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January 8, 2009
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AFSA Announces Additions to Vehicle Finance Conference Lineup
AFSA Submits Amicus Brief in Ford Motor Credit Case
President’s Financial Literacy Council Releases Recommendations
GMAC Expands Credit Spectrum of Auto Financing
MasterCard Reorganizes Business Units
Bank of America Completes Merrill Lynch Purchase
Wells Fargo Completes Wachovia Purchase
Economic Crisis Sharpens Focus on Stored Value Cards
Card Issues Remain Alive for Congress
Citigroup, Senators in Talks to Let Judges Modify Mortgages
Paulson Sees Changes for Freddie and Fannie
Fed Expects Weak Economy, Fears 'Prolonged Retraction'
Bankruptcy: Filings Jumped in 2008
Tuition Ammunition: A Happy Lesson on Lending
2nd Update: US Dem Senator to Push for Tax Credits for Car Buyers
Qualifying for a Car Loan Becomes a Smoother Ride
Credit Unions Up Ante for Vehicle Loans and Discounts
AFSA Announces Additions to Vehicle Finance Conference Lineup
New speakers have been added to the lineup for AFSA’s 13th Annual Vehicle Finance Conference & Exposition. The always-popular CEO panel now will feature Frank Armstrong, President, World Omni Financial Corp.; Mike Buckingham, President & CEO, Hyundai Motor Finance Company; Stephen Smith, Senior Vice President, American Honda Finance Corp.; and Sanjiv Yajnik, President, Capital One Auto Finance, Inc. In addition to keynote speakers James Carville and Mary Matalin, other general sessions include: "Enterprise Risk Management – Delivering Continuous Predictable ROI" and "The Next Big Idea: A Discussion with Innovators and Game Changers." Roundtable sessions will focus on profitability management analytics and operational effectiveness, legal and legislative issues, new strategies in loss mitigation, managing human capital, and avoiding and dealing with fraud. AFSA’s new Risk Management and Remarketing Committees will meet in conjunction with this event.
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AFSA Submits Amicus Brief in Ford Motor Credit Case
On Dec. 31, AFSA submitted an amicus brief in the U.S. Court of Appeals for the Fifth Circuit in Ford Motor Credit Company, LLC v. Rebecca Ann Dale.
Motor vehicle installment sale financers have a vital interest in this case. The 2005 amendments to section 1325(a) of the Bankruptcy Code added a paragraph that deals with certain claims secured by motor vehicles. The effect of this paragraph has been widely debated by creditors, debtors, counsel and commentators, with a split of authority in the bankruptcy courts. This case affords the court an opportunity to address this debate as to whether a creditor's claim is covered by the hanging paragraph where a portion of the financing is used to pay off negative equity from a trade-in vehicle.
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President’s Financial Literacy Council Releases Recommendations
The AFSA Education Foundation was among those organizations attending the January 6 meeting in Washington for the release of the President’s Advisory Council on Financial Literacy’s 2008 Annual Report to the president. The report includes 15 recommendations on improving financial literacy for students from kindergarten through post-secondary education; supporting the role of employers as providers of financial education; increasing access to financial services for the unbanked and underserved; undertaking research in the area of financial literacy; and increasing public awareness of the problem and the resources available to combat it.
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GMAC Expands Credit Spectrum of Auto Financing
SubPrime Auto Finance News (01/06/2009) Reed, Jennifer
GMAC Financial Services has modified its credit criteria and will provide auto financing to a larger number of customers. The company will now provide financing for customers with a credit bureau score higher than 620, just two months after implementing a minimum score of 700. GMAC was able to get back into the market so quickly because it recently became a bank holding company, which allows for expanded access to capital. GMAC also received funding from the Treasury Department's Troubled Assets Relief Program. "The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers," said GMAC President Bill Muir. GM dealers believe that the ability to offer attractive financing options will be an effective tool to draw in customers.
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MasterCard Reorganizes Business Units
Associated Press (01/06/09)
MasterCard has reorganized its business units so that its global customer accounts are aligned with the regions where they are based. Among the new business units is U.S. Markets, which will include all of MasterCard's U.S.-based global accounts along with its U.S. region. Meanwhile, MasterCard established two new teams in its Global Products & Solutions Segment. Core Products will drive consumer, commercial, debit, integrated processing solutions, and prepaid and PayPass products. Innovative Platforms will encompass e-Commerce, mobile, and chip platforms.
