October 17, 2019
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Written Testimony of Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau Before the House Committee on Financial Services

Chairwoman Waters, Ranking Member McHenry, and distinguished Members of the Committee thank you for the opportunity to present the Consumer Financial Protection Bureau's most recent Semi-Annual Report to Congress.

The Bureau presents these Semi-Annual Reports to Congress and the American people in fulfillment of its statutory responsibility and commitment to accountability and transparency. The Bureau's Spring 2019 (October 1, 2018, to March 31, 2019) Semi-Annual Report meets this mandate. My testimony is intended to highlight the contents of this Semi-Annual Report (Report).

1. Significant problems faced by consumers in shopping for or obtaining consumer financial products or services
In each Report, the Bureau identifies relevant trends affecting consumers shopping for, or obtaining consumer financial products or services. In this Report, the Bureau highlights three trends detailed in two Quarterly Consumer Credit Trends (qCCT) reports and a Research Brief.
Read more at CFPB


Google's payday loan app ban adds pressure on high-interest lenders

Google Play is banning digital lenders whose products have APRs of 36% or higher, per a Wall Street Journal report Sunday.

While the move may be seen as pro-consumer, it's a sign lenders have more than just regulatory compliance to consider in the evolution of their product strategies.

According to the report, the ban affects companies including CURO Financial Technology and Enova International, both of which have subsidiaries that offer digital payday loans. Reminiscent of the weight Amazon has over its sellers, it's an indication marketplaces can effectively dictate the terms under which participants operate.

"In general, a business should be able to choose who they do business with, but if it's the platform that makes the market, we get concerned about that," said Julie Hill, a financial institutions regulation professor at the University of Alabama School of Law.

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Fiscal 50: State Trends and Analysis

Federal Funds Hover at a Third of State Revenue

The share of states' revenue made up by federal dollars held steady at roughly one-third in fiscal year 2017, with nearly equal numbers of states posting upticks and drops in the percentage of their money coming from federal funds. Overall, the U.S. government provided 32.4 percent of all the revenue collected by states in fiscal year 2017-down slightly from 32.6 percent a year earlier. Read more below.

A slim majority of states-26-saw declines in the share of their revenue coming from federal dollars in fiscal 2017, including states that accepted as well as states that did not accept federal money to expand eligibility for Medicaid health care coverage. Still, federal funds were at their fourth-highest level in more than 50 years as a percentage of 50-state revenue, based on data going back to 1961, underscoring the significant role that federal dollars play in financing state government.
Read more at The Pew Charitable Trusts


MaxDecisions, Inc. founded in 2016 by two analytics and software engineering veterans dedicated to the integrity and excellence in analytics, marketing and risk management consulting for the online lending industry.

The founders of MaxDecisions, Inc. have decades of banking, financial services and online lending experience, both in consumer and small business lending. We have carefully cultivated a team of software engineers, data scientists, statisticians and mathematicians with specific knowledge in marketing analytics, fraud and credit risk management and portfolio and operational optimization.

Service to our clients is the most important aspect of our company. We don't succeed until our clients achieves the best result. We have build up a client base solely based on referral. Our dedicated team is what defines us. Read more at MAXDECISIONS


Are Americans Embracing Mobile Payments?

Survey of consumer experiences finds greater trust in credit, debit cards

Americans typically make purchases with cash, credit cards, or debit cards, but many are also conducting financial transactions using web browsers, text messaging, or apps on phones and tablets. Mobile transactions have been made possible by consumers' widespread adoption of smartphones and increasing preference for online commerce. Previous research by The Pew Charitable Trusts found that age is the best predictor of mobile payment use, with younger Americans driving the growth of these transactions, motivated in part by rewards or loyalty programs offered by mobile app providers. However, Pew's study also found that across generations, consumers remain skeptical of this financial technology, have persistent concerns about security, and are more likely to trust traditional methods, such as debit and credit cards.

