February 14, 2019
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Payday Loans Are No Worse Than Avocado Toast

The Consumer Financial Protection Bureau (CFPB) now proposes to rescind key provisions of its 2017 payday lending rule. Good. The old rule threatens to starve millions of hard working Americans out of short-term credit markets.

The new proposal would essentially scrap the stringent ability to repay portion of the original rule. That has industry supporters applauding (but calling for more reforms) and industry critics seeing red.

Sen. Elizabeth Warren (D-Mass.), for instance, believes that the new proposal "makes a mockery of the CFPB's statutory mission of protecting consumers." The truth, though, is that the original rule's approach to protecting consumers is incompatible with a free society. It rejects the notion that individuals understand what is best for themselves, and mandates that federal bureaucrats decide what is best for people.

The original payday-lending rule is the perfect embodiment of this command-and-control version of consumer protection. The rule requires lenders to certify, under penalty of law, that borrowers have the ability to repay their loans. That requirement reflects two related assumptions: (1) consumers can't determine when loans are too costly, and (2) lenders want to take advantage of this situation by lending to consumers who can't possibly repay. Read more at FORBES

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Comptroller of the Currency Supports CFPB Proposed Rule on Short-Term Small-Dollar Lending

WASHINGTON-Comptroller of the Currency Joseph Otting today issued the following statement supporting Director Kathy Kraninger and the Consumer Financial Protection Bureau's proposed rule rescinding requirements that lenders make certain underwriting determinations before issuing short-term small-dollar loans.

On February 6, 2019, the Consumer Financial Protection Bureau took an important and courageous step that will allow banks and other responsible lenders to again help consumers meet their short-term small-dollar needs. The proposed rule allows lenders to re-enter the market with quality products and services that offer consumers better regulated, priced, and structured products.

Each year, millions of Americans rely on nearly $90 billion in small-dollar loans, typically between $300 and $5,000. This kind of credit helps families cope with emergencies and assists small businesses with meeting short-term expenses. When regulatory actions took banks out of the market, the demand did not go away. Other lenders stepped in. The shrinking supply and steady demand drove up prices and promoted much less favorable terms.
Read more at Comptroller of the Currency Joseph Otting

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Consumer Financial Protection Bureau Releases Notices of Proposed Rulemaking on Payday Lending

Washington, D.C. - The Consumer Financial Protection Bureau today is proposing to rescind certain provisions of its 2017 final rule governing "Payday, Vehicle Title, and Certain High-Cost Installment Loans." Specifically, the Bureau is proposing to rescind the rule's requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The Bureau is preliminarily finding that rescinding this requirement would increase consumer access to credit.

In October 2018, under the leadership of then-Acting Director Mulvaney, the Bureau announced that it would issue Notice of Proposed Rulemakings (NPRMs) to reconsider the rule's mandatory underwriting requirements and to address the rule's compliance date. The proposals the Bureau is releasing today fulfill that commitment.

The Bureau's proposal suggests there was insufficient evidence and legal support for the mandatory underwriting provisions in the 2017 final rule. Additionally, the Bureau is concerned that these provisions would reduce access to credit and competition in states that have determined that it is in their residents' interests to be able to use such products, subject to state-law limitations. The NPRM proposing to rescind the mandatory underwriting requirement is open to public comment for 90 days. Read more at Consumer Financial Protection Bureau

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Sen. Elizabeth Warren calls on Kraninger to 'immediately' withdraw payday revision

Sen. Elizabeth Warren (D-Mass.) called on Kathy Kraninger, the new director of the Consumer Financial Protection Bureau, to "immediately" rescind a proposal to weaken the payday lending rule, becoming the latest prominent Democrat to weigh in on Kraninger's first major initiative.

"The rule you released today makes a mockery of the CFPB's statutory mission of protecting consumers. It should be withdrawn immediately," Warren, who helped establish the CFPB under President Barack Obama, said in a letter on Wednesday to Kraninger that was obtained by POLITICO.

The CFPB yesterday proposed scrapping the ability-to-repay underwriting requirement at the heart of the agency's 2017 rule reining in payday lenders.

House Financial Services Committee Chairwoman Maxine Waters (D-Calif.) also called on Kraninger to withdraw the rule in a statement Wednesday. Sen. Sherrod Brown (D-Ohio), the ranking Democrat on the Senate Banking Committee, which oversees the industry, criticized the revision as well.

