ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: August 1

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MicroBilt
Trump Confidant Lewandowski Calls for CFPB's Cordray to Be Fired

Former presidential campaign manager Corey Lewandowski urged the Trump administration on Sunday to fire the head of the Consumer Financial Protection Bureau, a sign that Republicans are stepping up attacks on the agency that's targeted Wall Street conduct.

Without being asked about the agency in an interview on NBC's "Meet the Press" on Sunday, Lewandowski said he wanted incoming White House Chief of Staff John Kelly to push for the firing of Director Richard Cordray, a Democrat mentioned as a possible candidate for Ohio governor in 2018.

"He's a person who is now all but running for governor in the state of Ohio, and he's sitting in federal office right now," Lewandowski said. "I hope that the new chief of staff looks at him moving forward and saying it's time to act decisively."

Lewandowski cited a rule issued earlier this month by the agency that would make it easier for customers to sue banks by restricting the use of mandatory arbitration to block class-action lawsuits. "It's going to be about a trillion dollars' worth of arbitration that the government's going to have to go through now," he said.

A spokesman for the CFPB didn't immediately respond to a request for comment on Lewandowski's remarks.

The futures of the CFPB, created after the 2008 financial crisis, and Cordray, whose term ends in July 2018, have become the subject of mounting speculation in Washington. The Trump administration has said it wants the ability to dismiss Cordray at any time for any reason, a change from current rules that say the president can only fire him for cause. Democrats say the agency serves as a necessary advocate for ordinary Americans, while Republicans say it oversteps its mandate and that Cordray's power is unconstitutional. Read more at BLOOMBERG
Insight.tm
Congress is Set to Protect Consumers from the CFPB

It's one of the most controversial components of the 2010 Dodd-Frank Act, but it has a nearly perfect political name. What member of Congress could possibly be against the Consumer Financial Protection Bureau (CFPB)?

The name is so perfect that hardly anyone stops to ask why the 20-plus federal statutes Dodd-Frank transferred to create the new agency failed to adequately protect consumers. The truth is that the Bureau's architects had a very different kind of consumer protection in mind: protecting consumers from themselves.

Consider the Wells Fargo account scandal. The Bureau completely failed to protect those customers. State-based lawsuits in California uncovered the problem. And the Comptroller - not the CFPB - was likely the first federal regulator to know what was going on.

All the CFPB did was levy a fine after the Comptroller and the City and County of Los Angeles had levied their own fines. Read more at FORBES
Incite Business
CFPB's Arbitration Rule No Favor for Consumers

When it comes to identifying the worst government agency, it's hard to pick just one. It's equally hard not to immediately think of the Consumer Financial Protection Bureau. There's just something particularly off-putting about an agency that is so self-righteous in trumpeting its virtuous defense of consumers but nevertheless keeps finding ways to make them worse off.

Established in 2010 as part of Dodd-Frank, the CFPB didn't take long to become notorious. One of its first acts was to completely and lavishly renovate its own headquarters-which, in typical Washington fashion, succumbed to ever-rising cost estimates. It then began participating in Operation Choke Point, an Obama-era attempt to strong-arm banks into closing the accounts of legal businesses that happen to operate in markets-such as firearms and tobacco-disfavored by politicians.

The CFPB also has waged a relentless war against small-dollar lenders who service a poorer clientele than traditional lenders, all while saddling conventional banks with costly new regulations. It's little wonder then that since the CFPB was created, free checking accounts have been on the decline and credit for the poor has been harder to find.

The latest example of CFPB overreach comes in the form of a rule prohibiting financial services companies from including binding arbit ration clauses in their contracts. This is a misguided decision for several reasons, writes Veronique de Rugy. Read more at REASON.COM
Community Involvement
Tina Hodges
The Tennessee House Speaker has named Tina Hodges, the CEO of Advance Financial, 
to the Douglas Henry State Museum Commission.
  
