ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

CFPB Arbitration Rule Hits a Roadblock

The Consumer Financial Protection Bureau (CFPB) issued a final rule on pre-dispute arbitration agreements on July 10, 2017. The final rule was published in the Federal Register on July 19, 2017, and as such, it is due to become effective on September 18, 2017 (60 days from the date the rule is published). The final rule prohibits consumer financial services providers from including terms in arbitration agreements that limit a consumer's ability to join or initiate a class action lawsuit.

The final rule sparked both praise and opposition from various groups around the country. While several groups quickly began publishing articles and writing letters, one group that has the power to stop the new regulation in its tracks decided to step in-Congress.

The House of Representatives elected to utilize the newly dusted-off Congressional Review Act (CRA) in an attempt to invalidate the recently adopted rule. The CRA allows Congress to disapprove of any regulations issued by executive agencies within 60 legislative days of publication in the Federal Register. Importantly, a "resolution of disapproval" under the CRA requires only a simple-majority vote, with no chance of amendment or filibuster. If the House, Senate, and president disapprove of the regulation, the regulation is effectively "killed" and cannot be reissued by the agency.

Read more at JDSUPRA

OPINION: 'Drain the swamp?' Start with the CFPB

As you muck around the D.C. swamp, there are plenty of dank crevices its denizens inhabit. Those habitats will need to be cleared away if President Trump ever hopes to drain the swamp. One of the darkest niches is called the Consumer Financial Protection Bureau.

The CFPB imposes horrific costs on America's financial system and consumers through overregulation, which has led to higher costs for financial services, loss of access to those services for lower-income consumers, and a lack of innovation. But the big reason for radical reform of the CFPB is that it is unconstitutional.

The Bureau's structure undermines the constitutional principle of checks and balances. Its director is not answerable to the president or to Congress. It is isolated from the regular appropriations process and instead gets its funding from the Federal Reserve, the central bank of the United States. Even the judicial branch, the courts, must give CFPB rulings extra deference that other agencies and citizens do not get. This is exactly the sort of setup the American people adopted the Constitution to avoid.

The problem with the CFPB started when Congress passed the Dodd-Frank Act in 2010 and thereby created the Bureau. It gave the agency's director too much power and too little accountability, as the District of Columbia Circuit Court of Appeals initially ruled in the case PHH Corp. v CFPB.

Read more at the WASHINGTON EXAMINER

Opinion: Financial education makes good business sense

Helping employees to better manage their finances could lead to a happier and more engaged workforce, says Alan Morahan

There probably isn't an HR professional out there who doesn't recognise that financial stress is a growing workplace problem. Research tells us it can not only affect a person's productivity, but also contribute to higher absence levels.

The scale of the issue was highlighted in a recent report by the CIPD, Financial wellbeing: the employee view, in which one in four workers claimed that money worries affected their ability to do their job.

For younger employees the situation is even worse, with a third of those aged between 25 and 34 saying money worries have affected their work. But what can companies do to ease this growing problem? Quite a lot actually.

An increasing number of UK organisations are rolling out financial education programmes in recognition of the financial stress experienced by their employees. In fact, according to Employee Wellbeing Research 2017: The evolution of workplace wellbeing in the UK - a report published by Punter Southall Health & Protection earlier this year - almost half of companies (47 per cent) now include financial education or guidance in their wellbeing strategies.

Of those that don't, more than a quarter (27 per cent) plan to add financial education or guidance to their health and wellbeing strategy over the next 12 months - a 57 per cent increase from a year ago - and almost half (49 per cent) said they plan to do so in the next few years. Read more at CIPD

CFPB Crackdown May Trap Borrowers in a Different Debt Trap

A federal financial watchdog agency may limit the access that millions of Americans - particularly women - have to short-term, small-dollar loans by drying up the market of loan providers.

The Consumer Financial Protection Bureau (CFPB), created in the wake of the financial collapse and designed to protect citizens from being exploited by financial institutions, announced a rule last year that would place new regulations on providers of small-dollar, short-term loans - also known as pay day loans. Some of the regulations would limit the ability of lenders to recover payments from borrowers and others would make it more difficult for people to secure a loan.

The CFPB may be ready to implement the rule and the impacts on both borrowers and lenders could be devastating.

Women are going to be hurt if this rule is implemented. According to Pew research, most payday loan borrowers are white, female and between the ages of 25 and 44 years old. Other demographics of borrowers are those with less education, are renters instead of homeowners, and are single parents.

While you might assume borrowers secure loans for a one-off, surprise expense such as broken pipes after a snowstorm or a medical bill for a sick child, most borrowers use the loans to cover ordinary living expenses.

Although the economy is at "full employment," wages have been relatively flat for American workers, leaving them not that much better off. Thankfully, other avenues to generate income are emerging through the sharing economy such as driving for Uber and Lyft or renting out space in your home on Airbnb, but those options aren't available to everyone and it can take time to start generating income.

