AFSA Sets State Legislative Priorities for 2008
New Committee of Professional Interest Formed
AFSA Files Amicus Brief in Tex Star v. Regal
AFSA Plans to Submit Comment Letter to FTC Regarding Credit Freezes
New Member Welcome



BofA-Countrywide May Be a Bargain, But Risks Are Many
Options Are Open for ResCap, Says GM's Chief Financial Officer
Kyle Petty's Victory Invitational Announces Wells Fargo as Victory-Level Sponsor





Early Returns for Wal-Mart Prepaid Card Promising
Britons Strike Back at Bank Fees
Industry Outlook Darkens After Amex's Warning
Just Put It on My 401(k) Debit Card
Viewpoint: Disclosures: Time to Start Over

To complement the association’s federal legislative priorities highlighted in last week’s Newsbriefs, AFSA’s state government affairs department has released its priority legislative list for 2008.

Statewide priorities with the greatest potential to impact AFSA membership include advocating risk-based pricing; maintaining consumers’ privacy while also ensuring their access to credit; avoiding interest rate caps; supporting the installment lending industry; and opposing interchange restrictions.

Rounding out the list of priorities are opposing card restrictions; defending the car buyer’s bill of rights; opposing the shifting of vehicle owner liability; protecting consumers against unfair and deceptive practices in mortgage lending while still allowing for product innovation; and monitoring mortgage licensing.

Contact the state government affairs department for more information.
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AFSA has merged its IT and E-Commerce Committees into the newly created eBusiness & Technology Solutions Committee. In part, the new committee will serve as an executive forum to share ideas on hot technology issues.

Donna Cheesebrough, VP & CIO, GMAC NAO and Melissa Bartholomew, VP eBusiness Group, Wells Fargo Financial, will co-chair the new committee. Mark Zalewski will be AFSA’s staff liaison.

The first electronic meeting of the eBusiness & Technology Solutions committee is planned for March. Member companies interested in appointing a representative to the committee may contact Zalewski at mzalewski@afsamail.org.

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On January 8, AFSA filed an amicus brief in support of the appellee’s petition for en banc reconsideration in the Tex Star Motors, Inc. v. Regal Finance Company LTD and Regal Finance Company II, Ltd. case in the 14th Court of Appeals. AFSA’s brief focuses on the Panel’s misinterpretation of “commercial reasonableness” in the Uniform Commercial Code (UCC) and urges the court to hear the case en banc and reverse the decision.

The rule articulated by the panel would effectively turn what is now a safe harbor for creditors seeking to establish the commercial reasonableness of a sale under the UCC into a minimum requirement for establishing commercial reasonableness. This is contrary to the express text of the UCC and prior Texas law. If the rule articulated in this case is upheld, it is likely to create difficulties and legal risks for vehicle and personal property finance companies in connection with their disposition of repossessed collateral.
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The Federal Trade Commission is seeking comments on the impact and effectiveness of state credit freeze laws and the credit freeze options offered by nationwide consumer reporting agencies. Because this issue affects a large number of AFSA members across industries, the association plans to submit a comment letter. Comments are due by Feb. 25.
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AFSA welcomes Microdynamics Group and Ascension Capital Group to the association as new Associate Members. Microdynamics Group, headquartered in the Chicago area, provides printed and electronic billing solutions. The company’s primary representative to AFSA will be Thomas Harter, Jr., Vice President of Sales.

Ascension Capital Group, headquartered in the Dallas/Fort Worth area, provides bankruptcy services to the finance industry. AFSA’s primary representative from the company will be Brent Smith, Vice President of Client Development.

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BofA-Countrywide May Be a Bargain, But Risks Are Many
Investor's Business Daily (01/14/08) P. A1; Stoddard, Scott

Bank of America's deal to acquire Countrywide Financial will not only turn the former into the largest U.S. mortgage lender, it also may spur consolidation--with banks reclaiming control of home finance from specialty lenders. Analysts, though, warn that the price for Countrywide could be too high if the current housing recession lasts longer and is more far-reaching than Bank of America forecasts. As soaring subprime loan defaults and a credit crisis hit the mortgage lender's stock hard, Bank of America already has lost over 50 percent of the $2 billion it invested in Countrywide late this past summer. Company officials acknowledge those concerns but note that the deal undervalues Countrywide to such an extent that any unforeseen losses will be covered.
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Options Are Open for ResCap, Says GM's Chief Financial Officer
Wall Street Journal (01/13/08) Stoll, John D.

