September 13, 2018
2018 edition: 73/104
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Dodd-Frank a Flop: Columbia Business School Study Recommends Fundamental Reforms for Landmark Financial Regulation

A Decade Since Start of Great Recession, Study Details Why Post-Crisis Regulations Have Proven Ineffective, Counterproductive for Both Banks and Consumers

Large Costs of Regulations are Constraining Economic Growth Without Reducing Risky Behavior

NEW YORK, Sept. 12, 2018 /PRNewswire/ -- This month marks a decade since the beginning of the Great Recession. In the wake of the crippling financial crisis, Congress and the Federal Reserve moved swiftly to take corrective action - from the Dodd-Frank Wall Street Reform, to the Volcker Rule and stress tests, to the Consumer Protection Act.

But the rush to pass and enforce regulations has not only proved ineffective, but counterproductive according to recent research from Columbia Business School Professor Charles Calomiris. The new article - Has Financial Regulation Been a Flop? (or How to Reform Dodd-Frank) - details numerous flaws in post-crisis financial regulations and proposes modifying or eliminating a number of recently approved financial reforms, including pieces of Dodd-Frank and the Volcker Rule.

"The Great Recession created a rush in Washington to establish guardrails for the financial industry," Calomiris said. "But good intentions, expanded powers, and new mandates do not necessarily lead to smart policy decisions. Ten years later, it's clear that the Dodd-Frank Act and further regulations are failing to curb risky behavior while obstructing economic growth. We can do much better than these costly, unsustainable regulations that will do little to prevent a repeat of the financial crisis."
Read more at Columbia Business School
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More banks are trying to get a piece of the payday loan pie

More banks are offering small loans to Americans facing short-term financial emergencies

Where would you turn for some last-minute emergency cash?

The answer for many in recent years has been payday lenders, and more recently, online companies have gotten in on the act. More banks are moving in that direction. U.S. Bank, a division of U.S. Bancorp USB, +0.02% this week announced "Simple Loan," to help Americans who suddenly have to come up with cash in a pinch.

To qualify for Simple Loan, customers must have a checking account at U.S. Bank. They can borrow between $100 and $1,000. They then must pay the loan back in three months, with three fixed payments. Lynn Heitman, executive vice president of U.S. Bank Consumer Banking Sales and Support, said the loans provided a "trustworthy, transparent" option.

They are similar to payday loans, which are used by millions of Americans who live paycheck to paycheck. They are typically for a few hundred dollars and must be repaid within a couple of weeks. Like payday loans, the Simple Loan doesn't come cheap. Read more at MARKETWATCH

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U.S. Bank takes on payday lenders

U.S. Bank is introducing a new loan program aimed at cash-strapped people who need to borrow several hundred dollars for a few months - and are willing to pay very high interest rates.

Annualized interest rates for the three-month loans of up to $1,000 are 71 percent or greater. But U.S. Bank says its loans would be far cheaper than many other lenders' short-term loans, often called payday loans.

"We know customers have unexpected short-term cash needs," said Lynn Heitman, an executive vice president with the bank. "And we believe that we can help our customers."

She said that a recent Federal Reserve Bank study found that 40 percent of adults would have to borrow money or sell something to cover even a $400 surprise expense.

Heitman would not say how profitable the bank anticipates the loans will be but said the expected the return would be "acceptable." She said that interest rates reflect the risk of borrowers not paying back loans. Read more at Minnesota Public Radio

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FirstCash Announces Acquisitions Totaling 154 Stores in Mexico; Full Year 2018 Additions Now Projected to Reach 425 Locations

FORT WORTH, Texas--(BUSINESS WIRE)--Sep 11, 2018--FirstCash, Inc. (the "Company") (NYSE: FCFS), the leading international operator of pawn stores in the U.S. and four countries in Latin America, today announced two third quarter asset acquisitions for a total of 154 full-service pawn stores in Mexico. With these acquisitions and continued openings of new stores, the Company's consolidated store count now stands at 2,444 locations.

The acquisitions were completed in two separate transactions with unrelated ownership groups. The first acquisition of 97 stores located in the southern gulf region of Mexico closed on August 15, 2018, while the second acquisition of 57 stores in east-central Mexico, closed on September 6, 2018.

