AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
November 6, 2018
2018 edition: 88 / 104
VOTE

'Choke Point' Is Frightening Precedent for Bank Regulatory Abuse

Every Halloween, there exists the temptation for bloggers, pundits, and commentators to describe routine events in the news with adjectives like "scary" and "frightening." Sensitive to sounding clichéd or inflammatory, I try usually to avoid using such terminology in my descriptions of the policy process.

Yet after reading through new documents introduced into a lawsuit stemming from the Obama administration's "Operation Choke Point," I find that "scary" and "frightening" actually fit. These documents show that powerful bank regulatory agencies engaged in an effort of intimidation and threats to put legal industries they dislike out of business by denying them access to the banking system.

While I am often outraged about things the government does, now I am truly scared and frightened about the ability of government bureaucrats to shut down arbitrarily whole classes of businesses they deem to be "politically incorrect." As one who champions the FinTech sector and the benefits it can bring, I also worry that such powers may be uses to shut down innovative new industries, such as cryptocurrency, that carry some perceived or real risks.

Choke Point was a multi-agency operation in which several entities engaged in a campaign of threats and intimidation to get the banks that they regulate cut off financial services - from providing credit to maintaining deposit accounts -- to certain industries regulators deemed harmful a bank's "reputation management." The newly released documents - introduced in two court filings in a lawsuit against Choke Point -- show that the genesis of Choke Point actually predated Barack Obama's presidency, and began when President George W. Bush was in power.
NEW NEW NEW
              ACCELITAS
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.

Judge tosses RICO claims against Montel Williams, payday loan site

TV personality Montel Williams and a payday loan website he endorsed do not have to face racketeering charges for allegedly marketing illegal payday loans, a federal judge in California ruled on Tuesday.

U.S. District Judge Jeffrey White in Oakland granted a judgment in favor of Williams and online firm MoneyMutual, saying borrowers suing them failed to show that they participated in coordinated activity to commit fraud, as required for claims under the U.S. Racketeer Influenced and Corrupt Organizations Act. Read more at REUTERS

INSIGHT
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.

Technology is shaking up the financial industry and big banks are struggling to adapt
  • Rapid changes in financial technology, or fintech, are shaking up the global banking industry.
  • Banks must adopt new technologies to survive an ongoing "extinction phase" wrought by such tech, according to Stephen Bird, Citi's global consumer banking CEO.
  • While new technologies cannot be ignored, bankers say the primary aim is to use them to provide the best service to customers.

Pedigrees, some stretching back centuries, are of little use to global banks unless they aggressively adapt to new financial technologies.

That's long been true, but the pace of innovation means financial juggernauts now face what one top executive likened to a mass extinction event.

A revolution in financial technology - often shortened to fintech - has propelled an explosion of new entrants who are shaking up the sector. Established giants, for their part, are fighting to adapt, emphasizing that technology may be changing fast but banking fundamentals are not.

Stephen Bird, CEO for global consumer banking at Citi, said the current changes may be happening on an unprecedented scale, but his bank - established in 1812 - is set to make the transition. Read more at CNBC

CFSA Conference
The voice for the small-dollar, short-term lending industry.
       

JOIN US IN MIAMI
at the premiere conference for the small-dollar lending industry to network with executives and experts, and engage on topics that matter to you.
Register Now

New Bankruptcy Cases Fall 2.2%
Published on October 31, 2018

Bankruptcy filings fell by 2.2 percent for the 12-month period ending September 30, 2018, compared with the year ending September 30, 2017, continuing a series of slight annual declines in new cases.

The September 2018 annual bankruptcy filings totaled 773,375, compared with 790,830 cases in the previous year, according to statistics released by the Administrative Office of the U.S. Courts. The number of bankruptcy cases filed was the lowest for any 12-month period since the year ending June 2007.

