AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
August 2, 2018

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Treasury calls for sweeping changes in fintech, end to payday-lending rule

The Treasury Department on Tuesday released its blueprint for regulating financial technology, a sweeping document that could influence policy in the emerging industry for years to come.

The recommendations include the endorsement of so-called regulatory sandboxes, which would allow companies to experiment with new services that push the boundaries of current law.

Treasury also called for the end of the Consumer Financial Protection Bureau's small-dollar lending rule, increased control for consumers over their data, and a national data breach notification standard. And it endorsed the fintech charter proposed by the Office of the Comptroller of the Currency. The OCC quickly followed through and offered updated guidance for its charter hours after Treasury released its report.

Some of those proposals are likely to be controversial with lawmakers, bankers and state regulators. Rescinding the payday lending rule will be especially contentious for Democrats, who have pushed for the regulation for years, saying many lenders charge exorbitant rates that entrap borrowers.

"Creating a regulatory environment that supports responsible innovation is crucial for economic growth and success, particularly in the financial sector," Treasury Secretary Steven Mnuchin said in a release. "We must keep pace with industry changes and encourage financial ingenuity to foster the nation's vibrant financial services and technology sectors." Read more at POLITICO


CALIFORNIA: Once again, lawmakers won't crack down on payday lenders

When phone bank worker Melissa Mendez, age 26, felt financially squeezed a few months ago-"I was short on cash and needed to pay rent"-she walked into a Cash 1 storefront in Sacramento and took out a payday loan. The annual interest rate: 460 percent.

That rate would shock a lot of people. Not Mendez, who once worked behind the counter at an outpost of the lending giant Advance America. She had fielded applications for short-term loans from all sorts of people: seniors needing more money because their Social Security check wasn't cutting it, people in between jobs and waiting for a first paycheck, and people like herself, lacking enough savings to get to the end of the month.

Unlike Mendez, many desperate people don't know what they're signing on to-often agreeing to aggressive collection practices, inflexible repayment options and exorbitant interest. "They just point at stuff and walk through it really fast," she said. "A lot of people just see the money and they don't see the interest rates."

In California, 1 in 20 people a year take out a payday loan, amounting to $2.9 billion annually. Payday lending has grown into a multi-billion-dollar industry, fueled by triple-digit interest rates, steep transaction fees and the pervasiveness of its hundreds of stores across the state.

Here's why 1 in 3 college-age Americans consider payday loans with interest rates of 400%

With just six weeks to go before he needed to turn over $600 in rent for his new apartment, Austin Wilson was starting to panic. He simply didn't have the money.

The University of Kansas senior owed his new off-campus apartment complex $500 for rent, plus a $100 one-time community fee, by Aug. 1. The problem was, his student loan reimbursement check that would cover his housing wasn't set to arrive until mid-August.

"I know this money is coming and I know when it's coming, but it's just a little bit too late," he says.

Wilson, a 21-year-old history major, says he wiped out his emergency savings earlier this year after his car broke down and he had to buy a new one. With just $100 left over, Wilson was planning for a thrifty summer: "I'd try to build that up over the summer. I'd tighten my belt. I'd cut back, I'd stop spending money on food."

But he had ailed to read the fine print on his lease. His rent was due Aug. 1, not Aug. 15, when he was scheduled to move in. After he realized his oversight, he scrambled to find a second job to supplement the roughly $400 he makes every two weeks working the front desk on weekends at a senior care center. He couldn't. Read more at CNBC


Dreher Tomkies LLP
Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.

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MICROBILT
With PRBC alternative credit scoring you can now assess the creditworthiness and ability to pay of the 100 million people who have no traditional credit history on file with the traditional credit houses.

New CFPB Strategy: Ask Violators What They Think They Should Pay, Sign Off On It

Office of Management and Budget Director and Deeply Unpleasant Man Mick Mulvaney pronounces himself quite pleased with the work he's done in his third and fourth jobs, running the Consumer Financial Protection Bureau into the ground and making Elizabeth Warren extremely angry. During his eight months at the helm, he's made two things very clear: Banks and others nominally regulated by the CFPB, or BCFP as he likes to call it, now run the show-with one notable exception-and those nominally doing the regulating are under no circumstances to look their "targets" in the eye or speak to them without being spoken to. Suffice it to say, the new mission statement has sunk in fast.

