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July 3, 2008
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AFSA Supports Business Activity Tax Simplification Act
July Webinars to Focus on FACT Act’s Red Flag and Affiliate Marketing Rules
Gannon Promoted to Vice President of Marketing
Nissan North American Makes Donation to MoneySKILL®
B of A Completes Countrywide Deal
Discover Completes Diners Club Acquisition
HSBC in National Corporate Banking Push
An Interview with Edmundo Vallejo
IRS May Get Reports on Credit Card Payments From Processors
Group Touts Visa Plan for Gas Station Holds
China's Shoppers Stock Up on Cards
Foreclosure Bill Orders Lenders to Talk to Borrowers
Hope Now: 1.7 Million Workouts on Loans Since July 2007
Hello Muddah, Hello Fadduh, My Portfolio Is in the Gutter
Cheaper, Bigger, and Cooler Student Loans
Hard Times for Student Borrowers
Viewpoint: Clear Progress in Serving Underbanked
Calling All Non-Prime Lenders for a Special Opportunity to Directly Reach Dealers
Good News for Soldiers Who Terminate Auto Leases When Deployed
AFSA Supports Business Activity Tax Simplification Act
On July 2, AFSA sent a letter to the chair and ranking member of the House Judiciary Subcommittee on Commercial and Administrative Law urging them to support H.R. 5267, the Business Activity Tax Simplification Act (BATSA). The bill would prohibit state taxation of an out-of-state entity unless it has a physical presence in the taxing state.
“BATSA will provide clear guidelines which will ensure fairness and create a secure business environment that will encourage businesses to invest and to expand interstate commerce. The legislation will also minimize expensive litigation for taxpayers and state governments,” wrote Bill Himpler, AFSA Executive Vice President of Federal Government Affairs.
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July Webinars to Focus on FACT Act’s Red Flag and Affiliate Marketing Rules
AFSA will host two educational webinars in July on how to comply with the Fair and Accurate Credit Transactions (FACT) Act rules that will take effect later this year. These short “lunchtime” webinars are designed to help companies make sure they are ready for the multitude of new requirements under the FACT Act’s Red Flag and Affiliate Marketing Rules. The Red Flags Rule Webinar will be held on Thursday, July 17, at 12pm EDT, and the Affiliate Marketing Rule Webinar will be held on Wednesday, July 23, at 12pm EDT.
Both webinars will be led by former FACT Act Program Manager at the FTC’s Bureau of Consumer Protection Andrew Smith, one of the country’s foremost experts on these rules. Currently, Smith is a partner in the Washington, D.C. office of Morrison and Foerster.
The webinars are open to both members and non-members. Register for the Red Flags Rule Webinar here. Register for the Affiliate Marketing Webinar here.
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Gannon Promoted to Vice President of Marketing
Effective July 1, AFSA’s Director of Federal Government Affairs Matt Gannon became the association’s Vice President of Marketing, a newly created position. Gannon’s new responsibilities include new member recruitment, overseeing Marketing Partnerships, exhibits, sponsorships and advertising, as well as serving as the staff liaison to the Associate Member Advisory Board. He also will work closely with Sheilah Harrison, AFSA’s Vice President of Membership Services. Gannon, who joined AFSA in 2005, previously worked for the National Republican Congressional Committee and with Capitol Advertising, Inc. He holds a bachelor’s degree from James Madison University.
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Nissan North American Makes Donation to MoneySKILL®
On June 27, Nissan North American presented a $15,000 check for MoneySKILL to Susie Irvine, President and CEO of the AFSA Education Foundation, at the Heisman® Anniversary Weekend in Austin, Texas. This anniversary weekend hosted the largest gathering of Heisman winners. Three members of the elite fraternity were honored: Pete Dawkins, Mike Rozier and Ricky Williams. A portion of the proceeds from the events will benefit MoneySKILL, Lift UP American, Big Brothers Big Sister of Central Texas and Audubon Texas.
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B of A Completes Countrywide Deal
Atlanta Journal-Constitution (07/02/08)
Bank of America Corp.'s acquisition of Countrywide Financial Corp. was finalized on July 1. The buyer is now the nation's top originator and servicer of home loans, with a firm grasp on 20 percent to 25 percent of the U.S. mortgage market.
