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Building up the Bureau
American Banker (12/01/11) Fest, Glen

The Consumer Financial Protection Bureau (CFPB) has been busy getting off the ground, installing directors of key offices, publishing its exam manual for monitoring banks, starting a blog on its website and building a presence on Facebook. However, financial services companies still face a great deal of uncertainty and questions remain whether the bureau will ban products or overlap with other agencies' interest in overseeing compliance with fair lending and equal-credit opportunity laws.

But the bureau has been working on easing industry’s concerns. Throughout its short existence, the CFPB has been reaching out to financial services companies through industry conferences and personal contacts. The CFPB has detailed the thinking behind its decision to apply equal scrutiny to banks and non-depository institutions. "We're going with a blended examination approach," said Steve Antonakes, associate director of the bureau's large-bank supervision unit. "The thought process here (is) we didn't want a hierarchy in the examination force to develop" that favored one group or the other. However, the blended exam process and other CFPB powers cannot take effect until a director is confirmed. The Senate Banking Committee passed Cordray's nomination to the full chamber in early October, but Republicans are holding out for a restructuring of the CFPB into a commission-led agency with direct Congressional funding and oversight.

While the CFPB is without a director, many of its leaderless are taking an active role. Raj Date, who replaced Elizabeth Warren as the president's special advisor to the U.S. Treasury for the CFPB, has been headlining public initiatives and industry outreach on the bureau's initial priorities: mortgages and student loans. Assistant director for service member affairs Holly Petraeus has spoken out about protecting military families from payday lenders and for-profit colleges.

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FTC Vehicle Finance Roundtables Examine Leasing, Spot Delivery and Consumer Education

On Nov. 17, the Federal Trade Commission (FTC) convened the last of its series of three roundtable events to gather information on consumer protection issues that arise in the sale, lease, or financing of motor vehicles. Many AFSA members and staff participated in the sessions. The third roundtable recapped themes discussed throughout the previous roundtables, but mostly focused on the leasing process. Among the topics covered were the pitfalls of the early termination of a lease, the merits of ancillary products, and dealer participation and markup. The discussion focused primarily upon dealer-arranged financing rather than direct financing. There was vigorous debate about the prevalence of spot delivery, title imperfections and lien release problems.
Participants generally agreed that consumer education could be improved, with some arguing for clearer disclosure of the spread between the retail terms of vehicle financing and the “buy rate.” Consumer advocates urged dealers to end so-called “yo-yo” financing, and one panelist called for dealer compensation to be divorced entirely from the negotiation of financing terms.
Prior to the first roundtable in April, AFSA submitted written comments to help educate policymakers on the vehicle financing process and the nature of the retail installment sales contract. AFSA members met with FTC officials throughout the year, helping to shape the overall dialogue. FTC officials were careful to note that the commission had made no decisions about whether to issue new regulations.

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New Member Welcome

AFSA welcomes new Business Partner SteadyPay Payment Solutions.
Based in Elizabethtown, Ky., SteadyPay Payment Solutions provides payroll deduction payment services. website

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Inside the Beltway
CFPB Mortgage Complaint Process May Have Big Impact
American Banker 11/30/2011

The Consumer Financial Protection Bureau (CFPB) will begin receiving complaints related to mortgages and other home loans “on or about Dec. 1,” bureau officials announced on Nov. 30, in conjunction with the release of their report on credit card complaint data. Jo Ann Barefoot, co-chair at Treliant Risk Advisors, predicts that the complaints related to mortgages will outnumber those about other products and that many of the complaints will allege discrimination, which can be used to target unfair or deceptive practices. “Mortgages are a complicated product so there’s a lot more basis for complaints that you may have in, say, the credit card area,” said Barefoot. The agency expects to be ready to handle complaints for all financial products and services by the end of 2012, and will utilize information retained through the credit card complaint process, which began on July 21, to help improve the system. Processing of complaints related to other bank products offered to consumers, such as savings accounts, is planned to begin in March.
According to the report, credit card complaints were mostly related to confusion over credit card terms and associated products, fraudulent credit card charges made by third parties and factual disputes between the issuer and consumer. The report also noted that most of the calls resulted in general feedback or answering questions, with only half resulting in the filing of a credit card complaint. However, industry pointed out that credit card complaints processed by the bureau represent less than one-tenth of a percent of the 383 million U.S. credit card accounts. The CFPB is also requesting comments on its proposed policy for disclosing credit card complaint data, such as the creation of a searchable public database, as well as seeking input on ways to effectively filter out confidential information from the complaints.

