ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

House Passes Volcker Rule Repeal in Spending Bill

A spending bill to fund federal regulators, loaded with policy provisions repealing the Volcker Rule and curbing the Consumer Financial Protection Bureau's authority, passed the House Sept. 14 in a mostly party-line vote, 211-198.

H.R. 3354 would subject the CFPB's annual funding to the appropriations process and would undo its supervision authority and ability to go after "unfair, deceptive, and abusive practices." It would also wipe out the bureau's ability to regulate payday lending, for which a final rule is expected soon, and arbitration, for which a rule was recently adopted.

The bill would also repeal the Volcker Rule, a part of the Dodd-Frank Act that restricts proprietary trading by banks, and negate the Department of Labor's fiduciary rule, which requires broker-dealers giving certain retirement advice to act in the best interest of their clients.

Its fate is uncertain in the Senate, where the policy provisions will likely be less popular and where Republicans' majority is slimmer.

CFPB, SEC Policies

Rep. Keith Ellison (D-Minn.) sought to amend the spending bill to remove the language that would move the CFPB under appropriations and restrict its authority on the small-dollar lending rule. Both of his attempts were defeated, largely along party lines.

Rep. Bruce Poliquin (R-Maine), who sits on the House Financial Services Committee, crossed party lines and backed both amendments. Democratic Reps. Alcee Hastings (Fla.), Henry Cuellar (Texas), and Collin Peterson (Minn.), were the lone Democrats who supported stripping the CFPB's payday-lending rule authority. Read more at BLOOMBERG

Opponents sharpen knives over impending US payday loan rule. Ryan J. Foley | AP. CNBC

Lobbyists and Republican lawmakers are gearing up for battle over a new U.S. regulation that is likely to dent profits in the $6 billion short-term, high-interest "payday" loan industry.

The Consumer Financial Protection Bureau (CFPB) is expected in coming days to release a long-anticipated rule curbing payday lending, now that a final review by other regulatory agencies has concluded, three people familiar with the matter said.

The rule pits the country's consumer financial watchdog against payday lenders who say the new regulation will wipe out much of their established industry, currently overseen by the states, and push poor and rural customers to use illegal loan sharks.

"We are likely, on our part, to take the appropriate actions that we can to see this rule never becomes effective, and that includes a possible lawsuit," said Dennis Shaul, chief executive of the Community Financial Services Association of America (CFSA), a payday lending trade group.

The group says the rule-drafting process was flawed because the agency did not listen to borrowers or properly process comment letters-an argument that could form the basis of potential litigation. The CFPB has declined to comment on its procedure or on the final rule, but public records show it closely followed the law throughout the rule making process.

Meanwhile, President Donald Trump's Republican party, which says the CFPB goes too far in its regulations, wants to undo the rule through legislation.

Recently, Republicans in the House of Representatives added a "rider," or amendment, to a spending bill banning the CFPB from regulating the payday loan industry. They are also poised to repeal the rule under the Congressional Review Act and bar the CFPB from ever drafting a similar regulation, according to aides and lobbyists.

Borrowers take out the small, short-term loans to cover emergencies and traditionally repay them with their next paychecks. Because the loans can carry interest rates as high as 390 percent, borrowers can become trapped in devastating cycles of taking out new loans to pay outstanding ones, the CFPB said. Read more at CNBC

Payday Lenders Win Special Protections from Congress

WASHINGTON - Faced with the opportunity to protect Americans from payday lenders and their 400 percent interest rate loans, a majority in the U.S. House of Representatives instead chose to side with America's legalized loan sharks and give them special protections for their dangerous products.

"Payday lenders depend on keeping people trapped in loans charging 400 percent interest. Congress just voted to give payday lenders a free pass, showing how out of touch they are with their constituents," Center for Responsible Lending executive vice president Diane Standaert said. "This vote came despite the fact that 73 percent of likely voters support protections against the harm of the payday debt trap. While these Congress members are failing their constituents, the Consumer Financial Protection Bureau is working to stop the harmful debt trap of payday loans."

