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January 29, 2019
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Shares of subprime lenders rally

(Reuters) - Payday lenders' stocks have emerged as big winners during the record-long U.S. government shutdown, though the updraft could prove short-lived.

Shares of pawn brokers, payday lenders and other subprime consumer finance companies have rallied and outperformed the broader market since Dec 22, when 800,000 federal workers were furloughed or left working without pay.

Pawn broker chains EZCorp and FirstCash have jumped over 18 percent since that date, with no resolution in sight over congressional Democrats refusal to approve Republican President Donald Trump's demand for $5.7 billion in partial funding for a wall along the U.S.-Mexico border.

Companies that provide payday loans and other kinds of subprime consumer credit have also rallied. Enova International, Curo Group Holding and OneMain Holdings have each surged 23 percent.
Read more at YAHOO FINANCE

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One study, two vastly different visions for CFPB payday rules

When Columbia University law professor Ronald Mann undertook a survey of 1,000 payday loan customers to determine if they could estimate how long it would take to repay a loan, little did he know that the resulting study would become a lightning rod in the drafting of the first federal regulation for small-dollar lenders.

The Consumer Financial Protection Bureau's prior leadership cited Mann's research over 30 times in an existing rule meant to impose strict underwriting requirements for payday loans.

But signs now point to Trump-appointed CFPB Director Kathy Kraninger employing the very same study in a highly anticipated revamp of that rule, which is expected to scrap the ability-to-repay requirement in what would be a huge win for the industry.

"Mann's study will probably be a centerpiece of whatever new rule comes out revoking the old rule," said Casey Jennings, an attorney at Seward & Kissel and a former attorney at the CFPB's Office of Regulations, who worked on the original 2017 regulation.

Mann's study - funded by a payday loan trade group - focused on whether borrowers could accurately predict when they could repay a loan. The research, conducted in 2012, has sparked contentious debate because it appeared to provide evidence both that underwriting standards were often not necessary, and that in certain cases they were.

"The relevant policy question is whether borrowers, deciding to start borrowing from a payday lender, understand what will happen to them," said Mann in an interview.

The study: "Assessing the Optimism of Payday Loan Borrowers"
Ronald J. Mann, Columbia University - Law School

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CFPB Announces Changes to Senior Leadership

Washington, D.C. - Consumer Financial Protection Bureau Director Kathleen L. Kraninger today announced leadership changes within the Bureau. The positions being announced today are:

Policy Associate Director for External Affairs; West Regional Director; Acting Chief Communications Officer; Deputy Associate Director for External Affairs; and the Director for the Office of Minority and Women Inclusion.

The following individuals were announced today as joining the CFPB leadership team:

Andrew Duke will serve as the Policy Associate Director for External Affairs. Mr. Duke has 27 years of experience in public policy, including 20 years on Capitol Hill serving with three different members of Congress. He received his B.A. in Economics from Hampden-Sydney College.

Laura Fiene will serve as West Regional Director. Ms. Fiene joined the CFPB at its inception in 2011. She brings over 31 continuous years of experience in regulating financial services companies, including 27 years dedicated to supervising and examining compliance with federal consumer financial laws and regulations. She graduated from Southern Illinois University. She holds an MBA from Golden Gate University and a J.D. from the University of Texas at Austin.
Read more at Consumer Financial Protection Bureau

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The American Dream: Does Your Zip Code Determine Your Destiny? Episode 46 PEW

Stat: 50%. The percentage of American children today who will grow up to earn more than their parents did.

Story: That's down from over 90 percent for children born in the 1940s and its says a lot about the current state of the American Dream. John Friedman, who's a leader of Opportunity Insights which is working to help people get out of poverty, says the opportunity to move up the economic ladder depends a lot on where you live and even who your kindergarten teacher was. He speaks with host Dan LeDuc about what factors can improve kids' chances of success.
Listen at Pew Charitable Trusts

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NAFCU elevates Credit Union issues at CFPB roundtable with Kraninger

NAFCU on Thursday elevated several credit union issues - including payday alternative loans, data collection related to the Home Mortgage Disclosure Act (HMDA) and small business lending, and remittances - to Bureau of Consumer Financial Protection Director Kathy Kraninger during a financial services industry roundtable. NAFCU has shared credit unions' concerns and priorities with Kraninger since she was confirmed as director in December.

