September 20, 2007
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Two Additional Educational Sessions Offered at AFSA's Annual Meeting
AFSA Files Amicus Brief in “Firm Offer of Credit” Claim
Complimentary Webinar to be Offered for Associate Members
AFSA Joins Trade Groups in Raising Concerns about Legislative Proposals
RouteOne Presents Captive and Non-Captive Funder of the Year Awards to GMAC and Wells Fargo Auto Finance
American General Breaks Ground on Downtown Evansville HQ
Payments Hit Seen From Search Firms
Would Credit Restrictions Hurt Low Income Borrowers?
Child Support Program Testing Debit Cards
House Votes to Overhaul the FHA
Home Woes Seen Aiding Repeat Try at RESPA Fix
Predatory Lending Laws Debated
D.C. Payday Bill Advances
$20 Billion College Aid Bill Heads to White House
Bankruptcy Filings Continue to Climb
Internet Payday Lenders Don't Always Play by the Rules
The Student-Loan System Needs a Major Overhaul
Buying Your Next Car: You Hold the Keys
Beyond Bread & Butter: How Auto Lending Can Be a Differentiator for C.U.s
Subprime Auto Losses, Delinquencies Rose in 2006, Study Finds
Online Auto Loan Company to Provide Auto Financing Options for Women
Two Additional Educational Sessions Offered at AFSA's Annual Meeting
Plan on attending two newly added, timely and educational sessions at this year’s annual meeting at the Four Seasons Aviara in San Diego on Monday, October 29, both starting at 2:00 p.m.
1. The Critical Link: How to Understand, Enable and Engage Employees to Deliver the Right Customer Experience
Thad Peterson, Division Vice President, Sector Strategy with Maritz Travel-- Financial Services Sector.
As a division vice president and financial services strategy expert at Maritz, Thad Peterson understands the key to maintaining a positive customer experience in uncertain financial times--EMPLOYEES. Creating a performance culture in which employees are delivering on your brand promise and gaining your customers’ trust is the only way to stay competitive. In his session, Peterson will discuss how successful companies motivate their employees to maintain positive customer relationships and increase sales, even in an era of mistrust.
2. Financial Business: Technology Synergy in the 4th Wave
Jeff Wacker, Director of Strategy, EDS.
Emerging capabilities with the potential to address emerging needs and create new opportunities for the financial industry are now coalescing into a major change in the way information technology is applied to both the financial industry and the consumers. In this presentation, EDS Fellow and Futurist Jeff Wacker will explore the beliefs that are driving the next generation of technology, enterprise and personal change. He will focus on the profound impact new information technology will have on enterprises in the financial business, people, and society.
(click for web site)
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AFSA Files Amicus Brief in “Firm Offer of Credit” Claim
AFSA is participating as an amicus in the Bruce v. Key Bank National Association case, which involves a Fair Credit Reporting Act (FCRA) “firm offer of credit” claim. The district court found that the defendant-lender violated the statute because its letter did not contain specific loan terms that the Seventh Circuit case law required. The court nonetheless entered a summary judgment for the lender; it found that the evidence presented showed that the lender’s violation of FCRA was not willful.
AFSA is participating in the Bruce appeal to explain to the Seventh Circuit why the industry’s reading of FCRA was objective. In the future, such “firm offer” cases could then result in a win for the lenders even if the Court continues to hold (erroneously, AFSA believes) that the pre-screened letters must contain a firm offer on their “four corners.”
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Complimentary Webinar to be Offered for Associate Members
Associate Members should mark their calendars for “How to Make the Most of Your AFSA Associate Membership,” scheduled for Wednesday, October 3, at 2:00 p.m., ET. Marguerite Watanabe, Chair, AFSA Associate Member Advisory Board, (Principal, Connections Insights) and Sheilah Harrison, Vice President, AFSA Membership Services will lead this 60-minute Webinar.
Associate Members will learn about the members-only information available on the AFSA Web site, how to access membership lists, how to maximize their Buyer’s Guide listing, how to make the most of becoming a Marketing Partner and other ways to connect with AFSA members who are current or potential clients. To register, contact Sheilah Harrison at sharrison@afsamail.org. She will send you the Dial-in number and Web access information.
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AFSA Joins Trade Groups in Raising Concerns about Legislative Proposals
AFSA joined eleven other associations in sending a joint letter to members of the Senate Judiciary Committee. It raised concerns about legislative proposals that would permit bankruptcy judges to changes the terms of a mortgage in a Chapter 13 proceeding. AFSA will monitor actions related to these proposals and will keep members posted on future developments. For additional information, please contact Bill Himpler at bhimpler@afsamail.org or 202-466-8616.
