NEWS: CFPB rule causing irreparable harm

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

September 18, 2018

2018 edition: 74/104

BUREAU'S SMALL-DOLLAR LOAN RULE ALREADY CAUSING IRREPARABLE HARM TO BUSINESSES IN ADVANCE OF 2019.

ALEXANDRIA, VA - Small businesses are already incurring enormous financial costs and laying off employees to comply with the Bureau of Consumer Financial Protection's (Bureau) small-dollar loan rule and some are already scaling back operations, according to a motion for preliminary injunction filed today by the Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas (CSAT). The motion also details the "massive irreparable financial losses" that small-dollar lenders will incur if the Bureau's rule continues as written and seeks to halt the rule to protect small businesses from incurring more costs, laying off employees and shuttering stores for a rule that may never go into effect, given the Bureau's pending reconsideration of the rule.

The motion states, small businesses "do not expect to survive under the Rule" and "are already experiencing store closings, business disruptions, and resultant lost revenues." Additionally, the motion adds, larger businesses "who expect to continue to operate under the Rule-likewise have already suffered and will continue to suffer irreparable injury. For instance, one large national lender has already spent more than $4 million dollars, and will spend $9 million more-two thirds of that in the final quarter of 2018-in order to implement costly company-wide changes to its information-technology systems, business practices and policies, and employee training."

"Businesses, their employees and communities across the country are already facing the harmful consequences of the Bureau's misguided rule," said Dennis Shaul, CEO of CFSA. "Worse, once fully implemented, the rule would virtually eliminate small-dollar, short-term loans, kill hundreds of small businesses, eliminate thousands of jobs and deny access to credit for millions of Americans."

Several CFSA members filed declarations in support for the motion for preliminary injunction, detailing the operational burdens and disruptive upheaval they are already facing many months before the compliance deadline of the rule in August 2019.

The voice for the small-dollar, short-term lending industry.

Dodd-Frank has failed, here's what should replace it says professor

The regulations introduced in the wake of the Great Recession have been a flop and the FHA and GSEs need to be wound-down, according to research from a Columbia Business School academic.

"The Great Recession created a rush in Washington to establish guardrails for the financial industry," said Professor Charles Calomiris who added that good intentions, expanded powers, and new mandates don't necessarily lead to smart policy decisions.

In an article titled 'Has Financial Regulation Been a Flop? (or How to Reform Dodd-Frank)' he highlights multiple failures of the post-crisis regulations and calls for several reforms to policy including parts of Dodd-Frank and the Volcker Rule.

"Ten years later, it's clear that the Dodd-Frank Act and further regulations are failing to curb risky behavior while obstructing economic growth. We can do much better than these costly, unsustainable regulations that will do little to prevent a repeat of the financial crisis," adds Calomiris.
Read more at MORTGAGE PROFESSIONAL AMERICA

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Consumer Bankers endorses U.S. Bank's Simple Loan product

The Consumer Bankers Association (CBA) has endorsed U.S. Bank's new Simple Loan product, which provides a more cost-effective option for short-term loans for consumers.

CBA said the Simple Loan product fills a critical need for consumers. The product is designed to help consumers who have emergency financial needs by providing a regulated and more affordable short-term loan.

The benefits are in accordance with a bulletin issued by the Office of the Comptroller of the Currency in the spring, encouraging banks to serve consumers in the small-dollar installment loan market better. Often, these small-dollar, or payday loans, are not regulated and carry high interest rates as well as more penal terms and conditions.

"U.S. Bank's goal is to fulfill a customer need. This program - and others like it offered by retail banks - are essential for consumers faced with financial emergencies," CBA President and CEO Richard Hunt said. "I am appreciative regulators are recognizing the need for short-term, small-dollar credit and the necessary roles banks can play in this space - instead of forcing American families to rely on costly, less regulated lenders." Read more at Financial Regulation News

Compete in the data-driven lending era.

New York sues US treasury for allowing fintechs to become banks

NY doesn't want firms like Square going nationwide without the need for state licenses.

New York is suing the US over a decision to permit US financial technology firms to apply for national bank charters, blasting it as "lawless" and "ill-conceived". Maria Vullo, superintendent of New York's Department of Financial Services, filed the suit against the Office of the Comptroller of the Currency (OCC) in a Manhattan federal court.

The controversial July 31st decision, which has been the target of two prior lawsuits, allows companies (ranging from payment services like Square and Venmo to online lenders and cyrptocurrency exchanges) the status and privileges of a "national bank". That way, claim advocates, they can overcome the state regulatory framework currently stifling fintech innovation. On the flip side, critics of the OCC charter claim it could protect fraudulent companies from proper state oversight.