NAFCU President and CEO Dan Berger and Executive Vice President of Government Affairs and General Counsel Carrie Hunt attended the meeting.

Following Kraninger's confirmation, NAFCU hand delivered a letter with bureau-specific priorities, including the need for:
the bureau to use its exemption authority to excuse credit unions from certain rulemakings;
"clear, transparent guidance" from the bureau on its expectations for credit unions under the unfair, deceptive, or abusive acts and practices (UDAAP) law; Read more at NAFCU.ORG

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Furloughed workers faced an all-too-common problem for many Americans-living paycheck to paycheck

A government job with its steady paycheck is supposed to be a ticket to the middle class. Yet 800,000 government workers just missed their first paycheck this weekend. During the last shutdown, two-thirds of government workers lacked savings to cover one pay period (two weeks) and this one is dragging on much longer. These workers are now entering a reality that has been increasingly affecting middle class families across America: severe income volatility.

Furloughed workers have already started taking steps all too common to families living paycheck to paycheck: curtailing spending, increasing credit card debt, delaying paying bills, and seeking short-term, small dollar credit. As these federal workers curtail spending-others are also impacted. Waiters are confronted with empty tables, taxi drivers with no fares, and service providers with skipped appointments-all seeing their wages fall unexpectedly. As the shutdown dominoes continue to fall, these negative volatility shocks spread.

Financial institutions are surprisingly ill equipped with reasonable products to help families handle short-term small-dollar credit needs. Families who overspend on their debit card are hit with a $35 overdraft fee-and this adds up. Americans overdraft to the tune of $24 billion a year. And those that need just a few hundred dollars to make it until the shutdown ends, will find that it can be more difficult to borrow $1000 to bridge this gap than it is to borrow $20,000 for a car. As a result, like 2.5 million households last year, they may choose to use a payday loan, often paying interest rates of 300-400 percent. Remember that everyone who uses a payday loan has a bank account, as a postdated check is collateral for the loan. Read more at BROOKINGS

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Advance Financial Wins Two Awards

NASHVILLE, TN - Nashville-based fintech company Advance Financial announced today that it received two silver One Planet Awards, one for Fastest Growing Company of the Year and the other for Corporate Milestone of the Year.

The coveted One Planet Awards honor best in business and professional excellence in every industry. Organizations from all over the world are eligible to submit nominations including public and private, for-profit and nonprofit, largest to smallest and new start-ups.

Advance Financial has seen exponential growth over the past year, opening its 100th store location and expanding its online presence to 11 states in 2018. Along with that, the company hired its 1,000th employee - two huge milestones in the company's 22 years of business.

"It's an honor to be named a winner by the One Planet Awards for our significant growth over the past few years," said Tina Hodges, chief executive and chief experience officer for Advance Financial. "These awards are a testament to our commitment to providing unmatched customer service and financial support to more communities throughout the state of Tennessee and beyond."

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Tax season opens: You can file your federal taxes starting yesterday

The Internal Revenue Service is ready to accept your federal tax returns starting Monday, Jan. 28.

You can file for free electronically through the IRS website or download paper forms. Tax preparation companies such as TurboTax and H&R Block are also filing tax returns to the IRS on behalf of their customers beginning Monday.

The agency recalled all its employees after the government reopened on Friday.

This tax-filing season marks the first since the new tax law that passed in December 2017. The most significant changes are the increased standard deduction, the doubling of the child tax credit and the $10,000 cap on the state and local tax deduction.

The government shutdown, the longest-ever at 35 days, also had raised questions about the agency's operations during tax season. To deal with the lapse in needed funding, the IRS had planned to limit telephone service and shutter taxpayer assistance centers where walk-ins could get in-person help with their taxes. Read more at USA TODAY

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Unbanked Population Exploited by Fees, But Technology Can Provide an Answer

According to a recent survey, 46% of Americans are not worried about having cash in their wallet because they prefer other forms of payment. A little more than half of Americans (53%) claim they try to have cash on hand just in case, which continues to fall year after year. The numbers for young adults, not surprisingly, is even less. This trend is likely to mean more and more vendors will minimize options to pay in cash and will encourage consumers to pay through other methods. In fact, 30% of adults, according to Pew Research, make no cash purchases at all in a given week.

