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April 24, 2008
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Financial Literacy Day on Capitol Hill Fast Approaching
New AFSA Vehicle Titling Committee Names Officers
New Member Welcome
GMAC Financial Services and War on Poverty-Florida Partner to Increase Financial Education in Florida
Wells Fargo Honors Earth Day 2008, Launches Three Initiatives
Payments System Review Flags Ongoing Regulation
FACTA Shatters Credit, Debit Card Myths
House Dems: Fed's Card Rule Efforts Not Enough
Fed Drafting New Credit Card Rules
House Panel Approves $15 Billion Foreclosure Bill
FHA Bill's Vote Nears, Questions Still Linger
Social Security Seeks Ways to Deter High-Interest Lenders
Alexandria Tax Plan Targets Payday Loans
House Passes Bill to Expand U.S. Loans for Students
CUDL Reports on Credit Union Performance
TransUnion.com Quarterly Auto Lending Analysis Finds Areas With Large Population Growth Also Have Greatest Levels of Average Auto Loan Debt
Running on Empty
CNW: Subprime Approvals Drop to Less Than 2 Percent of Loans
Financial Literacy Day on Capitol Hill Fast Approaching
The AFSA Education Foundation (AFSAEF) will participate in the 6th annual Financial Literacy Day on Capitol Hill on April 28. Presented by Junior Achievement, the Jump$tart Coalition, and the National Council on Economic Education, the event is intended to raise awareness of existing efforts to help educate America’s youth on personal finance issues. The event is sponsored by the American Institute of CPAs, Bank of America, Capital One, Freddie Mac, The Goldman Sachs Foundation, HSBC North America and State Farm.
AFSAEF will talk to attendees about MoneySKILL, the foundation’s free online personal finance curriculum, and will have numerous financial educational materials available in both English and Spanish.
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New AFSA Vehicle Titling Committee Names Officers
During an April 17 meeting, AFSA’s new Committee of Professional Interest, the National Title Solutions Forum (NTSF), elected its officers. Martha Edwards of Bank of America will serve as Chairman, Shirley Butler of Mercedes-Benz Financial as Co-Chairman, and Colleen Borys of PDP as Secretary. Kim Ford of Nissan Motor Acceptance Corporation will act as the committee’s liaison to AFSA. Effective immediately, the terms are for one calendar year.
Other board members include: Connie Anderson with Chase, Lori Ashby with Toyota Financial Services, Lisa Bryant with Navy Federal Credit Union, Beverly DeVine with FDI Collateral Management, Arlene Weinstock with VINTEK, and John Yarbrough with PAR North America.
The committee also decided to retain the National Title Solutions Forum name to continue to build upon the name’s recognition in the industry.
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New Member Welcome
AFSA welcomes new associate members Peak5 and PAR North America.
A privately-held loan servicing provider headquartered near Denver, Peak5 specializes in providing customizable and technologically advanced loan servicing solutions for the automotive, financial services, healthcare, and credit card industries. Web site
Headquartered outside of Indianapolis, PAR North America is a nationwide provider of vehicle remarketing services including repossessions, titling, vehicle transportation and lease end-of-term. Web site
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GMAC Financial Services and War on Poverty-Florida Partner to Increase Financial Education in Florida
PRNewswire (04/21/08)
GMAC Financial Services is offering a $25,000 grant to War on Poverty-Florida to promote financial literacy in Jacksonville, Miami, and Tampa, Fla. As part of the effort, GMAC will also offer GMAC SmartEdge financial education training to the organization's community partners. At the heart of the partnership between GMAC and War on Poverty-Florida is the "train-the-trainer" program, which will provide key partners with training on GMAC SmartEdge's financial education program. Those partners will then pass on the training they received to community members in targeted neighborhoods in select cities. "Given the economic trends in the U.S. and specifically Florida, we are excited about the opportunity to team with GMAC and SmartEdge to give consumers an advantage in managing their personal finances and developing good financial habits for long-term success," said War on Poverty-Florida's Karen Landry.