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RouteOne Presents Captive and Non-Captive Funder of the Year Awards to GMAC and Wells Fargo Auto Finance
PR Newswire (09/19/07)
At the Las Vegas F&I Technology Conference and Expo, RouteOne declared GMAC and Wells Fargo Auto Finance the winners of the Captive and Non-Captive "Funder of the Year" awards. This was the second consecutive win for both finance companies, which are both integrated with the RouteOne platform. GMAC and Wells Fargo Auto Finance were selected by the readers of F&I magazine, who cast ballots online during July 2007 and August 2007 at the F&I magazine Web site. The awards pay tribute to the companies' support of the vehicle dealer community. Mike Jurecki, CEO of RouteOne, asserted that GMAC and Wells Fargo Auto Finance supply exceptional service to their dealers, and possess the foresight and dedication needed to thrive in the "sometimes unpredictable world of auto finance."
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American General Breaks Ground on Downtown Evansville HQ
Inside Indiana Business (09/14/07) Bahamonde, Raquel
American General Financial Services has announced it has begun construction on a new headquarters in Evansville, Ind. The $35 million project is intended to allow the company to merge several of its offices in the city. When completed, the headquarters will make room for 150 new positions in the company, and help retain at least another 960.
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Payments Hit Seen From Search Firms
American Banker (09/17/07) Bills, Steve
Research by Deloitte Consulting has found that e-commerce, particularly the technique known as "search to purchase," could disrupt card networks' interchange fees. Card interchange fees usually range from 2 percent to 3 percent, depending on the size of the transaction. E-commerce providers such as Google, however, can earn 7 percent, mostly in advertising revenue, when a shopper uses a search engine to find a product online. According to Howard Weinberg, a principal at Deloitte Consulting, Google may be willing to rebate a portion of its fees to merchants in order to promote their use of its payment system, Google Checkout. Weinberg also noted that with online shopping growing 19 percent annually, search-engine companies such as Google and Yahoo! could quickly build scale to compare with Wal-Mart and force card companies to reduce their interchange fees.
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Would Credit Restrictions Hurt Low Income Borrowers?
TPMCafe (09/16/07) Warren, Elizabeth
New research from Angela Littwn is challenging the well-established substitution hypothesis in the credit regulation debate. Academics and bank lobbyists advance the substitution hypothesis, which says that imposing limits on credit cards would force poor U.S. citizens to seek needed funds from dangerous lenders. After studying low-income families, Littwn found that families without credit cards possess less total debt than families with credit cards. In addition, the study's participants ranked credit cards as one of the worst credit options; the families ranked direct borrowing from retailers much higher, and rated pawn shop and rent-to-own establishments as equivalent to credit cards. The participants viewed credit cards as particularly perilous because of their hidden fees, skyrocketing interest rates, and lack of limits. In an emergency, participants said they would borrow from friends and family if they had no access to credit cards or payday lenders, according to the study. However, Littwn has deemed the findings preliminary, because the study drew from a small data pool and was conducted in a state with no payday lending. Still, the research suggests that restrictions on credit cards could be effective if the substitution hypothesis is, in fact, faulty.
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Child Support Program Testing Debit Cards
Associated Press (09/16/07)
The Wisconsin Child Support Program is testing a program that will allow parents who receive child support payments by check to receive their funds on a debit card instead. The cards can be used to withdraw money at ATMs, and can be used to make purchases at the point of sale and online. The program is already available in St. Croix County, Wisc. Officials say that if the test goes well, parents in other counties will be offered the debit cards in the next several months.
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House Votes to Overhaul the FHA
Los Angeles Times (09/19/07)
The U.S. House of Representatives on Tuesday passed legislation to modernize the Federal Housing Administration (FHA) in a vote of 348 to 72. The measure overhauls the FHA's mortgage insurance program to allow current homeowners to refinance before they succumb to foreclosure and raises the limit on the value of loans it can insure. The Bush administration wants to boost the limit from $362,000 to $417,000, which is also the limit for Fannie Mae and Freddie Mac to invest in loans, but the House bill will make mortgages of up to $829,750 eligible for the FHA program under some circumstances. Low-income, first-time home buyers have traditionally used the FHA program, but many have borrowed from subprime lenders offering easy loan terms in recent years, driving down the agency's share of the origination market to 1.8 percent from 9.1 percent, according to Inside Mortgage Finance.
