AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

April 10, 2018


Payday-lending industry sues to block Obama-era rule

The payday-lending industry sued the Consumer Financial Protection Bureau on Monday in an attempt to block an agency rule the industry says will destroy it.

The regulation, which was finalized under the Obama administration, will radically change how payday lenders operate by requiring firms to verify that borrowers can afford the debt before giving them the money and capping the number of times someone can take out successive loans.

It is "draconian" and would "virtually eliminate" the payday-lending industry, according to the lawsuit by the Community Financial Services Association of America (CFSA), which was filed in the U.S. District Court for the Western District of Texas. The rule "was motivated by a deeply paternalistic view that consumers cannot be trusted with the freedom to make their own financial decisions."

The rule was already under assault. Republicans in the House and Senate have introduced legislation to block its implementation, and Mick Mulvaney, appointed by President Trump to temporarily lead the agency, has said he is reviewing the regulation.

But the payday-lending industry is moving even more aggressively to block its implementation. 
"
We do not take lightly that we are suing our federal regulator, however, we have long said we are pursuing all options with regard to the CFPB's harmful small-dollar lending rule, and one of these options was litigation," said Dennis Shaul, Chief Executive of the CFSA, the primary industry group for payday lenders .

The CFPB did not immediately respond to an inquiry about the lawsuit, and it is unclear whether the agency will fight it. Read more at THE WASHINGTON POST

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ARKANSAS among states to enact financial education legislation

Financial education is something I'm extremely passionate about. Several times a year, I travel to schools throughout the state and talk to elementary students about the duties of the State Treasurer and the importance of a solid financial foundation for success both in public office and life in general.

The Center for Financial Literacy in Vermont, which rates all states on their financial literacy instruction, gave Arkansas a 'B' in 2017 for its ability to provide financial literacy instruction in Arkansas schools. That's incredible news for our state when you look back to the Center's 2013 grade for our state - an 'F.'

There appears to be a nationwide trend toward encouraging financial literacy among young adults, and I'm happy that our state has had a hand in that.

Arkansas enacted a law in its last regular session that requires high schools to implement financial education curriculum as a prerequisite for graduation. Wisconsin and Kentucky also implemented similar legislation, and Washington state legislators passed a law requiring financial literacy seminars for higher education students.    Read more at MAGNOLIA BANNER NEWS

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ARIZONA LAUNCHES REGULATORY SANDBOX FOR FINTECHS

The Arizona Governor signed Arizona H.B. 2434 into law on Thursday, establishing Arizona as the first state to create a regulatory sandbox program ("Sandbox") for financial companies offering innovative products.

The Sandbox allows a person to temporarily test innovative financial products or services on a limited basis without otherwise being licensed or authorized to act under the laws of Arizona. A person may apply to enter the Sandbox by submitting an application to the Arizona Attorney General. The application must contain a description of the innovation desired to be tested, as well as a sufficient plan to test, monitor and assess the innovation while ensuring consumers are protected from a test's failure.

If an applicant is approved to be a Sandbox participant, the participant has 24 months after the date of approval to test the innovative financial product or service, with the possibility of a oneyear extension. The participant may only test products with Arizona residents and generally not more than 10,000 consumers may transact through or enter into an agreement to use the innovation, although that number can be expanded with adequate capital and risk management.
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PayPal Has Been Quietly Getting Into the Traditional Banking Business

What has FDIC insurance on balances, a debit card that can be used to withdraw cash at ATMs, and the ability to direct-deposit paychecks, but isn't actually a bank account?

It's PayPal's latest innovation, according to the Wall Street Journal. The company has reportedly been quietly rolling out traditional-bank features to certain groups of customers over the past few months.

The online payments company has good reason to keep this new offer mum: it doesn't have a U.S. banking license. That means all these services are the result of a series of bilateral agreements between PayPal and small banks that remain anonymous. These agreements help PayPal avoid FDIC regulations on whose deposits it will insure and Visa and MasterCard rules about what kinds of institutions the credit card companies will run cards for. So maybe it's not quite a bank account, but it sure walks and talks like one.

PayPal COO Bill Ready is pretty clear about who this "bank account" is and is not for: if you already have a bank account, it's not for you. He told the Wall Street Journal that the new service was driven by the necessity of a bank account in order to participate in the modern economy. "If you don't have a bank account, you can't take an Uber ride, can't stay in a room on Airbnb," he said.
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NEBRASKA: Lawmakers advance rules for payday loans in Legislature

Lawmakers advanced a bill on Friday that would add more rules to how payday loans can be provided to Nebraskans.

