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January 8, 2019
2019 edition: 002 / 102

15-state coalition argues against Payday Lenders using Tribal affiliations to avoid violations.   by Marian Johns Jan 7, 2019

BALTIMORE - Maryland's Attorney General Brian Frosh is the latest to join a coalition of 15 attorneys general that filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit to argue against payday lenders using fake affiliations with Native American tribes as a way to escape state law violations when practicing predatory lending.

According to Frosh's office, the coalition filed the amicus brief in Williams v. Big Picture Loans LLC, a case involving a group of consumers who filed suit against a Michigan-based payday lender for allegedly using excessive interest rates and alleging "tribal immunity" in order to avoid prosecution, the Attorney General's Office said.

A Virginia federal court ruled against Big Picture's immunity claim last year due to the company's inability to establish itself as a Native American tribe but Big Picture has appealed the case to the Fourth Circuit, according to Frosh's office.

"Payday lenders like Big Picture Loans cannot shield themselves from state laws by forming loose and questionable affiliations with federally recognized tribes," Frosh said in a statement. "We will do everything we can to make sure that Marylanders do not fall victim to predatory lenders wherever they are based."

According to the Attorney General's Office, most lenders are required by Maryland's Consumer Loan Law to be licensed by the commissioner of financial regulation with restrictions placed on interest rates. Read more at LEGAL NEWSLINE


Maxine Waters: Much of my work will be undoing Mulvaney's 'damage' to CFPB

Rep. Maxine Waters (D-Calif.) said one of her top priorities will be undoing the damage by former Consumer Financial Protection Bureau chief Mick Mulvaney now that Democrats control the House.

In an interview Thursday on "All In with Chris Hayes," the newly-named House Financial Services Committee chairwoman called Mulvaney's reforms to the agency, which she says eroded consumer protections, "dangerous" for American consumers.

"I've been focused on the Consumer Financial Protection Bureau," Waters told MSNBC on Thursday. "That was the center piece of the Dodd/Frank reform. And Mulvaney who was sent over temporarily by the president to oversee it after the guy who headed it left to run for governor. And he's tried to dismantle the consumer financial protection bureau."

"I'm going to focus on that and we're going to try and undo the damage that Mulvaney has done," she added. "The last two years have been very dangerous. I have been appalled and surprised at how blatant it has been. This administration is not at all concerned about the welfare of the average family."

Waters also criticized fellow members of Congress, especially on influential committees, for accepting money from large banks while largely serving those banks' interests in the government.
Read more at THE HILL

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New credit score changes help consumers - and lenders

Give us access to more of your data, and maybe we'll give you a higher credit score.

That's the underlying promise behind Experian Boost and the UltraFICO score. These new products from two of the biggest names in credit represent a major change in the world of credit scoring: Millions of consumers may soon be able to change that by sharing their cellphone and utility bill payment history or other information from their personal bank accounts.

This is potentially a big deal for consumers. The companies behind these products -- credit scoring giant FICO, Big Three credit bureau Experian and data firm Finicity -- said they could eventually bring many Americans higher credit scores and greater access to credit cards, personal loans and other types of credit.

It's an even bigger deal for lenders, however -- and that's really the point.

Ultimately, these moves are about giving lenders a bigger pond in which to fish for business. Lenders, not consumers, are the primary customers for credit bureaus and credit scoring firms, and lenders are hungry for new ways to source creditworthy borrowers they would have otherwise overlooked or to take market share by offering more attractive terms to borrowers than their competitors.
Read more at CBS NEWS


Fintech lenders and banks call for clarification on alternative data usage in loan origination

The US Government Accountability Office (GAO) has called for financial regulators to pay more attention to the role played by nonbank technology companies in the consumer and small business lending market.

The GAO conducted interviews with eleven fintech lenders and found a seven-fold growth in loan volumes from such companies between 2013 and 2017 alongside increasing alliances with banks to grow their portfolios and finance their lending.

Some of the fintech lenders GAO interviewed said they use alternative data to supplement the traditional data used to make credit decisions or to detect potential fraud. Some alternative data (such as on-time rent payments) are financial and similar to traditional data, while others are nonfinancial, such as a borrower's educational institution and degree.

Using alternative data in credit decisions presents potential benefits in the expansion of credit notes the GAO, but it also has potential risk implications relating to fair and accurate decision-making.

"The Bureau of Consumer Financial Protection (BCFP) and federal banking regulators have monitored fintech lenders' use of alternative data by collecting information and developing reports on alternative data," observes the GAO. "But they have not provided lenders and banks with specific guidance on using the data in underwriting. For example, BCFP's fair lending examination procedures and the banking regulators' third-party guidance on risk do not clearly communicate the agencies' views on the appropriate use of alternative data." Read more at FINEXTRA

Dreher Tomkies LLP

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The best and worst ways to borrow money during the federal shutdown

Two weeks into a partial government shutdown, hundreds of thousands of federal workers are furloughed or working without pay.

That's longer than most can get by without income, considering that over three-quarters of all full-time workers are living paycheck to paycheck, according to a report from CareerBuilder.

From personal loans to credit card advances, there are a number of ways to access cash to bridge the gap. But not all types of borrowing are created equal.

Here are some of the best and worst loans out there.

Payday loans
Also called cash advances, payday loans are the worst offenders. Even though these short-term loans, generally for $500 or less, are relatively easy to get - often through storefront payday lenders or even online - the interest can easily run into the triple digits.

Depending on your state's laws, payday loans are typically due two weeks later and must be paid off in one payment along with a "finance charge" (the service fees and interest). Read more at CNBC


USAA mishandled payday disputes, opened unauthorized accounts: CFPB

USAA Federal Savings Bank will pay over $15 million in restitution and fines to settle claims by the Consumer Financial Protection Bureau that the bank neglected stop-payment requests and reopened deposit accounts without customers' consent.

