November 19, 2019

A national interest rate cap would harm consumers in the name of consumers

The California legislature just passed a financial policy that would have dreadful consequences for the consumers it seeks to protect. Congress is considering a similar measure as Senator Richard Durbin (D-Ill.) reintroduced a bill and the House Financial Services Committee held a hearing on the issue and could mark-up legislation.

The proposed bill would impose a nationwide interest rate limit of 36 percent. The implicit targets of this bill are payday and other lenders who charge high interest rates for small loans. Far from protecting lower-income consumers from "predatory lending practices," however, a national rate cap of 36 percent would effectively cut credit lines to roughly 12 million payday consumers, many of whom have few other legal options for borrowing.

Also troubling, the proposed rate cap would likely eliminate the installment lending market, as well. Installment loans, which have average annual interest rates of 40 to 90 percent, represent the closest alternative to payday loans. They are used by an estimated 10 million consumers each year.

That the 36 percent rate cap would be so harmful for consumers might not be obvious. But the reasoning is straightforward. Interest rates are simply the price we pay for credit. Factors such as the lender's costs and risks, the bank's desire for profit, and consumer demand for credit all affect how expensive or inexpensive credit will be.
Read more at THE HILL


FDIC Releases Three Reports Analyzing Growth of Nonbank Lending

Decades-long shifts reported in corporate and mortgage loans between banks and nonbanks

WASHINGTON - The Federal Deposit Insurance Corporation (FDIC) today released a multi-part analysis of changes in the U.S. banking system since the 1950s, especially changes occurring since the financial crisis in 2008. These analyses address the shift in some lending from banks to nonbanks; how corporate borrowing has moved between banks and capital markets; and the migration of some home mortgage origination and servicing from banks to nonbanks.

FDIC's reports will be published in the next edition of FDIC Quarterly. They include:

Bank and Nonbank Lending Over the Past 70 Years - Total lending in the U.S. has grown dramatically in the past 70 years and, since the 1970s, the share of bank loans has generally fallen as nonbanks gained market share in residential mortgage and corporate lending. In other business lines, shifts in loan holdings from banks to nonbanks have been less pronounced as banks and nonbanks continue to play important roles in lending for commercial real estate, agricultural loans, and consumer credit. Studying the roles that banks and nonbanks play in lending markets allows for a better understanding of how banks respond to growth in nonbank lending and the implications of associated risks for the banking sector and the broader economy.

Leveraged Lending and Corporate Borrowing: Increased Reliance on Capital Markets, With Important Bank Links - Over the past decade, U.S. nonfinancial corporate debt reached record highs as issuance of corporate bonds and leveraged loans grew rapidly while credit quality and lender protections deteriorated.
Read more at Federal Deposit Insurance Corporation



November 14, 2019 | Access to Credit

The Community Financial Services Association of America (CFSA) Chairman D. Lynn DeVault today released the following statement on the Consumer Financial Protection Bureau report "Financial Well-Being by State," which highlights that tens of millions of Americans would struggle to come up with $2,000 for an unexpected expense:

"It is not surprising to see that nearly 57 percent of Americans would struggle to bridge a financial gap or pay an unexpected expense of $2,000. One of the many reasons millions of Americans choose to use small-dollar loans every year is to bridge financial gaps. Small-dollar loans are often the least expensive option for consumers, particularly compared to bank fees - including overdraft protection and bounced checks - or unregulated offshore internet loans and penalties for late bill payments.

"Instead of seeking to regulate these products out of existence, as it tried to do in the past, we encourage the CFPB to work to ensure that all Americans have access to legal and licensed sources of credit in their communities. As the CFPB reconsiders its small-dollar lending rule, we hope it takes the needs and realities of these consumers into account."
Read at Community Financial Services Association of America


3 Everyday Things in Your Office That Could Lead to a Data Breach

We've entered the age of the gigabreach, but the way your company could get hacked might surprise you.

When you think about cyberthreats, what comes to mind? An extortionist announcing your doom with a dark monitor and a laughing skull? State-sponsored cyber-warriors working from a secure command post? President Trump's certain, "somebody sitting on their bed that weighs 400 pounds?"

