AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

June 5, 2018

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CFPB, Payday Lenders Seek Pause in Rule Battle

The Consumer Financial Protection Bureau and payday lending industry groups on May 31 asked for a pause in litigation aiming to overturn the bureau's rules for the industry, as the CFPB confirmed that a new proposal is coming soon.

The Community Financial Services Association of America and the Community Service Alliance of Texas signed a joint motion to stay their lawsuit over the CFPB's payday lending rule filed in the U.S. District Court for the Western District of Texas.

The parties agreed that the litigation should be put on hold until after the CFPB completes a new proposal for regulating short-term, high-interest loans. Such a proposal could be released as early as February, according to the motion.

"The rulemaking process may result in repeal or revision of the payday rule and thereby moot or otherwise resolve this litigation or require amendments to plaintiffs' complaint," the joint motion said.

Along with the stay on litigation, the CFPB and payday lending industry groups asked that any new rule not take effect until 445 days after a new final payday lending rule is released. That would give the industry time to determine whether further litigation was necessary, or to get their systems up to speed if the industry decides that a new rule, should it come, is acceptable.
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CALIFORNIA Bows to Payday Lenders on Interest Rate Caps

SACRAMENTO (CN) - Targeting minorities and veterans lacking access to fair credit, lenders pushing small loans with interest rates above 100 percent are flourishing in California.

With no law limiting or discouraging triple-digit annual percentage rate lending, the personal loan market has exploded since the Great Recession. Lenders dished out over 300,000 loans to Californians with interest rates above 100 percent in 2016, a stunning jump from just 57 in 2006.

The lending market received a boost late Thursday, as California lawmakers killed yet another attempt to cap interest rates at 36 percent on loans between $2,500 and $5,000. In a bipartisan effort, the Assembly voted down a consumer protection bill 26-29.

The Center for Responsible Lending - which sponsored Assembly Bill 2500 - said lawmakers wilted and succumbed to the financial industry's heavy lobbying.

"Assembly members just signaled to predatory lenders that it's OK to target distressed Californians into taking out abusive loans," the nonprofit's policy director Graciela Aponte-Diaz said. "People around California and across the country want protections from these loan shark products - they've made their voices heard time and time again." Read more at COURTHOUSE NEWS
CFSA
NORTH CAROLINA: Here's why fees for some NC loans might increase 200 percent

Borrowers in North Carolina could pay much more to take out certain types of loans under proposed state legislation that would raise origination and late fees.

Consumer advocates are troubled by the change, which would apply to loans that are issued by banks and savings institutions and that are not secured by real estate. It could mean higher fees on a wide range of products, from personal to auto loans, consumer advocates say.

Maximum origination fees - what lenders charge customers when they take out a loan - would rise across various tiers of loans based on their dollar value, according to a draft version of the bill. But the largest increase would be borne by borrowers taking out the smallest loans, those worth less than $20,000. Banks currently cannot charge such borrowers more than $50 to originate such loans, an amount that would triple to $150 under the proposed bill, or 200 percent.

Banks and savings institutions would also be allowed to charge higher late fees on loan payments. Current law sets a maximum fee of 4 percent of the payment due. That means if a borrower today were late on a $300 loan, a bank could not charge more than $12. But under the bill, that fee could be as high as $35. Read more at CHARLOTTE OBSERVER
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Consumer Advocates Ask Judge: Reject CFPB's Request for Payday Loan Rule Delay
On the other hand, four consumer groups have supported strict rules governing the industry

Four consumer groups are asking a federal judge to deny a request by the CFPB and a payday lending group to place a strict short-term loan rule on hold.

Public Citizen, Americans for Financial Reform Education Fund, the Center for Responsible Lending, and the National Consumer Law Center accuse the agency and the trade group of trying to end run federal laws governing how rules are supposed to be issued.

The CFPB and the Community Financial Services Association of America have asked that that the effective date of the payday lending rule be delayed until a new rule is issued or the lawsuit challenging the rule is resolved. And the groups asked that all proceedings in the lawsuit be placed on hold. In addition, they ask that if the lawsuit is revived in the future, implementation of the payday loan rule be delayed until 445 days after the final ruling.

