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January 3, 2008
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Educational Mortgage Brochure
for Consumers Now Available in Spanish
AFSA to Weigh in on Rep. Maloney’s Credit Card Bill
AFSA Education Foundation Introduces Interactive Version
of Popular Budget Planning Brochure
AFSA
Members Invited to Participate in New National Standard Working Group
GE Money, Yes! Solar Solutions Create New Financing
Program for Solar Energy Solution
GMAC Expands
Services on Online Auction Site
Ka-ching! Shoppers Can Now Fully Cash in on Gift Cards
EC Ruling on MasterCard Interchange Could Foster Regulation in the U.S.
Gift Card Verification Glitch Hits Wal-Mart, Others
Maine Lays Claim to Consumer's Unused Gift Cards
Review 2007/Preview 2008: Assessing Financial Priorities on the Hill
Bush to Revive Push for Housing Remedy
Lender Lobbying Blitz Abetted Mortgage Mess
Washington
Wire: Americans Applaud Bush's Subprime Plan But Want More Action
Slow Building of a Rescue Plan
No Rest for Either Side in Va. Payday Lending Debate
Lenders Try Hand at Payday Loans
Texas' 2008 Tax Plan May Cause Small Rent-to-Own Dealers Financial Hardship
New Cars That Are Fully Loaded--With Debt
ILC Bill's Prospects Wane as Sense of Urgency Fades
Educational Mortgage Brochure for Consumers Now Available in Spanish
AFSA’s Education Foundation (AFSAEF), in conjunction with the American
Association of Residential Mortgage Regulators (AARMR) and AFSA, produced Préstamos
Hipotecarios, a Spanish version of the Mortgage Loans brochure to help educate
first-time and veteran homeowners, second mortgage holders, and those refinancing
a loan.
The brochure offers advice for both those seeking a home loan and
those struggling to make their mortgage payments. Among the tips for borrowers
who have fallen behind on their payments are to contact your lender as soon as
possible and be wary of offers from “foreclosure specialists.”
Consumers
interested in a free copy of Préstamos Hipotecarios may download a copy
from the AFSAEF’s Web site or call 1-888-400-2233.
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AFSA to
Weigh in on Rep. Maloney’s Credit Card Bill
As part of
its ongoing discussions on credit card issues with Members of Congress and their
staffs, AFSA representatives expect to meet with Rep. Carolyn Maloney (D-NY) sometime
in January on a discussion draft of her credit card bill that was circulated on
Dec. 19. The draft would ban a host of common credit card billing practices, including
some risk-based repricing constructs and a slew of other fee- and rate-increasing
systems. Universal default and double-cycle billing also would be banned. The
bill, as currently drafted, would place restrictions on the number of penalty
fees, while terms and opt-out and cancellation clauses would be mandated as an
alternative to rate increases. The bill also sets the terms on payment allocation
for variable-rate cards. Maloney plans to introduce the bill shortly after Congress
resumes, and she hinted her goal is to achieve the support of some of the committee's
top Republicans. House Financial Services Committee Chairman Barney Frank has
said card legislation is on his panel's agenda for 2008.
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AFSA Education
Foundation Introduces Interactive Version of Popular Budget Planning Brochure
The Consumer’s Almanac, a resource for creating monthly budgets to manage
household expenses, is now available online in an interactive format. First published
by AFSA’s Education Foundation (AFSAEF) in cooperation with the Consumer
Information Center in 1997, the almanac is one of the foundation’s most
requested materials.
Intended to help consumers gain control of their
financial situation, the almanac consists of a series of tables and worksheets
to help individuals calculate their expenses and plan for future needs through saving and investing.
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AFSA Members
Invited to Participate in New National Standard Working Group
In late November, AFSA received a go-ahead from the standards developer, ANS X9,
to develop an American National Standard that would provide a common set of criteria
and metrics for use in evaluating and pricing the public and private sale of whole
loan sale portfolios in the vehicle finance sector. Member companies interested
in participating in a working group to develop the new standard should contact
AFSA’s Mark Zalewski at mzalewski@afsamail.org.
