February 19, 2019
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Opinion: Regulating Payday Loans

A reader says a well-intentioned regulation could actually harm those of limited means for whom these loans are a last resort.
To the Editor:

Re "Mr. Trump's Payback for Payday Lenders" (editorial, Feb. 13):

Like many well-intentioned regulatory measures, the Consumer Financial Protection Bureau's regulations for payday lenders - which the Trump administration wants to roll back - actually harm those whom they are intended to help.

For many citizens of limited means, payday loans are the source of last resort for critically needed short-term funds. And yet these burdensome regulations, including requirements that the lender determine whether the borrower can "afford" the loan, will surely make it insufficiently profitable for many of these payday lenders to continue to operate and will cause many of them to leave the business altogether.

Those who support the bureau's measures decry the high interest rates these lenders charge for these risky loans and tout the "savings" borrowers will derive from the regulations. But those consumers who, as a consequence of these regulations, are unable to obtain payday loans, and instead lose their car or house to foreclosure, will be nameless, faceless victims of another well-meaning but counterproductive governmental regulatory scheme.
Read more at NEW YORK TIMES

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How Do Alternative Installment Loans Work?

High-cost installment loans are often marketed to borrowers with xxx credit.

Installment loans, like personal loans, car loans or mortgages, provide funds with a predictable repayment schedule. But for consumers with xxx credit, some payday and online lenders are offering a different kind of installment loan that provides access to credit at a high cost.

Meant as an alternative to payday loans, these typically small, short-term installment loans come with a high annual percentage rate and are often marketed for emergencies or fast access to cash. Here's what you should know if you're considering one of these loans.

Alternative Installment Loans vs. Regular Personal Loans
High-cost installment loans for xxx credit are no different from standard personal loans when it comes to their basic mechanics: Loan proceeds are paid to you, and you then pay back the loan according to the repayment schedule.

Where the two types of loans differ is in the approval requirements. To qualify for a regular personal loan with some lenders, you may need good or excellent credit. According to Experian, a good FICO credit score ranges from 670 to 739. A very good score falls into the 740 to 799 range, while a score of 800 or better is exceptional. Some lenders offer personal loans to borrowers in the fair credit range, but interest rates may be higher and approval is not guaranteed.
Read more at U.S. News & World Report

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Payday Lenders Sure Have A Cozy Relationship With The Trump Administration

The Trump administration is helping payday lenders through weak law enforcement and deregulation.

A company that defrauded customers but only got a slap on the wrist from the Trump administration also made a large donation to the president's 2017 inaugural committee.

Last month, Enova International, an online payday lender that operates the brands NetCredit and CashNetUSA, agreed to pay a $3 million fine for illegally taking money from customers' bank accounts and failing to honor loan extensions. But the settlement included no refunds for the victims.

Enova gave $25,000 to Donald Trump's presidential inaugural committee, an organization that prosecutors have been investigating reportedly because of possible money laundering, fraud and overpaying for event space at the Trump International Hotel.

Payday lenders as an industry donated more than $1 million to the inauguration, according to the liberal group Allied Progress, as well as tens of thousands to Trump's 2020 re-election campaign. The Community Financial Services Association of America, a trade group for the industry, last year started holding its annual conferences at a Trump hotel in Florida.

Last week, the Trump administration announced it would rescind parts of a new federal regulation that had been designed to rein in abusive lending practices that lead people to take out loan after loan and sink into debt. Read more at HUFFINGTON POST

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CFPB proposals to revise payday loan rule and delay compliance date published in Federal Register. by Ballard Spahr LLP

The CFPB's proposal to revise its final payday/auto title/high-rate installment loan rule to rescind the rule's ability-to-repay (ATR) provisions in their entirety and its proposal to delay the compliance date for the ATR provisions until November 19, 2020 were published in today's Federal Register. The CFPB's proposals would leave unchanged the rule's troublesome payment provisions and continue to require compliance by August 19 with those provisions.

