October 9, 2018
2018 edition: 80 / 104
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In The Battle Between Online Lenders And Banks, Data Wins

Online lenders arrived on scene at the perfect time for Silicon Valley. Coming out of the 2008 financial crisis, banks - the traditional lenders - were slow to understand the way that consumers wanted to access credit and were (understandably) reluctant to take on risk. Rather than focusing on consumers' needs and demands, banks were focused on other issues: regulatory challenges, capital constraints, and core technology built in the 1960s - inadvertently opening themselves up to the rise of online lenders.

It turns out that making a lot of loans is a relatively simple task - relax underwriting standards, pay a lot of money to acquire customers, and revenue goes through the roof. Venture capitalists, enamored by astronomical growth, poured millions of dollars into online lenders. And grow they did. But the hardest part remains: getting the economics of lending right.

To credit online lenders, they figured out how and when consumers want money, and more importantly, what consumers do not want: they don't want to sit in a branch with a loan officer to get it; they don't want to wait three days for the transfer to come into their account; and they certainly don't want to be told 'no.' However, the problem with online lenders has been the economics of the loans they make. Loan profitability is driven by the spread (the cost difference between the interest charged on the loan, less the cost of funding those loans), the cost of acquiring the loan, and the default rates of those loans. Online lenders start at a large disadvantage - banks use inexpensive deposits to fund the loans while the online lenders are dependent on raising debt or even more expensive equity. Banks already had the brand name and customers, while the online lenders needed to spend money (a lot of money) to find and attract new customers. Read more at FORBES

With Kavanaugh confirmed, will Supreme Court take aim at the CFPB?

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Kavanaugh believes the CFPB, as it is currently structured, is unconstitutional.

And he's written as much.

Back in 2016, Kavanaugh authored the Court of Appeals decision that declared the CFPB unconstitutional due to its leadership structure. The case that led to the CFPB being declared unconstitutional, which was brought by PHH, dealt with how much power the agency's director held.

In Kavanaugh's mind, the director of the CFPB is the "single most powerful official in the entire U.S. Government, other than the President," in terms of unilateral power.

"As an independent agency with just a single Director, the CFPB represents a sharp break from historical practice, lacks the critical internal check on arbitrary decision making, and poses a far greater threat to individual liberty than does a multi-member independent agency," Kavanaugh wrote in his decision. "All of that raises grave constitutional doubts about the CFPB's single-Director structure."

He continued. "By 'unilateral power,' we mean power that is not checked by the President or by other colleagues," Kavanaugh wrote. "Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement." Read more at REwired

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Payday Loans Popular Among Millennials

You need cash to pay an important bill, and you haven't got it. What do you do?

Many Americans turn to payday loans to fill this gap, even though the interest rates are staggering - an average of nearly 400% APR.

A recent survey by CNBC Make It and Morning Consult found that all generations use payday loans. While 11% of all Americans have taken out a payday loan over the last two years, millennials (22 to 37 years old) and Generation Xers (38 to 53 years old) rely on payday loans the most. Thirteen percent of both generations have taken out payday loans over the past two years, compared to 8% of Generation Z (18 to 21 years old) and 7% of baby boomers (54 to 72 years old).

A disturbing percentage of young Americans have at least considered the idea. Over half of millennials (51%) have considered a payday loan - not surprising, given that many millennials came of age during the housing crisis and the subsequent recession. The most common reason cited was to cover basic expenses like rent, utility payments, and groceries.

However, 38% of Generation Z have also considered taking out a payday loan. Their reasons were mostly associated with college costs (11%).

Older generations see the downsides of payday loans - or perhaps they experienced those downsides when they were younger. Only 16% of Gen Xers considered a payday loan, while only 7% of baby boomers did so. (Essentially, any baby boomers desperate enough to consider a payday loan followed through.) Read more at Herald-Mail Media 

US regulators suggests banks and credit unions share resources to fight financial crime

The federal depository institutions regulators and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) today issued a statement to address instances in which certain banks and credit unions may decide to enter into collaborative arrangements to share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively.

Collaborative arrangements as described in the statement generally are most suitable for financial institutions with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing. The statement, which was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, FinCEN, the National Credit Union Administration, and the Office of the Comptroller of the Currency, explains how these institutions can share BSA/AML resources in order to better protect against illicit finance risks, which can in turn also reduce costs. Today's joint statement is a result of a working group recently formed by these agencies and Treasury's Office of Terrorism and Financial Intelligence aimed at improving the effectiveness and efficiency of the BSA/AML regime. Read more at Finextra

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Mobile device verification technology and why your business needs it. by Philip Burgess

If the average consumer has any one item these days, it's likely a mobile device. Smartphones are truly ubiquitous, often the first thing people pick up in the morning to see what's happening in the world or find out if someone has contacted them via text, voicemail or private message. In fact, when people go online, it's frequently with their handheld device, as nearly 90 percent of mobile users log on to the internet daily, according to recent data from the Pew Research Center.

Mobile devices are so omnipresent, there are almost as many smartphones in the U.S. as there are people, a total that's expected to grow with each passing year.

What is mobile device verification?

The fact that smartphone ownership is so common is part of the reason why mobile device verification technology is so important. As its title implies, mobile device verification services enable businesses to establish customers or borrowers are who they say they are. Identity theft is rampant, as more payment options have enabled hackers to access users' sensitive data, even the information that people maintain on their devices. Verification technology gives businesses the specifics they need to substantiate their customers' identity. This not only helps to streamline transactions and approval, but also provides greater transparency and extra due diligence.
Read more at MICROBILT

Three Things They Don't Tell You About Bank Verification. by Adam DiVeroli

Not all bank verification solutions are the same, they might not even have the same function. If your business is using ACH transactions, odds are you are utilizing some sort of bank verification solution. Verification is a term thrown around casually to describe products that perform various functions, such as to confirm a bank account's status, affirm balance, authenticate reputation, and to establish ownership. These generalizations focus on the result of verifying, rather than the process.