The financial services trade group filed the suit challenging the strict payday lending rules that were issued by former CFPB Director Richard Cordray. When Cordray resigned, President Trump appointed Office of Management and Budget Director Mick Mulvaney as acting director.
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SOUTH DAKOTA: State violated payday lender's rights, judge rules

The head of the South Dakota Division of Banking exceeded his authority when he issued an order last year revoking the licenses of a payday lender, a federal judge has ruled.

Bret Afdahl revoked the licenses of several Dollar Loan Centers operating in South Dakota last year after an examination conducted by his office determined that the payday lender was violating a voter-approved initiative that capped interest on loans at 36 percent.

But U.S. District Judge Roberto Lange ruled that Afdahl exceeded his authority under state law, which deprived Dollar Loan Center of its constitutional due process protections. Afdahl has the authority to suspend a license, but his decision to revoke the licenses barred Dollar Loan Center from appealing through a neutral party.

"The division provided no notice whatsoever to DLC regarding the apparent violation of its licenses by making short term loans before the issuance of the order," Lange wrote. "While adequate notice is a flexible concept, a total absence of notice regarding one of the two primary bases for revocation of DLC's licenses does not satisfy the requirements of due process." Read more at ARGUS LEADER
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VERMONT Becomes First State To Regulate Data Brokers

Data brokers that sell personal information about residents of Vermont must register with the state, under a new law regulating the industry.

The law (H-764) -- which is the first state measure regulating data brokers -- was enacted last week without the governor's signature. In addition to the registration provision, the bill requires data brokers to notify people about security breaches, and to disclose whether they allow consumers to opt out of having their information collected, stored or sold. The measure also prohibits data brokers from charging customers to place a freeze on their accounts.

"While data brokers offer many benefits, there are also risks associated with the widespread aggregation and sale of data about consumers, including risks related to consumers' ability to know and control information held and sold about them and risks arising from the unauthorized or harmful acquisition and use of consumer information," the law states.

The measure was backed by Vermont Attorney General TJ Donovan, who stated the bill "promotes transparency" and "helps stop fraudsters." Read more at MEDIAPOST
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Financial Wellness Is a Process

Compared with new users, repeat users are 24% more apt to be on track for retirement and 21% more apt to have confidence in their investments, Financial Finesse research finds.

Employees who repeatedly engage with financial wellness programs offered by their employer are benefiting from a compounding effect, whereby gains in financial health grow over time, according to Financial Finesse's "Financial Wellness Think Tank 2017 Year in Review" research.

The firm's analysis of its business finds repeat users increased from 33% of total users in 2016 to 58% in 2017.

Repeat users of employer financial wellness programs show substantial improvements in key areas. For example, 79% of repeat users reported having a handle on their cash flow in their last assessment, compared with 69% on their first assessment. Fifty-nine percent of repeat users said they had an emergency fund to cover unexpected expenses during their last assessment, compared with 49% during their first assessment, and 43% indicated they are on track to reach their income goal in retirement at their last assessment, versus 22% at their first assessment.
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The Washington Post Reports that DOE will Stop Using ARM Companies to Recover Student Loan Debts

Article states that recovery duties will be added to workload of loan servicing companies.

The U.S. Department of Education (DOE) plans to stop using accounts receivable management companies to recover overdue student loans, according to an article published May 25 in The Washington Post .

Reporter Danielle Douglas-Gabriel cites a legal filing , in which attorneys for the department implored the U.S. Court of Federal Claims to dismiss a lawsuit filed by collection agencies vying for a federal contract.

"The attorneys say the case is no longer relevant because the Education Department is revamping the collection and resolution of overdue student debt," the article states.

Instead of contracting accounts receivable management companies to collect the debts, Douglas-Gabriel said the collection responsibilities will be added to the workload of the companies that service the loans. Read more at ACA INTERNATIONAL
AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION 
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. 

Alternative Financial Service Providers Association
757.737.4088

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dan@afspassociation.com
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