November 8, 2018
2018 edition: 89 / 104
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Court Stays CFPB Payday Loan Rule Compliance Date. by Ballard Spahr LLP
November 7, 2018

Yesterday, the court reversed course in the lawsuit filed by two industry trade groups challenging the CFPB's final payday/auto title/high-rate installment loan rule (Payday Rule). On its own initiative, the Texas federal district court granted a stay of the Payday Rule's August 19, 2019 compliance date and continued in force its stay of the lawsuit. Unfortunately, the court did not specify a termination date for the stay of the compliance date, as the trade groups and CFPB originally requested. Instead, the compliance date is stayed "pending further order of the court."

To my mind, the court's failure to specify how long the stay of the compliance date will remain in effect leaves the Rule's status hopelessly muddled. The CFPB has stated that its current plan is to revisit the Payday Rule's ability-to-repay (ATR) provisions but not its payment provisions. CFPB officials have indicated that the Bureau intends to propose a delay of the Payday Rule's ATR provisions but not the payment provisions. What happens if the CFPB follows through with that plan? When the parties report that development to the court, might the court just lift its stay of the compliance date, without affording lenders additional time to address the payment provisions?

My guess is that the court intends its stay to function like the tolling of a statute of limitations-meaning that, for each day the stay remains in effect, the August 19 compliance deadline is extended for an additional day. But alas, the court's order does not specify this intent. I hope the parties in the case ask for clarification that the compliance date will be extended day-for-day so long as the stay remains in effect. Alternatively, the CFPB could announce that it will propose a delay in the compliance date for the payment provisions when it moves forward with its rule-making next January.

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COLORADO Proposition 111: Payday loan interest limit wins big

More than 75 percent of voters supported measure that caps interest at 36 percent per year

A vast majority of Colorado voters have supported a measure that limits the interest lenders can charge on payday loans in the state at 36 percent per year.

Proposition 111 won the support of more than 75 percent of Colorado voters in the 2018 election, according to results from the Secretary of State's Office. Proponents had cast 1,272,491 votes in favor of the measure as of 9 p.m compared to just 389,585 from opponents.

Payday loans are typically $500 or less and can be obtained quickly with few requirements beyond having a job. They carry steep interest rates, but Proposition 111 would change that in Colorado by prohibiting lenders from charging an annual percentage rate (APR) of more than 36 percent.

Proponents say payday lenders take advantage of lower-income people facing financial emergencies. Current law allows Coloradans to be charged interest rates of more than 200 percent. Read more at DENVER POST

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Newly Unsealed Documents Show Top FDIC Officials Running Operation Choke Point

Last week brought new revelations regarding Operation Choke Point, the Obama administration's effort to freeze politically disfavored businesses out of the financial system. Rep. Blaine Luetkemeyer (R-Mo.), who helped lead a multi-year effort to shut the program down, highlighted some of theses newest findings and pointed out that stopping Operation Choke Point is not a partisan issue.

Luetkemeyer's legislation to prevent a redo of Choke Point - The Financial Institution Customer Protection Act of 2017 - overwhelmingly passed the House, with only two nay votes. Operation Choke Point was an egregious affront to the rule of law, so it is good to see that so many lawmakers want to prevent a repeat.

For those unfamiliar, Choke Point consisted of bureaucrats in several independent federal agencies taking it upon themselves to shut legal businesses - such as payday lenders and firearms dealers - out of the banking system. Given the nature of the U.S. regulatory framework, this operation was easy to pull off.

Officials at the Federal Deposit Insurance Corporation (FDIC), for instance, simply had to inform the banks they were overseeing that the government considered certain types of their customers "high risk." The mere implication of a threat was enough to pressure banks into closing accounts, because no U.S. bank wants anything to do with extra audits or investigations from their regulator, much less additional operating restrictions or civil and criminal charges. Read more at FORBES

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How to build up your business credit profile. by Walt Wojciechowski

Consider the following scenario: Two individuals recently established a business that they are operating as partners, and to do so, they needed an initial infusion of capital. They acquired those funds by applying for a loan with a regional bank that offered business financing backed by the Small Business Administration, providing evidence of their entrepreneurial wherewithal to the lender that included a reasonable business plan and their personal credit profiles, both of which were very good. All of this is perfectly reasonable and quite plausible. But after that initial loan, the likelihood of these owners receiving financing for other company needs solely on the strength of their individual credit drops considerably. And any loan they do qualify for with their own credit may not have an amenable term length or interest rate.

Lenders will begin wanting to see quantified analysis of the business's credit as an entity apart from its two founders - clear proof that the company is fiscally responsible in dealing with its own debt accounts. This is commonly represented as a business credit profile and score, which is what banks or other institutional lenders hope to see when they receive applications for equipment financing, operating capital or other essential expenses.

