NEWS: October 3

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Finance Industry Plans Lawsuit to Overturn CFPB Rule

A coalition of corporate lobbying groups, led by the U.S. Chamber of Commerce, sued the Consumer Financial Protection Bureau to overturn a rule that makes it easier for aggrieved customers to file lawsuits against financial firms.

The litigation, filed Friday in a federal court in Dallas, challenges the CFPB's controversial effort to curb forced arbitration. The plaintiffs include the chamber, the American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable, the American Financial Services Association and groups representing Texas businesses.

The groups filed the lawsuit as the fight over the CFPB's regulation comes to a head on Capitol Hill. While the agency argued that it gives consumers more power to hold firms accountable, some Republicans say the rule will mostly benefit trial lawyers and could result in Americans paying higher interest rates on credit cards and other financial products. GOP lawmakers are trying to overturn the regulation through legislation, though they have a limited time to do so and it's not clear they have enough votes in the Senate.

The CFPB rule, approved in July, targets arbitration clauses that are often buried in the fine print of contracts that consumers sign when they get new credit cards or open up checking accounts. The clauses prevent customers from banding together to file class-action lawsuits, instead requiring them to settle disputes through arbitration. The CFPB regulation requires companies to remove mandatory arbitration clauses from contracts by March. Read more at BLOOMBERG
Bankers To CFPB: Help Us Help Families In Need

By now, the sobering statistics are familiar: Nearly half of American adults say they could not cover an unexpected expense of $400, according to the Federal Reserve. Now, a new study by the Consumer Financial Protection Bureau (CFPB) similarly shows that more than 40 percent of Americans struggled to pay bills at some point during 2016.

But, familiarity doesn't make it OK. Richard Hunt, president and CEO of the Consumer Bankers Association (CBA), has authored a letter appealing to the CFPB to create responsible rules surrounding small-dollar, short-term loans for consumers facing economic hardship.

Hunt referenced the recent spate of hurricanes and wildfires that have left many Americans in dire financial straits and indicated that banks wish to help individuals and families impacted by such events. Unexpected bills and medical expenses can also leave families high and dry, Hunt wrote.

"Bankers know consumers often need help when unexpected expenses arise, and we want to offer safe, sustainable products during these times," Hunt wrote. "Any rules for offering these types of loans need to provide for flexibility in underwriting and realistic expectations on product usage in order to meet a very specific need - fast, affordable, small-dollar loans."

Previously, Hunt wrote, consumers had access to bank-offered deposit advance programs that served their short-term needs well. In addition, the programs had low default rates and offered more protection than most payday lending programs. However, those deposit-advance programs effectively became a casualty of strict new guidelines issued in 2013 for banks offering such products. Read more at PYMNTS.COM
Dreher Tomkies LLP
KANSAS: Johnson County man slapped with $4 million penalty for selling bogus payday loan debt

A federal judge in Kansas City, Kan., has awarded the Federal Trade Commission a $4 million judgment against Joel Tucker, a Johnson County businessman, who had been accused of creating and selling fake consumer debt portfolios.

The FTC accused Tucker in December 2016 of selling lists of purportedly outstanding payday loan balances to debt collectors. The FTC alleged those lists contained names, addresses, Social Security numbers and phone numbers of people who did not actually owe the debts assigned to them.

The debt collectors who bought these allegedly phony portfolios then pressured people to pay up on debts they did not owe, according to the FTC. The FTC said some of the people listed in the fake debt portfolios ended up paying the debt collectors to make the phone calls stop.

Also named as defendants in the case were SQ Capital, JT Holdings and HPD LLC, all companies that the FTC said were controlled by Tucker. Read more at KANSAS CITY STAR
Home Depot to pay $25M in data breach settlement

A federal judge has issued final approval on a $25 million settlement between Home Depot and financial institutions involved in a class action lawsuit against the company. The lawsuit stemmed from a 2014 data breach where hackers stole customers' payment information from self-checkout machines.

