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April 9, 2009
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AFSA Speaks Out on Credit and Funding in Auto Sector
AFSA Meets with Treasury Officials on TALF
AFSA Submits Comment Letter on Telephone Consumer Protection Act Petition
Upcoming AFSA Webinar to Focus on Human Resources
New Member Welcome
Ford Cuts Almost $10 Billion in Debt; Rating Agencies Respond
MasterCard Agrees to Cut Cross-Border Interchange Fees in Europe
HSBC Spreading Its Brand in Miami
U.S. Bank Selected as Indenture Trustee for TALF Eligible Nissan Auto Receivables 2009-A Owner Trust
Wells Fargo Said to Start Funding Mortgage Bankers
GMAC Loosens Auto Lending to More Buyers
Lawmaker Wants Cap on Credit Card Fees
House Panel OKs Card Reform Bill
Fed Said to Weigh Charging Higher Rates for Longer TALF Loans
Report: Lower Payments Key to Avoiding Defaults
Minorities Didn't Pay Higher Subprime Rates, Fed Study Shows
Private Loans for Students Remain Intact
Downturn Pushes More Toward Bankruptcy
State of Ohio Uses Deposit Carrot to Promote Financial Literacy Program
Too Many Cars, and They're Not on the Road
FTC Offers 'Red Flags' Web Site to Help Creditors and Financial Institutions Design Identity Theft Prevention Programs
AFSA Speaks Out on Credit and Funding in Auto Sector
In a video interview with Automotive Digest Weekly, AFSA President & CEO Chris Stinebert addressed the lack of funding in the auto sector. Stinebert emphasized that the industry is not seeking a bailout. Auto loans have always performed well, but a void exists in the marketplace for floorplan financing. With autos accounting for 20-25 percent of all retail sales in the U.S., a resurgence in this sector will help jumpstart the economy.
AFSA will continue to communicate these messages to government agencies and Congress as well as other media outlets.
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AFSA Meets with Treasury Officials on TALF
In the latest round of its efforts on the TALF issue, AFSA has had several interactions with the Treasury Department, including an in-person meeting with key officials from the Treasury’s Office of Financial Stability. During this meeting, AFSA representatives stressed the need to expand TALF’s eligibility requirements to allow more lenders to participate in the program. In addition, the association is continuing to voice the industry’s views through media interviews, emphasizing the need for dealers to have the floorplan funding they need to purchase cars from manufacturers and sell them to consumers. Looking ahead, AFSA expects to continue its discussions with Treasury officials and will also seek meetings with President Obama’s Auto Task Force to discuss TALF.
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AFSA Submits Comment Letter on Telephone Consumer Protection Act Petition
On April 2, AFSA submitted a comment letter to the Federal Communications Commission (FCC) on Paul D. S. Edwards’ Petition for Expedited Clarification and Declaratory Ruling Concerning the Telephone Consumer Protection Act (TCPA). The petition asked the FCC to clarify whether a creditor may place autodialed or prerecorded message calls to a wireless phone number that initially was provided to the creditor as a landline phone number.
AFSA strongly believes the TCPA permits a creditor to do so. Compliance with the TCPA does not require that the consumer must have originally provided the creditor a wireless phone number for calls to that number to be permissible, nor does it require the creditor to employ additional means to ascertain whether the number provided as a landline number was changed to a wireless number. In view of the overwhelming evidence indicating the explosion of the use of wireless phones as the primary – if not sole – means of telephone communication today, AFSA wrote that a failure to clarify the TCPA in this manner would result in significant commercial harm without yielding any significant benefits to consumers.
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Upcoming AFSA Webinar to Focus on Human Resources
The latest offering in AFSA’s webinar series addresses human resources. “Keeping the ‘Human’ in Human Resources” will be held on Wed., April 15 at 2pm EDT and again on Wed., April 29 at 2pm EDT. The webinar will focus on the current external human resources environment as described by studies from consulting firms Towers Perrin and Watson Wyatt; how to keep employees engaged during tough times; and how to handle and communicate human resources decisions. Both hour-long sessions will be led by Kathy Meyer, President of KM Consulting Group, who has more than 30 years of experience in human resources and the financial services industry.
