March 19, 2019

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CFPB Announces 18th Edition of Supervisory Highlights

WASHINGTON, D.C. - The Consumer Financial Protection Bureau ("CFPB" or "Bureau") today released its 18th edition of Supervisory Highlights. The report covers Bureau supervision activities generally completed between June 2018 and November 2018, and includes examination findings in the areas of automobile loan servicing, deposits, mortgage servicing, and remittances.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau is authorized to supervise banks and credit unions with more than $10 billion in assets, as well as certain nonbanks.

The report shares information regarding general supervisory and examination findings and the Bureau's supervisory program, but does not impose any new or different legal requirements than those in relevant laws and regulations. The information is disseminated to help institutions better understand how the Bureau examines institutions for compliance.
Read more at The Consumer Financial Protection Bureau


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What makes Americans take out personal loans?

People with high credit scores tend to leverage personal loans for home improvements.

Personal loans are an increasingly popular product, and people are using them to either consolidate some other type of debt, cover an emergency or fuel irresponsible consumption.

That's according to an in-depth study from LendingTree, which looked at anonymized data from customers in 2018. The study is packed with lots of great insights about consumer debt, including a breakdown of the reasons for taking out personal loans by credit score and across states.

Researchers were able to show, for example, that people with low credit scores frequently use personal loans to cover everyday expenses. On the other hand, people with high credit scores tend to leverage personal loans for home improvements.

The rate at which Americans are using personal loans is increasing, totaling some $125 billion in outstanding balances.
The two most common reasons for taking out a personal loan is to consolidate debt and refinance credit card balances, symptoms of the larger problem of indebtedness in America.
Read more at THE LADDERS


Restricting Small-Dollar Loans Hurts Consumers' Financial Well-Being
Efforts by legislators to regulate the terms of small-dollar loans (such as by imposing price caps on fees or limitations on use) typically produce negative unintended consequences that vastly exceed any social benefits gained from the legislation.

Restrictions on small-dollar loans, such as through outright bans or rate caps, result in increased credit problems for consumers. Some consequences of restricting small-dollar credit to consumers:
  • Incurring overdraft charges and extraneous bank fees by bouncing more checks
  • Seeking out illegal, offshore, or unregulated lenders
  • Filing for Chapter 7 bankruptcy
When states ban small-dollar loans, the marginal circumstances of consumers are only further aggravated.

GAO offers CFPB alternative data recommendations

The Government Accountability Office (GAO) has issued the Consumer Financial Protection Bureau (CFPB) a series of recommendations regarding sharing lender alternative data insight.

The GAO is recommending the CFPB and federal banking regulators communicate in writing to fintech lenders and banks that partner with fintech lenders, respectively, on the appropriate use of alternative data in the underwriting process.

The GAO said the recommendations stem from the CFPB having supervisory authority over some fintech lenders. Fintech lenders that have entered into third-party relationships with banks may also be subject to indirect oversight by federal banking regulators.

The recommendations include that the Director of the Bureau of Consumer Financial Protection should communicate in writing to fintech lenders on the appropriate use of alternative data in the underwriting process while the Chair of the Board of Governors of the Federal Reserve System should communicate in writing to banks that engage in third-party relationships with fintech lenders on the appropriate use of alternative data in the underwriting process.
Read more at Financial Regulation News

Alternative Credit Reporting

TEXAS: AG Pax­ton Urges 5th Circuit to Rule That the CFPB's Structure is Unconstitutional

Attorney General Ken Paxton expressed his hope that the U.S. Court of Appeals for the 5th Circuit will strike down the structure of the federal Consumer Financial Protection Bureau (CFPB) as unconstitutional after hearing arguments today in the case. Last July, he filed a friend-of-the-court brief with the 5th Circuit as the leader of a 14-state coalition challenging the CFPB's constitutionality.

"The CFPB has so much power and so little accountability, it operates like a branch of the government unto itself, violating the Constitution's separation of powers and stifling economic growth through overregulation in the process," Attorney General Paxton said. "It was set up so that its unelected director enjoys more unilateral authority than anyone else in the U.S. government, arguably even more than the President. Ultimately, a ruling by the 5th Circuit that the CFPB is unconstitutional will return control to the people, through their duly-elected representatives in Congress."

Last year, the D.C. Circuit Court of Appeals ruled that the CFPB's structure was constitutional, but the U.S. District Court for the Southern District of New York reached the opposite conclusion last month. The coalition of states is asking the 5th Circuit to disagree with the D.C. Circuit's decision.

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How to Leverage Intelligence to Help Online Lenders

We're back from this year's LEND360 conference. It was another great event: insightful presentations, engaging conversations, and a chance to reconnect with friends and colleagues. In this blog post, learn about 3 major topics that leading online lenders were discussing at this year's show.

3 Hurdles For Online Lenders
What made this year's conference different? Here's our list.

Fraud is getting worse.
Online lenders have no uncertainty about this next point: fraud operators are more crafty, diligent, and costly than ever before. Part of the problem is that all those headline-making data breaches of recently years have leaked torrents of identity data, which fraud operators are now putting to good use. And fraud operators, thwarted by the widespread adoption of EMV chips, are looking for new targets, including online lending, for adding to their ill-gotten gains. Among the realizations here: lenders need better IT defenses as well as identity intelligence that is more accurate and less hackable that the knowledge-based approaches that sufficed in simpler times.
Read more at ACCELITAS

Accelitas is an alternative data resource that delivers the power of AI to reach more underserved consumers and deliver predictive insights that are customized to your business.

