|
May 3, 2007
Study: Prime Customers Like Debit and Cash, Too
Card Companies Get an Earful in House Hearing
JPM Chase Supports Dodd Principles
Fed Consumer Study to Eye ARMs
Big Banks' Loan Push: Illegal Immigrants
Gov's Move May Delay Mass. Foreclosures
Bill Targets Predatory Lending Practices
No Consensus in Congress on Subprime Issues
Mortgagers Accept Assistance Guides
University Rated Lenders by Perks
Warnings on Student Lenders Unheeded
Bankruptcies Rise Fastest for Over-55 Group
Rent-to-Own Legislation Garners 40 Co-Sponsors--and Counting
Car-Loan Sector: Few Road Bumps
Some Nonfinancial Firms May Get Bank Charters
Volkswagen and HSBC Team Up to Offer Auto Loans in Argentina
Atlanta Braves and GE Money's Sport Finance Program Helps Fans
ILC Bill Clears House Committee
President's Identity Theft Report Faces Tough Hurdle in Congress
Senate Commerce Committee Begins Legislative Cycle on Identity Theft
Welcome New AFSA Members
Study: Prime Customers Like Debit and Cash, Too
American Banker (05/01/07) Lowe, Frederick
The results of a recent study released by TransUnion and payments consulting firm Edgar, Dunn & Co. have dispelled the notion that people who often use debit cards, cash, or checks for purchases have poor credit histories. According to the study, which surveyed 10,184 U.S. adults online from September to December, 54 percent of consumers who prefer to use their debit cards to pay for purchases had prime or superprime scores. TransUnion defines prime scores as credit scores of 635 to 764, while superprime is defined as credit scores of 765 to 950. Twenty-eight percent of those who preferred to use cash had superprime scores, and 25 percent had prime scores. Among check users, 69 percent had credit scores in the prime or superprime range. The results of the study are expected to help card issuers target their marketing mailings more effectively, said Tim Claytor, TransUnion's director of market intelligence, and Beth Costa, a director with Edgar Dunn.
Back to Top
Card Companies Get an Earful in House Hearing
American Banker (04/27/07) Vol. 172, No. 81, P. 3; Kaper, Stacy
House lawmakers criticized several credit-card practices at a subcommittee hearing on Thursday, citing exorbitant fees, interest rate schemes, double-cycle billing, universal default, and aggressive marketing to college students. But the hearing by the House Financial Services Committee's financial institutions panel lacked much of the fireworks that have marked earlier inquiries on the subject in the Senate led by Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations. Instead, House members appeared cautious in approaching any legislation on the issue, and urged the Federal Reserve Board to complete its review of credit-card disclosures soon. Rep. Carolyn Maloney (D-N.Y.), the subcommittee's chairwoman, warned that Congress may act if credit-card companies do not reform practices quickly.
Back to Top
JPM Chase Supports Dodd Principles
American Banker (05/02/07) P. 20; Kaper, Stacy
Senate Banking Committee Chairman Chris Dodd (D-Conn.) has won the backing of JPMorgan Chase for a set of subprime lending principles that he believes would help prevent borrowers from losing their homes. During a closed-door summit in April, Dodd recommended, among other principles, that lenders contact subprime borrowers with adjustable-rate mortgages before the interest resets and modify the terms if borrowers are unable to meet the increase in payments. Citigroup immediately expressed support for the principles. Other lenders are expected to announce that they have agreed to adopt the principles on Wednesday, which is the deadline set by Dodd.
Back to Top
Fed Consumer Study to Eye ARMs
American Banker (05/03/07) Sloan, Steven
Questions included in the Federal Reserve Board's consumer-finance survey, conducted every three years since 1983, will be updated in the latest poll in order for researchers to better understand the relationship between interest rates and residential loans. In particular, the study will look at consumer financial patterns related to adjustable-rate mortgages. "The results of the survey will fill a gap in our knowledge about the financial circumstances of different types of households," according to Fed Chairman Ben Bernanke. The National Opinion Research Center will query 10,000 randomly selected U.S. residents for the poll, the findings from which will be released in early 2009.
Back to Top
Big Banks' Loan Push: Illegal Immigrants
Wall Street Journal (05/03/07) P. C1; Sidel, Robin
Big banks are now following the lead of community banks in offering mortgages to illegal immigrants who lack Social Security numbers and traditional credit histories, instead allowing the use of Internal Revenue Service Tax Identification Numbers and employment histories. Loan programs from J.P. Morgan Chase & Co., Citigroup Inc., Wells Fargo & Co., and Fifth Third Bancorp are in the works; and a secondary market to sell and trade these mortgages is being created by Deutsche Bank AG in conjunction with the Hispanic National Mortgage Association. National Association of Hispanic Real Estate Professionals President Timothy Sandos says the estimated 375,000 undocumented immigrant households could provide $85 billion or more in originations, adding that defaults are less likely to be a problem with these borrowers. According to Sandos, "Once they get a piece of the American dream, they will do any and everything to make sure that bill is taken care of because it is the only asset they've got."