The settlement was preliminarily approved in March. Numerous credit unions were part of the class action lawsuit, and affected credit unions had until Sept. 14 to file a claim in the settlement.

In addition to the $25 million settlement fund, Home Depot will pay $2.25 million to sponsored entities whose claims were released in connection with Mastercard's Account Data Compromise program. Home Depot also agreed to implement stricter data security measures to better protect consumers' personal information.

Those entitled to part of the settlement can expect payouts to begin within 90 days.

NAFCU is continuing to push for a national data security standard as hacks similar to this in recent years have revealed millions of Americans' personal financial information. NAFCU is also working with Congress and regulators to ensure any new data security regulations do not burden credit unions. Read more at NAFCU

What CFSA Members Need to Know About the CFPB's Final Arbitration Rule
Hosted by Ballard Spahr LLP

Please join CFSA and Ballard Spahr for a complimentary webinar series to be held
throughout 2017. During this third webinar in a four-part series, we will discuss the
CFPB's proposed arbitration rules.


In 2011, the U.S. Supreme Court upheld the use of class action waivers in consumer arbitration agreements. Nevertheless, the CFPB has issued proposed rules that would prohibit the use of such waivers. This is a watershed event in the history of consumer arbitration. Please join us for a discussion of what the CFPB is proposing and how it could affect CFSA members and others in the payday loan industry.

  • The background of the CFPB's arbitration rulemaking;
  • The CFPB's proposed rules on consumer arbitration agreements;
  • Whether CFSA members will be covered by the proposed rules;
  • When the proposed rules might become effective;
  • Whether existing arbitration agreements will be grandfathered;
  • Whether arbitration agreements should continue to be used for individual arbitrations;
  • Possible legal and political challenges to the rules;
  • What CFSA members can do now to maximize the utility of your class action waiver;
  • What CFSA members should do now if you don't have a class action waiver; and
  • Alternative methods of reducing class action exposure.

Tuesday, October 3, 2017 | 12:00PM - 1:00PM ET

Dennis Shaul, CEO CFSA
Kim Phan, Ballard Spahr

Alan S. Kaplinsky, Ballard Spahr
Mark J. Levin, Consumer Financial Services Litigation

This program is open to CFSA Members, Ballard Spahr clients, prospective clients,
and  members of the financial services industry
There is no cost to attend.  
This program is not eligible for CLE credits.

Please register at least two days before the webinar. Login details will be sent to all approved registrants. For more information, contact Daniel Martin at
Dan Richard

For any business that extends credit to consumers, data is critical. In the financial services industry, alternative credit data is the richest and most uniquely predictive resource available to businesses wanting to model and predict the behavior of non-prime and underbanked consumers.

To that end, FactorTrust regularly develops and deploys predictive credit scoring models that weight and blend its alternative loan, inquiry, payment, stability, income and employment attributes into a numerical score indicative of a consumer's risk. While every scoring model is unique, the model development process at FactorTrust follows a flexible but standardized process flow built upon industry best practices. The first step of every model development is capturing the business problem.

Business Problem

FactorTrust's analytics specialists interview internal and/or external business stakeholders to obtain a conceptual understanding of the business problem the company has identified and that a model is intended to solve, as well as other project parameters.

The business problem will typically focus on a specific type of decision that a lender makes about consumers, such as:
Applicant credit risk decisioning,
Credit marketing for direct mail campaigns, or
Collections optimization.

The analytics specialists capture from business stakeholders the goal(s) the model is intended to achieve in the decisioning process. Goals may include minimizing certain bad outcomes, such as default rates or dollar loss rates. And/or, goals could include maximizing certain good outcomes such as approval rates, conversion rates or profitability. In most cases there are counter-balancing constraints. For example, a lender will want to minimize default outcomes while still approving an acceptable percentage of applicants. 
Bank Card Default Rate Shows Significant Decline

While mortgage and auto loan defaults are on the rise, hurricane damage in Texas and Florida are contributing to financial stress for some consumers, according to S&P Experian.