The publication of the proposals starts the clock running on the comment periods. Comments on the proposal to rescind the ATR provisions are due on or before May 15, 2019. Comments on the proposal to delay the compliance date for the ATR provisions are due on or before March 18, 2019. Read more at National Law Review

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

State Regulators Call For Eliminating Barriers To Fintech Lenders

The national association for state bank regulators put out a call today to cut barriers to fintech lenders.

But this is not about deregulation, said Conference of State Bank Supervisors President and CEO John Ryan in introducing a report

"One of the greatest values of financial technology is the efficiency and cost savings of an on-line only business with a streamlined product and the ability to pass those cost savings to consumers," CSBS asserted in the study.

.However, sometimes state laws bar fintech lenders, CSBS pointed out.

One category of barriers, said the report, are a handful of states with mandates for lenders to have a physical location in each state they do business in.

As an example, the study noted one fintech lender has received requests for over $90 million in loans from over 500 Nevada-based businesses but is unable to because of the archaic brick and mortar requirement. Read more at FORBES

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The Trump Administration Just Relaxed Payday Lending Rules. Is That Good or Bad for Borrowers?

Consumer Financial Protection Bureau Director Kathy Kraninger rolled back certain underwriting requirements in the bureau's payday lending rule last week, and consumer advocates disagree whether the results will be good or bad for consumers.

The scrapped part of the rule requires payday lenders to underwrite loans for borrowers who obtain more than six payday loans in a year. Lenders must verify the borrower's income and examine the borrower's other debts and spending. In other words, they must evaluate a borrower's "ability to repay."

When drafting the original payday lending rule, the CFPB believed these underwriting requirements helped prevent consumers from falling into a long-term debt trap. But the Competitive Enterprise Institute (CEI), thinks the underwriting requirements do just the opposite.

Consumers who take out multiple payday loans a year are often dealing with very difficult financial situations, wrote policy analyst Daniel Press, and procuring quick cash loans can help them get on their feet. A federal cap on how many loans they can get is essentially telling consumers how to manage their own finances. Read more at INSIDESOURCES

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Data provider, MicroBilt, improves decisioning tool for growing alternative credit marketplace

KENNESAW, Ga., Feb. 8, 2019 /PRNewswire/ -- Alternative credit data pioneer MicroBilt recently announced the launch of iPredict Advantage, the next iteration of its powerful automated decisioning tool for lenders.

Built on an improved algorithm that takes in traditional and proprietary alternative credit data, iPredict Advantage boasts +10% added predictive value over the original iPredict which was launched in 2000. Unlike conventional credit decisioning tools, iPredict Advantage also includes bankruptcies, liens, judgments and evictions data in its consumer assessment.

"By combining traditional credit reporting with our PRBC Alternative Credit database and civil records data, we're able to provide lenders with a more comprehensive picture of a consumer's creditworthiness," said Sean Albert, SVP/CMO at MicroBilt. "This delivers a win-win benefit. For the business, it often means opening the doors to customers they might have otherwise rejected due to thin traditional credit files. For consumers, it means access to the credit market where they didn't have it before."

iPredict Advantage factors in over 165 data attributes in calculating the potential risk of a loan applicant and returns a risk score, loan history, credit inquiry attributes, and consumer stability indicators. It is particularly relevant to the sub-prime lending space which has grown significantly in recent years and is increasingly vital to businesses and consumers.
Read more at MICROBILT

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New York and other cities want to ban cashless stores

New York City is weighing a proposed law that could challenge Amazon and other businesses - banning cashless stores.

A hearing was held Thursday on the bill, which has won support from legislators, unions and the city's Department of Consumer Affairs. Amazon, which runs several cashless bookstores and one four-star store in the city, didn't testify and declined to comment. Some restaurants, including the vegan chain By Chloe and taqueria chain Dos Toros oppose the bill and say running a cashless business protects the safety of their employees from robbery and theft.

