November 27, 2018
2018 edition: 94 / 104

Liberal state politicians are the new faces of financial regulation

The past decade in Washington, D.C. has seen financial services regulation elevated from a dorky policy backwater to a career-making battleground.

The 2008 financial crisis drew popular attention to banks, insurance companies and trading desks in a way it never had before, and politicians responded in kind, creating new checks on perceived misdeeds or fighting for private-sector freedom to drive economic growth.

On this point, President Trump's first two years in office have been characterized by a flurry of financial deregulation whose momentum will not be abated by a Congress likely gridlocked headed into a contentious presidential campaign season.

This has created a rare opportunity for savvy, progressive governors and state officials to seize the spotlight and become the country's fiercest cops on the financial beat.

As the Federal Reserve's vice chairman for supervision, Randal Quarles is one of the president's hand-picked overseers of financial regulation.

Governor Quarles gave remarks Friday morning on the future of financial regulation and painted a picture of a reformed regulatory framework and an administration intent on "recalibrating, in light of experience, the post-crisis regulatory regime." Read more at THE HILL

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New financial education resources to help teachers bring youth financial capability into the classroom

As children grow, their potential to manage money and understand financial concepts grows as well. The knowledge, skills, and behaviors kids learn when they're young lay the groundwork for their financial well-being as adults.

Schools and teachers play a critical role in financial education. But, we know there are challenges to bringing financial education into the classroom. Given the amount of content available, it may be difficult to find the best tools and information. This is especially true for educators who are new to teaching financial capability and may not know where to start. Also, limited time and resources may make it hard for schools and districts to offer targeted financial education classes.

We recently updated some of our youth financial education content to provide K-12 educators with new, free resources to help students develop financial knowledge, skills, and habits. These resources make it easy for you to find and download relevant classroom activities. They also can help you to evaluate financial education programs and understand the research-based building blocks of youth financial capability. These will be important stepping stones on the path to adult financial well-being. There are also resources to help you incorporate financial capability into your curriculum, whether you're an experienced personal finance teacher, new to the subject, or integrating financial capability into another subject area. Read more at CFPB

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Democratic House Likely to Scrutinize Lenders as State AGs Step Up Enforcement

A Democrat-controlled House will likely subpoena auto lenders for information about their practices, bumping up the threat of reputational and headline risk in 2019, Chris Willis, a partner at Atlanta-based Ballard Spahr LLP and practice leader of the firm's consumer financial services litigation group, told Auto Finance News.

"[The House Financial Services Committee] can issue subpoenas and other requests for information from financial institutions that highlight practices the Democratic members of the committee take issue with," Willis said. "The House can't make any regulations, but it can put practices into the news to get the attention of a congressional committee."

In spite of a political change in the House, control of the Consumer Financial Protection Bureau is slated to remain Republican - keeping the deregulatory environment in place.

The Senate will likely confirm President Donald Trump's nominee Kathy Kraninger as CFPB director following the Thanksgiving holiday, Willis said.

With Kraninger at the helm of the bureau, the likelihood of any significant regulatory change is slim. Still, with Rep. Maxine Waters (D-Calif.) as the new chair of the House Financial Services Committee, financial institutions can anticipate a lot of push for more regulation.


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Here's what it takes to create a product that actually helps the unbanked

There's no point in creating a product or service targeting the unbanked - unless it's designed with their specific needs in mind.

Data recently in October by the Federal Deposit Insurance Corp. indicates that 6.5 percent of U.S. households are unbanked, down from 8.2 percent in 2011 and 7.6 percent in 2009. In 8.4 million homes, no one has a checking or savings account.

There's no shortage of businesses and entrepreneurs trying to support the unbanked. But whether they're successful depends on their approach to addressing the unique challenges this population faces daily.

PayPal is one company that has vowed to help the unbanked. Customers who visit a Walmart store can now withdraw cash from their PayPal accounts for a small fee ($3). PayPal customers can also deposit cash and paychecks into their accounts. And through partnerships with some smaller banks, PayPal wants to offer new products for the unbanked, including debit cards and mobile check deposit.

Other startups have solutions designed to help the unbanked, too.

