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March 20, 2008
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Mortgage Advisory Board Tackles Legislative and Regulatory Issues in Meeting
MoneySKILL® Mania Competition a Success
AFSA Submits Comment Letter on Proposed Alaskan Mortgage Lending Regulations
Presenter Lineup Growing for Finance Industry Conferences
New Member Welcome
GMAC Names de Molina CEO
GE Money and Michelin Move Forward With Consumer Finance Program
Wells Fargo Among Potential Buyers for Struggling Cleveland Bank
Mazda, Sumitomo Mitsui to Buy Stake in Ford Japan Car-Loan Unit
Colleges' Debit-Card Deals Draw Scrutiny
Viewpoint: Let Market, Not D.C., Set Interchange Rates
MasterCard 'Welcomes' Dismissal of Antitrust Suit
Plastic Fee Fall
Democrats, Bush Square Off Over Housing Relief
Mortgage Industry Backs Bill to License Loan Officers
White House Offers Plan to Ward Off Credit Crisis
South Carolina Legislature Passes Tough, Stringent Identity Theft Law
Customize Fees and Make Customers Feel Special
Maybe Payday Loans Don't Hurt the Poor
Credit Turmoil Is Likely to Crimp U.S. Auto Sales
Leases Grow as Alternative to Long Loans
Fitch: U.S. Auto Lease ABS Issuance to Decline in 2008
Mortgage Advisory Board Tackles Legislative and Regulatory Issues in Meeting
The Mortgage Advisory Board met in Washington, D.C., on March 18 to discuss legislative proposals and state challenges. Currently, Congress is reviewing several bills dealing with mortgage lending, including Rep. Frank’s (D-MA) mortgage reform bill, Sen. Dodd’s (D-CT) homeownership preservation bill, several bankruptcy bills, the Senate stimulus package, a homeownership tax credit and a bill dealing with FHA foreclosure prevention.
The board also reviewed proposals by presidential candidates dealing with foreclosures and the President’s Working Group on Financial Markets. Among the state challenges covered during the meeting were the recent vacant property ordinances and foreclosure moratoriums. On the regulatory side, the Board discussed the U.S. Department of Housing and Urban Development’s (HUD) recently proposed Real Estate Settlement Procedures Act (RESPA) rules.
Immediately following the meeting, board members met with Federal Reserve Board staff to discuss their proposed amendments to the Home Ownership and Equity Protection Act (HOEPA).
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MoneySKILL® Mania Competition a Success
On March 13, the University at Buffalo School of Management and M&T Bank sponsored MoneySKILL Mania, a financial literacy competition for high school juniors and seniors based on the AFSA Education Foundation’s MoneySKILL course. Fourteen high schools registered for MoneySKILL Mania, and more than 70 students participated. The team from Sacred Heart Academy placed first and Jessica Yox of Sacred Heart Academy had the highest individual score. The event was designed to increase awareness of MoneySKILL and educate students to make informed financial decisions. Susie Irvine, AFSAEF president and CEO, welcomed the students, teachers and parents and thanked the University and M&T Bank for hosting and supporting the event.
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AFSA Submits Comment Letter on Proposed Alaskan Mortgage Lending Regulations
On March 14, AFSA submitted a comment letter on the proposed regulations by the Alaska Department of Commerce, Community, and Economic Development in Chapter 14, Title 3 of the Alaska Administrative Code. The proposed regulations address mortgage lending, including licensing of mortgage lenders, mortgage brokers, and originators.
In its comment letter, AFSA suggested that the Department incorporate some flexibility within the proposed definition of “employee” of a mortgage lender. As currently drafted, the definition lists predetermined factors that must be met in the employer/employee relationship, regardless of other relevant circumstances. AFSA recommended determining the definition of employee in a more case-by-case basis, rather than limited to the conditions set on the proposed regulations.
AFSA also expressed concern about the proposed investigative fee for the application of a loan originator license. AFSA believes the proposed fee is excessive because it is charged hourly and is not in accordance with the fee required by other states. A better alternative would be to cap the fee as it may foreclose opportunities for legitimate and qualified businesses seeking originator licensure.
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Presenter Lineup Growing for Finance Industry Conferences
The presenter schedule has been announced for the 8th Annual Finance Industry Conference for International Fixed Income Investors conference to be held in Paris, April 22-24. In addition, four more presenters – American Capital Corporation, PACCAR, Discover Card and Capital One – have been confirmed for the 18th Annual Finance Industry Conference for Fixed Income Investors to be held in Boston, May 12-14.
