August 13, 2019

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Big Picture Loans Lands Big Win for Tribal Lenders in Sovereign Immunity Case

n a recent decision by the Fourth Circuit, Big Picture Loans, LLC, an online lender owned and operated by the Lac Vieux Desert Band of Lake Superior Chippewa Indians, a federally recognized Indian tribe ("Tribe"), and Ascension Technologies, LLC, the Tribe's management and consultant company successfully established that they are each arms of the Tribe and cloaked with all of the privileges and immunities of the Tribe, including sovereign immunity. As background, Big Picture Loans and Ascension are two entities formed under Tribal law by the Tribe and both are wholly owned and operated by the Tribe. Big Picture Loans offers consumer financial services products online and Ascension offers marketing and technology services solely to Big Picture Loans.

Plaintiffs, consumers who had taken out loans from Big Picture Loans, brought a putative class action in the Eastern District of Virginia, arguing that state law and other various claims applied to Big Picture Loans and Ascension. Big Picture Loans and Ascension moved to dismiss the case for lack of subject matter jurisdiction on the basis that they are entitled to sovereign immunity as arms of the Tribe. Following jurisdictional discovery, the U.S. District Court rejected Big Picture Loans and Ascension's assertions that they are arms of the Tribe and therefore immune from suit.
Read more at Bradley Arant Boult Cummings LLP.

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CALIFORNIA: Lenders shift focus as payday loans reach 13-year low

Payday loans have fallen to a 13-year low in California, the state's Department of Business Oversight (DBO) said in a press release Thursday. Both the number of payday loans taken out by consumers in 2018 (10.2 million) and the aggregate amount of those loans ($2.8 billion) are the lowest figures since 2006, a continuation of a five-year decline, according to American Banker.

However, it appears lenders are migrating toward offering higher-dollar loans that are subject to less strict regulations. Payday loans, as defined by California, are limited to $300 with an interest rate capped at 15%. "On the one hand, it's encouraging to see lenders adapt to their customers' needs and expectations," DBO Commissioner Manuel P. Alvarez said in the press release. "But by the same token, it underscores the need to focus on the availability and regulation of small-dollar credit products between $300 and $2,500, and especially credit products over $2,500 where there are largely no current rate caps under the [California Financing Law]."

The report also highlights the industry's reliance on repeat business from lower-income consumers. Repeat customers accounted for 80.7 percent of the total amount borrowed. More than three-quarters of subsequent loans to repeat customers were issued within a week of the previous loan coming due. Half of all payday loan customers had average annual incomes of $30,000 or less. And repeat customers who took out seven or more loans paid 70.7 percent of the $420.5 million in fees the industry collected, according to the press release.
Read more at Banking Dive

Accelerate Payments & Lower Processing Costs

CFPB: Alternative Data Could Increase Availability, Lower Cost of Credit

The use of alternative data in credit decisions could make a significant difference in the cost and availability of credit for consumers, according to a new blog post published yesterday on the CFPB's website. The blog post highlights data submitted to the bureau regarding outcomes generated by using an underwriting and pricing model incorporating alternative data-such as information about borrowers' education and employment history-created by the Upstart Network. Upstart has been operating under a no-action letter from the CFPB to develop and test the model since 2017.

When comparing outcomes between a traditional model and the one that incorporated alternative data, Upstart found that using alternative data increased acceptance rates by 23% to 29% across all tested race, ethnicity and sex segments, while decreasing average APRs by 15% to 17%. Individuals that were considered "near prime" (with FICO scores between 620 and 660), younger applicants under age 25 and consumers with incomes of under $50,000 were significantly more likely to be approved under the tested model.

Fair lending testing showed no disparities between the traditional model and the tested model with regard to the approval rates and APRs provided for minority, female and senior borrowers, the CFPB added. Read more at American Bankers Association

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Trade Groups Take on CFPB Payday Loan Rule in Texas Fed Court.

