March 22, 2018

CFSA Conference

Volcker Rule Change Backed in House Panel's Dodd-Frank Remedy

U.S. House lawmakers have advanced legislation that could either expand or upend Congress's best hope of rolling back banking-industry regulations since the financial crisis.

The proposals approved by the Financial Services Committee on Wednesday include a Volcker Rule tweak that would put the Federal Reserve solely in charge of enforcing the Dodd-Frank Act ban on proprietary trading instead of the five agencies now assigned to the task. Supporters say the change would make it easier for Goldman Sachs Group Inc., JPMorgan Chase & Co. and their peers to abide by the rule, while critics complain that it would make it easier to weaken restraints on excessive risk-taking.

House Republicans, led by Financial Services Committee Chairman Jeb Hensarling, are pushing to add more changes to a broader rollback of financial-industry rules that passed the Senate in a 67-31 bipartisan vote. The House and Senate have to agree on a single piece of legislation to be sent to President Donald Trump to be signed into law.

The potential stumbling block is that Democrats who backed the Senate bill sponsored by Banking Committee Chairman Mike Crapo may not be willing to go along with what House lawmakers are seeking. Senators Heidi Heitkamp of North Dakota and Jon Tester of Montana, who played key roles in getting Crapo's bill passed, have said they won't entertain additions by the House.

CFPB and FTC Report on 2017 Activities to Combat Illegal Debt Collection Practices

Agencies provide annual summary of their actions under Fair Debt Collection Practices Act

Today the Consumer Financial Protection Bureau (Bureau) and the Federal Trade Commission (FTC) reported on their 2017 activities to combat illegal debt collection practices. The annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA) details the agencies' efforts to stop unlawful debt collection practices, including vigorous law enforcement, education and public outreach, and policy initiatives.

"I appreciate the opportunity to work with Acting Chairman Ohlhausen and all our partners at the FTC," Bureau Acting Director Mick Mulvaney said. "From now on, we will be working closely with the FTC to enforce the FDCPA while protecting the legal rights of all in a manner that is efficient, effective, and accountable."

"The FTC will remain vigilant in our efforts to monitor this industry and stop unlawful conduct that harms both consumers and legitimate businesses and will continue to work with our law enforcement partners, including the CFPB, on this important issue," FTC Acting Chairman Maureen K. Ohlhausen said.

The CFPB and the FTC share enforcement responsibilities under the FDCPA. In January 2012, they entered into a memorandum of understanding that provides for coordination in enforcement, sharing of supervisory information and consumer complaints, and collaboration on consumer education. The agencies work closely to coordinate respective efforts to protect consumers, including meeting regularly to discuss ongoing and upcoming law enforcement against collectors.
Dreher Tomkies LLP

CFPB's Chief Operating Officer Is Leaving, in First High-Level Mulvaney-Era Departure

Sartaj Alag told staffers he'll leave on April 18, after almost five years as the bureau's COO

Sartaj Alag, who has served as the Consumer Financial Protection Bureau's chief operating officer since 2013 and was a senior-level official from the agency's earliest days, told staffers he plans to leave the bureau next month, according to an internal memo viewed by Morning Consult.

Alag, who informed CFPB staffers Thursday that his last day at the agency will be April 18, is considered the first senior-level CFPB official to depart since Mick Mulvaney became acting director in November 2017. A CFPB spokesperson confirmed Alag's internal announcement but declined to provide further details about his departure or his replacement.

The move comes nearly four months after Mulvaney - who also serves as the Office of Management and Budget director - took on additional duties as acting director of the CFPB, which was created by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act following the 2008 financial crisis. Read more at MORNING CONSULT

FLORIDA: Governor Rick Scott Signs Payday Loan Bill Into Law

TALLAHASSEE, Fla. (AP) - Florida is easing some of the restrictions for so-called payday loans.

Gov. Rick Scott signed a bill (SB 920) on Monday that doubles the current limit on the loans from $500 to $1,000 and allows lenders to give 60-to-90 day loans.

Consumer advocates have said the new rules will create a debt trap for poor people. Back in 2001, the state cracked down on loans where lenders give borrowers money in exchange for holding a postdated check as collateral.

Existing lenders have said they needed to change the law because of potential new federal regulations. Supporters contended that payday lenders might have had to shut down without the change. Read more at US NEWS

CFSA Conference

Benefits of Selling Receivables to a Qualified Partner

Many creditors that do not have experience selling receivables portfolios are reluctant to start selling their debt. There have been plenty of negative headlines over the past 5 years, attacking debt buyers and their business models, and inexperienced sellers just do not know where to start. Those creditors that can look past the negative headlines, can quickly find qualified debt sale partners that help the creditor to establish immediate cash flow for otherwise value-less accounts while minimizing compliance and brand risks.