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Home Woes Seen Aiding Repeat Try at RESPA Fix
American Banker (09/17/07) P. 1; Hopkins, Cheyenne
The housing downturn and turmoil in the subprime mortgage market have prompted HUD to re-focus on reforming the Real Estate Settlement Procedures Act, with initial results expected by early next year. The proposal reportedly will be centered on creating a new good-faith estimate form that is more in line with the HUD 1 statement of settlement charges, disclosing such things as yield-spread premiums and providing the form to borrowers earlier in the mortgage process, says former HUD official turned lobbyist Howard Glaser. Even though a controversial provision from HUD's last reform attempt--the bundling of settlement services--likely will be eliminated, experts still expect industry representatives to butt heads over the matter to some extent.
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Predatory Lending Laws Debated
Raleigh News & Observer (NC) (09/13/07)
In the months to come, Capitol Hill lawmakers may take steps to make banks that package mortgage securities liable for fraud perpetrated by lenders. Federal predatory-lending legislation has become a hot-button issue with foreclosures rising and the housing crisis worsening, and consumer advocates are pressing hard for Wall Street's aggressive role in the increasingly complicated mortgage market to be acknowledged and subsequently checked. Scott DeFife, co-head of legislative affairs at the Securities Industry and Financial Markets Association, cautions that if investors in mortgage-backed bonds are suddenly faced with broad and unlimited liability, "the market will dry up." Currently, throughout much of the country, most borrowers have no legal recourse to hold the current owners of their home loans responsible for the actions of the original lender.
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D.C. Payday Bill Advances
American Banker (09/19/07) Carr, Matt
In a landslide vote, the District of Columbia council ratified the Payday Loan Consumer Protection Act of 2007, which, if signed into law by Mayor Adrian Fenty as anticipated, would limit the annual percentage rate on payday loans to, at most, 24 percent. The bill's sponsor, councilwoman Mary Cheh, explained that less than 1 percent of payday loan borrowers have the capacity to repay the loan within two weeks, and are therefore taken advantage of by the industry's "predatory nature." Councilman Marion Barry was the legislation's only challenger, arguing that there is great demand for payday lending services in Washington, D.C., and that the bill would force most of the city's payday lenders to shut down. Cheh responded by predicting that other sources of emergency funds would surface in the city as they have in the 13 other states and counties that have imposed a 24 percent cap on payday loans.
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$20 Billion College Aid Bill Heads to White House
USA Today (09/19/07) P. 3B; Block, Sandra
Congress passed a new college aid bill worth $20 billion on Sept. 18. The new bill is designed to slowly reduce interest rates on Stafford loans starting in 2008. If the bill becomes law, rates will continue to decrease until 2011, when they will fall to 3.4 percent. The rate cuts will only apply to government subsidized Stafford loans, and they will not be available to any current Stafford loan holders. The bill will also limit the amount of discretionary income borrowers will have to use to pay off these loans to 15 percent while allowing the government to pay interest on the loan for the first three years. Under the bill, the government has also agreed to offer loan forgiveness to individuals such as fire fighters and teachers who work in public service for at least 10 years. If the bill is signed by President Bush as expected, these new programs will be financed by reducing federal funding to private lenders.
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Bankruptcy Filings Continue to Climb
SubPrime Auto Finance News (09/18/2007)
According to the American Bankruptcy Institute (ABI), the number of American consumers filing for bankruptcy rose 17.3 percent from July to August. Bankruptcy filings are also up 31.2 percent from the same time last year.
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Internet Payday Lenders Don't Always Play by the Rules
Kansas City Star (09/15/07) Wenske, Paul
A federal court recently sided with the Kansas banking commissioner's office in a case against Internet payday lenders, ruling the state has the right to impose consumer protection laws on Internet financing companies. The judge's decision will likely prohibit Internet lenders from operating in Kansas without a license, regardless of whether or not they have a "storefront" presence, and will help consumer groups enforce the state's business rules. In light of the decision, Kansas is proceeding in a case against Utah-based Quik Payday Inc., demanding a $5 million fine and $445,000 in refunded money, to be distributed to 972 clients in the state. Kansas lawmakers allege Quik Payday made over 3,000 loans to the state's consumers, charging exorbitant interest rates and ignoring Kansas commerce laws under the guise of Internet retail. Quik Payday is taking the case to federal court in hopes of overturning the judge's decision, claiming Kansas has no authority to regulate Internet transactions due to interstate commerce laws.
