October 18, 2018
2018 edition: 83 / 104
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Newly-unsealed court documents released today show evidence of the federal government's illegal Operation Choke Point program in which top government officials and federal agencies pressured banks to cut all ties with lawful businesses. More than 100 records expose depositions and damaging emails of government officials, most notably at the Federal Deposit Insurance Corporation (FDIC), who executed a secretive campaign against lawful businesses it disfavored while ignoring due process and subverting the legal and regulatory process. This illegal campaign included threats from senior government officials that agency staff would be fired and bank officials could be subject to criminal prosecution. The key findings disclosed in the filing indicate that this campaign was instituted at the very highest levels of the FDIC and has been ruthlessly and enthusiastically implemented in the field:

In late 2010 or early 2011, the FDIC's senior Washington officials convened a meeting of all Regional Directors (or their designees) at which a senior FDIC official gave the agency's field officers the following message, direct from the FDIC's highest leadership in Washington: "if a bank was found to be involved in payday lending, someone was going to be fired." This threat had far-reaching consequences, since the regional directors collectively have supervisory authority over every FDIC-insured bank of United States.

Atlanta Regional Director Thomas Dujenski informed members of his staff that "[a]ny banks even remotely involved in payday [lending] should be promptly brought to my attention," and he repeatedly pressured banks into terminating payday lender customers. In one instance, he met personally with the chairman of a bank that serviced payday lenders, characterized payday lending as a "dirty business," and threatened the chairman with potential criminal prosecution if he did not end the relationship. After the bank complied and terminated the account, Dujenski covered the FDIC's tracks by seeking to ensure that the bank characterized the decision as its own. He also reported back to Washington: "I think we got our message across." During Director Dujenski's tenure every single bank in his region known to have had relationships with a payday lender ultimately ended those relationships. Read more at COMMUNITY FINANCIAL SERVICES ASSOCIATION OF AMERICA

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Pentagon, others baffled by CFPB plan to cease military lending exams

The Consumer Financial Protection Bureau's decision to stop examining financial firms for compliance with the Military Lending Act has sparked pushback not only from lawmakers and consumer advocates but also from the Defense Department and every major group representing military service members.

Acting CFPB Director Mick Mulvaney's claim that the Dodd-Frank Act does not give the bureau statutory authority to enforce the Military Lending Act is a major reversal from the Obama administration. As reported by several news outlets, Mulvaney has argued further legislation is needed to provide that authority.

But roughly 30 military and veterans groups are opposed to the supervisory rollback. The Department of Defense says it was not consulted on the bureau's decision and remains committed to the current law, which imposes a 36% annual percentage interest rate cap for active-duty military members and their dependents.

"The Department believes that the full spectrum of tools, including supervisory examinations, contribute to effective industry education about, and compliance with, the MLA," wrote Stephanie Barna, the acting assistant secretary of defense for manpower and reserve affairs, in a September letter to Sen. Bill Nelson, D-Fla. Read more at AMERICAN BANKER

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"Regulation by Enforcement is Dead" says the CFPB

Addressing the Mortgage Bankers Association (MBA) 2018 Annual Convention in Washington, DC on October 15, 2018, BCFP Acting Director Mick Mulvaney advised that regulation by enforcement is dead, and that he does not care much for regulation by guidance either. He noted to the members that they have a right to know what the law is.

Acting Director Mulvaney advised that if a party is doing something that is against the law, the BCFP will take action against them. However, he advised the difference between the BCFP now from its approach under the prior Director is that if someone is doing something that complies with the law and the BCFP doesn't like it, the BCFP will not take action.

With regard to UDAAP, Acting Director Mulvaney stated that he believes the concepts of "unfair" and "deceptive" are well established in the law, but that is not so with regard to the concept of "abusive". He noted he asked his staff to provide examples of what is abusive that is not also either unfair or deceptive. And he signaled that the BCFP will look to engage in rulemaking on abusive.

As we have reported the MBA and other trade groups recently sent a letter to the BCFB seeking reforms in connection with the BCFP's loan originator compensation rule. When asked by MBA President and CEO Robert Broeksmit about the letter, Acting Director Mulvaney advised that he knew the letter was received and that it is being reviewed by staff, but that he had not actually seen the letter. Mr. Broeksmit then handed Mr. Mulvaney a copy of the letter, drawing laughs from the audience. Read more at NATIONAL LAW REVIEW

Dreher Tomkies LLP Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.