Alternative credit score boosts credit eligibility. by Philip Burgess

The use of alternative credit scores can significantly increase the number of people considered eligible for credit. This means leveraging alternative credit scores not only helps individuals, but it also ensures banks and other lenders can continue to seek out new lending opportunities.

Hard-to-score individuals
One of the main reasons consumers aren't eligible for credit arises from their credit histories being too thin or stale. Due to this, many people simply don't have a credit score. In fact, the number of people without this crucial three-digit figure is growing. A 2015 report by the Consumer Financial Protection Bureau revealed an estimated 45 million people, or nearly 10 percent of the population, were listed as either credit invisible or have unscorable credit files.

The report noted that roughly 19 million people have unscorable files, and there are two reasons why a credit history might fall under this umbrella:

Insufficient data - The record either contains accounts that are too new or has too few accounts to reliably calculate an accurate score.

Stale data - The information is too old and there isn't any recently reported activity.

Although different credit-scoring models have varying thresholds for what they constitute as "insufficient" or "stale," the fact remains that a lack of data or old data simply won't be enough to determine a score. The CFPB noted that those without enough history due to these reasons were about evenly split, with 9.9 million people having insufficient data and 9.6 million lacking recent histories.

However, the larger chunk of individuals without scores were deemed "credit invisible" with about 26 million people falling under this category. These consumers have no credit history whatsoever with any of the major nationwide reporting agencies.

The challenges of credit invisibles
Without having this important three-digit number attached to their name, people who are credit invisible or have unscorable files will find it extremely difficult, if not impossible, to get credit or take out loans. This hinders them from purchasing a new car, getting a home mortgage or even obtaining a store credit card from a local retailer. All told, having either a thin or a stale file makes it extraordinarily tough for these individuals to access even the most basic necessities of life. Read more at MICROBILT
FactorTrust
Becoming a Bank - Varo Articulates the Leap from Fintech to Banking

Varo Money wants to become Varo Bank. The completely mobile-app driven fintech startup already lets customers juggle financial tasks with the touch of a button but now they want to make it official.

Varo has applied for a full national bank charter with the bank's headquarters in Utah in hopes of becoming a national bank. Varo is the second fintech startup to apply for a bank charter in as many months, with the SoFi application still pending, though there are key differences to the design of each application.

Colin Walsh, co-founder and CEO of Varo Money, took some time to discuss the bank charter application with deBanked, offering his take on how the future of banking is moving toward mobile and reviving the banker relationship, which has gotten lost along the way.

deBanked: Why a bank charter and why now?

Walsh: We founded Varo with a specific vision: to be an indispensable financial guide for customers, with a full suite of banking and financial products. Our founding intention was to create a bank that made it easier and more affordable to manage money. We've been in conversations with the regulators for a number of months, and we completed the "pre-application" process. In the past year the regulators' openness to new de-novo bank charter applications has shifted.

deBanked: Was SoFi's recent move to similarly apply for a bank charter any inspiration for you?

Walsh: SoFi's filing did not affect our process; we've been in conversations with regulators for months (see above answer). In addition, SoFi applied for a different type of charter than we did. They applied for a state-chartered ILC, which tend to be used by subsidiaries of companies whose primary business is not banking. We applied for a national bank charter to become a full-service national bank.
MerchantBoost
Credit Card Market Continues Growth in First Quarter; Including Record Number of New Accounts

Consumers' credit card use in the first quarter this year continues to grow, despite "sluggish" consumer spending and GDP growth, according to the American Bankers Association's (ABA) Credit Card Market Monitor Report released in July.

The ABA finds that the number of new credit card accounts increased 8.8 percent year-over-year and the total number of open credit card accounts reached a new post-recession high of 357 million, a 5.7 percent increase year-over-year.

The percentage of consumers with revolving accounts, meaning they carry a balance on their card from month to month, increased slightly to 44 percent and credit card outstanding balances as a share of disposable income declined, according to the report with data from January through March 2017.