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Discover Completes Diners Club Acquisition
Associated Press (07/01/08)
Discover Financial Services' $165 million acquisition of Diners Club International from Citigroup is complete. Discover CEO David Nelms said Diners Club "provides us with a path to achieving global acceptance, establishing new international partnerships, and generating higher payments volumes."
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HSBC in National Corporate Banking Push
Buffalo News (06/29/08) Epstein, John D.
HSBC Bank’s core market is New York state, but the company has its eyes on the Midwest and West Coast with a new marketing push aimed at middle-market businesses across the country. The bank is focusing on those companies that may need its international capabilities, particularly companies with large Hispanic or Asian customer bases, as HSBC is the market leader in Asia and has extensive operations in Latin America and hopes to parlay that brand recognition into new customers here. Ohio-based industrial packaging manufacturer Greif Inc., for example, chose HSBC because of its extensive overseas network. “They were in a lot of the same places we were in,” said Greif treasurer John Dieker. Greif has several bankers but its work with HSBC is growing because it is expanding its operations in Latin America and Asia, where HSBC “has a lot to offer,” Dieker said. More and more companies are looking to expand overseas, and HSBC hopes to capitalize on that trend. “We really focus on the situations where we can bring added value to management, and that’s about giving access to the world in a way that’s pretty much unparalleled,” said HSBC senior executive vice president Christopher Davies.
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An Interview with Edmundo Vallejo
Business News Americas (06/23/08)
In a recent interview, General Electric CEO for Latin America Edmundo Vallejo discusses the economic situation in Latin America and how GE Money will approach consumer loans in the region. GE is optimistic about growth in the region because its markets have such a low level of banking penetration. The region has been able to decouple from the slower growth and liquidity issues seen in developed markets, and Brazil remains a country in which GE wants to grow, he says. As the subprime crisis continues in the United States, Vallejo says the northern part of the region has been affected by the slowdown in remittances, which has impacted growth as well as losses and charge-offs in other financial products. Liquidity throughout the entire region has also been a concern, but the response by global banks has not affected the growth of consumer loans as of yet. GE Money expects growth to be about 25 percent to 30 percent in terms of assets in 2008.
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IRS May Get Reports on Credit Card Payments From Processors
Tampa Bay Business Journal (06/30/08) Hoover, Kent
Legislation pending in Congress would require payment card processors to disclose to the Internal Revenue Service how much money merchants receive through credit card and debit card transactions; the Bush administration believes this policy would spur more businesses to accurately report their income and help close the gap between what the government is owed in taxes and what it actually collects. Congress calculates that the proposal could raise almost $10 billion over a decade, and the reporting requirement is included as a revenue raiser in separate House and Senate bills. But the new regulation could not help fund both pieces of legislation, which puts pressure on the chambers to resolve the issue before the bill could be signed into law, and gives card processors and small business groups more time to challenge the proposal. Processors say the proposal will cost them millions of dollars, with First Data's Kim Stubna commenting that "our systems do not currently track merchant payment transaction to [taxpayer identification numbers] and it will be extremely expensive and time-consuming to reprogram our systems to comply with the new mandates." Small businesses, meanwhile, are concerned that they would be forced to cover these costs via higher fees, and Fifth Third Processing Services' Donald Boeding warns that some merchants might stop accepting credit cards. A cash migration would make it "less likely that the IRS will be able to track taxable income," he says.
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Group Touts Visa Plan for Gas Station Holds
American Banker (06/30/08) P. 7; Aspan, Maria
Visa's initiative to lower authorization hold times for gas purchases has been lauded by the Consumers Union. Visa recently announced that it is planning to change its processing systems to facilitate more rapid settlement, and Consumers Union's Michelle Jun urged MasterCard to follow a similar course of action. Visa also said that on July 18 it will cap interchange rates for fuel transactions made on consumer debit cards at 95 cents, and will implement in October a "systemwide" restructuring making the interchange rate for all consumer credit card gas purchases "a single, lower rate" of 1.15 percent plus 25 cents a transaction. Visa added that in the meantime it is "willing to work with fuel merchants and their acquirers individually to process credit transactions at these lower rates." In April 2007 MasterCard capped its interchange rates on gas purchases of at least $50, and Visa and MasterCard said they hope the changes will spur oil companies to pass on the savings to consumers and retailers.
