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April 23, 2009
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AFSA Appears on C-SPAN to Discuss Credit Cards
TALF Resource Center Added to AFSA’s Web Site
Email Marketing Subject of Upcoming AFSA Webinar
Chrysler Financial Drops Request for Additional Funding
MasterCard Completes Canadian M-Payments Trial
Banks Sway Bills to Aid Consumers
Mexico's Banks at Risk of Interest Rate Caps
Credit Card Debt Rising for Students
Top Credit Card Issuers Back Debt Repayment Relief Program
Credit Unions Won't Back Mortgage 'Cramdown' Plan
Fannie Mae and Freddie Mac Helping More Homeowners--Loan Modifications Increasing
FICO Web Site May Help Homeowners Seeking Loan Modifications
Campaign Targets the Unbanked
Federal Program to Boost Private Lending Struggles to Get Money to Consumers
U.S. Bank Launches Special Auto Loan Program for Eco-Friendly Vehicles
Average FICO Score Drops Again for New-Car Loan Approvals
Consumer Perception of Loan Rejection Leads Industry to Lose $10 Billion in 1Q Auto Sales
AFSA Appears on C-SPAN to Discuss Credit Cards
Ahead of President Obama’s meeting with executives from top credit card companies on April 23, AFSA’s Executive Vice President Bill Himpler discussed industry practices on C-SPAN’s “Washington Journal” earlier in the morning. During a half-hour segment on Federal Oversight of Credit Card Industry, Himpler provided a snapshot of the issues likely to be addressed in the White House meeting and answered callers’ questions on a variety of credit card-related topics.
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TALF Resource Center Added to AFSA’s Web Site
This week, AFSA added a new feature to its Web site to assist members and others with a special interest in developments related to the Term Asset-Backed Securities Lending Facility (TALF). The new TALF Resource Center is a one-stop source of AFSA’s position papers and other background materials on the subject. Members can follow AFSA’s efforts working toward an expansion of TALF from the association’s home page.
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Email Marketing Subject of Upcoming AFSA Webinar
AFSA will host the webinar “Email Marketing – Launching a Program that Gets Results” on Thurs., May 7 at 2pm EDT. Designed for those looking to implement or improve an email marketing program, the webinar will feature the expertise of Scott Hilchey, Vice President of Interactive Solutions, SourceLink, and Barry Roberts, Director of Marketing/eCommerce, American General Finance Corp.
The hourlong webinar will address the role email plays in the marketing mix, the benefits of email, what’s required to get started, and much more. Sponsored by Sourcelink, the webinar costs $25 for members and $50 for non-members who register by Thurs., April 30.
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Chrysler Financial Drops Request for Additional Funding
Dow Jones Newswires (04/17/09) Bennett, Jeff
Chrysler Financial has abandoned its request for more federal assistance and notified the Treasury Department late on April 16. The company said it has sufficient funds to fulfill its needs in the short term. However, the federal request has not been officially terminated because the company wants to keep its options open, said spokeswoman Amber Gowen. Chrysler Financial had originally requested a second round of funding on March 18 in the wake of getting a January cash infusion of $1.5 billion. Meanwhile, the company is waiting for approval from the Federal Deposit Insurance Corp. on whether it can be converted into an industrial bank holding corporation.
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MasterCard Completes Canadian M-Payments Trial
Finextra (04/16/09)
MasterCard Canada has completed the first Canadian trial of Mobile PayPass, a mobile payment service that uses near-field communications technology. "The completion of this trial provides us with Canadian-specific data that will help prepare for the potential roll-out of mobile payment services in the future," says MasterCard Canada's Scott Lapstra. The pilot was the first to use Bell Mobility's wireless network, which permits participants to make purchases using their mobile device at MasterCard PayPass acceptance sites across Canada. The average transaction amount during the trial was just below $20, which is perfect for merchants in high-volume, small-ticket purchase businesses, MasterCard says. "Our objective is to achieve a common gateway and standardized consumer experience for mobile payments," says Bell Mobility's Almis Ledas. "This successful trial underlined both the security and the convenience of mobile payments."
