January 17, 2019
2019 edition: 005/102


Supreme Court won't hear challenge to CFPB's structure

The U.S. Supreme Court on Monday declined to hear a lawsuit challenging the single-director structure of the Bureau of Consumer Financial Protection. NAFCU has long advocated for a commission structure at the bureau to ensure long term continuity and stability in its policymaking.

The lawsuit - initially brought by the State National Bank of Big Spring, Texas, the Competitive Enterprise Institute and the 60 Plus Association, an Alexandria, Va.-based free enterprise advocacy group - argued that the Dodd-Frank Act effectively gives "unbounded power to the CFPB," that far exceeds what is allowed under the U.S. Constitution.

Last year, the U.S. Court of Appeals for the D.C. Circuit sitting en banc upheld the bureau's constitutionality in another case brought by PHH Corp. However, there continues to be challenges in other courts: the U.S. Court of Appeals for the Fifth Circuit is tentatively scheduled to hear oral arguments March 11 for a challenge to the bureau's constitutionality brought by defendants accused by the bureau in 2016 of engaging in unfair payday lending conduct, and a federal judge in New York - months after the D.C. Circuit's decision - ruled the bureau's structure unconstitutional.

Also of note, the Fifth Circuit in July determined that the Federal Housing Finance Agency's (FHFA) structure, which is also single director, is unconstitutional. Read more at NAFCU

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Effort Continues to End Operation Choke Point

The congressman reintroduced legislation to end the program impacting banking services for debt collectors.

Days after the start of the 116th Congress, U.S. Rep. Blaine Luetkemeyer, R-Mo., reintroduced legislation to implement requirements for federal banking agencies terminating services to certain customer accounts while ending Operation Choke Point.

The Financial Institution Customer Protection Act of 2019 is among Luetkemeyer's efforts to end the controversial Obama-era program in which the Federal Deposit Insurance Corporation and U.S. Department of Justice (DOJ) reportedly applied pressure to financial institutions to cut off financial services to certain licensed, legally operating industries, including debt collection.

The legislation would require federal banking agencies to provide banks or credit unions written justification of any request to terminate or restrict a customer's account, except in instances of national security. The legislation would also require each federal banking regulator to report annually on the number of requests to terminate customer accounts that the FDIC, National Credit Union Administration, Office of the Comptroller of the Currency and Federal Reserve had made to a bank. Read more at ACA INTERNATIONAL

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States Sue to Override Feds for Right to Regulate Fintech. by Kate Patrick

States continue to fight the federal government for regulatory control of financial technology (fintech) companies, and the latest fintech lawsuit contends that feds don't have the legal right to regulate them.

Fintech companies are technology startups specializing in a certain aspect of financial services. Lemonade, for example, offers renter's insurance, SoFi refinances student loans and offers personal loans, and Kabbage provides small business loans.

According to an October lawsuit brought by the Conference of State Bank Supervisors (CSBS) against the Office of the Comptroller of the Currency (OCC), Congress has not authorized the OCC to regulate non-depository institutions, and so fintech companies that do not accept deposits - which is, most fintech companies - should be regulated by the states.

"For more than a century, states have regulated nonbank financial activities," CSBS states in the court filing.

Thus, the CSBS argues, the OCC should not accept formal applications for federal banking charters from fintech companies. The OCC announced it would begin accepting formal applications last summer. Read more at InsideSources, LLC

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Rep. Ocasio-Cortez set to join Rep. Maxine Waters on key financial services committee

Self-described socialist Alexandria Ocasio-Cortez announced on Twitter late Tuesday that she will join California Democratic Rep. Maxine Waters on the influential House Financial Services Committee, which oversees Wall Street and the housing industry.

California Rep. Katie Porter, Michigan's Rashida Tlaib, Hawaii Rep. Tulsi Gabbard, and Massachusetts Rep. Ayanna Pressley have also reportedly been tapped for the committee by Democratic House leaders, and a vote finalizing their appointments is expected within days.

"I am very grateful for the opportunity to sit on this committee as a freshman, and look forward to working under the leadership of @RepMaxineWaters!" Ocasio-Cortez wrote on Twitter late Tuesday. "Financial Services is one of just four exclusive committees in the House. It oversees big banks, lending, & the financial sector."

She added: "Personally, I'm looking forward to digging into the student loan crisis, examining for-profit prisons/ICE detention, and exploring the development of public & postal banking. To start."

The roles would afford the rising far-left Democrats a powerful platform to pursue the sweeping reforms they campaigned on, even as some moderate liberals voiced concerns that intra-party clashes would be inevitable. Ocasio-Cortez, 29, has suggested that the nation's largest banks should be broken up, and she shunned corporate donations during her House run last year.
Read more at FOX NEWS

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Big Tax Break for Business Owners at Risk as Shutdown Drags on

(Bloomberg) -- The longest government shutdown in U.S. history could cause tens of thousands of businesses to make a tough choice about whether to claim one of the biggest perks in the Republican tax overhaul.

