February 11, 2020

Interest rate caps harm consumers. by Thomas W. Miller, Jr.

Lawmakers in Virginia appear poised to "fix" an elusive "predatory lending problem." Their focus is the small-dollar loan market that allegedly teems with "outrageous" interest rates. Bills before the Assembly would impose a 36 percent interest rate cap and change the market-determined nature of small-dollar loans.

Other state legislators across the country have passed similar restrictions. To enhance consumer welfare, the goal should be to expand access to credit. Interest rate caps work against that, choking off the supply of small-dollar credit. These caps create shortages, limit gains from trade, and impose costs on consumers.

Many people use small-dollar loans because they lack access to cheaper bank credit - they're "underbanked," in the policy jargon. The FDIC survey classified 18.7 percent of all US households as underbanked in 2017. In Virginia, the rate was 20.6 percent.

So, what will consumers do if lenders stop making small-dollar loans? To my knowledge, there is no easy answer. I do know that if consumers face a need for money, they will meet it somehow. They will: bounce checks and incur an NSF fee; forego paying bills; avoid needed purchases; or turn to illegal lenders. Read more at THE HILL

AFSPA Partner 


Payday loans vs. magic wands. by David W. Kreutzer

Wishful thinking solves no problems. Instead, laws and policies based on wishful thinking create problems, usually for the people the policies are intended to help. A Virginia delegate's proposal to eliminate payday lenders is a case in point. Similar bans were implemented in Ohio and Colorado - both of which didn't work.

The mechanism for eliminating payday lenders is capping the annualized interest rate. In this case, the cap is set at 36% per year. Of course, for many loans (such as mortgages and most car loans) 36% is well in excess of any rate charged by lenders. This is a good sign these lenders can cover their costs with an annual percentage rate that is much lower than 36%.

However, payday loans are short-term loans for relatively small amounts. The term is typically for two weeks and the loan amounts vary from $100 to a few thousand dollars. With the proposed cap in place, the maximum allowed charge for a $100, two-week loan would be $1.38. For perspective, parking meters in Richmond are $1.50 an hour. That is, with the cap in place, payday borrowers could pay more for parking in front of the payday storefront than they would pay in interest on the loan.
Read more at Richmond Times-Dispatch

AFSPA Partner


Paving the Payments Future
For more than a decade, REPAY has put our clients first. We've spent years innovating the best financial technology and payment processing solutions to make their lives easier, and we've done a pretty great job. Headquartered in Atlanta, Georgia, we not only process for more than 10,000 merchant locations, but we've spread all across our great nation-from Chicago to Phoenix and more.


Written Testimony of Kathleen L. Kraninger 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 (Bureau's) most recent Semi-Annual Report to Congress.

Today, I am happy to present the Bureau's Fall 2019 Semi-Annual Report (April 1, 2019, to September 30, 2019) to Congress and the American people in fulfillment of our statutory responsibility and commitment to accountability and transparency. My testimony is intended to highlight the contents of this Semi-Annual Report (Report).

Since I last appeared before the Committee, I had the pleasure of marking my first year at the Bureau. It is an honor and privilege to serve and protect American consumers.
Read more at CFPB


Fintech and Alternative Lending Expected to Eclipse $390B

LearnBonds reported Wednesday that while traditional banks still hold the largest share for consumers and businesses, fintech lending is beginning to make its move in the market.

The report states that fintech lending will hit a $312.6 billion transaction value-growing 17% annually. The market is expected to reach $390.5 in value by 2023.

Global fintech lending was worth $181.2 billion in 2017, which jumped to $267.1 billion in 2019-an approximate 30% increase. The report states the overall market is forecast to grow by 7.7% over the next three years.

The U.S. is the second-largest fintech lending market in the world with $33.5 billion in market value. China has a fintech lending value of $265.7 billion transaction value and 90% of the market share.
Read more at the MReport



TransUnion: Bigger Data: The New Data Management Revolution.

