May 15, 2018

by Dennis Shaul, CEO of CFSA

National Consumer Protection Week gives us an important opportunity to reflect on whether we are truly listening to the wants and needs of American consumers.

The federal government and the entire financial services industry have a duty to help Americans understand their consumer rights so they can make well-informed decisions with their money - but it is unclear how often this is happening. To genuinely help consumers, recognition of the fundamental issues they face in their financial lives is essential.

Contrary to what many may believe, not every American has a bank account or credit card to cover financial gaps. For instance, according to a 2017 Federal Reserve study, more than 40 percent of Americans say they could not cover an emergency expense costing $400. In fact, there is a segment of the consumer population that is left out of the financial services sector altogether. Federal Deposit Insurance Corp. data show that more than 30 million U.S. households are unbanked or underbanked. Understanding how to help these individuals in managing their financial needs is a significant task.

Unfortunately, Washington has failed these consumers. As certain policymakers in our nation's capital seek to create new consumer protection regulations, they have not spent the needed time and effort to listen to consumers' financial needs and realities.     Read more at CFSA


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Don't gut proposed Ohio payday lending reforms: Editorial

Members of the Ohio House face a pivotal decision. They can side with the people who sent them to Columbus by passing the payday loan reforms in House Bill 123.

Or they can side with relentless Statehouse lobbyists for payday lenders -- lenders who for more than nine years have defied voters by charging borrowers unconscionable rates of interest; who, until mid-April, successfully kept HB 123 from moving out of committee; and who can be counted on to lobby intensively now to get legislators to water it down on the House floor.

HB 123 was introduced in March 2017, nearly a decade after Ohio voters, by more than a 63 percent margin, capped the annual percentage rate on payday loans at 28 percent. Payday lenders promptly found loopholes that the Ohio legislature refused to close. Result: Ohio saw highest-in-the nation interest rates, averaging 591 percent, as calculated by the Pew Charitable Trusts in 2016.

The reform plan Springfield Republican Kyle Koehler and Toledo Democrat Michael Ashford offered last year was a good compromise -- that languished for more than a year, until April 19, 2018, when the House Government Accountability and Oversight Committee finally approved it on a 9-1 vote. Read more at CLEVELAND.COM

Dreher Tomkies LLP
Providing Auto Dealers with a Financial Backstop

Auto dealers face unique challenges when it comes to managing their receivables portfolios. Any dealer that also offers direct financing options, faces even more complications and uncertainty when it comes to collecting the money due to them. Most auto financing companies reduce their risk of lending by requiring that the dealerships repurchase any loans that are deemed uncollectible which means the buck stops with the dealership.

With all these risks, dealerships need a reliable financial backstop to purchase these troubled accounts or to help them through the recovery process in a way that maximizes recoveries while minimizing compliance risks associated with consumer debt collection.

To Sell or To Collect, That is the Question

When dealerships have outstanding balances due, they need to decide what method is best for their business. Do they want to sell the account at a discount to create immediate cash flow, or do they want to hold out in hopes of collecting the full amount through the repossession and remarketing of the securitized vehicle? Both options have benefits and risks, but it is up to each individual to weigh the options.

Selling Delinquent and Charged-Off Accounts.    Read more at NATIONAL DEBT HOLDINGS

Employment Skip Tracing
New Payday Loan Option in Louisiana Fails in House Committee

State lawmakers have spurned an effort to establish new payday loan options in Louisiana.

BATON ROUGE, La. (AP) - State lawmakers have spurned an effort to establish new payday loan options in Louisiana.

The House commerce committee voted 9-7 against the bill Wednesday, as lawmakers disagreed on the best way to serve consumers while protecting them from crippling debt and predatory lending.

Sen. Rick Ward, a Port Allen Republican, proposed to create a new product offering loans between $500 and $875 with three- to 12-month terms. The state's current payday loan system allows lenders to offer a maximum of $350 for up to 30 days. The measure also would allow consumers to take out only one short-term loan at a time, cap loan payments at 20 percent of gross monthly income and have a maximum annual percentage rate of 167 percent.

The Advocate reports supporters called it a "consumer-friendly" option to help people with desperate financial needs. Opponents worried about worsening people's financial situations.

National Debt Holdings
Payday lending 'reform' in Ohio will just dry up these needed loans: Norbert Michel (Opinion)

WASHINGTON, D.C. -- For the last few years, Pew Charitable Trusts -- an advocacy group, not to be confused with the Pew Research Center -- has orchestrated a campaign to quash the payday lending industry. Their playbook closely aligns with that of the Center for Responsible Lending and the federal Consumer Financial Protection Bureau.

The approach is simple: Spread misleading information; scare everyone; and use the government to micromanage people's lives.

Just last month, Pew praised Ohio legislators for passing a new bill (House Bill 123) out of committee.

Pew called it "a long overdue step toward reforming the state's payday loan industry." But what the bill actually does is make it virtually impossible to make short-term loans.