Understanding the ins and outs of business credit and learning how to establish it won't be an instantaneous process, but the value it will offer in the long run is well worth the time and effort. Let's delve right into the thick of this process: Read more at MICROBILT

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Wall Street bets heavily on Democrats over GOP

The largest financial companies are betting big: on Democrats.

People and organizations tied to the four largest U.S. banks - JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) - have donated more money to Democrats in a tight race to take over the Senate, where Republicans control a narrow majority of 51 seats.

Data from the Center for Responsive Politics shows that Senate Democrats received three times more contributions from donors associated with the big four than Senate Republicans received.

The data does not mean that the companies directly donated money, only that individuals and organizations associated with those companies donated.

Incumbent Missouri Democrat Claire McCaskill, in a to-the-wire battle with Republican Josh Hawley, received $58,375 in individual and PAC contributions from Wells Fargo, the consumer bank still reeling from its fake accounts scandal.

Wall Street's support of the Democrats is dissonant with the vision of possible 2020 hopefuls like Elizabeth Warren and Bernie Sanders, who have amped up the political rhetoric against large banking institutions. Both have advocated for more prudent oversight of the financial services industry.     Read more at YAHOO FINANCE
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Wells Fargo admits more than 500 customers lost their homes due to 'calculation error'

Wells Fargo, with its already long-list of consumer abuse scandals, admits it improperly foreclosed more homes than it previously reported due to a "calculation error."

After an internal review, the troubled bank said it found that 870 customers were erroneously denied mortgage changes, with 545 of them losing their homes as a result of the error. The bank first reported the mistake in August, but said only 645 eligible borrowers were denied and of those, 400 lost their homes. The bank added that it had fixed the glitch and put $8 million aside to compensate borrowers this summer, but it hasn't updated that number since admitting more customers have been impacted.

Reuters, which first reported the news, cited an underwriting error that internally prompted the bank to reject home loan modifications instead of helping them.

In an email to FOX Business, Tom Goyda, a Wells Fargo spokesperson said: "We're very sorry that the errors occurred and have assigned a single, dedicated point of contact to ensure that each customer is engaged with and assisted individually."

While the internal inquiry is still ongoing, the bank said it has contacted a majority of those impacted to provide remediation. The error now includes customers who were involved with the foreclosure process from March 15, 2010 through April 30, 2018. Read more at FOX BUSINESS

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New financial education resources to help teachers bring youth financial capability into the classroom

As children grow, their potential to manage money and understand financial concepts grows as well. The knowledge, skills, and behaviors kids learn when they're young lay the groundwork for their financial well-being as adults.

Schools and teachers play a critical role in financial education. But, we know there are challenges to bringing financial education into the classroom. Given the amount of content available, it may be difficult to find the best tools and information. This is especially true for educators who are new to teaching financial capability and may not know where to start. Also, limited time and resources may make it hard for schools and districts to offer targeted financial education classes.

We recently updated some of our youth financial education content to provide K-12 educators with new, free resources to help students develop financial knowledge, skills, and habits. These resources make it easy for you to find and download relevant classroom activities. They also can help you to evaluate financial education programs and understand the research-based building blocks of youth financial capability. These will be important stepping stones on the path to adult financial well-being. There are also resources to help you incorporate financial capability into your curriculum, whether you're an experienced personal finance teacher, new to the subject, or integrating financial capability into another subject area. Read more at CFPB

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NDH Continues to Expand Portfolio Acquisitions

As the receivables market continues to grow, National Debt Holdings (NDH) is furthering its expansion and purchase of accounts receivables across a mix of product types through the end of the year.

National Debt Holdings is an experienced and qualified partner for the sale of accounts receivable portfolios. Specializing in the acquisition of short-term installment loans, auto deficiencies, medical accounts, and credit cards, National Debt Holdings is looking for large acquisitions to close out 2018.

Combining a professional and compliant transaction with exceptional customer service, National Debt Holdings delivers customized solutions to meet the needs of each client. We are consumer-focused and put our clients' best interests at the forefront of every activity. NDH is excited by the consistent growth we have experienced throughout 2018 and is seeking to expand acquisition of installment loan portfolios through the end of the year and beyond.

As a Receivables Management Association International (RMA) Certified Debt Buyer, sellers can be assured that compliance is integrated into every facet of every transaction. We adhere to the rules, regulations, and standards that guide and govern the receivables management industry. We strive to stand out amongst the competition by providing a seamless transaction and positive experience through each stage in the sale of your accounts receivable.

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MISSISSIPPI: High rate of payday loans continues

TUPELO * A recent survey by CNBC Make It/Morning Consult found that millennials may be taking out or considering payday loans more than ever, but poverty may be a factor closer to home for Mississippi residents.

With the ability to get a loan at one of the 23,000 payday lenders across the U.S. online, or even at certain banks, consumers may find it easier than ever to get into debt from high-interest rates on short-term loans. There are over 1,000 payday lender locations across Mississippi.