Court Continues Stay Of Litigation And Compliance Date In Trade Group Lawsuit Challenging CFPB Payday Loan Rule. by Ballard Spahr LLP   Thursday, August 8, 2019

The Texas federal district court hearing the lawsuit filed by two trade groups challenging the CFPB's final payday/auto title/high-rate installment loan rule (Payday Rule) entered an order on August 6 that once again continues the stay of the lawsuit and the August 19, 2019 compliance date for both the Payday Rule's ability-to-repay (ATR) provisions and its payment provisions. The order directs the parties to file another joint status report by December 6 "informing the court about proceedings related to the Rule and this litigation as the parties deem appropriate."

The order follows the filing of the most recent status report on August 2 by the CFPB and trade groups. In the report, the parties stated that they "are not requesting that the Court lift the stay of the litigation or lift the stay of the compliance date at this time." (Although the Bureau's final rule delaying the compliance date for the ATR provisions left unchanged the August 19 compliance date for the Payday Rule's payment provisions, the stay of the compliance date entered by the court on November 6, 2018 stayed the compliance date for both the ATR and the payment provisions.)

Thus, companies subject to the payment provisions of the Payday Rule will almost certainly have a respite of at least two and a half months (and likely longer) before the payment provisions will become applicable. Read more at The NATIONAL LAW REVIEW


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New York Joins The Wave of States Requiring Businesses To Adopt Reasonable Cybersecurity Safeguards To Protect Private Information. Epstein Becker & Green, P.C.

New York is the latest state to adopt a law that requires businesses that collect private information on its residents to implement reasonable cybersecurity safeguards to protect that information. New York now joins California, Massachusetts and Colorado in setting these standards. New York's law mandates the implementation of a data security program, including measures such as risk assessments, workforce training and incident response planning and testing. Businesses should immediately begin the process to comply with the Act's requirements effective March 21, 2020. Notably, New York's law covers all employers, individuals or organizations, regardless of size or location, which collect private information on New York State residents.

The "Stop Hacks and Improve Electronic Data Security Act" (SHIELD ACT), signed into law on July 25, 2019, requires implementation of an information security program to protect "private information" defined as:

any individually identifiable information such as name, number or other identifier coupled with social security number, driver's or non-driver identification card number or account number, credit or debit card number in combination with any security code, access code, password or other information that would permit access to the individual's financial account, or biometric information (such as fingerprint, voice print, retina or iris image);

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Why FedNow Will Slow Real-Time Payments

I'm from the government and I'm here to make sure you get your paychecks faster - even instantly...

...if you can just hang in there until about 2024.

That's the talk track now from the Fed, which a week ago today announced its plans to build and operate a new set of real-time rails, using accelerated access to employer paychecks as its launch use case.

It's a move that presidential hopefuls and lawmakers fully and publicly applaud. But for the Fed and its rails, they say, employees will be resigned to the bad old days of antiquated payroll systems that force them to live paycheck to paycheck, and at great financial risk.

It's a pretty bold claim.

It's also not why the Fed decided to enter the real-time payments fray.
Read more at PYMNTS.COM


Most Americans Are Living Paycheck to Paycheck, Survey Shows

When you have a seemingly endless list of bills to pay and financial responsibilities to take care of, it can be tough to make sure there's enough money to go around.

The average American is struggling to make ends meet each month, with 59% of U.S. adults saying they live paycheck to paycheck, according to a recent survey from Charles Schwab. Furthermore, nearly half of survey participants say they carry credit card debt and struggle to keep up with the payments.

If you're having a hard enough time paying the bills and putting food on the table without racking up debt, saving for the future is probably the last thing on your mind. Only 38% of people have an emergency fund, according to Charles Schwab, and one in five Americans don't have a dime saved for retirement, according to a survey from Northwestern Mutual.

However, although many people are living paycheck to paycheck and struggling to save, there's one mistake you could be making that's hurting your financial health.
Read more at THE MOTLEY FOOL

Lending as a Service

Car Title Loan Regulation Rollback Leaves Consumers at Risk

A rule to make these loans less problematic is being put on hold-possibly permanently

A rule scheduled to go into effect on August 19 that would make car title loans a less risky ride has been delayed for 15 months by the Consumer Financial Protection Bureau.

