February 5, 2019
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New Payday Loan Rate Cap Goes into Effect in Colorado. by Ballard Spahr LLP

As discussed in an earlier post, on November 6, 2018, Colorado's voters passed Proposition 111, seeking to limit interest rates and fees charged on payday loans in Colorado to an annualized percentage rate of thirty-six percent. Effective February 1, 2019, the proposition amends Colorado's Deferred Deposit Loan Act (C.R.S. § 5-3.1-101., et seq.), and pertains to all consumer loans originated for Colorado consumers where the lender: (1) accepts a dated instrument - typically a check or debit authorization - as sole security for a loan; (2) agrees to hold the instrument for a period of time; and then, (3) pays or credits the consumer an amount equal to the instrument, less finance charges, interest, and fees.

While payday loans originated prior to February 1, 2019 are not affected, the amendment marks significant changes for those deferred deposit loans originated for Colorado consumers on or after February 1, 2019. In addition to lowering the amount that can be charged by lenders to a thirty-six percent cap, the amendment also eliminates the prior availability of monthly maintenance fees and other charges lenders could traditionally utilize. Read more at NATIONAL LAW REVIEW

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CFPB settles with NDG Financial Corp., other Payday Lenders for deceptive marketing

The Consumer Financial Protection Bureau settled on Friday with several payday lenders and corporate officials based in Canada and Malta for alleged violation of the Consumer Financial Protection Act of 2010. The CFPB alleges they misrepresented to consumers that they were obligated to repay loans in states where the loans violated state licensing or usury laws and state law voided the loan. The loans were also illegally conditioned on irrevocable wage assignment clauses, which the CFPB alleges violates the Credit Practices Act. The proposed settlement covers NDG Financial Corp., E-Care Contact Centers, Ltd., Blizzard Interactive Corp., New World Consolidated Lending Corp., New World Lenders Corp., Payroll Loans First Lenders Corp., New World RRSP Lenders Corp., Northway Financial Corp., Ltd., and Northway Broker, Ltd and corporate officials Kimberly DeThomas, Jeremy Sabourin, and William Wrixon. The defendants were not fined but are permanently barred from advertising, marketing, promoting, offering, originating, servicing, or collecting any consumer loan issued to any consumer residing in the United States. The proposed consent order awaits approval by the U.S. District Court for the Southern District of New York.
Read more at MARKETWATCH

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Columbia prof's ties to payday lenders cloud CFPB rollback

Getting the straight story on payday loans might be even trickier than it looks.

Since at least 2017, US regulators have relied on a single, "objective" academic study to shape restrictions on short-term, high-interest loans, which critics claim are prone to victimize cash-strapped borrowers.

But the Ivy League professor behind that study - which scrutinized in particular the causes behind delinquency rates in various states - has enjoyed cozy ties to a payday-lending executive and advised other academics on how to sway policymakers, The Post has learned.

Ronald Mann, who teaches at Columbia Law School, has done previously undisclosed work at the behest of Hilary Miller, the president of the Short-Term Loan Bar Association, an industry group of payday lawyers, according to e-mails obtained by The Post.

In one instance, Miller urged another academic who was penning a pro-payday paper to use Mann's research to "explain away" delinquency data that could have undermined their case for deregulating the loans, which can carry interest rates of 400 percent and up, the e-mails show.

Mann had written to Miller in 2014 with advice on which data to play up when critiquing tight restrictions in Florida that forbid borrowers to roll over payday loans.
Read more at NEW YORK POST

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Payday Loans, Pawnshops And Borrowed Credit Cards: How Many Americans Got By In 2018

When it comes to managing personal finances, consumers are seemingly taking one step forward and three steps back.

For one thing, the portion of consumers who fell behind on bill payments went way up, increasing from 30.7 percent in Q2 2018 to as much as 41.2 percent in Q3 2018. Meanwhile, the portion who faced delinquency increased by more than a third, with 36.3 percent falling so far behind that they had to be contacted by debt collectors to settle accounts.

More concerning still was the fact that, even among consumers who had resolved their outstanding debts and pulled themselves out of delinquency, as much as 22.7 percent said they expected to fall right back in again in as little as a few months' time.

Yet, on the positive side, they were feeling better about their finances than they had in the past year. So, what's behind this feel-good factor?