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GE Money, Yes! Solar Solutions Create
New Financing Program for Solar Energy Solution
FOXNews.com (12/26/07)
GE Money has agreed to underwrite revolving and installment
consumer loans on Yes! Solar Solutions solar products under a new financing arrangement.
The loans will be offered under the GEOSmart Financing program, managed by GE
Money's Sales Finance division through the Yes! retail energy outlet in Sacramento,
Calif. Yes! Solar Solutions President Jeff Winzeler praised the partnership, saying
"We're excited to offer the GEOSmart Loan program, making it more convenient and
easily affordable for homeowners to make a positive impact on their homes and the environment."
(
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GMAC Expands Services on Online Auction Site
Automotive News (12/24/07) P. 24; Sawyers, Arlena
GMAC Financial Services is expanding the number of services offered through its
SmartAuctionOpen Web site. Now, the site sells former rental vehicles from major
dealers like Enterprise, National, and Alamo. In addition, the site will continue
to sell used vehicles owned by GM dealers and cars or trucks GMAC has been forced
to repossess. In addition to selling the cars, the site also offers services like
third-party inspections and a dispute process to settle any differences between
buyers and sellers. First priority on most vehicles is given to GM dealers through
a related SmartAuction site. However, GMAC also works with 2,800 non-GM dealerships.
GMAC predicts dealers will buy almost 400,000 vehicles this year through SmartAuction and SmartAuctionOpen.
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Ka-ching! Shoppers Can Now Fully Cash in on Gift Cards
Alameda Times-Star (CA) (01/02/08) Lin, Judy
Beginning
on Jan. 1, Californians will be allowed to redeem gift cards for cash if the balance
is less than $10 thanks to a new state law. The bill was drafted by state Sen.
Ellen Corbett (D) and signed by Gov. Arnold Schwarzenegger in October, although
the law is inapplicable to credit card gift cards or ones tied to multiple stores.
The new law characterizes a cash refund as currency or check, and wireless telecom
companies may credit a person's account electronically. Corbett estimates that
up to $8.2 billion in gift-card value went unspent in the United States in 2006.
A holiday shopping survey by Consumer Reports reckons that gift cards are the
most popular item consumers were planning to buy this season, after clothing.
Three other states--Vermont, Washington, and Montana--have cash redemption laws
that permit cash back for remaining gift-card balances ranging from $1 to $5.
Critics of the new California law share fraud concerns, with executive director
of the National Association of Theater Owners of California and Nevada Milt Moritz
warning that the statute could make it easier for credit card thieves to purchase
gift cards and convert them into cash.
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EC Ruling on MasterCard Interchange
Could Foster Regulation in the U.S.
Digital Transactions (01/01/08)
The European Commission (EC) has deemed that MasterCard Worldwide's
interchange-fee structure is illegal in the European Union--a decision that could
be extended to the United States if U.S. regulators take a page from their European
counterparts. Some 40 percent of bank cards in the EU are MasterCard-branded,
and MasterCard has promised to appeal the EC's ruling at the European Court of
First Instance in Luxembourg, contending that interchange rates should be shaped
by market forces and not regulation. Just a small portion of MasterCard's transactions
are impacted by the EC ruling, which should have no direct effect on the card
network's transaction-processing and licensing fees, according to Intrepid Ventures
principal Eric Grover. However, he warns that the decision could impede MasterCard's
ability to nurture transaction growth and compete with other card systems, and
"will spur regulators in other jurisdictions to intervene and treat card payment
networks like public utilities." Grover reports that Visa Europe will have to
revise its pricing practices once the EU publishes its full guidance on acceptable
types of interchange. In 2007, over 50 merchant lawsuits challenging bank card
interchange in the United States were consolidated into an immense class-action
case in a federal district court. Grover thinks there is only a slim likelihood
that the Federal Reserve would intercede in the interchange matter, in view of
the fact that the central bank has stated that the fees are not within its jurisdiction
and that market forces should be responsible for such pricing. But he acknowledges
that the EC ruling could encourage members of Congress who are focused on the
issue, and that the Democratic takeover of Congress has certainly raised the odds of intervention.