Back to Top
Gov's Move May Delay Mass. Foreclosures
Boston Herald (05/01/07) Van Voorhis, Scott
Massachusetts Gov. Deval Patrick has ordered state banking regulators to request delays of up to two months on foreclosure proceedings, and national housing activist Bruce Marks said the move essentially is a moratorium on foreclosures in the state. The postponement of foreclosure proceedings would apply to homeowners who have filed complaints with the state Division of Banks, and officials say it is unlikely that the requests would be turned down. The state, which had approximately 20,000 foreclosure filings in 2006, plans to seek delays on a "case-by-case" basis. "We will bring the Massachusetts standard nationwide," declared Marks, head of the Neighborhood Assistance Corp. of America.
Back to Top
Bill Targets Predatory Lending Practices
Portland Press Herald (Maine) (05/01/07) Murphy, Edward D.
Amid rising foreclosure rates and unchecked predatory lending, a bipartisan proposal was introduced this week in the Maine Legislature that would make mortgage brokers statewide subject to numerous new restrictions. The bill not only seeks to limit the fees lenders can collect on a loan, but also aims to prohibit mortgage clauses that restrict a borrower's ability to go to court and slashes the ceiling on lenders' fees to 5 percent of the total loan from 8 percent. Additionally, the measure would toughen the penalties for violations and require greater disclosure on loan documents. Uriah King, a policy associate with the Center for Responsible Lending, said that Maine's proposal would "go an awfully long way toward addressing the predatory lending abuses that have led us to this foreclosure crisis."
Back to Top
No Consensus in Congress on Subprime Issues
Home Equity Wire (05/01/07)
Legislators and industry groups have voiced various solutions for the nation's rising number of subprime foreclosures, but Congress has yet to weigh in on the dilemma. Sen. Charles Schumer (D-N.Y.) cites a report by the Joint Economic Committee that claims one million of the "exploding" adjustable-rate mortgages will reset in 2007. The report recommends establishing a relief fund run by the Federal Housing Administration. Consumer advocates and the National Association of Consumer Bankruptcy Attorneys want Congress to reform the bankruptcy code so homeowners can restructure their expensive subprime loans. However, the American Financial Services Association (AFSA) disagrees with the proposed bankruptcy reform, asserting that such changes would damage the lender's security interest in the loan. AFSA President Chris Stinebert says, "The last thing the real estate industry needs right now is more uncertainty."
Back to Top
Mortgagers Accept Assistance Guides
Winston-Salem Journal (NC) (05/03/07)
The Mortgage Bankers Association has joined Citigroup Inc., JPMorgan Chase & Co., HSBC Holdings Corp., Fannie Mae, Freddie Mac, and several other major players in the residential finance industry in endorsing new principles to help subprime borrowers on the verge of losing their homes. The principles include making early contact with borrowers having trouble with payments to work out an arrangement and modifying rates and terms to make their loans more affordable. "These principles represent a critical step in preserving homeownership and economic opportunity," according to a statement by Senate Banking Committee Chairman Sen. Christopher Dodd (D-Conn.), who initiated them. However, industry heavyweights Countrywide Financial Corp. and Wells Fargo & Co. did not agree to adopt the set of principles.
Back to Top
University Rated Lenders by Perks
Wall Street Journal (05/01/07) P. A4; Chaker, Anne Marie; Sataline, Suzanne
School documents show that the University of Texas at Austin rated student-loan companies based on incentives such as meals provided to campus officials. Officials with the university's Office of Student Financial Services (OSFS) assessed the companies on factors such as loan volume, customer service, reduced fees for students, as well as "the number of lunches, breakfasts, and extracurricular functions for entire OSFS staff." Lenders were ranked according to their generosity in providing such perks, and were ranked "very good" to "poor." Student Loan Xpress was rated "very good" in providing free food and functions, said a school review from March 10, 2006. In April 2007, the university's associate vice president and director of student financial aid, Lawrence Burt, was placed on paid leave after it was discovered that he owned shares of a former parent of Student Loan Xpress. Burt contends there is no link between the stock he owns and the fact that the firm was chosen as one of 20 lenders for services and benefits. Barry Burgdorf, vice chancellor and general counsel for the University of Texas system, says he is probing into Burt's oversight of OSFS and will report has findings to the university regents and president. Meanwhile, in a mid-April memo to officials at the 15 universities in the Texas system, Burgdorf requested that they "cease and desist use of all preferred lender lists" until his review is complete.
