looks like a small bank branch, with clerks waiting behind counters to handle transactions and chat with their regulars. Mrs. Alazaus sees herself as a local family merchant.

But federal regulators view her and businesses like Advance America quite differently: as part of a predatory industry that is ripe for reform and a crackdown. Read more at NEW YORK TIMES

A newsletter from the Community Financial Services Association of America (CFSA),

the national trade association for nonbank lenders offering 

small-dollar, short-term credit.

    August 9, 2016

What Consumers Are Saying About the CFPB Rule

for Small-Dollar Lending

The CFPB's proposed rule is a direct threat to consumers' ability to access regulated short-term loans and to manage periodic financial difficulty.

For the millions of Americans that use payday and other small-dollar loans each year, their need for credit will not disappear once these regulations are in place. At a time when, according to a recent Federal Reserve study, forty-seven percent of Americans cannot pay for an unexpected $400 expense, short-term credit plays a critical role in the lives of many families.

This week we're spotlighting the customer's voice, and what those who use these products are saying about the rule:

When asked how do they use small-dollar loans: "I'm a nurse and I work a regular schedule, have a regular income all the time but there are times that things come up unscheduled like auto repairs that you didn't anticipate or a medical bill." - Malinda

When asked why small-dollar loans are important to them: "It helped me to be able to keep my home, go to school, and put food on the table." - Katrica

When asked what they would tell lawmakers about small-dollar loans: "When you get the money...you go and take care of your needs. It would be devastating for a lot of people if they closed these types of businesses." - Dani

When asked what their experience has been taking out a small-dollar loan: "You feel like a family in there. You feel important, they know you, they know what you are doing, they help you." - John

A recent survey compared the views of payday loan borrowers with those who had never used the product. This survey found that people who have actual experience with payday loans have much better perceptions of the product, appreciate having the option, and fully understand the loan terms.

If the CFPB ultimately eliminates payday and other small-dollar loans, consumers will be forced to turn to costlier or less regulated options or not be able to meet their financial obligations. Some consumers will even turn to illegal, unlicensed and unregulated lenders who will inevitably prosper wherever regulated lending is restricted or banned.

You can read more about what consumers think about the CFPB's proposed rule here.

AMY CANTU

CFSA | Director of Communications

703.842.2092 (o)

acantu@cfsaa.com (e)

www.cfsaa.com

FINANCIAL WELLNESS: THE NEXT FRONTIER IN WELLNESS PROGRAMS

Why It Matters to Employers and Employees, and the New Way to Measure It Effectively

Employers have a vested interest in promoting the financial health of their employees, who can become less productive when burdened by money  worries. Nearly a quarter of employees confirm that personal finance issues are a distraction at work, and 39% say they spend three hours or more

each week dealing with issues related to personal finance.1

To alleviate these stresses, increasing numbers of employers are implementing financial wellness programs that educate employees about  the financial risks they face and provide tools to manage those risks. To support and enhance these efforts, The Prudential Insurance Company

of America (Prudential), with supporting research and analysis provided by EY,2 has created Prutection ScoreSM, a patent-pending tool to help  employers evaluate the financial wellness needs of their employee populations. Prutection ScoreSM provides employers with measures of how well

protected their employee populations are against key financial risks they face every day: loss of income due to premature death, illness, or injury;  out-of-pocket medical and non-medical expenses related to unexpected health events; and outliving assets in retirement.

The opportunities to improve individuals' financial wellness are vast. Drawing on data from its 2014 Financial Wellness Survey, Prudential has  found that most employees are unprepared to fully cover key financial risks they face during their working careers. Prudential also has found that

for each risk category, Prutection ScoresSM vary dramatically from one demographic group to another. Read the entire report at PRUDENTIAL

AFSPA

A public comment period has begun and will continue through September 14th.

Our goal is to generate as many different comment letters from our member companies, including you, your employees, business associates, contacts and customers. 

We need to count on you to get involved to protect

Payday lending rules could limit options for poor. by Robert Sherrill

In February, I was given the unlikely opportunity to testify before Congress on the Consumer Financial Protection Bureau's (CFPB) proposed small-dollar lending rule. My testimony was unlikely because I grew up in public housing, spent time in federal prison for selling drugs - and I'm a satisfied customer of the payday lending industry. The CFBP officially released its proposed rule on June 2, a rule that will threaten access to small-dollar loans for millions of Americans just like me. I feel compelled to tell my story and make sure others know the true value these loans have for people in need of short-term credit. Mine is a true success story, and I owe a great deal of it to the payday lending industry. Without the payday and title loans I was able to get, nothing that I have been able to achieve would have happened.

Ten years ago, I started a commercial cleaning business, Imperial Cleaning Systems Inc., in my hometown of Nashville. Today I have 20 employees.

As most small-business owners know, starting your own company isn't easy. Cash isn't always available to grow your company, and banks and credit unions don't make loans less than $1,000 to people like me, or to anyone else, for that matter. Access to credit is hard to come by for many small-business owners, but next to impossible for those of us who've made mistakes in our past. Personal loans, known as payday and title loans, were my only option to keep my business afloat.

I turned to a local company, Advance Financial, for access to cash through payday and title loans. These loans saved my business and may have saved my life. The CFPB says these loans are too expensive. I've found that the most expensive credit is the credit you can't get.

Read the story at The TENNESSEAN

AFSPA

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