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Reed Pushes Amendment to Protect Military Families from Abusive Financial Practices
The Hill (11/29/11) Needham, Vicki

Sen. Jack Reed (D-RI) is pushing an amendment to the Defense Authorization bill that would prevent lenders from charging “exorbitant fees to our servicemembers.” The provision enhances the Military Lending Act (MLA) by limiting interest rates at 36 percent for certain payday, auto-title and refund-anticipation loans. “We need to stop unscrupulous lenders from targeting our soldiers, saddling them with enormous debt and undermining our national security,” said Reed, a senior member of the Armed Services and Banking Committees. The amendment would ensure banks can’t put new labels on the same high-interest payday loans the MLA was intended to prevent. The amendment would make it clear the law applies to “open-end” credit along with “closed-end” credit; end the practice of charging high-cost overdraft fees for each individual debit card transaction approved by the financial institution; and end the practice of maximizing overdraft fees by reordering customers’ transactions from largest to smallest. The Federal Deposit Insurance Corp (FDIC) recently advised the financial institutions it oversees not to post transactions from highest to lowest. However, this doesn’t apply to financial institutions that are supervised by other regulators, Reed stated.

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CFPB Moves to Streamline Inherited Financial Regulations
HousingWire (11/29/11) Panchuk, Kerri

On Nov. 29, the Consumer Financial Protection Bureau (CFPB) announced that it is seeking input on ways it can streamline the financial and lending regulations it inherited from other agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Suggestions could include simplifying regulations that are difficult to understand, standardizing definitions of common terms and updating regulations that are now outdated or unnecessary because of new technology. “Our goal is to make it easier for banks, credit unions and others to follow the rules,” said Raj Date, the special advisor to the Secretary of the Treasury on the CFPB. “We’re asking the public to help us identify and prioritize concrete ways that we can streamline the regulations we inherited so that they work better for consumers and the firms that serve them.” Comments will be due 90 days after the notice and request for information is published in the Federal Register.

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Retailers Sue Fed over Debit-Card Fee Rule
The Wall Street Journal (11/22/11) Randall, Maya Jackson

On Nov. 22, the National Retail Federation, Food Marketing Institute and National Association of Convenience Stores, as well as two individual retailers, filed a lawsuit in U.S. District Court in Washington, D.C., against the Federal Reserve (Fed), claiming that the agency was too lenient on banks when it set the limits on the debit-card fees banks charge retailers, causing merchants that accept debit cards to be “substantially harmed” by the implemented rule. The Fed was required by the Durbin amendment – a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act – to take steps to ensure the debit interchange fees banks charge retailers are reasonable compared to the cost of processing debit-card transactions.
Effective Oct. 1, the Fed capped the rate merchants can be charged for debit card transactions roughly in half, to 21 cents. A 12-cent limit was originally proposed. Retailers argue that the Fed’s rule has not led to fair rates, and in some cases has actually put retailers at risk of paying higher fees. In their complaint, the retail groups assert that Miller Oil will pay a higher debit-card interchange fee because of the rule. "The Federal Reserve was required by law to come up with swipe fees that were 'reasonable' and 'proportional,' but what we got were neither," said Mallory Duncan, Senior Vice President of the National Retail Federation, in a statement. "Instead, the Fed allowed themselves to be influenced by the very banks they are supposed to regulate and raised the originally proposed cap to include expenses the law said were not allowed.” The plaintiffs also argue that the Fed’s rule is “invalid under the Administrative Procedures Act.”

