October 6, 2020
AFSPA Partner
The Gateway For Payroll Data

Big U.S. banks to report profit plunge as pandemic recession takes hold

NEW YORK (Reuters) - As big U.S. commercial banks close their books on the third quarter, analysts expect them to report a 30% to 60% plunge in profits on the year-ago period due to the pandemic-induced recession and near record low interest rates.

That slump in third quarter net income comes even though lenders are not going to make outsized provisions for expected loan losses as they did in the first and second quarters.

And, while capital markets and investment banking revenue is expected to be up from 5% to 20%, that won't be enough to make up for the decline in interest income from loans and securities.

"You have soft loan growth and you're still feeling the impact from aggressive Fed actions earlier this year," said analyst Jason Goldberg of Barclays.
Read more at REUTERS

AFSPA Partner

Paving the Payments Future

States Where People Need Loans the Most Due to Coronavirus

The coronavirus pandemic has deeply disrupted the U.S. economy, which in turn has hurt the incomes of many Americans. Businesses have been forced to lay off workers as they struggle to survive, and even though the job market has showed steady improvement over the past few months, the unemployment rate still sits at 8.4%. In addition, while all state economies are now at least partially reopened, spikes in COVID-19 have led some states to delay moving on to the next stage of reopening or even to close down businesses they previously reopened. It will take a long time to reverse the economic damage done by coronavirus, especially since Congress was unable to pass another stimulus package before the benefits from the first one lapsed. Consequently, many Americans need to borrow money to stay afloat.

Americans who are having trouble with their finances during the COVID-19 pandemic are searching for all sorts of options to relieve the pressure, from home equity loans to payday loans. However, people's interest in getting these types of loans varies from state to state. In order to determine the states where people are searching for loans the most during the pandemic, WalletHub compared the 50 states and the District of Columbia across four key metrics. These metrics combine internal credit report data with data on Google search increases for three loan-related terms.
Read more at WALLETHUB

AFSPA Partner

Lending as a Service

California's Proposed Mini-CFPB Is Cronyist and Ill-Conceived

Earlier this month, the California Legislature passed the California Consumer Financial Protection Law (CCFPL) to create a new state-based regulatory agency modeled after the federal Consumer Financial Protection Bureau (CFPB). If the legislation is signed by Governor Gavin Newsom (D), he would be approving of a bill that picks winners and losers in the financial services sector and implementing a law which would hurt consumers.

Specifically, the bill would replace the state's existing Department of Business Oversight (DBO) with a Department of Financial Protection and Innovation (DFPI). Under the CCFPL, the DFPI would have significantly more power than the DBO and would be able to bring forth both administrative and civil actions against financial firms.

However, thanks to last minute lobbying by certain trade associations, previously licensed financial services providers like banks and auto lenders would be exempted from the new stringent enforcement authority granted to the DFPI. Because of that, these firms would enjoy the benefit of dealing with the same regulatory regime they were subjected to while under the supervision of the DBO, all while other financial services firms, including competitors such as innovative FinTech startups, are forced to comply with enhanced regulations. Notably, these carveouts were not extended to certain previously licensed financial services providers, including payday lenders and student loan servicers.
Read more at the Competitive Enterprise Institute

AFSPA Partner
IRS releases state-by-state breakdown of nearly 9 million non-filers who will be mailed letters about Economic Impact Payments
IR-2020-214, Sept. 17, 2020

WASHINGTON -The Internal Revenue Service today released a state-by-state breakdown of the roughly nine million people receiving a special mailing this month encouraging them to see if they're eligible to claim an Economic Impact Payment.

The IRS will mail the letters to people who typically aren't required to file federal income tax returns but may qualify for an Economic Impact Payment. The letter urges recipients to visit the special Non-Filers: Enter Payment Info tool on before the Oct. 15 deadline to register for an Economic Impact Payment.

Nebraska Supreme Court hears last challenge to payday lending initiative

Nebraskans who opted to vote by mail this election cycle may have already recorded their decision on Initiative 428.

The measure to lower payday loan rates to 36% survived legal challenges aiming to keep it off the Nov. 3 ballot and over the ballot language.

A final lawsuit against the petition drive was before the state's highest court Thursday, however, where attorneys argued whether or not circulators had properly gathered signatures.

Brian Chaney, who worked in the payday loan industry, sued Secretary of State Bob Evnen and sponsors of Nebraskans for Responsible Lending last month, pointing to affidavits of 188 signers who said circulators had failed to read to them the initiative's object statement in full.


New CFPB Reports Find Consumer Credit Resiliency During the COVID-19 Pandemic

Recent research from the Consumer Financial Protection Bureau (CFPB) has found that consumers have not experienced significant increases in negative credit outcomes as a result of the COVID-19 pandemic and that negative credit outcomes remain lower than they were prior to the Great Recession of 2007-2009. These findings, from two new reports published by the bureau, help illustrate how consumers have fared during the pandemic and where the consumer credit industry stood prior.