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Native-owned financial institutions battle credit deserts

In rural areas without access to banking, tribal enterprises are helping fill gaps.

Native American-owned financial institutions are helping combat "credit deserts" in rural and Indigenous areas. The Center for Indian Country Development (CICD) released a map of Indigenous banks, credit unions and community development financial institutions (CDFI) that serve both tribal members, who often lack access to financial entities, and the surrounding rural communities as well.

According to Patrice Kunesh, director of CICD, Indian Country and rural America often lack access to financial institutions. "When we ask if we are meeting the credit and capital needs of Indian Country, we will measure the distance between the community and the nearest bank," says Kunesh. "That distance can be well over 50, 60, 70 miles or more." Kunesh says tribes considering moving into financial services can fill these gaps.

Kunesh also says Native-owned banks offer tribal members opportunities other financial institutions cannot, owing to their intimate knowledge of the community. Tongass Federal Credit Union, for instance, serves southeast Alaska and is able to modify and craft lending products, such as car or home loans, specifically for local Read more at HIGH COUNTRY NEWS

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TransUnion: Home equity lending is going to soar

Says market dynamics will propel more homeowners to tap equity

Home equity levels continue to rise, and all signs point to a market ripe for home equity lending, according to a recent report from consumer credit reporting agency TransUnion.

Home equity levels have risen every year and are now nearing $15 trillion, surpassing its 2006 peak by more than $1 trillion. TransUnion said this fact and several other dynamics will converge to create significant growth in home equity origination.

"There are ample signs that the home equity lending market is poised for growth. Home prices have surpassed 2005 boom levels and household home equity has grown even faster," said Joe Mellman, TransUnion's senior vice president and mortgage business leader. "Increasing consumer debt makes debt consolidation an appealing option and home equity can be the most economically attractive path to do just that."

Interest rates also play a role, according to Mellman. Read more at HOUSINGWIRE

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Democratic Lawmakers Say Payday Loan Background Does Matter

HARTFORD, CT - (Updated 4 p.m.) Democratic lawmakers who serve on the Banking Committee believe Republican gubernatorial nominee Bob Stefanowski's tenure as CEO of a payday loan company should matter to voters, even if his former company is barred from selling its product in Connecticut.

Under the north portico of the state Capitol, Reps. Matt Lesser and Bobby Gibson, joined Senate Majority Leader Bob Duff and attorney Sarah Poriss Monday in explaining why voters should care about the three years Stefanowski spent with DFC Global, a payday loan company that made high interest loans to consumers in the United Kingdom and the United States. None of the loans were made in Connecticut, which bans the sale of payday loans.

Stefanowski's campaign said he would do nothing to loosen Connecticut's ban on the products.

"His time at DFC Global shows his willingness to dive headfirst into difficult situations in an attempt to reform and turn around troubled organizations," Kendall Marr, a spokesman for Stefanowski's campaign, said. "That is why he is the best person to lead our state and get Connecticut back on track."

Stefanowski has said himself that he set out to change the industry with a predatory reputation.
Read more at CT NEWS JUNKIE

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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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Ted Cruz defends payday lending during San Antonio stop

Pressed by members of San Antonio's black community to help fight payday lenders who abuse their community with high-interest loans, U.S. Sen. Ted Cruz instead cautioned them about getting too aggressive against those businesses.

Cruz acknowledged that for some people, payday loan debt can spiral quickly out of control. But when he was asked to back legislation to cap payday loan interest rates, Cruz said he is reluctant to take action that could force some lenders to stop offering such loans to people who need them.

"You don't want to remove credit options for people in a tough circumstance where they have to then go to a loan shark," Cruz said at a meeting with about a dozen people at the Good Samaritan Veterans Outreach & Transition Center on Connelly Street.

Cruz said when the government stepped in to regulate subprime mortgage loans, suddenly it became hard for people to get home loans. Capping interest rates for payday lenders could have the same effect on that market, he said.

