February 22, 2018

Dreher Tomkies LLP

How the CFPB Plans to Scale Back Its Regulatory Mission

Acting Director Mulvaney says the agency won't go beyond Dodd-Frank in regulating financial services

The acting director of the Consumer Financial Protection Bureau outlined a less aggressive regulatory mission for the watchdog agency, saying it will enforce consumer protections but not go beyond its mandate under the Dodd-Frank law.

The mission statement by Mick Mulvaney, released Monday, said the CFPB's main goals are to "ensure that all consumers have access" to consumer financial products and services and to "implement and enforce the law consistently" to ensure that markets "are fair, transparent, and competitive."

The statement also said it will focus on protecting the legal rights of the financial companies it regulates and will write new rules that address what it deems as unwarranted regulatory burdens.

The new direction is a sharp departure from the aggressive regulatory stance taken by the CFPB's first director, Richard Cordray. Under his watch, the agency targeted a number of financial services companies it felt were misleading or cheating consumers, often resulting in fines and other punitive measures. Read more at CONSUMERREPORTS.ORG

CALIFORNIA: Democrats Seek to Ban High-Interest Consumer Loans

California Democrats have filed a bill that would cap annual interest rates at 19 percent and wipe out about $2.7 billion in loans to California residents.
Assemblyman Ash Kalra (D-San Jose) and Sen. Holly Mitchell (D-Los Angeles) introduced AB-2500, which would set a 19 percent interest rates cap for consumer loans with balances of between $2,500 and $10,000. The legislation in the last three weeks has picked up eight additional Democrat co-sponsors.

The California Legislature ended interest rate limitations for small loans above $2,500 in the 1980s. As a result, there was an estimated $1.5 billion in un-bankable intermediate-term loans issued to state residents, with over half the lending is at annual interest rates over 100 percent or more.

The new bill does not target very short-term pay-day loans, which can charge interest rates of up to 400 percent annualized to borrow up to $500 to bridge the gap between paychecks. But it would raise the cap from $2,500 to $10,000, for loans subject to a 19 percent interest rate limit.

The Expanded Military Lending Act Regulations

The Military Lending Act's ("MLA") lending restrictions are expanded to apply to consumer credit card issuers and unsecured consumer lenders. Compliance in most areas was mandatory as of October 3, 2016, but as to credit cards the mandatory compliance date is October 3, 2017. This results from the July 21, 2015 Department of Defense ("DoD") final rule amending the Military Lending Act's regulations. Included are depository institutions not previously subject to the regulations. Compliance with the expanded regulations require adjustments to financial products offered to military members and their families.

The Act and its Amendments
The Military Lending Act, 10 U.S.C. § 987, originally became effective on October 1, 2007. It has been amended twice in 2013 and 2015. The MLA was designed to deter loans that charged excessive fees and interest rates, disregarded a borrower's ability to repay, or those that established unrealistic payment schedules. It prohibits the securing of loans with checks, electronic access to bank accounts, vehicle titles or allotment of military pay. Read more at NATIONAL LAW REVIEW

CFSA Conference

House passes bills to streamline regulations for financial services companies

The U.S. House of Representatives passed two bills that seek to reduce regulations for financial services companies.

H.R. 3978, sponsored by Rep. French Hill (R-AR), is a legislative package of 5 bills. That package includes the TRID Improvement Act (H.R. 3978), which requires the Consumer Financial Protection Bureau (CFPB) to allow for the calculation of the discounted rate title insurance companies may provide to consumers when they purchase a lenders and owners title insurance policy simultaneously. It also includes the Protection of Source Code Act (H.R. 3948), which requires the Securities and Exchange Commission (SEC) to first issue a subpoena before making a person furnish to the SEC algorithmic trading source code or similar intellectual property.

Further, Hill's package of bills includes the Fostering Innovation Act of 2017 (H.R. 1645), which extends the exemption available to emerging growth companies (EGCs); the National Securities Exchange Regulatory Parity Act (H.R. 4546), which says the state "blue sky" exemption shall be available for all securities that qualify for trading in the national market system; and the S.A.F.E. Mortgage Licensing Act (H.R. 2948), which provides a temporary license for loan originators transitioning between employers.