To assist creditors with identifying legitimate debt buyers Receivables Management Association (RMA) has created a comprehensive certification program. The RMA Certification Program sets minimum requirements for debt buyer, collection agencies, law firms, brokers and other receivables professionals that exceed those set by Federal, State and local regulations.

The New CFPB A Review of Actions Taken by Acting Director Mulvaney During the First Three Months of his Tenure. by Hunton & Williams LLP

This is the seventh in a series of articles from Hunton & Williams LLP discussing reform efforts related to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). This article provides a brief update of the actions taken in the first three months of Mick Mulvaney's term as the acting director of the Consumer Financial Protection Bureau (CFPB).

From the outset it was clear that Mr. Mulvaney's tenure as acting director of the CFPB would be a political flashpoint. His contentious appointment set the stage for a potential sea change in the agency's enforcement and rulemaking agenda. Many anticipated that the former South Carolina congressman and current director of the Office of Management and Budget would completely overhaul the CFPB. After only three months on the job, Acting Director Mulvaney has already made several moves indicative of his intent to temper the aggressive stances taken by his predecessor, Richard Cordray, including halting the implementation and enforcement of certain rules against payday lenders, issuing a revamped strategic plan for the agency and seeking public input through broad requests for comment and information.

Payday Lender Regulations and Enforcement

The change in direction at the CFPB is most obvious in the context of small-dollar loans. Prior to Mr. Cordray's resigning as director, the CFPB published the Payday, Vehicle Title, and Certain High-Cost Installment Loans rule (Payday Lender Rule).1 The Payday Lender Rule determined that certain actions relating to small-dollar loans would violate Dodd-Frank's prohibition of "unfair and abusive acts" including: Read more at LEXOLOGY

Employment Skip Tracing

CFPB Oversight of Practice of Law is Back in the Spotlight

The Practice of Law Technical Clarification Act of 2018 (formerly of 2017) is back on the agenda of the House Committee on Financial Services. This had been on the list to be addressed in January, but had been postponed. It appeared again today on the schedule for this week.

The law is proposed as an amendment to the Fair Debt Collection Practices Act (FDCPA) to exclude law firms and licensed attorneys who are engaged in activities related to legal proceedings from the definition of a debt collector, to amend the Consumer Financial Protection Act of 2010 to prevent the Bureau of Consumer Financial Protection (CFPB) from exercising supervisory or enforcement authority with respect to attorneys when undertaking certain actions related to legal proceedings, and for other purposes.

Late last year insideARM published an article addressing this topic, titled Why states should have primary oversight of attorneys' activities in debt-collection litigation, by Thomas Pahl and Matthew Wilshire. Pahl is the Acting Director of the Bureau of Consumer Protection at the Federal Trade Commission, and Mathew J. Wilshire is a Senior Attorney in the Division of Financial Practices at the FTC. Read more at InsideARM

The risks of loan stacking. by Philip Burgess

As more small-business owners launch companies - 25 million Americans have started one within the past two years, according to figures from Babson College - many are finding success, but at the same time discovering that keeping their doors open costs more than they originally anticipated. To rectify the cash-flow shortfall, some are taking out second loans, thereby defraying these operating expenses.

But with more lenders to choose from, some are borrowing from multiple providers, taking advantage of more affordable interest rates in the process. Some don't stop there, taking out additional loans, sometimes to pay for the originals.

The strategy is called loan stacking, and while the activity has surged in recent years, its fraught with risks and land mines that can backfire for lenders who engage in the practice, even when borrowers pass the underwriting process with flying colors.

What is loan stacking?
As its title implies, loan stacking is where a borrower - typically a small-business person - already has a loan that's in effect but goes to a different lender and takes out another. There are public records that lenders can examine to see if a loan already exists, but in their haste, they may decide not to do their due diligence for fear of losing out on the business to a competitor.

Loan stacking is not illegal. Many online lenders have protocols in place that help them determine whether borrowers have the means to pay off what they've borrowed. The problem, though, is these underwriting methods are not foolproof, and those taking out loans frequently may have no intention of paying them off. Indeed, according to credit agency TransUnion, stacked loans are four times more likely to be fraudulent compared to loans where only one exists. In fact, of the $497 million that fintech lenders lost out on in 2015 - known in the industry as "charge-offs" - $39 million of it was attributable to stacked loans. Read more at MICROBILT

CFSA Conference Compliance School

Amazon's plan to reportedly offer 'checking accounts' is a direct assault on some of Walmart's most loyal customers

Amazon may be going after low-income shoppers in a big way.

The company is reportedly working on a program that will produce a product similar to a checking account, according to the Wall Street Journal. Customers could reportedly hold money in the account and take deposits.

Neither the customer nor Amazon would likely need to pay a fee for transactions. Amazon is currently in discussion with major banks for the idea, and it may never actually happen.

