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March 6, 2008
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Baseball Legend Jim Palmer to Speak at AFSA Independents Conference
Baseball Hall of Famer Jim Palmer will speak at the Breakfast of Champions during the AFSA Independents Conference in Arizona. He replaces Joe Morgan as the Breakfast of Champions' inspirational speaker on Saturday, March 29.
An outstanding player with the Baltimore Orioles, Palmer built a successful broadcasting career following his retirement from baseball. In addition to broadcasting for ABC, ESPN HTS, and local Baltimore stations, he has served as spokesman for a number of companies, associations, and nonprofits because of his credible character and the positive image he exemplified through his career. For more than 20 years, Palmer has served as the regional sports chairman for the Cystic Fibrosis Foundation. In 1990, he was honored by Little League Baseball for being a positive role model.
Don’t miss your opportunity to be inspired by this Baseball legend, who has been a great leader on and off the field. Click below to register for the AFSA Independents Conference.
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AFSA Opposes House Automobile Arbitration Bill
MoneySKILL® Connects with Students on Their Level
FTC Announces 10-Year Regulatory Review Schedule
New Member Welcome
Wells Fargo Gives a Record $14.4M to Bay Area Nonprofits
Visa, MasterCard Calling for Wide PCI Compliance
Cracking Down on Creditors
MasterCard to Fight EU Payment Ruling
Wisconsin Legislators Want to Make PCI Standards Law
Bernanke Wants Banks to Rework Mortgages
Some Borrowers Rescued
GOP Blocks Mortgage/Bankruptcy Vote
House Passes Partial Forgiveness for Medical Student Loans
ABI: Feb. Consumer Bankruptcy Filings Hit Record High Since Law Change
New York Is Investigating Ties Between Colleges, Vendors
Viewpoint: Product Innovation: A Balanced Approach
FDIC Chief Asks Congressional Guidance on ILCs
Fitch Discusses Auto Finance Industry in Latest In-Depth Report
Payday Loan Foes Aim at Car-Title Loans
Manheim Analyzes Auto Financing Industry's Health
AFSA Opposes House Automobile Arbitration Bill
On March 6, AFSA staff attended the House Judiciary Subcommittee on Commercial and Administrative Law hearing on H.R. 5312, the “Automobile Arbitration Fairness Act of 2008.” Sponsored by Rep. Linda Sanchez (D-CA) and nine other Democrats, the bill would effectively ban all pre-dispute arbitration on controversies arising out of the sale or lease of a motor vehicle.
According to H.R. 5312, any controversy over a motor vehicle consumer sales or lease contract “may not be settled by arbitration unless, after such controversy arises, all the parties to such controversy agree in writing to settle such controversy by arbitration.”
AFSA strongly opposes this bill and defends the value of alternative dispute resolution, such as arbitration, as a fair and effective mode of settling agreements between borrowers and lenders. In written testimony to be submitted on the bill in the next few days, AFSA says, “H.R. 5312 would leave automobile consumers in a no-win situation of either attempting to find a lawyer to file suit in court, or abandoning any realistic hope of resolving a dispute.”
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MoneySKILL® Connects with Students on Their Level
Today’s high school students are technologically savvy, and MoneySKILL® connects with them in a medium that they frequently use – the Internet. MoneySKILL® enrollment of high school students has increased by more than 100% and teacher registrations have increased 63% in 2007.
MoneySKILL is a free online personal finance course provided by the AFSA Education Foundation for the thousands of high schools students graduating each year without a basic understanding of money management fundamentals. The course is designed to be used as all or part of a course in economics, math, social studies or wherever personal finances are taught. Students can access the modules in the classroom or at home, so the material also can be assigned as homework. Built-in quizzes test the students’ grasp of each concept presented.
“MoneySKILL allows students to gain confidence in their knowledge of personal financial management that will have a life-long impact on all of their financial decisions," said Jim Agnew, Business Teacher at Orchard Park High School in Orchard Park, N.Y.
MoneySKILL continues to gain ground with teachers and students, thanks to the AFSA Education Foundation’s hard work to promote and upgrade the program to meet users’ needs. More than 1,800 teachers throughout the country received MoneySKILL training in 2007, and the foundation expects this number to be exceeded in 2008.