In part because of this lack of confidence-and the established history of positive experiences with traditional cards-mobile payment adoption has not met industry projections, even as e-commerce in general has seen strong growth in recent decades.
Read more at The Pew Charitable Trusts


Dreher Tomkies LLP is a law firm providing services to financial institutions nationwide. We concentrate in the areas of banking and financial services law. The Firm's practice encompasses all aspects of financial services provided by creditors to consumers and business entities. The Firm's clients range from Fortune 500 companies and foreign-owned enterprises to small businesses, including diversified companies, banks and bank holding companies, investment bankers, investment funds, finance companies, credit and charge card issuers, mortgage bankers, retailers, debt purchasers, manufacturers, industry and trade associations, and coalition and issue groups.

Our attorneys routinely advise clients on consumer lending, home equity lending, first and second mortgage lending, private label and general purpose credit card lending, student lending, retail sales financing, payday lending, title lending, RAL lending, agricultural lending, wholesale financing, inventory financing, business revolving credit and charge programs, factoring, health care and medical financing, deposit taking, home banking, annuity and insurance sales, GAP programs, reinsurance, debt cancellation and suspension, debt collection compliance, money transmitting, state and federal regulatory compliance, and the licensing and chartering of institutions.
Read more at Dreher Tomkies LLP


A risky mix: Looser financial regulations when monetary policy is easing

A decade after the worst financial crisis in our lifetimes and the subsequent tightening of financial regulation, the risks to financial stability are rising. The reason: financial regulations are being relaxed at the same time as the Federal Reserve is cutting interest rates to offset risks from heightened trade tensions. This is not a good combination at this point in the business cycle. It greatly increases the risk that the next recession, whenever it occurs, will be severe because it will be amplified by elevated financial imbalances.

Like the Fed, I have been assessing overall risks to financial stability in the U.S. as "moderate". The banking system has more capital. The shadow banking system as we knew it has been reined in. These more stable financial intermediaries are a critical counterweight to high financial vulnerabilities elsewhere. Among the vulnerabilities: compensation for credit risk in corporate bonds and loans is slim, and commercial real estate capitalization rates (rental income-to-price) are at historically low levels. Corporate debt ratios are at a record high and increases in debt are concentrated in the lower-quality firms. In addition, some mutual funds are promising daily liquidity while holding less liquid leveraged loans and corporate bonds, a risky mismatch.
Read more at The Brookings Institution


Turf War Blocked CFPB From Helping Fix Student Loan Forgiveness Program

Starting early last year, the nation's most powerful consumer protection agency sent examiners into companies that run student loan call centers to try to fix a troubled loan forgiveness program. But the Department of Education blocked the bureau from getting the information it needed, NPR has learned.

The Public Service Loan Forgiveness Program is designed to help firefighters, military service members, nonprofit workers and others. But thousands of people say they were treated unfairly and rejected.

One of them was Wendy Feliciano, a police sergeant in the Bronx borough of New York City. In 2007, she heard about the program, which promises public service workers that if they make qualifying student loan payments for 10 years, their remaining student loan debt will be forgiven.
Read more at NPR


Virginia's Payday and Title Lending Markets Among the Nation's Riskiest

Policymakers can look to other states' experiences to modernize small-loan laws

Americans from all walks of life use payday and vehicle title loans, and they do so typically to cover recurring expenses such as rent, mortgage payments, groceries, and utilities, rather than for unexpected expenses.1 Only a checking account and verifiable income are needed to get a payday loan;2 a clear title to a vehicle is usually required to get a title loan.

Lenders issue these loans to hundreds of thousands of Virginians each year. And this high-cost credit carries some of the most lax borrower protections in the country because lenders operating in the state can make loans according to any of four statutes, two of which allow unlimited interest rates.3 (See Table 1.) As a result, Virginia residents pay up to three times more for this type of credit than borrowers in other states, even those who get loans from the same companies.4

Other states, such as Colorado and Ohio, have modernized small-loan laws to make credit more affordable while keeping it widely available.5 Virginia could follow their lead to better protect borrowers from harmful loan terms. (See Table 2.)
Read more at The Pew Charitable Trusts


WASHINGTON, D.C. - The Consumer Financial Protection Bureau (Bureau) Private Education Loan Ombudsman issued today the 2019 Annual Report showing that from September 1, 2017 through August 31, 2019 the Bureau handled approximately 20,600 complaints related to private or federal student loans. Of these, there were approximately 6,700 private student loan complaints and 13,900 federal student loan complaints. The report also provides policymakers with a series of recommendations.

