ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

Washington, D.C.

October 5, 2017

The Consumer Financial Protection Bureau (Bureau) has issued a final rule governing the

underwriting of certain personal loans with short term or balloon-payment structures, as well as lenders' payment withdrawal practices for those loans and certain additional installment loan products (Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule or Rule).

For such short-term and balloon structure personal loans, the Rule requires lenders to choose between two ability-to-repay underwriting methodologies and requires lenders to report and obtain information about a consumer's financial obligations and borrowing history from certain consumer reporting agencies that are required to register with the Bureau. For all covered loans, the Rule limits certain repeated payment withdrawal attempts from a consumer's transaction account and requires lenders to provide disclosures related to certain withdrawal attempts.

Read the summary of the rule

Read the final rule

A FACT SHEET summarizing the CFPB rule

Generally, the Rule is effective 21 months after publication in the Federal Register.

FORTUNE

Americans should be able to make their own financial decisions.

This Government Agency Is Seriously Overstepping Its Bounds

The Consumer Financial Protection Bureau (CFPB) has a mission: to protect consumers from unfair, deceptive, or abusive practices. According to a new national poll by the Cato Institute in collaboration with YouGov, protection from deceptive practices is just what the American public wants. Asked to prioritize regulatory goals, the majority of respondents put "protect consumers from fraud" front and center.

Unfortunately, the CFPB continually misses the mark, issuing rules that make splashy headlines but in practice do little to stop bad behavior. Its latest proposed rule, expected to become final soon, doesn't target fraud itself. Instead, it goes after an entire industry and will significantly reduce consumers' access to credit at the exact moments they need it most.

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The CFPB has claimed that these loans create a "debt trap" for borrowers, the majority of whom do roll over the loan. To protect people from these "traps," the CFPB wants to institute new compliance requirements. If payday loan consumers end up accruing fees equivalent to 36% or more of the amount originally borrowed as a result of rollovers, the CFPB's compliance requirements would kick in, requiring lenders to assess the borrower's ability to repay the loan in the two-week period, and limiting the number of times a loan can be rolled over.

But the word "trap" is misleading. In fact, the terms of the loans are remarkably clear. " Borrow $100." "Pay $15 plus the amount borrowed." "Payment is due in full in two weeks." Try putting the terms of any other credit instrument - a credit card, an auto loan, a mortgage-into just 15 words. Even putting such loans into 15 pages would be a challenge. In fact, payday loans are a viable business model precisely because they're fast and require little paperwork, making it feasible for them to lend to consumers who can't get credit.

Those who use payday loans agree. 

As the Cato poll finds, the majority of payday borrowers say they receive good information about rates and fees from their payday lenders. 

The fact that payday borrowers remain in debt longer than two weeks is not evidence of deception; according to a recent Pew survey, the majority of borrowers correctly estimated how long it would take them to pay off the debt, even though for most of them, that would mean several months of repayment.                                       Read more at FORTUNE

WALL STREET JOURNAL EDITORIAL BOARD

President Cordray Strikes Again

He bids to kill payday lending after Trump refuses to fire him.

President Trump hasn't fired Consumer Financial Protection Bureau (CFPB) director Richard Cordray despite ample cause. Yet the economic costs continue to compound-now with the bureau's payday-loan rule that seeks to put the industry out of business.

The CFPB on Thursday finalized its rule regulating the pay-day market. These short-term loans are typically for less than $500 and carry fees of $15 per $100 borrowed. Many low-income Americans use them to pay for emergencies or bills that are due between paychecks.

Payday lending has been regulated by the states, and 15 impose restrictions that in effect ban the business. House Democrats in 2009 proposed sweeping legislation to regulate the industry that never got traction. Dodd-Frank directs the CFPB to supervise pay-day lenders but doesn't include express rule-making authority. But Mr. Cordray has demonstrated time and again that he doesn't see the law as a limit on his discretion.

