December 6, 2018
2018 edition: 97 / 104

Mulvaney's misfire: CFPB name change could cost industry millions of dollars

Mulvaney's desire to change the name of the agency he runs was a strange one. Insisting that the "Consumer Financial Protection Bureau does not exist" because the Dodd-Frank Act that created it referred instead to the Bureau of Consumer Financial Protection, he changed the agency's logo to BCFP and recommended the financial services industry follow suit.

But here's the thing: Dodd-Frank referred to both the CFPB and BCFP in its statutory language and changing the bureau's name (and its abbreviation) didn't accomplish anything other than to confuse the industry it supervises and consumers it protects.

Then again, maybe that's the point. Critics were quick to accuse Mulvaney of changing the name precisely to lower the CFPB's brand recognition with consumers, particularly given that the former South Carolina congressman was an outspoken opponent of the agency's creation. After all, CFPB gets 3.4 million monthly searches on Google. BCFP doesn't really register. It's hard for consumers to turn to an agency for which they don't even know the name.

Still, the financial services industry mostly shrugged at the name change. Banks, credit unions and their trade groups appear largely to be going along with Mulvaney's plan.


'Unqualified' and 'dangerous' Trump appointee set to take over consumer agency

If all goes according to Republican plan, this is the week a person with no experience in consumer protection will take over the consumer watchdog agency that the party has been steadily weakening to the point of irrelevancy.

Kathy Kraninger, a White House budget official, received the green light for final approval last week after Republican senators shut down debate on her nomination with a party-line vote of 50 to 49. The only wild card is whether memorial services for former President George H.W. Bush will delay action by a few days.

Kraninger would replace White House budget chief Mick Mulvaney, who has been leading the Consumer Financial Protection Bureau on an interim basis and fulfilling President Trump's pledge to make the agency friendlier to the businesses it was intended to crack down on - banks, payday lenders and others.

"If the Senate approves this unqualified acolyte of Mick Mulvaney, who has no consumer protection or financial regulation experience, expect her to simply follow his playbook," said Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group.

That means Kraninger will "leave service members and their families at the mercy of predatory lenders, work with payday lenders to eliminate the payday lending rule even Congress was afraid to vote to repeal, and reduce enforcement penalties, if any, to parking tickets, not punishments," he said. Read more at LOS ANGELES TIMES

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Analysis: How Trump appointees curbed the Consumer Financial Protection Bureau

Mick Mulvaney struck a jovial tone as he introduced the political appointees who would run the Consumer Financial Protection Bureau. One was nicknamed Dreamboat, he said in an email. Another was Mumbles. A third had been a "Jeopardy" contestant.

"They are really great people," Mulvaney, the acting director, wrote in a holiday message to the agency's 1,600 staffers last December.

The levity now seems like a cruel joke to career officials.

One year after Mulvaney's arrival, he and his political aides have constrained the agency from within, achieving what conservatives on Capitol Hill had for years been unable to do, according to agency data and interviews with career officials.

Publicly announced enforcement actions by the bureau have dropped by about 75 percent from average in recent years, while consumer complaints have risen to new highs, according to a Washington Post analysis of bureau data.

Over the past year, the agency's workforce has dropped by at least 129 employees amid the largest exodus since its creation in 2010, agency data shows. Read more at CHICAGO TRIBUNE


$1.3B award upheld against racecar driver Scott Tucker over payday loans

Prosecutors have said he made billions of dollars by exploiting financially struggling Americans, charging illegal interest rates that sometimes exceeded 1,000 percent.

SAN FRANCISCO - A U.S. appeals court on Monday upheld a nearly $1.3 billion award against a pro racecar driver who was sent to prison following a conviction for cheating consumers through his payday loan businesses.

Information Scott Tucker's companies provided consumers did not accurately disclose the loans' terms, a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals ruled.

The judges also said a lower court did not abuse its authority when it ordered Tucker and other defendants to pay back nearly $1.3 billion.

The case was brought by the Federal Trade Commission, which accused Tucker of deceiving consumers across the U.S. and illegally charging them undisclosed and inflated fees.

An attorney for Tucker, Paul C. Ray, said he was reviewing the decision, but he noted that one of the judges said a larger 9th Circuit panel should rehear the case. Read more at NBC NEWS


CFPB's Brian Johnson Makes Strong Case For Consumer Protection And Free Markets

Last Thursday, the Senate advanced the nomination of Kathy Kraninger to be the next director of the Consumer Financial Protection Bureau. The nomination had drawn the ire of Sen. Elizabeth Warren (D-Mass.) and other critics, and the Senate vote was along strict party lines.

Most of the criticism of Ms. Kraninger has had little to do with policy, so people have to look elsewhere to see what's really going on at the Bureau.

