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 March 13, 2008  House Credit Card Bill Opposed by AFSA Vacant Property Foreclosure Municipal Action Tracked by AFSA State Government Affairs AFSA Staff Attends Consumer Advisory Council Meeting eBusiness and Technology Solutions Committee Holds First Meeting New Member Welcome  Wells Fargo Exec Optimistic About Economy   Congress Takes On Credit Card Interchange Fees Lawmakers Want to Strip Fine Print From Gift Cards  Treasury Releases Analysis of Meltdown Rep. Frank Offers New Foreclosure-Help Proposal Mortgage Application Fees May Rise on Appraisal Reform  Experian and eBureau Partner to Offer New Credit Scoring Tool for Unbanked U.S. Consumers Banks Springing Up to Serve the Underserved Entering the Repossession Lane Bill Is Frank's, Choice May Be Hobson's Banking Fees Are Rising and Often Undisclosed  AppOne Details Products Designed to Combat Red Flag Violations As Auto Market Worsens, Wachovia Seeks a Boost Markit, Dealers Mull New Auto ABS Derivatives Index DealerTrack Launches Independent Network House Credit Card Bill Opposed by AFSA On March 13, the Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing on the “The Credit Cardholders’ Bill of Rights: Providing New Protections for Consumers.” Consumers, legal and economic experts, and credit card issuers testified at the hearing. AFSA expressed opposition to this bill in a letter sent to members of the House Committee on Financial Services on the afternoon before the hearing. In the letter, AFSA stated, “what is especially troublesome about this bill is its imposition of price controls that take away issuers’ ability to determine the cost of credit based on the borrower’s risk of default. If the current pricing structure is dismantled, issuers will be forced to raise interest rates and stop offering products, limiting choice and convenience for U.S. consumers.” Additionally, the letter emphasized that “as Congress evaluates the credit card market and considers possible actions, the evaluations should be based upon accurate data.” AFSA expects the subcommittee to hold another hearing on the bill in April before voting on the legislation. (click for web site) Back to Top Vacant Property Foreclosure Municipal Action Tracked by AFSA State Government Affairs The State Government Affairs department has undertaken gathering information on municipal ordinances that require financial institutions to register and maintain vacant and/or abandoned properties. With increased frequency, homeowners who feel they cannot pay their mortgages have started abandoning their properties. These properties have begun to deteriorate over time, and municipalities are declaring them nuisances. Because it is difficult to track the owner of the vacant property, these ordinances are imposing responsibility on the financial institution that holds the legal or equitable title or has foreclosed upon the property. Some of these resolutions require the financial institution pay a registration fee for the property and incur the cost of its maintenance and security. Some cities are taking other actions. For example, the city of Buffalo, N.Y. filed a lawsuit against 28 national lenders to recuperate between $1 million and $2 million spent to secure and demolish 58 vacant properties. AFSA is continually updating and charting the ordinances and related developments on the Web site to keep members informed of this trend. (click for web site) Back to Top AFSA Staff Attends Consumer Advisory Council Meeting AFSA staff attended the Federal Reserve Board’s Consumer Advisory Council meeting on March 6 during which Chairman Bernanke, Governor Krozner and Governor Mishkin were present. Members of the Council discussed the Board’s proposal to establish new regulatory protections for consumers in the residential mortgage market through amendments to Regulation Z, which implements the Truth in Lending Act and the Home Ownership and Equity Protection Act. Members also discussed foreclosure issues. Several of the points made during the meeting will assist AFSA in developing the association’s comments on the proposed amendments to Regulation Z. (click for web site) Back to Top eBusiness and Technology Solutions Committee Holds First Meeting AFSA’s eBusiness & Technology Solutions Committee held its inaugural committee meeting on March 12. The meeting’s 16 participants unanimously ratified the committee’s mission statement as “a forum for senior executives to discuss financial services trends or issues and in collaboration influence the application of current or emerging ebusiness capabilities that enable AFSA members to define practical solutions and standard practices.” The committee will hold another plenary teleconference meeting in June and their first face-to-face meeting in conjunction with AFSA’s annual conference. (click for web site) Back to Top New Member Welcome AFSA welcomes new active member Regional Management Corporation, new associate members Gregory and Adams, P.C. and Bryce Jewelry Company, and welcomes back active member Cooper Credit Corporation, Inc. Regional Management Corporation is one of the leading consumer finance installment loan companies in the United States, specializing in serving customers who do not have access to traditional mainstream financial institutions. Located in Greenville, S.C., Regional Management serves more than 90,000 customers through 96 branch offices located in South Carolina, Texas, North Carolina and Tennessee. Web site Based in Fairfield County, Conn., Gregory