AFSA’s two finance industry conferences feature many of the industry’s largest debt issuers providing in-depth commentaries on their strategies and operations. The two-day conferences bring together professionals responsible for credit and investment decisions with senior management of finance companies, rating agencies and the Industry's bankers. The April conference is supported by more than 15 of the biggest names in the European capital markets, and the May conference is supported by more than 20 of the largest names in the U.S. capital markets.
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New Member Welcome
AFSA welcomes active member Standard Financial, LLC, and new associate members ChoicePoint Precision Marketing, XpressCredit, and Harwood Resources.
Standard Financial, LLC, is a finance company headquartered in Baton Rouge. La.
ChoicePoint Precision Marketing, headquartered in Peoria, Ill., accelerates sales, improves customer retention and enhances cross- and up-sell programs. Ranked a top five marketing services company in the U.S., ChoicePoint provides full-service direct and database marketing solutions to leading companies in insurance, financial services, and many other industries. Web site
XpressCredit, headquartered in Syracuse, N.Y., is a leading provider of a Web-based, indirect lending platform. Its patent-pending solution links lenders with auto, motorcycle, RV and marine dealers nationwide. Web site
Harwood Resources provides legal services for employee groups, businesses and individuals relating to identity theft. Harwood is headquartered in Tyler, Texas.
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GMAC Names de Molina CEO
Reuters (03/18/08) Stempel, Jonathan
GMAC has named Alvaro de Molina successor to outgoing CEO Eric Feldstein. De Molina, who was elevated to the office of COO last summer, will assume Feldstein's responsibilities, effective April 1. De Molina said in an interview that the company has "a plan to be profitable in 2008."
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GE Money and Michelin Move Forward With Consumer Finance Program
Business Wire (03/14/08)
GE Money and Michelin have teamed up to offer consumer financing through GE Money's Sales Finance division. The CarCareOne private label credit program will offer 90-day, 6-month, or 12-month no interest programs on Michelin purchases. The program, which does not require a down payment and does not charge an annual fee, is an excellent option for car owners seeking to maximize the performance and efficiency of their vehicles amid rising fuel costs, officials say. "Budgeting for tire maintenance isn't easy--especially when unplanned needs arise," says Parmeet Grover, brand director for Michelin. "We pride ourselves on offering competitive prices to car owners, and the CarCareOne program is a great addition to our service offering that further helps people get and pay for the tires and ongoing maintenance they need."
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Wells Fargo Among Potential Buyers for Struggling Cleveland Bank
San Francisco Business Times (03/13/08) Calvey, Mark
Cleveland-based National City is looking for a buyer, and Wells Fargo is on the short list of possible acquirers. The San Francisco bank shows no sign of decreasing its acquisition activity after buying five banks from United Bancorp. of Wyoming Inc. earlier this year and recently purchasing Greater Bay Banks.
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Mazda, Sumitomo Mitsui to Buy Stake in Ford Japan Car-Loan Unit
Bloomberg (03/13/08) Ueno, Kiyori
Mazda Motor Corp. and Sumitomo Mitsui Banking Corp. are both planning to purchase stakes in Ford Motor Co.'s Japanese car loan unit. Mazda, which is in itself a third owned by Ford, will purchase a 40 percent share in Primus Financial Services Inc. Sumitomo will purchase a 41 percent share. Sumitomo's credit card unit will purchase 15 percent, while Ford Motor Credit Co. will keep the remaining shares.
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Colleges' Debit-Card Deals Draw Scrutiny
USA Today (03/16/08) Chu, Kathy
Some government officials are beginning to act on concerns expressed by consumer groups and university students about the rise of debit cards linked to student ID cards, saying the schools are raking in hundreds of thousands of dollars a year at the students’ expense. New York Attorney General Andrew Cuomo, whose investigation into the student loan industry recently led to changes in the system, is now looking at debit card agreements between colleges and banks. The student population tends to be low on cash, proving a profitable source of fee income for banks that charge up to $38 for each overdraft. The banks are also hoping to build relationships with students that will last into the future.
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Viewpoint: Let Market, Not D.C., Set Interchange Rates
American Banker (03/14/08) P. 10; Grover, Eric
The Credit Card Fair Fee Act of 2008, introduced by House Judiciary Committee Chairman John Conyers (D-Mich.), aims to curb interchange fees. The legislation proposes that a three-judge panel set payment system rates. However, regulators do not have the financial expertise the markets do and might end up hurting consumers, according to this opinion piece. Resources may be misallocated, and competition could decrease in a country that has one of the most competitive merchant acquiring and processing markets in the world. Under the new payment system, if payment systems do not agree to lower fees, lower card acceptance prices could be set for everyone. This would then increase cardholder fees, slash benefits, and suppress issuer innovation.
