NEWS: Dems debate working with GOP on CFPB revamp

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: March 29

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Top Trends in Short-Term Lending Demographic and Risk Metrics By Brett Taylor, VP, alternative lending practice, FactorTrust

As the market grows and becomes increasingly competitive, short-term lenders (STL) must focus on the tactics and strategies that yield the highest results to stay relevant. The biggest safety net lenders can offer themselves is to become informed about the industry's size, shape, stability trends, and most importantly stay ahead of the competition.

Demographics of STL Consumers

Knowing the customer is a must. Through a decade of measuring underwriting storefront successes via predictive alternative credit data, several insights about demographics in this consumer segment are well-documented, including:

Average age of:

Applicants-37 years old
Borrowers-39 years old
Best performers-40 years old

Average monthly income-$1,820 ($21,840 annualized)
Top five employer industries:

Retail
Quick-Serve Restaurants
Government
Business Services
Banking/Finance

Stability:

Change of Address-4.35 percent
Change of Phone Number-6.11 percent
Change of Bank Account Number-2 percent

Trends in Consumer Demand

Trends indicate that consumer demand for STL credit fluctuates throughout the year. Subsequently, default rates respond accordingly. Although these two metrics are not mutually inclusive, applicants increase in the summer and fall season and peak in December before tapering off again in February. Equipped with these deep insights into STL applicant behavior, lenders can forecast application volume and tailor their loan programs to meet the needs of consumers in every season.

Read more at FACTORTRUST

Dems debate working with GOP on consumer bureau revamp

Democrats are deeply divided over whether to work with Republicans to revamp the controversial consumer financial watchdog created after the 2008 financial crisis.

Some Democrats say they're open to working with Republicans to improve the Consumer Financial Protection Bureau (CFPB). Others dismiss the idea as an ill-intentioned backdoor into destroying the agency.

"At this point, it's impossible. They've tried to destroy [the CFPB] so many times, they've lost their credibility, really," said Rep. Stephen Lynch (D-Mass.), a veteran on the House Financial Services Committee. "That's their end game here."

Progressive groups are pushing Democrats to defend the bureau, the brainchild of Sen. Elizabeth Warren (D-Mass.). The party's liberal base, still fuming over the 2016 elections, does not want to see any compromise with Republicans over policies won by the left during the Obama era.

The CFPB has been in Republicans' crosshairs for as long as it has existed. They consider the agency redundant at best and an unaccountable, overly powerful drain on the American economy at worst.

The bureau opened in July 2011 with a mandate to crack down on harmful and fraudulent financial practices that other regulators might miss or not cover. Warren, then a Harvard professor and adviser to President Obama, is credited with laying its foundation. Read more at THE HILL

3 ways artificial intelligence will impact consumer lending by Walt Wojciechowski

The average consumer produces quite a bit of information today.

Every time someone pays a credit card or utility bill, some kind of system records that transaction for later reference. Add rent payments, outstanding loans other financial information in the mix, and you get a pretty detailed picture of that individual's financial situation.

Still, most loan officers don't have the time to conduct deep analyses into people's traditional and alternative credit reports. This is part of the reason why companies are integrating artificial intelligence into their consumer lending operations.

Unfortunately, there's a lot of hype associated with AI, which can discredit just how much of an impact this technology will have on consumer lending in the not-too-distant future. Here are three examples of how lenders can utilize AI when engaging consumers.

1. Underwriters achieve greater predictability

Underwriters do a pretty good job of determining how people's debt ratios, cash reserves and down payments impact their ability to keep up with mortgages. But what happens if an unexpected expense falls on a borrower's lap in the middle of the mortgage? It's hard to predict such hardships from occurring, especially if you're only using basic analytics tools. Read more at MICROBILT

GOP senators to Treasury: End 'too big to fail' for non-banks

Republicans on the Senate Banking Committee asked Treasury Secretary Steven Mnuchin on Tuesday to end the process of deeming non-bank financial institutions "too big to fail."

Ten of the Banking panel's 12 Republicans wrote to Mnuchin, asking him to freeze the Financial Stability Oversight Council's (FSOC) ability to classify as "systemically important financial institutions" any organization that isn't a bank. The SIFI label, nicknamed "too big to fail," subjects firms to stricter federal oversight and requirements.

The group of Republicans wrote that the FSOC process "lack transparency and accountability, insufficiently tracks data, and does not have a consistent methodology for determinations." They also claimed the process creates "substantial new regulatory costs while putting taxpayers on the hook for any future bailout to these firms."

Republicans have long objected to the "too big to fail" label and the process that the federal government would use to dismantle SIFI-designated financial firms on the brink of failure. Republicans claim that process amounts to a bailout, though no taxpayer money goes to the failing firms.

The House Financial Services Committee Republican staff recently released a report claiming the FSOC used the label "arbitrarily and inconsistently." They're likely to seek changes the process by either eliminating it or adjusting how a bank or firm is labeled systemically important.

Democrats defend the process as an essential tool to prevent teetering financial firms from triggering an economic crisis such as the one that occurred in 2007-2008. THE HILL

Ripoff Alert: World's Biggest Credit Score Agency Has Been Deceiving People

It now appears that all three of the biggest credit reporting firms have been tricking customers into paying for credit scores that don't deliver as promised.

The main reason people pay to find out their credit scores is to get the same info that banks and other lenders use when judging if someone is worthy of credit. But Experian-the biggest credit reporting company in the U.S. and around the world-must now pay a $3 million fine for allegedly "deceiving consumers about the use of credit scores it sold," according to the Consumer Financial Protection Bureau (CFPB).

"In its advertising, Experian falsely represented that the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions," the CFPB stated. "In fact, lenders did not use the scores Experian sold to consumers."

Experian accepted the judgment, although it admitted no wrongdoing. And the credit reporting giant wasn't the only one overhyping the scores it sold.

In January, the CFPB fined Equifax and TransUnion, the next two largest credit reporting firms, for a total of $23 million to settle similar claims. As my colleague Megan Leonhardt wrote at the time of the last CFPB judgment: Read more at MONEY

CANADA: We need better regulation and alternatives before ending payday loans

Regulations in Hamilton a step in the right direction, but more must be done

It's difficult to live in any Canadian city without stumbling across a payday loan provider.

To most Canadians, their flashy signs, obnoxious ads, and grandiose claims are more reminiscent of a sleazy car salesman than a financial institution. However, for our country's impoverished, they are an essential lifeline in an increasingly unstable economic landscape.

In a bid to protect consumers, the City of Hamilton recently announced a regulatory crackdown on the payday loan industry. The city implemented additional licensing fees and mandatory credit counselling for would-be clients. By using a regulatory strategy similar to one that controls the tobacco industry, Hamilton hopes to discourage the use of these aggressive and predatory financial services through education.

And it's about time.

After all, payday loans portray themselves as a quick and easy way to smooth out the peaks and troughs of living paycheque to paycheque. By providing short-term loans and requiring few, if any, prerequisites, they can be used by low-income individuals to temporarily put food on the table or cope with unexpected expenses. Read more at THE FULCRUM

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