June 6, 2019

Kraninger's CFPB gives consumers the tools to help themselves

Kathy Kraninger, newly minted director of the Consumer Financial Protection Bureau (CFPB), gave her first major policy speech last month. She laid out a vision for the bureau that is transparent, rule-based and cautious.

Judging by both this speech and Kraninger's actions during her first few months in office, U.S. consumers have cause for optimism about her tenure.

Kraninger affirmed the CFPB's four pillars - education, regulation, supervision and enforcement - while laying particular emphasis on the first. Agencies, she said, are often judged by their "output," i.e., how many complaints the bureau has handled or how much money it has recovered. But this metric is misguided, or at least incomplete.

If the bureau's primary goal is to foster a financial system that works, judging its success or failure will require looking at more than just enforcement actions. Indeed, sometimes overzealous enforcement actions can create more problems than they solve.

In a similar vein, perhaps most encouraging were her comments on rulemaking. In its short history, the CFPB has pursued certain policies with a single-mindedness that was imprudent and at times even shocking. Two such policies pursued by the bureau pre-Kraninger include rules on arbitration and small-dollar loans. Read more at THE HILL

Kraninger Sets Tone for Vigorous Enforcement Agenda in Decisions on Five Petitions to Modify or Set Aside CFPB CIDs. by Alan S. Kaplinsky, Ballard Spahr LLP

Consumer advocates have heavily criticized Director Kraninger and former Acting Director Mick Mulvaney for taking a much less aggressive attitude towards enforcement than former Director Cordray. While there are fewer lawsuits and consent orders under the Kraninger/Mulvaney leadership than under the Cordray leadership, the CFPB's enforcement activities are still quite robust as exemplified by the five decisions and orders issued by Director Kraninger on April 25 in which she, with minor changes, strictly enforced five separate CFPB civil investigative demands (CIDs). These decisions and orders largely flew under the radar until Jeff Ehrlich, CFPB Deputy Enforcement Director, mentioned them on May 20 in Chicago when he spoke at the PLI 24th Annual Consumer Financial Services Institute, which I co-chaired.

On April 23, the CFPB announced that in an effort to provide more transparency to CID recipients, it would provide more specific information in CID notifications of purpose. Director Kraninger's April 25th decisions and orders granted those petitions to modify or set aside the CIDs that included a challenge to the sufficiency of the CID's notification of purpose but only as to that challenge. (Her decisions and orders modify the notifications consistent with the Bureau's April 23rd announcement.) However, Director Kraninger denied those petitions as to all other challenges and fully denied the petitions that did not include such a challenge.

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The CFPC (Consumer Financial Protection Bureau) released the latest quarterly consumer credit trends report, which explores the relationship between fluctuations in consumers' credit scores and the timing of consumers' applications for credit.

The ability of consumers to access various types of credit can be affected by their credit scores, as many lenders require a minimum credit score before credit will be extended. Given the critical role that credit scores play in determining access to credit, there has been a push in recent years to make credit scores more available to consumers and to educate them on how their scores are used and calculated.

The report analyzes data from the Bureau's Consumer Credit Panel (CCP), a longitudinal, nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide credit reporting companies. The report focuses on consumers whose credit scores showed large increases or decreases between 2009 and 2017.

Key findings include:

Although a number of individuals have relatively stable credit scores, about two-thirds of consumers in the CCP experienced large changes (over 100 points) between 2009 and 2017. Among consumers with these large credit score changes, about twice as many consumers experience their maximum score before their minimum score. Read more at CFPB

Consumer Financial Protection Bureau Should Define 'Abusive'

The Dodd-Frank Act was a mammoth overhaul of financial services regulation. Along with creating an entire new consumer protection agency, the Consumer Financial Protection Bureau, it also created an entire new consumer protection standard, a prohibition on "abusive" acts or practices. This new prong is a part of a broader prohibition on "Unfair, Deceptive or Abusive Acts or Practices," otherwise known as UDAAP
The terms "unfair" and "deceptive" have been used in the context of government regulation for several decades, under the guise of the Federal Trade Commission, and are well known to the regulated community. Since its inception, however, the "abusive" standard has suffered from a lack of clarity.