The move "puts New York financial consumers -- and often the most vulnerable ones -- at great risk of exploitation by federally-chartered entities improperly insulated by New York law," Vullo said in the lawsuit, adding "the OCC's reckless folly should be stopped." Read more at ENGADGET

We are transforming lending with innovative payment instrument data and technology, increasing credit access to the financially underserved, and reducing fees for borrowers and creditors.

Some Employers Offering Payday Loan Alternatives

Whether it's a medical emergency, car accident, or some other unexpected cost, many Americans are financially unprepared.

Even in today's strong economy, many Americans continue living paycheck to paycheck and 40 percent don't have $400 to pay for emergency expenses, NPR reported. Many working-class people opt for payday loans and other high-cost borrowing options for emergency expenses. But now some companies are helping their employees by offering cheaper ways to obtain emergency cash.

Tech startup PayActiv is a platform that helps businesses offer employees access to emergency cash with low fees. The company's website says that two-thirds of the workforce needs access to cash between paychecks.

Safwan Shah, the founder and CEO of PayActiv, told NPR that low-income workers pay about $150 per month in interest and fees for high-cost, short-term loans. That adds up to $1,800 to $2,000 per year.

Walmart and PayActiv
Retail giant Walmart is a customer, using PayActiv's platform combined with the app Even, which helps people manage their money, reported NPR. This perk enables workers to obtain monetary relief in between pay periods using their already earned wages, such as 50 percent of their paycheck, for a low monthly subscription fee. Also through Even, funds can be transferred to a bank, used to pay online bills, loaded on a prepaid card, or obtained for cash. Read more at LEND EDU

Come Visit us at Lend 360, 2018 in Chicago, Il. October 8-11 at Booth #713

Archbishop of Canterbury to lead WONGA rescue effort

Welby to rally non-profit group to try to protect borrowers after loan firm collapsed

The archbishop of Canterbury is to lead a not-for-profit attempt to buy the £400m Wonga loan book after the company collapsed under a welter of compensation claims, the Guardian can reveal.

The Most Rev Justin Welby will next week convene investors and charitable foundations at Lambeth Palace to explore the possibility of a bid for the loans in an effort to protect about 200,000 borrowers who could otherwise be forced to pay back their debts at high rates by a commercial lending firm.

A proposal that the Church of England should buy the loan book using its £7bn in assets was made this week by the Labour MP Frank Field. As chair of the Commons work and pensions committee, Field has asked Wonga's administrators to delay making any deal with private companies while the church considers what it could do.

The MP said Welby showed enthusiasm for the idea and forwarded his proposal to the church commissioners, asking them to act if possible.

Field has also passed on the names of organisations interested in being part of the consortium to take over the company, which collapsed last month. He said he believed that after the Wonga debts were handled it could develop into a low-cost payday lender, charging nominal interest rates for short-term advances that could be paid back directly from benefit cheques, reducing the risk for backers. Read more at THE GUARDIAN

Analytics is your competitive advantage!

MaxDecisions, inc. releases 5th generation debt settlement response and conversion model

In this ever-changing world of machine learning, artificial intelligence and abundance of consumer credit information, debt settlement or debt resolution industry is become ever more advanced with ways to educate and resolve consumers with issues fulfilling their debt obligations.

We are at an all-time high in terms of consumer debt since the Great Recession of the past decade. Ever since the market downturn, the United States economy has experienced an unprecedented recovery. Job opportunities, wage growth and home equity are at an all-time high.

Similarly, the availability, access and abundance of credit have been free-flowing for the past five years. With the advent of online lending (prime, near prime, subprime and future prime), consumers can get up to $75,000 worth of personal loans all over the internet.

However, with the ever-changing economy, from time to time, consumers are having a difficult time managing their credit. And thus an industry of financial educators, debt resolution consolers and attorneys that are specialized in getting consumers back on the right path are now using sophisticated technology and analytics to serve this ever-growing need.

There are over 10 million United States consumers that are in some forms of default or hardship that needs help. Often, they don't know what they are eligible for and where they can get the much needed rescued to get their much-needed help. Read more at MAXDECISIONS

National Debt Holdings is a professional Receivables Management Company that partners with creditors to purchase and/or manage receivables at all stages of the account life cycle.