Back to Top
Warnings on Student Lenders Unheeded
Washington Post (05/01/07) P. A1; Paley, Amit R.
Allegations of dubious business practices among student lending companies and financial institutions were first addressed in 2001, when the Bush administration rejected a proposal for industry reform. That negative response has now put the Education Department under fire, as some attribute the inadequate federal oversight to an overly close relationship between the department and the student loan industry. The Education Department has defended its stewardship of student financial aid; however, the 2001 policy draft reveals that some Education Department officials were seeking clarification on the definition of prohibitive payments. The department ultimately decided to let the financial aid world create its own standards, but the endeavor fell apart, as did a 2006 rule-establishing effort. The Education Department is currently striving to establish industry rules that would stop conflicts of interest, such as lenders offering financial favors to colleges in exchange for increased student business. Recent investigations have found many such links, but it remains unclear whether the transactions defied federal prohibitions.
Back to Top
Bankruptcies Rise Fastest for Over-55 Group
Washington Post (04/27/07) P. D3; Day, Kathleen
In a trend blamed in some measure on escalating mortgage debt and medical costs, U.S. seniors are filing for personal bankruptcy at a faster pace than any other age group. A study from researchers at the Administrative Office of the U.S. Courts found that even though the number of Americans aged 55 and up expanded to 30.1 percent of the national population in 2002 from 29.2 percent in 1994, the share of seniors seeking bankruptcy protection swelled 45.8 percent to 14 percent from 9.6 percent over that same time frame. The study results are being brought to light at a time when other research is documenting how more older consumers are leaning on home-equity loans and credit cards to foot their medical bills.
Back to Top
Rent-to-Own Legislation Garners 40 Co-Sponsors--and Counting
RTO Magazine (04/26/07) May, Richard
Over 200 rent-to-own dealers are seeking congressional co-sponsorship for H.R. 1767 and S. 1012, federal legislation classifying the rent-to-own transaction as a lease. The bills also offer significant consumer safeguards. After conducting almost 400 meetings on Capitol Hill, dealers will now follow up with congressional members, who are currently reviewing the legislation. The bills have so far attracted a total of 40 co-sponsors.
Back to Top
Car-Loan Sector: Few Road Bumps
Financial Week (04/30/07) Henry, Jim
Subprime auto lenders have not been adversely affected like their counterparts in subprime mortgage lending. The reason is that car financing and home financing are dissimilar. For example, car lenders are unable to make adjustable-rate loans, so the effect of higher interest rates has not affected them as much. Another difference is that cars cost much less than homes, so a car loan is generally less stressful for borrowers. Furthermore, car lenders have generally been more restrained in their lending. GMAC's subprime automotive subsidiary, Nuvell Financial Services, has narrowed its subprime loan offerings, and Ford Credit shut down one of its subprime subsidiaries--Fairlane Credit--five years ago. Ford Credit also sold another of its subprime subsidiaries, Triad Financial, in 2005. Compared to other lenders, GMAC is more prone to keeping auto loans on internal books instead of reselling them, requiring GMAC to be more careful than other lenders to avoid having to assume any loan defaults. "We evaluate all aspects of the loan because we know the minute it's on our books, it's going to be with us until that contract is eventually paid off," says Barbara Stokel, executive vice president of GMAC's North American Operations. Standard & Poor's reports that losses on securitized subprime loans are in decline. In the third quarter of 2006, such lenders saw average loan losses of roughly 4.2 percent, down from 5.3 percent in 2005.
Back to Top
Some Nonfinancial Firms May Get Bank Charters
Wall Street Journal (05/03/07) P. A4; Paletta, Damian
The House Financial Services Committee approved a ban on commercially owned industrial loan companies Wednesday, but panel leaders signaled a final bill likely will have to include exceptions for several commercial firms, including automakers, to win over skeptics in the Senate. However, the deal would leave out retail giants such as Wal-Mart Stores Inc. and Home Depot Inc. The issue of whether commercial firms should be allowed to own industrial banks has emerged as one of the most divisive financial-services policy questions in Washington. Critics have argued that allowing commercial firms to own banks presents a dangerous mixture of banking and commerce, possibly putting the federal-deposit-insurance system at risk if a commercial firm fails. Supporters argue that these charters have operated safely for years and offer consumers more choice.
Back to Top
Volkswagen and HSBC Team Up to Offer Auto Loans in Argentina
BankNet 360 (04/27/07) Bernard, Stephen
Volkswagen Financial Services is teaming up with HSBC to provide financing choices for people in Argentina to purchase or lease Volkswagen or Audi vehicles. Under the joint venture, Volkswagen Financial Services will manage product and business development, marketing, and sales, while HSBC will oversee risk management, collections, and other operations via its HSBC Bank Argentina division. Volkswagens' chief executive says Argentina is among the 10 biggest markets for Volkswagen vehicles worldwide.
