March 5, 2019
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Subprime personal loans will flourish in 2019 thanks to startups and Donald Trump

Americans are again splurging on subprime debt. The spigots are forecast to open even wider next year for personal loans, thanks to financing provided by fintech startups as well as the Trump administration's lighter regulatory touch on payday lending.

Subprime personal loan balances have been climbing since 2014 and are forecast to increase 20% next year, to a record $156.3 billion, according to credit-scoring firm TransUnion. The last three months of this year will be the biggest quarter ever for origination, accounting for some 5 million loans. "A lot of it is being driven by non-prime and subprime originations," said Jason Laky, TransUnion's consumer-lending business lead.

In the past, personal loans were mainly used by borrowers with weak credit who weren't able to get other kinds of financing, like credit cards or home equity loans. But now, a decade after the subprime credit bubble popped, personal loans are experiencing a revival thanks to digital startups that make it quick and easy to borrow money this way. Instead of going to a bank, which may have been wary of the unsecured (no collateral) form of lending, borrowers can now get money in seconds via their smartphone.

Personal loans aren't new, and neither are point-of-sale loans, another option that is becoming increasingly popular. San Francisco-based Affirm, founded by PayPal co-founder Max Levchin, is one of the leaders in point-of-sale loans and is available at more than 1,200 US retailers..
Read more at QUARTZ

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CFPB chief to face lawmakers for first time since confirmation

The director of the Consumer Financial Protection Bureau (CFPB) will appear before a House panel next week as Democrats ramp up their oversight of the controversial regulator, the committee's chairwoman said Thursday.

Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee, said Thursday that CFPB Director Kathy Kraninger will testify next week before the panel.

The Financial Services Committee is scheduled to hold a March 7 hearing on the impact of the Trump administration's takeover of the CFPB. It was unclear if Kraninger would attend the hearing until Waters confirmed the director would appear before the panel.

"She will be there. She is a witness," Waters said. "It's confirmed."

A CFPB spokeswoman did not respond to multiple requests for comment.

Kraninger's testimony will be her first appearance before lawmakers since she was confirmed to lead the CFPB in December by a 50 to 49 vote. It will also be her first stint before the House Financial Services Committee, where she'll face Waters and a slew of Democrats highly critical of her appointment. Read more at THE HILL

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Walmart and Affirm team for installment payment service

Walmart has partnered with payments company Affirm to offer shoppers the option of paying for their purchases in installments at almost 4,000 Supercenters nationwide, according to an Affirm press release.

The retail giant also plans to begin offering Affirm as a payment option on in the coming weeks, according to the announcement. In-store and online, the pay-over-time option will be offered on items ranging in value from $150 to $2,000, excluding some merchandise such as groceries, alcohol, tobacco and pharmacy items.

After shoppers are approved for an Affirm payment plan, they can choose from installment repayment terms of three, six or 12 months, and are shown the exact repayment amount they'll owe each month, with interest displayed in dollars. There are no late fees.

Affirm already is available as a payment option through Walmart-owned brands Hayneedle and Allswell. Walmart and Affirm were first reported to be working together more than a year and a half ago, when Walmart was said to be piloting Affirm's technology. The partnership was seen as a sign that the brick-and-mortar retailer was beginning to evaluate technologies to make it easier for shoppers to reach purchasing decisions for items they might otherwise have passed up.
Read more at RETAIL DIVE

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NEVADA Lawmakers Aim to Strengthen Consumer Protections on Payday Loans

CARSON CITY, Nev. - Two bills before the Nevada Legislature would tighten up the rules on payday lending, just as the Trump administration is proposing to loosen them.

The Consumer Financial Protection Bureau recently proposed lifting the requirement that payday lenders verify that borrowers can pay back a loan. State Sen. Yvanna Cancela, D-Las Vegas, just introduced
Dollar Loan Center has distributed a packet to lawmakers that argues that a database would hurt the payday-lending industry, leave borrowers with less choice and be a risk for data breaches.

A second bill, Assembly Bill 118 from Assemblywoman Heidi Swank, D-Las Vegas, would cap interest rates at 36 percent. Now, some payday loans have annual interest rates as high as 652 percent. Attempts at a similar cap have died in past legislative sessions.

The CFPB also has said it will no longer supervise payday lending to military members and only investigate once a complaint has been made. Therefore, Cancela's bill would add protections from the federal Military Lending Act into state law. It caps interest rates at 36 percent for military members and their families. Read more at Public News Service

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Rep. Maxine Waters vows to fully empower CFPB employees

House Financial Services Committee Chairwoman Maxine Waters recently sent a letter to employees of the Consumer Financial Protection Bureau, promising to fully empower them to protect consumers.