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Gift Card Verification Glitch Hits Wal-Mart, Others
eWeek (12/28/07) Schuman, Evan
Gift cards for Wal-Mart
and other retailers were unusable for much of Dec. 26, with Wal-Mart laying the
blame at the feet of its third-party verifier. "Processing errors" with the verifier's
systems were responsible for holding up "the processing of a small percentage
of our gift card transactions," said a Dec. 27 statement from Wal-Mart. First
Data was identified as Wal-Mart's technology partner by a South Carolina television
journalist. The timing for this incident could not have been worse for retailers,
which have been aggressively promoting gift cards as a holiday gift that is free
of problems. Meanwhile, the coming year has been gearing up to be a major one
for gift card expansion, particularly by coaxing retailers to use the cards to
improve the quality of customer relationship management information on customers
and prospects. First Data manages gift card verifications for numerous retailers
and recently said that Michigan's Meijer super center chain and Canadian QSR chain
Tim Hortons had agreed to use its verification services.
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Maine Lays Claim to Consumer's Unused Gift Cards
Dow Jones Newswires (12/20/07)
Maine recently became
the latest state attempting to force national retail chains to return the partial
value of unused gift cards to consumers. Under the auspices of the state's unclaimed
property law, Maine's Treasurer sent letters to large vendors like Home Depot
and Best Buy asking them to give 60 percent of what each unused gift card is worth
to the state. The retailers are allowed to keep 40 percent of the gift card's
worth, which is roughly the average markup on a product. Thirty states have gift
card laws for in-state merchants, but so far national retailers have refused to
comply. The retailers argue that if any government entity should lay claim to
unused gift cards from nationwide chains it should be at the federal level to avoid confusion.
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Review 2007/Preview 2008: Assessing Financial Priorities on the Hill
American Banker (01/02/08) P. 1; Kaper, Stacy
There
are a number of financial services issues for Congress to face over the next year.
At the top of the list is the subprime mortgage crisis. There are already three
major pieces of legislation circulating between the House and the Senate to address
this issue. First off is a Senate bill that would prevent yield-spread premiums,
prepayment penalties, and debt-to-income ratios over 45 percent. The bill also
includes a provision that would effectively assign liability to the trust that
holds the note. Opponents of this provision argue it would also serve to cripple
the secondary market. While that bill concentrates on loan practices, other bills
are intent on rescuing bankrupt homeowners from foreclosure. One such House bill
would let bankruptcy judges modify subprime and nontraditional mortgages closed
between Jan. 1, 2000, and the date the bill is enacted. This bill may not become
necessary unless Treasury Department officials are unable to stop foreclosures
by freezing interest rates on some subprime loans. Another bill more likely to
be passed is designed to reform the Federal Housing Administration (FHA). If it
survives, this bill would allow the FHA to insure a wider swath of borrowers with weak credit.
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Bush
to Revive Push for Housing Remedy
Wall Street Journal (01/02/08) P. A2; McKinnon, John D.
President Bush's top communications adviser, Ed Gillespie,
says the White House plans to pressure Congress to take action to help stabilize
the struggling housing market--although it remains uncertain what steps the administration
will take. Observers point to legislation that has yet to pass on Capitol Hill,
including bills that would permit low-income, adjustable-rate mortgage borrowers
to refinance into fixed-rate loans through the Federal Housing Administration
and that would allow Fannie Mae and Freddie Mac to purchase loans worth more than
the current conforming-loan limit of $417,000. However, the White House would
approve an increase in the limit only if Congress passes legislation to reform
the government-sponsored enterprises to create a new regulator with power over
the size of their mortgage portfolios. Additionally, notes Mortgage Bankers Association
Senior Vice President Steve O'Connor, "If Treasury is looking for something to
put pressure on Congress, [enabling states to issue more tax-exempt bonds] is
something they can point to." Doing so could better position state housing authorities
to help borrowers refinance their mortgages and avoid foreclosure.
