November 1, 2018
2018 edition: 87 / 104
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Fed reportedly ready to change more banking regulations

The Fed is expected this week to vote on banking standards that would change the way big banks are regulated, according to a Dow Jones report.
Banks would be divided into categories based on risk factors including size, international activity, off-balance sheet exposures and levels of short-term funding.

The Federal Reserve is expected this week to vote on standards that would change the way big banks are regulated, according to a Dow Jones report.

Under the plan, banks would be divided into categories based on risk factors including size, international activity, off-balance sheet exposures and levels of short-term funding.

In addition, the rules would change the asset thresholds for certain levels of risk scrutiny for "advanced approaches capital rules." The levels would rise to $700 billion assets from $250 billion and $75 billion in cross-border activity from $10 billion, according to the report, which cites sources familiar with the Fed's thinking.

The moves are expected to be voted on Wednesday and come as Congress looks to loosing the reins on banking regulation following the post-financial crisis reforms. Read more at CNBC

Financial regulations still get avid consumer thumbs-up

A decade ago, the entire nation suffered through a financial crisis that led to the brink of a global financial collapse. While Wall Street reckoned with its risky practices, America's families suffered lost wealth of nearly $2 trillion, half of it coming from communities of color who were targeted for high-cost and unsustainable mortgages.

Now a new poll finds that even with the passage of a decade, consumers still support financial regulation and related enforcement. Moreover, when it comes to payday and car-title lending, consumer scorn has grown even stronger over the past year for these small-dollar, debt-trap loans that come with triple-digit interest rates.

The 2018 poll, conducted by Lake Research Partners and Chesapeake Beach Consulting, found that among respondents more than 90 percent viewed regulation of financial services to be very important, and registered support across partisan affiliations. Among Republicans, 85 percent supported regulation, compared to 92 percent of independents and 96 percent of Democrats.

Further, a growth in the number of consumers supporting a rule to hold payday lenders accountable increased 6 percentage points in just the past year. Believing that payday lenders prey upon those who have the fewest financial resources - low-wage earners, working families, and elder Americans, 79 percent of survey respondents want the Consumer Financial Protection Bureau to hold these predatory lenders accountable. A similar poll taken in 2017 tallied support of a CFPB payday rule at 73 percent. Read more at PHILADELPHIA TRIBUNE

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Online, mobile banking platforms top consumer preferences

The American Bankers Association (ABA) recently commissioned a survey that showed nearly three-quarters of consumers are choosing to access their bank accounts through online and mobile platforms.

ABA officials said work conducted by Morning Consult also showed the number of those who identified online banking via laptop or PC as their top option rose to 42 percent while those who used mobile banking grew to 30 percent, up 4 percent compared with last year's survey.

"As digital mediums become omnipresent in consumers' everyday lives, banks have invested in these channels to help people more seamlessly manage their accounts," said Nessa Feddis, ABA's senior vice president and deputy chief counsel for consumer protection and payments. "Banks offer a variety of options for people to securely access their money at any time in the way that is most convenient for them - whatever their preference."

The report also noted 18 percent of consumers continue to conduct their transactions in person at their bank's branch most frequently.

The survey was initiated from Sept. 11-12, 2018, among a national sample of 2,201 adults, interviews were conducted online and the data weighted to approximate a target sample of adults based on age, race/ethnicity, gender, educational attainment, and region.
Read more at Financial Regulation News

Here's why 1 in 3 college-age Americans consider payday loans

With just six weeks to go before he needed to turn over $600 in rent for his new apartment, Austin Wilson was starting to panic. He simply didn't have the money.

The University of Kansas senior owed his new off-campus apartment complex $500 for rent, plus a $100 one-time community fee, by Aug. 1. The problem was, his student loan reimbursement check that would cover his housing wasn't set to arrive until mid-August.

"I know this money is coming and I know when it's coming, but it's just a little bit too late," he says.

Wilson, a 21-year-old history major, says he wiped out his emergency savings earlier this year after his car broke down and he had to buy a new one. With just $100 left over, Wilson was planning for a thrifty summer: "I'd try to build that up over the summer. I'd tighten my belt. I'd cut back, I'd stop spending money on food."

But he hadn't read the fine print on his lease. His rent was due Aug. 1, not Aug. 15, when he was scheduled to move in. After he realized his oversight, he scrambled to find a second job to supplement the roughly $400 he makes every two weeks working the front desk on weekends at a senior care center. He couldn't.