In the letter, Waters said that CFPB had faced challenges over the past two years, and expressed her concern that morale is suffering at the agency. She said the CFPB should be a place employees can be proud of their work and confident of the value they provide in protecting consumers.

"I am writing to reassure you of the importance and value of your work, and to let you know, in no uncertain terms, that the anti-consumer actions mandated by Trump appointees will not be tolerated," Waters said in the letter. "I will work hard to ensure that you will once again be fully empowered to perform your duties on behalf of America's consumers."

Waters said that the CFPB has many "friends and allies in Congress" that will stand up for them.

"I have been concerned that actions taken, and changes made by Office of Management and Budget Director Mick Mulvaney were contrary to both the spirit and plain letter of the law and appear to be designed to frustrate the Consumer Bureau's mission," she wrote.
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Banning payday loans sends desperate borrowers running to pawn shops

Until 2008, a cash-strapped customer in Ohio seeking a quick, two-week loan from a payday lender might find themselves paying a hefty fee. These unsecured short-term loans-often secured with a post-dated check and seldom exceeding $500 at a go-carried annual percentage rates (APR) of up to almost 400%, more than ten times the normal limit permitted by usury laws.

Then, 11 years ago, the state stepped in to make such loans prohibitively expensive to offer. Ohio's Short-Term Loan Law limits APR to 28%, slashing the margins of lenders, and effectively banning payday loans in the state. But while the law was intended to protect the poor, it seems to have instead sent them scurrying to other, equally insecure, alternatives.

A new economics paper by Stefanie R. Ramirez of the University of Idaho, published in the journal Empirical Economics, looks into the effect of the legislation. Though it succeeded in ending the loans, Ramirez argues, it had the unintended effect of shifting the problem to other industries favored by people with few alternatives and xxx credit. Would-be borrowers are now relying on pawnbrokers, overdraft fees, and direct deposit advances to get themselves quickly into the black when times get tough. Read more at QUARTZ

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OHIO: 1st license issued under payday lending law

The first license under a new Ohio law that regulates payday lenders was issued last week.

SCIL Inc., which operates Speedy Cash storefronts, was awarded the license under the Short Term Loan Act - a law that resulted from a bill sponsored last year by state Rep. Kyle Koehler, R-Springfield.

"One of the biggest arguments against payday lending reform was that if we imposed actual fairness constraints on lenders, they would shut down and leave Ohio. Instead, what we see is the first license being issued in the 11 long years since the legislature first tried to address payday lending," Koehler said.

Koehler and joint sponsor state Rep. Michael Ashford, D-Toledo, introduced the bill to close loopholes and clarify statutes regulating the payday lending industry, including the Short-Term Loan Act, to ensure payday lenders are operating under intended guidelines.

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How to tell the difference between a legitimate debt collector and scammers

Dealing with debt collection issues can be challenging-especially when you're not sure if the person you're being contacted by is legitimate or trying to scam you.

When an account like a credit card, auto loan, or cell phone bill becomes past due, the original creditor may attempt to collect the amount owed. The creditor may also hire a debt collector or sell the debt to someone who may try to collect the debt. While there are many legitimate debt collectors in the financial marketplace, there are also scammers who may try to get you to pay on debts that you don't owe or on debts that don't even exist.

Warning signs of debt collection scams

Withholds information from you
A debt collector must tell you information such as the name of the creditor, the amount owed, and that if you dispute the debt the debt collector will have to obtain verification of the debt. If the debt collector does not provide this information during the initial contact with you, they are required to send you a written notice within five days of that initial contact. Read more at CFPB

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Why We All Need Financial Education at Work

More employers are offering financial education in the workplace. And if you're employer doesn't, you just might want to ask, "Why not?"

Studies show that financial education removes doubt and stress and results in improved performance, says Steven Kaye, the CEO of AEPG Wealth Strategies. What's more, Kaye and others says others -- not just workers -- benefit from financial education in the workplace. "Everyone benefits from financial education and financial wellness programs -- the employer, the employees, the employee's family, and even customers."

And others, many others, share that point of view. "The benefits of a successful financial education campaign is that employees who make better financial decisions have less financial stress, and studies have shown that employees with less financial stress are happier and more productive in the workplace," says Mike Webb, a vice president at Cammack Retirement Group "Education also leads to more efficient usage of employer benefits, such as better utilization of employer-sponsored retirement plans which also leads to employees not working past the age that they wish to retire, which also leads to employee dissatisfaction, and the inability of other employees to be promoted into their positions." Read more at THE STREET

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Top frauds of 2018 from The Federal Trade Commission

Every year, millions of consumers tell us - and our partners - about the frauds they spotted. In 2018, we heard from 3 million people and learned a lot from the reports entered into our Consumer Sentinel database. Here are some notable facts from the Consumer Sentinel Network's 2018 Data Book - including that a new category of scams has earned the unenviable right to chant "We're #1."