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Banks Sway Bills to Aid Consumers
New York Times (04/22/09) P. B1; Labaton, Stephen; Dash, Eric
The powerful clout that big U.S. banks enjoy in the nation's capital is becoming increasingly evident, as efforts in Congress to increase consumer protections in mortgage and credit card terms begin to fizzle. Lobbying campaigns by banks and their trade associations--especially in the Senate--are threatening to take some of the teeth out of credit card reforms sponsored by Reps. Barney Frank (D-MA) and Carolyn Maloney (D-NY). The measure would lower many fees charged by credit card issuers and limit the ability to impose penalties, but with little GOP backing in the Senate, the bill could be watered down or even killed. A similar fate may await a proposal that would give bankruptcy judges more flexibility to re-write mortgage terms so that borrowers pay less each month. Senate Democrats are hoping that talks with major banks will sway those institutions, which in turn could convince some GOP legislators and even some hesitant Democratic moderates to endorse the bill. Even so, the Democrats likely will have to make big concessions in the industry's favor in order to get the bill passed. Hoping to improve the odds of approval, President Obama is scheduled to meet on April 23 with representatives from American Express, Capital One, Bank of America, and other financial players. And, in the coming weeks, his administration plans to champion consumer finance issues, possibly including strict new lending criteria for homeowners applying for mortgages.
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Mexico's Banks at Risk of Interest Rate Caps
Reuters (04/20/09) Randewich, Noel
The Mexican Senate is expected to approve legislation that would allow the country's central bank to place caps on the interest rates and fees banks can charge. Under the legislation, the central bank would look at financial market conditions, administrative costs, loss expectations, and bank capitalization requirements and use that information to establish "reasonable" ranges on the interest rates credit card companies and other lenders can charge. Those interest rates currently average 42 percent. Bank executives say that the high rates are necessary because Mexican consumers are at a high risk of defaulting on their loans, and because the country's weak laws make it difficult for them to recover debts. In addition, the legislation would require banks to be more transparent about the fees they charge for services such as account maintenance and cash withdrawals. Banks would also be forbidden from charging more than one fee per service. Mexico's banking industry--which is dominated by foreign-owned banks--has said that imposing artificial limits on interest rates and fees would reduce lending and encourage some consumers to take out loans with loan sharks.
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Credit Card Debt Rising for Students
University Wire (04/19/09)
Given the current economic situation and the difficulty many students are having securing private loans and scholarships, students increasingly are relying on credit cards to finance their education, including tuition, books, school supplies, and commuter costs. According to a Sallie Mae study, undergraduates' credit card balances rose in 2008 to the highest level the student-loan provider has seen since it began conducting the study in 1998. In 2008, college students carried an average credit card balance of $3,173, while seniors graduated with an average balance of $4,100. The economic recession has likely contributed to the increase in credit card debt by hindering many parents' ability to pay for their children's educational expenses, said Karen Klugh, communications manager for the American Financial Service Association. "Because we're in a recession, and it's tough economic times all around, students aren't getting as much help from their parents, so they're having to undertake a lot more themselves," she said.
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Top Credit Card Issuers Back Debt Repayment Relief Program
CreditCards.com (04/15/09) Simon, Jeremy M.
Ten of the largest U.S. credit card issuers are offering new hardship debt management plans (DMPs) that will benefit tens of thousands of consumers. The DMPs are in response to the National Foundation for Credit Counseling's (NFCC's) call last fall for creditors to offer borrowers more reasonable long-term repayment plans. Creditors have offered repayment concessions to struggling borrowers for more than 40 years, says the NFCC. "However, in these tough economic times, fewer consumers have sufficient income to be eligible for, or the ability to maintain, a traditional DMP, often leaving bankruptcy as the only option," according to the consumer credit counseling group. The new DMPs will give people who have lost a job or are facing other challenging circumstances a minimum 1.75 percent repayment rate of their balance, compared with a repayment rate of 2 percent for other consumers. American Express, Bank of America, Capital One, Chase Card Services, Citi, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank, and Wells Fargo Card Services are participating in the program.
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Credit Unions Won't Back Mortgage 'Cramdown' Plan
Associated Press (04/22/09)
The National Association of Federal Credit Unions stated in a letter to Sen. Dick Durbin (D-IL) on April 22 that it still has questions about a potential mortgage modification program being developed by Democrats. The Senate is expected to vote on the so-called "cramdown" bill within the next few weeks, and Durbin had been hoping to get industry support for the measure. Banks and credit unions say the legislation would spark bankruptcy filings and ultimately lead to higher mortgage rates. Democrats now say a vote may take place without the industry's support.
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Fannie Mae and Freddie Mac Helping More Homeowners--Loan Modifications Increasing
RISMedia (04/17/09)
The Federal Housing Finance Agency's (FHFA's) Foreclosure Prevention Report shows that Fannie Mae and Freddie Mac completed workouts on approximately 24,000 home loans in the last three months of 2008--76 percent more than the third-quarter volume of modifications. Coupled with a foreclosure moratorium that gave borrowers more time to work with servicers to save their homes, the modifications reduced the number of foreclosures in the fourth quarter by almost 27 percent. "Fewer homeowners are losing their homes as a result of the foreclosure prevention efforts," said FHFA director James Lockhart. "We expect the numbers of those getting relief to grow further as the Making Home Affordable program picks up speed in coming months."
