NEWS: Congress Moves on Financial Reform Bills

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: September 12

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Fix Payday Loans with More Competition

Last week, I wrote about the devastating impact that the Consumer Financial Protection Bureau's (CFPB) new regulation on short-term, small-dollar loans could have upon consumers and businesses. The rule looks to prevent consumers from "rolling over" their loans, that is, remaining in debt for an extended period of time.

To recap, the rule would be absolutely devastating to the industry and the vulnerable consumers it serves, potentially wiping out 75 percent of the 20,000 payday loan shops across the country. There are around 12 million Americans who use payday loans each year. It is naive to think that when this legitimate option disappears, that they will not be driven to more harmful practices, like defaulting on loans or borrowing from illegal loan sharks.

Eliminating the already limited choices of vulnerable consumers will do more harm than good. There are multiple surveys confirming that the users of payday loans widely approve of the option. But this isn't to say that payday loans are an ideal form of financing. They are indeed high-fee, high-risk loans that one would rather not pursue. But simply regulating them out of existence does nothing to solve this problem. So how can we improve them?

Instead of issuing a rule that takes away options from consumers, we should be providing them with more. A lack of alternative choices is what drives most people to payday loans to start with. Increasing competition will drive down costs and foster better industry practices and innovation.

For starters, we could let banks and credit unions back into the market. Two bank regulators, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, imposed tough loan standards during President Obama's term, leaving many formal institutions to flee the market.

It is evident they want back in. Earlier this year, The Wall Street Journal reported: "Financial firms, spurred by the Trump administration's promises to deregulate, hope to return to offering short-term, high-interest loans after being pushed out of the sector by Obama-era rules."

Read more at FORBES

Congress Moves on Financial Reform Bills

Last week, the House Financial Services Committee held a hearing on a range of financial regulatory bills that Congress will consider this session. The bills represent needed reforms that would provide relief to a sputtering economic recovery.

Nearly a decade on from the 2007-08 financial crisis, it is clear that the federal regulatory regime is not working. The Dodd-Frank Act, with a fixation on financial stability at any cost, has led to the slowest economic recovery in modern American history and, ironically, an inherently unsound financial sector.

The U.S. economy relies on a smoothly functioning financial system to facilitate economic growth after a downturn. While Wall Street grabs much of the attention, the real driver of American industry is small- and medium-sized banks that finance local businesses. Sadly, post-crisis regulations have made this kind of lending increasingly difficult. As U.S. Chamber of Commerce Vice President Thomas Quaadman noted in his testimony, small commercial and industrial loans have risen a mere 0.188% from their 2008 lows. This is overwhelmingly due to the burden of new regulations that Dodd-Frank imposed.

One of the main culprits for the increased burden is the designation of medium-sized banks, such as First Horizon National Corporation-whose Executive Vice President, Charles Tuggle, also testified before the Committee-as Systemically Important Financial Institutions (SIFIs). Currently, banks with $50 billion in assets are designated as SIFIs and are subject to a swath of enhanced prudential and supervisory standards. This asset threshold is a completely arbitrary standard, which places no focus on whether an institution is actually a systemic risk, or if its activities warrant heightened regulation. Undoubtedly, compliance costs have increased as a result, leaving firms to focus less on servicing their customers.

Fortunately, there is a legislative solution. A bill sponsored by Rep. Blaine Luetkemeyer (R-MO), the Systemic Risk Designation Improvement Act, addresses many of the concerns of SIFI designations. Instead of an arbitrary asset threshold, the bill directs the Federal Reserve to look at interconnectedness, cross-border activities, and complexity when assessing their regulatory requirements. Subjecting medium-sized regional banks that predominately take deposits and have limited exposure to derivatives or trading to the same standards as large, complex, globally connected financial institutions makes little sense. First Horizon's Tuggle also stressed this point: "By any objective measure, most banks designated today as being 'systemically important' in reality pose no systemic risk at all, either domestically or globally." Piling on a mountain of new regulation is a bad idea, but at the very least, it should be tailored to address the institutions it is intended to influence. Read more at CEI.ORG

5 things to do right now if you're worried about the Equifax hack

Let's face it. There's a good chance your personal information was exposed during the Equifax data breach.

