January 24, 2008

Companies with a focus on state legislation will benefit from the annual Year in Review-Preview, which has just been released by the AFSA State Government Affairs Department. This comprehensive overview organizes the top-tier financial service issues addressed by the states in the last year by issue category. The report also provides a snapshot of what types of bills will likely be introduced throughout the coming year.

As an added benefit, the document also contains links to related resources. The report is available in the resources section of the AFSA State Government Affairs Web site.

For questions about the annual Year in Review – 2008 Preview, please contact Alejandra Siles at 202-466-8605 or asiles@afsamail.org.
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AFSA Education Foundation (AFSAEF) President and CEO Susie Irvine testified in front of the Council of the District of Columbia’s Committee on Public Services and Consumer Affairs at a public hearing on Jan. 23. The hearing’s purpose was to discuss the Financial Literacy Council Establishment Act of 2007, which would create a council to develop recommendations and encourage financial literacy education within the D.C. school system.

In her testimony, Irvine highlighted the foundation’s work, with an emphasis on MoneySKILL®, a free interactive personal finance curriculum. Additionally, she asked the council members “to work to make personal finance a required course in schools in the District of Columbia.”
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On January 14, AFSA and the National Auto Dealers Association (NADA) submitted an amicus brief in the 2nd Circuit in Reiber et al v. GMAC, LLC et al.

Motor vehicles installment sale financers have a vital interest in the outcome of this case. The 2005 amendments to section 1325(a) of the Bankruptcy Code added a paragraph at the end of the section that deals with certain claims secured by motor vehicles. The effect of this paragraph has been widely debated by creditors, debtors, counsel and commentators, and there is a split of authority in the Bankruptcy Courts. This case affords the Court an opportunity to address this debate as it pertains to whether a creditor's claim is covered by the hanging paragraph where a portion of the financing is used to pay off negative equity from a trade-in vehicle.
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In a series of meetings held this month with senior staff of Senate Leadership from both sides of the aisle, AFSA staff learned that the realities of a truncated legislative calendar in a presidential election year have already begun to sink in. Democratic staff noted that floor time in the Senate will be a very rare commodity and will be dedicated to moving appropriations bills and “one or two other must do’s.” Items that prove controversial will have a hard time securing a spot on the calendar. This reality is likely to curtail efforts by some industry critics to place significant restrictions on consumer lending.
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AFSA welcomes Lancaster Financial Services to the association as a new active member and Source International as a new associate member

Lancaster Financial Services, headquartered in Lancaster, S.C., offers secured and unsecured personal loans, retail installment financing and other credit related products to consumers. The company’s primary representative to AFSA will be Samuel “Chip” Asbury, IV, President.

Source International, headquartered in Orange Park, Fla., markets Web-based credit applications and credit scoring systems. The company’s primary representative to AFSA will be Lara Anthony, Vice President.
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American General Finance, Inc. to Acquire a Portion of Equity One's Consumer and Mortgage Loan Portfolio From Popular, Inc.
Business Wire (01/23/08)

American General Finance has announced that it plans to acquire a significant portion of Popular Inc.'s Equity One consumer branch loan portfolio for $1.49 billion. “American General Finance’s business continues to perform quite well compared to many consumer lenders. That fact, combined with [parent company American International Group's] continued support, allows the company to take advantage of loan growth opportunities that fit our strategic objectives and our underwriting and return requirements,” says American General Finance Chairman and CEO Frederick Geissinger. “Equity One’s portfolio complements our existing business and we are excited by the opportunity to increase the number of customers American General Finance lends to around the country.” The deal is expected to close early this year.
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CitiFinancial Announces Sponsorship of NASCAR Nationwide Series Team Entry
Racing Milestones (01/08)

CitiFinancial will be the primary sponsor of a number of Roush Fenway Racing entries in 35 official NASCAR races in the coming season. Citi's sponsorship is part of a larger partnership with Roush Fenway Racing. As part of the partnership, one of Roush Fenway's drivers will be selected to drive the CitiFinancial Ford. In addition, CitiFinancial Racing will run the "Crew Chief for a Day" event as a way to sponsor its branch show car program and promote the Citi brand throughout the race season.
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U.S. Lenders Cut Deals to Avoid Foreclosure Crisis
Reuters (01/22/08) Carey, Nick

GMAC Financial Services unit Homecomings Financial is one of several mortgage lenders providing relief to homeowners such as Sharon Jackson of Chicago. Jackson, who lost her job, feared foreclosure as she witnessed the fate of her neighbors' boarded-up homes. She then approached Homecomings, which agreed to lowered her monthly mortgage payment by nearly $300. "The smarter lenders are cutting deals," notes University of Maryland School of Business professor Peter Morici.
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Update: Ramius Capital Buys $23.6M Worth of AmeriCredit
Dow Jones Newswires (01/17/08) Favole, Jared A.

