ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
October 5, 2021
The Gateway For Payroll Data
Senate confirms Chopra to lead Consumer Financial Protection Bureau (CFPB)

The Senate confirmed Rohit Chopra on Thursday, by a 50-48 party-line vote, to lead the Consumer Financial Protection Bureau (CFPB).

With Chopra’s ascent to the bureau’s top role, lawmakers and analysts expect the regulator to assume a tougher stance on enforcement. During his March confirmation hearing, Chopra vowed stiffer penalties against entities found to commit fraud or misconduct. He also said he'd bring greater focus to fair lending, including investigating potential discrimination by credit decision-making algorithms.

The move marks a return to the CFPB for Chopra, who helped develop the regulator from its 2010 inception, alongside now-Sen. Elizabeth Warren, D-MA. He worked as the regulator’s first student-loan ombudsman until 2015. Chopra has served since 2018 as a commissioner with the Federal Trade Commission (FTC), where he regularly pushed the panel to take bolder action to curb “endless scandals involving large technology firms."

Paving the Payments Future
CFPB Report Finds Declines in Credit Card Debt, New Applications and Increases in Digital Engagement in 2020

As Public and Private Relief Ends, Consumer Credit Card Use Trends in 2020 began to Return to Pre-Pandemic Levels

WASHINGTON, D.C. – The Consumer Financial Protection Bureau released its fifth biennial report to Congress today on the consumer credit card market, finding that the market’s growth over the last few years reversed course in 2020. In reviewing the market for potential consumer harm, the report presents the latest research on consumer card use, cost, and availability. From a 2019 peak of $926 billion, credit card debt fell to $811 billion by the second quarter of 2020, the largest six-month decline on record, before reaching $825 billion by the end of the year.

“While public and private programs helped consumers bring down their credit card debt during the pandemic, we at the CFPB will be watching to make sure families and individuals still struggling get the assistance they need,” said Dave Uejio, the Acting CFPB Director. “Across the credit card market, consumers sought and used less credit, paid down debt, and dropped late payment rates to historic lows. As pandemic relief efforts end, the CFPB will be using all our tools to support an equitable recovery.”

Since the passage of the Dodd-Frank Act in 2010, and pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009, the CFPB has submitted a report to Congress every two years on the state of the consumer credit card market. The report released today highlights several indicators related to consumer credit card activity during the pandemic, including:

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Washington Supreme Court unanimously OKs tax on big banks

SEATTLE (AP) — The Washington Supreme Court on Thursday unanimously upheld a new tax on big banks aimed at providing essential services and improving the state’s regressive tax system.

The 1.2% business and occupation surtax — a tax added on top of other taxes — was passed by the Legislature in 2019. It applies to banks that make more than $1 billion in annual profits, but it is assessed only on their economic activity in Washington.

The banking industry sued, saying the tax discriminated against banks engaged in interstate commerce, in violation of the U.S. Constitution, which gives Congress the right to regulate trade among the states.

The justices ruled that the tax does not discriminate against out-of-state banks.

“It applies equally to all financial institutions meeting the $1 billion income threshold, irrespective of whether they are based inside or outside of Washington,” Justice Barbara Madsen wrote.

The ruling overturned a decision last year by King County Superior Court Judge Marshall Ferguson, who found that the tax did have a discriminatory effect.

Child Tax Credit Update Portal: The IRS upgraded the Child Tax Credit Update Portal to enable families to update their bank account information so they can receive their monthly Child Tax Credit payment.

Tax relief for employer leave-based donation programs due to COVID-19 pandemic: The IRS extended the tax relief provided in Notice 2020-46 for calendar year 2021 for employers whose employees forgo sick, vacation or personal leave because of the COVID-19 pandemic.
4 credit unions launch neobank aimed at LMI users

Four regional credit unions are cooperating to launch a neobank that caters to low-to-moderate-income (LMI) customers and aims to reduce racial and economic disparities in the financial services sector, according to a Tuesday press release.

"The credit union movement is really made for offering products at scale that are safe and affordable for [LMI users]," said Kristi Kenworthy, the managing director of Bank Dora Financial, the challenger bank founded by Minnesota-based Affinity Plus Federal Credit Union, Massachusetts-based Digital Federal Credit Union, New Hampshire-based Service Credit Union and USALLIANCE Financial of Rye, New York.

The launch comes as the number of monthly active neobank users has doubled between June 2019 and June 2021, The Economist found, citing data from Apptopia.

