ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
November 9, 2021
Paving the Payments Future
Fintechs are friends, not foes, of traditional financial institutions

To test the waters, a financial institution might consider purchasing a pool of loans from a trusted partner that sourced these loans in conjunction with a fintech, an Alliant Credit Union exec said.

As fintechs capture an ever-growing share of consumer financial activity, traditional institutions face mounting pressure to maintain their appeal. Faced with such competition, it’s natural for regulated financial service providers to view fintechs as adversaries. However, taking a defensive stance can lead to missed opportunities.

Traditional financial institutions and fintechs both have much to gain from forging symbiotic relationships. While fintechs may want to diversify their funding sources, banks and credit unions may look to fintechs as a means of providing their customers and members with enhanced account management tools along with more expansive borrowing solutions.

WOMEN in CONSUMER FINANCE CONFERENCE
Which Generation is Most Financially Literate?

Yes, younger generations have lower levels of financial literacy—but the results of a new study suggest that the overall levels and implications may not be what you think. 

According to the report from the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business, financial literacy is alarmingly low within each of the five generations—the Silent Generation, Baby Boomers, Gen X, Millennials and Gen Z—but it is the lowest among Gen Z.  

Two-thirds of Gen Z respondents could answer only 50% or fewer of the study’s P-Fin Index questions correctly. Approximately 40% of Baby Boomers and the Silent Generation answered more than 50% of the questions correctly—but averaged only 55%. The percentage of questions answered correctly by Gen Xers, Millennials and Gen Zers was 49%, 48% and 43%, respectively.

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See the #IRS tips to #GetReady
Serving the Unbanked: How Borderless Fintech Can Deliver Global Financial Inclusivity

While we find ourselves embracing an increasingly cashless society, it’s still difficult to picture life without having access to a bank account. However, for many adults around the world, the notion of having this level of access to financial management services is still impossible to imagine. The playing field is far from even when it comes to global finance, but emerging fintech may soon help to resolve the problem of the unbanked and monetary inclusivity.

In traditional banking, there are widespread barriers to financial inclusivity. Citizens may lack the necessary identification documents needed to open a bank account, they may live in a region that lacks a financial infrastructure where visiting the closest bank can be a profoundly difficult task, or they may simply lack the level of income to make them believe that banking services are necessary. 

Here, it’s important to note that traditional banks are generally inhibitive to lower-income households. Charges like overdraft fees, debit card fees, ATM withdrawal costs, transfer fees and other charges across the banking system can be severely restrictive for account holders in poorer nations. 

CFPB Finds Credit Report Disputes Far More Common in Majority Black and Hispanic Neighborhoods

Report Provides Additional Insight into Previously Observed Trends

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today released research finding that consumers in majority Black and Hispanic neighborhoods, as well as younger consumers and those with low credit scores, are far more likely to have disputes appear on their credit reports. The new research is a part of a series of reports focusing on trends in the consumer financial marketplace, and uses data on auto loan, student loan, and credit card accounts opened between 2012 and 2019.

“Families living in majority Black and Hispanic neighborhoods are far more likely to have disputes of inaccurate information appear on their credit reports,” said CFPB Director Rohit Chopra. “Error-ridden credit reports are far too prevalent and may be undermining an equitable recovery.”

The report shows that majority Black and Hispanic neighborhoods continue to face significant challenges with credit records. In nearly every credit category reviewed (auto loans, student loans, credit cards, and retail cards), consumers residing in majority Black areas were more than twice as likely to have disputes appear on their credit reports compared to consumers residing in majority white areas. For auto loans, consumers in majority Black areas were more than three times as likely to have disputes appear on their credit reports (0.8% of accounts with disputes in majority white census tracts compared to 2.8% of accounts in majority Black census tracts).

Crucial Conversations All Debt Collectors Should Have with their Creditors. by Smith Debnam Narron Drake Saintsing & Myers, LLP

With the CFPB having decided to leave the effective date of the Debt Collection Rule as November 30th, the push is on for debt collectors to ensure their compliance with the Rule by that date. As debt collectors make the final push towards implementation, there are crucial conversations debt collectors should be having with creditors to ensure a smooth transition.

Referral of the Account. Debt collectors should be discussing the referral process with their clients to ensure a clear understanding of the amount of the debt and what new or additional information creditors will need to provide for the debt collector to initiate collections. 

As we all know by now, the Rule introduces as a new concept the “itemization date.” Because the Rule requires the debt collector identify an “itemization date” and provide an itemization of the debt from that itemization date through the validation notice, it’s important both the creditor and the debt collector understand what comprises the balance being sent for collection and upon which “itemization date” it is based. 

Underbanked Consumers Seek Digital Alternatives

The paycheck to paycheck economy is changing what it means to be underbanked. In the past, the definition of an underbanked person was much simpler, meaning that the individual didn’t have basic deposit or checking accounts housed within a bank or credit union.

However, that definition now includes those who aren’t getting what they need from their banks and credit unions. As i2c President Jim McCarthy told Karen Webster in a recent On the Agenda conversation, “the underbanked population is much bigger than people realize.”

In the 21st century, underbanked consumers aren’t able to navigate their daily financial lives to the fullest, particularly if their primary accounts are accessed through digital channels.

As McCarthy noted, “The classic demographic definition of ‘underbanked’ gets thrown out the window. There’s clearly demand out there for alternatives to the classic financial services model as defined in the United States.”

Statement of CFPB Director Chopra on Stablecoin Report

WASHINGTON, D.C. — CFPB Director Rohit Chopra released a statement today regarding the Report on Stablecoins issued by the President’s Working Group on Financial Markets, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.

Statement of CFPB Director Rohit Chopra
The United States must do more to nurture a fast, safe, and competitive payments system. New technologies can help to advance this goal, which would yield enormous benefits for consumers, workers, and small businesses.

Today’s report examines stablecoins. Stablecoins are digital assets that are typically pegged to a sovereign currency. Over the last year, stablecoins pegged to the U.S. dollar increased by nearly 500% to $128 billion outstanding. The report highlights how stablecoins could be vulnerable to runs and fire-sales in ways that could create stress on the broader financial system absent adequate oversight.

FTC Finalizes Financial Institution Safeguards Rule. by WilmerHale

On October 27, 2021, the Federal Trade Commission (FTC) announced a newly updated rule under the Gramm-Leach-Bliley Act (GLBA) intended to require financial institutions to strengthen their data security safeguards to protect consumer financial information. The newly updated rule, the Standards for Safeguarding Customer Information (Safeguards Rule), amends the FTC’s 2002 Safeguards Rule, and comes in the wake of significant data security incidents and cyberattacks in the consumer financial services sector.

The FTC’s Safeguards Rule applies to non-banking financial institutions, such as check-cashing businesses, payday lenders, mortgage brokers, nonbank lenders, personal property or real estate appraisers, professional tax preparers, courier services, and credit reporting agencies. Those non-banking financial institutions will be expected to comply with the bulk of the requirements in the new Safeguards Rule likely by Q4 of 2022.

How the student debt crisis ballooned to $1.7 trillion

The student debt crisis ballooned to over $1.7 trillion in recent years. This debt has varying effects on students, workers and the larger economy. Since taking office, President Biden has been largely silent about a plan to broadly cancel student debt, even though he campaigned on canceling up to $10,000 in student debt for all borrowers. However, his administration has absolved some student debt for certain groups, like borrowers with disabilities and active duty service members.

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
Alternative Financial Service Providers Association
757.737.4088
315 Tuscarora St., Lewiston, NY 14092