And the best place to look is at a recent speech given by Brian Johnson, the acting deputy director of the CFPB. It is a great speech, and it clearly answers the bureau's critics who insist the Trump administration is "undermining the bureau's mission, or putting the financial interests of banks ahead of consumers, or dismantling the agency from within for political gain."

Johnson explains that, rather than run roughshod over consumer protection, the bureau is trying to guard the only type of consumer protection compatible with a free society. Too often, though, people fail to take the time to really understand each other, and that does not help the Bureau do a better job of protecting anyone. As Johnson notes near the beginning of the speech:

So, if folks want to believe that we're somehow trying to harm consumers, that is fine. We have thick skin. But it's not really productive, because you certainly won't convince us that that is our intention, and it tends to distract from our shared mission. The harder and more rewarding thing to do is to exchange ideas, to be exposed to different perspectives, and hopefully to learn from one another. Read more at FORBES

Promoting fair, equitable, and nondiscriminatory access to credit: 2017 Fair Lending Report

Access to credit is a key to economic mobility and prosperity for consumers and small businesses alike. Our annual Fair Lending Report to Congress highlights how in 2017 we continued to focus on promoting fair, equitable, and nondiscriminatory access to credit in mortgage lending, continued fair lending supervision of servicing and small business lending, and embarked on new efforts to encourage innovation in expanding credit access.

As the report explains, in 2017 the Bureau:
  • announced enforcement actions to address discrimination by a bank in its credit card lending, and against a mortgage lender that failed to report accurate data about the applications it received and loans it made to consumers
  • monitored lenders and servicers for compliance with the anti-discrimination laws under the Bureau's jurisdiction
  • issued a "no-action" letter to a company that uses alternative, or non-traditional, data to make credit and pricing decisions to support innovation and enable people with limited credit history, among others, to obtain credit or obtain credit on better terms
  • led efforts to collaborate with other federal banking regulators to issue new guidelines on how examiners evaluate whether covered mortgage lenders are reporting accurate data


Shocking payday loan schemes motivated this KC startup, which just won $1 million

Kansas City - a hotbed of illegal payday lending - has hatched a million-dollar idea for combating the often criticized industry.

On Tuesday, The Rockefeller Foundation and Chan Zuckerberg Initiative announced that Onward Financial Inc. is one of 10 companies in the country to receive $1 million grants from the Communities Thrive Challenge. The winners were chosen from more than 1,800 applicants nationwide.

Onward Financial is a program for employers that encourages their workers to start a savings plan, learn about personal finance and, if needed, borrow for emergencies at low interest rates. The program works through an app.

"I've been working on this for about two years," founder Ronnie Washington said of the personal finance app. "It means everything, quite honestly."

The money roughly triples his budget. It means hiring staff and expanding the program beyond its still tiny Kansas City footprint. Being the youngest grant recipient, Onward Financial gains validation that could open other doors and help attract other funders.

Washington, who is based in Washington D.C., launched the program in Kansas City partly because it's been a hub for the payday loan industry. Read more at THE KANSAS CITY STAR


Is Artificial Inelligence The New Debt Collector?

Debt collection may be among the more human and manual labor-intense activities when it comes to managing accounts receivables. Collections departments place calls, scores of them, send emails, and seek to work out payment plans - and very frequently none of the above translates into recovery of monies owed.

In fact, that happens only 20 percent of the time, at best. That's in part tied to legislation that is decades old, such as was passed in 1991, which allows consumers to tell collectors to stop contacting them, and to the traditional methods of collection that are based on phone calls and letters and repetition.

The mismatch between efforts and success speaks to a looming - and significant - issue for corporations of all sizes and across all manner of verticals, but especially for financial institutions trying to manage credit card and student loan debt.

Consider the fact that earlier this month, data from the Federal Reserve Bank showed that the total debt carried by Americans now stands at about $13.5 trillion. That's a record high, as noted by CNBC, and a trillion dollars higher than had been seen in the previous peak prior to the recession. Getting a bit more granular, the website noted that serious delinquencies, which includes debt that is past due 90 days or more, for student loans, rose to 9.1 percent from 8.6 percent in the previous quarter. Delinquency flows have been rising on auto-related debt through the past six years, and on credit card debt through the past year.

Consider too, that debt collection efforts are anything but well-received by consumers. A debt collection snapshot from the Consumer Financial Protection Bureau found that between July 2011 and May 2018, the Bureau received more than 400,500 debt collection complaints. That tally represented 27 percent of the total complaints received. Read more at PYMNTS.COM

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Why Aren't Millennials Spending? They're Poorer Than Previous Generations, Fed Says

Since millennials first started entering the workforce, their spending habits have been blamed for killing off industries ranging from casual restaurant dining to starter houses. However, a new study by the Federal Reserve suggests it might be less about how they are spending their money and more about not having any to spend.