A national wave of bankruptcies that began in 2008 reached a peak in the year ending September 2010, when nearly 1.6 million bankruptcies were filed. Read more at U.S. Courts.gov

   TransUnion
Compete in the data-driven lending era

Federal Reserve unveils proposal to ease regulations for larger banks

WASHINGTON (Reuters) - The Federal Reserve said on Wednesday it wants to ease regulations for U.S. lenders with less than $700 billion in assets, a way to lessen the burden on big commercial lenders that do not have volatile Wall Street businesses.

Under the Fed proposal, midsized lenders including U.S. Bancorp (USB.N), Capital One Financial Corp (COF.N), PNC Financial Corp (PNC.N) and Charles Schwab Corp (SCHW.N) would face lower liquidity and compliance requirements, and smaller banks would get even easier treatment.

The proposal stems from a law Congress passed in May that ordered the Fed to reduce regulatory burdens on community and regional lenders.

Under the proposal, which is subject to a comment period and may be revised, there would be four tiers of regulation for banks with over $100 billion in assets. Those with $250 billion to $700 billion in assets could enjoy a reduced liquidity coverage ratio (LCR), which requires banks to hold high-quality assets that could easily be turned into cash. Banks in that range could see their liquidity requirements reduced by as much as 30 percent, the Fed said.
Read more at REUTERS

We Provide lenders with an end-to-end cloud SaaS lending solution fully customized and white labeled for each lending client.

How to Leverage Intelligence to Help Online Lenders

3 Hurdles For Online Lenders
What made this year's conference different? Here's our list.

1. Fraud is getting worse.
Online lenders have no uncertainty about this next point: fraud operators are more crafty, diligent, and costly than ever before. Part of the problem is that all those headline-making data breaches of recently years have leaked torrents of identity data, which fraud operators are now putting to good use. And fraud operators, thwarted by the widespread adoption of EMV chips, are looking for new targets, including online lending, for adding to their ill-gotten gains. Among the realizations here: lenders need better IT defenses as well as identity intelligence that is more accurate and less hackable that the knowledge-based approaches that sufficed in simpler times.

2. The big credit bureaus have more data, but lenders are seeking alternatives.
In the past year or so, several alternative data vendors were acquired by the major credit bureaus. Their approaches, price points, and volume requirements have changed accordingly. Online lenders we spoke to are looking for alternatives; they're really looking for alternative, alternative data resources. In other words, now that the old guard has been acquired, they're looking for other small, nimble companies with unique data sources that have the ability to unlock predictive insights with less data. In a fast-moving market, being alternative can get you the insights that deliver a competitive advantage. Read more at ACCELITAS

  MerchantBoost
We are transforming lending with innovative payment instrument data and technology, increasing credit access to the financially underserved, and reducing fees for borrowers and creditors.

Midterms unlikely to halt Trump administration's regulatory rollbacks

Democrats have ambitions of undoing President Donald Trump's regulatory rollback. However, even if they take back the House during midterms next week, it's unlikely to dramatically reshape the regulatory environment for the banking industry and other financial companies.

Wall Street is predicting a mixed Congress; UBS, Wells Fargo and Nomura are all projecting Democrats will take the House while Republicans will hold onto the Senate. If that scenario plays out, the White House will likely have a hard time pushing forward on another round of tax cuts.

But on financial regulation, the ship may have already sailed.

The administration had the ball rolling in May, when the GOP-controlled Congress passed legislation revising large swaths of the Dodd-Frank Act that implemented a number of post-crisis reforms. The bill tasked the financial regulators, now mostly led by Trump-appointed officials, with paring back some of the Obama-era rules that broadly increased oversight of the financial services industry.

