NEWS: Should the Courts Limit the CFPB Director's Tenure?

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: January 10

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Should the Courts Limit the CFPB Director's Tenure? Not So Fast, Says DOJ

As the continuing saga of "what's next" plays out for the Consumer Financial Protection Bureau (CFPB) in the run-up to President-elect Donald Trump's inauguration and in the courts, the Obama administration's Department of Justice (DOJ) came out in procedural support of the CFPB in a filing late last week. In a response to a petition for rehearing en banc, the DOJ supported the CFPB's petition for rehearing, arguing that a panel decision filed on October 11 holding that the CFPB was unconstitutionally structured was incorrect and that the decision ought to be reviewed by the full US Court of Appeals for the District of Columbia Circuit. PHH Corporation v. CFPB (No. 15-1177, October 11, 2016).

We have previously detailed the case and its key developments here. To summarize: In PHH, a panel of the DC Circuit found that the CFPB was unconstitutionally formed because too much power is allocated to its unitary director, there is no effective congressional oversight of its appropriations or operations, and its director may only be removed by the president for cause. The panel held that the least intrusive remedy that would suffice to permit the CFPB to operate in a constitutional manner was to strike the "for cause" provision, thus rendering the director a standard non-career, "political" appointee of the president and subject to removal at his pleasure. With the election of Mr. Trump, it is highly unlikely that among the somewhat more than 4,000 "political" appointees who serve at the president's pleasure, President Trump would choose to permit this director of the CFPB to remain in office. Read the article at NATIONAL REVIEW

Credit Union National Association outlines 115th Congress Priorities

WASHINGTON, DC (January 3, 2017) - Members of the United States Senate

Members of the United States House of Representatives

Dear Senators and Representatives:

On behalf of America's credit unions and their more than 100 million members, congratulations on your election to the 115th Congress. We look forward to working with you over the next two years to ensure that local, member-owned credit unions can continue to serve their members.

Credit unions are not-for-profit financial cooperatives and were first established in the United States more than a century ago because most consumers had little to no access to safe, affordable financial services. The idea was that people could create economic freedom by pooling their savings and lending to each other. The idea perseveres today through a system of nearly 6,000 state and federally-chartered credit unions serving more than 100 million Americans. Since day one, credit unions have been a shining example of consumer protection in the financial services sector. They are pro-consumer protection institutions because they are owned by the consumers who rely on their services. Credit unions live by their motto, "People Helping People," every single day.

Corrective Action Needed to Mitigate Adverse Impact of CFPB Regulations

We have called on the CFPB to engage in a moratorium on new rulemaking, and we urge Congress to do the same. Through the enactment of common-sense regulatory reform, Congress should also take corrective action to mitigate the adverse impact of recently promulgated CFPB regulations and to stop pending and future rulemakings from harming consumers' access to safe and affordable financial services from local, member-owned credit unions.

For example, the CFPB's new rule on the Home Mortgage Disclosure Act requires lenders to report significantly more data points than Congress required under the Dodd-Frank Act and also requires credit unions to report data for home equity lines of credit (HELOCs), which was not mandated by statute. This regulation is an extreme resource drain for credit unions and their members and unnecessarily risks consumers' personal data. Further, the CFPB intends to implement this regulation unfairly and deceptively by not disclosing to lenders which data points will be publicly reported. We urge Congress to stop the implementation of this new regulation. Read the entire letter from CREDIT UNION NATIONAL ASSOCIATION

Why low-income American rely on pawnshops for alternative financing

Pawnshops don't exactly have the best of reputations. Their business model - offering people short-term loans using personal items as collateral - has consistently drawn complaints suggesting the industry preys upon the needy.

In 2012, when a national chain wanted to open a pawnshop in a long-vacant lot in Chicago's predominantly African American 18th Ward, for example, community members erupted up in strident opposition.

If there's such a negative public perception of pawnshops why do some 30 million Americans use them every year?

The reason, insists PawnGuru co-founder Jordan Birnholtz, is pawnshops have become a refuge of last resort for millions of low-income Americans systematically underserved by traditional, mainstream financial institutions. People deciding to use pawnshops, he argues, is an entirely rational choice exposing the fundamental failure of the U.S. banking system to meet the needs of many poor people.

Launched in 2014, PawnGuru is an online service intended to give people pawning their personal items increased leverage in the process. Someone can log in to PawnGuru, post the item he or she wants to pawn and receive bids from multiple pawnshops in their area.

Prices offered by different shops can vary wildly. For example, offers on a single diamond ring Birnholtz shopped around to different storefronts in the Detroit area ranged from $65 to $1,060. Read the entire story at KIVI-TV

Why are so Many New Yorkers Still Under-Banked?

The alternative financial system is the innocuous name given to businesses like pawnshops, check-cashing stores, and purveyors of pre-paid cards bearing the Visa and Mastercard logos. But being one of the un- or under-banked is not a condition New Yorkers would relish; it means you're probably poor or in serious financial straits.

Pawnshops and check-cashing stores thrive in the city's high-poverty neighborhoods where, depending on the neighborhood, it can be difficult to find branches of major commercial banks. Take it to the Bank, a May 2015 report by New York City Comptroller Scott M. Stringer's office, quoted statistics finding "1.2 branch locations for every 1,000 residents in areas with a majority-minority population, compared to 3.6 locations per 1,000 residents in areas that are majority white." The report also found that "the Bronx has the lowest concentration of bank branches per household of any county in the nation, while also having the lowest median household income in the five boroughs."

Back in 1994, the New York State Omnibus Consumer Protection and Bank Deregulation Act was enacted to help low-income consumers establish bank accounts so they would not be at the mercy of the often predatory practices of the alternative financial system for basic transactions such as cashing a paycheck or paying the rent or utility bills. The act mandated that every bank, trust company, savings bank, savings and loan, credit union or branch of a foreign bank offer basic banking accounts. Guidelines stipulate an opening deposit of no more than $25; a minimum balance requirement of no more than one penny to maintain the account; a monthly maintenance charge of no more than $3; eight free withdrawal transactions per month, including checks, in-person bank withdrawals, and withdrawals from a bank's own ATM; and unlimited, no-charge deposits. There are some restrictions for users such as direct deposit, closing all other similar accounts at that or another bank, and in some cases New York State residency.