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China's Shoppers Stock Up on Cards
Asia Times (06/26/08) Jiang, Catherine
The number of credit cards used by Chinese consumers nearly doubled in the first three months of 2008 from a year earlier, with the People's Bank of China reporting on its Web site that the volume of credit cards in circulation surged 93 percent in the year ending March 31, 2008, to 104.7 million. The boom in Chinese credit card usage follows aggressive marketing strategies by the Industrial and Commercial Bank of China and other banking institutions, while the Chinese government is eager to promote domestic spending and reduce China's reliance on exports to generate growth. Beijing has a target to have 30 percent of retail sales made through credit and debit cards in big cities by 2009, up from 10 percent at the end of 2005. A Shanghai Daily report says bank card-based transactions comprised 25.6 percent of the country's total retail sales in the first three months of the year, versus 21.9 percent last year, while the value of bank card transactions increased 58 percent year on year. To increase consumer use of cards, banks are installing point-of-sale terminals in restaurants and shops as well as putting more ATMs into operation. About 31.8 million Chinese hold credit cards, with each holding about three cards on average, according to Beijing-based researcher Analysys.
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Foreclosure Bill Orders Lenders to Talk to Borrowers
Ventura County Star (CA) (07/03/08) Herdt, Tim
California Gov. Arnold Schwarzenegger appears set to endorse an urgency measure obliging lenders in the state to talk to distressed homeowners about how they can avoid foreclosure and prohibiting the lenders from filing a default notice until 30 days after contacting a borrower or making a good-faith effort to do so. Current rules only require lenders to mail a notice of default to initiate foreclosure proceedings, but the measure put to Schwarzenegger on July 2 mandates face-to-face or telephone interaction between lenders and customers. The bill compels lenders to meet again, at the borrower's request, within two weeks of the first contact; forces lenders to provide advance notice to renters occupying homes that are about to be foreclosed; and gives cities more say-so over foreclosed properties in order to keep them from creating blight.
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Hope Now: 1.7 Million Workouts on Loans Since July 2007
DSNews (07/02/2008) Panchuk, Kerri
According to Hope Now, mortgage servicing companies helped about 170,000 homeowners avoid foreclosure in May and is on track to help 519,000 in the second half of 2008. Hope Now executive director Faith Schwartz says, "The May report demonstrates that Hope Now is helping homeowners avoid foreclosure. As promised, the industry has accelerated the pact at which it is helping homeowners."
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Hello Muddah, Hello Fadduh, My Portfolio Is in the Gutter
Wall Street Journal (07/02/08) Pilon, Mary
With the economy in a downturn, the financial literacy curriculum is expanding from business and finance camps to less traditional venues. Finance camps used to attract over-achieving high school students, but with the economy in a free-fall, finance camps are diversifying their clientele to include elementary-age children and students from a broader array of socio-economic backgrounds. The financial literacy curriculum may include how to rebalance portfolios, how to use credit cards without incurring high fees, and how to invest in real estate. Camp Millionaire in Santa Barbara, Calif., teaches campers how to create a minieconomy based on a phony currency called "moola." Campers also learn how to pay their bills using moola. Meanwhile, campers attending YoungBiz's Smart Start to Money Camp in Sarasota, Fla., learn about risk tolerance, stocks, and asset allocation through game play. The North Carolina Bankers Association and 4-H offer students the same opportunities at Camp Challenge, which provides financial education in the morning and traditional camp activities in the afternoon.