The new standard is particularly confusing because it is both enormously broad and vague. Indeed, this may reflect the tendency of governments to prescribe overly broad powers in financial regulation. As one Harvard Law Review note put it, "If the key anxiety of administrative law is that power might be exercised arbitrarily, the worry of financial regulation is that no power will be exercised at all." Read more at Competitive Enterprise Institute

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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.

Why Staying Ahead Of Tech is More Vital than Ever

A growing number of them are prioritizing technology investments, which means advisors who aren't risking falling behind the curve in productivity and quality of service. According to a recent survey by Financial Planning, zero advisors plan to cut their technology budgets and half plan to increase their spending this year.

Advisors that are less productive and those that offer fewer features than the competition tend to lose out on business. Here's why keeping up with technology is imperative for financial advisors.

What Tech Will Do
Robo-advisors have raised the bar for financial advisors. In addition to cannibalizing potential clients, the technology is rapidly changing client expectations. A recent survey found that 80% of high net worth individuals under 40 years old would leave a firm that did not integrate new technology like the automated wealth management services provided by robos. Online portals and mobile access to financial accounts and services are quickly moving from a novelty to a necessity for clients, which means advisors ignoring them could be on the chopping block.
Read more at ALCHEMY

Unbanked & Underbanked Populations in "Cashless" Societies

We clearly live in an age where technology is evolving every day, right before our eyes. With talk of driverless cars and computers that can chat online and seem so life-like, technology continues to push us forward.

This technological evolution is also very present in the financial, banking and payments world, where retailers - both online and brick and mortar are beginning to allow consumers to make payments without the option to use cash.

Not everyone is on board with this technology.

In 2018, there was a bill outlawing cashless businesses in Philadelphia - brick-and-mortar shops and restaurants where customers can only pay with credit and debit cards. Mayor Jim Kenney signed it into law recently, making Philadelphia the first major city in the country to ban cash-free stores. It takes effect July 1.

This bill was introduced to help unbanked populations. Unbanked and underbanked typically pay their bills in cash. If they need to borrow money it is usually from a local money lender at an elevated interest rate, and the vast majority of this population pay sharp interest rates when they are able to secure a line of credit, especially from a retailer.
Read more at VALUEWALK

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Say "yes" to thin-file and no-hit borrowers with REAL alternative data and a fully compliant, AI-powered score, customized for your business.
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Left-leaning lawmakers like Bernie Sanders want Americans to bank at the post office - why that won't help millions of people

Proponents say post offices could replace banks in areas where bank branches have closed.

Progressive lawmakers including U.S. Sen. Bernie Sanders and U.S. Rep. Alexandria Ocasio-Cortez want Americans to be able to visit their local post office for their banking needs.

Sanders, an independent from Vermont, and Ocasio-Cortez, a New York Democrat, see "postal banking" as a potential solution for the estimated 32.6 million U.S. households that are "unbanked" or "underbanked," meaning they don't have a checking or savings account and often turn to services like check cashing or payday loans that can harm them financially in the long term.

Proponents say post offices could replace banks in areas where bank branches have closed. In the wake of the financial crisis, thousands of bank locations shuttered as financial institutions sought to cut costs. As a result, some 3.74 million people live in so-called "banking deserts" and have limited access to financial services. Read more at MARKETWATCH

Trust Science Selected as Panel Member for Credit Invisibles Workshop

How is alternative data being used to service credit invisibles across Canada?

Trust Science CRO and 35 year industry vet, Chris Grnak, will be joining the Canadian Lenders Summit panel on June 5th to discuss how advanced lenders are using alternative data sources as well as advanced analytics to better target and serve thin file or credit invisible consumers.

He will also be sharing how Trust Science is moving the subprime credit industry and the plight of Credit Invisibles forward, with our alternative unstructured data, alternative credit score, and alternative underwriting models.

