November 21, 2018
2018 edition: 93 / 104
Happy Thanksgiving

Tim Cook: The Free Market Has Failed, Government Regulation of User Data Is Now "Inevitable"

Apple CEO Tim Cook says the free market isn't working when it comes to privacy - and that government regulation of tech companies and the way they store user data is now "inevitable."

"I'm a big believer in the free market," Cook told Axios. "But we have to admit when the free market is not working. And it hasn't worked here."

This isn't the first time Cook has predicted that government regulation of tech companies is on the horizon. Responding to the Cambridge Analytica scandal earlier this year, he told Recode and MSNBC, "I think the best regulation is no regulation, is self-regulation. However, I think we're beyond that here."

Implicit in Cook's assertion of market failure is a critique of the way Facebook has handled user data. In the Recode MSNBC interview, Cook explained why Apple would never use the Facebook model: "We could make a ton of money if we monetized our customers, if our customers were our product. We've elected not to do that... We're not going to traffic in your personal life. Privacy to us is a human right, a civil liberty."

Facebook CEO Mark Zuckerberg also admitted that "self-regulation doesn't work" in testimony before Congress in April, but warned, "we need to be careful about the regulation we put in place."
Read more at YAHOO FINANCE

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Financial overregulation wasted the last eight years

The eight-year experiment imposing prudential bank regulation on non-bank financial companies has apparently ended - for now.

None of the four non-bank companies originally designated as systemically important financial institutions (SIFIs) between July 2013 and December 2014 are still SIFIs. The designations of GECC, AIG and Prudential were all eventually rescinded, and MetLife successfully challenged its designation in federal court.

The SIFI designation idea was ill-founded, and the process, in the view of at least one federal judge, was flawed. The Financial Stability Oversight Council (FSOC) essentially wasted eight years examining the financial entrails of four large companies in the hope of finding an anecdote for global financial crises.

The designation of four non-bank financial companies could never have achieved that goal, and the time could have been spent creating and deploying more effective global regulatory mechanisms and integrated regulatory responses.

In 2010, when a shell-shocked Congress decided to extend pervasive prudential regulation to SIFIs, it was a radical departure from precedent. Rarely had such pervasive regulation ever been imposed on companies that did not enjoy federal deposit insurance or some other form of an express or implicit government guarantee. Read more at THE HILL

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Three Predictions for the CFPB in 2019

The Consumer Financial Protection Bureau (CFPB) has seen changes in its activities ever since former director Richard Cordray stepped down in November of 2017. His successor, current acting director Mick Mulvaney, has made a series of changes during his tenure on matters as big as the enforcement actions the bureau makes, and as small as shifting around the letters of the agency's acronym in order to emphasize the word "bureau" over the word "consumer."

Comparing the enforcement actions taken by the Cordray-led CFPB and the regime led by Mulvaney, Cordray's enforcement actions in his final year totaled 47 enforcement actions in number. Mulvaney, by comparison, totaled 8 over the course of his first year.

2. Payday lending will remain a focus
The bureau may be continuing to primarily focus its attention in the financial sector on the payday loan industry, but may end up easing its perspective on it. Following up on the finalization of a payday lending rule in 2017 prior to Director Cordray's departure, it wasn't expected to fully go into effect until August of 2019.

When Mulvaney became acting director, he announced his intent in January to potentially "reconsider" the payday rule, which aimed to prevent payday debt traps by requiring lenders to take steps to make sure borrowers can repay their loans. A judge in the western district of Texas ordered a stay on the rule's implementation, though, with no indication on when the stay will be further addressed by the court. The bureau also announced it only intends to revisit the "ability to pay" requirements under the rule, as opposed to the rule itself.


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Consumer Financial Protection Bureau neglects duty to enforce Military Lending Act

Although predatory lending often conjures up images of an economically blighted Urban America, seldom does the image of an enlisted man or woman come to mind. But just as check cashing stores, along payday and auto title loan shops focus on communities of color, America's military is also a frequent target.

For years and near military installations across the country, a profusion of predatory lenders plied their wares, capturing our service men and women into the same web of debt trap loans that ensnared Black and Latino civilians.

By 2006, a Department of Defense (DoD) report that delved into predatory lending practices against the nation's armed services shared how the financial stress wrought affected military readiness. The report shared how predatory lending resulted in multiple negative effects. From "undermining troop readiness" and morale, to even the revocation of security clearances essential to military operations.

In part the report stated, "Most of the predatory business models take advantage of borrower's inability to pay the loan in full when due and encourage extensions through refinancing and loan flipping. These refinances often include additional high fees and little or no payment of principal."