These loans, in which borrowers put up their car as collateral, can be hazardous indeed. One in nine car title borrowers fall behind on payments and have their vehicles repossessed, according to a 2015 Pew study (PDF).

Known as the underwriting provision, and first proposed by the CFPB when Barack Obama was president, the now-delayed provision was intended to prevent people with limited resources from getting car title loans they couldn't afford in the first place. It would require lenders to make sure that borrowers had the financial ability to pay their loans back before granting them.

Under President Trump, the CFPB has already drafted a proposal to do away with the underwriting provision after the delay. Read more at Consumer Reports, Inc

CFSA Conference

Small business bankruptcy measure heads to president's desk

Sen. Sheldon Whitehouse (D-RI) and Rep. David N. Cicilline (D-RI) recently touted the benefits of a bill designed to streamline bankruptcy procedures while providing tools aiding business owners' ability to keep companies afloat and preserve jobs.

The Small Business Reorganization Act, which they sponsored with Sen. Chuck Grassley (R-IA) and Rep. Ben Cline (R-VA), advanced both houses and now awaits the president's signature.

"The path to success is not a straight line for many small businesses," Whitehouse said. "Our bill will improve the bankruptcy process to give struggling small businesses better tools to get back on solid footing and preserve jobs. I'm grateful to Senator Grassley for his longtime partnership on this issue and to Congressman Cicilline for his support."

The bill would add a new subchapter V to Chapter 11 to streamline the bankruptcy process for small business, noting the new process will increase the chances of small businesses using the bankruptcy process to get a fresh start.
Read more at Financial Regulation News

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Poll finds half of Canadians don't trust professional help with debt - experts say there's a reason

Roughly half of Canadians have a hard time trusting professional companies to help them out of debt.

That's one of the findings of a recent poll conducted by Ipsos for MNP Ltd., one of the largest insolvency firms in the country. Although the survey didn't ask consumers where the cause of the distrust lies, experts have a few guesses.

"Many people - particularly young people - don't know that there is a regulated system in place to help severely indebted individuals," Grant Bazian, president of MNP Ltd said in a statement.

Licensed insolvency trustees (LITs) are the only ones authorized to offer debt relief options such as consumer proposals and bankruptcies. Proposals discharge part of a borrower's debt, while bankruptcies erase all debts with a few exceptions such as some student loans and spousal and child support. Both are legal processes. Read more at GLOBAL NEWS

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

New Mexico should consider electronic payment systems

According to the website Nerdwallet, New Mexico has the seventh-highest percentage of "unbanked" households among U.S. states. That means 11 percent of New Mexico families don't have access to bank accounts.

That same report estimated that New Mexico households lose between $40 and $104 million annually in fees and expenses due to being unbanked. Even for many New Mexicans who do have bank accounts, the geographical size and sparse nature of our population makes it difficult for many in our state to get to a bank in a timely fashion.

New Mexico can help reduce the costs of being "unbanked" by joining the growing number of state governments across the nation that are beginning to use prepaid cards when they make payments to citizens. Such payments include everything from tax refunds to government benefits and any other payment that government might make to citizens of New Mexico.

Specifically, states can provide a valuable new option for those who receive payments from government for those who do not have bank accounts to receive electronic payments.
Read more at The Eastern New Mexico News

Alt Data is the key to compete effectively

Model Your Best Performing Customers to Drive More Effective Acquisition

In her 2019 Internet Trends Report, Mary Meeker highlighted several key statistics that impact digital marketing strategies. As Americans spend more time than ever - 6.3 hours a day - consuming digital media, advertisers are taking advantage by investing more in digital advertising. Internet ad spend rose 22% in 2018, propelled by more data for better targeting and higher relevancy, enhanced AI capabilities, and more innovative ad formats. But at the same time, Meeker cautioned marketers on the rising cost of customer acquisition - a rate that won't be able to exceed lifetime value for much longer.