Under the amended LB194, providers of short-term, delayed deposit loans would be required to provide more information to borrowers and lenders wouldn't be able to use misleading advertising, such as promises to erase cred a it.

To secure a delayed deposit loan-often called a payday loan-a borrower typically submits a personal check for the loan amount, which is then held and cashed by the lender at the end of the loan period, which typically is 34 days.

LB194, introduced by Omaha Sen. Tony Vargas, would have limited the amount of interest that could be charged on a delayed deposit loan to 36 percent. Vargas said some Nebraska delayed deposit lenders currently charge more than 400 percent interest on loans. That language was taken out of the bill in the amended version.

"It is critical that the Legislature continues to work to reform payday lending," he said. "This doesn't reform payday lending [as amended], but it increases the information and notifications regarding payday loans given to consumers." Read more at NTV abc

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OHIO: Strict Interest Rate Cap Critical Issue In Payday Lending Reform Debate

A battle is brewing over payday lending in Ohio. There are more than 650 storefronts in the state but the industry argues that a new bill threatens to shut them all down. However, consumer advocates say payday lending has been skirting around state law for years to prey on desperate borrowers.

"It just snowballed so bad and I couldn't get out of that hole," said Denise Brooks, a single mother from Cincinnati, who was desperate to pay her car insurance bill. So she took out a loan from a payday lender. She continued, "I couldn't pay my bills cause I owed them and I couldn't borrow any more I was maxed."

Brooks says that loan only caused more problems.

"You're thinking temporarily just get me over this hump but with the interest rates and everything it's not just getting me over this hump," said Brooks.

That was eight years ago. Brooks, who was able to get out of the debt with some help from family, is sharing her story to make sure others don't become what she sees as victims of predatory lending. A Pew Charitable Trust study in 2016 showed Ohio has the highest payday lending interest rates in the country, topping out at 591%. Brooks and a group known as Ohioans for Payday Loan Reform are calling for strict interest rate caps at 28%, and for closing any loopholes around that cap.

Those regulations are in a House bill that has seen its share of starts and stops in the past year. Speaker Pro Tem Kirk Schuring says he wants to help move the bill forward.
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TEXAS: Lawmakers weigh changing Texas law that lets rent-to-own stores file criminal charges on customers

After hearing tales of shady dealing and criminal charges being filed against Texans who fall into the crosshairs of rent-to-own companies, the chairman of the state House Business and Industry Committee said Wednesday that his panel will "aggressively" consider changing the law that can turn missed sofa payments into a quick trip to jail.

Rep. René Oliveira, D-Brownsville, the committee chairman, said he was "stunned" to learn that a Texas Penal Code provision written in the 1970s by rental industry lobbyists is so stacked against consumers. Under the law, people are presumed to have stolen rented items if they sign a rental contract, don't return them as required and then don't respond to a certified letter sent by the company. The law doesn't require receipt of the letter - only proof that it was sent.

A months-long investigation by The Texas Tribune and NerdWallet found thousands of rent-to-own customers across the country - many of them in Texas - have had police reports filed on them under similar theft-of-service provisions. Some wind up arrested, jailed or facing felony theft charges.
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Standard of living sentiment reaches record high. by Walt Wojciechowski

With job gains amassing and take-home pay slowly but surely rising, Americans are feeling as good about how things are going than they have in years, an encouraging indicator for lenders coming to decisions on financing requests from applicants.

In Gallup's most recent Standard of Living Index - which tracks how consumers are faring economically on an ascending point scale - the measure reached an average of plus-54 in 2017. That's well above the plus-50 index average for all of 2016, which, at the time, was the index's highest score in the trending measure's 10-year history.

Gallup's Jim Norman indicated the notable lift in the index appears attributable to respondents' economic attitudes, with people having more disposable income available.

"This year's rise in the overall index is driven by an increase in Americans' outlook for their standard of living," Norman explained. "The percentage of Americans saying their standard of living is getting better has risen from 62 percent in 2016 to 64 percent so far this year, with a corresponding drop in the percentage saying it is getting worse, from 22 percent to 19 percent."

