ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

CBS NEWS: U.S. Small Business Administration (SBA) opposes payday lending rules

On the final day for public comment, the Obama administration's top small-business advocate is calling on the Consumer Financial Protection Bureau (CFPB) to reconsider its proposed regulation of the payday lending industry.

The U.S. Small Business Administration's Office of Advocacy on Friday filed formal comments with the CFPB, saying the agency had "underestimated the potential impact of this rulemaking on small entities."

Darryl DePriest, chief counsel in the SBA's Office of Advocacy, urged the CFPB to instead develop requirements to protect consumers "without jeopardizing their access to legitimate credit in states that do not currently regulate payday lending."

In unveiling its proposal in June, the CFPB cited its serious concerns that risky lender practices were "pushing borrowers into debt traps." That's because within a month, almost 70 percent of payday loan borrowers take out a second loan, and one in five new borrowers ends up taking out at least 10 or more loans, paying more fees and interest on the same debt.

The agency's proposed rules would not prohibit all payday, auto title or other high-costs loans, but they would require lenders to adopt stricter standards to determine if consumers have the ability to repay.

That requirement would make it difficult, if not impossible, for many payday lenders to remain in business, the SBA said. Read the entire report at CBS MONEYWATCH

Could payday loans be outlawed? Amscot isn't taking any chances

Amscot founder Ian MacKechnie at the company's Tampa headquarters with 102,458 handwritten customer comments that were sent to federal regulators. The company says new proposed regulations on the payday loans would drive it out of business.

Friday was the cutoff for the public to weigh in on the payday lending industry before federal regulators choose what terms companies can - and can not - offer to millions of low income borrowers around the country.

The issue is of vital interest to Florida's largest payday lender, Tampa-based Amscot. The firm has warned that the federal regulations, as currently proposed, would put it out of business. Privately held Amscot employs about 1,850 people and has annual revenues of more than $200 million.

Over the last few months, the company has asked its customers to contribute to the public comments, listing their name and address, which Amscot mailed to Washington, D.C.. About 560,000 Amscot customers did so, the company said. The majority of the customers chose to sign one of five pre-printed forms prepared by Amscot. One of the letters read in part: "Without this provider in my community, I know my family will suffer."

Industry representatives estimated that about 1.5 million comments have been submitted to the U.S. Consumer Financial Protection Bureau, which is responsible for implementing the new regulations.

"This rule-making has generated enormous interest," said Alex Horowitz, a senior officer for The Pew Charitable Trusts small-dollar loans project. "It demonstrates this is a high-stakes rule-making ... This could save low-income households more than $10 billion a year."

Horowitz and Amscot expect the CFPB to take roughly a year before the new regulations are imposed.

Payday loans are marketed to nearly half of Americans who do not have the cash to cover an unexpected $400 bill.

Amscot this week invited a Tampa Bay Times reporter to look over 102,458 handwritten customer comments, which were split into piles thousands of pages high.

"I am on disability and unfortunately my once a month check does not cover my monthly expenses. I actually rely on the cash advance in order to survive," one Tampa customer wrote. The company asked the Times not to publish the names or addresses of those who wrote the comments. The Times compared a handful of names to public records data and found matches.

"If you changed the cash advance program you will put more stress on familys (sic) that work from paycheck to paycheck," a St. Petersburg customer wrote.

The CFPB in June proposed new regulations to "end payday debt traps" by putting caps on the number and amount of loans that companies would be allowed to provide to customers.

Read the entire article at TAMPA BAY TIMES

CFSA Projects More Than One Million Customers Voice Opposition to CFPB's Restrictive Payday Lending Rule

CFPB Must Clear Massive Backlog

CFSA Announces CommentWatch Portal

to Track Progress

Alexandria, Va., October 5, 2016 -The Community Financial Services Association of America (CFSA) anticipates that more than one million concerned Americans will have spoken out against the CFPB's proposed short-term credit rule during the comment period that ends October 7.

In late September, Director Cordray said the CFPB had received over 500,000 comments on its rule proposal - a record-breaking number - and it appears that this number has doubled by the end. The CFPB now faces a massive backlog of public comments that must be uploaded to the Regulations.gov comment portal and reviewed before the Bureau can begin deliberations on the proposed rule.