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National and State News
Experian: 3Q Subprime Auto Loans Climb Year-Over-Year
SubPrime Auto Finance News (12/01/11)

According to Experian Automotive’s quarterly automotive credit analysis, 21.87 percent of all new-vehicle loans during the third quarter were made to customers in the non-prime, subprime and deep subprime categories. Deep subprime loans climbed 17.3 percent, subprime loans rose 17.8 percent, and non-prime loans increased by 12.5 percent during the third quarter. The average credit score for new-vehicle loans fell from 769 in the third quarter of last year to 763 in the third quarter of this year. For used-vehicle loans, the year-over-year average moved from 683 to 676.

"Consumers continue to do a better job of repaying loans, while at the same time, many of the most risky loans from 2007 and 2008 are now off the books," said Melinda Zabritski, director of automotive credit for Experian Automotive.

During the third quarter, 30-day delinquencies fell 7.05 percent, from 2.99 percent in the third quarter of last year to 2.78 percent, while 60-day delinquencies fell 7.4 percent year-over-year from 0.77 percent to 0.71 percent.

"With more loans being booked outside of prime, lenders are showing they are willing to be more flexible in their lending strategies," said Scott Waldron, president of Experian Automotive. "However, consumers may still have the impression that lending is extremely tight, so it is important for lenders and retailers to educate car shoppers that there are financing options available to a wider group of consumers," he stressed.

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Battle Looming Over Missouri Payday Loan Restrictions
St. Louis Today (11/25/11) Hancock, Jason

The battle over how much lenders charge for payday loans in Missouri is intensifying. A coalition of religious groups and civic organizations continue collecting signatures to get a measure on the state’s 2012 ballot that would limit the cost of short-term loans, including payday and car title loans, by capping the annual interest rates on these loans at 36 percent – a step that was taken after the failure of the legislature to cap rates. Supporting the initiative are political committees called Missourians for Responsible Lending and  Communities Creating Opportunity.
Supporters are not relying on funds to get the measure on the ballot, but rather are relying on a network of faith-based groups. “We’re never going to win the fundraising battle, and we know that,” said Molly Flemming-Pierre, policy and develop organizer for Communities Creating Opportunity. “But that doesn’t mean we won’t win the policy battle, and the heavy commitment of the faith community is how we’ll do it.” Katie Jensen Larson, state organizer with Metro Congregations United, said her organization’s 35 religious congregations in the St. Louis Area have pledged to collect thousands of signatures in favor of the ballot. “We got involved in this effort because our pastors started saying, ‘This is wrong and we have to do something about it,’” she stated.
The ballot measure is opposed by groups like the Missourians for Responsible Government, a Kansas-City based nonprofit, as well as groups such United Payday Lenders of Missouri. Randy Scherr, executive director of United Payday Lenders of Missouri, stated that the fees for small, short-term loans used to pay for emergency needs are still much smaller than bank overdraft fees or penalties for late bill payments. A lawsuit challenging the ballot issue, with John Prentzler, an executive with QC Holdings, as the lead plaintiff, was also filed in hopes to derail the ballot proposal. “People in our industry are very worried about how this will impact their business, their employees and their customers,” Scherr said.

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NMLS Tops Quarter Million Licensees thru Q3
Mortgage News Daily (11/22/11) Swanson, Jann

As of the end of the third quarter, over one-quarter million mortgage licenses are held by companies and individuals through the Nationwide Mortgage Licensing System & Registry (NMLS) – the legal system of record for mortgage licensing in 47 states, Puerto Rico and D.C. – according to a report released on Nov. 21. A total of 148,594 unique entities hold 277,326 licenses, 18,707 of which were added in the third quarter. The vast majority of license denials in the third quarter took place in Florida, where license applications were denied to 23 out of the 25 companies denied nationwide. In addition, the number of companies, branches and loan officers that withdrew their applications in Florida made up one-third of those that withdrew nationwide.

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December 1, 2011

Forward To A Colleague

Carleton, Inc
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ParaData Financial
Allied Solutions
Counselor Library
Life of the South
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Wells Fargo Preferred Capital
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