"I put in about 40 job applications," he says, but the only available jobs were for the weekend hours he was already working. "It's a little disheartening," he says. "I go through Indeed every two days. You send it in and then you don't hear back." Read more at CNBC

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Building Loyalty with Gen Z and Millennials Starts with a Better Experience

TransUnion explores the changing dynamics of consumer loyalty

What is the price of loyalty? In an era where consumer preferences are changing, garnering customer loyalty is more valuable than ever before. To explore loyalty trends, especially among Gen Z and Millennial consumers, TransUnion (NYSE: TRU) today released a new report, "Consumer First: The Path Forward in Financial Services," during the Money 20/20 conference. Studying loyalty dynamics is critically important, as consumers find themselves with an unprecedented wealth of diverse options available when it comes to financial services.

The report, which includes both proprietary TransUnion data and information from a new survey of over 2,700 consumers, found that younger consumers in particular have become an influential force for financial institutions, and are challenging the conventional wisdom around consumer loyalty. By 2019, the two youngest generations-Gen Z (born 1995 or later) and Millennials (born 1980 to 1994)-will compose nearly two-thirds of the global population (64%), and many of them will be taking an even more substantial part in the credit market.[1]

"Building strong relationships with customers has been paramount for success in the financial services industry for decades," said Steve Chaouki, executive vice president and head of the financial services business unit at TransUnion. "Today, we have observed that relationship building is much different than it was just a decade ago. What worked in the 1990s or 2000s may not necessarily be advantageous with the tech-savvy Millennial and Gen Z generations. Better understanding the needs of these generations can help financial services firms across the spectrum of size and sophistication build longer lasting relationships with these hugely important consumers."
Read more at TRANSUNION

CFPB Issues Statement Regarding Plans To Reconsider Payday Loan Rule. by Jeremy T. Rosenblum     Friday, October 26, 2018

Earlier today, the Bureau of Consumer Financial Protection released a Public Statement Regarding Payday Rule Reconsideration and Delay of Compliance Date. Echoing rumors that have been circulating in the industry for several weeks (which we had agreed not to address in our blog), the Statement reads in full as follows:

The Bureau expects to issue proposed rules in January 2019 that will reconsider the Bureau's rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule's compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions. The proposals will be published as quickly as practicable consistent with the Administrative Procedure Act and other applicable law.

Of course, the Bureau is correct in observing that the ability-to-repay (ATR) provisions of the Rule "have much greater consequences for both consumers and industry than the payment provisions." That is because the ATR provisions, if allowed to go into effect, would largely kill the industry and thus deprive millions of consumers of a source of credit they deem essential. Nevertheless, the draconian potential consequences of the ATR provisions do not justify leaving the payment provisions intact. These provisions are unduly complicated. They require hard-to-reach consumers to affirmatively reauthorize lender-initiated payment attempts after two consecutive unsuccessful attempts rather than relying on a simpler and more straightforward notice and opt-out regimen.
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Fewer US Households are "unbanked," according to FDIC survey

A recent survey by the Federal Deposit Insurance Corp. (FDIC) found that the number of "unbanked" U.S. households reached its lowest level since 2009.

The FDIC survey revealed that just 6.5 percent of U.S. households were unbanked in 2017, meaning they had no savings or checking accounts. This was down 0.5 percentage points from the last survey in 2015.

This means that about 8.4 million U.S. households were unbanked in 2017. Further, approximately 24.2 million more U.S. households were considered to be "underbanked," meaning they have a bank account of some kind, but also use financial products or services outside of an insured financial institution.

The decline in the unbanked rate from 2015 to 2017 is almost entirely related to changes in socioeconomic circumstances of U.S. households, the FDIC survey found.

The National Association of Federally Insured Credit Unions (NAFCU) appreciates this trend and is supportive of a bill that's currently in Congress that could further it. The bill - H.R. 4665 - would allow credit unions of all charter types to add underserved areas to their fields of membership. Also, the National Credit Union Administration (NCUA) has finalized some rules that will help federal credit unions reach potential members who want and need affordable financial services.
Read more at Financial Regulation News

Elections could put Wall Street's favorite lawmaker in top finance role

WASHINGTON (Reuters) - Next week's U.S. elections could see Wall Street's favorite congressman assume one of the most coveted roles setting financial policy on Capitol Hill - if Republicans retain control of the House of Representatives.

With opinion polls favoring Democrats to pick up the net 23 seats they need to win control of the House on Nov. 6, vocal Wall Street critic Maxine Waters is the likely bet to take over as head of the chamber's powerful Financial Services Committee.

But if the Democrats fail - and the party's edge on a generic ballot has narrowed to seven percentage points as of Oct. 23, according to Reuters/Ipsos polling data - Republican Blaine Luetkemeyer, a key banking industry ally, is the front-runner to lead the panel.