While apps like Venmo and Zelle aren't accessible to those without bank accounts, Vments has made it easy for the unbanked to transfer money. Through their platform, both the banked and the unbanked will be able to exchange digital cash for actual cash, even when there's no Wi-Fi or cellphone signal. Read more at BANKRATE

Compete in the data-driven lending era

Mobile device verification technology and why your business needs it. by Philip Burgess

If the average consumer has any one item these days, it's likely a mobile device. Smartphones are truly ubiquitous, often the first thing people pick up in the morning to see what's happening in the world or find out if someone has contacted them via text, voicemail or private message. In fact, when people go online, it's frequently with their handheld device, as nearly 90 percent of mobile users log on to the internet daily, according to recent data from the Pew Research Center.

Mobile devices are so omnipresent, there are almost as many smartphones in the U.S. as there are people, a total that's expected to grow with each passing year.

What is mobile device verification?
The fact that smartphone ownership is so common is part of the reason why mobile device verification technology is so important. As its title implies, mobile device verification services enable businesses to establish customers or borrowers are who they say they are. Identity theft is rampant, as more payment options have enabled hackers to access users' sensitive data, even the information that people maintain on their devices. Verification technology gives businesses the specifics they need to substantiate their customers' identity. This not only helps to streamline transactions and approval, but also provides greater transparency and extra due diligence.

Microbilt's Mobile Device Verify is truly comprehensive. In addition to providing you with the basics on borrowers applying via smartphone - such as first and last name and mailing address - it provides other relevant specifics as well, such as how long their number has been active, their line type and service status. It can also enable you to hone in on customers' exact location, down to their longitudinal coordinates. Read more at MICROBILT

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Enforcement Slowdown Defines Mulvaney's CFPB Tenure

Mick Mulvaney's year-long tenure atop the Consumer Financial Protection Bureau has resulted in stark changes both inside the watchdog agency and how it polices the industries it oversees.

Mulvaney's term as acting CFPB director is expected to end with Senate confirmation of his formal replacement in the coming weeks. And he is leaving an agency whose most visible tool-an aggressive enforcement unit-has in many ways been reined in.

"I think overall I would view him as a breath of fresh air for the bureau in that he restored a level playing field between consumer interests and the industry," according to Alan Kaplinsky, the co-practice leader of Ballard Spahr LLP's Consumer Financial Services Group.

Mulvaney, who also serves as White House budget director, entered the CFPB just after Thanksgiving last year promising to bring a more humble approach to bureau enforcement actions following former CFPB Director Richard Cordray's more swashbuckling tenure.
Read more at BLOOMBERG LP

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What the Unbanked Customer Really Wants

Fintech startups must meet them where they are, not only in a physical sense, but in a psychological one too

"If I had asked people what they wanted, they would have said faster horses." Henry Ford's words have become one of the most popular adages in business discourse, and for good reason. The idea captures perfectly the difference between what people think they need (that is, a faster horse) with what they actually do (that is, an automobile), and the role of the entrepreneur in discerning between the two.

While the gulf between incumbent technologies and new innovations may not always be as wide as horses and cars, it is always there for those who are patient enough to observe it. We witness this gulf in Southeast Asia, where close to a half billion people remain unbanked and thus unable to gain access to financial instruments, such as a savings account for their earnings, a line of credit for their small business, or a loan for their child's education.

The need

If you surveyed the unbanked for what they wanted-as some schools of entrepreneurial thought suggest you do-none of their comments would even touch upon banks, owing to the simple fact that many of them have never stepped foot in one, while others will not even know what they are.
Read more at Entrepreneur
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Why Young Women Are More Likely To Take Out Loans

The media regularly talks about payday loans - also called cash advance loans, post-dated check loans, and more - and why they're such a risky proposition, but the average consumer may not understand how these loans really work. In general, a customer applies for a loan - generally without a credit check - and gets a certain amount of cash.

They write a post-dated check for the full amount of the loan, plus a finance fee. At the end of the loan term - usually less than two weeks - the company can either deposit the post-dated check, or the customer can write a new post-dated check for a new, higher amount. By the time the customer finally pays off the loan, they may owe 400% interest, or more.

According to Finder, payday loans are most likely to be used by those who:
  • Have b  a d credit.
  • Have lower income.
  • Are younger (between 25 and 49 years old).
  • Are parents.
  • Are divorced or separated.
Several of these factors mean that young women are more likely to take out payday loans than young men. Read more at EQUITIES.COM

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House Democrats to investigate CFPB Acting Director Mick Mulvaney

The Senate will soon vote on the nomination of Kathy Kraninger as the next director of the Consumer Financial Protection Bureau. However, even if she is confirmed it may not stop Democrats from investigating CFPB Acting Director Mick Mulvaney.

