December 11, 2018
2018 edition: 98 / 104
Dreher Tomkies LLP

Senate confirms Trump nominee Kathy Kraninger to lead CFPB

The Senate narrowly confirmed Kathy Kraninger for a five-year term as the head of the CFPB, putting her in charge of an Obama-era agency that became a lightning rod for Republican attacks over its aggressive enforcement.

Kraninger, nominated by President Donald Trump in June, was approved on a party-line 50-49 vote.

The relatively unknown White House budget official, whose scant record on consumer finance and banking issues has confounded Democratic critics, will assume control of a regulator that looks markedly different from the one CFPB Acting Director Mick Mulvaney took over in November 2017.

Mulvaney muffled the agency, a Democratic favorite, during his tumultuous year-long tenure - freezing data collection for six months, dramatically reining in enforcement actions, reorganizing the student loan and fair lending offices, and installing political appointees to run the consumer bureau's day- to-day operations.

Sen. Elizabeth Warren (D-Mass.) - who is credited with conceiving of the post-financial-crisis agency and helping set it up during the Obama administration - led the opposition among Democrats to the appointment. She warned colleagues before the vote that confirming Kraninger amounted to "a vote to defang the consumer watchdog that returned nearly $12 billion to consumers before Mr. Mulvaney assumed control." Read more at POLITICO

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Five Priorities for New CFPB Director

This Thursday, December 6, Kathleen Kraninger was confirmed as director of the Bureau of Consumer Financial Protection by a slim margin of 50-49. Previously a mid-level manager at the Office of Management and Budget (OMB), Kraninger's confirmation elevates her to one of the most commanding bureaucratic positions in Washington, overseeing an abnormally powerful and aggressive regulator. Not only does the Bureau have the authority to regulate nearly every consumer financial product in the economy, but the director has enormous unilateral power and discretion in writing and enforcing those rules.

In her confirmation hearing, Kraninger assured the Senate Banking Committee that she would continue the work of her former boss at OMB, Mick Mulvaney, who has also overseen the Bureau as acting director this past year. She has promised to implement a free market reform agenda, focusing on greater competition and lighter-touch enforcement actions. To provide some guidance on how Kraninger, as director, can go about achieving this, I have outlined five reform priorities for the Bureau (in no particular order):

1. Rewrite the Payday Loan Rule. Perhaps the most pressing issue for the new Bureau chief is in how to go about rewriting a recently finalized rule governing Payday, Vehicle Title, and Certain High-Cost Installment Loans. I have discussed this issue at length recently, both how the Bureau can rewrite the rule narrowly or more broadly. Read more at Competitive Enterprise Institute


Payday loan alternative may be a better deal, but has its own risks

Payday loans target consumers with no credit or low credit scores. These high-interest loans promise fast cash until the next paycheck comes in, but oftentimes they create dangerous cycles of new loans to pay off the old ones, draining finances and pushing borrowers ever deeper into poverty.

In 2018, the Federal Trade Commission sued major payday lender AMG Services for deceptive lending that involved illegal withdrawals and charged hidden fees. The $505 million in restitution AMG agreed to is the largest refund the FTC has administered to date, covering an estimated 1.1 million borrowers.

Today, consumers have some protection from this type of predatory lending through the Payday, Vehicle Title, and Certain High-Cost Installment Loans rule from the Consumer Financial Protection Bureau.

But an alternative form of lending, known as installment loans, are quietly emerging as a less-regulated alternative to payday loans.

What are installment loans?
Installment loans are part of a non-bank consumer credit market, meaning they are originated from a consumer finance company instead of a bank. These loans are typically offered to consumers with low incomes and credit scores who can't qualify for credit through traditional banks.
Read more at BANKRATE


FTC Releases FY 2018 National Do Not Call Registry Data Book and Mini Site

Contains updated information on robocall complaints and state-by-state complaint analysis

The Federal Trade Commission today issued the National Do Not Call Registry Data Book for Fiscal Year 2018. The FTC's National Do Not Call (DNC) Registry lets consumers choose not to receive most legal telemarketing calls. The data show that the number of active registrations on the DNC Registry has increased significantly over the past year, while the total number of consumer complaints decreased for the first time in five years.

Now in its tenth year, the Data Book contains a wealth of information about the DNC Registry for FY 2018 (from October 1, 2017 to September 30, 2018). The Data Book provides the most recent information available on robocall complaints, the types of calls consumers reported to the FTC, and a complete state-by-state analysis.