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FTC Announces 10-Year Regulatory Review Schedule
On February 26, the Federal Register published the Federal Trade Commission’s (FTC) revised ten-year regulatory review schedule. The FTC will request comments on the rules and guides’ economic impact; continuing need; possible conflict with state, local or other federal laws or regulations; and the effect from any technological, economic, or other industry changes. Below is a list of when the rules and guides that may affect AFSA member companies will be examined:
Credit Practices Rule: 2010
Telemarketing Sales Rule: 2013
Standards for Safeguarding Customer Information: 2014
Rules Implementing the CAN-SPAM Act of 2003: 2015
Fair Credit Reporting Act (FCRA) Rules - Definitions: 2015
FCRA Rules - Free Annual File Disclosures: 2015
FCRA Rules - Prohibition Against Circumventing Treatment as a Nationwide Consumer Reporting Agency: 2015
FCRA Rules - Duration of Active Duty Alerts: 2015
FCRA Rules - Appropriate Proof of Identity: 2015
FCRA Rules - Summaries, Notices, and Forms: 2015
FCRA Rules - Disposal of Consumer Report Information and Records: 2016
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New Member Welcome
AFSA welcomes new associate members Zoot Enterprises, Merchants Mortgage & Trust Corporation and Marketing Associates, while also welcoming back active members Deep South Financial Services and Delta Financial Services of LaFourche, Inc., as well as associate member ID Analytics.
A privately held company in Bozeman, Mont., Zoot Enterprises provides credit decisioning and loan origination solutions to large financial services institutions. The high-tech, solution-oriented company was founded in 1990. Their expertise has led to long-term relationships with seven of the top-ten banks in the U.S.
Merchants Mortgage & Trust Corporation, LLC, founded in 1961, is a real estate finance company that services developer, investor and other lending needs in the residential, commercial and recreational real estate markets. Merchants operates similar to a commercial bank, but also provides solutions to non-conforming requests. The Denver-based company’s philosophy combines a risk-management approach to lending with traditional credit underwriting standards.
Marketing Associates, based in Richardson, Texas, provides a merchandise fulfillment program to the financial services industry by enabling finance companies to create installment loans on the sales of high demand consumer products. Marketing Associates provides merchandise selection and marketing, order placement and tracking, proof of delivery services, branch personnel training, all pre- and post-sales customer service, and reconciled vendor billing.
Deep South Financial Services is an independently-owned and operated consumer finance company headquartered in Louisiana. The company has 23 offices and is a member of the Louisiana Finance Association.
Located in Thibodaux, La., Delta Financial Services is an independently owned and operated consumer finance company that was founded in 2000.
ID Analytics is an identity risk management company that provides advanced analytic solutions to manage identity risk and prevent identity fraud throughout the customer lifecycle. ID Analytics has built its solutions on the ID Network®, the first and only national real-time system developed exclusively to manage identity risk. ID Network members include leaders from across the credit card, wireless telecommunications, and instant lending industries in the United States.
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Wells Fargo Gives a Record $14.4M to Bay Area Nonprofits
San Francisco Business Times (02/29/08)
In 2007 Wells Fargo made 1,860 grants to nonprofits and schools in the San Francisco area for a total of $14.4 million in donations for the year. The biggest portion of the funds went to education, which received $5 million, while the bank gave $3.8 million to community development programs, $2.6 million to human services groups, $1.8 million to arts and culture organizations, and $869,000 to civic programs. Some specific recipients included Glide Memorial Church in San Francisco and San Francisco General Hospital.
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Visa, MasterCard Calling for Wide PCI Compliance
American Banker (03/04/08) P. 6; Lucas, Peter
Visa and MasterCard have begun putting pressure on the third parties that handle cardholder account data, such as collection agencies, to come into compliance with the Payment Card Industry (PCI) data security standard. Until now, the card companies allowed a payment processor's PCI certification to be extended to collection agencies because they were more focused on mitigating the security risk of merchants and transaction processors. But rising rates of PCI compliance among midsize and top-tier merchants and public anger over the massive security breach at TJX last year have convinced Visa and MasterCard that they need to get collection agencies--which store credit card data on behalf of clients--to comply with the standard as well. "Ultimately, the company that has primary custody of the data and hands it off to business partners can be held liable if one of their partners is breached," says PCI Security Standards Council general manager Bob Russo. "Card issuers have to make sure their business partners, and so on, are PCI-compliant." However, it remains to be seen how far PCI compliance will extend into collections. Among the issues that need to be clarified is whether companies such as SoundBite Communications, a provider of automated customer contact technology, can sell card portfolios to buyers who are not PCI-compliant.