Owners of so-called pass-through entities such as partnerships and limited liability companies have to file their businesses' returns by March 15 -- and still don't have the final word from the Internal Revenue Service about who, exactly, qualifies for the 20 percent deduction on business income. Those returns form the basis of their personal returns, which are due on April 15.

The rules were nearing publication when the shutdown began, but could now face delays as the majority of IRS workers, who are responsible for writing the final regulations, and White House Office of Management and Budget employees, who would then review the regulations, are furloughed.

If companies take a position that the IRS challenges, they could be hit with penalties tied to the amount of the underpayment plus interest -- which is 6 percent for the first quarter of 2019.

The break, which could reduce a firm owner's tax bill by as much as one-fifth, was included in the Republican law as a way to cut rates for companies that didn't benefit from the overhaul's slashing of the corporate tax rate. The deduction applies to the hundreds of thousands of pass-through businesses -- from mom-and-pop convenience stores to private equity funds -- and has been regarded as one of the most complicated changes in the tax law.
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2019 Predictions: Consumer Credit, Balance and Delinquency Rates

At the end of the year, lenders have an opportunity to review their portfolios, consider economic indicators, and understand changes in consumer credit. To help lenders prepare for 2019, we shared our annual consumer credit forecast for the auto, credit card, mortgage and personal loan markets in a recent webinar.

The forecast considers various economic factors - such as gross domestic product, home prices, personal disposable income and unemployment rates - to predict consumer debt and serious delinquency rates. Partly due to the strong performance of these economic indicators, we expect originations and consumer balances to increase for most credit products.

Looking at delinquency rates, we forecast delinquency rates to remain at either low or 'normal' levels as lenders have confidence to add slightly more risk to their portfolios. We anticipate lenders will continue to manage risk exposure through loan amount and line management strategies in 2019.

Serious Borrower-Level Delinquency Rates** Read more at TRANSUNION

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OHIO: Will A New Law Finally Solve Ohio's Payday Lending Puzzle?

New regulation promises to make a dangerous option viable for those in need of credit.

Bob Miller did what many struggling Ohioans do when faced with a cash crisis: He got a payday loan. Three years ago, after successfully paying off two other short-term loans, the Newark resident decided to get a third, securing $600 from an online lender to cover a car payment.

Miller, however, failed to read the fine print of his loan, which charged him an annual percentage rate around 800 percent. In comparison, a typical credit's card's APR is about 12-30 percent. Miller, 53, fell behind. His car was repossessed as his loan's exorbitant interest rates turned his life upside down. "Who can afford that?" Miller says, sitting in his apartment, which is filled with Ohio State Buckeyes and patriotic decorations. It is tidy and comfortable, though furniture is sparse. He lounges on a loveseat and his dog, Bevo, is large enough to sit on the ground and lay his head on Miller's leg. "It was so easy to get [the loan], though, because you're online," Miller says.

Miller found himself in what payday loan opponents call a "debt trap," monthly payments that suck cash from bank accounts and do nothing to pay off debt. The inherent nature of the payday loan causes the issue. The loan must be paid off by the borrower's next payday to avoid refinancing charges that are automatically removed from the borrower's bank account, or cash a predated check each payday, until the full loan amount can be paid at one time. This means a borrower could end up paying far more than the loan is worth-without paying off any portion of the actual loan.
Read more at COLUMBUS CEO

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Credit score myths that might be holding you back from improving your credit

Improving your credit is possible, but it's hard to know where to start. There's a lot of misleading information out there, and these credit myths can get in the way of improving your credit score. Your credit score is important for determining things like whether you'll be able to qualify for a loan or credit card offers and the interest rate you'll pay. A good credit score gives you more options for your financial journey.

It's important to be confident when managing your credit, so here are some of the most popular credit myths debunked:

Myth: Checking my credit report will hurt my credit score.
Fact: Getting your free annual credit reports will not hurt your credit scores, and can be an important tool to make sure your information is accurate and up-to-date.
Requesting your free annual credit reports or purchasing your credit report will not affect your credit score. You can - and should - get your free credit reports from every 12 months. Reviewing your credit reports regularly gives you an opportunity to quickly identify and fix any inaccurate information.      Read more at CONSUMER REPORTS

Accelitas is an alternative data resource that delivers the power of AI to reach more underserved consumers and deliver predictive insights that are customized to your business.

People tell Moneyish what financial stability means to them

It means something different to everyone.

Financial stability for Lorena Tomasini, the 32-year-old owner of a life and health insurance agency in Miami, means being able to pay all of her bills while still saving for retirement and finding money to travel. For 21-year-old Ellie, a student loan-saddled college student and seasonal worker at a Nordstrom in Bloomington, Minn., who asked to be identified by her first name, it's "having a peace of mind where you're not worried about whether your income will cover all of your expenses."

For Melissa Blevins, a married 36-year-old blogger and real-estate agent in Springfield, Ill., it would mean being out of debt, having a solid emergency fund and being able to sock away consistent funds for retirement and her three kids' college tuitions.