The Democrats would have to take control of both chambers of Congress in order to pass new legislation that would either reinstate those regulations or introduce more stringent standards. Read more at YAHOO FINANCE

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

Announcing First Results from The U.S. Financial Health Pulse

Today's headlines - a soaring stock market, historically low unemployment levels - are obscuring the true nature of people's financial lives. Behind these rosy metrics, millions of Americans are struggling. The median wealth of U.S. households has yet to return to pre-recession levels. Loan defaults are inching upward and credit card debt is nearing an all-time high. Today, CFSI, in partnership with Omidyar Network, the Metlife Foundation, and AARP, is releasing the results from the first-ever U.S. Financial Health Pulse, a groundbreaking research initiative designed to track the financial health of Americans over time.

The U.S. Financial Health Pulse examines eight indicators of financial health, including income, bill payment, spending, saving, debt load, insurance, retirement planning and credit scores. Together, these indicators paint a complete and robust picture of how Americans spend, save, borrow, and plan. The Pulse will be conducted annually, so over time, it will show how these key indicators are changing and how each indicator--and the aggregate number--impact financial health year-over-year.

The Pulse is a wakeup call for industry leaders across private and public sectors, advocates, and regulators to work together to educate, and to develop products and pathways that will help Americans improve their financial health. The Pulse will give these key stakeholders the tools, resources, and knowledge to understand, track, and measure progress.
Read more at Center for Financial Services Innovation

MICROBILT

Capital One, Discover clamp down on lending

Credit card companies are tightening the lending standards for charge cards, a surprising move given the improving state of the global economy and record low unemployment in the U.S.

Capital One and Discover are among the major companies tightening their credit card requirements, saying they want to "become more cautious" in handling credit limits. While they are not concerned with consumers' ability to pay their debts, they do question how much longer the economic recovery will last, as first reported by The Wall Street Journal.

During the Great Recession credit card delinquencies peaked at 6.77 percent, according to the Federal Reserve Bank of St. Louis. They are now significantly lower. In 2018 the rate is about 2.54 percent.

For those looking at scoring a higher credit card limit, there are a few things they can do. Banks generally grant credit based on their assessment of how likely a borrower is to pay their bills. As a consumer, there are a few things you can do to maximize the credit line lenders are willing to extend - and it largely circulates around maximizing your credit score.
Read more at FOX BUSINESS

   Register Now
    
Register Now

JOIN US IN MIAMI
at the premiere conference for the small-dollar lending industry to network with executives and experts, and engage on topics that matter to you.

The Fed Is Relaxing Banking Rules. What Goodies Are the Banks Getting?

The Federal Reserve proposed on Wednesday loosening rules for 16 financial institutions, an important move forward in the Trump administration's effort to roll back bank regulation.

The Fed's proposals would affect banks with $100 billion to $700 billion in assets, including U.S. Bancorp, Capital One and American Express. The changes would not apply to the nation's eight largest banks, like Bank of America and Goldman Sachs, which have significantly more loans and securities on their balance sheets.

The Background
In May, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which pares back some of the regulations introduced after the financial crisis of 2008. The aim was to reduce compliance costs for many banks. Supporters of the law also contended that the banks it covers would not pose a big risk to the wider economy if they were to fail.

The act required the Fed to examine banks with assets between $100 billion and $250 billion and draft specific rule changes that would lessen regulatory burdens. But the Fed's latest proposals would also relax rules for some banks that have more than $250 billion in assets, which drew criticism from Lael Brainard, a Fed governor appointed by the Obama administration.

The Fed's deregulation comes at a time when banks do not seem to be weighed down by regulation. Bank profits are surging, and they are making large payouts to shareholders in the form of dividends and stock buybacks. Read more at the NEW YORK TIMES

LoanPaymentPros
We Provide Lenders with an end-to-end cloud SaaS lending solution fully customized and white labeled for each lending client.

The importance of merchant verification before partnering with other companies.
by Philip Burgess


The relationships that businesses develop with other companies as various forms of corporate partnership are, ultimately, essential to the proper flow and function of the entire U.S. economy. On a more practical, everyday level, these matters are just as important but often become less cut and dried. For example, an advertising agency can start out on the right foot with a particular client, establishing a routine vendor-customer relationship, but in just a few months the account might stop submitting payments for its invoices and go dark - not answering emails or phone calls - when agency representatives attempt to reach the organization.