Mortgage Bankers Association releases paper detailing CFPB reforms

The Mortgage Bankers Association released a report this week detailing changes it proposes to the Consumer Financial Protection Bureau (CFPB).

The paper, called The Roadmap to CFPB 2.0, seeks to ensure stability and consistent consumer protections in the CFPB's practices and rules.

The paper is informed by responses MBA received from 12 requests for information (RFIs) it made to the bureau in 2018. The CFPB issues a series of RFI's last year on a variety of topics looking for suggestions from stakeholders on how to better align its supervisory practices and the regulations with its mandate and generally accepted principles of sound prudential regulation.

"The Bureau has shown an admirable willingness to listen to stakeholder concerns about how it can improve both its own practices and the regulations it is tasked with enforcing," MBA President and CEO Bob Broeksmit said. "The recommendations laid out in this roadmap will further strengthen CFPB's policies and ensure that all consumers are treated fairly and equally and have access to the quality sustainable products they deserve." Read more at Financial Regulation News

Lending as a Service

IRS Private Debt Collection Program Brings in $130.6 Million

The Senate Finance Committee released a new quarterly report detailing the progress of the Internal Revenue Service (IRS) Private Debt Collection (PDC) Program - which works to bolster the U.S. Treasury and strengthen the effectiveness of the IRS by providing taxpayers with customized solutions that help them satisfy lingering tax debts in a manageable way.

As of December 13th, 2018, the PDC Program has directly collected $130.6 million in voluntary payments of long past-due tax revenue, plus millions more has been collected by the IRS as a result of PDC Program taxpayer outreach. To date, tens of thousands of taxpayers have now fully resolved their tax debts via the PDC Program, and more than 27,000 installment agreements are currently in process providing taxpayers the opportunity to pay their tax debt over time via flexible monthly payments tailored to their budget.

To boost internal IRS capabilities, the PDC Program has also generated more than $23 million for the IRS Special Compliance Personnel Program Fund, which provides the agency with much-needed resources to hire and train new permanent collections staff. The IRS Special Compliance Personnel Program officially began in October and has thus far spent just over $1 million to bring on new IRS collections employees. Read more at CPA PRACTICE ADVISOR

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New Minimum Salary For Overtime Exemption Proposed By Department of Labor

In a long-awaited decision, the Trump Administration's Department of Labor proposes to increase the salary threshold for white collar overtime exemptions to $35,308 per year.

Since 2004, the minimum salary level for overtime exemptions under the Fair Labor Standards Act (FLSA) for executive, administrative, and professional employees ("white collar" jobs) has been $23,660 per year. In 2016, in a controversial decision because of its impact on businesses, the Obama Administration enacted a rule that doubled the minimum salary level to $47,476. A federal court blocked the Obama-era rule from going into effect and shortly after the Trump Administration took office in 2017, it signaled that it would implement a more moderate increase to the salary requirement.

The proposed rule will officially rescind the Obama-era rule from 2016. The $35,308 salary level reflects a compromise between business and labor groups. The Department of Labor estimates that an additional one million workers will be eligible for overtime pay based on the increase in the minimum salary level. Read more at Womble Bond Dickinson

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Alchemy Lending Platform

Alchemy's Lending Platform is purpose-built to specifically address the needs of today's consumers as well as enabling automation and real-time underwriting for Banks, Speciality Financing firms and FinTech startups.

Our goal is to become the operating system to launch any financial products for banks and FinTech alike. Our lending vertical solutions are especially powerful with unique workflows that cater to patient financing, student lending and construction loans. Deep lending domain knowledge with lending and analytics know how is what our clients love the most about us.

Alchemy's lending platform is has two major benefits. Our lending operating system has users in unsecured installment loans, point-of-sale installs such as patient financing and construction loans:

A true end-to-end lending experience - We have developed a true end-to-end lending experience for our clients. Read more at ALCHEMY

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INDIANA: Payday lending industry gains upper hand in Statehouse fight

After years of fighting to lower the interest rates credit agencies can charge on subprime loans, consumer protection advocates thought they finally had a win lined up this legislative session.

A bill that would have capped two-week "payday" loans of up to $605 at an annual percentage rate of 36 percent-compared with the 391 percent APR that can be charged now-passed an Indiana Senate committee and headed to the Senate floor for a vote in February.

But supporters of the legislation-including Erin Macey, senior policy analyst for the Indiana Institute for Working Families, and Kathleen Lara, policy director for Prosperity Indiana-weren't celebrating that day.

Instead, they were digesting the details of another bill addressing subprime lending that had a 69-page strip-and-insert amendment released the night before the committee meeting deadline for the first half of the session.

"We had so little time to analyze the bill," Macey said.

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

The IRS has $1.4 billion in old tax refunds that Americans 'may have overlooked'-here's how to tell if some of it's yours

The Internal Revenue Service has roughly $1.4 billion in unclaimed federal income tax refunds that about a million Americans may have overlooked. And time is running out to claim that money.

How to tell if you're owed
So how can you tell if some of those funds belong to you? If you didn't file a 2015 tax return, the IRS said in a recent report, you may be due a check.

"We're trying to connect over a million people with their share of $1.4 billion in potentially unclaimed refunds for 2015," said IRS Commissioner Charles Rettig. "Students, part-time workers and many others may have overlooked filing for 2015."

This time last year, there was around $1.1 billion in unclaimed refunds. Read more at CNBC

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