ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

Court dismisses claims against investors for funding alleged "Rent A Bank" arrangement, but "Rent A Tribe" claims remain

The United States District Court for the Eastern District of Pennsylvania partially granted a motion to dismiss brought by investors in a consumer loan program for their alleged participation in a "rent-a-bank" scheme.

The loan program involved high-rate loans to consumers made over the internet. The Pennsylvania Attorney General (AG) brought suit against the lenders, loan servicers, investors and others.

The AG alleged that the defendants partnered with an out-of-state bank and later Native American tribes in what the court stated is "colloquially known as 'rent-a-bank' and 'rent-a-tribe.'" According to the complaint, the investors made an initial funding commitment in exchange for a fixed return on investment, which was later renamed a "participation interest." According to the complaint, the investors actively participated in the design and direction of the loan program with the tribal entities and determined the volume of lending by the tribal entities based on the investors' assessment of their own risk tolerance. The AG claimed that the investors were liable under the Pennsylvania Corrupt Organizations Act for their conduct relating to the loan program and actions to circumvent the Pennsylvania usury laws applicable to loans made to Pennsylvania residents. The Corrupt Organizations Act provides, in part, that it is unlawful for any person employed by or associated with any enterprise to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. Read more at DREHER TOMKIES LLP

FLORIDA: Payday lenders a step closer to longer loans

A controversial proposal that would revamp regulations for payday lenders continued moving through the House on Tuesday.

The House Government Operations & Technology Appropriations Subcommittee approved the bill (HB 857), which would allow payday lenders to provide longer-term loans for larger sums of money than under current law.

The bill would allow loans up to $1,000, with repayment over 60 to 90 days. Current law limits the loans to $500 for periods of seven to 31 days.

The bill has drawn opposition from groups that contend it could hurt low-income consumers who borrow money from the businesses.

"Do not foist on them a higher-cost product than they have now," Alice Vickers, an attorney for the Florida Alliance for Consumer Protection, told the panel Tuesday.

But backers say payday loans can play an important role for many low-income people who do not have access to other types of loans.

"We are allowing an entity to provide a product," Rep. Sean Shaw, D-Tampa, said. "That is not exploitation."

Supporters also say the measure is needed because of federal regulations proposed to take effect in August 2019 on the types of smaller-dollar, shorter-term loans made by payday lenders in Florida. Read more at ORLANDO SENTINEL

The ARM Industry Outlook for 2018. by MicroBilt NEWS

Gordon Beck, the chief executive of Diversified Consultants, Inc. (DCI), has a bold prediction for the ARM industry for 2018. Speaking on a webinar last week which was sponsored by Microbilt, Beck said that 2018 will be the ARM's industry's "best year in a decade."

To support his prediction, Beck pointed to growing consumer confidence which is presenting an opportunity to collect more money. As well, the delays and issues that impacted refund returns during last year's tax season will not happen again and as people are looking to "rebuild their credit," they will pay their bills, Beck said.

The objective of the webinar was to provide an in-depth outlook at what 2018 has in store for the ARM industry.

The big question for the industry is how the changes in leadership at the Consumer Financial Protection Bureau will impact the ARM industry. A new director could impact the ARM industry in a number of ways. The CFPB has been working on a rule for the debt collection industry for nearly four years, and that rule may be in jeopardy under a new director. A new director may also choose to make changes to enforcement prerogatives that could mean fewer investigations and enforcement actions against collection agencies. And if the CFPB does decide not to move forward with a rule or does take fewer enforcement actions, then many in the industry expect state attorneys general and state regulators to increase their regulatory oversight over collection agencies. There are a lot of potential dominoes that could fall, depending on who is nominated to be the next director of the CFPB.