After winning control over the House of Representatives in the most recent midterm elections, Democrats are already gearing up for an onslaught of investigations into the Trump administration. According to Politico, Democrats want to look into the soft regulatory environment ushered in by Mulvaney. Under his term, consumer protections eroded, the Democrats claim.

Recently, Ranking Member of the House Committee on Financial Services Maxine Waters, D-Calif., pledged that if she is selected to lead the committee, she will place a greater emphasis on affordable housing and focus on holding President Donald Trump accountable through investigations.

Now, the Senate could vote on Kraninger as the next director as soon as the week after Thanksgiving. And with Kraninger likely to be confirmed by a majority Republican Senate, Mulvaney's time at the CFPB will likely soon come to a close. Read more at HOUSING WIRE

March 18-21, 2019 / DORAL MIAMI
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Ross: Easy money and the rise of 'neo banking'

Banks are entering a whole new era. It's called neo banking. Because it's so "neo."

There is no imposing building with granite columns and marble floors. Instead, the branch office looks like a Starbucks with teller-istas.

You just sign over your paycheck, and suddenly you can buy things with a wave of the phone. As far as I can tell, you just look romantically at what you want to buy - and it's yours!

You can even get loans. But it's friendlier because neo banks don't have loan officers who look at your income statement and say "Ha ha ha, you're kidding!"

The day of the unfriendly bank is fast disappearing.

Even Amazon is supposedly considering checking account services. So the same company that sells you pretty much everything would know exactly how much you have to spend. Technology doesn't get any smarter than that.

I even see one neo banking service advertising perks like giving you access to your paycheck two days early. That's what we used to call a "payday loan." Read more at KIRO RADIO

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Merchant cash advances - salvation for small businesses or payday lending reincarnate?

"Why are you screwing us over?" the phone call begins. "We're coming after you ... you stole from the wrong company, my friend."

"How did I steal from you?" the recipient of the call asks.

"You stole from us. You blocked my payment."

"I blocked your payment because I don't have sufficient money."

"Well, that's not my problem ... next week you're going to be crying, tears running down your face, you're not even going to be able to get a hotdog, nothing ... you think you're going to fight us? Are you crazy? You're crazy ... do you know how much money we have? We have millions. We will never ever lose a battle."

"Listen, if I have some money, I will pay you guys. I just needed a break. All I needed was just one month of break, just one month of break..."

"I don't f-ing care. You better get your sh- together. We are coming after you."
Read more at YAHOO FINANCE

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Fed bank regulator walks tightrope on Dodd-Frank

The Federal Reserve's chief of financial regulation defended the central bank's plans to ease strict Dodd-Frank Wall Street banking rules on Wednesday in the face of bipartisan criticism from the House Financial Services Committee.

Randal Quarles, the Fed vice chairman of supervision, has found himself walking a tightrope over his efforts to loosen critical capital and leverage rules.

Republicans are demanding Quarles push President Trump's financial deregulatory agenda further along before Democrats who will take control of the House in January try to jam the Fed's gears.

Democrats, on the other hand, have fiercely opposed GOP efforts to weaken key banking l a w s. The hearing, the first by the committee since last week's midterm vote, also previewed the tougher scrutiny regulators can expect from the incoming House Democratic majority.

Democrats warned Quarles that they would fight any attempt to water down the post-crisis banking reforms and urged the Fed to tread carefully in 2019. Read more at THE HILL

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

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HSBC Data Breach Highlights the Dangers of New Account Fraud Attacks

HSBC, the world's twelfth largest financial services organization, has reported that a little under 1% of its U.S. checking accounts were accessed by unauthorized users in early October. As industry analyst Ron Shevlin has pointed out, 1% of HSBC accounts is roughly the number of all accounts in a mid-sized bank or credit union. In this blog, learn why new account fraud is increasing and how you can stay safe.

What Is New Account Fraud?
New account fraud occurs when a criminal uses someone else's personal information to open an account, usually with a financial services organization, in that other person's name. Once that account is open, the criminal can take additional steps, such as applying for credit or using the account to gain access to another, even more lucrative account.

HSBC hasn't released information about funds being stolen through this data breach. When these types of attacks occur, fraud operators often take advantage of account access to transfer funds to other accounts or to open new accounts, using information collected from the breached accounts. Read more at ACCELITAS

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