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Interim CFPB Director Testifies on Capitol Hill

On Nov. 2, Raj Date, the Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau (CFPB), testified before the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit in a two-and-a-half hour hearing. The topic of the hearing was, “The Consumer Financial Protection Bureau: The First 100 Days.”
Committee Democrats applauded the bureau for establishing offices to protect older Americans and military servicemembers. Democrats also urged the Senate to take up the nomination of Richard Cordray, the bureau’s enforcement chief who President Obama has nominated to be its first permanent director.
Date asserted that the bureau had been busy reducing regulatory burdens on industry. He also aired the common complaint of community banks that finance companies are not subject to supervision under the federal consumer laws, characterizing that scenario as unfair. As an argument for confirming a director, which will give the CFPB authority over non-banks, Date stated that under-regulated non-bank lending contributed to the recent financial crisis.
AFSA has urged Congress to enact reforms to improve the governance, accountability and oversight of the bureau, including replacing the single director with a bipartisan commission that would exercise control over the rulemaking and enforcement processes.
Responding to a question from Committee Chairman Spencer Bachus (R-AL) about how the bureau intends to carry out its mandate to prohibit “abusive acts or practices” under the Dodd-Frank Act, Date described the provisions of Section 1031, which outlines the “abusive” standard. He explained that the standard would be borne through experience gained over time as the bureau carried out its supervisory responsibilities.

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AFSA Introduces Issue Briefs, a New Resource for Members

AFSA recently released six papers as part of a new category of resources for members called “issue briefs,” which are designed to explain issues in-depth and objectively for use by policymakers or internally as members see fit. The first series of issue briefs cover annual percentage rate caps, driver/owner liability shifting, interchange, judicial vs. non-judicial foreclosure, payday lending databases and vacant property upkeep. New issue briefs are being added to the website regularly. Suggestions for additional topics are welcome; please send topic ideas to Danielle Fagre Arlowe at dfagre@afsamail.org.
Members can access the issues briefs on AFSA’s website under State Government Affairs Resources. Members may contact Susan Sullivan at ssullivan@afsamail.org for a login.

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AFSA Education Foundation Unveils Endowment Campaign

The AFSA Education Foundation (AFSAEF) unveiled its “Foundation for the Future” campaign to sustain its financial literacy programs during an awards ceremony at the 95th AFSA Annual Meeting at the Gaylord National Harbor Resort, National Harbor, Md. Under the leadership of AFSAEF Chairman Harry Goff, retired chairman & CEO, CitiFinancial, the endowment has raised more than $3.2 million since it began two years ago. The campaign’s goal is to raise $7.5 million.
During the conference, Goff extended the deadline for corporations and individuals to become Founding Members of the Legacy Society. Those who make contributions or pledges by the AFSA Independents Conference in April will be considered Founding Members. Please contact Susie Irvine at susie@afsamail.org or 202-466-8611 for information on how to contribute to the endowment.

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New Committee Leaders Elected

In conjunction with AFSA’s 95th Annual Meeting, several committees of professional interest elected new leaders.
Sharon Mancero, Vice President, Wells Fargo Preferred Capital, was elected Chair of the Business Partner Advisory Board, which includes a seat on the AFSA Board of Directors. Ted Lamb, Executive Vice President, Overby-Seawell Company, is Chairman-Elect.
Brian Parks, Vice President, Operational Risk, Wells Fargo Financial Resources, will chair the ID Theft Fraud Control Committee, and Thomas Annis, Director, Compliance and Financial Services Knowledge Center, John Deere Financial, will serve as Vice Chair. 
Rex J. Ellison, President & COO, Republic Finance, LLC, was elected Chair of the Operations Committee.
Luke McClanahan, Vice President, Brundage Management/Sun Loan Company, was elected Chair of the State Government Affairs Committee, with Scott Fontenot, Regional Director, State Government Relations, Wells Fargo, elected as Vice Chair. For a second term, Briget Polichene, Vice President & Counsel, Citigroup, will chair the Cards Subcommittee, Tom Hudgins, Vice President of Operations, Western-Shamrock Corporation, will chair the Personal Loans Subcommittee, and Jim Bantham, Vice President, State and Local Government Relations, Central Region, Citigroup, will chair the Mortgage Lending Subcommittee. Nate Glazier, Government and External Affairs Manager, Toyota Financial Services, will serve as the Vehicle Finance Subcommittee Chair.