"There are a lot of people that have plenty of money left over after paying all of their minimum payments, but when you look at the lack of retirement funds, and when you look at the lack of college savings, and when you look at 'We still have debt,' no - there's no security in that," Blevins told Moneyish. In fact, she added, she has never really felt financially stable. "I've never had a good nest egg; I've never been debt-free; I've never reached any of those big goals," she said.
Read more at MARKETWATCH

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Staggering Statistics: Americans are Failing Financially

FinFit, a FinTech company that provides over 125,000 employers with a unique financial wellness benefit platform, reports staggering statistics from their proprietary financial assessment tool. These are real numbers, reported by real people.

In a data assessment based on more than 20,000 FinFit members:
  • 71% do not have enough money on hand to cover 6 month's living expenses
  • 46% do not pay their bills on time
  • 48% spend as much as they make or more each month
  • 12% do not contribute monthly to a savings account, or any type of retirement account
  • 11% have credit card debt in excess of $5,000
  • 12% have student loan debt in excess of $20,000
Everyone has access to industry statistics. Seventy-five percent of Americans live paycheck to paycheck.1 The average American doesn't have more than $400 in savings.2

What isn't available is the level of detail as to how Americans are affected by their financial challenges. As one of the nation's largest financial wellness platforms, FinFit's holistic approach aims to solve individual's current financial challenges before asking them to plan for their future.

The concept of saving money is difficult if you can't see past today's challenge. FinFit provides financial education and resources to help employees set themselves up for success and solve current financial challenges, putting them in a position to better prepare for a positive financial future.           Read more at BUSINESSWIRE

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15 Reasons You'll Go Broke in Retirement

As 10,000 baby boomers turn 65 every day and count down the minutes to retirement, they're also counting their savings - and their fears. They're not alone. According to the latest Transamerica Retirement Survey, the single greatest retirement fear is outliving savings, which was cited by 52% of those polled. Indeed, 38% of workers aren't confident they will be able to retire with a comfortable lifestyle, the survey found, and 46% don't believe they are building a large enough retirement nest egg.

It's time to face your fears. Before you start your retirement journey, learn more about the common reasons why some retirees wind up broke in their golden years. More importantly, learn what you can do now to avoid that fate.

You Abandon Stocks
For those who survived (or are still recovering from) the Great Recession, it's burned-in knowledge that stocks can be a risky investment. After a series of wild market swings in 2018, the benchmark Standard & Poor's 500-stock index ended the year in the red, down 6.2%. The tech-heavy Nasdaq Composite index actually fell into a bear market last year, defined as a drop of 20% or more from a recent peak. It's scary to watch your nest egg shrink as you head into retirement, and the kneejerk reaction may be to pull all of your money out of stocks.

That would be wrong. Retirement experts say you'll likely need at least some of your savings in stocks throughout retirement for diversification and growth potential. Consider this: Despite 2018's woes, the S&P 500 gained an astounding 276.9% since the market bottomed out in March 2009. Read more at KIPLINGER

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Elizabeth Warren asks for ethics inquiry into Mick Mulvaney

Sen. Elizabeth Warren, D-Mass., who is exploring a 2020 run for president, has asked ethics lawyers to look into President Trump's chief of staff.

In a letter sent Tuesday, Warren said acting White House chief of staff Mick Mulvaney, who is also the director of the Office of Management and Budget, may have broken federal law when he reportedly spoke with senior officials at the University of South Carolina about becoming president of the school.

"Under the Stop Trading On Congressional Knowledge Act (STOCK), Mr. Mulvaney 'may not directly negotiate or have any agreement of future employment' with an outside entity unless he discloses the negotiations with the relevant agency's ethics office," Warren wrote in the letter Tuesday, addressed to Sonya White, designated agency ethics official at the Consumer Finance Protection Bureau, and Mark Paoletta, general counsel and designated agency ethics official at the Office of Management and Budget.

"Mr. Mulvaney is one of the top officials in the Trump Administration," Warren wrote. "His compliance with the STOCK Act is crucial to protecting American taxpayer and maintaining public confidence in the integrity of the federal government." Read more at WASHINGTON EXAMINER

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SOUTHERN CALIFORNIA: Payday Loan Operation for Sale
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What to know before you take an advance on your tax refund

In 2017, taxpayers took out more than 1.7 million so-called refund anticipation loans, or RALs, up from 1.5 million the year before, according to a 2018 report from the National Consumer Law Center.
Demand could be higher this year as a result of the government shutdown.
Yet refund-advance products can carry high fees, and consumer advocates warn they should be used only as a last resort.

Getting an advance on your tax refund may seem like a more attractive proposition this year - yet it's not a move to make lightly.

A growing number of consumers have been using financial products at tax time that promise to advance them part of their tax refund. In 2017, taxpayers took out more than 1.7 million so-called refund anticipation loans, or RALs, up from 1.5 million the year before, according to a 2018 report from the National Consumer Law Center. (Another 20.5 million obtained a refund anticipation check, or RAC, up from nearly 19 million in 2016. Such transfers don't speed up your refund, but rather act as a loan of the tax prep fees, which the preparer deducts from the refund when it arrives.)

Part of that swelling demand stemmed from new anti-fraud regulations that took effect last year, delaying refunds until mid-February for consumers claiming the earned income tax credit or the additional child tax credit. Read more at CNBC


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