We collected more than 1.4 million fraud reports, and people said they lost money to the fraud in 25% of those reports. People reported losing $1.48 billion (with a "b" ) to fraud last year - an increase of 38% over 2017.

The top reports in 2018 were: imposter scams, debt collection, and identity theft.

Younger people reported losing money to fraud more often than older people. Let that sink in. It's what the data have been telling us for a while, but it's hard for people to grasp. Last year, of those people who reported fraud and their age, 43% of people in their 20s reported a loss to that fraud, while only 15% of people in their 70s did.

When people in their 70s did lose money, the amount tended to be higher: their median loss was $751, compared to $400 for people in their 20s

Scammers like to get money by wire transfer - for a total of $423 million last year. That was the most of any payment method reported, but we also saw a surge of payments with gift and reload cards - a 95% increase in dollars paid to scammers last year.
Read more at Federal Trade Commission

Alternative Credit Reporting

Millennials Are Facing $1 Trillion in Debt

(Bloomberg) -- More than a decade has passed since young Americans faced debt levels this high.

Debt among 19 to 29-year-old Americans exceeded $1 trillion at the end of 2018, according to the New York Federal Reserve Consumer Credit Panel. That's the highest debt exposure for the youngest adult group since late 2007.

Debt levels play a role in how young adults view their spending conditions, according to a University of Michigan survey Friday. Younger adults -- those under age 35 -- have reduced their spending compared with previous generations possibly because of weakened job prospects, delayed marriage and educational debt.

Policy makers have recognized that lower spending limits economic growth. As a result, a number of policies to boost younger adults spending such as forgiving student debt have entered the political arena, according to Richard Curtin, director of the University of Michigan consumer survey.

Student loans make up the majority of the $1,005,000,000,000 owed by this cohort, followed by mortgage debt. New mortgages among young adults today remain quite a bit below levels incurred in the early 2000s. This may suggest adults are waiting longer to buy homes and may opt to rent for a longer period of time than previous generations. Read more at YAHOO FINANCE

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Donald Trump's CFPB Is Rescuing the Payday Loan Industry

The watchdog that targeted payday lenders is now their best friend.

The Consumer Financial Protection Bureau (CFPB) wanted to end the payday loan industry, then it became its savior.

In 2017, the CFPB approved rules that would have effectively killed off payday loans as we know them today. It estimated that the rules, which were slated to take effect August 2019, would have reduced payday loan volume by as much as 62% and vehicle title loan volume by as much as 93%.

Earlier this month, though, the enemy of high-cost lenders became its biggest supporter, announcing that it would reconsider some provisions in its plan, and push off their implementation until November 2020 -- if they are implemented at all.

How the CFPB planned to curtail payday lending
The payday loan business is a relatively simple one. Payday lenders provide small, short-term loans to borrowers who can't wait until their next payday to get access to cash. The typical payday loan is sized at about $350, and repaid two to four weeks later, though it varies by the lender and the state in which they operate.

Payday lenders skirt usury laws by assessing the bulk of their charges as fees, not interest. In Mississippi, for example, a borrower might get a $100 advance until their next payday, agreeing to repay the principal and a finance charge of $20 two weeks later. That equates to an APR of 521% Read more at THE MOTLEY FOOL

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Rep. Waters begins crackdown on credit reporting industry

House Democrats this week are kicking off work on the biggest overhaul of the consumer credit reporting industry in years, marking the first major legislative effort launched by new Financial Services Committee Chairwoman Maxine Waters.

The California Democrat is proposing a sweeping set of changes to how Equifax, Experian and TransUnion - the industry's three dominant firms - collect data on consumers and repackage it for lenders to gauge a borrower's creditworthiness.

While Waters and consumer advocates have been pushing consumer-focused reforms for years, the effort got an unexpected jolt of energy in 2017 when Equifax revealed that millions of individuals' information had been exposed in an historic cybersecurity breach.

There is now a bipartisan appetite for a credit reporting revamp, and interest is only expected to grow when members of the Financial Services Committee grill top executives from Equifax, Experian and TransUnion at a hearing Tuesday morning.

"It's still going to be an uphill struggle with the Senate and the House split and the president on the side that he's on, which is not usually my side," said U.S. Public Interest Research Group consumer program director Ed Mierzwinski. "But we have the best opportunity we've had in a long time."
Read more at POLITICO

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