February 20, 2020

Capping interest rates on payday loans leads to more debt and defaults.

TO THE CASUAL observer, the business of lending to poor, financially unsophisticated people at sky-high interest rates seems inherently predatory. But payday loans, as they are commonly known, are more complicated than they might at first appear. On the one hand, such loans are rarely paid off all at once. Most are rolled over into new loans, sometimes many times over, leaving cash-strapped borrowers caught in a cycle of debt. On the other hand, laws aimed at restricting payday loans can prevent risky borrowers from gaining access to credit. Some may be forced to seek even costlier alternatives.

A new paper by Amir Fekrazad, an economist at Texas A&M University-San Antonio, illustrates just how complex the issue can become. Using a database of millions of loans issued between 2009 and 2013, Mr Fekrazad analysed the impact of a law passed by the state of Rhode Island in 2010 which, in effect, reduced the interest rate allowed on a two-week payday loan from 15% (equivalent to an APR, or annual percentage rate, of roughly 390%) to 10% (260% APR). The law was intended to make such loans more affordable. Instead it caused some borrowers to roll over their loans more often, increasing the likelihood of default. The law also had several other unintended consequences: on average, the total number of borrowers rose by 32%, the number of loans per borrower jumped by 3.5%, and the principal of a typical loan climbed by 3%. All this amounted to approximately a 36% increase in total payday-loan volume. Poorer people began borrowing, too.
Read more at ECONOMIST

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Last Day Today!

Banks squeezed as unemployment in their ranks effectively reaches 0%

Executives try to find the right balance between cutting costs and attracting and retaining talent while low interest rates keep income down.

The tight labor market has banks under pressure. Banks are having to raise wages to attract and retain staff while at the same time try to meet investor demands to keep costs down, American Banker reported.

"This is a tough situation for banks," said James Chessen, chief economist at the American Bankers Association.

Because of the challenges banks face making money in today's low interest rate environment, they're already under pressure to cut expenses and generate revenues, the report said. Many have been making significant investments in technology upgrades to increase efficiency and upgrade their products and services.
Read more at BANKING DIVE

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Keeping the banking desert at bay in rural America

As big banks concentrate their branches in cities, smaller financial institutions and digital companies find ways to irrigate in abandoned markets.

When a community's only bank branch leaves town, the lack of financial services can pose a serious drawback for locals.

While residents and small businesses may have digital and mobile banking options to turn to when their brick-and-mortar option disappears, they are left with a lack of credit and cash depositing options that make the void especially hard to fill.

Banks shed 6,764 branches in the U.S., or 7% of the total number, from 2012 to 2017, according to a November report by the Federal Reserve.

The central bank identified 44 "deeply affected" counties that had 10 or fewer branches in 2012 and lost half or more of them by 2017. Thirty-nine of those counties are rural, the Fed found.
Read more at BANKING DIVE

Dreher Tomkies LLP

HSBC to cut 35K jobs in major restructuring
  • HSBC plans to cut 35,000 jobs and $100 billion in assets over the next three years as it continues to navigate global uncertainties such as the impact of Brexit and COVID-19, the coronavirus.
  • In its annual earnings release, the London-based bank said it will scale back its presence in the U.S. and mainland Europe, reduce the size of its investment bank and invest more in its Asian and Middle Eastern operations.
  • "The Group's 2019 performance was resilient, however parts of our business are not delivering acceptable returns," interim CEO Noel Quinn said in a statement. "We are therefore outlining a revised plan to increase returns for investors, create the capacity for future investment, and build a platform for sustainable growth. We have already begun to implement this plan, which my management team and I are committed to executing at pace."

Read more at BANKING DIVE



MaxDecisions, a Fintech AI Firm, Hires Bernard Guerrero

MaxDecisions, a Fintech A.I. and machine learning analytics company, has hired Bernard Guerrero as Vice President of Decision Sciences to further expand analytical products and offerings.

MaxDecisions is an analytical company utilizing the power of machine learning and artificial intelligence software to assist specialty financing companies, banks as well as Fintech startups.

Timothy Li, founder of MaxDecisions, issued the following statement on the appointment:
"As we strengthen our customer base and enhance our custom analytical product offerings, we are bringing industry veteran to help us deliver mission critical applications to help our clients from marketing to collections with our deep industry experience.
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ALABAMA Senate committee votes down payday loan restrictions

MONTGOMERY, Ala. (AP) - An Alabama Senate committee on Wednesday voted down a proposal to give payday lending customers longer to repay their loans.

The Senate Banking and Insurance Committee voted 6-8 against the bill by Republican Sen. Arthur Orr that would give borrowers 30 days to repay a loan instead of as little as 10 days.

Fellow Republican Sen. Tom Butler, who argued for the bill on Orr's behalf, said families facing financial needs turn to payday loans only to get trapped in debt cycles when they can't pay back the loans when they are due. He said the proposed change would have dropped the effective yearly interest rate from 450% APR to 220% APR.
Read more at ABC3340



Need a Great Consumer Reporting Company? Microbilt Made the List!

The Consumer Financial Protection Bureau (CFPB) -- part of the United States government -- recently mentioned Microbilt as a consumer reporting company on its list of companies to contact for specific types of reporting. Specifically, Microbilt was listed for its ability to provide bill payment and credit information, along with employment, property records, bank account, and court judgments for sub-prime and low-income consumers. Name and address information for these consumers was also listed as available through the company, to businesses that provide rent-to-own and short-term retail, consumer, and auto financing.