This legislative package passed 271-145 in the House.

House advances bill to provide more access to loans through fintech

The U.S. House of Representatives passed a bill that would provide consumers and small businesses with more opportunities to access loans through financial technology products.

The Protecting Consumers' Access to Credit Act of 2017 (HR 3299) clarifies recent legal confusion that has limited the ability of consumers and small businesses to use the modern financial services marketplace.

Specifically, the bill, introduced by Rep. Patrick McHenry (R-NC) and Gregory Meeks (D-NY), says bank loans that are valid when made as to their maximum rate of interest in accordance with federal law shall remain valid with respect to that rate regardless of whether a bank has subsequently sold or assigned the loan to a third party.

"We applaud Reps. McHenry and Meeks for introducing this legislation that helps consumers by strengthening capital markets and competition, and we urge the Senate to take up this legislation and pass it immediately," Lisa McGreevy, president and CEO of the Online Lenders Alliance, said.

Three Tips to Improve Credit Card Processing Costs. by Adam DiVeroli

As a business, each expense counts, including credit card processing costs. Credit card processing is a necessity to businesses today, but it comes at a price, is very complex, and complicated to understand. Furthermore, for online businesses and companies with recurring customers the threats of fraud and loss are very high. To improve your company's profit margin and reduce risk, we discuss steps you can take to protect your sales and mitigate expenses, potentially saving thousands of dollars each year.

Chargeback Management
Chargebacks can be the death of a business, not only as a loss of revenue, sales and product, but with the potential loss of card processing services. The card brands have specific tolerances based on the ratio of sales to chargebacks and disputed transactions. Anything over a 1% ratio of chargebacks to sales, jeopardizes your ability to accept credit cards as a form of payment.

When shopping for payment processing services, processors look at each of the KPIs of your current processing to establish your risk profile. The more chargebacks that you have increases the processor's risk of loss, as such your processing rates will be adversely affected. Merchant Boost employs a team of Certified Payment Professionals (CPP) with the expertise and experience in helping businesses better manage their payment ecosystem. We can help you to not only win a chargeback dispute, but also identify and reduce chargebacks from occurring in the first place.

Converting More Leads to Loans. by Noah Fitzgerald, CPP

The Problem: Lenders are missing opportunities. There are good borrowers that are declined. There are approved applicants that never originate.

Impact of the problem: There is lost time and money spent on finding and buying leads that are not converted. Declining good business is lost revenue and loss of good client.

Why is there a problem: Lack of recent and live data available on borrowers. Traditional data on borrower is aged and not relevant to their current position. There isn't credit data available for an applicant as they are new to country, new to seek loans, millennials, or baby boomers that have never used their credit.

Scope of the problem: A sizable % of all approvals never convert to an origination. 30-60% of all applicants are declined.

Opportunity: Just a 5% uplift in good originations that outperform existing default ratios of 15% that were originally declined, increases profitability significantly. Found money at higher margins with reduced risk. Reduce the loss of time and money invested into developing a lead.

Banks Like The Trump Regulatory Regime

When Donald Trump ascended to the presidency, he promised to radically scale back the reach and power of Dodd-Frank, the 2010 law designed to rein in excesses on Wall Street.

A year later, Dodd-Frank still remains on the books in full - though there is some motion on a bill that would dial it back a bit.

Nonetheless, according to Financial Times Reports, Wall Street is warming to the Trump regulatory era. An era that is, primarily, defined by lack of regulation on the whole - since Trump took office no major new financial regulations have been imposed or even really considered.

The Trump Treasury has also been instrumental in bringing Wall Street on board, as the new vision involves bringing down the level of regulatory burdens on the banking industry. Going hand-in-hand with that change is the actual regulatory supervision of banks, which has been described as "less abrasive" under new regulators that are less interested in micromanaging the FIs under their care.

"You could take any provision in [Dodd-Frank], and you could have a very strict or moderate or liberal interpretation," says Terry Dolan, chief financial officer of US Bancorp, America's fifth-biggest bank by assets. "Just the tone at the top has changed; it's a little bit more pro-growth and pro-market."

