NEWS: August 10

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CFPB Regulations Threaten Credit Market Competition

The Consumer Financial Protection Bureau (CFPB), the agency tasked with protecting consumers from "unfair, deceptive, or abusive" financing practices, is now looking to require an ill-defined class of "lenders" to record and report the gender, ethnicity and race of credit applicants, something that our legislative tradition prohibits.

According to the CFPB information request: "The purpose of section 1071 provided in the statute is: (1) To facilitate enforcement of fair lending laws; and (2) to enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses." When did small businesses become a protected group that the CFPB must look after? When did the CFPB determine that discrimination is a problem in small business financing?

Lending discrimination has been a widely researched topic for decades and many government and private agencies have monitored this issue. Apparently the CFPB feels that lenders still discriminate and that it needs to collect data to measure "discrimination" against women and ethnic minorities and, for some reason, against "small businesses".

There are two kinds of discrimination: "institutional" in which lenders have policies which systematically operate against certain applicants by race and gender (such as the old "red lining" policies) and "personal" in which the individual handling an application doesn't like the applicant and denies access to credit. Personal discrimination likely occurs but is impossible to document and prove, so it would appear that the CFPB wants to look for institutional discrimination and expand the concept of "lender" to rope in new institutions to examine. But it is unlikely that any lending institutions of consequence are institutional discriminators after decades of operating under the Equal Credit Opportunity Act (ECOA), a law passed in 1974 "which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance." Read more at FORBES
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If Richard Cordray resigns to run for Ohio governor, payday lending spat could erupt

WASHINGTON -- Political wags debate whether he will or won't. But if Richard Cordray resigns from his job as the nation's top consumer finance cop so he can run for Ohio governor, it could trigger a more intense debate, consumer advocates and attorneys say.

The question: Would Cordray leave the Consumer Financial Protection Bureau before issuing a rule cracking down on payday lending? More than two years in the making, the proposed rule represents the core mission of Cordray's bureau, which is to protect consumers from unfair or predatory financial practices.

Put aside the debate over whether payday lenders serve a need, providing quick cash to low-wage workers between paychecks, or are the legal equivalent of loansharks, charging exorbitant interest rates. That has played out already. Cordray's proposal would tie the ability to borrow to a borrower's ability to repay.

But the rule isn't ready. Maybe it will be soon. The CFPB won't say, but outsiders who watch the bureau closely say Cordray's employees are working feverishly on it.

But to issue a rule or approve new initiatives, the CFPB director must sign off. Attorneys say if Cordray leaves before the payday rule is ready, he will almost certainly trigger political and legal challenges over whether his Number 2 executive has the right to step in -- if this didn't first prompt President Donald Trump to effectively take over and shut down the rule.

"We don't want him to leave," said Karl Frisch, executive director of Allied Progress, a liberal group that has focused heavily on the fight to clamp down on payday lenders.

The reason for Cordray's possible resignation -- the fact that he could become the Democratic nominee for Ohio governor, if he could beat several other people planning to run -- "doesn't matter to us," said Frisch, a former Democratic operative.

Cordray, the bureau's first Senate-confirmed director, has nearly a year left in his five-year appointment, and Frisch says he and other consumer advocates want to see that work continue. Cordray's agency regularly announces crackdowns on lenders and collection agencies it says are overly aggressive, and it is working to implement a new rule that would bar credit card companies and banks from keeping borrowers out of group lawsuits claiming abuse.

"It would be horrible to see that work unwind," Frisch said. Read more at CLEVELAND.COM
House GOP outlines contempt case against Cordray

Republicans on the House Financial Services Committee have laid the groundwork to hold Consumer Financial Protection Bureau (CFPB) Director Richard Cordray in contempt of Congress.

Staff to GOP lawmakers on the Financial Services panel, who've already called for Cordray's dismissal, released a report Friday outlining their case. The report claims Cordray violated several committee subpoenas issued in April related to the CFPB's forced arbitration clause rule.

The report claims that Cordray failed to turn over documents that committee Republicans requested from the CFPB in April related to the arbitration rule, which was finalized late last month.

Financial Services Republicans have long threatened to hold Cordray in contempt of Congress for failing to respect subpoenas, while the CFPB has insisted it's done what's required.