FY 2018 Registration and Complaint Data

According to the Data Book, at the end of FY 2018, the DNC Registry contained 235,302,818 actively registered phone numbers, up from 229,816,164 at the end of FY 2017. The number of consumer complaints about unwanted telemarketing calls significantly decreased, from 7,157,337 in FY 2017 to 5,780,172 in FY 2018. Read more at FEDERAL TRADE COMMISSION


First-party fraud: What it is and how to guard against it. by Philip Burgess

From finding an unusual statistic to buying a one-of-a-kind heirloom or antique, virtually everything is easier to come by in today's instant information era.

But unfortunately, the age of convenience is not without its unfortunate side effects, as fraud has proliferated. In 2016, for instance, 15.4 million Americans were affected by it, based on estimates from Javelin Strategy & Research. The frequency of fraud hasn't subsided despite increased awareness among business owners and consumers, as 50 identity thefts occur every 60 seconds, according to the Identity Theft Resource Center.

There's a particularly pernicious threat that is sapping a tremendous amount of business owners' collective time, money and energy. It's called first-party fraud, and over the past 20 years or so has intensified in scale and scope. But what is first-party fraud? And how can you guard against it? The following is a brief overview of the scheme, how it manifests itself and what you can do to diminish your risk of being victimized.

What is first-party fraud?
First-party fraud is a premeditated scheme whose targets are primarily business owners, rather than customers, as is typically the case for third-party fraud. Otherwise known as "intent not to pay fraud," first-party fraud starts out in ways, not unlike most other transactions, where a customer seeks to buy products or services by way of credit. Typically during the approval stage, everything appears to check out, suggesting applicants are creditworthy because they make payments on time and don't have major outstanding debts. What isn't known to the lender is the applicant has no intention of following through on the amount he or she is borrowing. In other words, they're relying on their trustworthy track record - authentic or synthetic - to fool lenders into believing that they're a safe bet, when in reality they're the antithesis of trustworthy. Read more at MICROBILT


Why Artificial Intelligence and Alternative Data Are the Powerful Combination Financial Organizations Need

The combination of AI + alternative data is critical for addressing some of the most pressing issues facing the industry. In this paper, we're going to examine the benefits of AI and alternative data for lenders today.

  • Growing profits in an increasingly competitive and innovative market;
  • Finding good customers in a consumer market that is likely to experience a correction in the next year;
  • Verifying identities and making profitable lending decisions in real time;
  • Delivering that fast, frictionless digital experiences that younger customers such as Millennials and Generation Z (post-Millennial) consumers expect.


Nobody wants to bank at the post office - not even postal credit unions

A recent report from the Trump administration throwing cold water on the idea of postal banking has an unlikely backer - the National Council of Postal Credit Unions.

The Trump administration Tuesday released a report on reforming the U.S. Postal Service, and it echoed many arguments the banking sector has made against the concept - namely that the USPS is ill-equipped to manage the risks involved.

"Given the USPS's narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued," the report states.

"Any new competition in the financial field is a threat to postal credit unions," said Becca Cuddy, NCPCU board chair and CEO of Signature Federal Credit Union (formerly known as NAPUS FCU). A better strategy, she added, might be for external partners - including possibly banks - to partner with postal CUs or the council "rather than try to reinvent the wheel."

With a dwindling membership base, many postal credit unions are transitioning into community charters because of continued reorganization and downsizing at the Postal Service.

But even as postal CUs seek to broaden their charters or grow their SEGs, further challenges remain - including, noted Cuddy, that many such institutions are located in postal facilities and will "probably be forced to leave" as a result of downsizing. Read more at CREDIT UNION JOURNAL


Cybersecurity: Simple Tips to Protect Yourself

Simply employing the most basic of information security rules will make you and your business more safe and secure.

A few years ago, the world suffered one of the largest cyber-attacks in history. The breaches of Equifax and Target had incredible consequences that we are still feeling to this day. Once this tragedy struck, we all began to understand the importance of cybersecurity.

Major breaches are a cause for concern

Our collective faith in these institutions came to be of ill-fated consequence and distaste. We needed answers as to why our privacy was so swiftly stolen and spread for all hackers to witness. In light of this, the term cybersecurity came to the forefront of our minds as the only solution to an imperceivable problem.