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Inside the Beltway
Durbin Seeks to Beef up Small-Bank Interchange Exemption
American Banker (11/01/11) Wack, Kevin

Sen. Dick Durbin (D-IL), who was the driving force behind the provision in the Dodd-Frank Act that ordered the Federal Reserve Board (the Fed) to cap the debit fees banks can charge to retailers, is now behind a new effort to ensure small banks are not hurt by the cap. Both industry officials and regulators have argued that small banks are still adversely affected by the bill, even though it contained an exception for banks with under $10 billion in assets.
Durbin added a small provision as part of a spending package that would fund various financial regulators to instruct the Federal Trade Commission (FTC) to issue a report in late 2012 on how the small bank exemption is functioning. The report would explain whether the FTC has found evidence that payment card network companies have taken steps to make it harder for small banks to compete with large banks in the debit card market and investigate whether these companies have coordinated or colluded with large banks in an effort to put small banks at a disadvantage.
The provision is expected to be combined with other spending measures and adopted by the Senate next week. A source familiar with the measure has said that under Senate rules the FTC provision cannot be amended or removed when the spending measure goes to the Senate floor. Opponents of the provision likely only will be able to remove it when the House and Senate merge their respective bills to fund the financial regulators.

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Indiana AG Will Testify against Cell Phone Bill
The Chicago Tribune (11/02/11) LoBianco, Tom

Indiana Attorney General Greg Zoeller said he plans to testify before the U.S. House Energy and Commerce Committee’s Subcommittee on Communication and Technology on Nov. 4 against a bill being considered that would override Indiana’s “Do Not Call” law by allowing telemarketers and debt collectors to call residents’ cell phones. Zoeller has stated that, if adopted, the bill would lead to a flood of robocalls to people’s phones. “State’s attorneys general would be unable to enforce our more strict state laws on ‘Do Not Call’ and (the proposal) would prohibit us from regulating junk faxes and prerecorded calls or text messages” to cell phones, he said.
The bill’s supporters include eight Republican and one Democrat sponsor in the House as well as a coalition of business interests and close to a dozen other organizations. Supporters say that the bill would make modest updates to the Telephone Consumer Protection Act to allow businesses to compete in an environment where cell phones largely have replaced landlines.
Zoeller has yet to say whether Indiana’s congressional delegates will support him on this issue. Zoeller is also actively fighting on multiple legal fronts to maintain the state’s strict “Do Not Call” law and robocall ban. In September, a federal judge ruled that the state’s ban violated a federal statute governing interstate communications. The Indiana Supreme Court is also considering whether the state rightfully enforced the measure.

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National and State News
Equifax: Auto Finance Companies Originating More Subprime Loans than Banks & Credit Unions
SubPrime Auto Finance News (11/03/11)

Auto finance companies have significantly increased lending, with a growth of more than 47 percent during the last two years, according to the latest Equifax National Credit Trends Report. During the past two years, auto finance lenders outpaced bank and credit union lending to subprime borrowers, originating 854,800 loans in July compared to 820,200 loans originated by banks and credit unions. Vehicle loans to subprime borrowers are quickly approaching pre-recession levels, now accounting for 38.5 percent of all auto loan originations for auto finance companies and 17.6 percent for banks and credit unions. Delinquency rates for outstanding vehicle loans currently 60 or more days past due are also continuing to improve. The rate is now 1.63 percent of loans, compared to a peak near three percent, Michael Koukounas, senior vice president of special client services for Equifax, indicated. He attributes the auto lending industry’s ability to recover more quickly than others to “the more comprehensive data and verification tools for greater loan-level transparency in evaluating a wider band of consumers” that auto lenders have proactively adopted in response to the continually elevated unemployment rates. Equifax also reported that in the last year the average monthly payment has remained relatively unchanged, with auto finance company originated loan payments at $407 in July from $404 in July of last year.

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Las Vegas City Council sets Hearing on Foreclosure Proposal
The Las Vegas Review-Journal (11/02/11) Spillman, Benjamin

On Nov. 1, the Las Vegas City Council recommending committee voted to hold another hearing, which will take place Nov. 15, about a proposed ordinance that would make it a misdemeanor offense for lenders to fail to maintain foreclosed homes in the city. The delay will give banking, real estate and other groups more time to press for changes to the ordinance, such as lessening penalties. The ordinance’s provisions would require lenders to register – at $200 per property – abandoned and distressed homes with the city. It also requires lenders to maintain the property to prevent it from being an eyesore or health and safety hazard. Violations would be a misdemeanor, punishable by up to $1,000 fine or six months in jail.
About 300 homes become vacant and foreclosed in Las Vegas each month, real estate statistic analysts said. Proponents of the ordinance say it will prompt banks to act to prevent these vacant and distressed houses from deteriorating.
Critics, including Nevada State Bank attorney Charles Cook and senior vice president Harry Hinderliter say the ordinance contains vague wording and makes banks responsible for maintaining property they do not own. They urged the city to change the wording so the registration and maintenance requirements aren’t triggered until the notice of sale, because it occurs after efforts to prevent the foreclosure, such as mediation, are exhausted. Placing responsibilities on the lender prior to the notice of sale could also result in banks being told to maintain a property they have no legal right to enter.
The city’s recommending committee still seems set to push through some type of vacant property registration and maintenance ordinance, and has indicated they will use the delay to come up with language that will make the ordinance work.

