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March 26, 2009
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Morrison Honored with AFSA Outstanding Independent Award
AFSA Testimony Addresses FTC’s Role, Installment Lending
New Independents Leadership Installed at AFSA Conference
Outstanding Branch Executives Recognized at AFSA Independents Conference
Diners Club Signs Multi-Year Acquiring Agreement With SIX Multipay
Ford Doubles Buyback Amount for Loans to $1 Billion
GMAC to Bring 200 Jobs to Charlotte, Get $4.5M in Incentives
Debating a Ceiling on Credit Card Fees
Prepaid Card Use Rising as Credit Cards Stutter
Viewpoint: Keep Government Out of the Card Industry
Court Halts Bogus Mortgage Loan Modification Operations
Real Estate: Buyers Get Job-Loss Protection
Fed to Take Servicing Advances
Plan to Let Judges Alter Loans Stalls
Few States Require Personal Finance Education--Is It Time for Change?
New Student Loans Require Payments While in School
ANSI Panel to Standardize Identity Theft Tracking
Senators Urge Improvement to Auto Dealers' Credit Access
Late on a Car Loan? Meet the Disabler
Unitrin to Exit Auto Finance Business, Suspend Auto Lending
Higher Used-Car Prices Improve Prospects for Auto Lenders
Three Deals Launched on TALF-Debut Day
More Car Owners Behind on Auto Loans
Morrison Honored with AFSA Outstanding Independent Award
During the opening session of AFSA Independents Section’s 2009 Annual Conference & Exposition held March 18-21 in Las Vegas, Andrew Morrison, executive vice president of Brundage Management/Sun Loan Company and 2007-2008 AFSA chair, received the association’s Outstanding Independent Award.
The Outstanding Independent Award is given to an individual who has contributed significantly to the success of the financial services industry and the AFSA Independents Section through active involvement and participation in the community and the association.
Morrison is the current chair of the National Institute of Consumer Credit Management and sits on AFSA Education Foundation Board of Directors. He also served for many years on the Fund Distribution Steering Committee of the United Way of San Antonio and Bexar County.
In 2005, AFSA recognized Morrison with the Distinguished Service Award, which is given to individuals who have contributed significantly to the association and advanced its objectives.
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AFSA Testimony Addresses FTC’s Role, Installment Lending
On March 24, Nathan Benson, a member of AFSA’s Board of Directors and the Chief Executive Officer of Tidewater Finance Company, testified on behalf of AFSA at a hearing on “Consumer Credit and Debt: The Role of the Federal Trade Commission (FTC) in Protecting the Public.” AFSA was the only industry group to testify at the hearing held by the House Committee on Energy and Commerce’s Subcommittee on Commerce, Trade, and Consumer Protection.
Benson commented on the FTC’s effectiveness in enhancing consumer protection as well as the role of the installment loan industry in the nation’s economic recovery. In his testimony, Benson highlighted the differences between the installment lending and payday lending industries. He also expressed the industry’s support for clear, simple consumer disclosures in response to questions from the subcommittee. “As access to credit shrinks, it is important that installment loans are differentiated from other more risky forms of credit and continue to be available to those individuals and families that need them,” he testified. “Installment loans remain a safe option for small-sum credit.”
In addition to Benson, the hearing included testimony from Jon Leibowitz, Chairman, FTC; James Tierney, Director, National State Attorneys General Program at Columbia Law School; Christopher Peterson, Professor of Law, S.J. Quinney College of Law, University of Utah; and Ira Rheingold, Executive Director, National Association of Consumer Advocates.
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New Independents Leadership Installed at AFSA Conference
AFSA welcomes new leaders to the Independents Section Advisory Board. At the conclusion of AFSA’s 26th Annual Independents Conference & Exposition, Rex Ellison, President & COO, Republic Finance, LLC, was installed at the 2009-2010 section Chairman. Mark Roland, President & COO, World Acceptance Corp., is Chairman-Elect, and Jonathon Levin, President & CEO, Turner Acceptance Corporation, assumed the roles of Vice Chairman and PAC Chairman.