In the Q3 2018 edition of the Financial Invisibles Report™, PYMNTS surveyed more than 2,000 American consumers to get to the bottom of what was driving their financial confidence - even in the face of delinquency. Read more at PYMNTS.COM

Lending as a Service

States must step forward as CFPB retreats on predatory lending. The HILL Blog

Targeting the worst abuses that led to the foreclosure crisis, the Consumer Financial Protection Bureau in 2016 required payday and other lenders to determine whether potential borrowers can afford to pay back their loans. Now, amid the chaos of the recent government shutdown, comes news that President Trump's CFPB director intends to encourage predatory lending by scrapping this ability to repay rule.

With Congress gridlocked and legal challenges uncertain, it's up to states to fill the leadership void - through programs that promote affordable small-dollar loans and protect financially vulnerable consumers.

It's an effort that is much needed. A decade after the Great Recession, millions in America struggle to pay their bills every month. While unemployment is low by historical standards, wages are largely stagnant and good-paying jobs are hard to come by.

Any financial downturn - a health emergency, a disruption in work, or even a government shutdown - can send consumers into crisis. According to the Federal Reserve, 41 percent of Americans say they cannot cover a $400 emergency expense, or would have to sell something or borrow money to do so. This challenge is far greater in underserved and disadvantaged communities.
Read more at THE HILL

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A Winning Combination For Lenders: AI and Alternative Data

Artificial Intelligence (AI) is getting a lot of attention in the financial services market - and rightfully so. AI promises to deliver more accurate predictions of creditworthiness for lenders. It also promises to be useful in detecting fraud. In this blog, learn how lenders need more than AI platforms and new analytical models, to realize its full potential.

New Sources of AI Data
AI techniques such as machine learning learn to recognize patterns from studying vast amounts of data. But these techniques, impressive as they are, are of limited use when they are applied to the same old data that lenders have been relying on for years. They might be able to discover a few new patterns, but they'll also recycle a lot of previous analysis based on the same limited data sets.

Along with AI, lenders need new and unique data. Specifically, they need alternative data.

What's Alternative Data?
It's data beyond the traditional credit reports and FICO scores that have so long served as the basis for lending decisions. Alternative data is alternative along two different axes:
Read more at ACCELITAS

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Local banks can lead bipartisan efforts on financial regulation

As the new, 116th Congress begins to tackle the nation's policy challenges, community bankers stand ready to work with lawmakers to promote bipartisan reforms that will support communities in every congressional district.

With a proven track record of advocating common-sense reforms that deliver tangible results for Main Street consumers and small businesses, community banks are committed to building on recent successes by supporting economic principles that every member of Congress can stand behind.

The new chairwoman and ranking member of the House Financial Services Committee - Rep. Maxine Waters (D-Calif.) and Rep. Patrick McHenry (R-N.C.) - have indicated they can work together on bipartisan legislation.

With the Senate Banking Committee's recent history of bipartisan achievement, there are real opportunities to make headway on outstanding financial services policy issues to support our communities nationwide. Community banks are uniquely poised to help.
Read more at THE HILL

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Understanding the Impact of Credit Line Changes on Consumer Engagement

At the beginning of the year, lenders often adjust credit lines. In fact, consumers are 50% more likely to receive a credit line increase between the months of January and May. Credit line decreases occur at twice the normal rate during the month of January.

While it's critical for lenders to utilize credit line increases and decreases to prudently manage their business, it's important to understand the implication of such strategies.

Access the study to learn:
  • How credit line changes can result in a more engaged consumer
  • What happens to consumer balances after a credit line increase
  • The impact of a credit line decrease on engagement and attrition
Read more at TRANSUNION

Dan McCabe
"See you at the CFSA Conference & Expo in Miami"
Dan McCabe, President at AFSPA
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4 Expenses You Should Never Put on Your Business Credit Card

Although the majority of credit cards in circulation are for consumers, the popularity of business credit cards is on the upswing.

According to a 2018 report by the Mercator Advisory Group, the purchase volume of business credit cards is expected to go from $493 billion in 2017 to $686 billion in 2022. Some small business owners who previously used personal credit cards for business expenses are moving to business credit cards.

One of the attractions is that credit cards designed for businesses offer specialized account controls and the ability to create custom reports. These kinds of management tools just aren't available on consumer credit cards.

But if you do decide to start using a business credit card, there are a few things that you should never, ever buy with that card.

Travel expenses that get personal. A few months ago, I went to a finance conference in Orlando, Florida. I tacked a vacation day on to the trip and stayed one more night in a very nice hotel. I carefully divided my expenses between my business card and my personal credit card.

It's important to pay for your own entertainment for ethical reasons, obviously. But doing the right thing also saves you time when it's tax season. If you run a small business, your business credit card offers you fancy reporting tools for employee expenses, taxes and more.
Read more at U.S.News & World Report

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