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AFSA Responds to CFPBs Interim Final Rules

On Sept. 26, AFSA submitted one comment letter to the Consumer Financial Protection Bureau (CFPB) in response to four interim rules issued by the CFPB that would establish procedures for: (1) the conduct of adjudication proceedings, (2) investigations pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), (3) governing the process by which state officials notify the CFPB of actions or proceedings undertaken to enforce the Dodd-Frank Act, and (4) the public to obtain information from the CFPB under the Freedom of Information Act, the Privacy Act of 1974, and in legal proceedings. The latter also establishes the CFPB's rules regarding the confidential treatment of information obtained from persons in connection with the exercise of its authorities under federal consumer financial law.
AFSA stated its concern that the interim final rules do not sufficiently account for the adequacy and enforcement of existing state laws and regulations under which regulated entities operated before new regulatory obligations were imposed. “Furthermore, we are concerned that the Bureau’s stated commitment to efficiency may inhibit appropriate due care being given to matters under its jurisdiction,” AFSA wrote.

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Executives Join AFSA Board of Directors

New to the AFSA Board of Directors are Dietmar Exler, Vice President, Mercedes-Benz Financial Services, USA, Donald Gottwald, President & CEO, Automotive Finance Corporation (AFC), and Stevan Schmelzer, President & CEO, Personal Finance Company, LLC. In addition, Kevin Borgmann, President, Capital One Auto Finance, Inc. is replacing Sanjiv Yajnik on the board and Andrew Traeger, Vice President & Finance Director, John Deere Financial, is replacing Mike Matera.
Exler served as Chief Operating Officer for Mercedes-Benz Bank in Germany and was a member of the board of Mercedes-Benz Bank prior to his current position. He has held various positions with Daimler Chrysler Financial Services, including Vice President of Customer Services and Vice President of Marketing. He is a member of the AFSA Vehicle Finance Advisory Board and has been very active in supporting the association’s vehicle finance initiatives.
Gottwald is responsible for the strategic leadership of AFC’s objectives and growth. Gottwald was the former chairman of the AFSA Vehicle Finance Division. He is a current member of the AFSA Vehicle Finance Advisory Board and has held a position on that board since 2003 throughout his career with Saab, HSBC Automotive and Automotive Finance Corporation.
Schmelzer is an active member of industry associations at the state and national levels and was president of the Kentucky Consumer Finance Association from 2008-2010. He remains a member of that board in addition to being a member of the Tennessee Consumer Finance Association board. Schmelzer currently serves on the Independents Section Advisory Board, Professional Development Committee and is a member and instructor of NICCM Board of Governors.
Borgman leads all aspects of Capitol One’s auto finance business. He joined Capital One in 2001, and has had a variety of roles during his tenure, including leading Partnerships and Business Development, Internet Acquisitions and the Prime Credit Card business. Borgmann serves on the AFSA Vehicle Finance Advisory Board.
Traeger is a key member of John Deere Financial’s executive management team, with day-to-day responsibility for planning, implementing, managing and controlling all financial-related activities of the company. This includes direct responsibility for accounting, finance, forecasting and reporting. He is also responsible for ensuring effective internal controls are in place and ensure compliance with GAAP and applicable federal, state and local regulatory laws and rules for financial and tax reporting.

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New Member Welcome

AFSA welcomes new active members Great American Finance Company and Regional Acceptance Corporation and new Business Partners Drive America and PoIS, Inc.
Chicago-based Great American Finance Company has been providing financing to individuals through approved retail home furnishing dealers and direct personal cash loans since 1932. www.gafco.net
Regional Acceptance Corporation is an auto finance company headquartered in Greenville, N.C., with branches in 15 states. www.regionalacceptance.com
Drive America Holdings, Inc. has been providing roadside assistance to customers for over more than 40 years. Drive America is headquartered outside of Dallas. www.driveamericacorp.com
Located outside of Charlotte, PoIS, Inc. reduces processing time for paying off collateral-based loans by making the process uniform and simple with all lenders. www.poisserv.com

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Inside the Beltway
Debt Collectors, Other Businesses Want to Call Your Cell Phone
The Baltimore Sun (09/26/11) Ambrose, Eileen