The section also welcomed new board members Chip Asbury, President, Lancaster Financial Services; Todd Copic, Chief Financial Officer, Pioneer Credit Company; and Steve Schmelzer, President & CEO, Personal Finance Company. Outgoing board members Ginger Herring, President, 1st Franklin Financial Corporation and Judy Perkins, CEO, Security Finance Corporation of Spartanburg, and 2007-2009 Section Chairman Tim Stanley, President & CEO, Heights Finance Corporation, were recognized for their service on the final day of the conference. AFSA extends a special thanks to Stanley for his many contributions to the section and association during his term.
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Outstanding Branch Executives Recognized at AFSA Independents Conference
During AFSA’s 26th Annual Independents Conference & Exposition, six branch executives were recognized for excellent management and customer service skills. The Outstanding Employee Awards were presented by AFSA President & CEO Chris Stinebert during the Breakfast of Champions on March 21.
The honorees were:
- Tony Bowser, Branch Manager – Southern Division, World Acceptance Corporation
- Patty Franklin, Branch Manager – Central Division, World Acceptance Corporation
- Holly Graves, Branch Manager, Republic Finance, LLC
- Helen Loncar Goodman, Branch Manager, Heights Finance Corporation
- Tina Kendrick, Supervisor, Brundage Management/Sun Loan Company
- Terri Palafox-Golden, Branch Manager – Western Division, World Acceptance Corporation
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Diners Club Signs Multi-Year Acquiring Agreement With SIX Multipay
Business Wire (03/23/09)
Diners Club International, a unit of Discover Financial Services, has signed a long-term merchant acquiring agreement in conjunction with Discover, and SIX Multipay, a payment services provider. The multi-country acquirer agreement is the first to further European acceptance of Diners Club and Discover Network cards. The agreement requires SIX Multipay to provide merchants with single source electronic payment services for the acceptance of Diners Club and Discover Network card products in such countries as Switzerland, the United Kingdom, France, Germany, Ireland, Belgium, Netherlands, and Luxembourg. "Since acquiring Diners Club, one of our key priorities has been to strengthen acceptance," said Rajive Chadha, president, Diners Club International at Discover Financial Services. "Our agreement with SIX Multipay is an important step in helping reach that goal as we make progress on this initiative."
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Ford Doubles Buyback Amount for Loans to $1 Billion
Bloomberg (03/23/09) Naughton, Keith
Ford Motor Credit Co. has increased to $1 billion the amount of money it will allocate to repurchase term-loan debt from its parent company, Ford Motor Co. The repurchase was boosted because the offer was oversubscribed, the finance unit said in a statement. The positive response indicates interest in the company's ambitious debt plan.
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GMAC to Bring 200 Jobs to Charlotte, Get $4.5M in Incentives
Triad Business Journal (03/20/09)
GMAC Financial Services could receive nearly $4.5 million in incentives from the North Carolina Department of Commerce for creating 200 or more new jobs for its operations in Charlotte. GMAC will receive the incentives over a period of nine years if it makes $16.4 million in capital investments and lease payments, among other requirements, the department stated. Gov. Bev Perdue told reporters on March 20 that the company plans to bring "several hundred" new jobs to the region.
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Debating a Ceiling on Credit Card Fees
Washington Post (03/25/09) P. D1; Haynes, V. Dion
Legislation that seeks to shield consumers from credit card companies' so-called "punitive" interest rates was the subject of a March 24 hearing by a Senate Judiciary subcommittee. Current law mandates that people filing for chapters 7 and 13 bankruptcy protection must pay credit card balances as well as secured debts, and Sens. Sheldon Whitehouse (D-RI) and Richard Durbin's (D-IL) bill is designed to eliminate the credit card debt they must pay. The legislation would be applicable to companies that elevate rates higher than 15 percent plus the current yield on the 30-year Treasury bond. Heritage Foundation research fellow David C. John said that good lenders "will raise credit standards so fewer and fewer people will qualify for those credit products," and added that such people will be forced to engage with shady lenders that charge even higher interest rates.