Mick Mulvaney, the CFPB's acting director who has introduced pro-business changes at the bureau, said in an interview the bureau's enforcement strategy now emphasizes negotiating with target companies to settle disputes, rather than moving as quickly as Obama administration officials did to file civil lawsuits.

Mr. Mulvaney added the CFPB would reward companies for self-reporting problems, taking that into consideration when negotiating settlements.... Since Mr. Mulvaney's arrival in November, the bureau hasn't sued a single company....

Lawyers say some themes have emerged from the recent settlements. Of the five cases, three concerned violations in debt collection, an area Mr. Mulvaney said he would be watching closely. Two of the three cases didn't include compensation for affected borrowers, drawing criticism from consumer advocates. Read more at DEALBREAKER


Should your business be performing background checks? by Philip Burgess

To understand the importance of conducting a complete background check, all you need to do is look at the news. Fortune reported how two separate Uber drivers were arrested during the same weekend last summer. One man was pulled over for not where a seatbelt when officers discovered he had marijuana and a loaded, unlicensed gun in his car. The second was charged with sexual assault after refusing to let a female passenger get out of his car. Although both had been prescreened and subjected to a background check, these reviews were not comprehensive enough to discover any past criminal activity or indicate the possibility of future crimes. Notably, the first driver was hired by Uber despite having two earlier weapons-related felonies.

Two arrests for different crimes within one company are bad enough. That said, the consequences of lacking a complete background check aren't always legal - sometimes they're strictly financial. The damage is no small change, however. According to a 2016 CareerBuilder survey, employers say a bad hire costs them nearly $17,000.

Who needs to perform background checks?
Background screening services benefit a wide variety of individuals and organizations. Usually, the idea first brings to mind a human resources department about to hire an employee. For example, a landlord can search the eviction history of a potential tenant before offering a lease. Below are just a few of the types businesses that benefit from background checks: Read more at MICROBILT


New Survey Shows Vast Amount Of Americans Support CFPB

The Consumer Financial Protection Bureau (CFPB) may be hated by Republicans and the Trump White House, but it turns out to have strong support among consumers.

According to the Chicago Tribune, Americans for Financial Reform and the Center for Responsible Lending are planning to release a survey that shows at least 80 percent of Americans are concerned by Trump's recent efforts to limit oversight of banks and payday lenders, and potentially shut down the database of consumer complaints. What's more, the survey is expected to show that a high percentage of Americans are concerned about reduced regulatory oversight of racial discrimination among lenders, more cozy relationships between government officials and industry lobbyists, and laws that will ease the rules for businesses instead of focusing on protecting consumers.

"This survey tells us that people haven't been swayed by arguments that the CFPB is a job killer," said Lisa Donner, executive director of Americans for Financial Reform in the report. "They think financial regulation is important to them, and it needs to be tougher, not weaker. This means the actions being taken by the administration are completely opposite to the will of the people."

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Decision Cloud is a black box platform, which allows users to build decision waterfalls, utilizing Insight's services, as well as a plethora of third party vendor services.

Understanding Alternative Credit Data

When it comes to competing for and analyzing underbanked consumers, lenders cannot solely rely on traditional credit reporting to reveal valuable insight on them.

The Big 3 credit reporting agencies - Equifax, Experian and TransUnion - collect consumer credit information from lending institutions and other creditors, such as banks, credit card companies and auto lenders. They also collect the application information that individuals submit, such as their employment and income data, when they apply for credit cards or loans. Additionally, these agencies gather the financial information that's found in public records, such as court records from bankruptcies, liens or judgements.

The generic credit scores they produce are a great place to start when determining the level of credit risk for a prospective borrower. But statisticians across the industry have found that customizing the score with certain attributes greatly improves accuracy for predicting future credit performance - particularly in the below-prime consumer segment.

Alternative data is a loosely used term that includes the financial data collected from non-traditional lenders, and non-financial payment data.

Alternative tradeline data or credit performance, data collected from non-traditional lenders, is the most effective way of determining how creditworthy an underbanked consumer can be, and is also an absolute must to determine ability to repay. It also successfully unveils new opportunities to best serve them. Read more at FACTORTRUST


10 most stressed cities of 2018

Workplace stress can have a big impact on employees, often leading to higher rates of illness, absenteeism and turnover. While employers have put in place some effective well-being strategies that have made meaningful strides in reducing behavioral and biometric risks, fostering emotional well-being in general, and reducing stress in particular, remains stubbornly challenging.

