ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: June 20

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FactorTrust

U.S. Consumer Financial Watchdog Accuses Congressional Critics of 'Misstatements'

WASHINGTON - The head of the U.S. Consumer Financial Protection Bureau accused congressional critics of relying on "misstatements" to criticize his agency, which was set up under former President Barack Obama to pursue bad behavior by financial institutions.

Richard Cordray, the bureau's director, wrote to "correct the record" in a letter sent to a congressional panel on Wednesday regarding a recent report critical of the CFPB's work in a high-profile scandal.

The five-page letter took issue with multiple conclusions reached in a report released earlier this month by Republican staff on the House Financial Services Committee.

Some members of the committee have pushed for Republican President Donald Trump to fire Cordray, who has headed the agency since he was appointed by Obama, a Democrat, in 2012.

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The report said the CFPB had been an ineffective watchdog against Wells Fargo & Co, missing extensive improper sales practices and taking action only after work on the bank's unauthorized accounts scandal had been done by others.

The committee's report also depicted the CFPB as reluctant to cooperate with the panel's Well Fargo probe.

Cordray insisted that his agency had done critical work in policing Wells Fargo, and said the report "devolves into various misstatements and allegations" about the CFPB's work.

MicroBilt

The CFPB Is Hurting Consumers And It Needs To Be Reformed

The American people delivered a message to Washington in November: stop the federal overreach, change course and get the government off of our backs. For the millions of American consumers, small business owners and employees who rely on our financial system each and every day, the over-regulation from Washington has meant increased fees, fewer services and diminished access to credit. It's had a chilling effect on our economy and held back growth, wages and opportunity. And the root cause is Dodd-Frank and the Consumer Financial Protection Bureau that it created.

The CFPB is an agency of the executive branch that has been burying consumers and our economy under an avalanche of regulations. Many of these misdirected guidelines are drawn up by disconnected bureaucrats under the influence of flawed statistics and without a clear understanding of their impact on the consumers they aim to protect. It is important to protect consumers from any discriminatory practice. Yet, in doing so, we must be cautious that the cure is not worse than the disease. Yes, there are bad actors out there and we should hold them accountable to the consumer protection laws enacted by Congress. However, the CFPB, as currently structured, goes far beyond this task.

As a former bank examiner, small town banker, member of the House Financial Services Committee and Chairman of its Subcommittee on Financial Institutions and Consumer Credit, I can tell you that the CFPB in its current form is without question harming consumers. When you consider its structure, it's not hard to see why.

The CFPB is an agency unlike any other in American history. It has a single, unaccountable director. It draws unlimited funds from the Federal Reserve, outside of the purview of Congress. And the CFPB makes law through its own enforcement of the rules that it promulgates. A federal court even found its structure to be unconstitutional, and it is the subject of ongoing litigation.

Insight.tm

Gov. Abbott Vetoes RTO "Kiosk" Bill

Overregulation of retailers and consumers cited as reason for veto

(June 16, 2017) Yesterday, Gov. Greg Abbott vetoed HB 1859, the so-called RTO "Kiosk" bill. The bill was one of only 50 to be vetoed by the Governor out of 1500+ bills passed in the regular session that ended May 29.

In his veto proclamation, which is required by law to be issued when a bill is being vetoed, Gov. Abbott stated the following:

House Bill 1859 overregulates both retailers and their customers. It would require retail stores to impose elaborate and duplicative paperwork on customers who are interested in rent-to-own agreements. The bill also favors some retailers over others. Its burdensome new requirements would apply only to stores that do not specialize in rent-to-own agreements.

TARA (Texas Association of Rental Agencies) supported the bill during the regular session, which sought to amend the Texas Rental-Purchase Agreement Act by establishing new disclosure provisions for rent-to-own transactions conducted within retail stores. The measure is not expected to become a part of the special session of the Legislature that begins July 18 in Austin.

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Settlement shuts down payday lender, cuts fine nearly in half

All American Check Cashing owner Michael Gray has settled with state banking regulators after years of failed legal appeals over charges his dozens of payday lending stores used illegal loan rollovers to trap borrowers in a cycle of debt.

In exchange for Gray dropping further appeals of a license revocation order and civil penalties from the Mississippi Department of Banking and Consumer Finance, the state cut a $1.6 million fine by nearly half. With the settlement, Gray gives up his licenses to operate his 75 payday lending stores across the state, refunds $135,000 to 703 victimized borrowers and pays $889,350 in civil fines.

Regulators calculated the civil penalty based on $275 for each of the 3,234 loan rollover violations investigators uncovered in a probe that began in June 2014, according to the settlement order filed with Hinds Chancery Court.

The Banking Department's original order issued in January 2015 specified a $3 million fine.