and Adams’ mission is to create strategic partnerships that help their clients maximize opportunities, overcome obstacles, eliminate impediments to success, work through times of crisis or impasse and achieve their goals. The firm has long-term relationships with national, regional and local clients, including Fortune 500 companies, privately-held businesses, entrepreneurs, individuals and families. Their areas of practice include commercial, employment, securities and other civil litigation, real estate and land use, estate planning, trust and estate administration, tax planning, corporate structure and finance, business transactions, e-commerce and regulatory and corporate policy development. Web site Based in Cullman, Ala., Bryce Jewelry Company is the leader in live jewelry programs – including diamonds, gold and gemstones – for the rent to own industry. Web site Cooper Credit Corporation, Inc. is a private finance organization based in Baton Rouge, La. (click for web site) Back to Top Wells Fargo Exec Optimistic About Economy Arizona Republic (03/07/08) Wiles, Russ The economy will likely recover quickly even in the event of a recession, says Wells Fargo Chairman Richard Kovacevich, so long as the downturn is not prolonged. Addressing Arizona State University's W.P. Carey School of Business, he said that the economy overall is solid, with rising exports, low unemployment, healthy corporate cash levels, and a growing money supply thanks to recent rate cuts. The majority of the market except for housing and the auto industry is growing, he said. He added that the recent tightening of credit standards is merely a return to normal levels, and that standards had become too loose. (click for web site) Back to Top
Congress Takes On Credit Card Interchange Fees Consumer Affairs (03/07/08) Bosworth, Martin H. House Judiciary Committee Chairman John Conyers (D-Mich.) has introduced the "Credit Card Fair Fee Act of 2008," which would give merchants and retailers the ability to negotiate the fees they pay for accepting credit card transactions. Under the bill, lenders with "substantial market power" would be required to negotiate with merchants for fee terms, and if a voluntary resolution could not be reached, they would have to submit to binding arbitration with the Justice Department and the Federal Trade Commission. Conyers says the bill is not an attempt to regulate the industry, but is simply an effort to give merchants some negotiating power and to boost transparency and competition. Visa and Mastercard concealed their fee structure for many years, until a group of merchants sued to demand changes. The companies now publish their fee breakdowns, but merchants say their fee structures are still too complicated to decipher. (click for web site) Back to Top Lawmakers Want to Strip Fine Print From Gift Cards Waterloo-Cedar Falls Courier (IA) (03/06/08) Gearino, Dan Iowa's Senate Commerce Committee has voted 9-3 to ban restrictions that often show up in fine print on gift cards, such as expiration dates or decreasing values on a card if it is not used by a certain date. Currently, if a gift card purchased in Iowa is not redeemed within three years, businesses are required by law to declare the cash value as unclaimed property and transfer it to the Iowa Treasurer's Office. This totals about $500,000 every year. Under the proposed bill, however, businesses would still transfer the money to the Treasurer's Office after three years, but they would be able to retrieve it if a consumer later came to redeem that card. The Treasurer's Office, which receives around 100 consumer complaints each year regarding gift cards alone, assisted in writing the bill. (click for web site) Back to Top
Treasury Releases Analysis of Meltdown Washington Post (03/13/08) Cho, David; Schneider, Howard The U.S. Treasury has issued a report from the President's Working Group on Financial Markets spelling out the causes of the subprime mortgage crisis and pointing to the need for revisions in financial regulations. Specific recommendations will be released in the future. The Working Group's report is the result of seven months' of collaboration involving Treasury Secretary Henry Paulson Jr., Federal Reserve Chairman Ben Bernanke, and Securities and Exchange Commission (SEC) Chairman Christopher Cox. Observers believe the report will spark changes in the mortgage securitization process and the practices of credit rating firms. However, the Treasury does not have the authority to issue new rules governing credit ratings firms and will have to go through Congress or the SEC. In a September 2007 interview, Treasury assistant secretary for economic policy Phillip Swagel said, "There will probably be a lot more scrutiny, in a sense, a lot more analysis being done of the underlying credit." (click for web site) Free Registration Required Back to Top Rep. Frank Offers New Foreclosure-Help Proposal MarketWatch (03/13/08) House Financial Services Committee Chairman Barney Frank (D-Mass.) has introduced legislation that would allow the FHA to refinance more struggling subprime mortgages; the legislation calls for lenders to voluntarily write down loans in exchange for proceeds from a new FHA loan, assuming that the revised loan carries terms that the borrower could "reasonably be expected to pay," Frank says. Graham Fisher & Co. consultant Joshua Rosner says some Democrats, Republicans, and the Bush administration are likely to oppose the measure. Meanwhile, a proposal issued Thursday by the National Community