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MasterCard 'Welcomes' Dismissal of Antitrust Suit
Reuters (03/13/08) Keating, Gina
A U.S. appeals court has dismissed an antitrust lawsuit by several merchants who claimed MasterCard, Visa USA, and three banks colluded to set fees charged to businesses for credit card sales. The ruling was made by the 9th U.S. Circuit Court of Appeals. The ruling upholds a 2005 dismissal of the case by a San Francisco federal judge. The case was led by hair salon operator Sheri Kendall and restaurant operator James Maser. MasterCard general counsel Noah Hanft stated that no U.S. court has yet declared interchange to be illegal.
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Plastic Fee Fall
New York Post (03/13/08) Kouwe, Zachery
New legislation introduced by Reps. John Conyers (D-Mich) and Chris Cannon (R-Utah) that could dramatically lower the interchange fees that credit card companies charge to merchants for consumer transactions could also hurt Visa's planned initial public offering. Visa could suffer a nearly $600 million loss in annual revenues and its earnings per share could decline by as much as 30 percent from current estimates if the bill passes, according to a study by several hedge funds. MasterCard could lose $250 million from its annual revenue and experience a earnings per share drop-off of as much as 25 percent. Credit card-issuing banks could suffer a nearly $17 billion loss in annual revenue. The legislation was introduced on the back of fierce lobbying by major U.S. retailers such as Wal-Mart. Visa reports in its offering documents that any interchange fee revisions could have a "material adverse impact on our revenues, operating results, prospects for future growth, and overall business."
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Democrats, Bush Square Off Over Housing Relief
Washington Post (03/20/08) P. D1; Birnbaum, Jeffrey H.; Montgomery, Lori
The White House is working closely with Capitol Hill legislators on proposals that would help new home buyers and small investors nationwide by toughening up rules that govern mortgage lending. Meanwhile, House lawmakers reportedly are on the verge of approving a multibillion-dollar program to prevent hundreds of thousands of home foreclosures. The outlook for the plan is uncertain, though, as President Bush continues to balk at broad legislation to bail out strapped homeowners. Democratic congressional leaders believe the president will compromise eventually, at the urging of Treasury Secretary Henry Paulson and other senior members of the Cabinet.
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Mortgage Industry Backs Bill to License Loan Officers
Arizona Daily Star (03/18/08) Smythe, Christie
Mortgage lenders in Arizona say they support a bill in the state Legislature that would require loan originators to be licensed. Sponsored by Rep. Bill Konopnicki (R-Safford) and Sen. Jay Tibshraeny (R-Chandler) the measure would establish basic education standards for loan officers, require background checks, and allow the Department of Financial Institutions to keep track of loan originators. Similar legislation failed in previous years, but the current crisis in the mortgage market has the industry thinking long and hard about providing greater protection to home buyers. "Mortgage brokers are pushing this on ourselves," says Arizona Association of Mortgage Brokers President Stan Lund, who has been a long-time advocate of licensing requirements. "We want our industry to be regulated and licensed."
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White House Offers Plan to Ward Off Credit Crisis
New York Times (03/14/08) P. A1; Labaton, Stephen
The Bush administration wants states to issue licensing standards for mortgage brokers, lenders to provide more information on payment terms to home buyers, and companies to limit conflicts of interest in assigning levels of risk to mortgage securities sold to investors. The White House sees the proposal, which was welcomed by industry representatives, as having the potential to prevent future problems in the credit markets. Federal banking and securities regulators and new committees run by industry executives will issue regulations in the next few months to execute the plan, while federal legislation might be crafted to tighten rules for mortgage brokers. Democratic lawmakers said the proposal is too late and does not go far enough; they said that they plan to assist states in purchasing homes in foreclosure and press mortgage lenders to write down the value of mortgages in distressed communities.
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South Carolina Legislature Passes Tough, Stringent Identity Theft Law
Morning News (AR) (03/14/08)
South Carolina lawmakers have approved new identity theft legislation that allows state residents to place or remove security freezes on their credit reports. The state's toughest ID theft legislation to date, S.453 would offer security freezes as an option for free, and orders the State Law Enforcement Division to establish an identity theft database. Another provision in the measure would punish consumer credit rating agencies that neglect to remove invalid information from credit reports within 30 days of receiving notification of an error. S. 453 also grants a 15-minute lift to a consumer's credit report freeze that can only be accessed with the consumer's PIN number. Businesses must discard paper and electronic consumer information that is sensitive and contact consumers as soon as the business becomes aware that a security breach has occurred.