How restrictive is the bill? It places arbitrary limits on the loan period, the dollar amount of loans, the interest rate charged on the loan, and the manner in which interest is calculated.

All of these mechanisms will make it extraordinarily difficult for millions of Ohioans to get what they clearly want: small loans to tide them over for a few weeks. Read more at CLEVELAND.COM

Consumer lending in a gig economy. by Walt Wojciechowski

The gig economy is in full swing as people move to jobs sourced through mobile app platforms like Uber, TaskRabbit or PostMates. With these nontraditional jobs becoming more prevalent, it's important that companies providing credit or consumer lending have the tools at their disposal to adequately analyze the risks associated with gig workers' ability to pay rent.

While the individuals working these new types of jobs maintain electronic records of work on their phone, the nature of the work, with its set-your-own-hours scheduling, can make it difficult for applicants to provide sufficient and adequate information for work history.

However, the number of people using these apps as a source of income continues to rise. As more people join the gig economy, consumer lenders need the tools to accurately collect credit data on these individuals.

How many people are working in the gig economy?
The last time the U.S. Bureau of Labor Statistics collected data on the gig economy was 2005. At the time, the contingent labor force represented approximately 2-4 percent of all workers. While the BLS recently gathered more information regarding these occupations in May 2017, the data has not yet been fully analyzed or published. Read more at MICROBILT
NCUA to Propose New Payday Loan Alternative

The NCUA intends to consider adding a new option to its Payday Alternative Loan Program, according to documents filed with the Office of Management and Budget.

The agency plans to propose rules "modifying the minimum and maximum amount of the loans, eliminating the minimum membership requirement, and increasing the maximum maturity for these loans," according to its Spring regulatory agenda, released by OMB on Wednesday.

The new program would not replace the current PAL program, but would supplement it. The outline said that the agency also will solicit comments on the possibility of creating a third loan option, which would include different "fee structures, loan features, maturities, and loan amounts."

The changes would have to go through the regulatory process. The agenda states that the proposal will be released on "5/00/18."

It is unclear whether that date is merely a placeholder or if the NCUA intends to release its proposal this month. An NCUA spokesperson would not elaborate on the OMB filing.

A_S Management
Credit Card Usage at All-Time Highs, But Delinquency Rates Still Remain in Check

Q1 2018 TransUnion Industry Insights Report features latest consumer credit trends

With more than 416 million credit cards and nearly 175 million consumers with access to them, credit card usage continued its upward trajectory in Q1 2018. The latest TransUnion (NYSE: TRU) Q1 2018 Industry Insights Report, powered by PramaSM analytics and released during Card Forum 2018, features data and insights on consumer credit trends including reasons why credit cards are still performing relatively well despite the continued rise in serious delinquency rates.

TransUnion's report found that serious credit card delinquency rates per borrower (90+ DPD) increased in Q1 2018 to 1.78%, up from 1.69% in Q1 2017. The delinquency rate is now level with the 1.77% mark observed six years prior in Q1 2012, though it remains below the 10-year first quarter average of 1.91%. The average card debt per borrower also followed a similar path as delinquencies during the last year, rising 2.63% to $5,472 in Q1 2018 from $5,332 in Q1 2017.

Would flexible access to salaries help financial wellbeing?

Financial wellbeing in the workplace has quickly become one of the most discussed topics for HR departments - and it's no surprise that it has shot to the top of their agenda given that only 16% of employees say they are financially savvy and secure, according to one study by Barclays.

For employers, the fallout from financial stress within the workforce can take various shapes. From poor performance, attendance and punctuality, to strained relationships between co-workers, the effects of financial stress can cost both the employer and employee.

Positive moves are being made by HR to ensure financial wellbeing in the workforce, including the introduction of workplace pension schemes and free financial advice.
US auto loan balances reach $1.1 trillion

The total balance of outstanding auto loans in the US reached $1.1 trillion at the end of last year.

Data from Experian shows loan balances grew year-on-year just over 5%, or $57 billion, with banks now accounting for 33% of the market, while auto captives have supplied 23% of finance and credit unions 28% following their surge of double-digit growth for the past few years.

Most of the outstanding balances remain in the prime or super prime sector, which accounts for 61% of the market and most of the increase in finance, with sub-prime accounting for just under 20% of the market.

Experian analysis also reveals that 30-day delinquency rates are improving, down from 2.44% to 2.36% between Q4 2016-17.

The percentage of new cars with financing was 85.1% in Q4 2017, down slightly on the previous year, while the proportion of used cars with financing grew from 53.5% to 53.8%.

In total, around 28% of new cars are leased, compared to 4% of used cars. Leasing tends to be favoured by prime and super prime borrowers, where 34.8% take the option, compared to less than one quarter for sub-prime.

Average new car loans reached a record high of $31,099, a rise of $509, while terms stretched to 69 months for new loans, although just under one-third are between 73-84 months.
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