"Revolving accounts typically increase in the first quarter due to seasonal spending patterns, and the current share remains below the recession peak of 48.4 percent in 2009," the ABA reports in a news release. "The share of accountholders who pay their balance in full each month ("transactors") fell 0.3 percentage point to 28.8 percent of all accounts, while 27.2 percent of accounts were dormant."

The decline in credit card outstanding balances as a share of disposable income is a sign consumers are continuing to "demonstrate good payment behavior" even as the credit card market grows, according to the ABA. "As a share of disposable income, credit card credit outstanding declined 13 basis points to 5.3 percent in the first quarter, and has remained below 5.5 percent since 2012."

Monthly credit card purchase volumes increased 3.3 percent. Read more at ACA INTERNATIONAL
Dreher Tomkies LLP
Incite Business: Financial Regulation - the Sword of Damocles?
Overland Park, Kansas

Running a successful financial institution comes with a plethora of responsibilities and pressures. Dealing with these effectively and continuing to move forward can be challenging and rewarding. When you throw an uncertain (even hostile?) regulatory environment that has been threatening to pull the rug out from under your feet for years, that's a stress multiplier that has made some take a bunker mentality and just try to survive. While the bunker mentality is certainly a safe play, it makes it hard to be innovative or even keep pace with the competition.

Can you compare this environment to the tale of the Sword of Damocles? Damocles, a court attendant, traded places with King Dionysius after Damocles told the king how great his job was. The king traded, but placed a sword over Damocles head that was held precariously by a horse hair to represent the constant pressure a leader faced. Damocles quickly wilted under the constant threat of the sword and gave up his position.

This is similar to the current situation many financial institutions find themselves with the federal regulators placing a figurative sword over their heads. While the sword is figurative, the threat is very real. The big difference is the leadership of the financial institutions did not want to trade places with the regulatory body. In fact, they continue to appreciate the role of regulation in creating a healthy, consumer-focused business environment. The regulatory body just decided to place this "sword" over the financial service providers collective heads, periodically tweaking the tenuous string from which it is hanging to make sure everyone is aware of its presence. This threat has kept a large group of organizations from adapting to the changes in technology, consumer preferences, and competition. Who is benefiting from this situation? Consumers - no. Operators - no. Regulators - hmm.

I would argue that the regulatory environment many not stabilize until 2018, if then. There always seems to be something that continues to kick the "payday rules can" down the road another six months, right? Even if there is a change in leadership of the regulatory "king", can you be assured that it will have a positive effect for your business or will it just create more uncertainty and continue the waiting game? How has the change at the executive office helped your business so far in 2017? I'm not being critical, some changes takes time and involve a lot of moving parts behind the scenes. My point is you can always find a reason to not act, but you need to take charge of your destiny and create your own environment that removes the sword from hanging over your head. INCITE
CFSA
CFPB class-action rule may be straw that broke camel's back for banks, regulator says

The Consumer Financial Protection Bureau's new rule allowing class-action lawsuits in finance could be the last straw for banks, a top banking regulator warned Monday.

Keith Noreika, the acting comptroller of the currency, said the consumer bureau's newly finalized rule opening up banks to class-action lawsuits "may turn out to be the proverbial straw on the camel's back."

Nevertheless, he announced, his agency will not lobby within the government to stop the rule from going into effect. Instead, he encouraged Congress to strike down the regulation through the Congressional Review Act.

The Republican-led House voted last week to undo the rule. Passage in the Senate, where Republicans have a two-vote margin, is not assured.

The rule would prevent financial companies from writing contracts for their products that require customers with disputes to go into private arbitration. The effect of the rule would be to encourage more class-action lawsuits, a prospect that Republicans have criticized as a giveaway to trial lawyers but that Democrats say is necessary to give consumers leverage over Wall Street. The rule was finalized by CFPB Director Richard Cordray, an Obama appointee.

Noreika, a Trump appointee reponsible for ensuring the safety and soundness of banks, had raised concerns about the impact of the rule on banks' viability. Read more at WASHINGTON EXAMINER

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

315 Tuscarora St., Lewiston, NY 14092
dan@afspassociation.com
www.afspassociation.com