Accelitas is an alternative data resource that delivers the power of AI to reach more underserved consumers and deliver predictive insights that are customized to your business.

Fintech: Data Standardization is Your Next Competitive Advantage. by Timothy Li

When I took my first computer science courses in college, my professor often cited the old adage "Garbage in, Garbage out". Most of the students in the classroom chuckled. For most of us, that was the first time we heard that expression.

What he meant was that the accuracy and completeness of the data input is the most important aspect of any analysis or experimental design. Most of us didn't think too much of it given our projects, reports and desertion all had nicely formatted and packaged information as their input and, often the data is biased to help us understand the algorithm of theory at hand.

The Struggle
Fast forward to my career at Intel and JPMorgan Chase where I spent 80% of my time cleaning data. I never truly appreciated the importance of having accurate data until I worked over night until 5am to get the latest manufacturing master planning schedule at Intel and worked for 48 hours straight at Chase to get the latest Checking & Savings Account Profitability reports out that shaped the decisions of our marketing and pricing decisions.

The Struggle Continues
Recently, I found myself working at some of the most advanced data driven Fintech companies such as Kabbage, LoanDepot, RocketLoans and What these firms all have in common is that almost all their major decisions in Marketing, Product Management, Operations and Compliance all rely on accurate data. Read more at CROWDFUNDINSIDER

We are transforming lending with innovative payment instrument data and technology, increasing credit access to the financially underserved, and reducing fees for borrowers and creditors.

Four employee benefits trends to help attract and retain talent

Attracting and retaining top talent is more challenging than ever. Employment is up, U.S. unemployment is at a 10-year low(1) (falling to 4.4 percent this year) and aging baby boomers are reaching retirement and exiting the workforce.

In fact, the percentage of working-age Americans in the labor force has dropped to 62.9 percent, near a 40-year low. In the Dallas area, employment is booming. Dallas-Fort Worth led the nation's 12 largest metro areas for job growth last year, adding 100,400 jobs in 2017.

"North Texas has kept up with that explosion in demand for workers in part through in-migration," says Joan D'Amico, North Texas Market Executive for Global Commercial Banking at Bank of America Merrill Lynch. Dallas-Fort Worth has added 1.1 million new residents since 2010 with about half of those coming from in-migration. That outstrips any other major metropolitan area except Houston. Read more at BIZ JOURNALS

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

Seven Tips to Leverage Employment Verification Data. by Jesse Berger

Is more data better, or is better data really, better? Whatever your philosophy, employment data is already, or should be in your mix of sources. And know this, employment data is not just for verifying employment anymore, it has the potential to move the needle for you in several ways. Employment data attributes are now optimizing multiple steps of a customer's lifecycle and experience with your lending business. Incorporating employment data into your workflow can create a more efficient, seamless, and expedited process for the consumer. Here are seven tips to help you leverage employment data and improve your customer's lifecycle:
  1. Verify Identity: You can validate identity in real-time with employer reported data. This is more authoritative and accurate than self-reported, or information gathered from third parties. The employers gather ID information from an employee during the Form I9 or eVerify process, which require physical verification of documents. Knowing this is great because you can use employment data for mitigating fraud.
  2. Identify More Risk: During underwriting, an attribute simply indicating if an applicant is employed, regardless of position or income, has proven to be extremely predictive in assessing risk. By knowing whether a consumer is employed at the onset of the lifecycle (i.e. at the point of application), lets you segment risk groups quickly and easily. Applicants with verified employment go through a less manual process and make the online experience friendlier.
  3. Increase New Originations: Some of your models are going to point to a 'No' answer. Whatever the reason, verifying a consumer is employed may be the answer to taking a No to a Yes. Consumers that are employed are more likely to have the ability, and more importantly, the willingness to repay. Read more at MERCHANTBOOST

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Payday Lending Reform and the Need to Reduce Demand

Colorado passes an initiative to restrict all lending to a maximum of 36% but is this the best way to attack the problem?

Here in Colorado we had an initiative on the ballot last week to restrict payday loans to a 36% APR cap. It passed overwhelmingly because the general public does not want to support lenders who charge triple digit rates. The law goes into effect on February 1 and it likely means the end of the payday lending industry in Colorado.

This change comes on the heels of an opposite move at the federal level where the CFPB said it plans to propose revisions to existing rules that were designed to reign in payday lenders nationally. The CFPB had spent six years doing research and decided that one way to make payday lending more responsible was to require a check on a borrower's ability to pay. It makes sense as this is what pretty much all other types of personal loans require.

