August 30, 2018
2018 edition: 69/104


Kraninger has the tools to rein in an unwieldy CFPB

The Senate Banking Committee voted to approve the nomination of Kathy Kraninger to serve as director of the Consumer Financial Protection Bureau (CFPB).

Her nomination represents an opportunity to turn around a massive bureaucracy, which has been used, under the guise of consumer protection, to attack many of America's vital financial service providers.

It is clear the CFPB is in need of an overhaul, and Kathy Kraninger is the right leader for the job. She has a proven record of keeping bureaucracy in check.

She also manages, develops and oversees large budgets in her current role as an official within the Office of Management and Budget (OMB), where she works under CFPB Acting Director Mick Mulvaney. With a long history of advocating for less regulation, Kraninger will be a welcome change for the CFPB.

An agency created in response to the 2008 financial crisis through the Dodd-Frank Wall Street Reform and Consumer Protection Act, the bureau is "independent," meaning free from presidential - or just about any - oversight. 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.

Resignation signals Trump administration slow gutting of Consumer Financial Protection Bureau

The resignation Monday of the federal student loan ombudsman - along with his scathing kissoff letter - marks another in a series of slashes and setbacks to the Consumer Financial Protection Bureau.

Seth Frotman, watchdog of the $1.5 trillion student loan industry, quit in protest over what he called, "sweeping changes," to the agency, including resistance by Betsy DeVos's Department of Education, the lack of independence in the agency under the Trump administration and the suppression of information showing abuse by big banks.

"You have used the bureau to serve the wishes of the most powerful financial companies in America," Frotman wrote in his letter to the bureau's acting director Mick Mulvaney. "The damage you have done to the bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country."

The CFPB, created in 2008 after the financial crisis, was aimed at aggressively policing predatory lending by financial institutions like the kind that contributed to the banking crisis ten years ago.

When Mulvaney was appointed he made it clear that he would be reigning in the agency.

"We have committed to fulfill the Bureau's statutory responsibilities, but go no further," he announced in a strategic plan when he started. Read more at DAILY NEWS

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'Land of the Fee': How Hidden Costs Hurt Consumers

Americans are paying more than ever in fees, which are tacked on to the price of everything from utility bills to concert tickets. This money-making mechanism is used widely by both the private and public sector because fees are often far outside the regulatory domain. But Devin Fergus, a professor of history, black studies and public affairs at the University of Missouri, warns that fees are quietly draining the wallets of middle-class Americans who can do little about it.

Fergus notes that hidden fees represent a massive wealth transfer whose dimensions are mind-boggling. Subprime mortgages, payday lending, student loans and urban auto insurance now "collectively [cost] working- and middle-class consumers more than roughly $1.46 trillion each year," he writes in his new book, Land of the Fee: Hidden Costs and the Decline of the American Middle Class. "That eye-popping sum is greater than the revenue budgets of the United Kingdom and France, and nearly equal to that of Germany." Fergus writes that if the cost of these financial products could be cut just 1%, it would generate some $14 billion a year in new spending power that families could use to "reduce household debt, increase their savings, or invest in retirement or income-generating assets."

Fergus recently joined the Knowledge@Wharton show on SiriusXM to discuss his book, which traces the history of fees and explains their cumulative effect on income inequality.
Read more at WHARTON UPENN

FactorTrust®, a TransUnion company, provides alternative credit data, analytics and risk scoring information to help lenders make more informed decisions.

Insight: A Shift in Regulation From the CFPB to the States. by Allison Schoenthal

The consumer finance industry should not get too comfortable thinking that their regulators are in retreat. While the reach of the Consumer Financial Protection Bureau ("CFPB") may have been curbed since Acting Director Mick Mulvaney took office late last year, state regulation is coming. Many states are preparing, both the Attorneys General and state regulators, to take over where the federal government is leaving off. The consumer finance industry is a headline-worthy target that attracts consumer complaints, and voter attention. This is especially important as multiple attorneys general prepare to run for governor this year. Here is what to expect, and which states to watch.

CFPB Has Left a Void
The CFPB has not filed a new enforcement action in court since Mick Mulvaney became Acting Director in November 2017. Although the CFPB has quietly continued to move forward with ongoing enforcement actions and has even entered a handful of consent orders, Acting Director Mick Mulvaney has made it clear that he would like state regulators to shoulder more of the enforcement burden going forward. In February 2018, he spoke at the National Association of Attorneys General conference and announced that the CFPB would be "looking to the state regulators and state attorneys general for a lot more leadership when it comes to enforcement." He further suggested the states "know better" how to protect consumers in their own states.

The states have the tools to pick up where the CFPB left off, and the CFPB has offered to hand over the reins. But will the states take them? They haven't yet - but they could soon.
Read more at BLOOMBERG

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Financial Wellness Key to Addressing Financial Literacy, Hill Panel Told

Witnesses at a U.S. Senate hearing addressed industry efforts to improve financial literacy and offered a number of policy solutions to alleviate financial stress and improve retirement security.

The Aug. 21 hearing by the Senate Health, Education, Labor & Pensions (HELP) Subcommittee on Primary Health and Retirement Security featured a single panel of witnesses who participated in a roundtable discussion on "Financial Literacy: The Starting Point for a Secure Retirement."