Warren outlined her concerns with the proposal in a four-page letter.

"The agency's release of this new rule suggests that, under your leadership, the CFPB is continuing [former acting Director Mick Mulvaney's] pattern of going easy on payday lenders at the expense of consumers," Warren wrote. Read more at POLITICO

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Financial watchdog plans to scrap payday lending rules

New York - The nation's federal financial watchdog said Wednesday that it plans to abolish most of its critical consumer protections governing payday lenders.

The move is a major win for the payday lending industry, which argued the government's regulations could kill off a large chunk of its business. It's also a big loss for consumer groups, who say payday lenders exploit the poor and disadvantaged with loans that have annual interest rates as much as 400 percent.

"The CFPB was supposed to protect consumers. Unfortunately, the agency is now working to protect payday lenders," said Christopher Peterson, director of financial services at the Consumer Federation of America and a law professor at the University of Utah, in a statement.

Dismantling protections
The cornerstone of the regulations was a requirement that lenders make sure borrowers could afford to repay a payday loan without being stuck in a cycle of debt, a standard known as "ability to repay." This standard would be eliminated under the new rules.

Critics of the payday lending industry have argued that without these underwriting standards, the CFPB's new regulations are effectively toothless. The main criticism of the payday lending industry was that many borrowers would take months to repay a loan that was originally designed only to last a couple of weeks. Read more at CBS NEWS

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FiSCA Statement on the CFPB's Reconsideration of the Small-Dollar Loan Rule

WASHINGTON, DC - The Financial Service Centers of America (FiSCA) offered the following statement on the Consumer Financial Protection Bureau's (CFPB) announcement regarding its proposal to reconsider the Payday, Vehicle Title, and Other High-Cost Installment Loans Rule, and to delay the compliance date for the mandatory underwriting provisions contained in the existing rule.

"We applaud Director Kraninger and the CFPB for their thoughtful proposal to reconsider the SmallDollar Loan Rule," said FiSCA Executive Director Ed D'Alessio. "We are encouraged by the depth of analysis undertaken by the Bureau with respect to several of the deeply flawed and unsubstantiated conclusions that supported the original rule. It is our hope that the proposal to reconsider announced today will preserve access to credit for the millions of Americans who utilize small dollar loan products. We want to be clear that our industry never advocated for an environment without regulations, rather, we support an environment in which consumers can continue to access responsible credit products through regulated lenders."

"Additionally, we are heartened by the Bureau's announcement that it is proposing an extension of the compliance date for those provisions of the rule under reconsideration until November of 2020. A reasonable extension will give businesses sufficient time to implement compliance systems while providing the certainty the market desperately needs. We also look forward to and appreciate the opportunity to participate in the public comment collection period," D'Alessio continued.

"Today's announcement moves toward ensuring that our part of the financial services industry will operate on a level playing field with other providers. In turn, we can continue to employ tens of thousands of people, improve our store locations, and develop the innovative products and services our customers deserve," D'Alessio concluded.
The Financial Service Centers of America (FiSCA) 

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Consumer Financial Protection Bureau Semi-Annual Report Fall 2018

The Bureau of Consumer Financial Protection is pleased to present our Semi-Annual Report to Congress for the period beginning April 1, 2018 and ending September 30, 2018.

I am pleased to present the Consumer Financial Protection Bureau's Semi-Annual report to Congress for April 1, 2018 to September 30, 2018. This is the first Semi-Annual report published by the Bureau under my term as CFPB Director, which started in mid-December.
This report describes issues facing consumers, actions undertaken by the CFPB to protect them, and what the Bureau is doing internally to help it do its job better. While this reporting period took place before I started as Director, the activities described provide a backdrop and a launching pad for a fresh start at this agency.

Read the REPORT

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CFPB Could Be Prepped for Wrong Payday Fight

Lenders unhappy about the Consumer Financial Protection Bureau's watered down payday lending rule could prove a bigger threat to the agency's plans than consumer groups and state attorneys general.

Democratic state attorneys general and consumer groups have long discussed potential lawsuits if the original 2017 payday lending regulation is weakened, but are likely to have difficulty proving they have standing to sue.

The CFPB may actually be more vulnerable to a challenge from the payday industry, which is displeased with the CFPB's proposal to keep intact restrictions on access to consumers' bank accounts. Lenders may have both the incentive and standing to sue.