While Republicans haven't filed a formal legal challenge yet, it's the latest escalation in the contentious relationship between the GOP and CFPB.

Republicans say the CFPB, established in 2011 by Dodd-Frank to police predatory lending, is an unaccountable agency strangling banks and bullying financial services providers with overreaching, unconstitutional regulations and enforcement actions. They've passed sweeping legislation to rein in the bureau, limit it powers and give lawmakers control of its budget.

GOP lawmakers have also criticized Cordray's record leading the CFPB. Republicans paint Cordray, the former Democratic attorney general of Ohio, as a partisan using the bureau's expansive powers to bolster his political profile before a rumored 2018 gubernatorial run.

Democrats have fiercely defended the bureau since its inception and praised Cordray's work.
Student Loan Giant Faces Trial Over U.S. Claim It Duped Borrowers

Student loan giant Navient Corp., the industry's largest, has suffered a pair of courtroom defeats in its attempt to block government lawsuits alleging borrowers had been mistreated.

The losses come in a trio of lawsuits filed in January by the U.S. Consumer Financial Protection Bureau and state attorneys general of Washington and Illinois. They collectively allege Navient mistreated hundreds of thousands of student debtors by taking shortcuts to minimize its own costs, while adding what the CFPB said was as much as $4 billion in interest charges to borrower loan balances.

Navient illegally steered struggling borrowers facing long-term hardship into payment plans that temporarily postponed bills (while interest continued to accrue), the officials alleged, rather than helping them enroll in federal programs that cap payments relative to their earnings and offer the promise of loan forgiveness. Navient has denied the allegations.

On Friday, U.S. District Judge Robert D. Mariani in Scranton, Pennsylvania, denied Navient's motion to dismiss the CFPB lawsuit. Mariani wrote in his ruling that Navient's argument that its activities complied with the Higher Education Act, Department of Education regulations, and its loan servicing contract with the Education department didn't relieve the company of its obligation to not commit unfair, deceptive, or abusive acts in violation of the Consumer Financial Protection Act.
Incite Business
Russian authorities cracking down on payday loans

Small payday loans have become very popular among low-income Russians, and are often the only way some can make it to the next wage packet. But exorbitant interest rates have prompted authorities to curb the market.

When someone needs a hundred dollars for a few days before he gets paid, there is a strong possibility he will not bother going to a bank. If friends can't help, he's likely to approach money lenders.

Payday loans in Russia are usually given for no longer than a month. The amounts are rarely more than 30,000 rubles (about $500), however returning it on time can prove difficult.

The money lenders typically charge 600 percent annual interest. This means a borrower owes $750 on a $500 loan at the end of the month.

This forces the needy borrower to take out more loans to pay off the debt. And in this vicious cycle, they pay 600 to 800 percent interest rate per year.

Russian President Vladimir Putin has attacked the practice, comparing the money lenders to the old pawnbroker woman in Fyodor Dostoevsky's Crime and Punishment. In the book, the antagonist kills the woman in despair to pay off the debt.

Russia introduced a law at the beginning of the year which limits the interest to 300 percent of the principal amount. This means, on a $100 loan, the maximum sum one would pay would be $400. Penalties could only be applied to the due part of the loan, according to the law. Read more at RT.COM
RT America  is a TV channel based in  Washington, D.C. , and part of the  RT network , a global multilingual television news network based in Moscow, Russia. RT is a non-profit organization in part funded by the  Russian government
Community Involvement
Giving back to the communities we serve is of great importance to us at Advance Financial. 
Our Knoxville team partnered with the organization, Random Acts of Flowers, to arrange and deliver flowers 
to those needing encouragement in local healthcare facilities. #AFcares Volunteer Tennessee

Investment adviser gives tips on payday loans

HATTIESBURG, MS (WDAM) -  Mississippi residents who seek payday loans usually use them as a last resort. Investment adviser Dorian Black spoke to WDAM Tuesday and gave tips for people before they apply.

"If you go to one of these places, you want to make sure you go to a place where people actually care about you, and not just the interest they can make off of you," Black said.

There are a lot of reputable businesses that offer payday loans, but Black warns people not to fall for the bad ones.

"People can get in trouble," Black said. "Some of these places prey on vulnerable people who have low incomes. These people borrow this money, and they really don't have a way to pay it back."