Why does this matter? It may not for most of the population, but it does bring up a social issue for the unbanked population. Vivi Holdings announced results of a survey they commissioned from Pew Research that polled the unbanked population. The contrast between the wider population and the unbanked is dramatic as they are heavily reliant on cashing paychecks and thus paying by cash.

The survey polled 250 people without bank accounts, and 41.8% still receive their income by paper check or money order. They are heavily reliant on cash checking stores and other places such as grocery stores that have a similar service. The effect it has as these services grow in cost is like an involuntary lottery in that it is essentially a financial burden on the people that cannot afford it. More than half the people surveyed, according to Vivi Holdings, stated that more than half of the unbanked "spend between $20 and $40 when cashing a check." That can mean several hundred dollars of an already below poverty line salary per month goes to these vendors.

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High Percentage Of Caregivers Are Unbanked

A large percentage of caregivers do not have checking accounts. This presents a challenge to those in the financial services community who want to reach this population group.

LIMRA conducted a series of studies of the 43 million working-age Americans who serve as unpaid family caregivers. Although so much of the financial services industry has focused its attention on those who need care, the population segment that provides care has its own set of needs.

The second in this series of three studies looks at the savings needs of caregivers.

One finding that jumped out is that caregivers are significantly less likely than those in the general population to own bank accounts. One in five caregivers - an estimated 15 million people - is "unbanked," meaning they do not have a savings or checking account at an insured banking institution. This compares to 6.5 percent of American households who do not have a bank account.

The seeming reluctance to use a traditional bank sends a message to financial marketers, said James Scanlon, LIMRA senior research director. Read more at INSURANCE NEWS NET

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Many women are afraid to tell the boss they're pregnant. And they may have reason to worry

When it comes to the workplace, many working moms still believe they're overlooked and left behind.

Issues of gender equity have become top of mind in the wake of the #MeToo movement which focused a spotlight on sexual harassment at work. But 78 percent of working moms think they must prove their mettle more than their colleagues to climb the corporate ladder, according to a new study commissioned by Bright Horizons, a provider of child care and other employer-sponsored services.

Twenty-one percent say they would be worried to tell their boss they are expecting a child - nearly twice the number who were similarly concerned five years ago.

"I think we keep believing that these things have evolved,'' says Maribeth Bearfield, chief human resources officer for Bright Horizons. But "there are still women in the workplace who feel they're being disadvantaged on things like pay (and) career opportunities. ...You hear 'She's got children; she may not be able to work on the project as much.' 'Do we want her traveling?' Conversations that shouldn't take place, but they do.''

A sizable number of workers - 41 percent - believe working mothers are less dedicated to their jobs, and 38 percent frown on their needing more flexible hours, the report found.

Meanwhile, working dads get more latitude. Among those surveyed, 75 percent thought working fathers were more devoted to their professions than their female counterparts.
Read more at USA TODAY

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

Taxes 2019: When to file and what big changes to expect

Sitting down to do your taxes in the next few weeks - or talking with your tax preparer - will involve tackling the most sweeping changes in the federal income tax rules in more than 30 years.

You'll need to keep in mind that more than 600 rule changes took place under the Tax Cuts and Jobs Act, which was passed by Congress in late 2017.

All those changes even drove some industry experts to raise concern early on about possible delays to the typical, late January start of the tax season - and that was long before the federal government shutdown hit on Dec. 22.

Even so, the Internal Revenue Service promises to kick off tax season as of Jan. 28, the earliest date you can file your returns.

Will things end up being simpler? Maybe - if you're able to tap into a substantially expanded standard deduction and you no longer must string together all sorts of receipts and paperwork to itemize deductions. Read more at YAHOO FINANCE

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Federal Reserve to re-examine U.S. bank stress tests at July conference

WASHINGTON, Jan 28 (Reuters) - The Federal Reserve announced on Monday it would hold a conference in July to discuss the effectiveness of its stress tests for large banks, as the U.S. central bank considers changes to the critical post-financial crisis tool.

The conference, to be held July 9 at the Federal Reserve Bank of Boston, will focus on the "transparency and effectiveness" of the regular tests of bank books. Top Fed officials have said they are considering changes to the test, which has faced consistent criticism from banks that it is overly complicated and opaque.

"This outreach effort will help the public better understand how stress tests work and will help us learn how we can improve and refine the program," said Randal Quarles, the Fed's vice chair for supervision. Read more at REUTERS

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