The CFPB now faces a massive backlog in its comment portal. Presently, only 89,919 comments are publicly accessible on the Bureau's Regulations.gov comment portal. According to Director Cordray's estimates, this indicates a backlog of at least 410,000 comments that the CFPB must account for. Using CFSA's projection of at least one million customers having voiced opposition to the rule, the backlog would be more than 910,000.

Once the CFPB addresses this comment backlog, it is also required to carefully review all comments prior to any further deliberations on the proposed rule. The Bureau has said it will do this, according to a statement that notes it will "carefully consider all comments it receives as it moves towards crafting a final rule."

In an effort to monitor the CFPB's progress in addressing the backlog and examine the overwhelming number of customer comments opposing the CFPB's proposed rule, CFSA has launched CFPBCommentWatch.com. This website will serve as a tool for stakeholders and the media to easily monitor the CFPB's progress in clearing the backlog of public comments and uploading all comments for public viewing, as well as to ensure that the Bureau listens to the outpouring of customer voices on this rule.

This update is an example of the type of information CFSA members receive, which we hope you will find useful.

HAVE QUESTIONS?

Should you have any questions about the content of this memo, please 

contact CFSA Chief Operations Officer Charles Halloran at charles@cfsaa.com  or 888.572.9329

About the Community Financial Services Association of America

The Community Financial Services Association of America is the only national organization dedicated solely to promoting responsible regulation of the small-dollar lending industry and consumer protections through CFSA's Best Practices. As such, we are committed to working with policymakers, consumer advocates, and CFSA member companies to ensure that small-dollar loans are a safe and viable credit option for consumers.

NCUA to CFPB: Butt Out on Payday Loans

The NCUA-and not the CFPB-should regulate small-dollar lending by federal credit unions, NCUA Chairman Rick Metsger said Tuesday.

Commenting on the CFPB's proposed rules regulating payday loans, Metsger said that his agency developed the payday loan alternative (PAL) program and has ensured that members are well-protected. And so, he said, the CFPB's oversight is not needed.

The CFPB issued the proposed rules in June and comments on them are due by Friday. So far, more than 188,000 comments have been filed with the CFPB. The payday loan industry has encouraged borrowers to file comments opposing the rules.

CUNA has filed its comments, while NAFCU has not yet done so.

In his letter, Metsger said that the NCUA protects members of federal credit unions.

"As the prudential regulator for federal credit unions, NCUA already ensures that members receive the type of protections the Bureau is seeking to address," he wrote.

He added that while the CFPB has said the proposed rules would exempt the PAL program, in reality, the rules would impose new requirements on credit unions offering the loans. They also would eliminate the flexibility the NCUA has in altering the program.

"The Bureau should therefore defer to determinations of the FCU prudential regulator about this product," Metsger wrote.   Read the article at CREDIT UNION TIMES

Are Payday Loans Really All Bad?

A new paper suggests payday loans improve well-being in some situations, but not in others.

Payday lenders occupy a controversial niche in the marketplace: Opponents of the industry contend that they trap unsophisticated borrowers in an ever-mounting cycle of high-interest debt, while the lenders argue that they provide a valuable service-credit-to Americans who the conventional banking industry has largely left behind. Earlier this summer, the Consumer Financial Protection Bureau proposed a number of new regulations aimed at the payday lending industry. But what about getting to the real root of the problem-the dearth of feasible financial options available to low-income Americans?

To date, the evidence on the effects of payday loans on well-being has been decidedly mixed. Some researchers have linked payday loans to a host of economic ills, including problems paying mortgages and other bills, higher rates of personal bankruptcy filing, an increased need for government assistance, and lower rates of child support payments. Elsewhere, researchers have found that access to payday loans mitigates foreclosure rates after natural disasters, while regulating the industry only results in more bounced checks and a decline in overall financial condition.

A new paper by the Federal Reserve's Christine Dobridge suggests that both of these narratives may be correct. More specifically, while access to payday loans improves household well-being during times of financial distress, the opposite is true during normal times. To reach this conclusion, Dobridge compared household expenditures in two different types of households in states that banned payday lending: those that lived close to a border with a state that did allow lending (so had access to loans), and those that didn't live close to such a border.

Read the entire article at PACIFIC STANDARD

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