Year-to-date, the Company has opened 37 new stores and acquired 342 existing stores in four separate transactions in Latin America, increasing the store count since the beginning of the year by 34%. FirstCash now operates 1,340 locations in Latin America, representing 55% of its total store base. Additionally, the Company acquired 18 stores in the U.S. this year and now operates 1,104 U.S. locations.

The Company now expects to add approximately 425 total locations in 2018, which includes at least 65 new store openings and the 360 stores acquired year-to-date. The aggregate purchase price for the 360 stores acquired thus far in 2018 is approximately $105 million. Read more at OAONLINE

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Vets Groups Urge Mattis to Keep Pressure on Payday Lenders

Nearly 40 veterans and military family organizations have joined in a letter to Defense Secretary Jim Mattis and White House Office of Management and Budget Director Mick Mulvaney urging them to keep in place oversight of payday lenders under the Military Lending Act of 2006.

The effort, led by the Veterans Education Success non-profit advocacy group, includes a $250,000 campaign to publish the letter to Mattis and Mulvaney, who also is acting head of the Consumer Financial Protection Bureau (CFPB), in full-page ads in the Washington Post, the Los Angeles Times and other newspapers.

VES claims that Mulvaney planned to have CFPB roll back "crucial protections for our troops, leaving them exposed and vulnerable to payday loan companies and other abusive practices."

In a similar letter last month to Mulvaney, all 47 Democrats in the Senate and the two Independents who vote with them charged that the CFPB plan would eliminate routine and random examinations of firms for compliance with the Military Lending Act. Read more at MILITARY.COM


Dodd-Frank changed consumer protections after the financial crisis - here's how that's shaking out today

For millions of consumers in the early part of the 2000s, the Dodd-Frank Act of 2010 came too late.

The massive legislation, passed in the aftermath of the Great Recession, was intended to better regulate financial institutions and safeguard their customers against risky loans and abusive practices.

Yet by the end of 2009, roughly 7.1 million homeowners already had lost their homes to foreclosures since 2006, due largely to taking on risky, unsustainable mortgages.

Some lenders allowed borrowers to take on more than the home's value or did not confirm a borrower's income. Other types of loans became unaffordable as interest rates rose and home values plummeted.

Unemployment stood at 9.9 percent heading into 2010 after layoffs rose and hiring ground to a halt. Delinquencies on credit cards also peaked in 2009, as many consumers struggled to stay afloat. Read more at CNBC

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Will New Regulations Avert Another Meltdown?

After the Great Recession, U.S. and European authorities enacted new regulations to shore up the global financial system and patch deep vulnerabilities that surfaced during the crisis. The rules are meant to strengthen banks and non-bank financial institutions as well as mitigate their risk-taking activities, which required government bailouts and extraordinary central bank efforts that, by one tally, cost $12.8 trillion just in the U.S.

U.S. financial reforms are encapsulated in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the biggest financial reform package since the Great Depression, which was signed into law in 2010. (The Trump administration later eased regulations for banks with assets below $250 billion.) The key features of Dodd-Frank are the following: It requires banks to improve capitalization so they are better able to absorb losses, raise liquidity levels for the first time to be more equipped to handle cash demands at short notice and develop a resolution plan for orderly failure without jeopardizing the financial system. Read more at WHARTON.EDU

  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.

Top 5 reasons why direct mail is dominating performance marketing

Every lender faces the same issue today, marketing. Most of the lenders start with "leadgen", online lead generators that send traffic to lender's call centres, websites or form fill. These online lead generators have been around for a decade now and they have been struggling in the face of outright bans by Google and Facebook. Direct Mail on the other hands has been successful in performance marketing for the past 5 decades.

Reason #1 - Control

If you are a lender and one of your number of costs is marketing, then you should always have control over your marketing. Most importantly control over how you acquire your customers. Often, direct mail starts with acquiring a mailing list from one of the credit bureaus. There are 30-40 million customers at any given time looking for credit. Be it a Lending Club style consolidation loan or a short-term emergency personal loan, there's always someone looking to consolidate their debt or getting over a life emergency.