Congress Proposes Consumer Protection Whistleblower Reward Program

Senator Catherine Cortez Masto recently introduced the Financial Compensation for Consumer Financial Protection Bureau (CFPB) Whistleblowers Act, which would require the Consumer Financial Protection Bureau to provide rewards to whistleblowers who report original information relating to a violation of consumer financial law resulting in monetary sanctions exceeding $1 million. Awards would range from 10% to 30% of the collected monetary sanctions, and in cases where the CFPB is unable to collect at least $1 million of the imposed sanctions, the CFPB would award a whistleblower 10% of the amount collected or $50,000, whichever is greater.

The bill is cosponsored by Chairman of the Senate Banking, Housing, and Urban Affairs Committee Senator Sherrod Brown (D-Ohio) and Senators Dick Durbin (D-Ill.), Elizabeth Warren (D-Mass.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), and Tina Smith (D-Minn.).

Putting people over profits in the financial services industry

Have you ever heard the phrase “people over profits?” This phrase embodies the mission of credit unions, like KEMBA Financial Credit Union, and defines a fundamental distinction in business philosophy between banks and credit unions.

Most banks answer to stockholders and their focus on profits, whereas credit unions answer to their members, who are also their owners as represented by a volunteer board of directors. This crucial difference in business philosophy is especially important during times of crisis, like we’ve experienced over the past 18 months under COVID-19 and the ensuing economic uncertainty for both individuals and businesses, big and small.

Credit unions, like KEMBA, are not-for-profit financial cooperatives that provide the same services as traditional banks, including commercial banking opportunities, but with a different mindset – people helping people; for example, helping members thrive financially and uncovering ways to support their communities regardless of circumstances. This phil sophy applies to both retail and business members.

CFPB files opposition to trade groups’ motion to extend stay of payment provisions compliance date until appeal resolved; trade groups file response. Ballard Spahr LLP

The CFPB has filed its opposition to the motion of the two trade groups challenging the payment provisions in the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule) that asks the court to extend its stay of the compliance date until 286 days after their appeal to the Fifth Circuit is resolved. The trade groups have appealed from the Texas federal district court’s final judgment granting the CFPB’s summary judgment motion and staying the compliance date for the payment provisions until 286 days after August 31, 2021.

In its opposition, the CFPB asserts that the trade groups’ have not established a likelihood of success or substantial case on the merits of their claim that the 2017 Rule was rendered void by the invalid Dodd-Frank Act provision restricting the President’s removal of the CFPB Director. In addition, the CFPB argues that the balance of equities weighs against extending the stay. According to the CFPB, the trade groups have not shown irreparable harm that would justify an extension of the stay because the payment provisions “impose only modest requirements on lenders” and they “have never established that their compliance costs would be significant.”

Why becoming a bank is paying off for LendingClub

With its 2020 deal to acquire Radius Bank, LendingClub gained a banking charter — and also a means to cut costs, grow revenue and position itself to offer tailored products.

LendingClub’s acquisition of Radius Bank — a $185 million transaction that closed in February — ensures a sustainable revenue model and positions the company to offer personalized products for its 3 million-strong customer base, CEO Scott Sanborn told Banking Dive.

Becoming a bank cuts down on “value leaving the building” by eliminating the need to share revenue with partner institutions, and through a cheaper cost of funds, he said. It also opens up new revenue streams, including interest income.

LendingClub delivered 93% sequential revenue growth in the second quarter, according to a July earnings report, due partly to the cost efficiencies it realized by bringing Radius Bank under its umbrella. 

Survey: 75% of Retirees Are Not Leaving a Nest Egg, Would Rather Spend Golden Years ‘Living It Up’

COVID-19 caused more baby boomers to retire in 2020 than in any other year, and while traditionally retirees make more frugal spending decisions to leave a financial legacy for their family, this generation is ready to spend their days living it up, according to a new survey.

According to a recent survey from Coventry, more than 75% of over 1,500 respondents are ditching the idea of leaving a nest egg for their family and plan to spend the remainder of their lifetime — and money — making memories, citing a dramatic shift in prioritization from material things to experiences.

Peter Hershon, SVP of Account Services at Coventry, told GOBankingRates that the challenges of COVID-19 put into perspective what is most important to baby boomers. “During the pandemic, seniors were at the highest health risk, more likely to be socially isolated and may have missed out on quality time with loved ones,” he stated. “Looking ahead, boomers are less focused on leaving a financial inheritance for the next generation — and would rather ensure their legacy by making priceless memories with those loved ones today.”

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
Alternative Financial Service Providers Association
757.737.4088
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