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Lender
Lobbying Blitz Abetted Mortgage Mess
Wall Street Journal (12/31/07) P. A1; Simpson, Glenn R.
The lobbying efforts of Ameriquest and other subprime lenders
helped to foster the mortgage crisis, critics contend. Ameriquest lobbied against
state lending curbs, as did other subprime lenders and banking industry trade
groups. State legislatures across the country wanted to curb predatory lending,
but the lobbying efforts discouraged some of those efforts. Ameriquest executives
and affiliates gave more than $20 million to political groups at both the state
and federal levels. President Bush was given more than $200,000 for his re-election
campaign, and Rolling Stones tickets were given to legislators in several states,
ethics records show. Following the housing market falloff and the credit crisis,
Ameriquest has stopped approving new subprime loans, and it is being sued by hundreds of people alleging mortgage fraud.
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Washington
Wire: Americans Applaud Bush's Subprime Plan But Want More Action
Wall Street Journal (12/21/07) P. A8; Harwood, John
A recent Wall Street Journal/NBC News poll reveals that 55 percent of respondents
are in favor of the Bush administration's plan to hold rates on certain subprime
mortgages steady to help borrowers avoid foreclosure. However, 52 percent of respondents
believe the plan does not go far enough. With regard to income level, 43 percent
of those polled with yearly incomes above $75,000 say more needs to be done to
help struggling borrowers. Meanwhile, the survey shows that 33 percent of respondents
are against the plan, and 25 percent of Republicans insist the plan goes too far.
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Slow Building of a Rescue Plan
Wall Street Journal (12/21/07) P. A15; Phillips, Michael M.; Paletta, Damian; McKinnon, John D.
Federal Deposit Insurance Corp. Chairman Shelia Bair may be
single-handedly responsible for bailing out needy families affected by the mortgage
meltdown. Last spring, Bair's pitch to the mortgage industry to freeze adjustable
interest rates to prevent needy families from losing their homes received a cool
reception. Industry representatives recoiled at the notion of rescuing borrowers
in what amounted to a bailout and told her that a federal mandate was not necessary
to prevent foreclosures because it was in their best interest to do that job themselves.
But Bair did not give up, contacting her counterparts at the Treasury Department,
which was already tracking the business practices of subprime lenders, and the
Federal Reserve to inform them of her plan to take the industry to task publicly
for refusing to offer the concessions needed to address the problem. Although
no one responded to her correspondence and she received little support from the
Bush administration, by November President Bush had announced a five-year freeze
on adjustable interest rates for financially troubled families, and now many credit
Bair with coming up with the proposal. "She gets a lot of credit for raising this
issue and highlighting the appropriateness of a more systematic approach," says Treasury undersecretary Robert Steel.
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No Rest for Either Side in Va. Payday Lending Debate
Associated Press (12/29/07) Potter, Dena
Virginia's
General Assembly will hold hearings Jan. 9 to determine the fate of payday lending
in the state. Lawmakers will revisit the issue again after failing to act on over
a dozen bills introduced at the start of the 2007 session. Opponents maintain
that payday lending is a predatory industry that takes advantage of the poor and
uninformed and should be abolished. However, that task has proven difficult to
do in light of the amount of money payday lenders have at their disposal to hire
powerful lobbyists, market themselves in a favorable light, and make campaign
contributions to influential legislators. During the last session, payday lenders
had nearly 20 lobbyists walking the floors of the chamber on their behalf. To
ensure what they view as a more level playing ground, opponents of the industry
have secured their own lobbyists to argue their position in the upcoming session.
But payday lenders say their critics misrepresent their industry and are just
as well-funded. Among the objectives opponents will push is for Virginia lawmakers
to impose a 36 percent cap on the interest payday lenders can charge each year.