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Cheaper, Bigger, and Cooler Student Loans
U.S. News & World Report (07/01/08) Clark, Kim
The U.S. government is permitting every college undergraduate to borrow more money from one of the least expensive federal loan programs, reducing interest rates for needy students, and making repayment easier for financially struggling parents. New federal regulations that went into effect on July l raise the amount that nearly every full-time undergraduate will be able to borrow from the U.S. Stafford program to a minimum of $5,500. The Stafford loan will not cost students more than 6.8 percent annually in interest and 2 percentage points in fees, for an overall yearly rate of 7.25 percent. Congress has also reduced the interest rate Stafford loans will charge students who are regarded as needy to only 6 percent for the scholastic year that begins in the fall of 2008. Parents who take out a new federal PLUS loan will be allowed to delay payments until six months after the student exits school. Numerous parents with good credit, strong income, and home equity, however, often discover that private loans are better deals. Parents who can convince a bank to allow them to tap their home equity in spite of the current housing and credit challenges may find banks that offer rates as low as 4 percent during the summer of 2008. Meanwhile, parents who do not want to involve their home equity may be able to locate banks that will make unsecured loans at similarly appealing rates. Discover Financial Services states it is providing borrowers with credit ratings in the top 20 percent private education loans at half a percentage point beneath the prime rate. Numerous upstart businesses such as Greennote or Virgin Money operate by having students who get a relative or friend to lend them college funds pay a small fee to draw up the paperwork to convert informal lending deals into business agreements that are billed and handled like bank loans.
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Hard Times for Student Borrowers
In These Times (06/08) Ewert Jr., James H.
Between August 2007 and May 2008, a minimum of 103 lenders ceased or suspended giving student loans, says the student-loan resource Web site Finaid.org. The groups that have stopped include Sallie Mae, the College Loan Corporation, and Nelnet, which are among the country's biggest lenders. Meanwhile, Forbes reports that no bonds supported by student loans were bought during 2008's first quarter. "Lenders are just having difficulty raising the capital," explains America's Student Loan Providers executive director Kevin Bruns. "We’re going into the summer months, when about 75 percent of the student loans are processed." He adds that while around 75 percent of $60 billion will be processed this summer, there currently is not $45 billion of capital in the system because lenders cannot generate it. The Department of Education is starting to repurchase student loans from firms that cannot sell them to other investors, and it will increase by twofold the amount of funds available for the U.S. government's direct-loan program, Sallie Mae. Many students who already have loans, though, are having problems repaying them, including Brett Novak, who graduated from Orlando's Full Sail University with around $100,000 in Sallie Mae student loans. Novak no longer has the choice to consolidate his loans, and as of June, he had to begin making his $1,000 monthly loan payment.
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Viewpoint: Clear Progress in Serving Underbanked
American Banker (06/27/08) P. 11; Tescher, Jennifer
According to this opinion piece in the American Banker, during the past five years much progress has been made in reaching out to the underbanked. Many companies are now collecting nontraditional data on consumers with no credit files, and products like prepaid cards and small-dollar credit products are flourishing. The Underbanked Financial Services Forum recently showcased these and other products while highlighting five main themes in underbanked strategy: a focus on building relationships, collection of nontraditional data, creation of new products to suit the needs of the underbanked, experimenting with credit terms while preserving quality, and promoting savings products. The underbanked market is now a legitimate business opportunity for banks, and cultivating these five areas will ensure that the market continues to grow, the commentary says.
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Calling All Non-Prime Lenders for a Special Opportunity to Directly Reach Dealers
SubPrime Auto Finance News (07/01/2008)
The challenging capital markets and economy have caused numerous lenders to restrict underwriting mandates, which has left a large number of U.S. dealers struggling to locate indirect auto lenders willing to serve their special-finance clients. Therefore, SubPrime Auto Finance News has partnered with www.OnlineBKmanager.com to create a list of indirect auto lenders that still serve the non-prime and subprime credit tiers. To make this list as precise as possible, SubPrime Auto Finance News editor Jennifer Reed is asking lenders to contact her at jreed@subprimenews.com to give her a short overview of their services, tell her what states they operate in, and explain where dealers can go to obtain additional information, such as a Web site or an executive. Photography, including shots of leading executives or headquarters, is also acceptable. The deadline to be included in the special August edition is July 9. The list will also be added to the SubPrime Web site, and will be regularly updated.
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Good News for Soldiers Who Terminate Auto Leases When Deployed
Kiplinger Tax Letter (06/27/08) Vol. 83, No. 13,
Current law forbids car lessors from charging early termination fees if the soldier who voids the lease is deployed for at least 180 days. In addition, the Internal Revenue Service has ruled that these soldiers do not owe income tax on the forgiven debt or waived termination fees.
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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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