Reinvestment Coalition urges the government to purchase discounted mortgages via auction, reselling the mortgages to banks and investors after reducing their principals and interest rates. (click for web site) Free Registration Required Back to Top Mortgage Application Fees May Rise on Appraisal Reform CNNMoney (03/12/08) Christie, Les Borrowers can expect to see an increase in mortgage application fees beginning in 2009, when a new agreement that New York State Attorney General Andrew Cuomo reached with Fannie Mae and Freddie Mac takes effect. In an effort to crack down on inflated appraisals, Cuomo hammered out a pact that calls for the government-sponsored enterprises to buy mortgages only from lenders that use independent appraisers and for separate appraisals to be submitted for each lender that a borrower applies to. The cost will be passed on to consumers, and a borrower who chooses to shop around might have to pay as much as $1,000 to $2,000 in appraisal fees for loans submitted--compared to about $400 previously--and might even lose the lower interest rates they had locked in for 30 days because turning in applications individually is time-consuming. Some mortgage brokers also express concern that borrowers will want to work directly with lenders as a result of the agreement. (click for web site) Free Registration Required Back to Top
Experian and eBureau Partner to Offer New Credit Scoring Tool for Unbanked U.S. Consumers PR Newswire (03/11/08) Experian and eBureau have partnered to launch the Emerging Credit Score to help lenders assess the creditworthiness of unbanked and underbanked consumers. "Our goal has always been twofold: to help underbanked consumers get the credit and affordable financial services they deserve and to provide our clients that serve these consumers with the best risk-management tools. Utilizing this groundbreaking new scoring method, lenders can now effectively--and equitably--lend to this population and grow their consumer base," said Zaydoon H. Munir, Experian senior vice president. Emerging Credit Score will collect Experian's credit data and eBureau's alternative consumer credit, payment, and identity data and provide it to grantors. The score will reflect the purchase and payment histories of consumers with little or no credit history and reveal information about the thin-file and no-file consumer segment, which, respectively, accounts for 44.7 million and 28 million consumers in the United States. (click for web site) Back to Top Banks Springing Up to Serve the Underserved New York Times (03/08/08) Galst, Liz Banks are turning to niche markets to grow new business, finding it beneficial in developing strong customer relationships and distinguishing themselves in a market filled with giant banks. Chase Manhattan Bank, for example, recently opened its Nuestro Banco unit in Raleigh, N.C., which courts the skyrocketing Hispanic population there. The bank offers check cashing for new immigrants and bank applications in Spanish, and the building's exterior is even decorated with Hispanic-influenced stucco and tile. Hispanic banking is the largest niche; others include environmentally responsible banking and Muslim banking. New Resource Bank invests its deposits in green businesses, which satisfies customers who do not want to bank with a company that underwrites projects like coal-fired plants or unsustainable logging. New Resource says many big banks fail to understand green businesses and see risks in the wrong areas, such as higher price points for organic food, and deny financing for green businesses for the wrong reasons. Meanwhile Islamic law forbids the charging or paying of interest, meaning most Muslims have interest-free checking accounts, pay off their credit cards every month, and rent rather than buy homes. University Islamic Financial Corp. offers rent-to-own home buying agreements and savings accounts that offer profit sharing rather than interest. (click for web site) Back to Top Entering the Repossession Lane Boston Globe (03/07/08) Abelson, Jenn Repossessions are increasing rapidly as the rate of car-loan defaults hits a 10-year high of 3.4 percent. The auto-loan business has been suffering the same problems as the mortgage industry, because many lenders during the economic boom began offering more subprime loans with extended repayment terms, overall doubling the amount of American auto-loan balances in the past decade. Now that oil prices are high and the economy has slowed, consumers are finding they have more to pay off than their cars are worth and are faced with choosing between giving up their car or their house--and many are greeting the auto repossessors with relief. Repossessions have increased 15 percent this year, while lenders are tightening their underwriting standards, making fewer subprime loans, and writing off billions in defaulted loans. Analysts worry that the situation may tip the industry into a crisis, but others note that auto lenders can recover more quickly than mortgage lenders, because repossessions occur just 90 days after a default compared to a year for mortgages. (click for web site) Back to Top Bill Is Frank's, Choice May Be Hobson's American Banker (03/07/08) P. 1; Kaper, Stacy Rep. Barney Frank (D-Mass.) has threatened bank lobbyists who might oppose a credit union relief bill currently pending in the House with the possibility of introducing a separate bill for banks and thrifts, leaving lobbyists torn about which way to proceed. But Frank said a middle ground can be found, and lawmakers