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Wells Fargo Honors Earth Day 2008, Launches Three Initiatives
PRNewswire (04/21/08)
In honor of Earth Day 2008, Wells Fargo & Co. is sponsoring three programs with eco-friendly features. From now until June 10, Wells Fargo customers who enroll for online-only statement delivery for their private or business account will have the opportunity to win up to $25,000. Customers already enrolled to receive both online and paper statement delivery will be entered automatically for opting out of paper statements. The Wells Fargo Online Statements Sweepstakes will award a total of $50,000 to 18 winners. The bank has also expanded its online rewards program with environmentally friendly options. Wells Fargo customers enrolled in the bank's Enhanced Rewards, Exclusive Rewards, Rewards for Business Check Card, Wells Fargo Business Card Rewards, and Wells Fargo BusinessLine Rewards programs are now eligible to receive green rewards options that can be redeemed for more than 20 eco-friendly items, including an EcoPod Recycling System, an AirPod Personal Air Purifier, and an Allsop Green Solar Swirl Light. Wells customers who buy a new residential photovoltaic solar energy system with a home equity loan or line of credit extended by the bank can also qualify for a $250 Wells Fargo Visa gift card. The offer expires Dec. 31, 2008.
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Payments System Review Flags Ongoing Regulation
Australian Associated Press (AAP) (04/21/08)
A review of reforms focusing on the Australian card payments system cites the probable need of ongoing regulation to prevent instability caused by an absence of competition. The reforms overturned card issuers' rule that merchants cannot pass on credit card interchange fees to customers, and established that average interchange fees in the Visa and MasterCard protocols could not exceed 0.5 percent of transaction value. A trio of options were considered in the latest review, including the continuance of the current state of affairs, the further reduction of credit card fees to 0.3 percent of transaction value, or the Payments System Board's withdrawal from interchange regulation if the industry can guarantee competition by reworking its arrangements. "In the absence of regulatory oversight, there is a significant risk that interchange fees in some systems will be set at levels that are too high from the point of view of the efficiency of the system," the board noted in the review.
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FACTA Shatters Credit, Debit Card Myths
Green Sheet (04/21/08)
The Fair and Accurate Credit Transactions Act (FACTA) passed by the House five years ago states that "no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipts provided to the cardholder at the point of sale or transaction," and the printing and presentation of receipts with complete card numbers after Jan. 1, 2008, constitutes a breach of FACTA. More than 300 class-action lawsuits have been filed in the United States against merchants and acquirers concerning such violations. Although fines and penalties can only be levied against retailers whose FACTA violations are determined to be "willful," attorney Theodore F. Monroe says, "it's pretty much impossible for any major merchant to show that it was not a willful violation." Monroe doubts that smaller merchants will be hit with much litigation, as the class-action suits should be chiefly focused on the top "couple of hundred merchants in the country." He also says the damage caused by the theft of paper receipts with credit card numbers and expiration dates is limited when the Card Verification Value or the rest of the magnetic code is not provided. Merchants who feel they were shortchanged when they were configured for processing may take legal action against their card processors down the line. FACTA was passed a year prior to the creation of the Payment Card Industry Data Security Standard.
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House Dems: Fed's Card Rule Efforts Not Enough
American Banker (04/18/08) P. 1; Sloan, Steven; Kaper, Stacy
The House Financial Services Committee's Democratic leaders criticized regulators' efforts to combat abusive card practices, indicating they have no plans to wait for action by the agencies. Rep. Barney Frank (D-Mass.), a co-sponsor of related legislation, said it was a mistake to wait for the Federal Reserve during the subprime mortgage crisis and that it would continue to be a mistake. "To be honest, I look back" at the crisis and former Fed Chairman Alan Greenspan's decision "not to do anything for a long time" as a mistake, he said--"I wish we would have been able more vigorously to preempt him." Rep. Carolyn Maloney (D-N.Y.), who chairs the House Financial Services financial institutions subcommittee, said the legislation she and Frank co-sponsor would establish a "bill of rights" for credit card holders, to include bans on such practices as double-cycle billing and universal default. The time it has taken the Fed to take on the card practices has been criticized by some Republicans as well, such as Rep. Spencer Bachus of Alabama, the top Republican on the Financial Services Committee. "We've waited a long time for the Federal Reserve to issue final regulations regarding industry practices on consumer protection that are long past due, and I, for one, look forward to receiving them in the very near future," he said.