Office-related stress plays a big part in a new study from WalletHub that compares stress among some of the country's largest cities. The financial site compared the 180 cities across four key dimensions using 37 different metrics: work-related stress, money-related stress, family-related stress and health and safety related stress.

Regarding work-related stress, points were tallied based on things like unemployment rates, average commute times and income growth rates. As for money-related stressors, median incomes and housing affordability were taken into consideration. In addition, family-related stress was calculated using childcare costs rates and parental-leave policies while health and safety stressors were calculated using statistics on increases in annual health premiums, suicide rates and mental health. Read more at BENEFIT NEWS EBN


CFPB loses lawsuit against Cleveland debt collection firm

CLEVELAND, Ohio -- A federal judge ruled against the Consumer Financial Protection Bureau in a lawsuit it filed against a Cleveland debt collection firm that said the firm misled debtors about the involvement of attorneys in collecting debts.

Senior U.S. District Judge Donald Nugent wrote in an opinion released Wednesday that the CFPB did not prove that Weltman, Weinberg & Reis sent demand letters that were false, misleading or deceptive.

The CFPB sued Cleveland firm Weltman, Weinberg & Reis in April 2017, saying the firm's attorneys were not sufficiently involved in sending out the letters, even though the letters prominently mention they were sent out by a law firm and occasionally raise the possibility of legal action for unpaid debts.

The judge said the firm's attorneys were meaningfully involved in the debt collection process. Nugent also wrote there was no evidence that any debtor's decision to pay a debt was influenced by attorney identifiers on the demand letter and that the CFPB provided no evidence that debtors were harmed by the letters. Read more at CLEVELAND.COM


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National Debt Holdings
National Debt Holdings is a professional Receivables Management Company that partners with creditors to purchase and/or manage receivables at all stages of the account life cycle.

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New York State's Flawed Online Lending Report

Earlier this month, the New York Department of Financial Services (NYDFS) released a study of online lending, including findings and recommendations for changes in state law. The report, which included a survey of online lenders, has a number of issues.

To start with, much of the analysis offered up by NYDFS includes no supporting evidence. Repeatedly, the study makes broad assertions without substantiating the claims. For example, the report claims "payday lenders often operate in a regulation-free environment." That is not correct. Numerous federal statues cover consumer credit generally, such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Electronic Funds Transfer Act, and the Gramm-Leach-Bliley Act. All 50 states also regulate small-dollar loans extensively. Eighteen states and the District of Columbia-including New York-prohibit high-cost payday lending entirely and Arkansas went so far as to impose an interest rate cap in its state constitution.

Another example is the claim that "[s]mall businesses have reported dissatisfaction with their online loans because of both high interest rates and unfavorable terms that are not often clear to the owners." Yet, again, no evidence is provided. If this were truly the case, it would be a useful contribution to the academic literature for the data to be made available, especially given that studies looking into these markets have found the opposite-online lending can be cheaper and fairer than other sources. Read more at Competitive Enterprise Institute


Payroll Cards No Longer Just For Low-Wage, Underbanked Employees

Payroll cards are an important vehicle to ensure that employees - particularly those who are underbanked and unbanked - are able to efficiently receive their wages. Yet, the tool has also earned a controversial reputation, thanks to legal disputes and regulatory concerns over high fees that can come with certain payroll card products.

Clearly, there is room for improvement. In a new report by the Center for Financial Services Innovation (CSFI), authors Kaitlin Asrow, manager of CFSI, and Andrew Dunn, CFSI data associate, explore exactly which aspects of the payroll card is working for today's employees, and which aspects should be considered for a makeover.

In its "Making Payroll Cards Work For Employees" report, published earlier this month, CFSI acknowledges the challenges that payroll card fees impose on its users. Most users of payroll card products are not burdened by excessive fees, the report noted, but there remains a significant portion of users who are burdened in this way. In addressing the issue of excessive fees, the payroll card industry has an opportunity to remake its reputation, from a payment vehicle for employees who have no other option in how they get paid to one that employees strategically choose over other vehicles, like direct deposit, for financial management and convenience. Read more at PYMNTS.COM

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AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
 Members own over 64,000 locations and online operations

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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