A congressman since 2009 but relatively unknown at a national level, Luetkemeyer has emerged as a favorite of bankers who have found him responsive to complaints that overzealous regulation is hurting the economy. Read more at REUTERS

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Labor Department proposes multiple-employer retirement plans

The U.S Labor Department introduced a proposal to expand access to employer-provided retirement plans to facilitate the formation of association retirement plans or multiple employer plans.

Under this structure, multiple small businesses can join together to make retirement plans available to their employees. The proposal is in response to an executive order by President Donald Trump last year to remove barriers impeding more employers from sponsoring retirement plans.

The Insured Retirement Institute (IRI) supports the proposal to form association plans, which it backed in its 2018 Retirement Security Blueprint.

"We welcome today's proposal to help make retirement security a reality to some of the approximately 38 million U.S. private-sector employees who do not have access to an employer-provided retirement savings plan," Cathy Weatherford, IRI president and CEO, said. "IRI and its members will carefully review this proposal and provide constructive input to the regulatory process."

The Labor Department said these association retirement plans could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area. They could also be offered in a particular industry nationwide and Professional Employer Organizations. Sole proprietors and their families will also be permitted to join them. Read more at Financial Regulation News

State Regulators Sue To Block FinTech Charters

In the latest salvo over awarding national bank charters to FinTechs spanning tech upstarts across online lending and various payments functions, the Conference of State Bank Supervisors (CSBS) filed suit late last week against the Office of the Comptroller of the Currency (OCC) over the latter's plan to award those charters.

The suit, filed in the U.S. District Court for the District of Columbia, contends that, as noted in a statement from CSBS President and CEO John Ryan, "common sense and the law tell us that a nonbank is not a bank. Thus, CSBS is calling on the courts to stop the unlawful, unwarranted expansion of powers by the OCC."

Under the terms of the proposed granting of charters, these FinTechs would be able to operate across the country without having to be licensed on a state-by-state basis.

Reuters reported last week that, according to OCC spokesman Bryan Hubbard, the OCC does indeed have the authority to issue the aforementioned charters. In his own remarks, he said that "state laws that address anti-discrimination, fair lending, debt collection ... would also apply to special purpose national banks. State laws that prohibit unfair or deceptive acts or practices that address concerns such as material misrepresentations and omissions about products and services ... also generally apply to national banks." Read more at PYMNTS.COM

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

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Leveraged loan growth sparks concerns about the next financial crisis

Former Fed Chair Janet Yellen and other big names in the financial regulatory space are expressing concern over the systemic risk of leveraged loans.

Lenders will originate leveraged loans to companies looking to finance large transactions, such as a merger. Those lenders then bundle those loans into collateralized loan obligations, which are shopped and traded among investors as securities.

Yellen recently told the Financial Times that she has seen a "huge deterioration" in lending standards in the $1.3 trillion market for leveraged loans, which has only expanded since the financial crisis.

"If we have a downturn in the economy, there are a lot of firms that will go bankrupt, I think, because of this debt," Yellen said. "It would probably worsen a downturn."

Yellen is not alone in flagging the leveraged loan market. In a September 2018 paper, the Bank for International Settlements published a report warning that as monetary policy normalizes, floating rates on leveraged loans could worsen borrowers' debt coverage ratios and decrease the amount of loan recovery rates in the event of a downturn.

Collateralized loan obligations, once seen as an attractive source of yield in a low-rate environment, have also seen their spreads tighten as the Fed steadily raises rates.
Read more at YAHOO FINANCE

The State of Personal Loans in 2018. by Mike Brown

This past decade has seen the personal loan industry grow from a fledgling, high-risk business to a booming space occupied by numerous lenders and prime borrowers.

According to the most recent consumer data from TransUnion, the national personal loan debt stood at $107 billion in Q2 of 2017. This represents a 10.80 percent increase from the same quarter in 2016 and a 132 percent increase from 2012.

During this time, consumers have also been substantially more successful at repaying their debt; personal loan delinquencies dropped from 8.50 percent to 3.02 percent, a new low.

Personal loans have become increasingly popular because they can assist cash-strapped consumers caught in a bind in a relatively low-cost way. The product can be used for household expenses, debt consolidation, home improvement, life events such as marriage, medical costs, and everything in between.

As mentioned above, fintech lenders have made an aggressive move into the personal loan space. TransUnion reported that fintech lenders comprised 3 percent of the sector in 2010, but that share skyrocketed to 30 percent in 2015 and has only continued to grow.

Using our own applicant data in conjunction with data from our fintech lending partners, LendEDU has put together The State of Personal Loans in 2018 report, which will give readers an inside view of the personal loan industry through the most up-to-date data Read more at LENDEDU

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