Debt collection calls to cell phones may soon be allowed, if proposals by the White House and Congress are adopted. Currently, debt collectors can call cell phones if they manually dial the number (they may use auto dialers with the consumers consent), but most businesses typically use automated dialing systems so that they can contact more consumers in a faster time period. President Obama’s proposal, which is a part of his deficit-reduction plan, is to change the law so that people delinquent on a government debt could be contacted by cell phone – a step that could mean “substantial increases in collections.” The other proposal is a bipartisan bill introduced in the House last week that would allow businesses to use auto dialers and recorded messages to reach cell phone users. Consumer advocates have expressed concern that these changes could lead to consumers being bombarded with “nuisance” calls. But supporters say that current regulations have not kept up with technology and the fact that more and more consumers do not have traditional landlines. According to Mark Schiffman of ACA International, current regulations were set based on telemarketing concerns, specifically, preventing consumers from having to pay expensive phone charges for computer-generated call pitches. This is now less of a concern because consumers have flat-rate plans or pay a lot less for cell phone minutes. Additionally, approximately 40 percent of consumers use a cell phone as their primary or only phone, a percentage even higher for consumers in their 20s and 30s, Howard Waltzman, a lawyer representing business groups said. A change in the law could also allow companies to make informational calls to consumers on cell phones – such as alerting them of fraud – while still banning telemarketers and allowing consumers to opt out.

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Final GFE Rule Coming, HUD-1 Redesign About to Start
National Mortgage News (09/26/11) Collins, Brian

After the Consumer Financial Protection Bureau (CFPB) completes its final round of public comments on the good faith estimate form next month, they plan to redesign the HUD-1 settlement sheet, Patricia McCoy, the CFPB’s assistant director for mortgage markets, announced. McCoy said that the CFPB wants the new GFE mortgage application form to mesh with a new HUD-1 settlement sheet so that “the front-end form and the back-end will be harmonized to fit together.” The CFPB will complete a fifth round of public comments on the GFE redesign next month and in a few months will start seeking rounds of public input on the HUD-1 settlement sheet. The CFPB will request one more round of public comment on the redesigned GFE Application form and HUD-1 settlement sheet around July 2012, the same time it expects to release its proposed rule to merge the RESPA/TILA Disclosures.

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Post Dodd-Frank, Preemption Fight Still Favoring Bankers
American Banker (09/28/11) Davidson, Kate

Industry observers say the Office of the Comptroller of the Currency’s (OCC) hand was strengthened last week, when a federal judge in Iowa ruled that the preemption standard was not materially changed by the Dodd-Frank Act – the second such decision this year. In U.S Bank v. Schipper, Judge James E. Gritzler said that the Dodd-Frank Act used the same preemption standard applied in Watters v. Wachovia Bank. His ruling quoted Watters, saying that ‘“state consumer financial laws are preempted, only if… the state consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers.”’ This decision, along with a case earlier this year that came out of an appellate court in Florida, can “give the OCC more ammunition for legal challenges…and also provide banks a better understanding of how the Barnett standard will be applied under the reform law,” Robert Cook, a partner with Hudson Cook LLP, said. However, while the decisions affirming the OCC’s view on preemption are helpful for banks, they will not stop more cases from being pursued by consumer advocates and states. “If you’re industry, you could take some comfort from the decision, but there are a lot more salvos that are going to be fired in the preemption battle than just this case,” Jeffrey Taft, a partner with Mayer Brown LLP, stated. “Until the appellate courts weigh in, it’s hard to draw any conclusions about who has won and who has lost,” he added.

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Fixing U.S. Foreclosures May Take a Year: Regulator
MarketWatch (09/23/11) Zibel, Alan

The costly and time-consuming process of sorting through foreclosure documents and fixing improper foreclosure practices may take U.S. banks at least another year, according to John Walsh, acting head of the Office of the Comptroller of the Currency. Regulators ordered major banks and thrifts to overhaul their foreclosure practices last spring after finding that lenders filed foreclosures without the correct documentation and without sufficient staff to properly deal with distressed borrowers. Banks are now working with independent consultants to identify any borrowers who may have been negatively affected by these foreclosure-processing problems, a process which has become lengthier than expected. “It would be great if it could be completed more quickly, but it’s important that it be done correctly and in a way that assures fair treatment for homeowners,” Walsh stated. Regulators are also requiring banks set up a single process for borrowers who want their case reviewed. The effort, expected to be launched in several weeks, will include a joint website, toll-free number and advertising campaign.

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National and State News
Divide Widens within AG Camp over Robo-Signing Settlement
DSNews (09/23/11) Bay, Carrie

Dissension among state attorneys general regarding what should be included in the ongoing robo-signing settlement with mortgage servicers is continuing to rise. Kentucky Attorney General Jack Conway and Minnesota Attorney General Lori Swanson are the newest to speak out against the settlement, questioning how thorough the states’ investigation has been and opposing any settlement that would protect servicers from future liability. “There should be absolutely no criminal or civil immunity given to banks for activity that has not yet been investigated,” Conway stated. Swanson also expressed concern over banks obtaining liability protection, specifically for mortgages that have been securitized or for improper ownership or documentation related to servicer’s use of Mortgage Electronic Registration Systems (MERS). New York Attorney General Eric Schneiderman was excused from the executive panel by lead investigator Iowa Attorney General Tom Miller for “undermining” the multistate talks last month, when he expressed concern over these aspects of the settlement. Beau Biden (DE), Martha Coakley (MA), and Catherine Cortez Masto (NV) have also expressed reservations about the settlement negotiations. Tom Miller has stated that the AG Negotiating Committee does not intend to release servicers from all civil liability, including liability related to securitized loans.