It's likely not intended to compete with the existing banking industry.

"We think [Amazon's] aim with expanding its financial offering is less about disrupting the financials sector and more about increasing engagement on its own marketplace," the Bank of America analyst Justin Post said in a note to clients. Read more at BUSINESS INSIDER

Walmart opening FedEx Office locations in 500 stores

A FedEx Office partnership gives shoppers one more reason to go to a Walmart in addition to food concessions, check-cashing services and even legal services in some locations. It could also help the retail giant realize omnichannel ambitions.

Expect more from the tie-up, Charles Dimov, VP of marketing at OrderDynamics, told Retail Dive in an email. "With Fedex Office locations in-store, Walmart becomes even more of a destination for many needs, and impulse buys. The next possible step is the synergy of making both Fedex and Walmart stores as pickup points for in-store pickups," he said. "Again this caters to additional purchases, as 58% of pickups result in additional buys." Read more at RETAIL DIVE
A_S Management

Complacency is comfortable, but the results can be costly

There are myriad reasons why organizations fall behind when it comes to updating their products or improving existing services. Regulatory uncertainty, budgetary constraints, insufficient staffing, technology concerns, outdated business philosophies and a fear of the unknown are reasons I often hear from credit union leaders who aren't satisfied with their existing performance, but who are hesitant to revisit their overdraft program strategy to increase revenue and improve member service.

But maintaining the status quo in an increasingly competitive industry can have far-reaching consequences. And the results may not only negatively impact the credit union's performance, but also prove detrimental to its workforce and the level of service provided to members.

For instance, while waiting for new regulatory input on overdraft strategies over the past several years, some institutions have allowed their program to become stagnant or have decided to forego implementing a compliant overdraft solution until a final ruling was announced. As a result, many existing programs are most likely outdated which creates increased risk for examiner scrutiny and sub-par results. Both of which can be perilous in regard to reputational and competitive capital.

Will New CFPB Leadership Select More Than One ARM Industry Rep for Advisory Board?

ARM industry professionals have been applying to get on this board since its inception. To date, only two individuals have been selected: Joann Needleman, former NARCA president and currently a partner with Clark Hill, served a three-year term which ended last August; Ohad Samet, the CEO of debt collection firm True Accord, began a three-year term last September.

While Needleman was a long-time ARM industry veteran and leader when appointed to the CAB, Samet was a relative newcomer to the industry. We wrote at the time,

For those who don't recognize the name, Ohad Samet of One True Holding Company is the new member who was selected to represent the ARM industry on the Consumer Advisory Board. This is an interesting choice. Founded in 2013, his debt collection firm, TrueAccord, is based on a primarily digital collection model, which is currently considered to be unconventional for the industry. A newcomer to collections, TrueAccord is not hampered with legacy systems or processes, or evidently with clients who are too conservative to pursue the strategy. To get a sense of the firm's philosophy, read this article by Ohad, which we also published today. Read more at insideARM

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ILLINOIS: Check Cashing Fees Raised on Payroll Checks, Lower on State Assistance

People who use Illinois currency exchanges will pay less in fees to cash certain types of checks. It's part of an overhaul of the state's check cashing fee structure.

The fees for cashing state assistance checks went down, while rates on payroll and personal checks both went up. Customers will also pay different fees depending on how much the check is worth.

That was the deal reached by the currency exchange industry, which indicated higher rates were needed to cover their costs.

But Conner Kerrigan, who works at a Chicago employment agency, said the fee hikes on paychecks spell trouble for those who don't earn much money.

"Each percentage point currency exchange companies take out of the paycheck of a low-income family, is another drop in the bucket that will eventually drown the marginalized people of the state of Illinois in economic immobility," Kerrigan said. Read more at NPR ILLINOIS

GAO recommends ways to bolster banking in low- and moderate-income areas

The U.S. Government Accountability Office (GAO) made several recommendations on how low- and middle-income communities can be more effectively served by the banking industry.

The Community Reinvestment Act (CRA) is a law designed to encourage banks to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income areas. A 2015 study by the Federal Deposit Insurance Corporation found that 7 percent of U.S. households were unbanked-meaning no one had a checking or savings account-and about 20 percent were underbanked.

The GAO study found that low- and moderate-income (LMI) communities have at least as many banks and credit unions nearby as middle-income communities in rural areas and larger metropolitan areas. However, they have fewer than in smaller metropolitan areas.

To find out how those areas could be better served, the GAO reached out to stakeholders for feedback. The stakeholders included consumer advocacy groups, financial industry members, and regulators.

They shared several options that could serve as incentives for financial institutions to provide basic banking services and small-dollar loans in LMI areas. Specifically, those suggestions include revising the lending and service tests, expanding CRA to include all bank affiliates and nonbanks, expanding assessment areas, and issuing additional guidance.
National Debt Holdings
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