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Cracking Down on Creditors
Newsweek (03/04/08) Link, Matthew
Rep. Carolyn B. Maloney (D-N.Y.) says she introduced the Credit Cardholder's Bill of Rights Act last month because she has been seeing even more complaints from her constituents about credit cards than about subprime mortgages. Cardholders need to be protected from arbitrary rate increases, excessive fees, and sudden changes in terms that the cardholder is not informed about, she says. The balance between card companies and cardholders has become very lopsided in favor of the companies, she says, and her bill intends to even out the relationship. The practice of changing due dates on cards without informing the cardholder amounts to trying to catch the cardholder in a mistake so that the companies can raise rates and fees, she says, and a banning of this practice is supported by both parties in Congress. The bill would require a 45-day notice for changing a cardholder's rate, and card companies could no longer continue their practice of applying payments to lower-interest-rate balances on cards with multi-rate balances. Card companies are fighting the bill, and while Maloney says she supports card companies as an economic force and source of much employment in the country, she also believes they must use fair business practices. Her bill does not tell the companies how to operate--there are no price or fee controls, for example--but merely requires that they stick to the terms of their agreements with cardholders.
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MasterCard to Fight EU Payment Ruling
Financial Times (03/03/08) Tait, Nikki
MasterCard has announced it will challenge the European Commission's (EC's) decision that the company's fees for cross-border transactions are illegal. According to the EC, MasterCard charges interchange fees for cross-boarder payments, which unfairly inflates prices and violates European competition regulations. MasterCard has launched a formal appeal claiming its fees are both fair and necessary. Javier Perez, president of MasterCard Europe, says that if unchallenged the rules "would not only be bad news for consumers but a blow to the European payments industry." In spite of its objections, MasterCard says it will comply with the EC's directive while the appeal is being processed, which could take several years. The EC has instructed the company to withdraw the fees before June 21 or face penalty payments of up to $316,000 for each day they remain in effect.
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Wisconsin Legislators Want to Make PCI Standards Law
Bank Technology News (03/08) Vol. 21, No. 3,
In Wisconsin, potential legislation could hold card issuers accountable for losing consumer PINs or security codes after credit and debit card transactions are processed. Bills suggested by the Wisconsin Credit Union League would institute penalties for losing such information in the form of paying costs for re-issuance of the cards and closing consumers' accounts and possibly paying for identity theft protection and crediting certain accounts.
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Bernanke Wants Banks to Rework Mortgages
Washington Post (03/05/08) P. D1; Irwin, Neil
Mortgage foreclosures are likely to continue for some time, Federal Reserve Chairman Ben Bernanke said on March 4. During a convention of community bankers in Orlando, the economist called on mortgage lenders to reduce the principal owed on certain loans; but he did not say that mortgage originators should be forced to delay foreclosures or that the government should buy problem loans. "Efforts by both government and nonprofit entities to reduce unnecessary foreclosures are helping, but more can and should be done," Bernanke said. He noted that mortgage lenders have been willing to allow subprime borrowers with adjustable-rate mortgages to keep their interest at low starter rates but not to renegotiate the value of the loans. Additionally, he said that about 1.5 million of these loans are scheduled to reset to higher rates in 2008.
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Some Borrowers Rescued
Wall Street Journal (03/04/08) P. A3; Simon, Ruth
The Hope Now Alliance reported on March 3 that mortgage companies helped 1.04 million homeowners stay in their homes between July 1 and Jan. 31, adding that 73 percent received repayments plans and 27 percent benefited from loan modifications. Treasury Secretary Henry Paulson praised the efforts of the mortgage coalition leading the industry's initiative and said the report shows that "looking at the big picture, we're making progress."