General Motors Corp. (GM) recently announced that GMAC is still weighing its options when it comes to restructuring its mortgage arm, Residential Capital. According to GM CFO Fritz Henderson, GM hasn't, "really eliminated anything," when it comes to restructuring possibilities. GM owns a 49 percent stake in GMAC and therefore holds a great deal of sway in the unit's decision-making process. Experts say GMAC is likely to choose one of several options. It may increase ResCap's funding, try to find another investment partner for the unit, sell off the unit, or put ResCap under bankruptcy protection.
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Kyle Petty's Victory Invitational Announces Wells Fargo as Victory-Level Sponsor
WhoWon.com (01/10/08)

Wells Fargo & Co. has been named a Victory-level sponsor for Kyle Petty's Victory Invitational Golf Tournament. As a Victory-level sponsor Wells Fargo gets the naming rights for the post-tournament awards luncheon. The golf tournament will raise money for children with serious illnesses. Proceeds will benefit the Victory Junction Gang Camp and the Arizona State University College of Nursing and Healthcare Innovation. The NASCAR-themed gold tournament is scheduled for Feb. 28 outside of Phoenix.
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Early Returns for Wal-Mart Prepaid Card Promising
American Banker (01/15/08) P. 9; Launder, William

In the eight months since it was introduced, the Wal-Mart MoneyCard has made some headway with underbanked consumers, concludes a Synergistics Research study. The study found that 20 percent of consumers making less than $40,000 a year are familiar with the prepaid Visa debit card, while 10 percent said they were likely to buy one. Experts say the card--which costs $8.94 up front and $4.94 a month--has made headway for a number of reasons. Synergistics CEO William McCracken noted that Wal-Mart has a better reputation than banks among low-income consumers. In addition, distrust of the banking system--particularly among Hispanic immigrants--also makes these consumers feel more comfortable using financial services offered by Wal-Mart, McCracken said. For their part, consumers said they liked the MoneyCard because its value could be refunded if the card is lost or stolen, because it is easy and inexpensive to reload, and because it is available at Wal-Mart, the survey found.
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Britons Strike Back at Bank Fees
Business Week Online (01/15/08) Capell, Kerry

Hearings to determine the legality of bank overdraft charges began in Britain on Jan. 14. Britain's top eight banks are facing off against the Office of Fair Trading (OFT). These hearings come as a result of a number of lawsuits brought by bank customers against their banks over the past two years, saying overdraft fees violate consumer protection laws. In 2007, British banks made $7 billion on overdraft fees and excess-borrowing charges. However, lawsuits prompted them to return $810 million in fees just in the first half of the year. If the hearings go against the banks, it could influence not just British regulations but a similar debate in the United States. If the OFT prevails, British banks may be forced to return overdraft charges for the past six years. Activists say overdraft charges go far beyond the average $9 it costs every time someone overdraws their account. However, the British Bankers Association says free checking and no-fee ATM service could disappear if the banks lose the case. If British banks are able to remain profitable without charging high overdraft fees, it would lend support to a congressional push to limit overdraft fees in the United States, according to Harvard Law School professor Elizabeth Warren.
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Industry Outlook Darkens After Amex's Warning
American Banker (01/14/08) P. 6; Launder, William

News of American Express' recent profit warning has taken the U.S. card market by surprise. Amex's disclosure that it would assume a $440 million charge in the fourth quarter to cover increasing delinquencies and charge-offs left analysts questioning the health of the rest of the card market, which does not have the scale of corporate accounts or creditworthy affluent cardholders Amex has. Amex also reported slower spending in December, which is unusual because of the holiday shopping season. Financial Insights research director Aaron McPherson said the situation is critical, noting that if a combination of worsening credit and decreased spending is "affecting Amex, it's probably affecting … [other issuers] worse, because they don't have as affluent" a contingent of cardholders. Keefe, Bruyette & Woods analyst Sanjay Sakhrani also views Amex's profit warning as an ominous sign of things to come for the rest of the market, saying, it "definitely says this is what we are seeing across the industry. … It's going to get worse. There is no doubt about it."
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Just Put It on My 401(k) Debit Card
TheStreet.com (01/14/08) Baribeau, Simone

More employers are offering 401(k)-enrolled workers debit cards that can be used to withdraw money from their retirement funds. The ReservePlus card gives workers the option of tapping their 401(k)s before retirement. Once a company enrolls in the program and an approved loan line for a ReservePlus account is set up, workers can use debit cards to withdraw funds from the account. Participants reimburse the fund through the same system they use to pay off their credit card. But critics complain that programs like this make it too easy to access retirement funds when most Americans are not putting enough away as it is. "Big picture: it just takes us out of the context of a 401(k) loan being a loan of last resort," says AARP's Jean Setzfand. "Seeing what we see, [with retirement savings] not quite where we want to see it, we're just afraid that this is going to deplete it further."
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Viewpoint: Disclosures: Time to Start Over
American Banker (01/11/08) P. 10; Weinstock, Peter; Dreyer, Stephanie

Regulatory and congressional efforts to revise card disclosure requirements are ineffective because they fail to achieve the original objective of disclosure, which is to give consumers the information they need to make informed decisions, according to this opinion piece by two Hunton & Williams LLP attorneys. The problem is illustrated in a February 2006 Banking Law Journal article in which it is suggested that "plain English" disclosures replace the steady patchwork of "fine-tuned" disclosures. Regulators can begin by crafting safe-harbor disclosures in a plain English format, then test the efficacy of the information in a field test with focus groups. The Fed should also consider hiring an impartial body such as a marketing research firm to oversee the process instead of using a regulator-appointed attorney. Anything less than a full overhaul of the current system will result in a government decree, the commentary says.
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