"Between 2009 and 2014, the percentage of Canadians using payday loans more than doubled from 1.9% to 4.5%. During that time, Canadians became the most indebted consumers among the members of the G7 (roughly, the 7 richest countries on earth), as household debt to income increased from 145% to 160%, and in 2017 hit a record high of 165%." - Canadian Lenders Association Read more at TRUST SCIENCE

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Introducing AI Lift, the AI-powered credit risk web service that leverages uncorrelated alternative data to identify the 20-30% of today's thin-file and no-file borrowers ready to be creditworthy customers.

Why Cleveland Wants to Bring Back Postal Banking

An idea from the early 20th century is ripe for revival in urban "banking deserts," say advocates like the U.S. postal worker union.

In the United States, the post office is for mailing letters, and the bank is for cashing checks.

That's not the case in France, Italy, Japan, China, Brazil, India, and New Zealand, all of which offer financial services like money transfers through their post offices. And it wasn't always true in the U.S.: For half a century, the the U.S. Postal Service offered a Postal Savings System, which at one point held 10 percent of the entire commercial banking system's asset stash.

Today, the USPS's financial services are limited to sending out money orders, giving cash back, and, occasionally, delivering birthday checks. But some city leaders and organizers of the Campaign for Postal Banking are trying to revive postal banking. Postal union leaders hope that in the process, they'll be able to save the postal service, too.

In a press conference last week, a group of Cleveland-area elected officials and local labor leaders called on the U.S. Postmaster General to make cities and suburbs in Northeast Ohio the first test case for the system. Read more at CITYLAB

Will employee vacations hurt your business this summer?

American workers Opens a New Window. are notoriously bad about taking vacations, and it's a habit that employers should encourage them to kick. Taking extended breaks from the job Opens a New Window. can help workers recharge, refresh, and avoid falling victim to burnout. It's therefore encouraging to see that U.S. employees expect to take 10 days off from work, on average, between June and August this year, according to staffing firm Robert Half.

Or is it?

While getting away can actually help workers better focus on the job and improve their productivity, problems can arise when too many workers are absent at once. Such is the problem many U.S. business owners will no doubt face this summer, since 58% of employees intentionally save up vacation time for June, July, and August. If you're worried about being short-staffed in the coming weeks, here's how to cope. Read more at FOX BUSINESS

Lending as a Service
Compete in the data-driven lending era

Three Tips to Improve Credit Card Processing Costs

As a business, each expense counts, including credit card processing costs. Credit card processing is a necessity to businesses today, but it comes at a price, is very complex, and complicated to understand. Furthermore, for online businesses and companies with recurring customers the threats of fraud and loss are very high. To improve your company's profit margin and reduce risk, we discuss steps you can take to protect your sales and mitigate expenses, potentially saving thousands of dollars each year.

Chargeback Management
Chargebacks can be the death of a business, not only as a loss of revenue, sales and product, but with the potential loss of card processing services. The card brands have specific tolerances based on the ratio of sales to chargebacks and disputed transactions. Anything over a 1% ratio of chargebacks to sales, jeopardizes your ability to accept credit cards as a form of payment.

When shopping for payment processing services, processors look at each of the KPIs of your current processing to establish your risk profile. The more chargebacks that you have increases the processor's risk of loss, as such your processing rates will be adversely affected. Merchant Boost employs a team of Certified Payment Professionals (CPP) with the expertise and experience in helping businesses better manage their payment ecosystem. We can help you to not only win a chargeback dispute, but also identify and reduce chargebacks from occurring in the first place.
Read more at ValidiFi

Common Myths About Subprime Lending

When lenders target and serve consumers with a low credit score, it benefits the economy in multiple ways. It enables consumers with subprime scores (those with a VantageScore 3.0 of 300 to 600 at the point of opening a loan or credit product) to use credit to meet their financial needs and to build a healthy credit history if they make payments in a timely fashion. Consequently, this enables lenders to operate profitably so they can continue to offer credit to those in need. This phenomenon creates a loop of healthy credit access and credit supply, and contributes to our overall economic growth.

However, there are common myths about subprime lending, partially driven by the financial industry's painful experiences in the last recession[1]-the underlying drivers of which are too many to be pointed out in this article. In this series, we will debunk or prove some of those hypotheses about subprime consumers in the U.S.