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GOP Blocks Mortgage/Bankruptcy Vote
National Mortgage News (02/29/08)
A Democrat-backed bill that would have allowed bankruptcy judges to restructure subprime and nontraditional mortgages has been voted down by Senate Republicans. The defeat of the bill, which would also have provided revenue bonds for refinancing subprime borrowers and federal grants to buy properties in foreclosure, is being heralded by Republicans as a boon for banks and Wall Street, while Democrats say it hurts ordinary Americans facing foreclosure. The American Financial Services Association's Bill Himpler says the financial industry could back the bill if the bankruptcy provision were removed, noting that allowing changes to the bankruptcy code would "essentially undermine investor confidence in mortgage lending." The bill will likely be put to another vote before the Senate takes its break March 15.
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House Passes Partial Forgiveness for Medical Student Loans
Amnews.com (03/10/08) Hansen, Dave
A bill that recently passed the House would forgive up to $2,000 per year of student loan debt for medical students serving in areas of need, for a maximum of $10,000. Some observers note that the amount is small compared to the average $140,000 in loan debt a medical student typically amasses, but say that it at least signifies that lawmakers are aware of the problem. Scholarships would be more effective to encourage people to enter the field of medicine, experts say, because loan repayment only helps those who can already afford to enter medical school. The American Medical Association (AMA) is concerned that the bill may exclude primary care specialties, and is working to expand the bill. In its current form the bill provides new disclosure requirements for private lenders, disclosure rules for federal lenders regarding giving notice about terms for consolidating debt, and a Government Accountability Office study examining debt's impact on students. The bill passed by a very large margin, but a Senate bill passed last year does not have the AMA-backed provisions, which means lawmakers will likely have to find compromises between the two bills in order to hammer out one that will pass both houses.
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ABI: Feb. Consumer Bankruptcy Filings Hit Record High Since Law Change
SubPrime Auto Finance News (03/04/2008)
Consumer bankruptcy filings rose by over 15 percent in February when compared to January, according to the National Bankruptcy Research Center. There were over 76,000 consumer filings in February, more than a 37 percent increase from last year's total. Experts say that it is too early to blame the mortgage crisis for the increase in bankruptcies, but the crisis could lead to an even higher rate in coming months. The American Bankruptcy Institute estimates that over 1 million consumers will file for bankruptcy in 2008. Democrats recently attempted to pass a bankruptcy reform bill, but the bill was blocked by Republicans in the Senate after the White House threatened to veto it over cost concerns.
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New York Is Investigating Ties Between Colleges, Vendors
Wall Street Journal (02/29/08) P. A14; Tomsho, Robert
New York Attorney General Andrew Cuomo is probing the affiliations between colleges and the firms that provide their students with books, financial services, health insurance, and food. Cuomo's special assistant, Benjamin Lawsky, said the probe will target whether these firms are offering inappropriate payments in an effort to secure deals. Under such a situation, the companies' goods and services might not be in the students' best interests, he said. Lawsky revealed that although no subpoenas have been issued, Cuomo's office has requested and received information related to various industry events, such as a conference sponsored by the National Association of College and University Business Officers. Colleges are also being criticized for allegedly stashing away endowment funds while launching significant tuition hikes. Sen. Charles Grassley (Iowa), the senior Republican on the Senate Finance Committee, has called for large college endowments to spend 5 percent of their assets each year, equal to the rate required of private foundations. Another problem for colleges is the possibility that students will face difficulties in obtaining loans as a result of the squeezed credit market. The Pennsylvania Higher Education Assistance Agency has announced it will temporarily halt making federally guaranteed loans.
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Viewpoint: Product Innovation: A Balanced Approach
American Banker (02/29/08) P. 11; Tescher, Jennifer
There are a variety of alternatives to payday loans on the market today, and these new small-dollar loan products will give short-term relief to consumers but also potential trouble to product providers. There are two categories for the new products--modified versions of payday loans with more consumer-friendly features issued by banks, and small lines of credit sold by prepaid card issuers. The Federal Deposit Insurance Corp. recently issued draft guidelines for payday alternatives, recommending a maximum interest rate of 36 percent, and has begun a two-year pilot test with 30 community banks to test the products. Participating banks offer loans of up to $1,000 with multi-pay-cycle repayment terms, with some also offering automated savings plans and simplified underwriting. Meanwhile, H&R Block is offering lines of credit up to $1,000 to its customers with interest rates between 9 percent and 36 percent, and Meta Payment Systems has launched its iAdvance line of credit, which offers up to $600 in credit that can be drawn on in $20 increments with a $2.50 fee for each $20 borrowed. The new products will help consumers and will help companies strengthen customer relationships, but the products are still untested and companies should proceed with caution.