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Fed Drafting New Credit Card Rules
Washington Post (04/18/08) P. D03; Trejos, Nancy
Later this spring, the Federal Reserve will introduce new rules to impose limitations on the credit card industry's activities. Sandra F. Braunstein, director of the Fed's division of consumer and community affairs, said the regulations should be finalized by the end of this year and will incorporate some proposals from the Credit Cardholders' Bill of Rights, introduced by Rep. Carolyn B. Maloney (D-N.Y.). Maloney's bill would require card companies to notify consumers of any interest rate hikes in advance and allow cardholders to reject those fees. The bill has 100 co-sponsors; however, it still faces opposition from executives who say it is too restrictive and would lead to increased costs for all borrowers since it would be harder for companies to accurately assess a person's risk. "Without that ability to differentiate risk, less creditworthy consumers would have fewer means of accessing regulated credit, relatively risk-free consumers would face a higher cost of credit, and banks would have to rethink their lending models," said John P. Carey, chief administrative officer of Citi Cards. The Treasury Department's Office of Thrift Supervision, responsible for regulating all federal and some state thrift institutions, is also developing more severe credit card controls, which should be revealed soon.
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House Panel Approves $15 Billion Foreclosure Bill
New York Times (04/24/08)
The House Financial Services Committee has passed two bills that aim to ease the housing crisis. The first bill supported by Democrats seeks to avoid blight in neighborhoods hit hard by foreclosures by giving $15 billion in loans and grants to states, which would distribute the money to cities, counties, and towns to purchase and repair foreclosed homes. The measure was opposed by Republicans who insisted that private lenders who have taken ownership of these properties will be the main beneficiaries. The committee also passed a bill proposed by Rep. Michael Castle (R-Del.) and Rep. Paul Kanjorski (D-Pa.) that would prevent investors from filing suit against mortgage holders who assume losses by permitting struggling borrowers to refinance.
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FHA Bill's Vote Nears, Questions Still Linger
American Banker (04/24/08) P. 1; Kaper, Stacy
The House Financial Services Committee is expected to vote on a bill proposed by Chairman Barney Frank (D-Mass.) that would allow cash-strapped mortgage borrowers to refinance into FHA loans after lenders and investors write down the loans by 15 percent or more below the market value, despite the fact that numerous questions about the legislation have yet to be answered. Given that the bill permits participation only by those borrowers who cannot afford their mortgages, who live in their homes, who have mortgage debt-to-income ratios higher than 35 percent, and who obtained their loans before the start of the year, there are questions surrounding the number of borrowers who would benefit. While Frank believes as many as 2 million borrowers would be helped, private industry experts think just 300,000 to 500,000 borrowers are eligible. There also are concerns about whether lenders will take part in the program--as investors would need to approve the writedowns--as well as questions about how market values would be calculated and how second liens would be handled.
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Social Security Seeks Ways to Deter High-Interest Lenders
Wall Street Journal (04/22/08) P. A4; Francis, Theo
The Social Security Administration is worried that high-interest storefront operations are wrongfully taking Social Security direct-deposit payments from the elderly and disabled, and the agency is currently looking for alternative methods to deliver benefits. Over 80 percent of Social Security recipients get their benefits through direct deposit; however, more lenders are using that system to capture high-interest loan payments from people's benefits. Some lenders ask borrowers to deposit their Social Security checks directly into banks that partner with the lenders, but these banks are usually in different states and do not supply borrowers with checks or ATM cards, meaning borrowers have to go to the lender to obtain what is left of their monthly benefits after loan payments, interest, and fees are subtracted.
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Alexandria Tax Plan Targets Payday Loans
Washington Post (04/21/08) P. B5; Downey, Kirstin
Officials in Alexandria, Va., have proposed a new tax on payday lenders. If passed, payday and car-title lenders would be subject to a business license tax of 58 cents per $100 in gross receipts. Currently, the tax is set at 35 cents for every $100 of gross receipts, which is the same as other financial services firms. The city estimates the new tax would generate approximately $13,000 annually that could be used to improve financial education for at-risk consumers. The bill would also limit the maximum number of loans a customer could take out in a set time period. The bill originally called for a 36 percent cap on payday and car-title loan interest rates, but that has since been dropped from the legislation under fierce protests from Virginia's commercial lenders. The state currently caps interest rates for these types of loans at annual rates of 391 percent. However, payday lenders are still unsatisfied with the bill, arguing they are being unfairly targeted by the new tax increase. They have threatened to sue the city if the legislation is passed.
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House Passes Bill to Expand U.S. Loans for Students
New York Times (04/18/08) P. A22; Herszenhorn, David M.