A limited number of slots are available for each session. For more information, contact Sheilah Harrison, AFSA Vice President of Member Services, at 202-466-8602 or sharrison@afsamail.org.
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New Member Welcome
AFSA welcomes new active member Pennyrile Finance, LLC, as well as new associate members Dial Connection and Open Rule Systems.
A small consumer finance company in business since 2005, Pennyrile Finance, LLC is located in southwestern Kentucky.
Started in 1987, Dial Connection helps companies upgrade, design and develop administrative systems. The company is headquartered in New Jersey, about 15 miles outside of Philadelphia. Web site
Open Rule Systems, headquartered in the Dallas/Fort Worth area, provides loan origination software that supports all of an organization’s origination processes. Web site
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Ford Cuts Almost $10 Billion in Debt; Rating Agencies Respond
SubPrime Auto Finance News (04/07/2009) Reed, Jennifer
Ford Motor Corp. has announced that it has taken steps to reduce its debt. Ford Motor Credit used $1 billion in cash to buy back $2.2 billion of debt at $0.47 on the dollar and another $1.1 billion in cash to buy $3.4 billion worth of unsecured notes. Furthermore, $4.3 billion of Ford's 4.25 percent senior convertible notes were tendered when a debt restructuring offer closed on April 3. All told, the plan will reduce Ford's $25.8 billion debt by approximately $9.9 billion. That in turn will allow Ford to save $500 million on its annual cash interest expense, based on current interest rates.
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MasterCard Agrees to Cut Cross-Border Interchange Fees in Europe
Business Travel News (04/03/09)
MasterCard has agreed to three conditions set forth by the European Union in response to a December 2007 case that said MasterCard's interchange fees ran counter to antitrust laws. MasterCard will set the average cross-border interchange fee at 0.3 percent for credit card purchases and 0.2 percent for debit card purchases. The previous fees were between 0.8 percent and 1.9 percent. MasterCard will also nullify related price increases that were made in October 2008, and the company will make rules clearer to understand. The European Competition Commission is investigating practices by Visa, and the agreement will not create a competitive advantage.
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HSBC Spreading Its Brand in Miami
Buffalo News (04/02/09) Epstein, Jonathan D.
HSBC Holdings has inked an advertising deal that will take its brand to Miami. Under terms of the five-year pact, the London-based lender's logo will be prominently featured within and outside of 102 jet bridges at Miami International Airport. The "Points of Value" advertising campaign will appear inside the corridors leading from the gates to the aircraft, and highlight HSBC's Premier personal banking service extended to customers with at least $100,000 in deposits and investments, or $500,000 in deposits, investments, and loans. With more than 380 offices in New York State and 470 branches across several other states and the District of Columbia, HSBC's U.S. subsidiary, HSBC Bank USA, is already well-known. The airport branding program is currently featured at 41 airports in 17 countries.
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U.S. Bank Selected as Indenture Trustee for TALF Eligible Nissan Auto Receivables 2009-A Owner Trust
Business Wire (04/02/09)
Nissan Motor Acceptance Corp. has chosen U.S. Bank as indenture trustee for its asset-backed note financing, which is mainly supported by a pool of motor vehicle retail installment contracts. In its role as indenture trustee for the $1.369 billion Nissan Auto Receivables 2009-A Owner Trust, U.S. Bank will be responsible for compliance oversight, noteholder communication, and distributing interest and principal payments to investors. Nissan is one of the first issuers to apply for eligibility under the Treasury’s Term Asset Backed Securities Loan Facility and the first to issue debt under the program.