The names, Social Security numbers, birth dates, addresses, and driver's license numbers for 143 million people may have been accessed. That kind of information could be used by someone else to open bank accounts, credit cards and loans in your name.

The credit card numbers of an additional 209,000 people were also accessed. Those people will be notified directly. Everyone else must go to a website created by Equifax and submit their last name and last six digits of their Social Security number to find out if they were affected.

If you're concerned about whether your information has landed in the hands of hackers, here are five things you can do right now:

1. Check your free credit reports

Under federal law you are allowed to request a free copy of your credit report once a year from each of the three credit reporting agencies: Equifax, Experian, and TransUnion. You can request a copy of your credit report online at www.annualcreditreport.com.

It will tell you if anyone has requested a check on your credit. This happens, for example, if someone tries to open a new credit card or apply for a loan in your name.

But it could take time to show up on your report, so you won't necessarily see any changes right away. Read more at CNN MONEY

Embattled CFPB chief Richard Cordray vows to make sure "people are treated fairly"

WASHINGTON -- "Let the buyer beware" is usually good advice.

Even so, it helps if the consumer has someone watching his or her back.

CBS News correspondent Erin Moriarty has been talking to the embattled head of the federal agency that's trying to do just that.

Richard Cordray has been called one of the most powerful men in Washington. And that comes with a price.

"What I feel is that we need an independent consumer watchdog," Cordray said. "You have regular people who have problems with big financial companies. How do they get relief? And you need somebody who's gonna stand on their side and level the playing field for them."

Cordray is a former attorney general of Ohio, a University of Chicago-educated lawyer, and thanks to an exceptional gift of recall, he's a five-time Jeopardy winner. But he raised the hackles of some in Washington when President Barack Obama appointed him director of the Consumer Financial Protection Bureau (CFPB).

He's been rebuked, criticized and insulted on Capitol Hill.

"I've been given a job to do," Cordray said. "It's a great job. It's a great way to serve my country. We're trying to improve the consumer financial marketplace one American at a time."

Read more at CBS NEWS

What CFSA Members Need to Know About the CFPB's Final Arbitration Rule

Hosted by Ballard Spahr LLP

Please join CFSA and Ballard Spahr for a complimentary webinar series to be held

throughout 2017. During this third webinar in a four-part series, we will discuss the

CFPB's proposed arbitration rules.

Overview

In 2011, the U.S. Supreme Court upheld the use of class action waivers in consumer arbitration agreements. Nevertheless, the CFPB has issued proposed rules that would prohibit the use of such waivers. This is a watershed event in the history of consumer arbitration. Please join us for a discussion of what the CFPB is proposing and how it could affect CFSA members and others in the payday loan industry.

Topics

The background of the CFPB's arbitration rulemaking;
The CFPB's proposed rules on consumer arbitration agreements;
Whether CFSA members will be covered by the proposed rules;
When the proposed rules might become effective;
Whether existing arbitration agreements will be grandfathered;
Whether arbitration agreements should continue to be used for individual arbitrations;
Possible legal and political challenges to the rules;
What CFSA members can do now to maximize the utility of your class action waiver;
What CFSA members should do now if you don't have a class action waiver; and
Alternative methods of reducing class action exposure.

Tuesday, October 3, 2017 | 12:00PM - 1:00PM ET

Moderators:

Dennis Shaul, CEO CFSA

Kim Phan, Ballard Spahr

Speakers:

Alan S. Kaplinsky, Ballard Spahr

Mark J. Levin, Consumer Financial Services Litigation

This program is open to CFSA Members, Ballard Spahr clients, prospective clients,

and members of the financial services industry.