"I do not believe that the bureau will propose a debt collection rule in 2018," said David Cherner, a lawyer with the firm of Moss & Barnett. That being said, "I think that the value of a rule outweighs the value of not having a rule." Read more at MICROBILT NEWS

House of Representatives Passed MOBILE Act. by Kilpatrick Townsend & Stockton LLP

On January 29, 2018, the U.S. House of Representatives passed H.R. 1457, the Making Online Banking Initiation Legal and Easy (MOBILE) Act of 2017, in an overwhelming 397-8 vote. The bipartisan legislation, which provides opportunities for consumers to open bank accounts without having to visit a physical branch, was introduced by Representatives Scott Tipton (R-CO), Randy Hultgren (R-IL), Patrick McHenry (R-NC), David Scott (D-GA), Terri Sewell (D-AL), and Krysten Sinema (D-AZ).

Currently, banks face difficulty implementing verification processes for online and mobile banking accounts due to inconsistent state laws on swiping or copying state-issued identification cards. While most states permit mobile banking applications to copy licenses for verifying a customer's identification, a small number do not and the House bill would preempt the conflicting state laws. The MOBILE Act would streamline the process for consumers wishing to open bank accounts electronically and ensure consumers are protected by the participating bank's identity theft and financial fraud policies. The bill would permit financial institutions to use electronic copies of identification for purpose of identity verification. Specifically, the MOBILE Act would allow financial institutions, with an individual's consent, to record personal information from a scan, copy or image of a driver's license or other personal identification card. Read more at LEXOLOGY

Will Republicans be able to dismantle the Consumer Financial Protection Bureau?

Since November, the Trump administration has taken steps to overhaul the Consumer Financial Protection Bureau (CFPB) - the Obama-era consumer watchdog agency that Democrats created after the global financial crisis to monitor American consumers' financial interests.

Based largely on a proposal from then-Harvard law professor (and now U.S. senator from Massachusetts) Elizabeth Warren, the CFPB acted aggressively in its first five years. It handled nearly 1 million consumer complaints, its enforcement actions returned nearly $12 billion dollars to 27 million consumers, and it put into place a bevy of new financial regulations. Sen. Richard J. Durbin (D-Ill.) recently quipped that Wall Street hates the CFPB "like the devil hates holy water."

But Republicans are now attacking the CFPB. Will they succeed in dismantling it from the inside? How durable will their efforts be? Here are four keys to understanding what is happening at the CFPB. Read more at THE WASHINGTON POST

Why Adding Visibility to Customer Repayments Matters. by Noah Fitzgerald, CPP

Businesses that extend credit or terms to their customers take on an inherent risk. You provide a service, loan, product or goods without getting partial or complete payment at time of delivery with the expectation that the customer will pay you on time in the future. The reality is, when a business extends credit to a consumer they are investing in that consumer's ability to repay for the service or product they received.

This model of extending credit has been around for years, but over the past decade the rate of repayment defaults has climbed sharply. Today, the average repayment default on a payday loan is over 20%, 50% on high interest online installment loans, upwards of 33% on vehicle title loans, and 12% on high risk vehicle loans. These payment defaults not only cost the business loss of revenue and operational expenses, but have significant impacts to the consumer. In a recent study performed by the CFPB, the average default customer incurs total fees of over $185 in bank penalties, of which 36% have their bank accounts closed by the depository institution. In these scenarios, both the customer and the business lose. The customer loses their access to banking services while the business loses their principal and interest revenue with no ability to collect.

Read more at MERCHANT BOOST

Mick Mulvaney: I'm not 'gutting' CFPB

Yes, I mean to change the bureau. This shouldn't surprise anyone: Opposing view

The accusation that I am "gutting" the Consumer Financial Protection Bureau (CFPB) is not new. It fits a certain narrative - pushed by people who cannot accept the fact that Donald Trump is president. There is a problem with the claim, however: It is just flatly wrong.

Yes, I mean to change the bureau. This shouldn't surprise anyone. That's exactly what happens to every agency when a new administration appoints new leadership. And we're looking for a lighter regulatory hand: bringing common sense and balance to government regulation is a central tenet of this administration.