Fortunately, these kinds of situations aren't common, as there is usually prior indication of something being off with the client, which signals to the vendor that there exists a mistake in need of some rectification. But the possibility that it can happen at all illustrates the importance of merchant verification for companies' B2B transactions.

A broad spectrum of factors must be considered in terms of how they relate to this process, ranging from proper identification of a merchant's issuing bank to various screening procedures that search for possibilities of fraud and other irregular activity.

The basics of merchant verification
The primary purpose of analyzing any transaction, be it B2B or between a business and consumer, is to determine its veracity - identifying the location of its initiation, the financial institution from which it originated and the existence of sufficient funds in the account to cover the purchase, whatever it may be. Ultimately, the biggest difference between verification of B2C and B2B transactions is one of scale, but there are additional factors making the latter more complex. When push comes to shove, though, a fruitful business relationship depends greatly on trust, and because the financial stakes are much higher in B2B transactions, establishing trust by putting orders through a verification process is even more important than doing so for consumer purchases Read more at MICROBILT

 
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.

One-size-fits-all bank regulation is really one-size-fits-none

As The Hill has reported Wednesday, the Federal Reserve released a framework for matching the regulation of 29 large banking companies with their individual risk profiles.

The Fed will accept public comments on this complex, 124-page proposal until Jan. 22.

Perhaps given that the release occurred on Halloween, the Fed's proposal generated frightening talk about the risks this regulatory initiative poses to the safety of large banks and the overall financial system, as well as the health of the entire economy.

Fed Governor Lael Brainard, an Obama appointee, voted against the proposal, arguing "it went beyond Congress's intent and exposed the financial system to unnecessary risk."

Dennis Kelleher, president of the pro-reform group Better Markets, asserted that "deregulating some of the largest banks in the country will make the financial system less safe, less stable and less protected from another crash."

A more insightful comment, though, came from Greg Baer, head of the Bank Policy Institute, when he stated that the proposed regulatory framework "does not do enough to tailor regulations based on banks' risk profiles." Read more at THE HILL

MaxDecisions
Analytics is your competitive advantage!

Real People and Small Dollar Loans. by Charlotte Hays

As you might know, the Consumer Financial Protection Bureau has declared war on small, high interest loans (known as pay day loans) under the rubric of protecting consumers from supposed sharks who will prey upon them in a time of need.

The CFPB wants stringent regulations that can drive many, if not most or all, those who make these loans out of business.

But do consumers really need protection from these lenders? Or perhaps do they sometimes benefit from having this resource, albeit at interest rates that should discourage anyone of making a lifelong habit of obtaining these loans?

In his book, The Journey Back to Now, Robert Sherrill, now a successful businessman, recounts growing up in public housing and spending time in prison. He also did something else that would shock and horrify our bureaucratic elites: he took out a payday loan in order to turn around his life.

Far from denouncing such loans as predatory, Sherrill writes in today's Examiner:

When I got out of prison and wanted to turn my life around, a payday loan allowed me to start my commercial cleaning business, Imperial Cleaning Systems, Inc.

As many small business owners will tell you, starting a company isn't easy - there never seems to be enough money. I needed a simple $1,000 loan to get myself up and running; but I quickly found out that banks and credit unions have regulations and rules that typically hinder those with a criminal background and a turbulent financial history. Read more at Independent Women's Forum

AFSPA
Visit the AFSPA WEBSITE.

NEWSLETTERS
Read past NEWSLETTERS

AFSPA
Update your membership information.
 
AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
 Members own over 64,000 locations and online operations

Alternative Financial Service Providers Association
757.737.4088

315 Tuscarora St., Lewiston, NY 14092
dan@afspassociation.com
www.afspassociation.com