"Once again, predatory lenders and their allies in Congress are working to ensure that ever more American families fall into the payday loan debt trap," Said Gynnie Robnett, campaign director at Americans for Financial Reform. "Those who voted for stripping CFPB of enforcement authority are giving payday lenders keys to circumvent state laws and other protections put in place by the public directly. This is a clear warning signal: Predatory lenders will never stop trying to rip off American families. Congress should resist the moneyed lobbyists, and stand with ordinary Americans."

"The decision to side with a sleazy industry that makes its millions trapping desperate people in triple-digit-interest-rate loans boggles the mind," said Lauren Saunders, associate director of the National Consumer Law Center. "Payday lenders drain billions of dollars in fees every year from the communities that need it most - communities many of these members of Congress are supposed to be here to represent." Read more at PAYMENTS JOURNAL

August Bankruptcy Filings Increase for Consumers and Businesses

Consumer filings represent a majority of the bankruptcies in the U.S.

Total bankruptcy filings in the U.S. increased 11 percent in August 2017, according to the American Bankruptcy Institute (ABI).

"Commercial chapter 11 filings totaled 426 in August, a 29 percent increase over July's total of 331 filings," according to a news release from the ABI and data provided by Epiq Systems Inc. "Overall business filings also increased as the 3,255 filings were 13 percent more than July's total of 2,886 filings."

There were 68,117 total bankruptcy filings from consumers and businesses in August, compared to 61,403 in July, according to the news release.

"The 64,862 consumer filings in August also represented an 11 percent increase from the previous month's consumer total of 58,517," it states.

Total bankruptcy filings declined slightly in August 2017 compared to August last year, 68,117 and 68,551 respectively.

The ABI's Chapter 11 commission recently made recommendations for reform.

Read more at ACA INTERNATIONAL

Financial Wellness Programs Critical to Avoid Lost Productivity

PwC says there is a great need for financial wellness programs, as 53% of employees feel financially stressed, and this costs employers with 10,000 workers $3.3 million a year in lost productivity.

In a new report, "Financial Stress and the Bottom Line," PwC finds that it is very beneficial for companies to offer financial wellness programs, as they alleviate workers' financial stress, boost their productivity, avoid higher health care plan use and help workers save more for retirement and health care.

"Our research is showing that financial stressors are not only negatively impacting employees but are costing the employers," says Kent Allison, a partner and national practice leader with PwC. "Stressed employees are found to be less productive, take more time off to deal with financial matters, are more likely to leave the company for higher compensation, and are more likely to cite health issues caused by financial stress. These findings evidence a direct correlation between an employee's financial well-being and a company's bottom line and may help justify an investment in a financial wellness program." Truly successful financial wellness programs change people's everyday behaviors and have lasting effects, PwC says.

This year, PwC surveyed 1,600 workers and discovered that 53% feel financially stressed. Employees reporting financial stress tend to be younger and are more likely to be female; 35% of Millennials and 44% of Gen X say they are financially stressed, compared to 21% of Baby Boomers. Fifty-nine percent of women say they are financially stressed, versus 41% of men.

Read more at PLAN SPONSOR

Two Democrats challenge the payday-loan industry

With a small tweak to a federal tax credit, Democrats want to offer cash-strapped borrowers an alternative to high-priced loans. Would it work?

Could a small change in a federal tax credit significantly reduce people's need for predatory payday loans?

That's the hope of a new tax bill introduced Wednesday by Sen. Sherrod Brown and Rep. Ro Khanna. Their topline idea is to massively expand the Earned Income Tax Credit (EITC), which gives low- and moderate-income Americans a subsidy for working. Most attention will focus on the cost of the legislation, which could run near $1 trillion over 10 years, although an exact estimate isn't available. But buried within the bill is a small change that could have big ramifications for the payday loan industry, which covers short-term financial needs by charging very high interest rates.

The idea is to let people who qualify for the EITC take up to $500 as an advance on their annual payment. Normally, the EITC is a cash benefit that arrives all at once, after tax time-a kind of windfall that's nice when it happens, but doesn't help cash-strapped workers cover costs during the year, when they actually arise. The so-called "Early EITC," which Brown first proposed in 2015 and built off a proposal from the Center of American Progress in 2014, would fix that by allowing workers to request an advance, an amount that would later be deducted from their lump-sum EITC benefit. In effect, the advance is a no-interest, no-fee federal loan that could help cover short-term expenses or a gap in income.