Those people who rely on small-dollar loans are real Americans

Bureaucrats in Washington are often accused of being out of touch with the citizens who pay their salaries. Time after time, Washington elites make decisions about education, healthcare and taxes that show they're out of step with the needs and wants of American voters.

A perfect example of this disconnect came last October, when Richard Cordray, then director of the Consumer Financial Protection Bureau, released his Vehicle, Title, and Other High-Cost Installment Loans Rule - also known as the small-dollar loan rule. Now millions of people are at risk of losing access to much-needed credit.

For most Americans - especially those who are more financially secure - the CFPB's rule may have gone largely unnoticed. There wasn't a big debate in Congress; and if you rely on traditional banking services you likely won't feel the impact. But I know the effect this rule will have, because I've used these small-dollar loans, and they helped me get my life on track.

The CFPB claims these regulations are essential to protect consumers; but this is simply not the case. Financial decisions should be left to the consumer; only the consumer can truly protect themselves and know their dire financial needs. Worse, these rules will do more harm than good - putting 80 percent of lenders out of business and leaving the more than 15 million American households who use these loans each year with nowhere to turn but the unregulated market. Additionally, tens of thousands of the hard-working people employed in the industry will lose their jobs. Read more at WASHINGTON EXAMINER

A_S Management
CFSA Conference

Financial literacy: Many Americans lack it. by Walt Wojciechowski

The unbanked and underbanked have their reasons for frequently preferring to use cash as opposed to credit cards in their day-to-day purchases. A considerable number of those who don't have bank accounts at all simply don't have enough money to justify setting them up. A less common - but no less important - reason is a (perhaps incorrectly) perceived lack of understanding regarding financial matters. But it isn't just the unbanked and underbanked whose financial literacy may be lacking. The same can be said for much of the nation's citizens - "banked" or otherwise. When it comes to financial understanding, 33 percent of respondents in a 2017 Equifax poll gave themselves a "C" average. Much of this may be due to a limited initiative to better inform themselves. For example, in the same poll, when participants were asked what they had done to improve their financial literacy over the course of the previous 12 months, close to 40 percent said they hadn't done anything specific. Of those who had consulted educational resources, 45 percent turned to articles from newspapers or online destinations. 22 percent of 15-year-olds weak in financial proficiency

Financial illiteracy is an issue independent of age, other polls show. Nearly 1 in 4 U.S. -based teenagers - specifically, those who are 15 years old - lack basic financial comprehension skills, according to survey data from the National Center for Education Statistics. In testing conducted by the Program for International Student Assessment, 15-year-old Americans scored lower than teens from six other countries: Spain, Lithuania, Slovakia, Chile, Peru and Brazil, respectively. With age traditionally comes wisdom - but not necessarily in the financial literacy department. In an exam that tested retirees' understanding of how to stretch their dollar further - so it lasts their post-career years for as long as possible - just 5 percent of respondents passed with a B or better, according to the American College of Financial Services. In fact, 74 percent of those who took the examination failed, answering fewer than 60 percent of the questions correctly. Read more at MICROBILT

Under Trump, consumer agency promises to do the bare minimum, and nothing more

Let's say there was a federal agency charged solely with protecting consumers from financial abuse. And let's say that agency was so good at its job, it succeeded in returning $12 billion to consumers who had been ripped off by greedy banks and lenders.

How would you reward that agency?

If you're President Trump, the answer is to slash its funding by 23% and get rid of rules "that unduly burden the financial industry."

The $4.4-trillion White House budget proposal unveiled last week drew heat for its generous allotments to the military at the expense of social programs, as well as its ridiculous pretense that $1.5 trillion in much-needed infrastructure spending would be provided mainly by state and local governments.

I also pointed out that the budget plan included only halfhearted measures to fulfill Trump's stated goal of reducing sky-high prescription drug prices.

Nearly overshadowed by these developments was the budget's defenestration of the Consumer Financial Protection Bureau, which Trump has made a top policy goal.

It's been clear since our businessman-in-chief took office that he had no love for a federal consumer watchdog - and that his administration was more than happy to dance to the tune of financial-services industry lobbyists who wanted it dead. Read more at LOS ANGELES TIMES

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