can manage to pass relief for both entities. The credit union bill would allow credit unions to move to a risk-based capital system and expand into areas currently served by banks such as payday loans; bankers complain that if credit unions get these benefits they should have to pay the same taxes as banks. Proponents of the bill, meanwhile, say it will only enhance credit unions' ability to serve its intended customers, noting that the current lending cap of 12.25 percent of total assets currently reduces their ability to serve members and that they must turn customers away every day. (click for web site) Back to Top Banking Fees Are Rising and Often Undisclosed Washington Post (03/02/08) Tomoeh, Murakami Tse The Government Accountability Office (GAO) has released a report indicating that the average bank overdraft fee has risen 11 percent since 2000 and that banks are not disclosing the fees to customers despite laws that require it. The report's authors visited 154 banks, and at more than 20 percent of the locations they were unable to obtain comprehensive lists of checking and savings fees; at one third of the banks they could not get account terms and conditions; and the information was not available on the Web sites of 50 percent of the banks. According to Eric Halperin, director of the Washington office of the Center for Responsible Lending, the fees can be more than $30 per instance and are hitting low-income customers disproportionately. Banks' income from such noninterest sources rose 27 percent in 2006. The GAO report encourages regulators to find ways to ensure that customers are actually getting the fee information before opening an account, and all five banking regulators have said they will address the issue. (click for web site) Back to Top
AppOne Details Products Designed to Combat Red Flag Violations Subprime News (03/11/08) To help car dealers and lenders deal with the Federal Trade Commission's new Red Flag Rules for identity theft, AppOne offers some products that simplify compliance with the rules. Under the Red Flag Rules, which go into effect Nov. 1, dealers and lenders are required to implement "observable and measurable" identity theft prevention programs. AppOne's IDOne is an automated alerting system that notifies its users regarding discrepancies and looks for patterns of possible fraud. AuditOne reconciles finance documents with information provided on credit applications, and InterviewOne verifies the identity of the buyer and the type of car being purchased. AppOne says its products can help dealers and lenders avoid the costly penalties and fines that could be racked up by non-compliance with the Red Flag Rules. (click for web site) Back to Top As Auto Market Worsens, Wachovia Seeks a Boost American Banker (03/10/08) P. 2; Davis, Paul Wachovia is looking to cautiously increase its indirect auto finance portfolio, after nearly quintupling its portfolio two years ago with the purchase of Westcorp. The auto portfolio surpassed Wachovia's expectations, and the bank is hoping to take market share from companies leaving the sector in the face of rising loan defaults. Wachovia is moving cautiously, though, tightening its underwriting, favoring fuel-efficient cars with high resale values, and approving fewer applicants in order to skew its portfolio upward to 700-plus credit scores. The bank says its losses will be higher than last year, but executives feel good about the future prospects for the business. The bank's losses in the indirect auto portfolio rose by 33 percent to $400 million last year, but applications are increasing. (click for web site) Back to Top Markit, Dealers Mull New Auto ABS Derivatives Index Reuters (03/06/08) Leinfuss, Nancy Markit Group is in the early stages of developing an index that would be tied to auto loan securitizations, the company says. While Markit says there has been no concrete product developed yet, the idea would be for pools of car loans from companies like GMAC and Ford Motor Credit to be packaged and sold as securities. Recent warnings about U.S. car loan delinquencies, however, are prompting some analysts to worry that the auto-loan securities could face the same fate as mortgage-backed securities. Some say, though, that while delinquencies are on the rise, they are merely recovering from artificial lows seen in 2005, when bankruptcy reform went into effect. (click for web site) Back to Top DealerTrack Launches Independent Network The Auto Channel (03/03/08) DealerTrack has unveiled a new Web-based network that connects independent dealers with financing sources, which will include strong risk mitigation and allow dealers to boost the number of financing options they offer customers. The country's 42,800 independent dealers sold more than 13 million used cars in 2007, but they have more trouble developing relationships with lenders than franchised dealerships, and having limited financing options limits their potential revenue opportunities. DealerTrack Independent Network aims to change that, and offers ongoing dealer monitoring, vehicle title processing, and title insurance with partners such as VINtek and Vehicle Title Agency. So far there are five lenders onboard, including ACC Consumer Finance, AmeriCredit Financial Services, Fireside Bank, Turner Acceptance Corp., and Universal Special Auto Finance. (click for web site) Back to Top 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,  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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