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AFSA Testifies on Promoting Accountability and Transparency at CFPB

AFSA President & CEO Chris Stinebert testified on Feb. 8 before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit’s hearing on “Legislative Proposals to Promote Accountability and Transparency at the Consumer Financial Protection Bureau.” Stinebert expressed AFSA’s support for several legislative proposals that would address a number of the industry’s concerns with the CFPB. For example, AFSA supports the “Proprietary Information Protection Act of 2012,” which would provide statutory protection that institutions do not waive any privilege when submitting confidential information to the CFPB in the course of the supervisory process. The association also supports several bills that would enhance congressional oversight of the CFPB and impose budgetary accountability through the annual appropriations process. During questioning by the committee, Stinebert noted that federal supervision is new territory for nonbank institutions and encouraged the CFPB to draw upon the decades of experience of state agencies in regulating consumer credit.

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Vehicle Finance Division Welcomes New Chair

Andrew Stuart, President & CEO, Volkswagen Credit Inc., was installed as chair of the American Financial Services Association's (AFSA) Vehicle Finance Division Advisory Board at the conclusion of the association's 16th annual Vehicle Finance Conference & Exposition in Las Vegas.

In this role, Stuart will oversee the division’s initiatives and serve on the conference’s planning committee as its chair. More than 600 individuals belong to the division, which provides a forum for analyzing regulatory, legislative and market trends that impact the industry.

Stuart started his career at Volkswagen Group Canada in 1991 and transferred to Volkswagen Group of America in 1995. He has held various management positions with Volkswagen in Sales, Marketing, Product Planning and Financial Services. Stuart also led Bentley Motors Inc. as CEO from 2004 to 2007. Most recently, he held the position of Executive Vice-President and Chief Financial Officer at VW Credit. 

Stuart is a member of the AFSA Board of Directors and also serves on the Junior Achievement of the National Capital Area Board of Directors. He received a Bachelor of Commerce in Marketing from Saint Mary’s University and received his MBA from the University of Oregon.

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White Paper Details Faith-Based Actions on Financial Services Regulation

On Feb. 7, AFSA published a white paper on recent faith-based organization activities that attempt to increase regulation of the financial services industry. Consumer activist groups have found a new ally in their efforts to restrict consumer lending practices, and faith-based groups have been promoting their proposals in several conservative states, including Illinois, Iowa, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Texas and Utah.

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AFSA Attends NMLS User Conference

AFSA attended the 4th annual Nationwide Mortgage Licensing System and Registry (NMLS) User Conference and Training, which took place February 6-9 in Scottsdale, Ariz. During the conference, the Conference of State Bank Supervisors (CSBS) and its affiliate, the State Regulatory Registry LLC (SRR), announced plans to expand the NMLS to accommodate states’ use of the system to license or register non-mortgage, non-depository financial services industries, including consumer lending and debt collection. The transition of existing licenses and registrations onto NMLS is scheduled to begin in a dozen states as soon as April, with more transitioning in 2013.
New SAFE Act Examination Guidelines (SEGs) for use by state non-depository mortgage regulators were released at the conference. “These guidelines provide a standardized set of examination procedures that will result in a thorough review of an entity’s compliance with state licensing through NMLS and individual [mortgage loan originator] compliance with state law and the SAFE Act,” said John P. Ducrest, Commissioner of the Louisiana Office of Financial Institutions and Chairman of CSBS. State regulators can choose whether to use all or portions of the guidelines, and they are not required. “By making the SEGs public and available to those entities we supervise, state mortgage regulators are increasing the transparency of mortgage supervision and letting the industry know what we expect of them,” said Darin Domingue, Deputy Chief Examiner of the Louisiana Office of Financial Institutions and President of AARMR.