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Bank of America Completes Merrill Lynch Purchase
Reuters (01/01/09)
Bank of America (BoA) has closed its acquisition of Merrill Lynch. By completing the purchase, BoA has become the nation's largest bank, with about $2.7 trillion of assets. Merrill Lynch shareholders received 0.8595 of BoA common shares for each of their shares. In addition to 359,100 preferred shares issued in the merger, BoA plans to issue 1.71 billion common shares, worth $24.1 billion.
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Wells Fargo Completes Wachovia Purchase
Reuters (01/01/09)
Wells Fargo & Co. has closed its $12.7 billion acquisition of Wachovia Corp., making it the nation's fourth largest U.S. bank by assets. The completed deal also makes Wells Fargo the largest branch network, with over 6,600 offices in 39 states and the District of Columbia.
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Economic Crisis Sharpens Focus on Stored Value Cards
Prepaid Press (01/05/09) Van Cleef, Carol R.
The prepaid/stored value card industry has come under increased scrutiny as recent retailer bankruptcies heighten concerns about whether cards will be honored if the issuing merchant goes under. Such worries spurred the Federal Trade Commission (FTC) and other agencies to take action, with the FTC amending its consumer guidance on gift cards to disclose more information about the potential impact a retailer's bankruptcy may have on its gift card value. Now both retail and general purpose prepaid card programs must be revised to guarantee the protection of cardholder funds and address the potential financial ramifications. Consumer interest groups requested that the FTC deem the sale of retailer gift cards an unfair and deceptive practice if cardholder funds are not segregated from other corporate funds at the time of purchase and then placed in a trust, and to develop accompanying rules to make such segregation mandatory. The FTC responded that it had redrafted a previously issued advisory informing consumers that a risk exists, and that they may not recover the full value of their gift cards if a merchant goes out of business or files for bankruptcy. A number of lawmakers on Capitol Hill favor pushing consumer friendly prepaid card legislation in 2009. Congressional pressure could drive initiatives to place more prepaid card/stored value program funds under the aegis of the federal deposit insurance effort.
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Card Issues Remain Alive for Congress
American Banker (12/31/08) P. 1; Kaper, Stacy
Reforming credit card practices is still a priority for some lawmakers in Congress, despite the Federal Reserve's recent adoption of tough new restrictions on credit card practices. Restricting interchange fees also remains an issue of great interest, although analysts say any new legislation faces an uphill battle. House Judiciary Committee Chairman Rep. John Conyers (D-Mich.) and Sen. Richard Durbin (D-Ill.) are expected to reintroduce legislation dealing with interchange fees, which is staunchly opposed by banks and the card networks. An interchange fee bill was supported by the House judiciary panel last July, but ran into trouble because lawmakers clashed over the actual intent of the legislation. "It's not an easy issue to reconcile," says analyst Brian Gardner. Rep. Carolyn Maloney (D-N.Y.) has called for legislation that enacts many of the Federal Reserve Board's restrictions on credit card practices, but she wants them implemented sooner than the Fed's 2010 deadline.
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Citigroup, Senators in Talks to Let Judges Modify Mortgages
Wall Street Journal (01/08/09) P. A3; Williamson, Elizabeth; Enrich, David
In what appears to be a reversal in position for the banking industry, Citigroup Inc. is in talks with lenders regarding legislation to permit mortgage restructuring in bankruptcy court. The industry previously has warned that "cramdowns" would boost borrowing costs, but such bankruptcy reform has the support of many Democrats as well as President-elect Barack Obama. Sen. Dick Durbin (D-Ill.) introduced a bill on Jan. 6 to allow bankruptcy judges to restructure mortgages, and similar legislation was also raised in the House.
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Paulson Sees Changes for Freddie and Fannie
New York Times (01/08/09) P. B6
Treasury Secretary Henry Paulson Jr. shared his views on the future of Fannie Mae and Freddie Mac in a Jan. 7 speech before the Economic Club of Washington. Congress and the Obama administration could withdraw all government support and put the firms up for sale as private entities, he said, although he expressed some doubt about that strategy. Paulson also said a public utility type of company that would guarantee mortgage credit could be created to replace Fannie Mae and Freddie Mac.