David Dowhan has a successful track record of executive leadership at growing both private and public venture-backed companies and has been a pioneer in online marketing since 1997. Before joining TransUnion, Dowhan most recently lead TruSignal, Inc. in his role as CEO and founder before TruSignal was acquired by TransUnion in May 2019. Before TruSignal, Dowhan spearheaded strategic business and product development efforts at eBureau, managed marketing analytics at Aderactive, and held executive roles at and NextCard, Inc.

On average, marketing spend on customer data analytics has nearly doubled over the past two years. Still, the majority of sales and marketing professionals say they face challenges across data organization, analysis, activation and more, according to a Forrester-commissioned study. That could be one reason why hundreds of martech and ad tech platforms enable some form of data management today.

Until recently, I've seen many of these platforms parse data management technology based on data type and use case, including customer data management (CDPs), new customer acquisition (DMPs), retargeting platforms and more. Today, there's an increased need to manage and activate multiple datasets, which requires sophisticated technology capable of operating beyond singular applications.
Read more at TRANSUNION


Economics in Brief: U.S. House Dems Disagree on Payday Loan Caps

U.S. House Dems Disagree on Payday Loan Caps

A bill that would impose a nationwide cap of 36 percent interest on consumer loans received bipartisan criticism at a hearing Wednesday, though its supporters still say the bill is needed to protect vulnerable Americans, American Banker reports.

Originally introduced by a bipartisan coalition, now both Democrats and Republicans on the House Financial Services Committee are raising concerns that an across-the-board rate cap would cut off loans to people who need them the most.

"APR I don't think is the best way to evaluate the cost of short-term loans," said Rep. Brad Sherman, D-Calif. Read more at NEXT CITY



Trust Science: The Role of Time Series in Loan Data Analysis.

In the first two blogs of our four part blog series we covered structured and unstructured data in underwriting and the importance of ontologies, or agreements of what the data mean. This brings us to the next topic, time, and its impact when analyzing loan data. Time series modeling is a very popular and powerful way to make predictions based on historical data. In loan data analysis, roughly 80% of people are working with time series data. In this post we discuss the following:
  • Assumptions made regarding time
  • Time series data
  • Time and compliance

Assumptions of Time-stamps
We previously covered in part one of our blog series that unstructured data must be converted to structured data in order for a machine learning credit underwriting model to learn and understand the data. Programmers are often required to make assumptions about the data in order to make the data structured.

One notorious type of assumption relates to time. Time is very important in unstructured data, as it provides us with time-stamps for loan data analysis and predictions. We require a mutual agreement of what the time-stamp means between all parties interpreting the time-stamp.
In the real-word, seven o'clock means something different for every human being on the planet. And human time and programmer time tend to be two different things. Human time is interpreted as unstructured data and the programmer interprets time as structured data.




WASHINGTON, D.C. The Consumer Financial Protection Bureau (Bureau) and the U.S. Department of Education (ED) announced a new coordination agreement in order to better serve student loan borrowers. Under the newly signed Memorandum of Understanding (MOU) the agencies will share complaint information from borrowers and meet quarterly to discuss observations about the nature of complaints received, characteristics of borrowers, and available information about resolution of complaints. The MOU also provides for the sharing of complaint data analysis, recommendations, and analytical tools.

"This agreement concerning student loan complaints will protect students as both the Bureau and the Education Department work to resolve their complaints," said Consumer Financial Protection Bureau Director Kathleen L. Kraninger. "This MOU provides a robust framework that allows for the staff at both agencies to work together to provide better outcomes for consumers."
Read more at The Consumer Financial Protection Bureau


How can you help your employees prepare for tax season? By David Kilby

As an employer, you are in a unique position to support your employees during tax season. Here are just a few ways.