The new rule requires lenders to conduct a "full-payment" test to ensure that borrowers can repay the loans and fees within two weeks while meeting other major financial obligations. Short-term loans that customers can roll over are capped at three, and lenders are barred from debiting customer checking accounts after two unsuccessful attempts at collection.

These restrictions may seem well-intended, but they in effect allow loans only to unprofitable customers with good credit and prevent lenders from taking recourse against borrowers who don't pay their bills. As a result, many Americans will lose access to an important source of emergency cash.

Mr. Cordray is outraged that "lenders actually prefer customers who will re-borrow repeatedly rather than simply repaying the loan when it comes due." Yet this is how credit cards make money too.

While he portrays borrowers as unwary victims, most understand their options. A 2009 study by George Washington University found that about half of borrowers surveyed had considered other credit alternatives, and more than 80% lacked funds in their bank accounts to cover expenses. Payday loans can prevent borrowers from incurring more expensive overdraft fees.

Mr. Trump may be loath to make Mr. Cordray a progressive martyr by firing him. But his reluctance has allowed the director to do significant economic harm with the pay-day rule and ban on arbitration class-action waivers, which Senate Republicans are unlikely to overturn under the Congressional Review Act.

The recent rule-makings give the President more cause to dismiss the director, and a D.C. Circuit Court of Appeals panel has held that he can be removed at will. Mr. Cordray has appealed the panel's ruling to the full circuit. If Mr. Cordray doesn't now leave on his own, will the President have the will to fire him?      Read more at WALL STREET JOURNAL

Out-of-Touch CFPB Ignores Consumers, Issues Final  Small-Dollar Lending Rule

Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), today released the following statement regarding today's release of the CFPB's final rule on small-dollar lending:

"This federal small-dollar lending rule is a tremendous blow to the more than one million Americans who spoke out against it during last year's comment period. Millions of American consumers use small-dollar loans to manage budget shortfalls or unexpected expenses. The CFPB's misguided rule will only serve to cut off their access to vital credit when they need it the most. The rule is not only misguided, it's hideously complex for loans of a few hundred dollars. The final rule is nearly 1,700 pages - more than 300 pages longer than the proposed rule

"There was an unprecedented outcry against this rule during the comment period - setting a record for a CFPB rulemaking and marking one of the largest of any federal agency. Yet, from the start, the CFPB's small-dollar loan rule was crafted pursuant to a pre-determined ideological agenda that relied on biased data, anecdotes, and closed-door dealings with so-called consumer groups that have long sought to eliminate small-dollar lending.

"The flawed rulemaking process raises serious questions that demand answers. Throughout the rulemaking process - even during the comment period itself - the Bureau ignored the input of small- dollar loan customers, industry, and numerous other experts as it rushed to finalize the rule. While it was clear that the Bureau was on an ideological campaign against payday from day one, the full scope of the rule has been less clear. At one point it covered all small dollar loans, at another point there were rumors that the rule would be bifurcated and what we have today appears to be some kind of hybrid. The shifting scope of the rule seems to be a function of expediency more than anything else .

"The questions about Director Cordray's intentions and ambitions have created a cloud of suspicion over this rule. In particular, the timing of the rule raises questions about whether it was hastily issued to fit an artificial timetable and all the Director's recent actions at the Bureau raise questions.

"The CFPB's coziness with special interest groups during the rule's crafting, its failure to address any kind of illegal lending in this final rule, and its disregard for the consumers who have spoken out against the rule only lend more credence to suspicions of a partisan political agenda guiding the Bureau's actions.

"The CFPB's actions have also raised a fundamental issue of whether the agency has observed due process or simply chosen an arbitrary route in its rulemaking. On several occasions, CFSA raised serious concerns over the CFPB's inaccurate categorization of the unique, individualized comment letters it received. Additionally, CFSA expressed concern about whether the Bureau was appropriately reviewing and considering all public comments as required by the Administrative Procedure Act (APA). CFSA also cited concern about the inconsistent process in which the comment letters were posted to Regulations.gov for public viewing.