A payday loan is defined by the Consumer Financial Protection Bureau as a usually short-term and high-cost loan of $500 or less that is typically due on the consumer's next payday, and depending on state law, payday loans may be available through storefront lenders or online.

According to a 2015 Federal Reserve Bank survey of finance companies - the survey is completed every five years - motor vehicle loans and leases from consumer lenders made up 31 percent and 20 percent of assets respectively, and 26 percent of consumer credit went toward installment cash loans, non-vehicle sales credit, and small, single-payment loans such as pawn, payday and auto title lenders.

Mississippi has the highest concentration per capita of payday lenders in the nation, with about 1,000 locations concentrated for the most part in low-income areas. Read more at DAILY JOURNAL

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

Agencies issue proposal to streamline regulatory reporting for qualifying small institutions

The three federal banking agencies today invited public comment on a proposal to reduce regulatory reporting burden on small institutions by expanding the number of regulated institutions eligible for streamlined reporting. The proposal would implement section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The proposal would permit insured depository institutions with total assets of less than $5 billion that do not engage in certain complex or international activities to file the most streamlined version of the Call Report, the FFIEC 051 Call Report. The agencies also are proposing to reduce by approximately 37 percent the number of existing data items reportable in the FFIEC 051 Call Reports for the first and third calendar quarters.

The Federal Reserve Board and the OCC also are proposing similar reduced reporting for certain uninsured institutions that they supervise with less than $5 billion in total consolidated assets that meet the same criteria.

All institutions, regardless of size, submit a quarterly Call Report that includes data used by regulators to monitor the condition, performance, and risk profile of individual institutions and the industry as a whole. Read more at the FEDERAL RESERVE

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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.

CFPB policy on military lending supervision 'unacceptable,' says consumer group

The Consumer Financial Protection Bureau has the statutory authority to ensure compliance with the Military Lending Act (MLA), according to an analysis by the Consumer Federation of America (CFA).

The analysis follows an announcement by the CFPB of plans to end supervisory examinations for violations of the MLA.

"It is completely unacceptable for the Trump administration to abandon those who have sacrificed in defense of our country," said CFA Director of Financial Services Chris Peterson, author of the report.

The MLA was passed in 2006 to address predatory lending affecting military personnel by capping interest rates on loans made to service members and their families at 36% and prohibiting the extension of payday loans, vehicle title loans, and other types of harmful credit products to military personnel.

While the CFPB has conducted supervisory examinations under the MLA since 2012, the agency is now claiming that it does not have the statutory authority to carry out preventative supervisory audits. Read more at MPA

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Credit Reporting Agencies (Literally) Keep America's Consumers Moving

At a time of heightened public awareness and concern about Big Data and cyber security, it's important to clearly understand the historical roles and socio-economic benefits of consumer credit reporting agencies (CRAs). CRAs are part of a highly regulated industry that creates democratic freedom and broad consumer engagement with the modern economy.

Enacted nearly 50 years ago, and enforced by the U.S. Federal Trade Commission, the Fair Credit Reporting Act (FCRA) promotes the accuracy, integrity, and privacy of information contained in consumer credit reporting agency files.

Since 1971, the U.S. credit reporting system has operated under the terms of the Act, although there have been several key amendments since that time. In 1996 for example, Congress reevaluated the FCRA in an effort to balance evolving national, local and personal interests. Key to achieving that balance was the preemption of state laws affecting provisions of the FCRA considered critical for maintaining a voluntary, market-driven credit reporting system that offers widespread, objective access to credit and the opportunities it provides.

The national credit reporting system regulated by the FCRA has worked well through the decades, functioning so seamlessly behind the scenes that credit reporting agencies are sometimes taken for granted, or viewed as dispensable. However, they create significant benefits for millions that should not be overlooked. Let's take a look, for example, at the vital role CRAs play in consumer mobility. Read more at TRANSUNION

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"Overbiffing" is the latest outrage in debt collection

Overstating a debtor's balance - also called "overbiffing" - is the latest outrage in unfair debt collection.

In a recent case, regulators allege a New York debt collector may have tricked thousands of consumers into paying far more than they actually owed by fraudulently inflating consumer balances and using profane, abusive and illegal tactics to collect the fabricated bills. The term is called "overbiffing" because the scammers overstate a person's "balance in full," which is sometimes shortened to BIF.

Slapping a temporary restraining order on a half-dozen companies affiliated with a Buffalo debt collector named Robert Heidenreich, also known as "Bobby Rich," regulators maintain that Heindenreich's bill collectors chronicled just how much they "overbiffed" by using forms showing the actual balance due as well as the inflated amount that they told consumers was owed.

In many cases, this false "balance given" was hundreds, even thousands, of dollars more than the consumer actually owed.

"This is really egregious," says John Heath, directing attorney at Lexington Law, a credit repair firm. "Unfortunately this is something that happened enough that the FTC had to involve itself in filing an action." Read more at CBS NEWS

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