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Wells Fargo Said to Start Funding Mortgage Bankers
Bloomberg (04/02/09) Levy, Ari; Mildenberg, David
Wells Fargo intends to launch a unit to supply funding to independent mortgage bankers, sources say. The bank might spend as much as $4 billion to create a warehouse-lending unit, according to David Lykken of Mortgage Banking Solutions. The new division would be based in the Atlanta area, Lykken says. A non-profit organization called the Warehouse Lending Project, which hopes to strengthen the market, says roughly 41 percent of home loans are funded by mortgage banks. In addition, there are currently fewer than 30 warehouse lenders today, compared to 115 in 2005, and the amount of credit available has declined by nearly 90 percent to $25 billion in the past two years, according to the group. The group forecasts that mortgage originations in 2009 will reach $2.8 trillion.
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GMAC Loosens Auto Lending to More Buyers
Associated Press (04/02/09)
GMAC says it will waive certain dealer fees for a limited time and make billions available in car loans to entice potential buyers. Through June, GMAC is waiving the fee for posting older vehicles on its online Web site. It will also let some dealers postpone wholesale interest charges for two 30-day periods over the next four months. GMAC says it is allocating $5 billion for consumer loans over the next 60 days, and will restart supplying loans to consumers with credit scores below 620. GMAC also says it will reduce certain rates for new and used vehicle financing.
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Lawmaker Wants Cap on Credit Card Fees
Brockton Enterprise (MA) (04/03/09) Tatz, Dennis
Massachusetts state Rep. Joseph Driscoll has proposed a bill intended to cap the fees credit card companies charge retail merchants. If the bill becomes law, credit card companies would be able to charge retailers no more than 0.75 percent for each transaction. Such fees now average 2 percent.
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House Panel OKs Card Reform Bill
American Banker (04/03/09) P. 7; Kaper, Stacy
The House Financial Services financial institutions subcommittee has approved a bill written by Rep. Carolyn Maloney (D-NY) that would place limits on some of the practices credit card companies use. Under the bill, credit card companies would be forbidden from using double-cycle billing and universal default and from issuing cards to borrowers under the age of 18, unless they are emancipated from their parents or guardians. In addition, credit card companies would be forced to provide borrowers with 45 days' notice before they could increase their interest rates. The bill also allows borrowers to set firm caps on their credit limits and forbids companies from charging for online or telephone bill payment services. The bill--which is very similar to rules adopted by the Federal Reserve Board and other regulators--is scheduled to go into effect one year after it is enacted or by June 30, 2010, whichever comes first.
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Fed Said to Weigh Charging Higher Rates for Longer TALF Loans
Bloomberg (04/08/09) Lanman, Scott
The Federal Reserve may possibly extend limits from three years to five on the Term Asset-Backed Securities Loan Facility (TALF) in exchange for higher interest rates on the loans. Commercial mortgage-backed securities industry lobbyists have said that the loans need to be extended to encourage investor participation, especially since the TALF program is off to a slow start. Longer loans, however, would make it more difficult for the Fed to tighten credit when inflation increases, but higher rates on the extended loans could be a viable compromise. On April 7, the Fed received applications to borrow $1.7 billion in the program's second monthly round, down 64 percent from the $4.7 billion applied for in March.
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Report: Lower Payments Key to Avoiding Defaults
American Banker (04/06/09) P. 5; Hopkins, Cheyenne
A new report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision shows that only 29 percent of mortgage modifications by national banks and thrifts in the fourth quarter resulted in lower payments, while higher payments and unchanged payments accounted for 32 percent and 27 percent of modifications, respectively. However, the report reveals that 50.6 percent of modified loans with unchanged payments and 45.8 percent of those with higher payments redefaulted within six months, while the redefault rate for modified loans with lower payments was just 22.7 percent. Comptroller John Dugan says he will push for banks to lower monthly payments when modifying loans, but he notes that the economic downturn and the fact that many borrowers owe more than their homes are worth are driving up redefault rates.