The responsibility should also fall on the person asking for the loan. Black tells people that if they can't pay the money back, don't borrow it.

"The individual has some responsibility as well," Black said. "You want to make sure that when that next paycheck comes around, you're going to be able to pay that money back."
If the money is not payed back in time, the person could be charged late fees. Before applying for any loan, it is also a good idea to research interest fees.

According to Black, you should look at every other option before considering a payday loan.
"These are short-term and high interest loans," Black said. "It should be your last resort." WDAM.COM
New overdraft prototypes released by Consumer Finance Bureau

The Consumer Finance Protection Bureau is testing four new prototypes of the model form that banks and credit unions give consumers weighing overdraft protection.

Each of the prototypes is a simple, one-page design aimed at making the costs and risk overdraft coverage easier to understand and evaluate.

People who frequently attempt to overdraw their checking accounts pay almost $450 more in fees in they opted in to debit card and ATM overdraft coverage, according to a bureau study.

An overdraft happens when consumers don't enough money in their account to cover a transaction, but the bank or credit union pays anyway. The average fee for this service is around $34 per transaction, and requires that the account deficit be paid for subsequent deposits
Dreher Tomkies LLP

This Unnecessary Bank 'Service' Could Be Costing You $450 A Year

You go out to lunch with a friend, ring up a $40 tab, pull out your debit card to pay-and, later, breathe a sigh of relief that your overdraft "protection" saved you from embarrassment when your bank account has run dry.

Perhaps you shouldn't be quite so grateful. A new study shows just how lucrative the business is for banks-and adds up what a spender like you may really be paying for the service.

People who overdraft regularly-defined in this case as more than 10 times a year-and who have opted in for overdraft protection are paying about $450 in unnecessary fees a year, according to the Consumer Financial Protection Bureau, which says it examined over 40 million consumer checking accounts. In total, those overdraft fees add up to about $15 billion annually, the consumer watchdog estimates.

Banks charge overdraft fees occur when you use a debit card to pay for something or make an ATM withdrawal, and you don't have the funds in your checking account to pay for it-but the bank covers you anyway. On average, each transaction incurs a $34 fee, the CFPB found.

But thanks to new rules put in place in 2010, banks can't just arbitrarily charge you a fee: If you want this service, you have to opt in. If you don't opt in, the debit card purchase or ATM withdrawal will just be declined-but if you've used a check, you could face a separate fee (for "non-sufficient funds") and the bank can reject the payment. Read more at MONEY MAGAZINE
by FactorTrust CEO Greg Rable

Member-driven. Member-centric. Member-friendly. No matter what you call it, today's members, or consumers, are driving the way businesses interact with credit unions and other providers. It's not exclusive to the financial services industry - consumers are driving the way we do business across the board, demanding that businesses adapt to the way customers most want their needs to be met. But credit unions may be challenged when trying to tailor business to member-specific needs while simultaneously managing risk. The competing and conflicting interests can impact membership and growth in share of wallet.

But a goldmine of data, largely untapped by credit unions, could enhance loan portfolios in the anticipated surge in consumer borrowing. While alternative credit data exists for consumers with less than 700 credit scores - an estimated 113 million consumers - Big 3 bureaus never consider it.

This may be news to consumers. Out of 2,279 U.S. adults recently surveyed, 71% assume major credit bureaus are including all consumer credit history, including non-traditional payments like short-term loans, online, rent-to-own and more. The survey, conducted by Radius Global Market Research in June 2017 and commissioned by FactorTrust, showcases the disconnect between consumers and their own credit data, in relation to the actual data lenders use to determine lines of credit.

Little do these consumers know, the true nature of their payment habits is not being accurately reflected in their credit files. Since the alternative loans they are taking out and repaying on time are not included in their credit profiles, their credit histories are inaccurate and incomplete.

The omission of this type of alternative credit data - short-term loan and rent-to-own payments, for instance - means that consumers who successfully repay these non-traditional loans do not receive the credit they deserve. But, 72% of U.S. adults believe lenders would be more likely to consider a consumer for a loan with information about all of their loans, including alternative credit data. Another 68% said their credit history would improve if it incorporated all of their payments including non-traditional loans. Read more at FACTORTRUST

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

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