Sen. Michael Enzi (R-WY), the subcommittee's chairman, suggested in his opening statement that if there was any benefit to the financial crisis, it served as an awakening for many, including employers who recognize that employee financial health can have significant impacts on the productivity. "A person cannot be expected to give 100% when they are trying to resolve their own financial crisis, particularly when they don't have the tools to do so," Enzi stated.

Financial Wellness Programs

Vishal Jain, a VP in Prudential Financial's Workplace Solutions Group, addressed employer efforts to address financial literacy through financial wellness programs. "Building upon employers' recognition of the value of employees' health wellness over the past decade, there is a growing realization on the part of employers that there is significant value in employees' financial wellness," he stated.
Read more at National Association of Plan Advisors
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The Case for a State-Owned Bank. by Meagan Day

Regulating finance won't cut it. To combat predatory lending, we need a fully public, state-owned bank.

I'm a college student. I don't really have assets," Austin Wilson, a twenty-one-year-old senior at the University of Kansas who was short on rent by a few hundred bucks this month, recently told CNBC. "I own my car, I have a bunch of Dungeons & Dragons books. I could try to sell those."

Wilson filled out forty job applications, looking for a last-minute gig to supplement his work at a senior care center, but nothing came through in time. His bank wouldn't loan him anything less than $3,000 with corresponding interest, which he was hesitant to add to his already substantial student loan debt.

Thus Wilson joined the nearly 40 percent of college-age Americans who, according to a poll conducted by CNBC, seriously consider taking out a payday loan - a small-sum, quick-turnaround, high-interest loan that can help in a pinch but can also easily lead the borrower down a spiral of debt.

There are nearly twice as many payday lenders as there are McDonald's locations in the United States. Payday lenders rake in $46 billion a year. The business model is predicated on hidden fees, punitive fines and exorbitant interest rates - up to 700 percent in some cases. These high-risk loans often precipitate financial disaster, but people who are cash-strapped take them anyway, because they have no other option. Without them, they won't be able to pay rent and may risk eviction, or they won't be able to afford transportation or childcare and may lose their job. Read more at JACOBIN

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.

EUROPE: What's gone wrong with payday lender Wonga?

ix years ago the founder of Wonga described the payday lender as a "platform for the future of financial services".

But it seems the future has not turned out quite the way Errol Damelin had hoped.

This week, the company is considering "all options" after reports suggested it was close to collapse.

Its reversal of fortunes has been prompted by a deluge of compensation claims for loans taken out before 2014.

The Financial Conduct Authority ruled four years ago that Wonga's debt collection practices were unfair and ordered it to pay £2.6m in compensation to 45,000 customers.

Since then tougher rules and price caps have hit profits for payday lenders and dealt a seemingly fatal blow to their business model.

'Instant and transparent'
Wonga was founded in 2007 to offer loans for less than 30 days to consumers without the need to go through a lengthy application process.

"We have dared to ask some hard questions, like how can we make loans instant, how can we get money to people 24 hours a day, seven days a week, how can we be totally transparent?" Mr Damelin told the BBC in 2012. Read more at BBC



Millennials: The leasing generation. by Walt Wojciechowski

For people looking to buy a new car and wondering about whether to buy or lease, there's no right or wrong answer. It all depends on goals, needs and expectations. But based on data compiled by Edmunds, millennials' car ownership interests lean toward leasing.

In 2015, the most recent year for which data is available, nearly 30 percent of 18- to 35-year-olds opted to lease their new-car purchases rather than purchase, Edmunds reported from car registration data put together by Polk. That's up by approximately 46 percent tracing back to 2010, which over the same period saw a 41 percent increase in leasing among all car shoppers.

Sometimes referred to as "Generation Y" and born between the early 1980s and the mid-to-late 1990s, millennials represent a substantial portion of the American populace, currently outnumbering the baby boomer generation. Indeed, according to Census Bureau data reviewed by the Pew Research Center, more than one-third of the labor force fall into the millennial category. That's the equivalent of 56 million individuals. In other words, the trends found among millennials help shape the economic marketplace in terms of what sells and resonates with the consumer public.
Read more at MICROBILT

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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.

The Future Of Banking: Fintech Or Techfin?

The banking industry is experiencing disruption at an increasing pace. Over the past few years, traditional financial institutions and non-traditional fintech firms have begun to understand that collaboration may be the best path to long-term growth. At the same time, big tech firms are offering financial services, creating techfin solutions.

The rationale for collaboration is the ability to bring strengths of both banks and fintech firms together to create an stronger entity than either unit could bring on their own. For most fintech organizations, the primary advantages are an innovation mindset, agility (speed to adjust), consumer-centric perspective, and an infrastructure built for digital. These are advantages that most legacy financial institutions don't possess.

Alternatively, most banking institutions have scale, a stronger brand recognition and established trust. They also have adequate capital, knowledge of regulatory compliance and an established distribution network.

According to the World Fintech Report 2018 from CapGemini and LinkedIn, in collaboration with Efma, "Most successful fintech firms have focused on narrow functions or segments with high friction levels or those underserved by traditional financial institutions, but have struggled to profitably scale on their own. Traditional financial institutions have a vast customer base and deep pockets, but with legacy systems holding them back." Read more at FORBES

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