Why CFPB Recognition Matters

The CFPB is responsible for protecting consumers when it comes to the financial sector. As such, the CFPB only provides information for companies that have been properly vetted and can be trusted with consumer information. It looks for fair treatment, quality data, safe and secure practices, and the ability to perform the job of consumer reporting to a high standard. Microbilt is proud to have made the list of consumer reporting companies that the CFPB trusts. Since its creation in 2010, the CFPB has been actively focused on curtailing abusive practices for debt collection and reforming mortgage lending.
Read more at MICROBILT


Lawmakers look to boost banks' transparency on diversity efforts
  • Twenty-nine percent of senior- and executive-level positions at U.S. banks with more than $50 billion in assets are held by women, according to a House Financial Services Committee report published this week. Racial and ethnic minorities comprise 19% of senior- and executive-level employees at those banks, the report found.
  • Twenty-seven of the 44 banks examined in the report said they conduct internal reviews of gender pay equity. Fifteen of those banks publicly report that data, according to the report.
  • The report suggested lawmakers pass legislation to force banks to share diversity data with their regulators and make it public. The study also sought to require banks to publicly disclose the diversity of their boards and to increase their investments in diverse suppliers.

Read more at BANKING DIVE


LendingClub buys Radius Bank for $185 million in first fintech takeover of a regulated US bank
  • LendingClub, a fintech company that pioneered personal loans made online, is buying a U.S. bank to give it access to a stable and cheaper source of funding, CNBC has learned.
  • LendingClub is paying $185 million in cash and stock for Radius Bancorp, a Boston-based online bank with about $1.4 billion in assets.
  • LendingClub had been a leader in an earlier wave of fintech firms focused on marketplace lending, or matching borrowers with lenders.

LendingClub, a fintech company that pioneered personal loans made online, is buying a U.S. bank to give it access to a stable and cheaper source of funding, CNBC has learned.
Read more at CNBC


Taxes 2020: What you don't know about your tax bracket could hurt you

Tax brackets may be one of the most misunderstood aspects of the tax system - and that can hurt taxpayers.

"In the past three days, I've had two people say to me, 'I have a dumb question: Is it true if I'm right against the tax bracket, and I make $100 more and get bumped into the next tax bracket I'll pay thousands of dollars extra in taxes?'" says Chris Mulvaney, a tax director at CBIZ MHM. "There is this misperception that all your income will be taxed in the top bracket."

As that question suggests, many people believe that their top marginal rate reflects the percentage they'll pay on their entire income. In other words, a single taxpayer with $100,000 in annual income might mistakenly believe that her top marginal rate of 24% applies to every dollar she earns.
Read more at USA TODAY


The best free antivirus for 2020: Keep your PC safe without spending a dime

Many of the mainstream antivirus vendors offer a free version of their security suites. Here are our top five choices for free antivirus.

We spend a lot of time looking at the best paid antivirus suites on this site, but we don't spend a lot of time talking about free antivirus solutions. Part of the reason is that the free versions are based on their paid counterparts.

If you see a paid version you like that offers a free version, you can safely assume the antivirus protection level is similar, save for any specific malware types the free version doesn't cover.

To create this list of the top free AV programs we looked at the top mainstream antivirus suites for Windows 10 and selected the ones that offer a free version, as not all of them do. After that, we looked at how well these suites performed in third-party detection tests. We also made sure they weren't resource hogs, because the last thing you want is a piece of free software slowing down your PC while running in the background.
Read more at PC WORLD


Trump's Budget Seeks to Increase Funding for the Internal Revenue Service

Staff would grow by a net 1,700 positions from 2020 levels, if $400 million in "cap adjustments" to exceed spending levels in the 2019 budget agreement is included.

President Trump's fiscal 2021 budget seeks to restore funding to its 2010 levels for the Internal Revenue Service, which has been struggling with staffing and resources over the past decade.

On Monday, the White House sent Congress a $4.8 trillion budget request for fiscal 2021 that would increase military spending by 0.3% and decrease non-defense spending by 5%. For the Internal Revenue Service, the plan proposes $12 billion, which is about a 4% increase from fiscal 2020, yet would decrease staff levels by 1,183 full-time employees. However, with $400 million in "cap adjustments," there would be a net increase of 1,700 positions from fiscal 2020 levels. "Cap adjustments" are spending that is allowed above the limits in the 2019 budget agreement because of its potential to generate revenue.


Trump Pushes for Presidential Power as Top Court Mulls CFPB Fate

The Consumer Financial Protection Bureau's independence, designed by a Democratic-controlled Congress to insulate the agency from political pressure, now risks being its downfall.

President Donald Trump's administration is set to argue to the U.S. Supreme Court on March 3 that the Constitution gives him much broader power to fire the CFPB director than is provided by the 2010 law that created the agency.

The case could mean a fundamental change for the CFPB, created as the brainchild of now-Senator Elizabeth Warren after the 2008 financial crisis to regulate credit cards, auto loans and other consumer finance products. The justices could block the bureau from pursuing enforcement actions, put it more squarely under presidential control or even abolish the agency.

The ruling, due by late June, could affect other federal agencies, most immediately the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. The Supreme Court has deferred acting on appeals in a multi-million-dollar lawsuit against that agency while it considers the CFPB clash
Read more at BLOOMBERG


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