However, it's important to consider the different aspects of bank verification to understand what the available methods are and how they work, ensuring that you are using the correct tool for your needs. Here are three factors to keep in mind when selecting a solution to fit business' needs.

Credentialed or non-credentialed?
Credentialed Verification: A credentialed log-in process requires consumers to provide their internet banking credentials (username and password). This method provides a plethora of information including the current balance, transaction information, verification of ownership, income verification, and more.
Non-Credentialed Verification: The other way to obtain bank account verification data is through a non-credentialed method. For this method, consumers do not need to provide their online banking credentials. This method provides information including the current balance, verification of ownership, and more. The benefit of not requiring a consumer to provide their internet credentials is that there is zero friction added to your application process. Read more at MERCHANTBOOST
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TransUnion Receives Outstanding Company Culture Award

TransUnion (NYSE: TRU) announced today that the company was awarded the 19th Annual ITA (Illinois Technology Association) CityLIGHTS Award for "Outstanding Company Culture." The 19th Annual ITA CityLIGHTS Awards is the premier annual event in the region that elevates and honors achievements from the local technology community.

The Outstanding Company Culture Award goes to companies that have instilled a high-performance culture in their workplace by encouraging employees to take their career to the next level, fostering diversity and inclusion, and are committed to positively contributing to the community.

"TransUnion is honored to be recognized by the Illinois Technology Association for our commitment to our people and culture," said Mohit Kapoor, Executive Vice President and Chief Information and Technology Officer at TransUnion. "Our team is passionate about using information to make a positive impact on the world, and TransUnion is committed to providing meaningful career opportunities and an inclusive work environment to help our people succeed."
Read more at TRANSUNION

FCC fines one telemarketer for spoofing calls and proposes fines for another

The Federal Communications Commission has fined one telemarketer more than $82 million - one of its largest-ever fines - and proposed another $37.5 million in fines for another, both related to call spoofing.

In the first case, telemarketer Philip Roesel and his companies were fined more than $82 million for making more than 21 million robocalls selling health insurance from spoofed numbers. The FCC had first proposed the fine to Roesel and his companies, including Wilmington Insurance Quotes and Best Insurance Contracts, last summer under the Truth in Caller ID Act. According to the FCC, Roesel and his companies made more than 21.5 million calls during the time period of the complaint, averaging more than 200,000 calls per day - and the vast majority, nearly 17.5 million, were calls placed to mobile devices, including disruption of medical paging service provider Spōk's service. The FCC's Enforcement Bureau was also able to tie calls from Roesel's companies to 44 specific consumer complaints filed around the same time.

"By spoofing his caller ID information, Mr. Roesel made it difficult for consumers to register complaints and for law enforcement entities to track and stop the illegal calls," the FCC said. It went on to note that in the filing Roesel made in his own defense, he "argues, among other things, that Roesel spoofed the caller ID to avoid having his cell phone 'overwhelmed' with return phone calls from consumers that he robocalled-to protect his own phone number from the same kind of disruption he was imposing on consumers." Read more at RCR WIRELESS NEWS

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Under scrutiny, online auto lender Marlin Financial stops making new loans

Marlin Financial has stopped taking new customers as state investigators scrutinize its business practices.

The online auto lender at the center of a Florida Attorney General investigation has a note on its website that it is "no longer accepting new loan applications" as of the end of September.

The company offered no further explanation and did not elaborate after the Tampa Bay Times contacted its attorney on Tuesday.

A Times investigation published Sept. 14 revealed that Marlin's loan practices apparently broke the law as it stuck consumers with much more debt than expected, charged interest rates above state limits and deprived some customers of access to items in their repossessed cars.

"We need to send a clear message that if you abuse consumers, you will be held accountable," U.S. Rep. Charlie Crist, D-St. Petersburg, said Tuesday in a statement to the Times regarding Marlin's halt.

"A (Consumer Financial Protection Bureau) investigation into Marlin Financial will shine an even brighter light on deceptive practices, protecting the people from fraud, and making victims whole again," he said. Read more at TAMPA BAY TIMES

Baptist Church Seeks to Intervene In CFPB Payday Rule Lawsuit. by Jenny N. Perkins, Ballard Spahr L.L.P.

On September 19, 2018, the Georgia based Cooperative Baptist Fellowship (the "Fellowship") filed a motion to intervene as a defendant in a case filed by the Community Financial Services Association of America Ltd. and the Consumer Service Alliance of Texas challenging the CFPB's Payday Rule. The lawsuit was filed in April 2018 claiming, among other things, that the CFPB did not follow proper procedure in issuing the Payday Rule; that the CFPB improperly deemed certain lending practices unfair and abusive; that the CFPB's authority to address unfair and abusive practices is unconstitutional; and that the CFPB's structure is unconstitutional. The motion to intervene came on the heels of the trade group plaintiffs' request to lift the stay and motion for a preliminary injunction. The stay was entered in June.

The Fellowship claims that it has standing to intervene because of its previous efforts to get the Payday Rule written and, once the Rule is implemented, it would be able to redirect the resources it currently devotes to combating payday and vehicle title loans. The Fellowship further argued that it would vigorously defend the lawsuit, while the CFPB might not - citing the CFPB's plans to reconsider the Rule as well as its willingness to stay the Rule's compliance date.
Read more at Consumer Finance Monitor.

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