For the year ending August 31, 2018, the Bureau handled approximately 3,800 private student loan complaints, a decrease of approximately 50 percent compared to that of the previous year (2017). For the year ending August 31, 2019, the Bureau handled approximately 2,900 private student loan complaints, a decrease of approximately 25 percent compared to that of the previous year (2018). Read more at CFPB


The Bank Account Validation Suite

A suite of non-credentialed data services that reduces overdrafts and return fees

Bank Account Validation (BAV) is a comprehensive suite of instant and near-real-time data services that assists financial service providers and businesses with identity validation, fraud detection, compliance, and risk. The suite offers a variety of bank account data such as the ability to validate account ownership, determine the current balance and funds available and quickly identify the risk associated with an account. Financial service providers and businesses can use the BAV suite in application, underwriting, and ongoing customer management to improve their payment processing KPI's and ensure regulatory compliance.
Read more at VALIDIFI

Dreher Tomkies LLP

Americans Support Federal Action To Make Student Loan Repayment Easier

Majorities see loans as important to help pay for college, but worry about those struggling to repay

Americans believe that student loans can help open doors to better careers and rising incomes, according to a new survey, and most agree that it is reasonable to borrow to pay for higher education, given the benefits of a college degree. But they are also concerned about people's ability to easily repay their loans-and the impact that has on the economy.

Americans say that borrowers should do more to prioritize repayment of their loans. But, importantly, the survey results also show that they support government action to make it easier for people to repay.

The national poll, conducted by the opinion and market research company SSRS for The Pew Charitable Trusts, finds that:

Close to 9 in 10 (89 percent) believe that many borrowers have a hard time paying back their student loans. The vast majority agree with this statement, regardless of age, income, race, political party, or whether someone in the household has student debt.
Read more at The Pew Charitable Trusts


Credit Unions Shun Online Ads For Content To Acquire Customers

In August, Facebook instituted changes to its advertising policies as the result of a settlement it reached with anti-discrimination groups and the federal Department of Housing and Urban Development (HUD). The social media site faced accusations that its ad-targeting platform - which allows ad buyers to select what demographic groups they want to target with their advertisements - was allowing and encouraging financial institutions (FIs) to violate non-discrimination provisions of the Fair Housing and Truth in Lending Acts.

Under the provisions of those laws, banks are explicitly barred from systematic attempts to ban or limit users' access to financial services, or information about products, on the basis of race, gender or membership in other protected groups. HUD and various civil liberties groups argued that Facebook's ad-targeting tools were a veritable menu of methods to improperly exclude protected groups from even seeing ads. Read more at PYMNTS.COM


Prospects Rising for Lower-Cost Small-Dollar Loans

Millions of consumers could save billions of dollars with alternatives to payday borrowing

The nation's three federal bank regulators-the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve Board, and the Office of the Comptroller of the Currency (OCC)-are working together to find ways to improve access to small-dollar loans, raising hopes that more banks could offer affordable small installment loans that cost about six times less than payday loans.

To date, most banks have not offered small installment loans in part because of concerns that without explicit approval, they could be subject to future regulatory action. An announced agreement on rules for such lending could substantially boost the market for affordable alternatives to payday and similar high-cost loans. Twelve million American adults use payday loans annually. Average borrowers earn about $30,000 per year, and most use costly payday loans to cover ordinary living expenses over the course of months, not unexpected emergencies over the course of weeks. Bank regulators are examining ways to make less burdensome alternatives more widely available.
Read more at The Pew Charitable Trusts


Alternative Financial Service Providers Association

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