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Analysts Stay Cautious after Automakers Cheer October New-Vehicle Sales Performances
AutoRemarketing (11/02/11) Zulovich, Nick

While many automakers have been highlighting their “record” and “best since” October new vehicle sales performances, analysts remain cautious when discussing what these numbers will mean for the future. Jeremy Anwyl, chief executive officer of Edmunds.com, attributes the high sales to customers beginning to return to the market after being kept from it in April through August due to high prices and inventory shortages. “Depending on pricing and availability through December, most of this should play itself out by year end,” Anwyl said. “This suggests we should view sales in October with a degree of caution. The performance over the past few months is not the start of a trend. It is more of a mini-bubble.” Anwyl predicted that the demand for vehicles will continue to rise until next year, but that sales trends will likely remain modest.
J.D. Power estimated the October retail seasonally adjusted annualized rate (SAAR) to be relatively strong at 10.5 million units, the same level as September, and placed the total light-vehicle selling rate at 13.1 million units. Jesse Toprak, True Car vice president of industry trends and insights, said that sales over 13 million mean that “the underlying demand for car buying is healthy, but far from being ideal.” He added that industry sales are about two years from reaching a normal sales level, which is about 14.5 million units, and expects unit sales in 2012 to be around 13.7 million.
Toprak explained that the very low new vehicle sales volumes seen over the last few years resulted in one- to three-year-old used car shortages, and the highest resell values seen in recent history. He expects this to be relieved somewhat as new cars are sold and fresh inventory is provided to auctions and dealers. However, he predicts that it will be another year or so, probably around the fourth quarter of 2012, before increased new vehicle inventory decreases the pressures on used cars and significantly eased used car prices are seen.

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Foreclosure Timeline Lengthened by 140 Days Over Past Year: LPS
DS News (11/01/11) Bay, Carrie

Mortgages on houses that were foreclosed on in September were delinquent for an average 624 days, according to a study from Lender Processing Services (LPS). The figure is significantly higher from 484 days in September 2010, which was right before processing issues surfaced. LPS reports that the time between the last payment made and a foreclosure sale in judicial states is 761 days – six months longer than in non-judicial states. Foreclosure sales in judicial foreclosure states are very low, with only 1.6 percent of their foreclosed properties going to sale. This slow pace has caused the foreclosure inventory to balloon, with almost seven percent of all active loans in judicial states in foreclosure.
According to LPS, foreclosure starts in September were slightly below the three-year average. Servicers initiated foreclosure on 220,273 homes, which is down 11 percent from August and 15 percent from a year earlier. LPS data showed that delinquencies are almost double pre-crisis levels, while foreclosures are eight times higher. Modification volumes have been declining since June 2010, with approximately 2 million mortgage modifications occurring since January 2010.

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CIT Group Launches Commercial Real-Estate Lending Group
The Wall Street Journal (11/02/11) Rubin, Ben Fox

CIT Group Inc. is restarting one of its former lines of business by launching its new commercial real-estate lending group, CIT Real Estate Finance, which will focus on markets in Boston, New York City and Washington, D.C. Matthew E. Galligan, who has been appointed as group head of the new business, said they will concentrate on offering “commercial real estate loans to top tier sponsors in developers in major cities we know well.” He added that they will “provide stabilized, value-add and construction loans in excess of $20 million to highly experienced and well-capitalized developers in the office, retail, industrial and multi-family rental sectors.”

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Nissan Motor Acceptance Has New Chief
Automotive News (11/02/11) Henry, Jim

Nissan Motor Acceptance Corporation (NMAC) has a new President and CEO, Mark Kaczynski, who will officially assume the role Dec. 1, but is already transitioning into the post. Kaczynski has been with Nissan since 2007 as controller of sales and marketing for Nissan Americas. He will succeed Steven Lambert, who will now oversee all of Nissan’s information systems and services in North and South America as Nissan’s vice president of information systems.
NMAC’s press release on the appointments may be viewed here.

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November 3, 2011

Forward To A Colleague

Wells Fargo Preferred Capital
Counselor Library
Allied Solutions
ParaData Financial
Carleton, Inc
Balboa Insurance
GoldPoint Systems
Life of the South
AFSA Newsbriefs

AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to newsbriefs@afsamail.org to subscribe.

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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.