Back to Top
Atlanta Braves and GE Money's Sport Finance Program Helps Fans
Huliq.com (04/27/07)
GE Money's Sales Finance unit has united with the Atlanta Braves to provide Braves fans with a new, affordable, and convenient way to pay for ticket packages. Ticket packages over $199 are eligible for the GE Money Sport Finance Program. The program's 90-day promotion offers fans no-payment and no-interest terms, so long as the balance is paid before the promotional term ends. Turner Field will display signs with the GE Money brand. Dennis Murphy, vice president of GE Money's Sporting Goods industry, explains that the company is "pleased to partner with a team like the Braves to provide flexible financing options for their tremendous fan base."
Back to Top
ILC Bill Clears House Committee
AFSA staff have been carefully following the debate on industrial banks and even testified against the measure in committee. On May 2, however, the House Financial Services Committee reported out HR 698--the Industrial Bank Holding Company Act--to the full House. The committee adopted a Manager's amendment, which clarified that securities firms with ILCs would continue to come under supervision of the Security and Exchange Commission. The committee briefly entertained an amendment offered by Rep. John Campbell (R-CA) to provide an exception for all vehicle manufacturing companies. After a commitment from Chairman Barney Frank (D-MA) to address their concerns in negotiations with the Senate, Rep. Campbell withdrew the amendment. In preparation for the markup, committee staff were very clear that Chairman Frank hoped that no amendments would be offered to his Manager's amendment. Keeping the bill "clean" helps the chairman in negotiations with the Senate.
AFSA president and CEO, Chris Stinebert, called the bill "unfair and anti-competitive." To read his entire statement, click here.
Back to Top
President's Identity Theft Report Faces Tough Hurdle in Congress
The President's Identity Theft Task Force released its Strategic Plan, "Combating Identity Theft" on April 23. (Links to the Strategic Plan and Volume II, Supplemental Information are included below.) AFSA sees this as one measure among many that will soon emerge around this issue and will keep members informed.
The Task Force credited the regulatory structure under which financial institutions operate as the most effective way to prevent ID theft. It emphasized the need for all business sectors to take the precautions that financial entities are required to protect sensitive personal information wherever it is used, stored or transmitted. In AFSA's view, the task force does use what appears to be an overly broad definition of identity theft, but does take care to differentiate between "new account fraud" and "existing account fraud." Since this plan is viewed as a White House initiative, it will face a hurdle in separating the content from the messenger as Congress considers how much of the plan to incorporate in its upcoming federal response.
To see the Strategic Plan, click here. To see the Supplemental Information, click here.
Back to Top
Senate Commerce Committee Begins Legislative Cycle on Identity Theft
The Senate Commerce Committee approved S. 1178, the "Identity Theft Prevention Act" on April 25. It is important to note that while this bill is imperfect, this will be first of what could be eight Congressional Committees to address data security this year. Such issues as credit freeze, the Federal Trade Commission (FTC) "super-regulator" status and state Attorney General enforcement all infringe on the jurisdiction of other committees. These issues will need to be addressed and a compromise reached before any comprehensive bill reaches the President's desk for a signature.
The Senate Judiciary and House Energy & Commerce Committees both have introduced legislation and will be the next to mark up their bills. Senate Banking and House Financial Services Committees are expected to draft bills in the next couple weeks, and AFSA will pass copies of those bills along to members in the near future.
Back to Top
AFSA welcomes its newest members and looks forward to working with them in the future.
Active Membership
Charles Younce
Beacon Finance Corporation
La Follette, Tennessee
Commercial Membership
Shelly Huchel
Vice President, Investor Relations
Allied Capital Corporation
Washington, DC
www.alliedcapital.com
Associate Membership
Ed Bourgeois
President & CEO
My EZ Car Care
River Ridge, LA
www.myezcarcare.com
Christine Renard
Senior Vice President
BoS (USA) Inc. (Bank of Scotland)
New York, NY
Back to Top
Abstract News © Copyright 2007 INFORMATION INC.
|
In This Issue:
AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. For more information,
please contact newsbriefs@afsamail.org.
AFSA's mission is to protect and improve the consumer credit business, maintain a positive public image, and create a legislative climate in which reasonable credit regulation can and will be enacted. The Association operates in the public interest, encourages and maintains ethical business practices, supports financial education for consumers of all ages, and provides other assistance in related fields on an as-needed basis. The American Financial Services Association has provided services to its members for over ninety years. The Association's officers, board, and staff are dedicated to continuing this impressive legacy of commitment through the addition of new members and programs, and increasing the quality of existing services.
|