Chances are good, your version of cyber risk involves one of the above "types" hunched over a keyboard deploying massively sophisticated malware on the networks of unsuspecting businesses and government agencies. Think again.

Forget megabreaches. We've entered the gigabreach era. The personal data of entire nations is up for grabs--literally: Ecuador, Bulgaria. And the threat is not only coming from external sources. There are smaller things to worry about, and they are in your office right now.
Read more at INC


California Lender Experiences 400% Funding Growth

Consumer Lending Company Direct Mail Marketing Channel Growth Case Study

A newly established California lender experiences explosive growth with MaxDecisions, Inc. multi-channel marketing strategy. With a combination of Direct Mail ordinations strategy in combination with Email Marketing strategy, this upstart California consumer finance company experienced a 400% growth in funding year over year.
MaxDecisions, Inc. helped this California lender in late 2016 and begin a firm offer of credit direct mail campaign to increase customer acquisition and decrease defaults. So far, we've conducted 4 separate direct mail campaigns and helped our client set record breaking daily fundings month over month.

Our client is pleased with the growth and loan performance and we've since helped our client to increase the mailing count and continue to manage the entire direct mail process from end to end.

The biggest challenge today with lenders is acquisitions and defaults. As lenders look to diversify their acquisition channel and gain control over their own leads, they are faced with many options and challenges. Online marketing is difficult because lenders don't really know the credit quality and income level of online customers. Often, online applications or organic traffic falls out of the underwriting criteria due to credit or insufficient income and lenders ended up spending money on acquisition cost (data and staffing) and ended up converting less than a few percentages of organic traffic. Read more at MaxDecisions, Inc


More Americans are working well into retirement. Here's why

The trend could change the landscape of the entire U.S. labor market.

More Americans are choosing to work well into retirement, a trend that could change the landscape of the entire U.S. labor market.

According to a new survey conducted by the Harris Poll on behalf of TD Ameritrade, the majority of Americans - about one in three - plans to work into retirement. About 92 percent of respondents from ages 40 to 49 said they intend to have a job in retirement, compared to about 66 percent of respondents from ages 60 to 69. Roughly half of respondents between the ages of 70 to 79 expect to work about 10 hours per week in retirement.

"Gone are the days of retirement being seen as an essential, defined life stage, where an employee could expect to work for a company long-term and be taken care of after retiring," said Christine Russell, senior manager of retirement and annuities at TD Ameritrade.
Read more at FOX BUSINESS

Dreher Tomkies LLP

LeadSherpa: "Adding Online Lending to Storefront Operations"

LeadSherpa provides a fully managed online lending program for traditional storefront lenders interested in extending their lending operations online. Our team of experienced professionals will customize the appropriate online workflow, establish performance metrics and work with you to achieve measured results.

Our team can be engaged to manage the entire online lending process or as a resource to assist in your current online lending efforts. Leveraging online lending Best Practices, we'll map out all facets of a successful online lending strategy.

Highlights include:
  1. Development and implementation of online lead filters and target consumer profiles
  2. Online lead generator evaluations, integrations and price point management
  3. Implementation and management of third-party data providers through the use of custom waterfalls and scorecards
  4. Automated tracking and measurement of lead performance
  5. Analytics, Analytics and more Analytics

Read more at LeadSherpa


Americans now have a record $14 trillion in debt

US households are now sitting on a record $14 trillion in mortgages, credit cards, student loans and other forms of debt.

Household debt ticked up 0.7% during the third quarter, the New York Federal Reserve said on Wednesday, continuing a five-year climb encouraged by low unemployment, strong consumer confidence and cheap borrowing costs.

Consumer debt is now about $1.3 trillion higher than the previous peak set in 2008, although these figures are not adjusted for inflation nor the larger size of today's economy. Household debt has climbed about 25% from the post-recession low of $12.7 trillion.

Mortgages remains the largest chunk of Americans' debt, accounting for $9.44 trillion. That's up by $31 billion, or 0.3%, from the end of the second quarter, according to the NY Fed.
Read more at CNN


Knowing the Difference Between ID Verification and ID Authentication

Identity verification is often confused with identity authentication. Unfortunately, the two offer extremely different levels of scrutiny. Simply verifying the identity of people is no longer adequate in many situations.

