ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: May 30

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Buried deep within GOP bill: a 'free pass' for payday and car-title lenders

You have to wade all the way to Page 403 of the 589-page Financial Choice Act to find a one-sentence provision that obliterates current efforts to bring fairness and responsibility to payday lenders and similar merchants of never-ending debt.

Section 733 of the bill, which could come up for a vote by the full House of Representatives as soon as this week, declares that federal authorities "may not exercise any rulemaking, enforcement or other authority with respect to payday loans, vehicle title loans or other similar loans."

With that one line, Republican lawmakers have declared their willingness to allow people facing financial difficulties to be at the mercy of predatory lending practices that typically involve annual interest rates approaching 400%.

"They're trying to sneak in that provision," Diane Standaert, executive vice president of the Center for Responsible Lending, told me. "It seems like they hoped no one would notice.

She called the provision "a free pass for payday and title lenders to not be subject to efforts to rein in their abusive practices."

Payday loans are intended to serve as short-term fixes for financial troubles. In practice, however, borrowers frequently are unable to repay the original loan and become trapped in ongoing cycles of debt.

The Consumer Financial Protection Bureau has found that over 19 million U.S. households resort to payday loans. Of that number, almost 70% of borrowers have to take out a second loan to cover the first, and 20% end up saddled with 10 or more loans, one after the other.

Title loans are similar except the borrower's vehicle is put up as collateral. Not only do title loans come with crazy-high interest rates, but if you fall behind on payments, you can lose your wheels.

DECISION Cloud

TEXAS: Payday lending battle is ongoing; Valley legislators vote against local regulation of industry

The push to preempt the right of Brownsville and other Texas communities to regulate payday and auto-title lending via the so-called "Uniform Ordinance" may have spent itself this legislation session, but expect the fight to be taken up again next session.

That's according to Jennifer Allmon, executive director of the Texas Catholic Conference of Bishops, which has been keeping a close eye on the payday/auto-title industry's efforts during the current session, which ends June 18.

She doubts any further anti-Uniform Ordinance amendments will get the necessary two-thirds majority at this point in the session, though Allmon predicted the industry will be "back in force" next session, emboldened by the votes it garnered this time around - even from some Rio Grande Valley Democrats.

House Bill 3081 by Rep. Giovanni Capriglione, R-Southlake, and Senate Bill 1530 by Sen. Craig Estes, R-WichitaFalls, which would have preempted the Uniform Ordinance statewide, stalled out this session. However, on Monday, Capriglione attached an amendment containing the same language as HB 3081 to another amendment by Rep. Tom Craddick, R-Midland, who supports regulating payday/auto-title lenders.

Craddick's amendment would have made the Uniform Ordinance state law. Capriglione attached his amendment as a "poison pill" to defeat Craddick's amendment, which Craddick then pulled to kill the amendment Capriglione had attached.

Six Democrats voted for the Capriglione amendment, including four from the Valley: Rep. R.D. "Bobby" Guerra, D-Mission; Rep. Ryan Guillen, D-Rio Grande City; Rep. Oscar Longoria, D-Mission; and Rep. Eddie Lucio III, D-Brownsville.

Lucio, reached by cell phone Tuesday on the House floor, said he was assured his vote for the Capriglione amendment would not affect a zoning ordinance Brownsville imposed on payday/auto-title businesses that he described as the city's "primary tool for regulating that industry." Lucio said he wasn't clear on the specifics of the Uniform Ordinance, which is separate.

MicroBilt

Can Walmart's sweepstakes game teach the unbanked to 'bank' their money?

In order to let the unbanked and underbanked portion of its customer base take part in things like online shopping, Walmart has launched programs that make the retailer look a bit like a bank itself. But with its Prize Savings program, Walmart has taken a step that banks have not - Walmart is incentivizing its customers to save.

Last year, Walmart introduced the Prize Savings program as part of its MoneyCard offering, as discussed in an article on Good. The program gives users the chance to win cash prizes in a monthly sweepstakes if they place money into the "Vault" portion of the MoneyCard pre-paid debit account. Since Walmart introduced the Prize Savings program, the number of customers keeping money in their Vaults has increased 130 percent to 100,000.

Though the Vault was introduced based on research that indicated Walmart customers were not saving their money, the user agreement for the Vault specifies that it is not a savings account and does not pay interest. Nevertheless, as a savings account-like service, the Vault encourages users to deposit - or "stash" - money they cannot spend immediately. The funds in the Vault are available only via transfer.

From one perspective, the Vault appears to give its users a lesson in financial responsibility. The casual language and gamification, as pointed out in the Good article, promotes saving to a customer base otherwise suspicious of financial institutions and the small print and jargon they're known for. On the other hand, the Vault keeps users within Walmart's shopping ecosystem and offers no interest, while the long-term stability of the service remains to be seen.

Walmart isn't the only retailer that has been trying to open up otherwise closed segments of the economy to the unbanked and underbanked.

Amazon.com, for instance, recently rolled out Amazon Cash. The program allows a customer to use an account-associated barcode at the cash register of a participating retailer in order to deposit cash into an existing Amazon account. PayPal has a similar offering, PayPal MyCash, which may have been the inspiration for Amazon Cash. But Walmart may be the first notable retailer to offer a savings-like account. Read more at RETAILWISE

Dreher Tomkies LLP

NEVADA: Lawmakers want to create payday loan database

CARSON CITY - Nevada officials want a better way to track and understand how the payday loan industry works in the state.