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Prepaid Card Use Rising as Credit Cards Stutter
CreditCards.com (03/23/09) Metzger, Tyler
U.S. credit card use is slipping as consumers opt for less costly prepaid cards. "Because of the economy, there is a shift with more consumers going from credit to debit and prepaid," says Mercator Advisory Group analyst Brent Watters. "People are reluctant to use credit, and it's pushing them to another payment vehicle." Even consumers that already own a debit card are using a prepaid card to rein in spending or to budget, Watters says. The amount of money loaded onto prepaid cards is expected to skyrocket from $2.1 billion in 2007 to approximately $7.1 billion in 2009, Mercator predicts. The push toward prepaid is being aided by Green Dot, NetSpend, and nFinanSe, which are managing and issuing the prepaid cards to a large number of outlets, including check-cashing services, supermarkets, and drug stores. The three companies also supply the hardware, software, and customer support needed to control all the cards. Prepaid cards are appealing to people who lack bank accounts because they do not include the credit checks and minimum account balances required by banks. They also are useful for big purchases, Watters says.
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Viewpoint: Keep Government Out of the Card Industry
American Banker (03/20/09) P. 9; Grover, Eric
Intrepid Ventures partner Eric Grover writes in this opinion piece in American Banker that the U.S. government is moving in on the credit card industry, with various members of Congress introducing or reintroducing legislation that seeks to regulate the sector. "Washington is attacking the card industry's principal revenue sources--finance, interchange, and penalty fees for creditworthy cardholders and administrative fees for subprime ones--and curbing consumers' freedom to choose products," he contends. The move to ban various practices, including double-cycle billing, universal default, and penalty and subprime administrative fees, stems from agreement among certain lawmakers, consumer activists, and many consumers that such practices are unwanted. "The important question, however, is not whether they are desirable, but whose determination of desirability is dispositive: Washington politicians and regulators or consumers in the market?" argues Grover. "If features are fully disclosed, Joe Sixpack should be free to make a choice different from what [House Financial Services Chairman] Barney Frank [D-MA] would make for him." Grover foresees the diminishing of revolving credit and preemptive fee hikes by issuers, and says a proposal from Senate Banking Chairman Christopher Dodd (D-CT) would "infantilize Americans" by banning people between 18 and 21 from getting a credit card without a parent or guardian signing and their taking a financial literacy course. Grover also alleges that the subprime card business model would be destroyed by Frank's prohibition on fees higher than 25 percent of the credit limit, truncating credit for the 18 percent of U.S. adults who are subprime and 27 percent who have little to no credit.
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Court Halts Bogus Mortgage Loan Modification Operations
Federal Trade Commission (03/24/09)
Following a tip from the Federal Trade Commission (FTC), a U.S. district court has demanded that two firms, New Hope Modifications and Hope Now Modifications, stop falsely advertising their participation in a federally sponsored program that assists troubled homeowners. The specific charges from the FTC say the two companies are not affiliated with the legitimate HOPE NOW Alliance, frequently extract one month's mortgage payment as a fee for using the network, neglect to help homeowners revise the terms of their mortgages, and then refuse to offer refunds. "With many consumers desperate for relief and afraid they might lose their homes in these difficult economic times, some unscrupulous individuals prey on these fears for their own financial gain,” said Jon Leibowitz, who chairs the FTC. "We won’t hesitate to take action against these types of con artists now and in the future."
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Real Estate: Buyers Get Job-Loss Protection
South Florida Sun-Sentinel (FL) (03/26/09) Owers, Paul
A number of property firms, including Keller Williams Realty in South Florida, are offering to cover mortgage payments for borrowers for six months in the event of a job loss. Keller Williams' program is for FHA, VA, and USDA loans; and it could eventually be expanded to include conventional financing. The South Florida pilot program could be offered to buyers across the country in the coming months.
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Fed to Take Servicing Advances
American Banker (03/23/09) P. 6
The Term Asset-Backed Securities Loan Facility has been broadened by the Federal Reserve to assist mortgage servicers in paying advances to bond investors, and it will begin accepting service advances as collateral in asset-backed securities in April. The central bank believes such a move will make it possible for servicers to better prevent foreclosures.