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Bloomington Alderman Appear Set to Curb Payday Lending Rates
WJBC-AM (09/27/11) Denham, Ryan

At their Sept. 26 City Council work session, Bloomington, Ill., aldermen appeared ready to make the city one of the first in the state to cap interest rates on small loans. Illinois lawmakers recently passed some payday-lending reforms that cap rates at 36 percent for consumer installment loans, and a group of payday lending opponents want Bloomington to take these restrictions further and cap all interest rates for payday loans, which they say are an economic drain on the city’s residents. Craig Varga, a Chicago attorney who represents the Illinois Financial Services Association, spoke on behalf of payday lenders and other businesses, including title loan and installment lenders. He told the council that Bloomington’s home rule legal status does not give them the power to cap rates, and informed them that any ordinance would almost certainly face a legal challenge from the industry. He also expressed concerns that a city ordinance capping small loan rates may lead to the city deciding to put interest limits on other loans they feel are too high, such as car or homes loans. Other industry groups that spoke out against the possible ordinance pointed out that opponents of payday lending haven’t given the state’s new law enough time to make in impact and that the state’s new database will ensure no borrower has more than two payday loans at any one time. The city’s attorney also provided a preliminary opinion about an ordinance, affirming that Bloomington does not have the legal authority to cap rates. The council took no further action, but is planning to revisit the topic at their Oct. 24 meeting.

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Florida Needs to do more to Curb Student Loan Default Rates
Sun Sentinel (09/28/11)

The rate of student loan defaults at universities and colleges in Florida is on the rise, according to figures released by the U.S. Department of Education this month. The state default rate of 10.5 percent tops the national average of 8.8 percent and makes it the ninth worst for student defaults. Figures also showed that more than one in 10 Floridians who were required to begin paying off their loans in 2009 defaulted by the end of 2010. These defaults are extremely detrimental for students, according to this editorial, as they ruin the students’ credit, impair their ability to live independently because they cannot get future loans or rent apartments and prevent them from getting federal aid for school in the future. It also means more costs for taxpayers, who now have to pay for the loans that were guaranteed by the federal government. Student loan defaults at for-profit colleges are more than double than the rate among public college students. The federal government has begun cracking down on for profit colleges with high default rates by threatening to cut off their eligibility for federal grants and loans if there is no improvement. States also have the obligation to tackle high student loan default rates. However, this year’s audit of the Florida panel that regulates for-profit colleges found that the state did not have written policies and procedures and did not respond promptly to consumer complaints.

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A New Regulatory Hassle for New York Servicers?
Mortgage Servicing News (09/27/11) Dymi, Amilda

New York is now following 35 other states by requiring the registration of mortgage servicers. While the New York Department of Banking started implementing the requirements on an emergency basis in 2009, the obligations have now been extended, with the new deadline of Oct. 1. The scope of the requirements have also been expanded to include entities holding mortgage loan servicing rights that do not actually engage in the servicing of mortgage loans – a requirement that probably only eight to 10 states have, according to Costas Avrakotos, a partner at K&L Gates. Companies subject to the rule must file an application for registration within 30 days of issuance to continue to be in operation until the application is processed and approved.

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Layaway Opens New Options for Gift-buyers
The Olympian (09/26/11) Griffin, Justine

Revamped retailer layaway programs are making a comeback, especially among consumers who are unable to get credit. Layaway permits shoppers to reserve an item in store and pay in installments or at the end of the contract, without incurring interest or affecting a credit score. This payment option is especially attractive for shoppers on the lower end of the income scale. “There are no finance charges and customers have the ability to pace themselves and teach themselves financial responsibility without major penalties,” said Salima Yala, the spokeswoman for Sears Holdings Company. These programs also mean extra costs for retailers, who must hire additional employees and space to store and monitor the items for customers, a likely reason why stores are reintroducing the programs during the peak holiday season.

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Volkswagen's US Financing Division Names New CEO
BusinessWeek (09/27/11)

Effective Jan. 2012, Andrew Stuart will become president and CEO of VW Credit, Inc., the Volkswagen Group of America Inc. announced Sept. 27. Stuart has more than 20 years of experience in the automotive industry and has served as VW Credit’s executive vice president and CFO since 2008. He will succeed Kevin Kelly, the current president and CEO, who will retire in January after 34 years with the company.

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95th AFSA Annual Meeting

September 29, 2011

Forward To A Colleague

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

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.