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Inside the Beltway
States, Feds Announce Details of $25 Billion Mortgage Settlement
Forbes (02/08/12) Fisher, Daniel

State attorneys general and the federal government announced a $25 billion settlement on Feb. 9 with five of the biggest mortgage lenders over “robosigning” foreclosure documents. California and New York recently rejoined the settlement, which includes every state except Oklahoma and the District of Columbia. The settlement provides for $17 billion in first and second-lien principal reduction for homeowners who are underwater. Another $1.5 billion will go to 750,000 borrowers who lost their homes in foreclosure, equaling about $2,000 per borrower. The borrowers will receive payments without being required to drop any other legal actions against the servicers. In addition, $2.5 billion will be paid to the states, including funds for future investigations.
Proposed new servicing rules designed to prevent “robosigning” are also part of the settlement. In future filings, lawyers and other representatives of servicing companies will be required to attest to their accuracy. Paying agents to speed up foreclosure procedures will be prohibited. Before filing for foreclosure, servicers will be required to provide borrowers in default 14 days with itemized statements, including payment history, mitigation efforts undertaken by the bank to date, and a number to call to try and reach a solution.

Additional details of the settlement are available at www.nationalmortgagesettlement.com

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McConnell, Senate GOP to Support Court Challenge to Recess Appointments
American Banker (02/06/12) Blackwell, Rob

On Feb.3, 39 Republican Senators signed a letter declaring their intent to file an amicus brief supporting any legal challenge to the constitutionality of President Barack Obama’s recess appointments to the Consumer Financial Protection Bureau (CFPB) and National Labor Relations Board. The letter is signed by most Republicans in the Senate, including Minority Leader Mitch McConnell (R-KY) and several Banking Committee members. Sen. Richard Shelby (R-AL), the committee’s ranking Republican, who has been an outspoken opponent of the appointments, did not sign onto the letter. His spokesman has said that the Shelby will wait to see the details of the court case and the arguments involved before deciding to sign on.
Cordray’s appointment has yet to be challenged in court, but lawyers for Flatbush Gardens apartment complex have asked a judge to throw out a complaint from the NLRB, arguing the recess appointments are invalid. The Justice Department has issued an opinion supporting Obama’s decision to make the appointments under the argument that the pro forma sessions were not valid.
Senate Republicans are also calling on Senate Majority Leader Harry Reid, who along with Senate Democrats first used the pro forma session tactic to prevent President George W. Bush from making recess appointments, to clarify his position on the legality of pro forma Senate sessions. “Despite the fact that you were indisputably the author of what became the routine use [of] pro forma sessions to prevent recess appointments…you have on multiple occasions publicly expressed your support for President Obama's efforts to bypass the Senate,” the letter states. “It appears that you believe the importance of preserving [the] Senate's constitutional role in the nomination and appointment process varies depending on the political party of the President.”

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National and State News
Comfort Confronts High Anxiety as Consumer Protection Bureau Takes Root
Automotive News (02/08/12) Henry, Jim

At AFSA’s Vehicle Finance Conference, which began on Feb. 1, the association said that while it was somewhat reassured by Consumer Financial Protection Bureau (CFPB) representatives, it still had a variety of concerns about how the regulatory body will implement its mandate.
The bureau has expressed interest in creating more new and transparent loan documents and AFSA is more confident that this could in turn mean the bureau will be more transparent to the industry. CFPB Assistant Director Richard Hackett confirmed the bureau’s reassurances to auto lenders, stating that keeping a “continuous dialogue” with industry was important so “our fact basis for planning and policies can be well informed.” Referring to AFSA’s dealings with the bureau, AFSA president & CEO Chris Stinebert stated, “They are not shooting from the hip. They state repeatedly they want to base decisions going on facts – not on anecdotes, but on data, on empirical research. If that is true, then we have very limited concerns.”
However, during a panel discussion, it was noted that AFSA heard indirectly that bureau field staff showed up to perform bank examinations in other lending areas accompanied by lawyers in addition to the usual experts, which was “unusual and off-putting.” The bureau was also criticized for the extremely short notice it provided when it held its recent “field hearing” on payday lending and for their use of the event as a platform to publish their guide for CFPB examiners on payday lending.
Bill Himpler, AFSA executive vice president, said in effect auto lenders will have to wait and see. “Despite what we hear from the [CFPB] staff, what we hear from the field I don't think really lowers our anxiety level.” Himpler said.