Here are the four myths we will explore, leveraging TransUnion's market intelligence solution, Prama:
Myth 1: Subprime lending has grown exponentially since recovery from the last recession.
Myth 2: Subprime consumers are served by specialty/non-traditional lenders only.
Myth 3: Subprime borrowers have difficulty improving their scores over time.
Myth 4: Thin-file[2] subprime borrowers, who enter the market for their first card or first loan on file tend to perform significantly worse than those with a thick credit file.[3]
Read more at TRANSUNION

Redefining how financial service businesses measure risk and process payments.


Reform Fair Lending Laws to Uphold Rule of Law

In my first post in this series, I discussed how the CFPB's new director, Kathleen Kraninger, assured the Senate Banking Committee in her confirmation hearing that she was committed to upholding the rule of law. More than just a buzzword, Director Kraninger has shown her commitment through such actions as asking Congress to clarify the bureau's authority to supervise for compliance with the Military Lending Act and ending "regulation by enforcement." And yet, there is much more work the new bureau can do to uphold the rule of law.

One important reform is rectifying the original meaning of the Equal Credit Opportunity Act. ECOA is a landmark civil rights law from the 1960s that was enacted to ensure that all consumers have equal opportunity in credit applications. ECOA continues to serve a noble purpose-preventing discrimination in the granting of credit-but modern interpretations of the law through its implementing rules, Regulation B, have stretched its meaning beyond recognition to enact a policy agenda that Congress never intended. Read more at Competitive Enterprise Institute

5 reasons your employees are unhappy

Most workers Opens a New Window. go through periods where they're less than content. But if your employees are overwhelmingly unhappy, that's a problem that you, as a business owner or manager Opens a New Window. , need to address. If your staff is largely disgruntled, you're apt to find that a large percentage of your workforce jumps ship or starts lagging performance-wise. Neither situation is ideal. Therefore, you'll need to think about why your workers aren't satisfied and aim to address those issues as best as you can. Here are a few possible reasons to explore.

1. They're underpaid
When you don't pay your workers what they deserve, they can easily grow disgruntled and feel unappreciated. If you suspect that lackluster salaries are driving your employees to a place of unhappiness, it may be time to review your compensation strategy and take steps to pay more competitively. That could mean shifting resources around or even downsizing some dead weight on your staff to better compensate your most valuable players.

2. They don't get enough time off.   Read more at FOX BUSINESS

Alternative Credit Reporting

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

10 associations oppose current FCC robocall proposal

On Thursday, the Federal Communications Commission will consider a proposal the chairman calls bold action to help consumers block unwanted robocalls but is being questioned by 10 different industry associations, including the American Financial Services Association.

FCC chairman Ajit Pai has circulated a declaratory ruling that, if adopted, would allow phone companies to block unwanted calls to their customers by default. In addition, companies could allow consumers to block calls not on their own contact list. The accompanying draft and further notice of proposed rulemaking would propose a safe harbor for providers that implement network-wide blocking of calls that fail caller authentication under the SHAKEN/STIR framework once it is implemented.

"Allowing call blocking by default could be a big benefit for consumers who are sick and tired of robocalls. By making it clear that such call blocking is allowed, the FCC will give voice service providers the legal certainty they need to block unwanted calls from the outset so that consumers never have to get them," Pai said in a news release.

Employee wellness programs do pay off

Employers believe in workplace wellness programs. More than eight in 10 large employers and half of small companies Opens a New Window. -- now sponsor at least one wellness initiative.

Companies invest more than $8 billion annually to help workers quit smoking and exercise more. Some even offer stress and resilience training and programs to improve sleep and mental health.

But, is the investment paying off? Some of the research says not so much. But that same research is focusing on the wrong things.

The most recent study, published in the Journal of the American Medical Association, reports that wellness programs don't improve employees' health outcomes or save employers money.

Let us consider the JAMA study. Researchers tracked nearly 33,000 employees at BJ's, the wholesale grocer, and found no significant improvement in health outcomes for employees who participated compared to those who did not. However, researchers only evaluated the wellness program based on isolated metrics, such as employees' cholesterol levels or their overall spending on prescription drugs. Read more at FOX BUSINESS


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