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Plan to Let Judges Alter Loans Stalls
Wall Street Journal (03/20/09) P. A3; Williamson, Elizabeth
Legislation allowing bankruptcy judges to modify mortgages has stalled in the Senate due to banking industry opposition and lack of support among moderate senators. A spokesman for Senate Majority Leader Harry Reid (D-NV) said the bill may not advance until lawmakers return from a two-week recess beginning April 6. The House version underwent numerous changes, and, as it stands now, will allow only existing loans to be modified during bankruptcy and permit principal write-downs only when there is proof of pre-bankruptcy modification efforts. The banking industry wants cramdowns to apply only to subprime financing.
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Few States Require Personal Finance Education--Is It Time for Change?
MarketWatch (03/23/09) Coombes, Andrea
Grade-school financial education classes might not have prevented the economic crisis, but they could have mitigated the impact and left consumers better prepared, financial experts say. Laura Levine, executive director of the JumpStart Coalition for Personal Financial Literacy, says it is wrong to pin all the blame on victims, but urges students and individuals to receive education to avoid being taken advantage of in the future. Three states--Missouri, Tennessee, and Utah--require K-12 schools to teach one semester of personal finance education as a stand-alone class. Seven other states require personal finance be taught as a component of another class, such as economics. Few expect financial education to be at the forefront of President Obama's current agenda, though administration representatives have met with the President's Advisory Council on Financial Literacy to discuss the need for literacy classes, said Tahira K. Hira, a Council member and professor of personal finance at Iowa State University. Schools should extend versions of these classes to younger students, said Levine. "While a high school student has the intellectual capacity to understand the content, the younger kids have a better ability to establish behaviors such as saving, frugality, things like that. You want to catch them at all levels," she explained.
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New Student Loans Require Payments While in School
Associated Press (03/20/09) Choi, Candice
Sallie Mae has announced that it is replacing its signature student loan, which allows students to begin making payments after they graduate, with a new product that requires interest payments to be made when students are still in school. In addition, the time frame borrowers would be given to repay the loans would be shortened from between 15 to 30 years to between five to 15 years. However, borrowers would not see significantly higher payments after graduation with the new loans because the interest payments students make while they are still in school will help them to avoid negative amortization. The change is also expected to benefit Sallie Mae in a number of ways. For example, the interest payments will help to improve cash flow for Sallie Mae, said FinAid.org publisher Mark Kantrowitz. In addition, the company's default rate is expected to drop from the current 4.5 percent because the new loans will be less risky, since families that cannot afford the interest payments while students are still in school will be ineligible.
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ANSI Panel to Standardize Identity Theft Tracking
PC World (03/20/09) Vamosi, Robert
The American National Standards Institute recently convened a second workshop for the Identity Theft Prevention and Identity Standards Management Panel as part of an effort to determine whether to standardize identity theft metrics. During the workshop, participants took part in panel discussions that addressed several topics. One panel drafted working definitions for the terms "identity theft" and "identity fraud." According to the panel, identity theft occurs when personal data is first accessed, while identity fraud occurs when personal data is used. Meanwhile, another panel discussed a proposal for organizations to share data breach information on a neutral third-party-hosted server in order to develop a more accurate idea about the severity of the problem of data breaches. After the conference ended, participants broke into three working groups and agreed to continue standardizing identity theft metrics. The three groups plan to meet individually over the next several months and collectively draft and publish a report on the standardization of identity theft metrics by this summer.
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Senators Urge Improvement to Auto Dealers' Credit Access
Detroit News (03/20/09) Shepardson, David
A group of eight Democratic and Republican senators sent letters to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke on March 19 urging them to alter the Term Asset-Backed Securities Loan Facility (TALF) program. The program, which is being overseen by the Fed, aims to thaw the nation's frozen credit markets by lending money to investors to buy securities backed by consumer loans such as auto, student, and credit card loans. However, the program is limited to only assets with AAA-ratings--a requirement that the eight lawmakers said should be eased to help the struggling auto industry. In their letter, the senators noted that the requirement effectively prevents auto finance companies from financing wholesale dealer inventories. The senators added that keeping the ratings requirement in the TALF program will put U.S. auto finance companies at a cost disadvantage to their competitors, since they will be required to pay higher incentive costs in order to offer competitive low-interest rate financing on vehicles. Dealers, meanwhile, would be charged higher rates to finance their inventories, the letter noted. The letter from the group of senators comes on the heels of similar letters to President Obama, in which auto dealers asked for improvements to access to dealer credit through the TALF program.
