ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

Judges divided over power of CFPB

WASHINGTON - Federal appeals judges are divided as they hear arguments over whether the president should be able to more easily fire the head of the government's consumer finance watchdog agency.

The U.S. Court of Appeals for the District of Columbia, in a rare hearing Wednesday by all its judges, took up the politically charged case involving the Consumer Financial Protection Bureau and the power of its director. The judges are reconsidering a ruling last fall by a divided three-judge panel that would make it easier for President Donald Trump to fire CFPB Director Richard Cordray. He was appointed in 2011 by President Barack Obama.

Lawyers for the Trump administration and a company sanctioned by the consumer agency argued that the way the CFPB was created, by Obama and Democrats in Congress after the financial crisis, violated the Constitution, by giving the director excessive power.

The 10 judges - six appointed by Democratic presidents and four by Republicans - appeared split along ideological fault lines as they challenged, in turn, the opposing arguments put forward by the Trump administration and the CFPB.

In an unusual turn, the Trump Justice Department is opposing the consumer watchdog agency within its own government.

"This agency goes further than anything Congress has attempted to do in history," declared Ted Olson, the prominent attorney with Supreme Court victories who represents the mortgage lender in this case, PHH Corp. The company was accused of illegal conduct by the CFPB and ordered to pay $109 million, then struck back by bringing the case that has raised constitutional issues and moved up to the nation's second most influential court.

The appeals panel ruled in October that the way the CFPB is organized violates the Constitution's separation of powers by limiting the president's ability to remove the director. The law creating the CFPB allows its director to be removed only "for cause" - such as neglect of duty - and not over political differences. The judges said that conflicts with the Constitution, which allows the president to remove officials for any reason.

Olson criticized the "power concentrated in one individual" - Cordray - when the CFPB was established by the 2010 Dodd-Frank financial oversight law.

Several judges quickly jumped in and challenged Olson's assertions.

Having a consumer agency board with several members could actually make them less accountable than a single director, suggested Patricia Millett, one of four judges who were named by Obama. And although the CFPB receives guaranteed funding from the Federal Reserve and thereby avoids congressional budget approval, the agency still must justify its expenditures and activities to Congress, Millett said.

Justice Department attorney Hashim Mooppan called the CFPB "a quintessentially executive agency" whose director can't be distinguished in the power he wields from the Treasury secretary or other members of the president's Cabinet.

On the other side, attorney Lawrence DeMille-Wagman, representing the CFPB, made the case that the consumer agency works in a similar way to the Federal Trade Commission. The courts have upheld the firing-only-for-cause protection for FTC commissioners, he noted.

But Judge Brett Kavanaugh wryly suggested a turnaround scenario: If Trump appointed a new CFPB director after Cordray's term expired, and that person enjoyed similar protection through a five-year term, there may be a president from another party in 2023 wanting to fire him or her. 

Read more at FOX NEWS

Buried in Trump's Budget: A New Attempt to Kill the CFPB

The Republicans appear to be making another move to kill-or at least slash-America's biggest consumer watchdog.

Buried deep in President Donald Trump's 2018 budget request to Congress-specifically, on page 158 out of 159 pages in the supplemental "Major Savings and Reforms" document-is a section headed "Restructure the Consumer Financial Protection Bureau." It appears to be yet another Republican shot across the bow against the embattled consumer protection agency-but in this case, it's an action Congress currently has no authority to implement.

The CFPB, which oversees financial institutions like banks, credit card companies and lenders, has returned $12 billion in restitution for roughly 29 million Americans since it started work in 2011. But the agency has also been under fire since its inception under the Dodd-Frank legislation, largely from Republican lawmakers, who rail against the agency's allegedly "unchecked authority."

Trump's $4.1 trillion budget-which was presented to Congress on Tuesday-proposes to restructure the CFPB, limit the agency's mandatory funding in 2018, and provide discretionary appropriations to fund it beginning in 2019. The budget estimates that this "restructuring" will yield a cost savings of $6.8 billion of the next 10 years. When you consider that the CFPB's budget for the fiscal year of 2016 was roughly $600 million, however-just under a 10th of that amount-such a move sounds more like total elimination.

"Not only are they going to 'save' that money, they're going to do it by cutting the entire thing," says Karl Frisch, executive director of Allied Progress, an anti-Wall Street lobby group. 

Read more at MONEY

Consumer survey: Voters say CFPB should be run by a bipartisan commission

The highly contested leadership structure of the Consumer Financial Protection Bureau should be a bipartisan commission if it was up to voters to decide.

The Consumer Bankers Association, the Independent Community Bankers of America, and the American Land Title Association teamed up to commission a Morning Consult poll of registered voters in key battleground states, including Indiana, Maine, Michigan, Missouri, Montana, North Dakota, Ohio and West Virginia. The Morning Consult conducted the online survey of 6,132 registered voters from May 3 to 16, 2017.