The national bank card default rate declined to its lowest level since December 2016, according to the latest S&P Experian Consumer Credit Default Indices report for August 2017.

Bank cards, compared to auto loans and mortgages, were the only credit type with a decline in the default rate last month, according to the report.

The bank card default rate declined 12 basis points to 3.19 percent in August. Auto loan defaults increased by nine basis points to 0.95 percent while the first mortgage default rate increased three basis points to 0.65 percent, according to the report.

It notes that the auto loan default rate remains low compared to historical levels.

The composite rate for consumer credit defaults increased three basis points from July to August to 0.86 percent.

"Overall, consumer credit defaults show no reason for alarm," David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said in a news release on the report. "Defaults on first mortgages are flat to down while defaults on auto loans have risen slightly in recent months. Consumer credit defaults on bank cards continue their upward creep since the end of 2015 despite a recent drop. The combination of an improving labor market, low inflation, and low interest rates are the principal factors behind currently favorable consumer credit conditions." Read more at ACA INTERNATIONAL
How To Stop Boring Students When Teaching Personal Finance

Is your personal finance lesson spongeworthy?

In one of the most memorable Seinfeld episodes of all-time, Elaine's preferred contraceptive sponge is pulled off the market, causing her to hoard her existing stash. With a limited supply, Elaine agonizes over whether the man she's dating is "spongeworthy" or if she should wait for a better catch.

Elaine's dilemma is not only entertainment, but also a humorous method to analyze more mundane and humdrum economic topics like opportunity cost, scarcity, and option-value pricing. Princeton Professor Avinash Dixit applied Elaine's predicament in a paper, An Option Value Problem from Seinfeld, "to quantify [the value of] this concept of spongeworthiness." The paper went viral, at least by academic journal standards, and helps reinforce how Seinfeld can be used to teach economics. Similarly, I have found the use of clips from Seinfeld and other popular television shows to be an essential tool when teaching financial literacy, not only to reinforce important concepts, but also to drive student engagement. Read more at FORBES
ACE Cash Express
 ACE Cash Express Supports Boys & Girls Clubs of San Antonio with $11,207 Donation.
"Our employees and customers continue to be passionate about supporting local organizations like the Boys & Girls Clubs of San Antonio," said Eric Norrington, Senior Vice President of Public Affairs at ACE. "We're proud to support organizations in the local communities where we have stores."
How data aggregation helps establish creditworthiness. by Walt Wojciechowski

Business owners, regardless of their companies' sizes, have two overriding goals: customer satisfaction and making smart lending decisions. There are a variety of means by which both can be achieved, one of which is data aggregation.

As its title suggests, data aggregation is the process by which businesses - frequently lenders and banks but many others as well - accumulate information about a potential borrower to establish the person's creditworthiness. Aggregation and financial technology companies - or "fintechs" - do this by compiling an eclectic mix of payment options that go above and beyond traditional credit, as some people may not have access to credit or prefer to buy with cash or some other transaction system, like mobile pay.

Jon Stein, CEO of an online investment firm, noted that the advantages of data aggregation have been evident in a variety of industries, both for businesses and consumers.

"Just think about all the important advances in health care that depend upon your data, your DNA, your health care records," Stein told American Banker. "If all that was owned by a single doctor and you didn't have the right to access that data, own that data, transfer it to another doctor if you wanted to, there would be a terrific outcry."

Enhances transparency

Alternative credit reporting is one of the payment systems data aggregation relies on to help businesses make informed lending decisions. After all, consumers today make many purchases and payments that aren't traditionally counted in credit analysis. These include monthly rent bills, utilities, mobile phone bills as well as internet and cable television packages. Those who consistently make their payments on time should be rewarded for their efficiency and expediency, and alternative credit helps make this possible. 

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

315 Tuscarora St., Lewiston, NY 14092