Toward that end, I changed the internal structure of our fair lending enforcement and supervision functions. I did that in order to have only one office, not two, that handles enforcement, and only one, not two, that handles supervision.

I also decided to reconsider rules on payday lending. Going unreported: State regulators told the bureau years ago that such rules were unnecessary, as many states had already regulated those businesses.

And in a move that is unprecedented in Washington, I asked for zero dollars to fund our operations. I did that because the bureau had an unnecessary $177 million "reserve fund." Put another way: We didn't need the money. Read more at USA TODAY

6 steps to protect your business from ID theft

For the self-employed and owners of small businesses, whose time and energies are devoted to growing the company, data security often falls in priority.

It shouldn't. Protecting your business and your clients' financial data is critical to averting the kind of disaster that could tank your business dreams.

The dangers are real. According to the IRS, business identity theft cases have increased from around 350 in 2015 to about 10,000 cases in 2017, potentially costing $137 million total.

"Fraudsters are stealing as much as $1 billion a year from small and mid-sized businesses in North America and Europe, and the numbers are only going to increase," says Mike Gross, director of product innovation for global fraud and identity at credit reporting giant Experian. "Because the largest institutions have sophisticated fraud prevention solutions in place, the latest fraud attacks are looking to exploit the next tiers of businesses that are typically not as well defended."

Soloists, freelancers and businesses with few employees often have scarce resources available for ID theft prevention. But there are still a number of practical, affordable steps you can take to make it tougher for criminals to steal your valuable information. Read more at CREDITCARDS.COM

Majority of banks, credit unions offer mobile banking services, survey finds

According to a new survey from the Federal Reserve, 89 percent of banks and credit unions already offer mobile banking services to their customers.

The report, the 2016 Mobile Financial Services Survey, also learned that 97 percent of financial institutions plan to offer mobile banking services by the end of this year.

Further, the survey, done by the Federal Reserve Bank of Boston, also revealed that more credit unions market mobile banking services to underbanked consumers than banks. Specifically, about one-third of credit unions market mobile banking services to underbanked consumers, with an additional 25 percent planning to market the services in the next two years. Only 22 percent of banks, however, currently market the services, with about the same amount planning to within two years.

The survey also found that 53 percent of credit unions offer mobile credit card account services compared to only 12 percent of banks.

Of the 706 institutions that participated in the survey, 186 were credit unions.

Among other findings, only 24 percent currently offer mobile payments, which allow the use of mobile phone to pay for goods. However, an additional 40 percent plan to offer mobile payments by 2018.

Finally, to protect consumers' information, more than 80 percent said their mobile banking platform has inactivity timeouts, multi-factor authentication, and mobile alerts.

Read at FINANCIAL REGULATION NEWS

Talk centers on Mick Mulvaney if chief of staff John Kelly leaves

Washington (CNN)Mick Mulvaney, President Donald Trump's chief budget officer, is in the spotlight this week as staffers consider what might happen if White House chief of staff John Kelly leaves in the wake of the Rob Porter scandal.

Conversations have been going on all week long among White House staffers as to what a "post-Kelly world looks like," a source familiar with these discussions said. And "the conversation keeps coming back to Mulvaney."

Trump also has been quizzing those around him about their opinion of Mulvaney in recent weeks, aides and associates tell CNN.

This source noted that these conversations were "hot" earlier this week at the height of the Porter fiasco, but that they seem to have cooled down -- at least for the moment. One reason why Mulvaney talk is on the rise, this source said, is he "doesn't have any enemies" inside the West Wing.

Mulvaney, a fiscal conservative, has led the Trump's Office of Management and Budget and Consumer Financial Protection Bureau.

A source close to Mulvaney confirms that discussions are "ongoing" and that the OMB director is aware that the President would like him to potentially be chief of staff.

Read more at CNN POLITICS

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