Customer acquisition has always represented a push and pull tension: How to reach the right potential customers, but do so at scale, while keeping costs at bay. The perfect balance of achieving both efficiency and effectiveness in prospecting new customers has eluded marketers.

For companies in sectors like banking, credit and insurance, this added nuance is managing risk: improve the rate of gaining lower risk customers while managing acquisition costs.

CFPB Ombudsman Reviews Consumer Complaint Processes and Redress

The ombudsman's mid-year update addresses complaint referrals between federal agencies.

Consumer Financial Protection Bureau Ombudsman Wendy Kamenshine issued the office's 2019 Midyear Update with news on obtaining consumer complaint responses along with its Ombudsman Forum and Interactive programs completed this year. ACA International members who attended the Washington Insights Fly-In last May participated in one of the highly engaging interactive programs.

Overall, in the first six months of this year, the ombudsman received 581 inquiries from companies, individuals, consumer and trade groups.

The role of the ombudsman's office is to provide independent, impartial and confidential resources for consumers, banks and nonbanks in resolving issues with the bureau. In that role, it also makes recommendations to the bureau. Read more at ACA INTERNATIONAL


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CFPB delays rule to make car title loans less risky, Chase forgives Canadians' debt, and robocall-blocking apps may violate user privacy

SAN FRANCISCO (KGO) -- CFPB delays rules to make car title loans less risky

The Consumer Financial Protection Bureau is delaying a new rule that would make car title loans less risky for consumers.

The rule, known as the "underwriting provision," was set to go into effect August 19, and will be delayed for 15 months. The provision was originally proposed by the CFPB during the Obama administration, and was meant to prevent people from taking out loans they likely couldn't afford. It required lenders to ensure that their borrowers had the ability to pay their loans back before granting the loan. Under the Trump administration, the CFPB has already drafted a proposal to do away with the provision entirely once the delay elapses.

Car title loans are notoriously risky. Usually meant to be short-term solutions, borrowers would be able to put up their cars as collateral for their loans. According to Consumer Reports, most of these borrowers get loans for a 30 day term and for $959 on average. However, a Pew study found that one in nine car title borrowers falls behind on payments, and ultimately has their car repossessed.

Chase Bank forgives credit card debt of Canadian customers
Read more at KGO-TV

Redefining how financial service businesses measure risk and process payments.

Walmart crypto coin patent could be a back door to banking

Walmart has filed a patent application for a digital currency that, like Facebook's Libra, would be a stablecoin backed by traditional currencies. And it envisions a very specific use case where its coin could stand in for cash - or even for a bank account.

The patent mentions a hypothetical "currency micromarket," defined as "an unattended retail environment where consumers can purchase products from open shelves, coolers, or freezers and use a self-checkout kiosk to pay for their products." It sounds a lot like Amazon Go, a checkout-free retail concept that has been bogged down by lawmakers' insistence that Amazon also accept cash.

In this scenario, Walmart's coin wouldn't just be a substitute for cash; it would function more like a banking relationship: "Customers without traditional bank accounts can create a microbank at an institution such as a retailer, which gains interest while their money is there. A customer buys digital currency, such as at the beginning of a month."


Advance Financial
Advance Financial Wins Four National Awards for Their Continued Success and Growth

NASHVILLE, TN - August 8, 2019 - Nashville-based financial services and fintech company Advance Financial has won four 2019 national awards in recognition of their continued growth and success - specifically, the hiring of their 1,000th employee and the opening of their 100th location. The awards include two gold CEO World Awards for Milestones of the Year; a gold PillarĀ® World Award for Milestone of the Year in Jobs Growth; and a silver Globee Award for Jobs Growth of the Year. These awards are in addition to its already substantial collection of industry awards in the past year, which include recognition on Inc. 5000 fastest growing private companies for eight straight years.
Read more at The Tennessee Tribune


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