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FICO Web Site May Help Homeowners Seeking Loan Modifications
Bloomberg (04/17/09) Leondis, Alexis
FICO is launching a new Web site that will show struggling homeowners within seconds whether they may qualify for loan modifications or refinancing and then have a free, HUD-approved credit counselor contact eligible borrowers within 48 hours. The Web site, mortgagereliefonline.com, will also recommend debt counseling for homeowners who do not meet the government's guidelines for foreclosure prevention. According to Lisa Nelson, a vice president with the Minneapolis-based credit-rating firm, streamlining the number of consumers seeking to modify or refinance their loans will help lenders.
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Campaign Targets the Unbanked
Credit Union Journal (04/20/09) Vol. 13, No. 16, P. 11
Eight cities across the country are participating in the Bank on Cities campaign, which is part of a new effort by the National League of Cities to encourage low-income families to establish relationships with mainstream financial institutions. The participating cities--which include Indianapolis; St. Petersburg, FL; Newark, NJ; and Denver--are currently looking for banks and credit unions that can offer lifeline savings accounts to unbanked consumers. The program is based on another initiative called Bank on San Francisco, which was able to sign up tens of thousands of unbanked consumers for accounts at credit unions and banks. The program has since been expanded to other cities besides San Francisco, including Houston, San Antonio, and Los Angeles.
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Federal Program to Boost Private Lending Struggles to Get Money to Consumers
Washington Post (04/23/09) P. A1; Irwin, Neil
Government and industry sources say federal agencies are frustrated that the Term Asset-Backed Securities Loan Facility (TALF) program has not had more of an impact on boosting consumer lending, although some observers say the mere existence of the program has been helpful. TALF supported $4.7 billion in consumer lending in March and $1.7 billion so far in April, but the U.S. government had hoped it would back tens of billions of dollars in new loans a month and eventually total $1 trillion. Some private investors have shied away from the program because of its restrictions on business activities, and brokerage houses have expressed concern about a potential backlash from Congress or the media if mistakes are made in drawing up contracts.
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U.S. Bank Launches Special Auto Loan Program for Eco-Friendly Vehicles
SubPrime Auto Finance News (04/21/2009)
U.S. Bank has announced a new auto loan program that offers a 0.5 percent rate reduction on loans for new and used cars certified by the Environmental Protection Agency (EPA) as environmentally friendly SmartWay vehicles. This designation applies to vehicles that the EPA says have low emissions and good fuel economy. About 16 percent of all 2009 vehicles are SmartWay, identified by a special designation on the automobile's sticker. The U.S. Bank loan will also be set up on automatic payment from a bank account, without the use of paper statements.
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Average FICO Score Drops Again for New-Car Loan Approvals
Auto Loan Daily (04/17/09) Opsitnik, Liz
Banks appear to be relaxing their standards for approving consumer car loans. In March, the average FICO score for new car buyers was 722, the lowest since May 2006, reports CNW Research. This score is inclusive of buyers who financed, leased, and paid cash, but excludes commercial fleets that are used 80 percent or more for business purposes.
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Consumer Perception of Loan Rejection Leads Industry to Lose $10 Billion in 1Q Auto Sales
Subprime News (04/16/09) Reed, Jennifer
Many consumers' assumption that they cannot obtain approval for an auto loan was determined to be one of the drivers of a decline in auto sales, according to CNW Research analysis. "Consumers who are convinced they can't get an auto loan even though their credit history and FICO score would qualify under even stricter application parameters have cost the auto industry more than 800,000 sales in the first quarter [of this year]," CNW's Art Spinella estimates, which adds up to more than $10 billion in lost vehicle sales. He observes that 50 percent of active shoppers who dropped out because they assumed that they lacked sufficient home equity to buy a vehicle actually had more than enough equity. Spinella points out that a dearth of "proactive loan offers in the past year" discouraged a sizable number of new-car intenders to even inquire about getting an auto loan. "And while many dealers have been aggressively promoting the availability of loans at the local level, their voices needed to be supported by financial institutions that historically have promoted such loans through credit-card bill stuffers, direct mail, and in-bank reader boards," he adds, noting that such promotions have become virtually nonexistent since last summer.
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Abstract News © Copyright 2009 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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