June 7, 2018

Payday Lenders Are Making Bank on New, High-Interest Products

Payday lending stocks are beating records. Mostly because they're no longer payday lenders.

Enova International Inc. has more than doubled so far this year, the best performer in the Russell 2000 Consumer Lending Index, followed by rival Curo Group Holdings Corp., up 64 percent.

Helping to drive those gains are a raft of new financing products that carry the same ultra-high interest as payday loans. But, because of their length, size or structure, these offerings aren't subject to the same regulatory scheme.

"We made a big effort over the last five years to diversify our business," said Enova Chief Executive Officer David Fisher in an interview. The diversification was meant, in part, to spread out regulatory exposure, he said.

These products quickly became so popular that Enova and Curo now report that a vast majority of their revenue comes from them rather than payday loans, as before. Enova now mostly offers installment loans and lines of credit. Curo is also largely focused on installment loans too, while also doing some gold-buying, check-cashing and money-transferring. Read more at BLOOMBERG

Mulvaney Sides With Payday Lenders Asking Court to Block Restrictions

Payday lenders fought, and lost, a battle to block new federal rules curbing short-term loans that critics say can trap people in cycles of debt.

Now, with the restrictions scheduled to take effect next year, the lenders have moved their fight to the courtroom, and have gained a powerful ally: the Consumer Financial Protection Bureau, which wrote the rules the industry is seeking to overturn.

In a joint motion filed late last week in federal court in Austin, Tex., Mick Mulvaney, the bureau's acting director, sided with two industry trade groups suing the agency. The bureau asked a judge to delay the rules until after the industry groups' lawsuit is resolved, which may take years.

By then, the entire issue could be moot: Mr. Mulvaney has said he intends for the bureau to reconsider, and perhaps repeal, the rules. To do that, the agency has to follow a formal administrative process, which it has said it plans to begin by February. Read more at NEW YORK TIMES

Dreher Tomkies LLP
OHIO: New Ohio House speaker faces tough payday lending issue

The next Ohio House speaker will quickly confront payday-lending legislation that has become mixed up in an FBI investigation, nasty Republican infighting and accusations of threats and stall tactics.

Some payday lenders say they are willing to compromise. But both the author of the payday legislation and the front-runner to become speaker say the industry's goal is to stall.

Rep. Ryan Smith, R-Bidwell, who could be named speaker when the House meets Wednesday, said he has been attacked by payday-lending interests trying to stop House Bill 123, which seeks to regulate what consumer advocates say are the highest rates in the nation on small-dollar, short-term loans. Too often, critics say, the loans trap low-income borrowers in a cycle of debt.

The bill passed a committee without changes and was set for a House vote in April.

National Debt Holdings
Mulvaney dissolves CFPB's Consumer Advisory Board

Consumer Financial Protection Bureau acting Director Mick Mulvaney has dismissed the members of the agency's Consumer Advisory Board, after complaints that he had canceled two meetings with the panel with little notice.

Anthony Welcher, the consumer bureau's Policy Associate Director for External Affairs, informed board members of the decision on a conference call Wednesday. The members were told that their terms were terminated and they were not permitted to reapply.

"We're doing our best now to execute on sort of what we will define as a different form of reaching out and engaging the community," Welcher said, according to a recording of the call obtained by POLITICO.

A new board will be formed, Welcher said.

"As part of this, we've decided we're going to start the advisory groups with sort of a new membership, to bring in these new perspectives for these new dialogues," he said. "We're going to be using the current application cycle to populate these memberships in the new groups. So we're going to be transitioning these current advisory groups over the next few months."

MINNESOTA: Digging out of Debt: Minnesotans tackle payday loans

FARGO N.D. -- Banks and churches are teaming up to get people in crisis out of payday loan debt.
People in Minnesota are more prone to falling into this debt trap.

In North Dakota, you can have up to $500-dollars in a payday loan. They put you on a registry to make sure you don't take out multiple loans at once.
But getting more loans is as easy as crossing this bridge.

Debt relief workers told us there's no registry in Minnesota. Because of this, Clay County has the highest amount of payday loans in the entire state.

Payday loans are a popular and risky solution to getting cash fast. Michelle Rydz, Executive Director of the High Plains Fair Housing Center, said she went to a lender incognito to see how fast a customer can get manipulated. Read more at ABC WDAY6

CFPB to Resume Data Collection After Data Security Review

Acting Consumer Financial Protection Bureau Director Mick Mulvaney on May 31 said he plans to restart collecting consumers' personal information, ending a hold on that collection he put in place soon after taking over the bureau.

Mulvaney said in an email to staff at the bureau obtained by Bloomberg Law that an outside vendor had determined that the CFPB's information security systems "appeared to be well-secured" following an "exhaustive" review. While there were some changes that needed to be made to the way the CFPB handles data protection, the bureau is putting in place fixes recommended by the outside experts, Mulvaney's email said.

That assurance was enough that Mulvaney will allow bureau to resume collection of sensitive personally identifiable information, the email said.

"This process has been an important exercise in holding ourselves to the same high standards to which we hold the entities we oversee," Mulvaney's email said.

Mulvaney, who also serves as director of the Office of Management and Budget, put in place the hold on collecting personally identifiable information soon after President Donald Trump named him acting CFPB director on Nov. 24. Read more at BLOOMBERG
Consumer bankers lay out concerns about CFPB's complaint reporting process

The Consumer Bankers Association (CBA) offered some complaints about the Consumer Financial Protection Bureau (CFPB) consumer complaint reporting processes.

The comments are in response to a Request for Information the CFPB issued earlier this year on the matter. The CBA lays out three specific areas of concern regarding the complaint reporting process.

The CFPB's complaint database does not protect consumers from re-identification risks and thus creates consumer harm. The CBA also said the publication of complaints might subject companies to inaccurate and unfair criticism that is often subjective and potentially misleading without context or facts. Thus, it may misinform consumers.

Additionally, CBA said the authors of Dodd-Frank did not intend for or authorize the CFPB to share complaints publicly. Plain reading of the statute indicates that they did not specifically authorize it as they have in other contexts.

"CBA members strive to ensure their customers receive a swift and complete review of their complaints and inquiries. In fact, the overwhelming majority of complaints filed with the Bureau are successfully resolved by consumers' financial institutions," David Pommerehn, CBA vice president and associate general counsel, said. Read more at Financial Regulation News

Employment Skip Tracing
Report Demonstrates How Online Lenders Benefit Economy. by Todd Stone

A report on "The Economic Benefits of Online Lending to Small Businesses and the U.S. Economy" was released yesterday, using data from 180,000 U.S. small businesses that represented nearly $10 billion in funding from 2015 to 2017.

The report used data from five online lenders, including OnDeck, Kabbage and Lendio, and was sponsored by the Electronic Transactions Association (ETA), the Small Business Finance Association (SBFA) and the Innovative Lending Platform Association. The report was researched by three economists at NDP Analytics, an independent research firm.

One of the key findings was that the ten billion dollars funded from 2015 to 2017 by five of the top alternative small business lenders generated $37.7 billion in gross output and created 358,911 jobs and $12.6 billion in wages.

"I think the most important takeaway from this study is that small businesses are benefiting from a wide variety of choices in lending products," said Jason Oxman, CEO of the ETA. "And, in particular, the online small business lenders have provided really a remarkable amount of working capital to small businesses in this country."

Oxman told deBanked that he was surprised to learn from the report the percentage of borrowers that operate extremely small businesses. According to the report, 24 percent of online business borrowers operate businesses that have less than $100,000 in annual sales. And two-thirds of online business borrowers had less than $500,000 in annual sales. Read more at deBanked
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