November 19, 2018
2018 edition: 92 / 104
Because of THANKSGIVING; Newsletters will be
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'The freaks are coming out of the woodwork': Comments of the week

On an argument that the Federal Deposit Insurance Corp. should reconsider its rate cap methodology, which can harm institutions trying to serve the underbanked:
"Stunningly straightforward logic. As a consumer, I shop rates in all 50 states. Today that may not be normal, but it is increasingly becoming normal and for the FDIC to impose 'horse and buggy' thinking on an internet based world is to ensure that things will go off the rails at an inopportune time. FDIC should reform this now so that banks can adjust before this becomes an issue."

On the impact of several moderate Democrats who supported the regulatory relief law getting defeated in the midterms:
"Let's be honest here, the so called moderate Democrats only supported bills that they thought would get them re-elected."

On an argument that Operation Choke Point might be only part of the story for why some banks have severed tied with payday lenders:
"No skepticism needed. Black and white difference in a bank being punished for bad behavior and an entire legal industry being banned from banking services because an unelected regulator does not like the industry. it is not a regulator's decision to make but rather the voters in the states offering the service to, generally, consumers who do not have access to credit from any other legal source. The fees are high--likely too high but they do provide financing to people who need it."

On the Consumer Financial Protection Bureau's efforts to define the term "abusive" after years of enforcing the standard without a strict definition:
"Completely redundant. Since when is a practice 'Abusive' which is not also 'Unfair' or 'Deceptive' or both? Why not Egregious? Why not Fraudulent? Why does congress not fund agencies to enforce existing regulations as opposed to creating redundant agencies with vague mandates and open ended checkbooks? Answer - it gives the appearance of 'doing something'. Perhaps better oversight of existing agencies would have been better for the consumer."

March 18-21, 2019 / DORAL MIAMI
CFSA Conference _ Expo

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This Big Bank Has Joined the Payday Loans Game

The costly short-term loans are being offered by a major financial institution -- which is drawing familiar criticism.

The payday loans industry says its short-term, small-dollar loans serve a need and help tens of millions of cash-strapped customers every year.
But the loans can be costly, so more than a dozen states have banned them, and a few others have restricted payday lending.
Now, at least one major financial institution believes payday loan-type products are useful and not harmful to borrowers - and is looking for a piece of the action.

They're called "payday" loans because the money comes due within a couple of weeks - theoretically, the next time you get paid. Though payday loans can help people deal with temporary financial setbacks, critics call them predatory.

The lenders charge stiff fees, which inflict a lot of financial pain when a borrower can't repay a loan in time and must take out a new one.

"A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400%," says the Consumer Financial Protection Bureau. "By comparison, APRs on credit cards can range from about 12% to about 30%." Read more at MONEYWISE

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Tribune editorial: Utahns are getting wise to payday lending

The good news is that payday lending appears to be on the decline in Utah.

The bad news is that the lenders are raising rates and taking more debtors to court.

The Utah Department of Financial Institutions released its annual report on "non-depository lenders," which includes check-cashing stores, payday lenders and title loan companies. It appears Utahns are not walking into those businesses as much as they once did. One in five stores has closed in the last two years, and business overall is down.

So what has changed? An improving economy probably has as much to do with it as anything, but the Utah Legislature has also beefed up state oversight of an industry that has sent too many vulnerable Utahns into a debt spiral.

But the decline in business hasn't stopped the astounding average interest rate on these loans from rising. The average was 485 percent last year and climbed to 528 percent this year. The highest rate that any one was charged in the year also climbed from 1,408 percent to 1,565 percent.

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FDIC Request for Information on Small-Dollar Lending

The FDIC is seeking comments and information from interested parties on small-dollar lending, including steps that can be taken to encourage FDIC-supervised financial institutions (banks) to offer small-dollar credit products that are responsive to customers' needs and that are underwritten and structured prudently and responsibly. This request for information will be separately published in the Federal Register.

Background Information
The FDIC is responsible for maintaining stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, making large and complex financial institutions resolvable, and managing receiverships. As discussed further below, the FDIC is soliciting public comments on issues related to small-dollar lending by banks. Specifically, we are requesting information on the consumer demand for small-dollar credit products, the supply of small-dollar credit products currently offered by banks, and whether there are steps the FDIC could take to better enable banks to provide such products to consumers to meet demand.