Getting your own list from the credit bureaus is the only way to control your own marketing. The names and address of your potential customers are not shared by anyone else. Unlike online lead generators, the lead that was sold to you is also sold to your competitors. The chances of you getting that customer to convert into one of your credit product are very low. This behaviour promotes bad behaviour amongst some lenders, and that they will do anything to convert their purchased leads due to this artificial competition infiltrated by online lead generators.  Read more at MaxDecisions

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Bureau of Consumer Financial Protection Announces New Advisory Committee Members

WASHINGTON, D.C. - Today the Bureau of Consumer Financial Protection (Bureau) announced the appointment of new experts from outside the federal government to the Consumer Advisory Board, Community Bank Advisory Council, and Credit Union Advisory Council. The three advisory committees provide advice to Bureau leadership on a broad range of consumer financial issues and emerging market trends.

"Today, I am appointing experts to the Bureau's advisory committees who will bring a fresh perspective to our important work," said Bureau Acting Director Mick Mulvaney. "These experts are highly talented individuals in consumer finance markets, and we look forward to working closely with them throughout their service."

The Dodd-Frank Wall Street Reform and Consumer Protection Act charges the Bureau with establishing a Consumer Advisory Board to advise and consult with the Bureau's Director on a variety of consumer financial issues. The Bureau also created a Community Bank Advisory Council and a Credit Union Advisory Council. The Community Bank Advisory Council and Credit Union Advisory Council advise and consult with the Bureau on consumer financial issues related to community banks and credit unions. In March 2018, the Bureau issued a notice in the Federal Register outlining the responsibilities of the advisory committees, as well as the duties of its members, and solicited applications for appointment. Read more at Bureau of Consumer Financial Protection

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FTC Settlements Ban Fraudulent Debt Collectors from Debt Collection Business and from Buying or Selling Debt

The operators of a Georgia-based debt collection business that allegedly used false claims and threats to get people to pay debts - including debts they did not owe or that the defendants had no authority to collect - are banned from the debt collection business and from buying or selling debt, under settlements with the Federal Trade Commission.

According to the FTC's complaint, the defendants' debt collection business model was based on falsely claiming to consumers that they had committed a crime and would be sued, have their wages garnished, or be put in prison if they did not pay purported debts. In many instances, the defendants collected on debts consumers had already paid or that the defendants otherwise had no authority to collect. They also illegally contacted consumers' employers and other third parties, and failed to provide written notices and disclaimers required by law.

The settlement orders also prohibit the defendants from misrepresentations regarding any financial products and services, and from profiting from or failing to properly dispose of customers' personal information collected as part of the challenged practices.

Each order imposes a $3,462,664 judgment that will be partially suspended, due to the defendants' inability to pay, when they have surrendered certain assets. In each case, the full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. Read more at Federal Trade Commission

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

First-party fraud: What it is and how to guard against it. by Philip Burgess

From finding an unusual statistic to buying a one-of-a-kind heirloom or antique, virtually everything is easier to come by in today's instant information era.

But unfortunately, the age of convenience is not without its unfortunate side effects, as fraud has proliferated. In 2016, for instance, 15.4 million Americans were affected by it, based on estimates from Javelin Strategy & Research. The frequency of fraud hasn't subsided despite increased awareness among business owners and consumers, as 50 identity thefts occur every 60 seconds, according to the Identity Theft Resource Center.

There's a particularly pernicious threat that is sapping a tremendous amount of business owners' collective time, money and energy. It's called first-party fraud, and over the past 20 years or so has intensified in scale and scope. But what is first-party fraud? And how can you guard against it? The following is a brief overview of the scheme, how it manifests itself and what you can do to diminish your risk of being victimized.

What is first-party fraud?
First-party fraud is a premeditated scheme whose targets are primarily business owners, rather than customers, as is typically the case for third-party fraud. Otherwise known as "intent not to pay fraud," first-party fraud starts out in ways, not unlike most other transactions, where a customer seeks to buy products or services by way of credit. Read more at MICROBILT

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International Lender seeking to buy 2 or 3 U.S. locations.
  • We will consider single businesses or an existing business with multiple locations in cities close to each other.
  • A mixture of payday loans and term loans preferred.
  • We are also interested in online lenders.
  • Ideal setting: Florida, in the Delray / Miami / Boca / area or North Carolina, but open to all.

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Chicago Area Small Dollar Installment Lender
    • Mature, highly profitable single store loan business available for sale.
    • State-Licensed Installment Loan Lender
    • High Visibility and Traffic Counts
    • Trailing 12 mos. fees of $700,000
    • Low write-offs (10% of fees)
    • Very low delinquency (80-85% current)

 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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