March 7, 2019
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How Financial Regulations Affect the Economy

Finance exists to redistribute purchasing power across space and time.

Workers who spend less than they earn on goods and services can use the surplus to buy assets. Once they retire, they can sell those assets to finance consumption spending without having to toil.

Companies have their own life cycles. When young, they issue shares to savers to raise money (and to employees to limit their cash outflows). As they age and their operating cash flows exceed their investment needs, they can borrow against their assets to reward earlier shareholders.

The job of banks, asset managers, insurers, and other financial intermediaries is to create assets for those who want to spend less than they earn and provide capital to those who want to spend more.

These intermediaries are not passive actors simply matching the desires of others, of course, but are for-profit businesses with their own shareholders and workers. This can create tensions between what is best for the financial firms and what is best for the financial system.
Read more at BARRON'S


Payliance: The Power Behind Payments Technology

Parties File Status Report in Trade Group Lawsuit Challenging CFPB Payday Loan Rule. by Ballard Spahr LLP

The CFPB and the two industry trade groups that filed a lawsuit in a Texas federal district court challenging the CFPB's final payday/auto title/high-rate installment loan rule (Payday Rule) filed a status report with the court on March 1. The court directed the parties to file the status report by March 1 when, in November 2018 on its own initiative, it granted a stay of the Payday Rule's August 19, 2019 compliance date and continued in force its stay of the lawsuit.

The status report references the CFPB's proposals to revise the Payday Rule to rescind the rule's ability-to-repay (ATR) provisions in their entirety and delay the compliance date for the ATR provisions until November 19, 2020. The parties report that they have been engaged in discussions about how the litigation should proceed given that the proposals would leave unchanged the Payday Rule's payment provisions and continue to require compliance by August 19 with those provisions.

The parties indicate that they believe they may be able to agree on a joint proposal and are continuing discussions. They state that they plan to submit an additional status report by March 8 that either makes a joint proposal on how the litigation should proceed or, if no agreement is reached, that sets forth each party's position on how the litigation should proceed.
Read more at National Law Review

CFSA Conference _ Expo
CFSA Conference _ Expo

Editorial: Cashless stores may be good -- for highlighting plight of the unbanked

Last week, Philadelphia Mayor Jim Kenney signed into law a ban on stores that don't accept cash payments. City Council passed the bill over the objection of, which was planning to open an Amazon Go in the city, a cashier-less and cashless store, as part of a national expansion of the prepared-food and grocery store chain.

Those supporting the ban on cashless stores argue they discriminate against poor people who don't have checking or savings accounts, let alone credit cards, and are therefore considered "unbanked."

While it may be hard to imagine living without a bank account, according to a 2017 survey of the Federal Deposit Insurance Corp., in about 6 percent of Philadelphia households, no member had a bank account - about 35,000 households.

Opponents of the ban argue that it could hinder innovation in the retail sector and prevent businesses that are moving toward a cashless model from opening in Philadelphia, thereby costing the city jobs. Kenney signed the bill but expressed similar concerns. Read more at Post Bulletin

Alternative Credit Reporting

Lawmakers introduce bill to tax financial transactions

A group of lawmakers wants to tax financial transactions -- a move they argue will generate billions of dollars in revenue and reduce the risk of another financial crisis.

On Tuesday Sen. Brian Schatz (D-Hawaii) introduced the Wall Street Tax Act in the Senate, while Rep. Peter DeFazio (D-OR) introduced legislation in the House.

Sen. Kristen Gillibrand (D-NY), a 2020 presidential contender, Rep. Alexandria Ocasio-Cortez (D-NY), and other progressive lawmakers have signed on as co-sponsors.

The plan would tax the sale of stocks, bonds and derivatives at 0.1%. (A stock trade of $1,000 would incur a tax of $1.)

The Joint Committee on Taxation has estimated a financial transaction tax would raise an estimated $777 billion over the next 10 years.

"Over the last decade, Wall Street has made record profits from high-risk trades that have made the market dangerously volatile, while doing nothing to add real value to our economy or raise wages for workers," said Schatz. "My bill will help discourage this kind of risky, volume-based trading and bring in billions in new revenue."

The lawmakers say the tax would apply to the fair market value of equities and bonds, and the payment flows under derivatives contracts. Initial public offerings and short-term debt (with a maturity of less than 100 days) would be exempted. Read more at YAHOO FINANCE

Lending as a Service

CFPB's Kraninger appearance at March 7 House Financial Services Committee hearing to be followed by panel of witnesses. by Ballard Spahr LLP

The House Financial Services Committee has updated its website to confirm that CFPB Director Kraninger is scheduled to appear at the Committee's hearing tomorrow entitled "Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau."