But the payday loan industry has become successful in part because lenders did not have to take into account a borrower's ability to repay. By not having to do this important step lenders could save money and expand their borrower base. But in doing so they have been serving many people for whom a payday loan is clearly a bad idea. Read more at LEND ACADEMY

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Despite the "good economy," only 28% of Americans are financially healthy

Only 45% of people in a new survey said they have enough to cover three months of living expenses.

By some measures, the American economy is booming. Corporations are raking in profits. Unemployment is low. But wages are still stagnant, and a new report says that only 28% of Americans can be considered financially healthy.

"We felt like we needed to create a definitive study that helped to demonstrate that while the larger economic headlines around a roaring stock market, and low unemployment, and great consumer spending are out there, that's not actually telling an accurate story," says Jennifer Tescher, CEO of the Center for Financial Services Innovation, the organization that created the report, called the U.S. Financial Health Pulse.

The organization, which works with startups that are building financial health tools, surveyed more than 5,000 Americans this year.
  • Nearly half said that their spending had equaled or exceeded their income in the last 12 months.
  • 44% of those relied on credit cards to make ends meet.
  • Only 45% have enough to cover three months of living expenses (even though the majority of Americans say that they save whenever possible).
  • 42% have no retirement savings.
  • 30% have more debt than is manageable.
Read more at FAST COMPANY

March 18-21, 2019 / DORAL MIAMI
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Americans think 22 is the ideal age to get a credit card-but money experts disagree

The right age to apply for your first credit card is whenever you can handle it responsibly. Many Americans think that age is 22. But according to a recent survey from financial website Bankrate, which polled 10 certified financial planners from different parts of the country, that's actually not soon enough: 19 is a smarter age at which to start building your credit history.

"I think 22 is a little late," Dana Twight, a certified financial planner in Seattle, tells Bankrate. "I think you want to help your kids, or your independent kids, and support them in opening a card when they're young enough to benefit from a parental safety net, if that's possible."

That's because a credit score, which can range from 300 to 850, is an important measure of your financial health that signifies your trustworthiness to financial institutions. A good score can help determine how easy, or how expensive, it will be for you to rent an apartment or buy a home.

So, "the sooner you start building credit," concludes Bankrate, "the better." Read more at CNBC
Decision Cloud is a black box platform, which allows users to build decision waterfalls, utilizing Insight's services, as well as a plethora of third party vendor services.

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.

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Consumer Credit Origination, Balance and Delinquency Trends: Q2 2018

Ten years after the financial crisis of 2008, consumers are generally in a much better place. In the aftermath of the crisis, we observed massive shifts in how consumers prioritized and paid their debts.

Note that serious delinquency is defined here as borrower delinquency rates of 60 or more days past due (60+ DPD) for all credit products except credit cards, for which 90+ DPD is used. Peak delinquency levels occurred in the following timeframes: Mortgage (Q1 2010); Auto (Q4 2008); Credit Card (Q1 2009); Personal Loans (Q1 2009).

The changes are most evident in the mortgage industry, where delinquency rates increased massively after the proliferation of subprime mortgage lending in the mid-2000s. For auto and personal loans, serious delinquencies rose slightly during the financial crisis, but increases were modest and short-lived. Credit card delinquencies are now half their peak level in 2009.

Balance growth in the last 10 years has been strongest in the auto loan and unsecured personal loan markets; however, all products have seen significant balance growth from their lowest observed values after the recession. Read more at TRANSUNION

  National Debt Holdings
National Debt Holdings is a professional Receivables Management Company that partners with creditors to purchase and/or manage receivables at all stages of the account life cycle.

Are Your Employees Leaving You? It's Not Them. It's You.

With the unemployment rate at a historically low 3.7%1, competition to recruit new talent is fierce. However, one important consideration as you work to fill new positions is the increasing rate of employee turnover. While you are focused on filling new positions at your company, so are other organizations - and they're busy recruiting the experienced talent working for you!

One way to retain employees is showing commitment toward improving their wellness - particularly, financial wellness. Just how important is a financial wellness program? Based on recent reports on Americans' finances, it's critical. A 2017 CareerBuilder survey2 revealed alarming reports on American workers: 71 percent say they are in debt, and 78 percent are living paycheck-to-paycheck. These financial struggles translate to stress, affecting employee health and work performance.

By offering a financial wellness benefit like FinFit, you demonstrate your concern for the wellbeing of your employees. In our 2017 financial survey, 85% of employees said they appreciated their employer for offering FinFit, 70% reported increasing their personal savings through the program and 84% said that FinFit helped them solve a financial crisis and refocus on work. Read more at FINFIT

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