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Lenders Try Hand at Payday Loans
Columbia Tribune (12/24/07)
To better access the
estimated 73 million Americans who are underserved by the banking industry, banks
and credit unions are now offering alternative banking services like payday loans.
By penetrating that market, banks and credit unions not only stand to profit themselves,
they also offer an alternative to consumers. Every year, about $10 billion in
fees is collected from small-scale loans and immediate check cashing services.
However, these practices have come under increasing fire both from legislatures
and consumer advocates. To solve this problem, the Federal Deposit Insurance Corp.
intends to launch a two-year study allowing 40 banks to offer loans up to $1,000
as an alternative to payday loans. Some credit unions have also been pursuing
this avenue. Recently, California's Wescom Credit Union and Kinecta Federal Credit
Union both purchased chains of check cashing stores. Under the credit unions'
management, the stores will offer credit union services in addition to check cashing.
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Texas' 2008 Tax Plan May Cause Small
Rent-to-Own Dealers Financial Hardship
RTOHQ (12/20/2007)
Texas has passed a new law that will increase the state's margin
tax starting in 2008. The law will expand the tax to smaller businesses and change
the tax rate so it is based on revenues instead of retained earnings. This change
could have a major impact on the state's smaller rent-to-own dealerships. One
dealer predicts his tax rates will rise from $2,000 to $40,000 a year. That kind
of hike could cause small dealerships to sell out if they can not remain profitable under the increased pressure.
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New Cars That Are Fully Loaded--With Debt
Los Angeles Times (12/30/07) P. A1; Bensinger, Ken
Increasingly, consumers who take out loans for new vehicles end up paying far
more than the ticket price. Driving the trend is the fact that more Americans
are rolling over debt from their old vehicles to their new car loans. As more
people subscribe to the practice, consumers are taking on more automobile debt
for longer periods of time. Now, instead of signing a three-year financing agreement,
many Americans sign up for seven-year loans. Data compiled by the Federal Reserve
shows that almost 45 percent of loans are for longer than six years. Also rising
is the amount of debt still owed on vehicles, with the average amount financed
hitting $30,738 in October 2007, up $3,500 from the same period the previous year
and 40 percent in the last 10 years. The end result is that consumers never pay
off their auto loans, which some experts believe could extend the U.S. economy's
credit crunch. Financial institutions could also find themselves in trouble because
approximately two-thirds of securitized auto loans have terms longer than 60 months,
which Standard & Poor's says is a "credit concern."
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ILC Bill's Prospects Wane as Sense of Urgency Fades
American Banker (12/31/07) P. 1; Adler, Joe
Traction for legislation to prohibit commercially owned industrial
banks has flagged, significantly reducing the likelihood that Congress will act
before the Jan. 31 expiration date of a Federal Deposit Insurance Corp. (FDIC)
moratorium on all industrial loan company (ILC) applications by commercial outfits.
"With the Wal-Mart application off the table, I think it takes away the fervor
of the unions, and I think as a result it weakens the legislative coalition,"
declared former head of the Independent Community Bankers of America Ken Guenther.
Without prohibitive legislation, Wal-Mart and other commercial firms could again
apply for an ILC and the FDIC could rule on applications already in the pipeline.
"The record clearly shows that ILCs are a strong, responsible part of our nation's
financial system," said Sen. Robert Bennett (R-Utah). "I believe restrictive legislation
is unnecessary, however, if Senator [Chris] Dodd and my fellow [Senate Banking
Committee] members decide the Congress should further define the role of these
limited purpose charters, I plan to be an active player in that discussion." Some
observers said Dodd can get his bill barring commercial ILC ownership passed even
with Bennett's objections, although others think Bennett and Dodd could still
work out a compromise--or that Bennett could push forward with his own proposal--in
the time it takes for the FDIC to process the existing ILC applications. A compromise
plan supported by ILC owners and certain applicants would not ban all commercially
owned ILCs, but would allow lawmakers to prohibit any interstate branching by such firms.
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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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