Request for Comments from Interested Parties
The FDIC is issuing this request for information (RFI) to seek public input on steps the FDIC could take to encourage FDIC-supervised institutions to offer responsible, prudently underwritten small-dollar credit products that are economically viable and address the credit needs of bank customers. This effort is consistent with the FDIC's commitment to increase transparency, improve efficiency, support innovation, and provide opportunities for public feedback on issues affecting FDIC-supervised institutions and their customers. Read more at Federal Deposit Insurance Corporation
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Vote on Kathy Kraninger for CFPB director set for week after Thanksgiving

Senate Majority Leader Mitch McConnell (R-Ky.) filed cloture Thursday on several nominations, including Kathy Kraninger to lead the Bureau of Consumer Financial Protection, setting up a Senate vote on confirmation for the week after Thanksgiving.

Kraninger was nominated in June by President Donald Trump to serve as the bureau director, where she would replace Acting Director Mick Mulvaney. Mulvaney was appointed in November 2017 after the resignation of the previous director.

The Senate Banking Committee approved Kraninger's nomination in August with a 13-12 vote. CUNA wrote to the committee prior to the hearing.

Kraninger, an Ohio native, has served at OMB, the U.S. Senate and the Department of Homeland Security. Read more at CUNA.ORG

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How Democrats plan to save the agency Republicans love to hate (the CFPB)

Maligned consumer protection bureau gets new allies in Democratic House

Newly empowered House Democrats are vowing an all-out fight to salvage the Consumer Financial Protection Bureau in the face of the Trump administration's drive to curb the agency's power.

Party lawmakers have seethed for the past year as Mick Mulvaney has cut back on enforcement and curtailed funding requests for the bureau, the brainchild of President Donald Trump's nemesis, Sen. Elizabeth Warren (D-Mass.).

Mulvaney, Trump's budget director, will soon depart as acting CFPB chief to be replaced by his little-known lieutenant at the Office of Management and Budget, Kathy Kraninger, who has no experience in consumer affairs or banking. That could give the Democrats a much stronger hand in defending the Obama-era bureau, by doing everything from securing its independent source of funding to conducting endless oversight hearings.

Fending off further GOP attempts to rein in the CFPB "would be a battle with this administration, and it would be a test of wills," said Rep. Lacy Clay of Missouri, the top Democrat on the House Financial Services subcommittee with jurisdiction over the agency. Read more at POLITICO

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6 ways to protect your business from a data breach, right now

In our connected world, cybersecurity and data breach prevention are hot topics for every business owner and manager. A hacked account or device causes more than just a headache: it can bring down the entire network, causing a business to come to a screeching halt.

While statistics show that it may not be possible to prevent a cyberattack, you can take immediate steps to ramp up protection for your business, your employees, your customers, and your data. The key is to take a multi-layered approach, as there is no one-and-done solution to cybersecurity.

Educate your employees
The first step in protecting your business from a data breach is training your team on how to stay vigilant and aware of threats, and how to identify and handle suspicious activity if they come across a possible threat. Many data breaches happen as a result of employees opening malicious files and attachments or accessing websites that infect their devices. Regular reminders, company meetings and data breach "fire drills" are good ways to keep cybersecurity top of mind.

Fortify your firewall
A solid firewall is the next layer of protection for your business. A firewall prevents unauthorized connections and malicious software from entering your network. It monitors all traffic coming in and going out of the network, and if it detects a computer or program trying to gain access, it decides whether to block or allow the access based upon your pre-defined rules. Just like everything else in your network, the firewall needs to be maintained and updated regularly to be effective.
Read more at BIZJOURNALS

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What Are We Learning about Artificial Intelligence in Financial Services?

Although it is still early days, it is already evident that the application of artificial intelligence (AI) in financial services is potentially quite important and merits our attention. Through our Fintech working group, we are working across the Federal Reserve System to take a deliberate approach to understanding the potential implications of AI for financial services, particularly as they relate to our responsibilities. In light of the potential importance of AI, we are seeking to learn from industry, banks, consumer advocates, researchers, and others, including through today's conference. I am pleased to take part in this timely discussion of how technology is changing the financial landscape.1

The Growing Use of Artificial Intelligence in Financial Services
My focus today is the branch of artificial intelligence known as machine learning, which is the basis of many recent advances and commercial applications.2 Modern machine learning applies and refines, or "trains," a series of algorithms on a large data set by optimizing iteratively as it learns in order to identify patterns and make predictions for new data.3 Machine learning essentially imposes much less structure on how data is interpreted compared to conventional approaches in which programmers impose ex ante rule sets to make decisions.