The House has passed a bill aimed at preventing a student loan crisis before it happens. The bill boosts the amount of money students can borrow and allows the Education Department to buy federally guaranteed loans from private lenders so that banks can make more loans. "This is about making sure the lifeboats are going to float," said Rep. George Miller (D-Calif.), head of the House education committee and sponsor of the bill. Dependent students may now borrow up to $31,000 and independent students up to $57,500, up from $23,000 and $46,000, respectively. President Bush has indicated support for the bill. So far there has been no trouble in the student loan market, but lawmakers say all recent problems have happened suddenly and without warning, and the bill is intended to prepare for the worst. Critics say that is exactly the problem with the bill—that it addresses a crisis that has not happened and would strain taxpayer dollars in the event of a student loan credit crunch.
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CUDL Reports on Credit Union Performance
SubPrime Auto Finance News (04/22/2008)
The recently published CU Direct Corp. 2008 Auto Lending Business Intelligence Report concerning credit unions' performance in the auto-lending industry last year said it was equal to those of banks and additional lenders. A leading reason for this outcome might be that credit unions were able to provide competitive financing rates to their members compared to other groups, the report suggested. Credit unions made 16.9 percent of the auto loans issued in 2007, versus 18 percent in 2006. "Auto lending continues to be the one area where credit unions held a significant market share," noted CUDL market research analyst Joe James. He added that there are five states--Alaska, Colorado, Oregon, Utah, and Washington--where an individual credit union is the leading lender in the whole state. CUDL also said that credit unions revealed good risk management regarding auto-lending portfolios. Last year, the typical new-vehicle loan maturity was 72 months, compared to 65 months in 2006.
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TransUnion.com Quarterly Auto Lending Analysis Finds Areas With Large Population Growth Also Have Greatest Levels of Average Auto Loan Debt
PRNewswire (04/21/08)
A new report on auto lending trends published by TransUnion found that average car loan debt overall grew 0.13 percent in the fourth quarter of 2007, with the biggest growth taking place in the areas of the country with the largest population growth. Average debt was $12,738, with Nevada having the top average of $16,133 followed by Washington, D.C., with $15,818. Debt growth was highest in Oregon, with 3.55 percent, and D.C. with 3.34 percent. The highest delinquency rate was found in Louisiana, with 1.44 percent, while the lowest was Alaska, with 0.16 percent. Delinquencies are more prevalent in southeastern states, said TransUnion’s Ezra Becker, noting that the trend is a continued ripple in the economic problems caused by Hurricane Katrina and, indirectly, the current mortgage crisis. The areas with the greatest improvement in delinquency were Alaska, down 41 percent, North Dakota, down 35 percent, and Oregon, down 12 percent, though Becker noted that the delinquency rates in these areas were already so low that small improvements created large percentage changes.
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Running on Empty
Washington Post (04/20/08) P. F1; Mui, Ylan Q.
Further proof of the U.S. economic recession can be seen in the auto loan industry, where delinquencies are up. Payments on indirect auto loans more than 30 days past due hit a 17-year high in 2007, rising more than 3 percent in the fourth quarter. Though these delinquencies have not been restricted to a specific economic class, industry observers believe many are a derivative of ballooning mortgages that have made many homeowners late paying other bills. Furthermore, repayment plans that exceeded the standard 5-year loan period have accounted for a significant number of delinquencies. The trade group Americans Well-Informed on Automobile Retailing Economics, of which the American Financial Services Association is a member, recommends that consumers contact lenders as soon as their bills become unmanageable.
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CNW: Subprime Approvals Drop to Less Than 2 Percent of Loans
SubPrime Auto Finance News (04/17/2008) Reed, Jennifer
Subprime buyers and the dealers attempting to fund them are finding it hard to obtain approval for a new-vehicle loan, claims CNW Research's Art Spinella. During the first quarter, 1.38 percent of all loan approvals were subprime, versus over 12 percent a year earlier. Spinella noted that dealers are finding they need to send consumer-credit applications to a larger number of lenders to obtain approvals in 2008, which includes individuals who have high credit scores. He explained that in the first few weeks of 2008, prime borrowers' applications were sent to over three separate financial groups before getting a loan, versus 1.8 during the same time last year. For subprime, it was 5.6 organizations versus 4.2 a year ago. Spinella pointed out, however that there are regions of the nation that are still performing well, including the agricultural Midwest, where certain dealers are experiencing almost unprecedented vehicle sales. The California and Florida sectors are pulling down the nationwide numbers, because they comprise such a large percentage of overall American sales. Spinella discovered that the typical transaction price for a vehicle was $25,983 in 2008, compared to $26,174 in 2007.
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Abstract News © Copyright 2008 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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