July 10, 2018

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CFPB's Payday Rule Should Be Repealed. by Jeff Joseph, an adjunct professor at George Washington University and George Mason University

The Consumer Financial Protection Bureau's "payday rule" is on the chopping block.

Mick Mulvaney's CFPB recently voiced support for a motion to reconsider the mandate, bringing it one step closer to repeal. His agency described the payday rule as "arbitrary and capricious."

Consumers everywhere can rejoice. The payday rule not only undermined short-term lenders, but it also erected barriers to capital for low-income Americans, who rely on payday loans to pay a month's rent, cover health care costs, and manage other recurring expenses.

To understand why, it's important to understand the payday rule's origin. That story begins in 2016, when then-CFPB director Richard Cordray first issued a mandate to regulate short-term lenders and rein in, according to the agency, interest rates of 300 percent or higher.

In Cordray's words, "The CFPB's new rule puts a stop to the payday debt traps that have plagued communities across the country."

In reality, the average two-week payday loan of $100 comes with a $15 fee, which Cordray's CFPB equated with an annual percentage rate of 400 percent. Of course, the $15 fee is standard practice for two reasons: Not only do short-term loans provide credit with a quicker turnaround than other loan options, but the borrowers often have risky credit histories.

Short-term lenders tend to service low-income communities, which saddle them with more financial unpredictability. As a lender, should you treat C-suite executives and part-time restaurant workers with the same level of scrutiny?

The CFPB's "debt trap" narrative could use some scrutiny of its own - because it's just not true. A 2009 study from Clemson University found that payday loans do not lead to higher rates of bankruptcy. According to economics professor Michael Maloney, one of the study's co-authors, payday loans actually "appear to increase the welfare of consumers by enabling them to survive unexpected expenses or interruptions in income." He noted that only two percent of payday borrowers file for bankruptcy. Read more at THE WESTERN JOURNAL

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OHIO: Payday lending bill set for rare Senate summer hearing. by Owen Daugherty / The Columbus Dispatch

The Ohio Senate is set to hear - and possibly revise - the once stalled payday lending bill next week.

The Senate Finance Committee will discuss the bill Monday and possibly hold a floor vote Tuesday in an unusual mid-summer legislative session.

Senate Republicans have been working extensively with The Pew Charitable Trusts to add consumer protection provisions to the controversial bill, said John Fortney, spokesman for Ohio Senate President Larry Obhof, R-Medina.

The bill as passed by the House would cap rates at 28 percent annual interest plus a maximum fee of $20 per month along with prohibiting loan payments larger than 5 percent of a borrower's monthly income. Additionally, the bill would cap total interest and fees at 50 percent of the loan amount, meaning a payday lender could make $250 off a $500 loan.

Introduced in March of 2017, House Bill 123 sat dormant for about a year before picking up steam following the resignation of Cliff Rosenberger, R-Clarksville, as House speaker. He quit amid reports that the FBI was investigating international travel that was paid for in part by lobbyists for the payday loan industry.

After sailing through the House in early June once speaker Ryan Smith, R-Bidwell took over, the bill seemed poised for a Senate vote before summer break. But it was put on hold, with Obhof hinting it could come back up over the summer if the committee could come to an agreement on the language. Read more at RECORD-COURIER

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CFPB Official Who Challenged Mulvaney's Leadership Stepping Down

Leandra English is giving up her fight to run the Consumer Financial Protection Bureau.

English, who Democratic lawmakers have claimed for months is the rightful leader of the regulator, plans to step down next week and drop her lawsuit challenging the Trump administration's November decision to name Mick Mulvaney the CFPB's acting director, her lawyer said in a Friday statement.

She decided to resign in light of President Donald Trump's decision to nominate administration budget official Kathy Kraninger as the controversial agency's permanent leader.

English became ensnared in a legal and political firestorm last year when the CFPB's outgoing director Richard Cordray tried to put her in charge as he stepped down to run for governor of Ohio as a Democrat. The Trump administration balked, arguing that it had legal authority to install a temporary director, and the president appointed Office of Management and Budget Director Mulvaney atop the CFPB.

A federal court sided with the Trump administration last year, a ruling that English later appealed. Her lawyer said that she intends to file court papers formally on Monday to bring that litigation to a close. Read more at BLOOMBERG
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Mick Mulvaney turned the CFPB from a forceful consumer watchdog into a do-nothing government cog

Until last Thanksgiving, the Consumer Financial Protection Bureau was known for forcefully pursuing its core mission, returning nearly US$12 billion to about 30 million consumers who had been taken advantage of by financial institutions.

But since then, the bureau has been known for ... well, not much. After Obama-appointee Richard Cordray stepped down, President Donald Trump named as interim director, his budget chief Mick Mulvaney, who has long been a foe of the CFPB.

The president recently nominated a new permanent director - who has no consumer finance experience but is one of Mulvaney's own deputies at the Office of Budget and Management - for a five-year term, with hearings likely to take place later this year.

So what does this mean for the only government agency focused on protecting consumers from financial shenanigans? I've been writing about consumer law for more than 30 years and follow the work of the CFPB closely. Let me explain what it used to do, what it's doing now and what the change means for consumers. Read more at BUSINESS INSIDER

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Robocalls hit an all-time high in May

As the calls continue to mount, the FCC ups its efforts to crack down on the nuisance

Robocalls shattered a U.S. record in May, with more than 4 billion calls placed -- a 40 percent increase since January. Over a quarter of those calls were scams.