The update also indicates that Director Kraninger's appearance will be followed by a panel consisting of the following individuals:
  • Hilary Shelton, Director & Senior Vice President for Advocacy and Policy, National Association for the Advancement of Colored People
  • Linda Jun, Senior Policy Counsel, Americans for Financial Reform
  • Jennifer Davis, Government Relations Deputy Director, National Military Family Association
  • Seth Frotman, Executive Director, Student Borrower Protection Center
  • Scott Weltman, Managing Shareholder, Weltman, Weinberg & Reis Co., L.P.A.
In addition, the Committee's majority staff issued a memorandum to Committee members about the hearing that indicates former Acting Director Mulvaney was invited to appear but failed to respond to the Committee's requests. The memorandum includes a summary of the Bureau's Spring 2018 and Fall 2018 Semi-Annual Reports that notes the "significant drop in enforcement actions" and that the Spring 2018 report "included only one instance of public enforcement action regarding fair lending" while the Fall 2018 report "reported no public fair lending enforcement actions during the covered April-September 2018 period, despite issuing a higher number of supervisory actions against institutions." It also notes the Bureau's reduced spending in 2018 as well as the reduction in its workforce. Read more at National Law Review

Merchant Boost Announces Name Change to ValidiFI
Redefining how financial service businesses measure risk and process payments.

ACH For Lenders: Understanding ACH Payments and Loans

Before the advent of electronic payments, funds were sent by check, money order, or other types of paper transactions, including cash. Since then, the way both businesses and consumers send and receive money has evolved. Stemming from this evolution was the adoption of ACH payment processing.

What is ACH Payment Processing?
An ACH, or Automated Clearing House transaction is a digital transfer of funds from one bank account to another utilizing routing and account numbers.

The system relies on authorization from a receiver (borrower) to an originator (lender) for each transaction that is launched into the ACH process. Once authorized, an originator will initiate an ACH transaction to move the funds. A borrower can both receive loan funds or make loan repayments through the ACH network.

Understanding ACH Payment Processing
ACH transactions are not posted in real time. Instead, the transaction moves through a batch process, with the Federal Reserve serving as the central control point. Standard ACH transactions work through this process overnight, while same day debits and credits are possible.

Flexible cut-off times provide lenders with the tools needed to meet customer expectations while managing costs. Read more at PAYLIANCE

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Sen. Brown introduces bill to allow consumers to file class-action suits against financial companies

U.S. Sen. Sherrod Brown (D-OH) introduced legislation last week that would end the practice of forced arbitration and allow consumers to file class action suits against financial companies.

The Arbitration Fairness for Consumers Act would also ensure that financial crimes cannot be hidden from the public in a private and opaque process.

"Forced arbitration is about big companies silencing victims and giving more power to corporations that already have too much power over the lives of working Americans," said Brown, ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. "Ending the use of forced arbitration in student loans, credit card agreements, and employment contracts gives working Americans a fighting chance against powerful special interests."

This bill would overturn legislation which passed Congress in 2017 to eliminate the ability of consumers to file class-action suits against banks and credit card companies. Instead, it instituted the use of arbitration clauses, which require people to bring claims individually against the company, outside the court system, before a private individual (an arbitrator).
Read more at Financial Regulation News

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Maxine Waters: Mulvaney was brought in to 'basically destroy' the CFPB

On Wednesday, Rep. Maxine Waters (D-Calif.) previewed some sharp questions that her committee is ready to ask leaders in the Trump administration and in the business community as the House Committee on Financial Services embarks on a series of hearings and legislative efforts in the weeks ahead.

Waters chairs the House Financial Services Committee, which includes high-profile freshman Alexandria Ocasio-Cortez and presidential candidate Tulsi Gabbard. The committee will introduce legislation to more closely regulate the Consumer Financial Protection Bureau, the government's top consumer watchdog, with a special aim at Mick Mulvaney, Trump's chief of staff who ran the agency for 13 months.

"The bill reverses the harmful structural changes Mulvaney and his deputies made to damage the agency one by one" Waters said. She added that Mulvaney was brought in to "basically destroy and undermine the CFPB."

This legislation, which is not expected to reach President Trump's desk, would reverse a range of Mulvaney's decisions. Much of the agency's activities had been reined in under Mulvaney.
Read more at YAHOO FINANCE

CFSA Conference _ Expo
CFSA Conference _ Expo

After a slow start and surprised taxpayers, refunds are up

The average 2018 refund is up, according to the latest IRS accounting, after a sharp decrease at the start of tax season surprised taxpayers expecting to see more benefits from the Trump tax cut.