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Late on a Car Loan? Meet the Disabler
Wall Street Journal (03/25/09) Welsh, Jonathan
An increasing number of car dealerships are installing "disablers," devices placed under dashboards and connected to ignitions that keep cars from starting if buyers get too far behind on payments. One company that sells disablers, On Time, said that sales rose 25 percent in 2008 over the year before, and expects to see sales double in 2009. While the used-car market received a boost from the recession, auto buyers are having a harder time getting credit, but the device can help more customers qualify for loans and pay more responsibly. Disablers also feature a built-in satellite-based locator that makes it easier for the vehicles to be repossessed if payment is delayed too long. Consumer-advocacy groups have expressed concern, however, over not only this high level of surveillance, but the potential danger to drivers if they are stranded when the car shuts down. Dealership owner Leon Green said that customers hardly miss a payment since he began using the disablers.
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Unitrin to Exit Auto Finance Business, Suspend Auto Lending
Dow Jones Newswires (03/24/09) Grace, Kerry E.
Unitrin Inc. stated that its Fireside Bank unit will no longer extend new loans. The halt in new lending is part of the company's plan to leave the vehicle-financing business. "The turmoil in the economy, coupled with changes in the used-car marketplace and increased capital requirements has led to this decision," said Unitrin CEO Don Southwell. Fireside expects to have early lease cancellation costs of $3 million to $6 million as well as layoff costs of $6 million to $10 million.
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Higher Used-Car Prices Improve Prospects for Auto Lenders
Dow Jones Newswires (03/23/09) Saha-Bubna, Aparajita
Used car prices are rising, to the relief of U.S. lenders and dealerships. Prices for some used vehicles "are up as much as $1,600 per vehicle compared with December," according to GMAC spokesman Michael Stoller. "It's a positive in terms of revenue. It improves proceeds from vehicle auctions." At Jeff Liccardi's dealership in Watchung, NJ, a 2007 Ford Explorer now sells for $13,850, up from $11,600 in January. The higher values mitigate some of the pressure on lenders who sell many of these vehicles--a portion of which are repossessed from owners who cannot make their payments--at a loss. With more money coming in per used vehicle, vehicle finance companies can strengthen their lease portfolios by reducing the risk of incurring steeper impairment fees on operating lease assets, explains analyst Mark Wasden of Moody's Investors Service.
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Three Deals Launched on TALF-Debut Day
Wall Street Journal (03/20/09) Rappaport, Liz
Nissan, Ford Motor Credit Co., and Citigroup kicked off the government’s Term Asset-Backed Loan Facility (TALF) the week of March 16 by selling tranches of bonds. The Federal Reserve lent $4.7 billion to TALF borrowers, and the completion of the deals indicates that the program is helping to thaw the frozen asset-backed securities markets. The TALF program involves Federal Reserve loans for hedge funds and other investors to buy newly issued securities backed by various types of consumer debt, and the Fed said that it is expanding the types of securities it will accept as collateral to include loans to buyers of business equipment, leases for vehicle rental companies, loans to auto dealers, and mortgage-servicing payments.
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More Car Owners Behind on Auto Loans
USA Today (03/19/09) P. 2B; Carty, Sharon Silke
Consumers are taking increasingly longer to make their car payments, raising the risk of loan default. Experian Automotive credit tracking has reported a 17 percent rise in car loans nearing default in the fourth quarter as Americans continue to struggle through the recession; the share of loans 60 days past due is forecast to increase by 40 percent by December 2009, compared to December 2007. The news has prompted lenders to tighten credit standards and issue fewer loans, especially to subprime buyers.
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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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