The CFPB's consent order, announced Thursday, alleged the bank refused to investigate when customers asserted that funds had been debited in error. The agency specifically singled out USAA's process for responding to disputed payday loan transfers as a source of the bank's faulty practices.

The CFPB said USAA also engaged in unfair acts or practices from 2011 to 2016 by reopening closed consumer deposit accounts in certain circumstances without providing timely notice.

The order said that USAA reopened 16,980 closed accounts without obtaining consumers' authorization, and that 5,118 customers incurred roughly $270,000 in fees. In July 2017, USAA reimbursed those customers' fees plus interest.

The $82.2 billion-asset San Antonio bank agreed to pay a $3.5 million fine and $12 million in restitution to 66,000 members for violations of the Electronic Fund Transfer Act, Regulation E and the Consumer Financial Protection Act of 2010, the CFPB said. Read more at AMERICAN BANKER

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Millennials Using Phone Payment Apps Make Worse Money Decisions

Mobile payments is one of the hottest sectors in Fintech.

Venmo and Square/CashApp have battled for years over the hearts and minds of millennials, with CashApp recently declaring victory- thanks in part, some say, to its pioneering incorporation of Bitcoin trading into the app.

In May, Square CEO Jack Dorsey told an audience at the Consensus Conference in New York that many Square Cash App users are "underserved and even unbanked...(something the company wants to) lean into more."

"What we're seeing now is people are using it as their (primary) bank account," said Dorsey, who added that the majority of Square Cash App payments are flowing in from Walmart, McDonalds and several other fast food outlets.

This fall, a study by the Global Financial Literacy Excellence Center at the George Washington School of Business also showed that users of mobile payment apps, though they tend to control more assets, also tend to be less financially literate and more impulsive than counterparts using traditional banking interfaces.

According to reporting at Quartz:
"A study of mobile-payment using millennials (ages 18-34) in the US found they were less likely to be financially literate than others of the same age who didn't pay for things with their phones. They were also more likely to make other bad financial decisions, like overdrawing checking accounts, racking up credit card fees, borrowing from payday lenders, or dipping into their retirement accounts early." Read more at CROWD FUND INSIDER

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What You Need to Know About Fintech Lending Platforms. by Philip Burgess

The rise of the internet has caused considerable disruption to almost every industry, though the world of finance has seen the most significant changes. In the past, consumers heavily relied on the expertise of financial institutions, but the digital revolution has ushered in an era of personal banking based on a self-service model. Now that consumers have access to powerful economic management tools, they're better equipped to understand the impact of their decisions and maintain their own financial well-being. For example, our 2013 study on short-term loans found that the average borrower takes around 5 renewals to pay off a loan, with more than half of all borrowers paying it back within 3 renewals or less. Not only does this point to a more fiscally responsible consumer pool, but it also demonstrates an increase in borrower confidence. So how has everything changed so rapidly?

The Fintech uprising
Technology has been the driving force behind the trend toward personalized banking activities, as it has enabled a variety of online marketplaces and new service models to flourish. A 2018 study by the Congressional Research Service (CRS) provides a thorough overview of how marketplace lending has created new opportunities for consumers and small businesses, owed in part to the rising popularity of Fintech, or "innovative financial technology."

Marketplace lending refers to the nonbank lending industry, which utilizes Fintech to distribute loans via online platforms, though incumbent lenders have grown increasingly interested in joining the fray. Often called peer-to-peer lending, this business model offers consumers and small businesses a quick and easy way to obtain loans through nontraditional economic channels. While it can be difficult to land on a precise definition for marketplace lending, the CRS points to these defining characteristics: Read more at MICROBILT


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With major financial protections on hold, here's how you can guard your investments

*The Consumer Financial Protection Bureau ushered in new leadership last month, and some consumer advocates worry that certain protections could weaken.
*In addition, the Securities and Exchange Commission is working on a "best interest rule" for investors, though it may take awhile to come to become finalized.
*Advocates say consumers need to be extra vigilant and champion their rights.

Individual investors may want to add one more resolution to their lists for 2019: Watch their backs.

More than a decade after the financial crisis, individual investors are still viewed as the best guardians of their own personal financial security.

The aftermath of the crisis prompted new efforts to boost protections for individuals, with many of those rules stemming from provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

That law helped to create the Consumer Financial Protection Bureau, a consumer watchdog agency. It also gave the Securities and Exchange Commission the authority to establish regulations for a uniform fiduciary standard that would protect retail investors.

Yet even as a new director of the CFPB, Kathy Kraninger, was confirmed last month, some consumer advocates are worried about that agency's future. Read more at CNBC


U.S. banks 'well-positioned' for adverse market conditions: OCC spokesman

WASHINGTON (Reuters) - The U.S. banking system has strong capital and liquidity and is well-positioned to manage more adverse market conditions, a spokesman for the Office of the Comptroller of the Currency said on Wednesday.

In a statement to Reuters, Bryan Hubbard said the banking regulator was monitoring the effects of falling stock markets on the nearly 1,300 institutions it oversees and would share any relevant systemic information with fellow supervisors through the appropriate interagency forums.

U.S. stocks posted a loss in 2018 for the first time in a decade due to fears over a weakening global economy and the U.S.-China trade war, sparking fears turmoil could spread to other parts of the financial system.

"The federal banking system ... is strong with capital and liquidity near historical highs and improved earnings and risk management. From this strength, the federal banking system is well positioned to manage more adverse market conditions," Hubbard said in the statement.
Read more at REUTERS

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