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Minorities Didn't Pay Higher Subprime Rates, Fed Study Shows
Bloomberg (04/02/09) McKee, Michael
A new study by the New York Federal Reserve Bank looked at more than 75,000 adjustable-rate mortgages, known as 2/28 loans, originated in August 2005 and determined that lenders did not base pricing on race, sex, or ethnicity. The study shows that interest rates around 2.5 basis points less than the mean initial mortgage rate of 7.3 percent were given to black and Hispanic borrowers, and zip codes with high percentages of black, Hispanic, and Asian residents reported less expensive 2/28 mortgages. According to the study, "These results suggest the possibility that subprime lending did serve as a positive supply shock for credit in locations with higher unemployment rates and minority residents."
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Private Loans for Students Remain Intact
Memphis Commercial Appeal (TN) (04/04/09) P. B3; Sullivan, Bartholomew
The Senate has approved Sen. Lamar Alexander's (R-TN) amendment to protect the Federal Family Education Loan Program (FFELP). The amendment was designed to retain the involvement of private lending institutions in the nation's student loan business, and addresses President Obama's budget proposal to increase direct government funding of student loans and end the FFELP, which he maintains would benefit taxpayers by eliminating unnecessary subsidies for banks. Alexander disagrees. "Packing up this nation's successful student-lending program and sending it to Washington to be administered … is not what students and universities want," Alexander said in a statement.
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Downturn Pushes More Toward Bankruptcy
New York Times (04/04/09) Bernard, Tara Siegel
The number of bankruptcy petitions filed each day in March rose 9 percent from February and 38 percent from a year earlier, according to Automated Access to Court Electronic Records President Mike Bickford. A total of 130,793 people filed for bankruptcy in March, with the biggest factor possibly the tightening of credit. Robert Lawless, a professor at the University of Illinois College of Law, said total bankruptcy filings could reach 1.45 million or 1.5 million by the end of 2009, compared with nearly 1.1 million in 2008. Bankruptcy filings are approaching the numbers achieved before the new bankruptcy law that took effect in October 2005.
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State of Ohio Uses Deposit Carrot to Promote Financial Literacy Program
Crain's Cleveland Business (04/03/09) Kass, Arielle
In Ohio, if a person completes a newly formed, year-long financial literacy program called SaveNOW, the Ohio Treasury will raise the interest rate on the person's savings account by 3.25 percentage points. Participating banks include Liberty Savings, Wayne Savings, MainSource Savings, and National City Bank, which is now a part of PNC Financial Services Group. Ohio Treasurer Kevin L. Boyce said in a statement that the average savings account yields 0.15 percent interest, so the SaveNOW program will significantly boost that yield. "It will be yet another way the Ohio Treasury will be able to strategically invest in the people of Ohio, by encouraging saving, ensuring increased financial security, and providing opportunity through the provision of a continuing financial education," Boyce stated. The bonus interest rate will be applied to the average daily balance of a depositor’s account after a financial literacy assessment is passed.
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Too Many Cars, and They're Not on the Road
Washington Post (04/03/09) P. A1; Dennis, Brady
As vehicle sales continue to fall as a result of the sour economy, more and more new cars and trucks are piling up in ports around the world, waiting to be shipped to dealers. At the Port of Baltimore, for example, 57,000 new domestic and foreign cars are being stored until there is enough demand for them from consumers. More vehicles are also being stored at nearby Baltimore-Washington International Marshall Airport. As the backlog continues to build, car makers are trying to come up with ways to get consumers back into dealer showrooms. General Motors (GM) and Ford, for example, have introduced programs that will cover several months of car payments if buyers lose their jobs. In addition, GM has announced that it would lower its credit score threshold from 700 to 620, which is considered to be a high-risk, subprime market. However, the effect such moves will have on new vehicle sales is likely to be limited, analysts say. They point out that sales probably will not rebound until consumers feel more secure about their jobs.
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FTC Offers 'Red Flags' Web Site to Help Creditors and Financial Institutions Design Identity Theft Prevention Programs
Federal Trade Commission (04/02/09)
A new Federal Trade Commission (FTC) Web site helps enterprises subject to the Red Flags Rule develop and implement identity theft prevention programs. Entities under the purview of the FTC have until May 1, 2009, to comply with the rule.
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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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