Four weeks into the tax filing season, the most recent IRS numbers, from Feb. 22, showed the average tax refund had increased by 1.3 percent over last year's -- $3,143. A few weeks before, the statistics showed an 8 percent decrease in the average tax refund compared to 2017.

The 35-day government shutdown earlier this year and sweeping changes to tax laws at first made it difficult for the IRS to explain the fluctuation.

Experts said that the tax cut meant people saw more in their paychecks over the course of the year because the Treasury Department and the IRS lowered the amount that could be withheld after the 2017 tax reforms.

A smaller withholding would predictably lead to a lower refund, which, in some cases, could put people in a position where they'll owe money, said Leigh Osofsky, a tax law professor at the University of North Carolina School of Law. Read more at ABC NEWS

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Fed weighs tighter restrictions on foreign banks in rare Trump-era move

The Federal Reserve may soon tighten restrictions on foreign banks to prevent them from relying too much on the U.S. central bank in a crisis, a move that's likely to face pushback from the industry, Republicans in Congress and other countries.

The Fed, under leaders appointed by President Barack Obama, ramped up oversight of foreign banks after the 2008 financial crisis, when those lenders borrowed heavily from the central bank and pulled many of those dollars out of the country.

Now, President Donald Trump's hand-picked regulators could ratchet up the rules even more this month by placing new liquidity requirements on U.S. branches of foreign banks, according to people familiar with the matter. If they follow through, it would serve as a striking example in the Trump era where financial regulation is being made more, not less, restrictive.

"The regime under [Fed Chairman Jerome] Powell is slowly taking shape, and it's not one-sided deregulation," said Karen Petrou, managing partner of Federal Financial Analytics.

In 2014, the central bank required the largest overseas-based lenders to form intermediate holding companies to house their U.S. operations. Those units, like big domestic banks, are required to keep a certain amount of cash on hand in the U.S., in case of emergency.
Read more at POLITICO

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The wallet as you know it may be dying

You grab your keys, smartphone and wallet when you leave the house. Would it be such a disaster if you left that last one behind?

In the not too distant future, it may not be. Your physical wallet is on borrowed time.

Your phone, after all, increasingly provides the utility in digital form for the many reasons you schlep a Costanza-sized billfold in the first place, from showing off pictures to making mobile payments.

Think about it. At the airport, you hand your iPhone or Android handset, rather than a paper document, to the TSA agent who inspects and scans your boarding pass.

You scan your phone entering ballparks, movie theaters and concert halls, too.

Most states will accept an electronic copy of your automobile's insurance ID card during a traffic stop. Read more at USA TODAY

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Private payrolls up 183,000, but Moody's economist says jobs may have peaked

Job creation at the company level cooled in February after a sizzling start to 2019, according to a report Wednesday from ADP and Moody's Analytics.

Private companies added 183,000 workers for the month, about in line with Dow Jones estimates of 185,000.

Though the number marked a deceleration, it came with some good news: ADP and Moody's sharply increased their count for January, raising the originally reported number of 213,000 all the way up to 300,000.

Still, one economist thinks the decline in February could indicate that the jobs market has peaked.

"The economy has throttled back, and so too has job growth," Mark Zandi, chief economist at Moody's Analytics, said in a statement. "Job gains are still strong, but they have likely seen their high watermark for this expansion."

In a subsequent interview on CNBC, Zandi said he sees first-quarter economic growth coming in around 0.3 percent, "so it's going to start showing up in the payrolls numbers."
Read more at CNBC

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Fiscal 50: State Trends and Analysis. PEW TRUSTS

Western, Southern States Gain Residents the Fastest
All but two states-Illinois and West Virginia-gained residents over the past decade, even as population growth nationally continued to slow. Following the long-term trend, the United States in 2018 grew at its weakest pace in more than 80 years, with nine states losing residents. Population trends matter to both state government finances and economic growth. Read more below.

The fastest-growing states in the 10 years ending July 2018 were predominantly in the West and South. Topping the list were Utah, Texas, Colorado, and North Dakota, which each added people at more than twice the median rate and were among the top five in economic growth since the Great Recession began. States with fast-growing populations typically have strong labor force growth, which fuels economic activity and helps generate tax revenue to fund any increased spending on infrastructure, education, and other government services.

Top-ranked Utah's population expanded by more than 498,000 since mid-2008, or the equivalent of 1.73 percent a year, and second place Texas' grew by nearly 4.4 million, or 1.68 percent a year. Texas added more people but trailed Utah based on their 10-year growth rates, which measure the constant pace that population would have had to change each year since 2008 to reach its latest count. The median rate of growth among states was 0.63 percent a year.
Read more at Pew Charitable Trusts

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