The EITC is the rare government program with support across the political spectrum: It's a mechanism for providing benefits to low-income Americans while encouraging work, since it increases as a person's income rises. But the way it's paid out, as a lump sum in the form of a tax refund, has attracted critics. "Why do we have a credit that is geared towards households making between $10,000 and $25,000 a year where they are getting between $2,000 to $6,000 in one payment?" said David Marzahl, president of the Center for Economic Progress, which has proposed reforms to the EITC. "In reality, their needs are spread across the year." Read more at POLITICO

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CFPB Releases Latest Supervisory Highlights Report

The summer 2017 report includes updated information on FDCPA compliance for debt collectors and entities in the small-dollar lending industry.

The Consumer Financial Protection Bureau has released the 16th edition of its Supervisory Highlights Report with updates on examinations of businesses in debt collection, auto lending, mortgages, short-term small-dollar lending and credit card account management.

The CFPB's supervisory activities from January through June 2017 led to or supported public enforcement actions that resulted in about $1.15 million in consumer remediation and an additional $1.75 million in civil penalties, according to the report.

The report's findings represent alleged problems at individual companies and are not necessarily indicative of the practices of the entire collection industry or other financial services industries. The report provides guidance to industry participants on how their operations can remain in compliance with the consumer financial laws and includes examples of common opportunities for improvement.

Short-Term, Small Dollar Lending

The CFPB's supervision program also covers entities that offer or provide payday loans, including other short-term, small dollar products.

The CFPB proposed a rule containing requirements related to small-dollar lending in June 2016 and reportedly could scale back the rule to concentrate on short-term loans, ACA International previously reported.

The CFPB started its payday lending supervisory program in 2012 and has conducted multiple examinations for compliance with Federal consumer laws such as Regulation E, which implements the Electronic Fund Transfer Act.

Overall, during review of entities that offer small dollar products to consumers, examiners found compliance management system weaknesses and violations of federal consumer financial law, including the Dodd-Frank Act's prohibition of Unfair, Deceptive or Abusive Acts or Practices (UDAAPs), according to the report.

Specific to practices by small-dollar lenders collecting their own debt, for example, examiners found that one or more entity contacted consumers at their workplace; made repeated calls to third parties; and made statements to consumers that they must immediately contact the lender to avoid additional collection activity, including being visited at home or work, according to the report. 

Read more at ACA INTERNATIONAL

• The background of the CFPB's arbitration rulemaking;
• The CFPB's proposed rules on consumer arbitration agreements;
• Whether CFSA members will be covered by the proposed rules;
• When the proposed rules might become effective;
• Whether existing arbitration agreements will be grandfathered;
• Whether arbitration agreements should continue to be used for individual arbitrations;
• Possible legal and political challenges to the rules;
• What CFSA members can do now to maximize the utility of your class action waiver;
• What CFSA members should do now if you don't have a class action waiver; and
• Alternative methods of reducing class action exposure.

Income volatility leaving underbanked stuck in neutral. by Walt Wojciechowski

Americans have been doing much better in the personal finances department in recent months, which is good news to both consumers and lenders providing financial services. The national unemployment rate has hovered at around 4.3 percent, according to the Labor Department, a low last witnessed more than a decade ago, and median household earnings are improving. Indeed, last year, the typical household was pulling in $59,039, the Census Bureau reported, a 3.2 percent increase from the previous year, the highest median salary on record.

While this is a net positive for consumers looking to improve their quality of living - as well as lenders, eager to provide the credit leniency borrowers enjoy - there's a sizeable pool of potential customers that's waiting to be tapped: the underbanked.

Approximately 9 million families - the equivalent of 15 million U.S. adults - are underbanked, according to the Federal Deposit Insurance Corporation. Not having access to or ownership of a checking or savings account, the underbanked represent approximately 7 percent of the population.

Given the ubiquity of banking services, it may come as a surprise that the rate is so high. One of the main reasons why it's elevated stems from income volatility among the underbanked, meaning those not earning a consistent salary from month to month. In 2015 - the latest month for which data is available - nearly 31 percent of the underbanked said their earnings varied significantly between pay periods, according to the FDIC's findings, and 26 percent said the variation was moderate. Read more at MICROBILT

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