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Fed Expects Weak Economy, Fears 'Prolonged Retraction'
Washington Post (01/07/09) P. D3; Irwin, Neil
Federal Reserve leaders recently concluded that the nation's economy will remain weak well into the new year and may be in danger of entering a "prolonged contraction." As a result, the central bank's policymaking committee has agreed to take aggressive action to contain the recession, including slashing the interest rate the Fed controls effectively to zero. Fed officials say they are inclined to keep rates "exceptionally low" for the foreseeable future and may next expand special lending programs aimed at lowering the rates that Americans pay for different loans. Specifically, minutes from the last session of the Federal Open Market Committee indicated members' interest in expanding a $600 billion program to try to push down mortgage rates; purchases of mortgage-related securities under that program began shortly after the first of the year.
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Bankruptcy: Filings Jumped in 2008
Washington Post (01/06/09) P. D2
Nearly 1.1 million Americans filed for bankruptcy in 2008, a 32 percent rise over 2007, as the recession forced more firms and individuals to request protection from creditors. Filings for individuals soared to 1.03 million, according to figures gathered by Automated Access to Court Electronic Records. It was the largest yearly total since 2005, when Congress changed laws to make it tougher for consumers to get rid of debt in bankruptcy.
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Tuition Ammunition: A Happy Lesson on Lending
Wall Street Journal (01/06/09) Tomsho, Robert
Although the credit crunch has reduced lending in a number of sectors, including the home-mortgage and corporate loan sectors, student loans have largely not been affected. By Nov. 28, the federal government had guaranteed or made $65.2 billion in student loans for the current school year, an increase of more than 18 percent over the same time a year ago. By comparison, mortgage lending was down 38 percent. Meanwhile, loan volume in the Federal Family Education Loan Program (FFELP) has risen 50.4 percent to $18.5 billion. Loans to students have increased in spite of the credit crunch thanks in large part to the Ensuring Continued Access to Student Loans Act, which was signed into law by President Bush in early 2008. Among the provisions in the legislation is one that allows the Department of Education to work with the Treasury Department to buy new FFELP loans directly from lenders for their full principle value plus accrued interest and a $75 fee. This has helped boost lending in the program despite the pullout of 106 lenders. But the legislation has not helped the private student loan market, which has seen a number of lenders pull out and a number of others tighten their lending standards. However, the government has begun taking steps to ensure continued access to private student loans as well, including implementing a $200 billion program that aims to encourage investors to buy securities backed by private student loans and other types of consumer debt.
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2nd Update: US Dem Senator to Push for Tax Credits for Car Buyers
Dow Jones Newswires (01/05/09) Mitchell, Josh
Sen. Barbara Mikulski (D-Md.) has announced that she plans to include $2 billion to $3 billion in tax credits for car buyers in a broad economic stimulus package being considered by Congress as part of an effort to help boost sagging vehicle sales. Under Mikulski's proposal, buyers who take out auto loans of up to $49,500 by the end of this year will be able to deduct their interest payments and sales and excise taxes on their federal income tax returns. The credits would be available for consumers who buy foreign and domestic vehicles. However, consumers whose household incomes are more than $250,000 would not be able to receive the credits. Mikulski's announcement comes just days after the U.S. auto industry revealed that sales declined in December, capping a year that was the industry's worst in more than 15 years.
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Qualifying for a Car Loan Becomes a Smoother Ride
Boston Herald (01/02/09) Harrison, Steve
Auto loans may become more easily available, now that GMAC Financial Services is scheduled to receive $5 billion in federal bailout money. In the past few months, car buyers with good credit scores have had to pass rigorous criteria, but now those standards apply to only about 25 percent of prospective buyers. November saw a 37 percent drop in auto sales nationwide compared to the previous year, but new government loans to GM and Chrysler may boost the companies' prospects. According to Jerry Ferrell, a general manager at City Chevrolet in Charlotte, N.C., sales have improved in recent months, and are expected to continue.
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Credit Unions Up Ante for Vehicle Loans and Discounts
Ward's Dealer Business (01/01/2009) Stark, Derek
Credit unions have begun to offer discount programs and auto loans. Nearly 2,000 credit unions have teamed up with General Motors to offer nearly $10 billion in car loan funds, in addition to a supplier discount of up to 5 percent of the retail price of a vehicle. “We’ve seen some heightened activity with credit union auto lending, specifically because of what’s been going on with the auto leasing area--lenders kind of backing away from that--and then with [the] subprime mess we had earlier in the year,” said Bill Meyer, a spokesperson for Credit Union Direct Lending.
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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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