The free market responded to the need of borrowers, who can't get loans from traditional lending institutions or family and friends, with small-dollar loans - usually between $100 and $500 - that carry interest rates and fees that protect the lenders, who are taking on big risks.

Some 12 million Americans borrowed money from 20,000 storefront lenders and hundreds of websites. This industry employs 50,000 people and mostly in low and moderate income communities.

If the CFPB's proposed rule kicks in, according to their own estimates, payday lenders would lose three-quarters of their revenue. Many would be forced to shut their doors and lay off workers.

What happens when women and men lose access to this source of credit? Their needs don't disappear, but they turn to other -potentially more financially devastating-sources.

Read more at INDEPENDENT WOMEN'S FORUM

Could loan benefits be the next big thing in voluntary?

With many of Americans living paycheck to paycheck, credit and loan benefits are becoming a more appealing voluntary option for employees. Some brokers are viewing the benefit of taking out a loan through the employer, rather than going to a payday loan or auto title loan business, as a tertiary level offering that could retain young talent who are struggling to cover rent payments, student debt, car loans and other cost of living requirements.

However, some brokers fear they lack the manpower and capacity to retain the additional knowledge necessary to proficiently educate clients on these types of benefits.

The Consumer Financial Protection Bureau recently conducted a study that examined how certain high-cost financial products, such as payday loans and auto title loans, affect consumers. The CFPB determined that these products often prove unaffordable, which then leads to significant financial harm.

When it came to short-term loans that are typically due on the borrower's next payday, the bureau found that the median fee on a storefront payday loan is $15 per $100 borrowed, and the median loan term is 14 days, resulting in an annual percentage rate of 391% on a loan with a median amount of $350.

Jeff Oldham, senior vice president of employer sales and the Benefitstore at Benefitfocus, says from an employer perspective, wages in America have remained relatively flat within the last five to 10 years, but healthcare spending continues to rise. Because of these stagnant wages, having a credit or loan option available through employee benefits could relieve financial burdens for employees while also not running the risk of high interest rates that could come from a payday loan company. 

Read more at EBN

Navient CEO Jack Remondi: CFPB is more interested in filing lawsuits than fixing student loan servicing

In one day, Navient was hit with three lawsuits from federal and state authorities accusing the student loan management company of putting its interests before those of struggling borrowers.

Rather than take the time to help people find the best repayment plan, authorities say that Navient took the easy way out by steering borrowers into forbearance plans that temporarily postponed their payments but racked up interest charges. Investigators at the Consumer Financial Protection Bureau say they discovered Navient employees misallocating payments, supplying incorrect information and ignoring borrowers' requests for help. And those alleged misdeeds, coupled with others, informed lawsuits filed by the attorneys general for Illinois and Washington.

The CFPB's 66-page complaint details years of alleged maleficence that Navient president and chief executive Jack Remondi disputes. He insists that the company he has led for nearly three years has a strong track record of keeping people out of default and enrolling them in affordable repayment plans despite the constraints of the poorly designed federal student loan program. Remondi shared his opinion of the flurry of lawsuits and why Navient will fight them all. Here's an edited version of our conversation: Read more at The WASHINGTON POST

Has CFPB Director Cordray violated the Hatch Act?

The so-called Hatch Act generally prohibits executive-branch officers and employees from "run[ning] for the nomination or as a candidate for election to a partisan political office." (5 U.S.C. 7323(a)(3).)

The U.S. Office of Special Counsel, which enforces the Hatch Act and has authority to issue advisory opinions about it, has concluded that the Hatch Act's "prohibition against candidacy 'extends not merely to the formal announcement of candidacy but also to the preliminaries leading to such announcement and to canvassing or soliciting support or doing or permitting to be done any act in furtherance of candidacy.'" In its words, "any action that can reasonably be construed as evidence that an individual is seeking support for or undertaking an initial 'campaign' to secure a nomination or election to office would be viewed as candidacy for purposes of the Hatch Act." Examples of "preliminary activities directed toward candidacy that would violate the Hatch Act" include "meeting with individuals to plan the logistics or strategy of a campaign."

Richard Cordray, director of the federal Consumer Finance Protection Bureau, is subject to the Hatch Act bar. The Hatch Act uses the term "employee" but defines that term broadly to include "any individual, other than the President and the Vice President, employed or holding office in ... an Executive agency other than the Government Accountability Office" (emphasis added). The law establishing the CFPB specifies that it "shall be considered an Executive agency, as defined in section 105 of title 5," and that "[e]xcept as otherwise provided expressly by law, all Federal laws dealing with ... officers [or] employees ... shall apply to the exercise of the powers of the [CFPB]."

Read more at NATIONAL REVIEW

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