The most recent Standard of Living Index analysis was conducted in 2017, with responses recorded during the first two-thirds of the year. Read more at MICROBILT

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Lawmakers support payday lending rule

A group of lawmakers forwarded correspondence this week in support of upholding the Consumer Financial Protection Bureau's (CFPB) payday lending rule.

A Senate delegation comprised of 44 members are in favor of the initiative, which they said helps rein in business practices by payday lenders nationwide designed to exploit the financial hardships facing millions of families.

The letter to CFPB Acting Director Leandra English and Office of Management and Budget (OMB) Director Mick Mulvaney urges them to end efforts repeal the payday lending guideline.

"We understand that the CFPB is delaying the rule by granting waivers to companies who would otherwise be taking steps to begin complying with the rule and that the Bureau may be offering the payday loan industry an opportunity to undermine the rule entirely," the senators wrote. "We view these actions as further efforts to undermine the implementation of this important consumer protection rule."

Officials said Congress created the CFPB to protect Americans from unfair, deceptive and abusive lending practices Predatory lenders often target borrowers who find themselves in need of quick cash by charging them excessive interest rates and hidden fees that trap them in long-term cycles of debt. Read more at Financial Regulation News

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In surprise move, CFPB appeals judgment against CashCall slashed by judge

When President Trump appointee Mick Mulvaney took over as interim director of the Consumer Financial Protection Bureau in November, he pledged to use a light hand, saying the bureau works for lenders just as much as it works for consumers.

Since then, the bureau has dropped a lawsuit against lenders affiliated with a Northern California Native American tribe, sought to roll back rules reining in payday lenders and, most recently, asked Congress to curb the bureau's power to make new rules.

And yet the bureau took steps last week to continue legal action against high-cost Orange County lender CashCall Inc., a move that consumer finance attorneys called surprising and seemingly out of keeping with Mulvaney's marching orders.

The CFPB filed documents saying it plans to ask the U.S. 9th Circuit Court of Appeals to reconsider a recent decision in which a federal judge ordered CashCall to pay a fine of $10.3 million for issuing loans with illegally high interest rates. That judgment, handed down in January, was seen as a win for CashCall and as something of a rebuke to the CFPB, which had asked for penalties and restitution of $287 million. Read more at THE LOS ANGELES TIMES

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Employee retirement confidence on the decline

There's a troubling trend when it comes to retirement: Though more employees believe saving for their post-work years is a top financial priority, retirement confidence is on a downward trend.

A recent survey of 5,000 employees from Willis Towers Watson finds that workers' financial confidence has eroded over the past 24 months, after several years of steady improvement. More than half of survey respondents say they feel confident they have enough money to live comfortably 15 years into retirement, but that is down significantly from 69% in 2015. Retirement confidence had been rising steadily since the Great Recession, when 61% of survey respondents said they were confident they would have a secure retirement. Only 39% of women say they are confident they will have enough resources to last 25 years into retirement compared with 54% of men.

"Saving for retirement is a significant challenge for the vast majority of working Americans," says Shane Bartling, senior consultant at Willis Towers Watson. "Varying financial needs make it difficult for many men and women to build a retirement nest egg. While our survey finds that women place a lower priority on saving for retirement than men do, we believe it's a question of, 'Am I able to save for retirement?' rather than, 'Is it important to save for retirement?'" Read more at EBN

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Americans are actually doing a good job paying their debts right now

Finally, some good news about consumer debts.

Americans were able to pay their debts back - including personal and auto loans and credit card bills - better than they have in quite a while in the fourth quarter of 2017.

The number of delinquencies, or people who were overdue on their loans by 30 days or more, dropped in all eight categories that the American Bankers Association, a trade group, tracks. That's the first time that has happened since early 2012.

Those eight categories are: direct auto loans, indirect auto loans, home equity loans, marine loans, mobile-home loans, personal loans, property-improvement loans and RV loans.

Delinquencies on credit-card bills also fell. Just 2.46% of all accounts were delinquent, below their 15-year average, 3.6%, the study found. The ABA only tracks credit cards that are issued by banks.

This comes at a time when consumer debts are sky-high. Americans collectively owe more than $1 trillion in credit-card debt, according to the Federal Reserve. They owe another $1.1 trillion in auto loans, up from $987 billion in 2015, according to the credit-reporting agency Experian.
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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. 

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