The three key components of AI--algorithms, processing power, and big data--are all increasingly accessible. Due to an early commitment to open-source principles, AI algorithms from some of the largest companies are available to even nascent startups.4 As for processing power, continuing innovation by public cloud providers means that with only a laptop and a credit card, it is possible to tap into some of the world's most powerful computing systems by paying only for usage time, without having to build out substantial hardware infrastructure. Vendors have made it easy to use

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

Americans are splurging on all flavors of subprime debt

American subprime borrowers are stocking up on all kinds of debt, from home mortgages to automobile loans and credit cards. Personal loans have been especially perky, as financial technology upstarts compete to lend to consumers with spotty credit histories.

The amount of personal loans outstanding rose to $132 billion in September, an 18% increase from a year earlier, according to data from TransUnion, a credit bureau. The subprime segment grew at the fastest rate, expanding 28% from the same period in 2017. SoFi, Marcus, Prosper, Best Egg, Avant, and Upstart account for more than 30% of all new personal loans (subprime as well as higher quality prime debt), according to Experian.

A healthy economy is one reason for the borrowing uptick. So far, delinquency rates-a measure of how well loans are performing-are lower than they were in 2015 and 2016, according to TransUnion. Lending has also gotten a boost from the Trump administration, which has relaxed some financial regulations and prevented consumer protections targeting high-interest lenders and payday loans from coming into force.

"The favorable regulatory environment has fueled growth in non-prime lending, with fintechs leading the way," Jason Laky of TransUnion said in a statement. "Banks and credit unions continue to compete in the personal loan market and are offering larger loans and longer terms to prime and better consumers, whose overall balances are growing the quickest." Read more at QUARTZ

Compete in the data-driven lending era

10 Must-Dos to Boost Your Direct Mail Campaign! by Michael Li
  1. Volume. To obtain meaningful results, you have to commit to a meaningful volume. A few thousand pieces here or there will lead to upsetting results and might prematurely end your efforts in using direct mail as a acquisition channel.
  2. Avoid Using Only Marketing or Demographics Data. They don't work and don't let cost lure you in. Always use a credit bureau and actual credit attributes.
  3. Use Multiple Credit Bureaus. the coverage between the 3 prime bureaus are not the same. Even if the same prospect can be found across all bureaus, the depth of their credit profile are quite different.
  4. Response Modeling Is Not Enough. If you are fortunate to have a team of data scientists, building a response model is not enough. You need to consider building a risk model. The most desperate applicants are often time the most risky.
  5. Firm Offer Of Credit, Always. Always use firm offer of credit and not ITA (invitation to apply). With a firm offer you can use languages that are direct and draw people's attention.
  6. A/B Testing. For a variety of reasons, you might have opted out A/B testing. It's not too late. Subtle differences in wording or color variances could lead to a significant increase in response rate.          Read more at LINKEDIN
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Payday lenders starting to close after voters limit interest rates

DENVER -- Proposition 111, which passed in Colorado during the 2018 midterm election, caps interest rates from Payday lenders at 36 percent.

Currently the average payday lending loan in Colorado has an interest rate in Colorado of 129%.

The measure is already forcing some businesses to close.

Payday Loans in Aurora, which has been in business for 25 years, announced they will be closing. The owner told FOX1 off camera the risk to loan money to risky borrowers is no longer worth it.

Supporters of Proposition 111 remain grateful voters overwhelming passed the measure. The campaign's goal was to limit these businesses -- calling them "predatory."

"It takes effect on February 1st of next year," Corinne Fowler, campaign manager for Proposition 111, said.

"Most likely some will close," Fowler added. Read more at KDVR-TV

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How to reach more customers with Artificial Intelligence

Why you need to leverage Artificial Intelligence to identify customers
After years of positive growth, it's easy to get complacent, but there are three major challenges that will impact the growth and profitability of the financial services industry over the next few years. To meet these challenges and achieve success requires more than just keeping out the bad guys. It requires leveraging new techniques like Artificial Intelligence (AI) for identifying more good guys and seamlessly converting them into customers.

Here are the three challenges:
1. An economic downturn is near.
The economy has been strong for so long now, it's easy to forget that business is cyclical and that no matter how long a growth market lasts, corrections and downturns still occur. It's becoming clear that we're at the end of a business cycle. Consumers have now amassed over $1 trillion in credit card debt. Default rates are creeping up on credit cards, bank cards, student loans, and mortgages, putting added pressure on consumers' borrowing costs. Many experts believe the economy is going to turn in the next 18 months or so. Lenders are going to have a much harder time selecting borrowers who will enable them to maintain their current targets for portfolio profitability.
Read more at ACCELITAS

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