A study published this month by Christopher Kurz, Geng Li and Daniel J. Vine found millennials are less financially well-off than members of earlier generations when they were the same ages, with "lower earnings, fewer assets and less wealth."

Their finances were compared with Generation X, baby boomers, the silent generation and the greatest generation.

The researchers examined spending, income, debt, net worth and demographic factors among the generations to determine "it primarily is the differences in average age and then differences in average income that explain a large and important portion of the consumption wedge between millennials and other cohorts."

Millennials, which the study defined as those born between 1981 and 1997, with ages ranging from 21 to 37, "paid a price" for coming of age during the Great Recession. They had to face historically weak labor demand and unusually tight credit conditions. Read more at National Public Radio


Ohio: You Can Pay Your Taxes With Bitcoin. Here's the Catch.

There's no shortage of fintech news, and crypto news in particular practically bumps into you in the hallway. Every week, our finance & technology email will sort through the useful and the useless in fintech news and deliver it right to your inbox on Fridays. Sign up here.

The big cryptocurrency news this week was that Ohio became the first state to allow you to pay your taxes with Bitcoin.

Here's the catch: You can't actually pay your Ohio taxes with Bitcoin.

What you can do (if you are a business that owes Ohio taxes; this new systems applies only to businesses) is go to a website set up by the Ohio Treasurer, enter how much you owe in taxes, in dollars, for a specific tax period, and then sell Bitcoin to a third party, Bitpay, which sends the dollars to the state. Read more at BARRON'S


Federal regulators encourage banks to innovate to protect against illicit activity

Federal regulatory agencies are encouraging banks to explore innovative approaches to strengthen the financial system against illicit financial activity.

In a joint statement issued this week, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency said such measures are necessary to meet their Bank Secrecy Act and anti-money laundering (BSA/AML) compliance obligations.

"The agencies recognize that private sector innovation, including new ways of using existing tools or adopting new technologies, can help banks identify and report money laundering, terrorist financing, and other illicit financial activity by enhancing the effectiveness and efficiency of banks' BSA/AML compliance programs. To assist banks in this effort, the agencies are committed to continued engagement with the private sector and other interested parties," they said in the joint statement.

Innovation has the potential to augment aspects of banks' BSA/AML compliance programs in areas including risk identification, transaction monitoring, and suspicious activity reporting, the agencies added. Read more at Financial Regulation News

Dreher Tomkies LLP

Cybersecurity: Simple Tips to Protect Yourself

Simply employing the most basic of information security rules will make you and your business more safe and secure.

A few years ago, the world suffered one of the largest cyber-attacks in history. The breaches of Equifax and Target had incredible consequences that we are still feeling to this day. Once this tragedy struck, we all began to understand the importance of cybersecurity.

Major breaches are a cause for concern

Our collective faith in these institutions came to be of ill-fated consequence and distaste. We needed answers as to why our privacy was so swiftly stolen and spread for all hackers to witness. In light of this, the term cybersecurity came to the forefront of our minds as the only solution to an imperceivable problem.

What cybersecurity really means

Cybersecurity, also referred to as information security, is truly the process of double checking every access point on a network to make sure that it is well protected and that whatever damage may occur is mitigated to the fullest extent possible. It is a complex task that is simple in implementation if done well.

Now, of course, we understand the importance of passwords and other tools that we can use to secure our information and keep it away from those who would do harm. In this article, we will discuss methods being used in the cybersecurity sector to keep information as safe as possible. Read more at SECURITY TODAY


Banks will be hit with 'massive disruption' from fintech in the next five years, Klarna CEO says

Banks will be faced with "massive disruption" in the next five years amid competition from financial technology challengers, the chief executive of Swedish bank Klarna told CNBC on Tuesday.

New European legislation that was introduced at the start of the year, called PSD2, requires banks to share their customer data with third-party providers to enable them to create new financial products.

Sebastian Siemiatkowski, Klarna's boss, said that this new regulatory framework and the rise of tech-driven banking players are a recipe for significant competitive pressure on traditional lenders.

"I'm one of those people who always say disruption is going to take 10 years or 15 years," Siemiatkowski told CNBC's Elizabeth Schulze at the Slush tech conference in Helsinki, Finland.

"I actually now really think that, with PSD2, there is going to be massive disruption to the retail banking space in the next five years. I just see all the prerequisites are there: the customers are willing now to switch, it's easy to switch, the services are better, with the new people coming into the stage." Read more at CNBC

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