As consumers move to pay with their credit cards, some restaurants and retailers opt to exclude cash as a way of payment. Ritchie Torres, the New York City councilman who introduced the bill last year, aims to protect populations who don't own bank accounts or who want to use cash to protect their privacy, as well as senior consumers who are used to paying in cash.

According to a 2017 survey from the FDIC, the unbanked population in the U.S. has fallen to 6.5%. An additional 18.7% of U.S. households are underbanked, meaning they have a checking or savings account but also obtained financial products and services outside of the banking system. The rate is even higher in New York City, where one in four households are underbanked, according to a study in 2015. Read more at YAHOO FINANCE

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Retail Apocalypse: These big retailers closing stores, filing for bankruptcy

Some of the United States' most prominent retailers are shuttering stores or declaring bankruptcy in recent months amid sagging sales in the troubled sector.

The rise of ecommerce outlets like Amazon has made it harder for traditional retailers to attract customers to their stores and forced companies to change their sales strategies. Many companies have turned to sales promotions and increased digital efforts to lure shoppers while shutting down brick-and-mortar locations.

Discount footwear retailer Payless became the latest company affected by the trend, after sources familiar with the matter told Reuters Opens a New Window. that the company would shutter all of its roughly 2,300 U.S. stores while filing for bankruptcy later this month. FOX Business breaks down which prominent retailers have closed stores or filed for bankruptcy in recent months.

Abercrombie & Fitch
Facing declining sales, the once-prominent fashion brand announced in March 2017 that it would close 60 of its U.S. stores with expiring leases during its 2017 fiscal year. The chain has closed hundreds of store locations over the last few years while placing an increased emphasis on online sales. Read more at FOX BUSINESS

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1 in 4 Americans do not have access to basic banking services. Here's what activists are doing to fix it

Low-income and poverty-stricken Americans tend to be disproportionately affected by a lack of access to banks. These individuals are frequently called the "unbanked" and the phenomenon is more widespread than one might think. Estimates suggest that 1 in 4 Americans is either unbanked or underbanked, meaning they don't have access to basic banking
Watch the VIDEO on CNBC

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Credit unions respond to CFPB payday proposal

The Consumer Financial Protection Bureau (CFPB) today released a proposed rule making changes to its short-term, small-dollar lending rule. Credit Union National Association (CUNA) has consistently advocated for the CFPB to revise its rule to ensure their 115 million credit union members have access to short-term, small-dollar lending options.

The trade group is currently analyzing the proposal and sent a letter to Director Kathy Kraninger in December, supporting revisions to the rule that would create an express, broader exemption for credit union loan products. CUNA agrees with the CFPB that payday lenders should be effectively regulated.

"Credit unions are known for providing safe and affordable short-term, small-dollar loans designed to keep members away from predatory payday lenders and debt traps," said CUNA Chief Advocacy Officer Ryan Donovan. "We support bureau efforts to revise this rule, and urge the bureau to ensure these changes do not inhibit credit unions participating in the short-term, small-dollar loan market." Read more at CUNA

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Why can't a third of small businesses make payroll, pay bills?

A global study by Intuit, a business and financial software company, uncovered the fact that nearly a third of small businesses Opens a New Window. are unable to either pay vendors, pay back pending loans or pay themselves or their employees. The problem: Cash flow

"The State of Small Business Cash Flow Opens a New Window. " focused on the behaviors, attitudes and status of cash flow challenges experienced by small businesses and the self-employed.

This is true despite recent tax cuts, regulatory rollbacks and other stimulus policies that have benefited small businesses.

According to the study, on average U.S. small business owners are losing $43,394 annually by foregoing a project or sales due to issues created by insufficient cash flow.

For many small businesses and self-employed workers who struggle with cash flow, the problem isn't that they don't have funds in the pipeline - it's that they don't have the funds readily available for real-time expenses.

Small business billing practices need to be looked at, Intuit said. Nearly two-thirds of small business owners report that the time it takes the money to process after receiving a payment has the largest impact on their company's cash flow. Read more at FOX BUSINESS


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