Tax season is right around the corner. Unfortunately, many of your employees aren't familiar with the effect tax withholdings have on their income, paycheck or tax returns. While filing taxes as a W-2 employee may seem straightforward to some, it can be a daunting task if you aren't familiar with the process. Each of your employees has nuances to their financial situation, some of which they may not be aware.

Providing your employees with tax filing tips and guidance to ensure they are filing their information accurately and appropriately, while maximizing the amount of their hard-earned money they retain would be a valuable benefit to offer, right?

Typically, this type of guidance is only provided by professional tax experts, financial advisors or financial counselors. Unfortunately, many employees are not in a financial position to afford this support. Read more at BENEFITS PRO


As Mortgage Rates Skid, Homeowners Rush to Refinance and Save

Homeowners are responding in a big way to tumbling mortgage rates, which have dropped to the lowest levels in years and have reached all-time lows for midwinter. Applications for mortgage refinance loans have spiked and are coming in at the fastest pace in six and a half years, a trade group says.

But owners who decide to swap out their mortgages and stay in their homes aren't helping to relieve the shortage of houses for sale. Would-be buyers keep struggling to find homes they want, and they've become less eager to borrow.

Overall mortgage applications rose 5% in the week ending Jan. 31, the Mortgage Bankers Association said Wednesday.

The increase was led by homeowners' hunger for refinance loans. Refi applications surged 15% last week to the highest level since June 2013, and they were coming in at nearly three times the rate seen a year ago.
Read more at YAHOO FINANCE



State of the States 2020 from PEW

In our annual State of the States series, Stateline reporters look at some of the pressing issues state lawmakers are facing as they begin their work this legislative session.

Day One: Voting Access
The 2020 presidential election is just months away and state legislators, courts and election officials are making final changes to policies governing access to the ballot. States remain divided along partisan lines on expanding and tightening voting laws.

Day Two: Vaping
In the wake of last year's mysterious vaping-related lung illness and increased concern about growing rates of teen vaping, governors, mayors and state lawmakers are calling for flavor bans and excise taxes to make the highly addictive nicotine-laced liquids less appealing to kids.

Day Three: Natural Disaster Prep
As the effects of climate change become increasingly apparent, many states are beginning to prepare for ongoing challenges instead of responding to disasters as one-off events.
Read more at The Pew Charitable Trusts


The government is finally cracking down on robocall enablers

The government has cracked down on some robocallers, even going so far as to fine one alleged robocaller $100 million.

But for a long time, companies that allow robocallers to use their services have been left to do their thing - and in the process unleashed billions of robocalls on the annoyed public. The involvement of many voice-over-IP - internet-based phone - companies in enabling robocalling has been a dirty secret in the telecom industry.

Recently, the government has begun to crack down on companies that enable bad actors to scam and harass. This week, the Federal Communications Commission sent letters to six phone companies asking them to stop allowing international robocalls to enter the U.S., and to participate in traceback efforts to track down the sources.

This follows actions from the Department of Justice and the Federal Trade Commission in reining in the companies that facilitate international robocalls.
Read more at YAHOO FINANCE

Dreher Tomkies LLP

Court Stops Sprawling Scheme That Operated Hundreds of Websites That Deceived Consumers About Government Services

Defendants made millions of dollars from sites that overwhelmingly mislead consumers

A court has granted the Federal Trade Commission's request to preliminarily halt a scheme in which the defendants operated hundreds of websites that promised a quick and easy government service, such as renewing a driver's license, or eligibility determinations for public benefits. Following an evidentiary hearing, the court held that the FTC was likely to prevail in proving that "the websites were patently misleading."

The FTC's filings in the case allege that consumers provided their information because they believe the websites will actually provide these services. Instead, consumers received only a PDF containing publicly available, general information about the service they sought.

Documents filed by the FTC allege that the defendants' sites employed similar branding, language, and functionality to induce consumers to relinquish their credit card information, personal data, or both. Read more at The Federal Trade Commission


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