Payday lenders make loans to borrowers who have a source of regular income. The borrower leaves the lender a post-dated check for which the lender can seek payment if the loan is not repaid within a specified time.

Regulators say their lengthy investigation found that Madison-based All American initiated a companywide scheme in which borrowers were encouraged to pay only the fees on their payday loans and get a new loan to replace the former one. This practice, regulators say, led to higher and higher debt for the borrowers and violated Mississippi's ban on rollovers of the low-dollar short term loans. Read more at MISSISSIPPI BUSINESS

Dreher Tomkies LLP

Banks Call for Looser Payday Lending Rules

U.S. banks eager for a larger share of the payday lending market are pushing for measures that would allow them to issue more of the short-term, high-interest loans.

The American Bankers Association and the Consumer Bankers Association pitched several steps to U.S. Treasury Secretary Steven Mnuchin that would allow banks to offer payday loans more easily, The Wall Street Journal reports. The trade groups say they want a significant part of the 2013 rules that forced them out of the market to be scrapped, and they do not want the Consumer Financial Protection Bureau to initiate the restrictive new rules on payday lending that it proposed last year. (See also: How New Bank Rules will Buoy Bank Stocks.)

"We feel very strongly that we want to serve all our customer segments," said Mark Erhart, senior vice president of retail product management for Fifth Third Bancorp.

Payday loans are often viewed as predatory in that they demand a high fee for loans usually made to consumers living on a paycheck-to-paycheck basis. Nearly 12 million Americans take out payday loans each year and spend about $9 billion in fees, according to the Pew Charitable Trusts data. The average payday lender is in debt for five months of the year, and they spend $520 on average in fees to borrow $375.

Large banks like Fifth Third, Wells Fargo & Co., Regions Financial Corp. and U.S. Bancorp say they can find profitability in offering payday loans, also called deposit advance loans, more affordably to consumers if they can do it on a large scale. Other banks argue the loans are costly because they are issued in small amounts. (See also: A Split Outlook for Bank ETFs.)

"The biggest hurdle to community banks making more small-dollar loans is cost," Joseph Gormley, assistant vice president with Independent Community Bankers of America, told the Journal. "More or less, it costs them the same amount to make a $500 loan as it does a $20,000 loan."

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Americans are suddenly defaulting on their credit cards

The American economy has looked pretty robust of late - unemployment just hit a 16-year low and stocks recently reached an all-time high.

This makes it all the more curious that Americans have suddenly stopped paying off their credit card bills at a rapid rate.

In the last two fiscal quarters, banks reported a steep rise in credit card charge-offs - debt that companies can't collect from their customers - according to a report from Moody's.

This chart from the report shows how each bank has fared on charge-offs, with Capital One, First National of Nebraska, and Synchrony showing the worst performance over the period:

The sharp increase, the largest since 2009, is especially unusual given how strong the US employment market has been, Moody's noted. It suggests that American consumers haven't fallen onto hard times so much as banks have started to loosen their standards and issue credit more aggressively.

Card issuers have been much stricter since the financial crisis and the passage of the CARD Act in 2009, which added an array of protections for consumers. Getting a credit card got a lot tougher, especially if you had sub-prime credit.

Charge-offs and unemployment tend to be related: When people lose their jobs, credit cards tend to be one of the first bills people stop paying, as compared to a home or auto loan where people risk losing those crucial assets. Read more at MSN MONEY

Incite Business

Judge bounces USAA negligence suit vs payday lender over multi-million-dollar check-cashing fraud

CHICAGO - A federal judge has dismissed a suit by USAA against an Illinois payday loan service alleging that it was responsible for over $3 million USAA lost in a fraudulent check-cashing scheme by third parties.

USAA Federal Savings filed a lawsuit in 2016 against PLS Financial Services Inc. claiming the company was negligent in protecting its bank members' financial and personal information. As a result, its system was vulnerable to third parties creating fraudulent checks with the stolen information. USAA argued PLS was in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA).

USAA is headquartered in Illinois, providing financial services to U.S. military personnel and veterans. PLS offers check cashing and payday lending at around 300 retailers across the nation, including Illinois.

In October 2012, the federal government and PLS settled a case after PLS was accused of not properly protecting its customers' personal information. In the settlement, PLS agreed to develop a better security system and be more diligent in protecting customer information.

However, security issues continued for PLS, USAA said. It was revealed not long after that settlement that a PLS employee was providing third parties access to its computer systems. Those third parties were creating counterfeit checks with the information available to them, assisted by the employee. USAA alleged it cashed more than 2,000 counterfeit checks cashed, costing USAA more than $3 million. Read more at COOK COUNTY RECORD

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