What cybersecurity really means

Cybersecurity, also referred to as information security, is truly the process of double checking every access point on a network to make sure that it is well protected and that whatever damage may occur is mitigated to the fullest extent possible. It is a complex task that is simple in implementation if done well. Read more at SECURITY TODAY

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Critics say cashless retailers penalize the poor

Many businesses are going cashless -- accepting only credit, debit and mobile forms of payment -- to cut costs associated with cash management and to speed transactions. This shift in payments suits the one in four Americans who say they don't carry paper money, but it excludes the unbanked -- would-be customers without checking or savings accounts.

So lawmakers, arguing that cash boycotts are discriminatory, are working to make sure greenbacks remain a viable payment method. That comes as trendy eateries like Dig Inn, Dos Toros Tacqueria and SweetGreen dispense with cash entirely.

New York City Council member Ritchie Torres last week proposed legislation that would require all local businesses to accept cash in addition to credit cards and contactless payment methods. Massachusetts has required since 1978 that no retailer "shall discriminate against a cash buyer by requiring the use of credit." New Jersey lawmakers on Monday advanced a bill to ban cashless stores. Philadelphia and Washington, D.C. have also introduced bills that would require businesses to accept cash.

"There has been a rising tide of cashless businesses, and it occurred to me, what if you're underbanked, as is true of 25 percent of New Yorkers?" Torres told CBS MoneyWatch. "What if you're undocumented, what if you're homeless? Then you have no means of purchasing goods and services in a cashless establishment, and that has an exclusionary effect on vulnerable members of society." Read more at CBS NEWS


From Cash To Real-Time Payments

Forty countries: That's how many places either have real-time payments programs in progress or live. That's progress. Yet, there is more work to be done.

In the latest edition of the PYMNTS DataDrivers podcast, Karen Webster talks with George Evers, senior vice president of real-time product at Vocalink, about the how far real-time payments have already come, and where they are headed. Along the way they dug into important data points that describe not only the current status of real-time payments, but the opportunities that could help spark further growth.

Obviously, when it comes to real-time payments, the "speed at which people get money is an important factor" in the spread and use of those types of transactions, Evers said. But that's not the only benefit associated with real-time payments.

Unbanked Consumers

1.7 billion: That's the number of unbanked adults in the world, most of them living and working and paying bills in developing economies, such as those in certain parts of Africa and Asia. China has the world's largest unbanked population, at 225 million people, followed by India (190 million), Pakistan (100 million) and Indonesia (95 million). Unbanked adults rely on cash, and their financial habits and daily lives are largely defined by the habits centered around the use of cash. They take cash to storefronts to pay bills, for instance, and receive cash - sometimes daily pay - in exchange for their labor. Read more at PYMNTS.COM


Bill protects small business from predatory lenders

Sens. Sherrod Brown (D-OH) and Marco Rubio (R-FL) recently crafted the Small Business Lending Fairness Act, which is designed to shield small businesses from predatory lenders.

The bill seeks to protect small businesses by codifying the Federal Trade Commission's (FTC) 1985 ban on confessions of judgment in consumer loan contracts and extending the ban to include small business borrowers.

"When we let financial predators harm hard-working Americans through scams like confessions of judgment, we undermine the dignity of work that makes this country great," Brown, ranking member of the U.S. Senate Committee on Banking, Housing and Urban Affairs, said. "This bipartisan bill ensures that consumers and small business owners benefit from protections that prevent predatory lenders from stripping away their hard earned money under cover of night."

Confessions of judgment require a borrower to give up rights in court before obtaining a loan and allow the lender to seize the borrower's assets without warning to satisfy the debt. Although many states have banned this practice for small business loans as well as individuals, borrowers are still exposed because the FTC left open a loophole. Read more at Financial Regulation News


The US needs to clean up its monetary excesses and twin deficits

Global talking forums, such as the G-20, show that unhelpful rhetoric and an allegedly obstructionist behavior in official international organizations are not the way to advance America's interests. Those organizations have been built and underwritten by America at some of its finest hours of enlightened world leadership.

Washington neocons, famously seeking a "full-spectrum global dominance," will not be the only people to note, with a tinge of sadness, that a real "program" speech for the G-20 was delivered last Friday at a Buenos Aires summit by Chinese President Xi Jinping. They will also shake their heads in disbelief seeing that the BRICS (Brazil, Russia, India, China and South Africa) summit, on the same day, ripped the West's addiction to indiscriminate sanctions warfare, while urging constructive multilateral relations and a regulatory update of the World Trade Organization.

All that is a world away from the first G-20 summit in Washington, D.C., in November 2008 at the height of the global financial crisis that ushered in the Great Recession.

The U.S. is still nursing the deep wounds of that epochal debacle. Read more at CNBC

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