Assembly Bill 515 would create a confidential database of payday, high-interest and title loans done in Nevada. The idea is to create data, without the names of people receiving loans, that will better help the state get a sense of the industry's activities.

The bill was heard Monday in the Assembly Government Affairs Committee which took no action on the bill. It is exempt from deadlines and an emergency request from the speaker.

"It's a good first step," said Assemblywoman Heidi Swank, D-Las Vegas, who is sponsoring the bill with Assembly Speaker Jason Frierson, D-Las Vegas.

Swank's presentation outlined concerns with the payday loan industry, which is frequently criticized for high-interest lending practices that Swank said are "designed to put borrowers on a debt treadmill indefinitely."

Under the bill, licensed lenders would enter loan information into the database.
Swank stressed the bill does not hinder the industry. "It does not limit access to payday lenders at all," she said.

George Burns, the state commissioner of Financial Institutions, said the database could help the state identify trends and understand what's going on in the industry.

"Any information that can be complete and accurate is an integral tool to us to be able to properly regulate this industry," Burns said.

Lobbyists for the lending industry testified against the measure, citing concerns about a private vendor collecting a government fee that would be charged per loan. LAS VEGAS REVIEW-JOURNAL

FREE WEBINAR
CFSA Complimentary Webinar Series: 
'The Ongoing CFPB Threat'
Hosted by Ballard Spahr LLP

Complimentary Webinar Series  to be held throughout 2017. This second webinar in a three-part series will explore the continued presence of the CFPB and its ongoing impact on the payday lending industry.

Overview
Despite the regulatory changes being initiated by the Trump administration, many of the recent executive orders do not reach independent agencies such as the CFPB. Thus, the CFPB threat will continue, at least for the short-term, as Director Cordray has emphasized that the CFPB is taking a "business as usual" approach towards its rulemaking, supervisory, and enforcement activities.

During this webinar, we will discuss what CFSA members should expect from the CFPB in 2017 as well as what role CFSA members can play as the Republican Congress considers various CFPB reform legislation.

What You Will Learn About:
  • Predictions about the Director Richard Cordray's future at the CFPB
  • An in-depth discussion about the CFPB proposed payday lending rules
  • Potential CFPB legislative reforms

There is NO COST

 Wednesday, May 31, 2017 | 12:00 PM - 1:00 PM ET
Login details will be emailed to you

Moderators:
Dennis Shaul, CEO CFSA
Kim Phan , Ballard Spahr

Speakers:
Alan S. Kaplinsky, Ballard Spahr
Chris Brown, Deputy Chief of Staff, Congressman Blaine Luetkemeyer (R-MO)

*This program is open to CFSA members and prospective members as well as Ballard Spahr clients and prospective clients, and any other members of the financial services industry. 

There is NO COST 
This program is not eligible for CLE credits.

Please register at least two days before the webinar. 
For more information, contact Daniel Martin at martind@ballardspahr.com
 

TEXAS: San Antonio reaches settlement over city's payday-lender law

San Antonio has settled long-running criminal and civil battles over a city ordinance regulating payday and auto-title lenders.

A few businesses that opposed the ordinance, which took effect in 2013, have now registered with the city as "credit access businesses" and agreed to pay $60,000 to cover the city's costs, including investigative expenses. A civil lawsuit brought by one of the companies seeking to have the law declared unconstitutional has been dropped.

In addition, the city has agreed to dismiss criminal cases against the businesses, which had been charged with failing to register with the city and for refusing to present business records. Identical charges against one of the business's store managers also are being dropped.

The two sides reached a settlement following a mediation last month, according to Joe Niño, deputy city attorney.

"Our main goal ...was getting the CAB companies to go ahead and register with the city of San Antonio, which is what they did," he said. "We're happy."

Niño said the companies that settled are Cash Station, doing business as Power Finance Texas; Rapido Dinero, doing business as Power Finance; and Texas Loan Brokers I, which operates two Texas Title Loan stores.

State corporate records show Cash Station's owners include state Rep. Gary Elkins, a Houston Republican who has fought state legislation to regulate payday lenders.
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The CFPB Wants Data On Small Business Loans. Bankers Are Outraged

They're heeeere!

In its first seven-plus years, the Consumer Financial Protection Bureau set its sights on - what else? - consumer finance. It made rules to rein in mortgage lending, payday loans, debt collection, and the like. But it was inevitable that the bureau would eventually turn its attention to business lending, and that day finally came earlier this month, when it asked the public to comment on how it should seek data on small-business loans from banks and other lenders.

The CFPB is acting on a provision of the Dodd-Frank financial reform law that requires lenders to collect and report data on credit sought by small businesses, minority-owned businesses, and women-owned businesses. With the aim of helping the government enforce fair lending laws, as well to help communities figure out how to better serve these businesses, the law specifically directs financial institutions to compile 13 separate data points, including the amount of funding sought and approved, the type and purpose of the financing, as well as the location and most recent annual revenue of the applicant. And the law allows the agency to specify "any additional data that the Bureau determines would aid in fulfilling the purposes" of the law.

Historically, there's been very little data on small-business loans and who's making them or getting them, apart from information gathered about loans backed by the Small Business Administration (which comprise a very small part of the market). It wasn't until 2010, for example, that banks had to report the size of their small-business loan portfolio on a regular basis, and even then the definition manages to simultaneously include a lot of loans that you wouldn't think of as small business loans, and exclude many others you would. And now it appears the government will scale back collecting that information as part of the Trump administration's agenda to reduce regulatory burden.    Read more at FORBES

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Alternative Financial Service Providers Association
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