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Customize Fees and Make Customers Feel Special
US Banker (03/08) Vol. 118, No. 3, P. 48; Adams, John
Some banks are offering individualized fees for customers to get away from the one-size-fits-all, product-centric approach and hopefully build better relationships with customers. National City Bank's relationship-pricing strategy involves software that analyzes customer data, transaction histories, credit risk, and other personal habits to come up with personalized fees, hoping the move will bring the bank a larger portion of the customer's business. The strategy seems to be working--the bank's percentage of single-service or single-product households has fallen 70 percent since instituting the relationship-pricing plan a year ago, its rate of account growth has risen 18 percent, its household return is up 30 percent, and debit card spending has climbed 16 percent. A recent BAI study found that 52 percent of customers find rewarding relationships to be "vital," while only 12 percent said they feel they have such a relationship with their bank. Some say the trend toward relationship pricing will be slow to catch on, because there are deep cultural differences between business and technology at most banks, or what Gartner analyst Richard DeLotto calls "a legacy system attitude."
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Maybe Payday Loans Don't Hurt the Poor
Spirituality & Health (04/01/08) P. 37; Kiesling, Stephen
After deciding to loosen its criteria, a South African lender issued loans to 325 formerly rejected applicants. The loans were provided to the poor, despite having an annual interest rate of about 200 percent. Those who received them established credit ratings, reduced their chances of being in poverty by 19 percent, and were more likely to keep their jobs. "In our desire to protect the poor, we must be careful [to] not take away the only ladders they have," writes Spirituality & Health editor Stephen Kiesling.
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Credit Turmoil Is Likely to Crimp U.S. Auto Sales
Wall Street Journal (03/19/08) P. A11; Kosdrosky, Terry; Flowers, John
Citing the slowing U.S. economy, J.D. Power & Associates lowered its auto sales projections for this year. New vehicle sales projections in the United States were reduced 4.8 percent to 14.95 million, and the market research firm predicts additional attrition in the second quarter before a turnaround occurs. J.D. Power's earlier sales forecast predicted sales of 15.7 million vehicles. J.D. Power, which now expects retail sales of 12.3 million vehicles this year, down from its original estimate of 12.6 million, attributed the revised outlook to falling consumer confidence and ongoing turbulence in the credit market. Every sector of the automotive industry is being affected, including fleet sales. GM officials say the company will stand by its second-half sales forecast for now. "If we can stabilize this thing, I think we're still OK for some growth in the second half," says GM Vice Chairman Bob Lutz. "However, when you're in the midst of a period of heavy turmoil like we've had for the past couple of weeks, the situation becomes more unpredictable. Right now, I would say we just have to sit out the next two to three weeks and see what happens."
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Leases Grow as Alternative to Long Loans
AutoWeek (03/17/08) Sawyers, Arlena
Leasing is becoming more popular for customers who want to avoid loans that, as of last year, can take an average of 64 months to pay off. Dealers and automakers are also endorsing leases as fewer people are buying new vehicles, because lease customers are more likely to come back sooner to purchase a new car. Leases made up 19.3 percent of new-vehicle sales in 2007, an increase from 14.3 percent in 2003. This rate soared to 21.7 percent in the first couple months of 2008 and is predicted to reach 22 percent later this year. Many mass-market brands promote leasing to attract customers. Customers with good credit can purchase two-year leases on five 2008 models for $199, with a $2,199 down payment, from Mazda American Credit through March. According to Eric Johnston, vice president of sales and field operations at Mazda North American Operations, the lease promotion helped Mazda raise its U.S. new-vehicle market share to 2 percent in January and February of this year, up from 1.8 percent last year.
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Fitch: U.S. Auto Lease ABS Issuance to Decline in 2008
Business Wire (03/13/08)
The level of new retail vehicle lease originations and auto lease asset-backed securities (ABS) issuance is expected to decline in 2008 due to falling U.S. domestic vehicle sales, static vehicle lease penetration rates, rising pressure on residual realization levels, auto manufacturers' financial stress, and overall ABS market volatility, according to a report from Fitch Ratings. Lease ABS structures are more complicated than auto loans due to greater risks associated with the fact that the lessor is also the car's owner, making it difficult to isolate leases and vehicles from the assets of the lessor. Further, the leases are subject to residual value risk and therefore vulnerable to volatility in used car prices and the wholesale market.
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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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