"Given the overwhelming volume of customer comments and the CFPB's duty to read each of them, it seems suspect that the CFPB was able to review the comments as it is required by law. Ignoring the people who use small-dollar loans shows that the Bureau has chosen special interests and activist groups over the very consumers it claims to protect."

Dennis Shaul, CEO of the Community Financial Services Association of America

BREITBART NEWS

CFPB Sparks Anger by Pushing Regulation on Payday Lenders

The Consumer Finance Protection Bureau (CFPB) announced a long-awaited crackdown on payday loans Thursday, angering critics who say it could kill the payday loan industry and is a politically motivated move by Director Richard Cordray - rumored to be eyeing a run in the Ohio gubernatorial race.

The rule aims to stop "payday debt traps" by requiring lenders to determine if the borrowers can afford to repay their loans, as well as limiting the practice whereby lenders debit payments from bank accounts, something the agency says can lead to fees and account closures from financially struggling Americans.

"The CFPB's new rule puts a stop to the payday debt traps that have plagued communities across the country," Cordray said in a statement. "Too often, borrowers who need quick cash end up trapped in loans they can't afford. The rule's common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail."

Republicans and free marketeers have criticized the rule for putting an undue burden on payday loan companies, something they say will limit low-income Americans' ability to get urgent money with which to pay bills.

"These restrictions may seem well-intended, but they in effect allow loans only to unprofitable customers with good credit and prevent lenders from taking recourse against borrowers who don't pay their bills," the Wall Street Journal editorial board wrote in a response to the move Friday, adding, "As a result, many Americans will lose access to an important source of emergency cash."

Republicans have bristled at the CFPB since its inception as part of the 2010 Dodd-Frank financial reform bill, have claimed the agency unconstitutional, and have called on President Trump to fire Cordray, accusing him of running a "rogue federal agency."

Adding to the controversy are the maneuverings and meetings from Cordray that indicate he is lining up for a run in the Ohio gubernatorial race. During the summer, he met with a range of left-wing groups, and opponents have claimed Cordray has rushed through the rule so as to line up with his political schedule. He dodged answering questions about his political future during a Labor Day picnic in Ohio this month.

Congressional Republicans have asked for an investigation as to whether Cordray has violated the Hatch Act with his political dealings. Congress can overturn the ruling, although it is not yet clear if it will.                                             Read at BREITBART NEWS

The Final Payday Lending Rule Drops (Now What?)

CFPB Has Spoken: Payday Lending Regs Drop

................And there are a few avenues.

There is the Congressional Review Act, 

which could be used to prevent the rules from ever taking effect and to effectively block any new short-term lending regulation.

"There is already CRA fatigue on the Hill, and moderate Republicans are hesitant to be painted as anti-consumer," noted Isaac Boltansky, the director of policy research at Compass Point Research & Trading.

There is also the possibility that Cordray's replacement, who will be appointed by Donald Trump and will take over in July 2018, could effectively block or change the rule before it ever goes into effect.

And there will be lawsuits, as the industry has said it will sue to keep the regulation from going into effect.

The moral for the story.

These final rules are very likely far from the final word to come from the federal government on the payday lending question. 

Read the entire article at PYMNTS.COM

USA TODAY 

Payday loans face new challenge: Can borrowers afford them?

Lenders that offer payday loans and other small advances to cash-strapped consumers must first determine if the borrowers can afford to repay the debt under a long-awaited federal rule finalized Thursday.

The rule, adopted by the Consumer Financial Protection Bureau, also would curtail repeated attempts by the lenders to debit payments from borrowers' bank accounts, a practice that racks up mounting fees and can trigger account closures.

"These protections bring needed reform to a market where lenders have too often succeeded by setting up borrowers to fail," CFPB Director Richard Cordray told reporters on a conference call.

The rule will take effect 21 months after it's published in the Federal Register.