"They're gearing up for a consumer challenge. I think they probably don't believe that there would be an industry challenge," Alan Kaplinsky, the co-head of Ballard Spahr LLP's consumer financial services group, said in a Feb. 11 phone interview.

Rollback Anger
Consumer advocates and Democratic state attorneys general shredded the CFPB's Feb. 6 proposed rule because it removed ability-to-repay provisions that were the 2017 regulation's central tool.

The provisions would require payday, auto title and certain installment lenders to determine whether consumers could afford the short-term, high-interest credit, and put in place restrictions on the number of consecutive loans consumers could take out.
Read more at BLOOMBERG LAW

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Why are so many of us living paycheck to paycheck?

If the economy is so great and unemployment is so low, why do so many Americans live paycheck to paycheck? And why don't we seem to care?

Survey Suggests Economic Overconfidence
If the economy is so great and unemployment is so low, why do so many Americans live paycheck to paycheck? And why don't we seem to care?

The February Financial Invisibles Report attempts to answer these questions, noting, "For three consecutive quarters, consumers have been optimistic about their financial futures even while slipping further into debt."

Results from the corresponding Q3 2018 survey suggest that we're relying too much on credit giving us false confidence in our financial outlook.

Overconfidence Rules
According to the survey, 38.8% of Americans thought they were in better financial standing compared to a year ago, with 43.3% saying they were in about the same financial shape similar numbers to the first two quarters of 2018.

Meanwhile, delinquencies are on the rise. In Q3 2018, the number of consumers who missed a payment rose by one-third over the previous quarter, reaching 41.2% of respondents. Most delinquent consumers (36.3% of respondents) were far enough behind to have been contacted by a creditor. Read more at NBC 2

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A growing number of Americans have more credit-card debt than savings

The economy may be better, and unemployment may be lower. But that doesn't mean American consumers are doing any better with their debts.

That's according to a new survey of 1,000 people from the personal-finance company Bankrate. It found that 29% of Americans have more credit-card debt than they do emergency savings. And the problem is getting worse.

In 2018, 21% said they had more credit-card debt than emergency savings. And in 2015, 22% said they had more credit-card debt.

So what gives?

This disturbing trend is "evidence of a lot of the strain households are under," said Greg McBride, the chief financial analyst at Bankrate. Some 41.2% of households carry credit-card debt and the average amount is $5,700, according to personal-finance website ValuePenguin.

Hourly pay is rising, now climbing at a 3% rate, after years of growing at just 2% or even smaller. But the cost of living is also going up. When adjusted for that, "real" wages actually have declined 1.3% since the end of 2017, according to a report from the salary comparison site PayScale.
Read more at MARKETWATCH

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Online Lenders Alliance (OLA) Statement on CFPB Small Dollar Rule

WASHINGTON, DC - February 7, 2019 - Mary Jackson, CEO of the Online Lenders Alliance (OLA) released the following statement in response to the Consumer Financial Bureau's (CFPB) plans to revisit parts of the Small Dollar Rule.

"We support a well-regulated market, based on fact and industry reality, and we support CFPB and other regulators efforts to drive out bad actors and protect consumers. However, the recently published CFPB proposals to fix the problem with its previously issued small dollar lending rule is about more than just payday loans. It is about the fintech industry's ability to help provide access to credit for the millions of American borrowers who are often locked out of credit from traditional financial institutions. We know this because our diverse membership includes not only lenders, but also alternative credit bureaus, lead generators and software developers - the entire fintech community."

"For online lenders today, ability to repay standards are in use and are fundamental to successful lending. OLA members have led the industry in new innovations that balance ability to repay underwriting standards with the convenience and access consumers expect. After all, lenders know best that if borrowers don't repay loans, lenders go out of business. Today, our members offer a host of tailored credit products to meet a wide range of consumers' personal financial situations. The vibrant growth in non-bank lending and fintech companies demonstrates our success in delivering good customer experience and sustainable business models."
Read more at Online Lenders Alliance

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Record 7 million Americans are 3 months behind on car payments, a red flag for economy

A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis era.

Economists warn this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.

"The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market," economists at the New York Fed wrote in a blog post.

A car loan is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails. When car loan delinquencies rise, it is a sign of significant duress among low-income and working-class Americans.

"Your car loan is your No. 1 priority in terms of payment," said Michael Taiano, a senior director at Fitch Ratings. "If you don't have a car, you can't get back and forth to work in a lot of areas of the country. A car is usually a higher priority payment than a home mortgage or rent."

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