ARIZONA Hits London On A Mission To Woo UK Fintechs

Where would an innovative and ambitious British Fintech business pitch its flag if it were to expand into the US for the first time? While there's an obvious answer, Doug Ducey, the Governor of Arizona, hopes Britain's best Fintechs can be persuaded to look beyond Silicon Valley. Some 750 miles to the South-East of the Bay Area, Ducey has been doggedly pursuing his ambitions to position Phoenix as a technology hub that will attract businesses from around the world.

Now Arizona is ready to make its pitch. Its representatives are in London this week with a mission to woo British Fintechs considering their options in America. They hope the offer of regulation-free access to the US market, plus help with office space and even talent, will be enough to seal the deal.

Spearheading the effort is Darryn Jones, the Greater Phoenix Economic Council's vice-president of business development. He will co-host a series of events for start-ups alongside Tech UK and the UK Government's Department of International Trade, which are both working hard to help Britain's most successful Fintech businesses internationalise. Read more at FORBES

Come Visit us at Lend 360, 2018 in Chicago, Il. October 8-11 at Booth #801

Not Your Father's Bank Aggregation Solution. by Adam DiVeroli

What if I told you that you are using bank aggregation inefficiently? As the technological landscape evolves and more data is readily available, having the access to data is not enough. You need to know your data, the technology that creates it, and how and when to use it to really harness the full power.

Bank Account Aggregation

Bank account aggregation is the process of gathering data from one or multiple bank accounts into a single place. Once the data has been aggregated, there are many uses for it, depending on the purpose of the aggregation. The majority of financial service providers have historically used bank aggregation technologies for KYC and the decisioning stage of a consumer application. The data is used by businesses to verify income, employment, creditworthiness and ownership. But should you really be using it to verify ownership? On the rare occasion, you might receive the name of the person who owns the bank account provided. Unfortunately, the name provided is rarely accurate, because these solutions were not designed for a bank account ownership verification but to simply extract the consumer's bank account transactional history. While the consumer's bank account transactional history is important to knowing your customer's characteristics and traits, it cannot be used for verification and KYC purposes.

Introducing Bank Connect Read more at MERCHANTBOOST

With PRBC alternative credit scoring you can now assess the creditworthiness and ability to pay of the 100 million people who have no traditional credit history on file with the traditional credit houses.

As Payday Loan Market Changes, States Need to Respond

Ohio's Fairness in Lending Act is a good model for reforms

State lawmakers need to be on the alert: Big changes are underway in the payday loan market, many of which will be detrimental to borrowers and socially responsible lenders. Longer-term, high-cost payday and auto title installment loans have spread dramatically as companies diversify their business models in an attempt to reduce reliance on conventional payday loans. However, without state-level safeguards, these longer-term products often have excessive prices, unaffordable payments, and unreasonably short or long durations, and therefore can be as harmful to borrowers as conventional payday loans.

What should states do?
State lawmakers who want a well-functioning market for small loans will need to establish strong but flexible safeguards to protect consumers and ensure transparency. Legislators in states where payday loan stores operate should consider measures similar to Ohio's Fairness in Lending Act (H.B. 123), which was passed in July. The law tackles the main problems in the market by lowering prices, requiring that payments be affordable, and giving borrowers reasonable time to repay. It also includes crucial provisions to balance the interests of consumers and lenders, thereby ensuring widespread access to credit. Read more at PEW TRUSTS

Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.

High home prices fueling demand in fully furnished apartments. by Philip Burgess

With home values through the roof - the typical existing home in the U.S. through July lists at $269,600, the 77th month in a row that the price has increased, according to the National Association of Realtors - renting popularity has skyrocketed. The trend in property preferences has afforded landlords and real estate investors plenty of opportunities to evaluate creditworthy tenants using alternative credit data.

In an attempt to distinguish themselves from other entities, property managers are opting to furnish the apartments, houses and condos that are available for rent, a decision that's proving to be both popular and profitable.

Citing figures from the Highland Group, The Wall Street Journal reported that revenue for the corporate housing market has exploded. Indeed, in 2017, its valuation was $3.6 billion, a 13 percent increase from 2016 and the fifth consecutive 12-month stretch of year-over-year growth.

Devon Patterson, a New York City-based visual effects production manager, told the Journal that renting his place fully furnished has enabled him to buy with less hassle and concern should he decide to move elsewhere.

"I can just enjoy New York and not feel locked in by my furniture, my cable and my internet," Patterson explained. Read more at MICROBILT

Advance Financial is named to Forbes' first-ever ranking of

'The Best Employers for New Graduates' .