Retail banking industry representatives criticized the new requirements.

"It is hard to believe just days after the CFPB reported more than four in ten Americans were struggling to pay monthly bills - often because of unexpected or emergency expenses - the Bureau would drive Americans to pawnshops, offshore lenders, high-cost installment lenders and fly-by-night entities," said Richard Hunt CEO of the Consumer Bankers Association.

Dennis Shaul, CEO of the Community Financial Services Association of America, said, "Millions of American consumers use small-dollar loans to manage budget shortfalls or unexpected expenses. The CFPB's misguided rule will only serve to cut off their access to vital credit when they need it the most."                      Read more at USA TODAY

Three Tips to Improve Credit Card Processing Costs. by Noah Fitzgerald

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.

Interchange optimization

The primary cost element of your processing rate and fees is the card brand interchange, which is roughly 85% of your total card processing cost. The monies collected for interchange goes directly to the card issuing bank of the customer's card used for purchase. There are over 900 different interchange rates and fees between Visa, Master Card, Discover and American Express. These rates are set by the card brands and vary based on numerous factors, such as: card type (debit, credit, rewards, business, international, etc.), card present vs. card not present, when you settle your payment batch, the data included with the payment record, and the various combinations of these elements.  Read more at MERCHANT BOOST

Financial Protection Bureau Finalizes New Rules To Curb Predatory Lending, But Will Congress Let It Happen?
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Payday Rule Coming In 2019... MAYBE

While the new rule will soon be published in the federal register, it's going to be at least 21 months before lenders have to abide by these new guidelines - and that's if certain bank-backed lawmakers and the payday lending industry don't succeed in getting it shut down.

Lawmakers have already tried to shut down the CFPB payday rule before it was written. The Financial Choice Act, introduced by Rep. Jeb Hensarling - who received nearly $2 million from the financial sector in 2016 and is already nearing the $700,000 mark for 2018 - would explicitly strip the CFPB of its ability to regulate small-dollar lenders.

That bill is still pending, after passing the House in June on a party-line vote, but seems unlikely to anywhere in the Senate where it would face too much opposition to be passed.

However, Hensarling and his anti-consumer ilk have another tool they will certainly try to use on the payday rule: the Congressional Review Act. That's a (until this administration) little-used law that allows Congress to roll back new federal rules if they disapprove of them.

Congressional Republicans are currently using the CRA to shut down the recently finalized CFPB rule on forced arbitration, though again that measure is currently stalled in the Senate, which has until early November to act or let the rule go into effect.

The other tool, which will likely be deployed by the payday industry regardless of what Congress does, is the courtroom. Just as in the arbitration dispute, where industry trade groups are now suing to halt the rule from being enforced, the payday loan rule seems destined for the courtroom.        Read more at CONSUMERIST

Payday lenders now face tougher requirements

Lenders must make sure the borrower has the means to repay the loan

The Consumer Financial Protection Bureau (CFPB) has finalized a rule requiring lenders to determine whether a borrower has the means to repay the loan.

Currently, payday loan borrowers can secure a loan without financial documentation; usually in the amount of $200 to $500. Since the loans are due in two weeks, borrowers often take out another loan to repay the first one.

The CFPB aims to put a stop to this by preventing borrowers from ending up with a series of loans (each with steep fees) to refinance the same debt.

The new rule not only covers payday loans, but similar products like auto title loans, deposit advance products, and longer-term loans with balloon payments.

Small dollar lenders will also face new restriction on their ability to make repeated attempts to debit payments from a borrower's bank account, resulting in mounting fees and even account closure.

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Despite the celebration among consumer groups, there is some concern that the Payday Lending Rule may be short-lived.

A coalition of consumer groups, called 'Stop the Debt Trap', warned that some in Congress may attempt to repeal the rule. The group says it will fund an advertising campaign to mobilize consumers to oppose any Congressional roll-back. 

  Read more at CONSUMER AFFAIRS

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