There is no cost to attend.

This program is not eligible for CLE credits.

Please register at least two days before the webinar. Login details will be sent to all approved registrants. For more information, contact Daniel Martin at martind@ballardspahr.com

ABOUT BALLARD SPAHR

Ballard Spahr LLP, an Am Law 100 law firm with more than 500 lawyers in 13 offices in the United States, provides a range of services in litigation, business and finance, real estate, intellectual property, and public finance. Our clients include Fortune 500 companies, financial institutions, life sciences and technology companies, health systems, investors and developers, government agencies and sponsored enterprises, educational institutions, and nonprofit organizations. The firm combines a national scope of practice with strong regional market knowledge. For more information, www.ballardspahr.com

FACTORTRUST GOES EXTRA MILE IN ENSURING UTMOST SECURITY FOR

CONSUMER DATA

Security and privacy are at the heart of any credit bureau. Safeguarding the data of 275 million transaction records per year cannot be done as an afterthought.

In a proactive effort to secure sensitive information, FactorTrust has recently undergone the rigorous process of ensuring the critical systems responsible for storing, processing and transmitting all sensitive data is payment card industry (PCI) compliant. PCI is an industry standard for service providers and merchants to make sure that cardholder data is protected when stored and transmitted. Although the standard is primarily developed to protect card holder data, FactorTrust Office of Information Security decided to extend the scope of implementing PCI controls to safeguard non-public information (NPI) and personally identifiable information (PII). Protecting NPI and PII using more stringent security controls throughout the organization is critical to support the FactorTrust's mission objectives. While some of our competitors may only comply with vague regulatory requirements, FactorTrust exceeds such minimal levels by implementing stringent control standards to protect consumer data. FactorTrust customers can conduct business in a secure manner knowing proper safeguards are in place to protect sensitive data.

Victor Gamra, FactorTrust's director of information security & IT compliance, provided details on why FactorTrust took this extra step in security:

THE FACTORTRUST INFORMATION SECURITY PROGRAM WAS DEVELOPED SPECIFICALLY TO ENSURE THE BEST SECURITY CONTROLS ARE IMPLEMENTED TO PROTECT ALL SENSITIVE DATA TRANSMITTED, PROCESSED AND STORED THROUGHOUT OUR MAJOR APPLICATIONS AND UNDERLYING INFRASTRUCTURE. OUR ARCHITECTURE IS DESIGNED TO PREVENT AND DETECT THREATS FROM IMPACTING OUR BUSINESS OPERATIONS.

With redundant systems across collocated datacenters, FactorTrust maintains consistent availability of services. The FactorTrust information security & IT compliance program addresses the requirements of various security standards, including: SOC2, PCI-DSS and OWASP Application Security Verification Standard. Read more at FACTORTRUST

How Employers Are Helping Their Employees Retire

Employers are becoming increasingly concerned about the financial well-being of their employees, and they are expanding how they demonstrate their loyalty. Employers large and small are offering programs such as robust health insurance plans, on-site daycare, after school care, flexible work hours, Health Savings Accounts (HSA's), and the ability to work remotely. Some companies also provide on-site amenities such as workout facilities and yoga classes while others reimburse health club dues, and employ nutritionists and personal trainers.

As it relates to financial wellness, employers are also taking an active role to help employees reach their long-term financial goals. In 2016, according to the National Compensation Survey conducted by the Bureau of Labor Statistics, the percentage of private-sector workers who had access to a defined contribution plan such as a 401(k) or a defined benefit pension plan was 66%.

In addition to simply offering a defined contribution retirement plan, employers are embracing the ability to automatically enroll workers in their 401(k) plans. This is known as automatic enrollment, or automatic contribution arrangement. This allows for eligible employees in 401(k), 403(b) and 457(b) plans, SARSEPs and Simple IRA plans to have a percentage of their wages automatically directed into their company's retirement plan without the participant's explicit authorization.