Cruz never flat out rejected supporting caps on interest rates, but repeated his concern about going too far. Read more at HOUSTON CHRONICLE


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Cash may still be king after all. by Walt Wojciechowski

Since its inception, cash has been the undisputed sovereign of legal tender and the principal currency of the unbanked and underbanked. In recent years, however, indications have emerged suggesting its seemingly indomitable reign may be coming to an end. Polls suggest consumers are carrying it around less frequently than they used to and in 2016, 87 percent of respondents attested to paying with it on a regular basis, down from 93 percent compared to a year earlier.

So is cash on its way out? To paraphrase Mark Twain, its demise has been greatly overexaggerated.

Perhaps the best example is its availability. As reported by CNBC, cash circulation has increased at a 5 percent growth rate over the past 20 years. In fact, between 1996 and 2016, bank notes have approximately doubled, totaling 40 billion. Its annual growth rate is evident on an annual basis as well, matching that of euro notes, based on figures the business news network obtained from the European Central Bank.

Yet despite these convincing statistics indicating cash is still relevant, many Americans believe cash is yesterday's news - so much so that it may not always be around. In a 2016 survey conducted by Gallup, more than 60 percent of respondents said it wouldn't surprise them if society became cashless at some point in their lifetime. Thirty percent of people who felt this way believed its ouster was "very likely."

Dan Schulman, PayPal CEO, said he doesn't foresee this happening - and certainly not anytime soon. Read more at MICROBILT

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Top 5 Reasons Why Direct Mail is Dominating Performance Marketing

Every lender faces the same issue today, marketing. Most of the lenders start with "leadgen", online lead generators that send traffic to lender's call centres, websites or form fill. These online lead generators have been around for a decade now and they have been struggling in the face of outright bans by Google and Facebook. Direct Mail on the other hands has been successful in performance marketing for the past 5 decades.

Reason #1 - Control

If you are a lender and one of your number of costs is marketing, then you should always have control over your marketing. Most importantly control over how you acquire your customers. Often, direct mail starts with acquiring a mailing list from one of the credit bureaus. There are 30-40 million customers at any given time looking for credit. Be it a Lending Club style consolidation loan or a short-term emergency personal loan, there's always someone looking to consolidate their debt or getting over a life emergency.

Getting your own list from the credit bureaus is the only way to control your own marketing. The names and address of your potential customers are not shared by anyone else. Unlike online lead generators, the lead that was sold to you is also sold to your competitors. The chances of you getting that customer to convert into one of your credit product are very low. This behaviour promotes bad behaviour amongst some lenders, and that they will do anything to convert their purchased leads due to this artificial competition infiltrated by online lead generators.

Direct marketing is different, you are targeting customers that you aren't competing to convert. It builds brand loyalty, stickiness for a second or third loan and ultimately a great lender and customer relationship for the future. Read more at MAXDECISIONS

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Insight's industry-revolutionizing technologies, TruScore, TruTrac, and Decision Cloud filter out fraud while identifying likely high performance leads, thus developing stellar decisioning waterfalls, improving conversion rates, reducing acquisition costs, and ultimately maximizing profits.

Insight technology captures, validates, verifies, scores, and tracks lead information, and provides you with key decision data, increasing your ability to convert leads into profitable customers. Insight's solutions are fully customizable. You determine what lead data factors are most important to you. No other products in the marketplace offer such unique and efficient solutions. Insight is at the forefront of lead scoring and lead verification technology. Our solutions are designed for lead generation networks and the lead buyers they serve.

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CFPB to spell out 'abusive' practices by financial-service companies

Mulvaney says term is too vague

WASHINGTON - A federal regulator plans to explain what it considers to be "abusive" practices by companies selling financial services, a move aimed at giving a clearer idea of what behavior would get companies into trouble under relatively new government enforcement powers.

Mick Mulvaney, the Consumer Financial Protection Bureau's acting director, said Monday the bureau is working on a regulation defining how it views unfair, deceptive or abusive acts or practices, known as Udaap. Most of the CFPB's enforcement actions involve such claims and the 2010 Dodd-Frank financial law, which created the CFPB and gave it broad enforcement powers.

Companies have long complained that the CFPB's Udaap approach was overly broad and nuanced, making what would trigger an enforcement action less predictable. Read more at MARKETWATCH

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