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Student Debt: The Next Financial Crisis?
Forbes (02/08/12) Touryalai, Halah

Student loan debt now exceeds credit card debt in the U.S., with total outstanding student loans exceeding $1 trillion for the first time in 2011, indicating that student debt could be the next big financial crisis. The student debt issue is an even bigger concern because it affects young borrowers as well as their parents. Parent borrowing is up 75% since the 2005-2006 academic year, according to a report from the National Association of Consumer Bankruptcy Attorneys (NACBA). College seniors who graduated with student loans in 2010 owed five percent more than the previous year, according to the Project on Student Debt at the Institute for College Access & Success.
According to the report, student loan debt can harm the economy, because young people with significant debt burdens often delay life-cycle events such as purchasing a car or home or getting married and having children. The report states that as with the environment before the foreclosure crisis, bankruptcy attorneys are seeing “more and more consumers seeking their help with unmanageable student loan debt, and with no relief available.” Unlike other types of loans, student loan debt is not forgivable in bankruptcy, which bankruptcy lawyers are pushing Congress to change. They do not want these loans treated different from other forms of unsecured credit and argue that exempting these loans causes an even greater harm for borrowers because there are no limits on interest rates and fees, and limited repayment options exist for borrowers facing financial hardship.

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A New Attempt to Deal with Foreclosed, Vacant Properties
Progress Illinois (02/07/12) Blake, Matthew

Recently, Illinois governor Pat Quinn introduced Illinois Building Blocks, a pilot program to rehabilitate vacant, foreclosed properties in Cook County and give assistance to homeowners. Chicago has a similar program to rehab such properties. In Cook County, foreclosures are down, but many foreclosed upon properties remain vacant. The average foreclosure case in Cook County court takes 567 days.
According to housing advocates, state government efforts lack resources to financially assist homeowners and communities and persuade mortgage servicers to participate. “With any of these programs, the resources are limited compared to the scope of the problem,” said Bob Palmer, policy director for Housing Action Illinois. The greatest source of funds for foreclosure prevention comes from the federal government, but the primary federal program has been disappointing. Less than 750,000 mortgages have been permanently modified under the Homeowner Affordable Modification Program, which President Barack Obama claimed would help 3 million to 4 million homeowners when announcing the program in February 2009.
Illinois Housing Development Authority Spokeswoman Rebecca Boykins said that the state’s donation tax credit is one possible way to get banks on board. Banks would get a 50-cent income tax credit for each dollar contributed to an affordable housing project. To fund the Building Blocks program, the Illinois Housing Development Authority will provide $50 million and Cook County will add $5 million. The goal of Building Blocks is to “return vacant and foreclosed upon properties to their proper use” in six Cook County cities. Included in the strategy is helping potential homebuyers purchase foreclosed homes. The state will provide homebuyers up to $10,000 in down payment and closing cost assistance and lower the credit score needed to qualify for a mortgage.

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Obama Nominates JP Morgan Executive to FDIC Board
Reuters (02/03/12) Lynch, Sarah N. and Clarke, Dave

President Barack Obama announced his final nomination – Jeremiah Norton, currently an executive director for JP Morgan Securities, LLC – to fill the five-member Federal Deposit Insurance Corporation’s (FDIC) board of directors. Norton previously served as deputy assistant secretary for Financial Institutions Policy at the U.S. Treasury Department and as a banking and insurance staffer for Rep. Edward Royce (R-CA).
President Obama’s other nominees to the board include Martin Gruenberg to serve as chairman and Thomas Hoenig as vice chairman. Thomas Curry, who was nominated as U.S. Comptroller of the Currency, also currently serves on the FDIC board. The heads of the U.S. Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau (CFPB) get an automatic seat on the FDIC board. Gruenberg will serve as acting chairman while awaiting confirmation.
The full Senate has yet to vote on Obama’s FDIC nominees, due to the political stalemate over the CFPB. Richard Cordray was installed as director of the bureau by a recess appointment by President Obama after Republicans blocked a vote on his confirmation. Norton’s nomination, according to a congressional aide, was suggested by Senate Republican leadership.

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February 9, 2012

Forward To A Colleague

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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.