According to the findings, 58% percent of registered voters in key battleground states say a bipartisan commission should run the CFPB. Only 14% said the CFPB should keep its current structure.

The survey also found that more than half of voters believe a commission would help consumers and small businesses, with 59% saying a commission would better position the CFPB to help consumers over the long run.

Three in five voters said a commission would make the CFPB fairer (63%), more representative (62%), more accountable (62%), and more transparent (60%).

Plus, 57% said the CFPB's authority to supervise financial institutions, write rules and enforce penalties is too important to be controlled by a single director.

Richard Cordray is currently the director of the CFPB, but there's a lot of uncertainty surrounding the future of the position. Read more at HOUSINGWIRE

Troubling Trend? U.S. Household Debt Surpasses 2008 Peak

Total household debt reached $12.73 trillion in the first quarter of 2017, surpassing its $12.68 trillion peak reached during the Great Recession that began in 2008, according to the Federal Reserve Bank of New York's newly issued quarterly update.

While not quite a reason to be alarmed, the milestone presents an opportunity to examine certain trends in the credit markets that are worth watching, officials said.

"This marked a $149 billion (1.2%) quarterly increase and nearly three years of continued growth since the long period of deleveraging following the Great Recession," the New York Fed stated.

The quarterly report is based on a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data by the New York Fed.

Although debt has reached record heights, the N.Y. Fed stated, it took an unusually long time - from a historical perspective - for debt to reach the 2008 level again. Translation: We're probably not headed toward another recession.

"Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today," said Donghoon Lee, Research Officer at the New York Fed. "This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance." Read more at eCreditDaily

A record 107 million Americans have car loans

Americans went on a massive shopping spree for cars and trucks in recent years. Many paid for their vehicles by taking out a loan.

A record 107 million Americans have auto loan debt, according to data released this week by the Federal Reserve Bank of New York. That's about 43% of the entire adult population in the US.

It's an eye popping number. Auto loans have been growing rapidly. In early 2012, only 80 million Americans had car loans. In fact, more Americans had home mortgages than auto loans in 2012. But all that has changed.

Today the number of auto loans far outpaces home loans. It helps explain how car makers have had year after year of record sales. Car sales notched another all-time high in 2016, though lately the buying frenzy seems to be over.

6 million Americans are behind on their car payments

Americans don't need to buy new cars every year, and an alarming number of people can't afford to pay their car loans. There are 6 million people who are 90 days or more behind on their car payments, according to the data. That puts them in danger of having their car or truck repossessed.

Beth Yeager has seen the ugly side of the auto loan boom first-hand. She helps run the Pathway of Hope program for the poor at the Salvation Army in Louisville, Kentucky. A lot of single moms with kids end up in her office in a bind. They can't pay their auto loan, but if they lose their car, they often can't get to work. Read more at CNN MONEY

GOP Rewrite of Dodd-Frank Act: How Could It Impact Lending Practices? by Walt Wojciechowski

On May 4, the House Financial Services Committee approved the Financial CHOICE Act, voting to send the bill to the House floor, according to The Hill. Developed by Chairman Jeb Hensarling, the proposed law would repeal many of the regulations instituted under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

If enacted into law, how would the Financial CHOICE Act impact commercial and consumer lending practices?

Overhauling the Consumer Financial Protection Bureau

The CHOICE Act proposes reforming the CFPB as a civil enforcement agency and rename the institution as the Consumer Law Enforcement Agency (CLEA). The Act would also reform CLEA's statutory mandate "to ensure that it takes into account, and seeks to promote, robust market competition," as well as enforce consumer protection laws.

Moving past the law's intentions, the CHOICE Act would enable courts to "correct any erroneous interpretation" the Agency makes within its legal powers. It also mandates that CLEA:

Conduct thorough cost-benefit analyses of regulations it is considering adopting.

Give up the authority to prevent consumers from using financial products and services it deems "unfair, deceptive, or abusive."

Cannot unilaterally broaden its powers without authorization from Congress.

The CHOICE Act's authors maintained that the CFPB has neglected to clearly define what "unfair, deceptive, and abusive acts or practices" (UDAAP) really are. The argument stands that, as financial institutions (FIs) have no clear, accurate idea of what an UDAAP is, many refrain from offering services to lower-income individuals and developing innovative financial products. 

Read more at MICROBILT

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION 

 
ASSOCIATION WEBSITE     SUPPLIER DIRECTORY      ADVERTISE 

FOR SALE BY OWNER

AFSPA helps our members grow their Alternative Financial Services business by providing them with the best information, research, data, support, relationships and by vetting and presenting the best available product and service providers for the Alternative Financial Services Industry.