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The Student-Loan System Needs a Major Overhaul
American Enterprise Institute (09/13/2007) Hess, Frederick M.; Squire, Juliet
New York Attorney General Andrew Cuomo and Congress both merit commendation for attending to the outmoded and overloaded student loan industry, but the system still needs to be reassessed and re-engineered, according to Frederick M. Hess and Juliet Squire of the American Enterprise Institute (AEI). Since the Higher Education Act was passed in 1965, a college education has transformed from a luxury to a necessity, but the student-aid system has not changed in response. In addition, federal aid enables students to attend the college of their choice, despite the huge gap between the cost of a public college and the cost of a private education. Hess and Squire recommend that Congress consider six measures to heighten transparency and increase fairness for students. Re-evaluating federal subsidies is one such step, as Congress' recent decision to cut borrowers' interest rates in half will force taxpayers to underwrite the across-the-board subsidy. Hess and Squire call on private lenders to underwrite customized and convenient loans for students wishing to attend expensive colleges. Congress should continue expanding the use of income-contingent lending to eventually offer a variety of repayment models tailored to students' post-graduation income trajectories. Hess and Squire advocate reallocating money spend on the HOPE and Lifetime Learning tax credits to Pell Grants to give truly needy students access to college. Holding loan originators accountable for their loans may produce a more sensible alignment of incentives, as the loan originators would possess a portion of the risk. Finally, making the financial aid application user-friendly would be helpful, as would providing more training to financial aid officers.
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Buying Your Next Car: You Hold the Keys
Military Money (09/01/07) Stinebert, Chris; Koblenz, Andy
U.S. military personnel are more knowledgeable about the process of purchasing and financing a car than the general American public, and are more likely to devote time to exploring their financing options, according to a survey by Americans Well-informed on Automobile Retailing Economics (AWARE). While only 58 percent of American consumers surveyed reported feeling informed about auto financing, 75 percent of military respondents reported feeling well-versed with the process. Before making their last car purchase, 37 percent of military respondents conducted at least three hours of research, in comparison to only 26 percent of the general public polled. These findings make sense in light of the personal finance education programs being run throughout the military, such as the Personal Financial Management Program hosted by the Airman and Family Readiness Center at New Mexico's Cannon Air Force Base. The AWARE poll also discovered that younger military respondents possess a stronger grasp of the car buying process than their older military colleagues, because younger military personnel are more likely to investigate multiple financing options and review their credit score before shopping around. In addition, a greater percentage of younger military personnel plan to negotiate financing for their next car purchase, and want to learn more about car financing from the car financing industry.
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Beyond Bread & Butter: How Auto Lending Can Be a Differentiator for C.U.s
Credit Union Journal (09/17/07) Vol. 11, No. 37, P. 8; Jacobson, David
Credit unions striving to gain a competitive edge may want to consider collaborating with the automotive industry to fulfill the auto buying needs of members and consumers. Indirect lending is an effective way for credit unions to raise membership. Still, credit unions must manage current member growth and new member growth separately, as current membership is a credit union's most valuable resource and must be diligently fostered. Credit unions can retain a greater percentage of the car loans procured by current members by providing such members with a positive car buying experience and by offering credit union financing at the point of sale. Credit unions that offer indirect lending will be held responsible for the purchase experience, and must therefore be prepared to address member issues and complaints, either internally or by partnering with an adept provider.
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Subprime Auto Losses, Delinquencies Rose in 2006, Study Finds
BankNet 360 (09/17/07) Belles, Marcie
According to the National Automotive Finance (NAF) Association's survey, credit performance in the subprime auto sector began to deteriorate before the 2007 mortgage problems emerged. In addition, the subprime auto sector should remain fairly insulated from the current mortgage sector woes, predicted Jack Tracey of NAF. Between 2005 and 2006, subprime loan delinquencies rose from 6.8 percent to 11.6 percent, according to the NAF survey. Repossessions increased by 7.6 percent from 2005 to 2006, as well. The survey also discovered that loan terms have been expanding since 2004, when only 63 percent of subprime loans were written for terms of over 60 months, compared to 74 percent of subprime loans in 2005 and 76 percent of subprime loans in 2006.
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Online Auto Loan Company to Provide Auto Financing Options for Women
PR Leap (09/16/07)
AskPatty.com is unveiling an Auto Finance Center for Women, with help from partner myAutoloan.com, an online auto loan company. The free service presents users with real, online loan offers from nationally recognized direct-to-consumer lenders like HSBC and Wachovia. Before even going to the car dealership, users can receive up to four online car loan offers simply by filling out an online car loan application. Doing so enables women to review and compare multiple financing opportunities in order to find the best loan, and also accelerates the dealership auto loan process. Greg Thibodeau, CEO of myAutoloan.com, hopes the service will counteract the fact that, according to consumer advocacy groups, women often assume less favorable loan terms and conditions than the average auto financing consumer, and pay higher interest rates as well.
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Abstract News © Copyright 2007 INFORMATION INC.
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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.
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