The first report, entitled "The Early Effects of the COVID-19 Pandemic on Consumer Credit," examines the impact of the coronavirus pandemic on consumer credit outcomes, including: delinquencies, payment assistance, credit access, and account balances. The report uses data from January 2019 to June 2020 from the bureau's Consumer Credit Panel, a longitudinal and nationally representative sample of approximately 5 million de-identified credit records. It follows up on another report released by the bureau this April that looked at the initial and immediate impact of the pandemic on consumer credit.
Read more at the Competitive Enterprise Institute


NEW MEXICO: Proposal renews debate on payday loans

SANTA FE - The debate over capping New Mexico interest rates on storefront loans might not be over yet.

Three years after state lawmakers approved a bill that capped small-loan interest rates at 175%, a prominent Santa Fe-based think tank is proposing that the cap be lowered significantly - to 36% - and financial literacy classes be made a graduation requirement for high school students statewide.

Fred Nathan, executive director of Think New Mexico, said the proposed changes would enable state residents to better protect their personal finances.

"With the economic crisis caused by the COVID-19 pandemic, New Mexicans are more vulnerable than ever to predatory lenders, increasing the urgency of these reforms," Nathan said in a statement. Read more at ALBUQUERQUE JOURNAL


Postal Banking: An Idea Whose Time Has Returned?

On September 17th, Senators Kirsten Gillibrand (D-NY) and Bernie Sanders (D-VT) went on Facebook Live to announce their introduction of the Postal Banking Act, a bill that would have the US Postal Service provide a "public option" in some retail banking services. Postal banking has been proposed many times in recent years as a progressive reform. The Joe Biden-Bernie Sanders "Unity Task Force Recommendations" document (p. 74) endorsed the idea in August as a way of "ensuring equitable access to banking and financial services." Senator Gillibrand introduced a similar bill two years ago, and an organization called The Campaign for Postal Banking has been promoting the idea since 2014.

An important impetus for the recent interest was a 2014 white paper by the Inspector General of the USPS entitled "Providing Non-Bank Financial Services for the Underserved." The Executive Summary of the white paper (p. i) argued that "The Postal Service is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector." The USPS report in turn drew on a 2012-13 series of reports and reform proposals regarding payday lending by the Pew Charitable Trusts.

Dreher Tomkies LLP

How employee financial stress increases healthcare costs

Happy employees breed happy customers. According to Gallup, organizations that excel in engaging their employees achieve earnings-per-share growth that is more than four times that of their competitors.

So it's disheartening to see our employees struggling for a lot of reasons, starting with the fear and anxiety they are feeling over the ongoing health crisis and what it's doing to our financial markets. Most people's work lives are still in disarray. Most haven't returned to the office and have no timeline for when they may. Those that have are facing a new normal that includes regular COVID-19 testing and wearing PPE masks throughout the day. According to Forrester, more than 50% of workers are afraid of the spread of COVID-19. Death counts, political wars, and protests over social injustice dominate the news, as financial markets spin out of control.


U.S. Fed to extend curbs on big bank buy backs, dividends through end of year

WASHINGTON (Reuters) - The U.S. Federal Reserve will curb big bank capital distributions through the end of the year, meaning the likes of JPMorgan Chase & CoJPN., Citigroup Inc.C.N, Wells Fargo & CoWFC.N and Bank of America Corp.BAC.Nwill be barred from share buy backs and will have to cap dividends.

The central bank announced it would extend its existing policy of limiting capital payouts for banks with at least $100 billion in assets, to ensure lenders have enough capital to weather the economic strain caused by the coronavirus pandemic.

The restrictions, which apply to 34 banks, including the U.S. operations of several large foreign firms, were extended "due to the continued economic uncertainty from the coronavirus response," the Fed said.

The Fed announced in June it was taking the unprecedented step of limiting bank payouts after finding lenders faced significant capital losses under a pandemic-informed stress test. Under the new policy, banks cannot pay higher dividends than they did in the second quarter, and payments cannot exceed a firm's average net income over the last four quarters.
Read more at REUTERS


Pawnshops see a surprising decline in business during pandemic

Pawnshops seemed poised for a boom.

With the pandemic causing record high unemployment, more Long Islanders might have been expected to bring their jewelry, electronics and other valuables to the stores in search of ready cash.

Instead, just the opposite happened.

Local pawnshop owners said they're seeing a record drop in business, as fewer customers pawn their possessions and more pay off their loans and get their items back sooner.
Read more at NEWSDAY


With stimulus in legislative limbo, market may see boost in small-dollar loans

Four regulators issued guidance on the products in May, but banks have been slow to roll out offerings. Higher demand may provide the catalyst they need.

With lawmakers wrangling over the future of stimulus payments and unemployment benefits, cash-strapped consumers may be forced to look at credit products to meet upcoming expenses.

Among subprime consumers who make up roughly one-third of the U.S. population, options are limited, with many resorting to high-cost payday loans. In recent months, however, regulators have urged banks to get into the small-dollar lending market to help customers negatively affected by the pandemic.

Despite the push, only a handful of banks offer small-dollar loans. Banks in the space say they can offer them profitably, and they can deepen customer relationships as credit scores improve.
Read more at BANKING DIVE



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