According to robocall-blocking software developer YouMail and its Robocall Index, the first place trophy for most scam calls placed goes to the Interest Rate Scam, a swindle that offers zero-percent interest rates to trusting consumers in exchange for their personal financial details.

Now, with summer vacations and the upcoming school year being top-of-mind, there are new scams lurking. Those include the Student Loan Scam which guarantees student loan forgiveness to hopeful graduates, and the Travel Scam, which offers free trips to naive vacationers. Travel scams are the robocall du jour, increasing 162 percent in the last two months alone.

"Despite the best efforts of regulators, industry groups, service providers, and app developers to stop scam robocalls, we are warning consumers to remain vigilant by not picking up any calls from unfamiliar numbers, using robocall blocking apps, and researching numbers before calling them back," commented YouMail CEO Alex Quilici to ConsumerAffairs.

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NEW YORK: Manhattan U.S. Attorney Announces Settlements With Two Native American Tribes Involved In Scott Tucker's Payday Lending Scheme;
Also Announces That More Than $500 Million In Forfeited Funds Will Be Returned To Victims Of The Scheme

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced non-prosecution agreements (the "Agreements") with tribal corporations controlled by two Native American tribes: the Modoc Tribe of Oklahoma and the Santee Sioux Tribe of Nebraska. As part of the Agreements, the tribal corporations agreed to forfeit, collectively, $3 million in proceeds from the illegal payday lending enterprise owned and operated by Scott Tucker. As part of the Agreements, the tribal corporations acknowledged, among other things, that Tucker used his agreements with the tribal corporations to evade state usury laws and that representatives of the tribes filed affidavits containing false statements in state enforcement actions against parts of Tucker's payday lending enterprise.

Mr. Berman also announced that monies forfeited to the Office in connection with its investigation of Tucker's scheme, including monies recovered as part of the Agreements, will be remitted to the Federal Trade Commission ("FTC") for distribution to victims of the payday lending scheme. In total, the U.S. Attorney's Office expects to remit in excess of $500 million to the FTC for victims.

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COLORADO: Colorado Attorney General Cynthia Coffman Leads Bi-Partisan Effort to Preserve States' Authority to Fight Abusive Lending Practices

DENVER - Colorado Attorney General Cynthia H. Coffman and Massachusetts Attorney General Maura Healey are leading a bi-partisan effort urging U.S. Congressional leadership to vote against HR 3299 ("Protecting Consumers' Access to Credit Act of 2017") and HR 4439 ("Modernizing Credit Opportunities Act"). The coalition of 20 attorneys general sent a letter to leadership in the U.S. Senate expressing their opposition to the proposed legislation which would invalidate the States' ability to limit interest rates on payday and other high interest loans and undermine the State's ability to enforce consumer protection laws.

"Colorado has long exercised its sovereign right to protect consumers from abuse by limiting the interest rates that lenders can charge on consumer loans," said Attorney General Coffman. "While state interest rate limits are preempted by federal law for some bank loans, the pending bills seek to improperly expand that preemption to include payday and other non-bank lenders. I join my fellow State Attorneys General in urging Congress against the further restriction of the States' ability to protect their citizens from lending abuses." Read more at COAG.GOV

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Equifax must boost security under agreement with states, including Maine

The stronger measures are intended to prevent data breaches like the one in 2017 that exposed personal information.

Credit reporting firm Equifax Inc. will be required to incorporate stronger data security measures after a breach last year that affected about 147.9 million Americans, according to a consent order reached with the firm and signed by regulators from eight states, including Maine.

In Maine alone, the personal information of more than 524,000 residents was breached.

The agreement specifically mandates that Atlanta-based Equifax increase oversight of the company's information security program and important vendors to "ensure sufficient controls are developed to safeguard information," according to a statement Wednesday from the California Department of Business Oversight.

Equifax also must identify "foreseeable threats and vulnerabilities" in keeping personally identifiable information private, evaluate the likelihood of threats to information security and determine safeguards - all within 90 days of the consent order. Read more at PRESS HERALD


NEW YORK: Governor Directs Department of Financial Services to Issue a Final Regulation Requiring Credit Reporting Agencies to Comply with New York's First-in-the-Nation Cybersecurity Regulation

Regulation Gives New York Oversight of Credit Reporting Agencies for the First Time Ever

Governor Andrew M. Cuomo today announced that the Department of Financial Services has issued a final regulation to protect New Yorkers from the threat of data breaches at credit reporting agencies, such as the Equifax breach that exposed the personal private data of millions of New Yorkers. The new regulation, which incorporates comments received during a public comment period, requires credit reporting agencies with significant operations in New York to register with DFS for the first time and to comply with New York's first-in-the-nation cybersecurity standard. The annual reporting obligation also provides the DFS Superintendent with the authority to deny, suspend and potentially revoke a consumer credit reporting agency's authorization to do business with New York's regulated financial institutions and consumers if the agency is found to be out of compliance with certain prohibited practices, including engaging in unfair, deceptive or predatory practices.

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