Leucadia National recently announced its intentions to purchase 11.3 million shares of AmeriCredit for $146 million, while Ramius Capital Group has acquired 2 million shares of the Texas-based auto finance company for $23.6 million. Ramius is part of an activist group that owns a 10 percent stake in AmeriCredit.
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Visa Reports Mid-Sized Merchants Are Making PCI Progress
Digital Transactions (01/22/08)

Compliance with the Payment Card Industry (PCI) data security standard has been validated by merchants comprising two-thirds of Visa's U.S. transaction volume, according to a Jan. 17 report. Visa reports that 62 percent of 709 identified Level 2 merchants have validated compliance, compared to 15 percent as of Dec. 31, 2007. An additional 30 percent have submitted initial validation or are in remediation, while initial validation is in progress for the remainder. In the meantime, compliance has been validated by more than three-quarters of 326 U.S. Level 1 merchants, which account for half of Visa's volume, while initial validation has been submitted by 23 percent, Visa says. Twenty percent of 2,596 Level 3 merchants, whose transactions are exclusively electronic and make up less than 5 percent of Visa volume, had submitted an initial validation or were in remediation as of Dec. 31, while 54 percent were fully validated. "Visa has been proactively driving PCI compliance into the retailer market through the tried-and-true, carrot-and-stick approach--offering price incentives to those who comply and fines to those who don't," said Gartner analyst Avivah Litan. Visa's Michael E. Smith credited initiatives by Visa, merchants, and merchant acquirers for the growing PCI compliance rates, stating that "in 2007, more U.S. merchants made good on their commitment to protect cardholder information than any other year."
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Visa Says Hopeful for New Fee Deal With EU
Reuters (01/21/08) Jones, Huw

On Monday, Visa Europe announced it was optimistic about reaching an agreement with the European Commission to retain its interchange fee on transactions in spite of the European Union's (EU's) decree against competitor MasterCard. On Dec. 19, EU Competition Commissioner Neelie Kroes determined that MasterCard's interchange fee was illegal and must be changed within six months. Visa got an exemption from certain EU competition regulations in exchange for limiting its interchange fee, but that deal ended on Dec. 31. Visa now has to negotiate a new agreement. Uncertainty for the industry will probably extend for six months or more until MasterCard determines how to handle the decision, Visa Europe President Peter Ayliffe said. MasterCard is appealing the decision. While certain merchants want a price surcharge enacted to pay for interchange fees, Ayliffe noted that this would be "an absolute disaster" for the European payments arena.
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Accelerating Checkouts
Baseline (12/07) No. 79, P. 38; Schuman, Evan

The popularity of alternative payment modes--such as online and cell phone payments--is skyrocketing, especially among younger consumers, but wireless carriers and credit card companies are impeding the alternative payment movement in the United States. U.S. wireless carriers are holding up mobile payment rollouts because they view them as a threat to their control over devices and the commissions they collect on all mobile transactions, forcing retailers to circumvent the carriers and utilize cell phone numbers and Web interaction without having to get the cellular carriers to sign off. "With such fragmentation in the industry, carriers all have special things they want to do with their devices," says Digby CEO Dave Sikora. "And device manufacturers are not going to line up behind that value proposition if it's going to raise their cost of doing business." A joint venture between a McDonald's franchise and mobile payment vendor Mocapay will allow customers to deposit money into a Mocapay account and receive short-term authorization to use a transaction code, which is a tactic to discourage thieves from exploiting Mocapay accounts. Mocapay's intended appeal to retailers is its lower cost in comparison to other payment methods. Mocapay CEO Rod Stambaugh says a truly worthwhile investment entails integrating the application into the store's point-of-sale and customer relationship management packages. The alternative payment transition is proceeding at a more accelerated rate in Asia and Europe.
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