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FDIC Chief Asks Congressional Guidance on ILCs
American Banker (03/06/08) P. 19; Adler, Joe
On March 5, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair urged Congress to expedite the approval of a bill to prohibit commercially owned industrial loan companies (ILC). The FDIC has been urging lawmakers to clarify the limits on who can own ILCs since controversy was stimulated because of applications by Home Depot and Wal-Mart. Partisan bickering has impeded Senate legislation to institute ILC ownership restrictions, leaving the FDIC without direction as it contends with pending applications following the January expiration of its moratorium on such applications. "I hope we get an answer soon," said Bair.
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Fitch Discusses Auto Finance Industry in Latest In-Depth Report
SubPrime Auto Finance News (03/04/2008) Reed, Jennifer
Extended loans and competition from foreign carmakers are a few factors causing strife in the U.S. automobile finance industry. An analysis by Fitch Ratings shows a strong negative relationship between the lagging economy and portfolio growth for lenders, especially captives. "Asset quality deterioration, higher funding costs, and uncertain ABS market conditions could result in negative rating action for some non-captive lenders; however, the larger lenders benefit from significant business line diversity and stable deposit funding," the evaluation said. Unemployment rates are at a high, and losses from subprime loans reached 3.27 percent as of May 2006, according to Fitch's Auto ABS Annualized Net Loss Index, while loss expectations for this year are at 11 percent. Captive lenders are also suffering losses from defaulted loans offered to borrowers under 72-month plans, because longer loan terms generally mean drawn-out repayment of principal. Sales overall have decreased, while leases gained popularity within the past few years; according to Fitch, auto ABS issuance volume was $75.1 billion in 2007, a 20.6 percent drop from 2006, while lease/rental issuance more than doubled from 5 percent in 2006 to 12 percent last year. Meanwhile, portfolios at foreign captives have been growing at a double-digit pace, thanks to quality measures and higher international demand.
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Payday Loan Foes Aim at Car-Title Loans
Associated Press (03/03/08) Potter, Dena
Advocates for the poor who strongly oppose payday loans are also planning to go after car title lenders, who they say use predatory practices in offering short-term, high-interest loans that can cause even more trouble than payday loans. The market is unregulated, and in most states lenders are governed under the laws that apply to pawn shop brokers. Eight states have introduced legislation this year, and New Hampshire has nearly completed an agreement for a 36 percent interest rate cap on both payday and car title loans, while the federal government has prohibited the lenders from charging military personnel more than 36 percent. Lenders say car title loans are less of a problem than payday loans because consumers can only have one at a time, unlike payday loans.
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Manheim Analyzes Auto Financing Industry's Health
SubPrime Auto Finance News (02/28/2008) Reed, Jennifer
Manheim's 2008 Used-Car Market Report discusses how the subprime mortgage crisis has impacted the auto sector and its future, noting that auto lending is still strong but lenders should use caution and maintain their lending and underwriting principles to protect future profits. Weakness in the credit market, which is vital to both new- and used-vehicle sales, could have caused major problems in the auto industry, but the report says it was "heartening" that the retail auto financing market remained solid in 2007. The report states that the subprime auto industry did not follow the same path as subprime mortgages because the auto lending sector is more mature and lenders have learned from their experience, noting that unlike the auto industry, mortgage brokers had no stake in whether a loan is repaid. They also made the mistake of assuming that the value of the homes used as collateral would increase in value and were caught off guard by depreciating home values, but the auto industry is aware that cars do not rise in value and therefore its loans are more secure. But despite the sector's strength, auto lenders did lower permissible loan-to-value and payment-to-income ratios in the face of the credit crisis, which the report says will have only a short term effect on the market and should ensure long-term healthy credit.
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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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