From identity theft to providing false information on job applications or even making false claims about certifications and licenses; it is now more important than ever for employers to dive deeper than merely verifying the identity of potential employees and actually authenticate the claims they have made. It also works wonders for businesses that lend money, extend credit, or make long-term contracts with customers, too by offering confidence that you are working with the person you believe you are working with.

What is ID Verification?

The process of verifying IDs, for the most part, involves simply securing documentation that supports claims someone is who they say they are. It is often in the form of a driver's license or other state identification but can also be done through a combination of identifying records, such as state identification, birth certificates, Social Security numbers, etc.
Read more at MICROBILT


Auto loan originations near record high, as household debt soars

As U.S. household debt reaches a trillion-dollar milestone, more Americans are taking out vehicle loans.

Auto loan balances increased by $18 billion in the third quarter, according to the household debt report released by the New York Fed on Wednesday, to $1.32 trillion.

Auto loan originations - at $159 billion - were up slightly year over year, but volume is the second-highest ever recorded.

"The data suggest that households are taking advantage of a low-interest-rate environment to secure credit," Donghoon Lee, research officer at the New York Fed, said in a statement.

While aggregate delinquency rates rose in the third quarter to 4.8 percent, researchers noted that underwriting standards tightened for auto loans, and the median originating credit score rose 8 points to 771. Read more at FOX BUSINESS


OLA's (Online Lenders Alliance) latest white paper highlights how innovation in the financial technology space is playing a role in driving credit inclusion for the approximately 100 million Americans who currently fall into the non-prime credit category. The report details the vital role that online lending plays in the economy and in individual consumers' lives.


"Online Lenders Alliance Releases New White Paper Outlining The Role Fintech Innovation Plays In Driving Credit Inclusion
NOVEMBER 5, 2019

Today, the Online Lenders Alliance (OLA) released its latest white paper, which highlights how innovation in the financial technology space is playing a role in driving credit inclusion for the approximately 100 million Americans who currently fall into the non-prime credit category. OLA is the center for lending, technology, and innovation representing the growing online lending industry, which serves consumers who, while creditworthy, lack access to credit options."
Recommended by LeadSherpa


Three US banks have gone bust in recent weeks, after a failure-free 2018

Three small US banks have failed in the past few weeks, making it four busted lenders so far this year. That marks a turnaround from 2018, when no American banks collapsed, one of only three years since 1933 without a single bank failure (the others were 2005 and 2006).

City National Bank of New Jersey, Resolute Bank in Ohio, and Louisa Community Bank in Kentucky failed between Oct. 25 and Nov. 1, according to the Federal Deposit Insurance Corporation (FDIC). Another tiny lender, Enloe State Bank in Texas, went bust in May this year.

The bank busts in 2019 appear idiosyncratic, meaning there are few signs of underlying turmoil that is likely to spread to other lenders. The Office of the Comptroller of the Currency cited "unsafe or unsound practices," when it appointed the FDIC as a receiver of City National Bank. Kentucky's Louisa Community Bank had weak policies and high management turnover, according S&P Global Market Intelligence; an employee reportedly pleaded guilty to embezzling $45,000 from the lender earlier this year.
Read more at QUARTZ


Why a Money Market Account May Be a Better Choice Than a Savings Account

Money market accounts are typically more robust savings accounts that yield higher interest rates while allowing the consumer to write checks and pay for purchases with a debit card. Some savers may prefer a money market account to a traditional savings account.

The interest rate from money market accounts fluctuates depending on what current rates are available in the money market. However, money market accounts may require a higher balance than a traditional savings account in order to skip paying a monthly fee.

"A money market account works best for those who think they might need access to their funds and want to earn the best yield with their bank," says Melissa Eggleston, chief deposit officer at NBKC Bank in Kansas City, Missouri.

A money market account resembles a savings account in many ways. These accounts are an option for consumers who are seeking a higher interest rate. While some savings accounts have a low or no minimum to either open the account or maintain it without paying a monthly fee, money market accounts could require both.
Read more at U.S.News & World Report

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