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AFSA Working with CFPB on Consumer Complaint System Clarity

In response to the March 13 letter AFSA sent to CFPB Director Richard Cordray expressing the association’s concerns about its announcement to expand its Consumer Response System to include complaints about auto and personal loans, CFPB representatives immediately contacted AFSA to establish meetings to address the concerns expressed in the letter, particularly regarding the lack of clarity as to how the CFPB will handle complaints it receives about companies not under its authority. The CFPB has indicated that consumer complains launched against financial institutions not currently supervised by the CFPB will be forwarded to the Federal Trade Commission (FTC) for follow up and resolution. In addition, the CFPB is exploring how best to communicate the complaint to the financial institution in a timely manner.

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Vacant Property Maintenance Topic of AFSA White Paper

On March 9, AFSA released a white paper on state and local legislation that imposes vacant property registration and maintenance requirements on mortgage lenders and servicers.

State and local governments are increasingly introducing legislation requiring mortgage lenders and servicers to maintain and register vacant and abandoned properties. The white paper discusses relevant state and local vacant property legislation, much of which presents an unreasonable burden on – and significant legal challenges for – mortgage lenders and servicers, as it imposes maintenance requirements prior to the transfer of ownership. In 2011, 11 states and the U.S. Congress enacted vacant property legislation. Vacant property legislation has yet to be enacted in 2012, though 151 bills are currently pending.

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New Member Welcome

AFSA welcomes new active member Dent-A-Med, Inc. dba The HELPcard and new Business Partners Alliance Inspection Management, MBSi Capital Corp., and Online Resources.

Based in Springdale, Ark., Dent-A-Med, Inc. dba The HELPcard serves prime and near-prime consumers desiring to purchase goods and services. website

Alliance Inspection Management (AiM) is a new and pre-owned vehicle inspection partnership in North America. AiM’s corporate office is located in Long Beach, Calif. website
Located in Pheonix, Ariz., MBSi Capital Corp. provides lenders with an e-commerce solution for repossession assignment distribution and management. website
Online Resources provides web and phone-based financial services, electronic payments, and marketing services to drive consumer adoption. Online Resources is headquartered in Chantilly, Va. website

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Inside the Beltway
Cheat Sheet: Long-Awaited Final Terms of $25B Mortgage Settlement
American Banker (03/12/12) Davidson, Kate and Berry, Kate

On March 12, the U.S. Department of Justice released the lengthy legal document outlining the $25 billion settlement with the five mortgage servicers – providing crucial new details about the agreement’s terms. In describing the settlement, Laurence Platt, a partner with K&L Gates, stated that, “while the settlement terms are likely to contribute to the future housing recovery, the federal and state governments appear intent to continue to pursue enforcement actions for prior conduct.” Under the agreement, the mortgage servicers will have to comply with new servicing standards relating to loan modifications and foreclosure documentation. Servicers will also have to provide a single point of contact for borrowers. Consumer relief requirements include various incentives and credits that banks can receive based on their treatment of borrowers. Servicers are also required to review their compliance with the Servicemembers Civil Relief Act (SCRA) and to take steps to comply with servicing provisions that specifically protect borrowers that are military servicemembers. The agreement also includes releases from certain federal claims. The official monitor of the settlement is Joseph A. Smith, Jr., the former banking commissioner of North Carolina. Smith will issue quarterly reports on the servicers’ compliance and will be able to seek fines if servicers fail to correct violations.

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National and State News
Auto Lending Revs Up at Growth-Starved Banks
American Banker (03/09/12) Finkle, Victoria

Banks are increasingly turning to auto lending as a way to boost their consumer loan growth, accounting for roughly 41 percent of all car financing in the fourth quarter of 2011. “There are very few growth categories [for loans] – home equity is down, personal lending is restricted, and credit cards lost outstanding balances as consumers paid down [their debt],” stated Ken Alverson, a managing director with consulting firm Novantas. The decrease in growth available in these other categories has made auto loans, which are secured and typically have low delinquencies, very attractive as a source of growth for banks, especially those already in the business.

As with 2011, car analysts are predicting steady or improved sales of new and used vehicles in 2012. This means more consumers seeking bank financing to buy vehicles and, much like with other loans, competition between banks for the least risky borrowers. More than half of car financing in the last quarter of 2011 went to buyers with super-prime credit ratings. The increase in competition between banks and non-bank lenders has also led to drops in auto loan interest rates to an average of 4.59 percent at the end of the third quarter of 2011, estimates Alverson. With the lower interest rates and drops in bank deposit rates, lenders will have to increase auto loan originations in order to remain competitive.

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Prepaid Debit Card Fee-Disclosure Box Makes its Debut
American Banker (03/13/12) Fitzgerald, Kate

A new fee-disclosure box aimed at helping consumers understand the costs of using prepaid cards is being tested by three major issuers. The box, which was designed by the non-profit group the Center for Financial Services Innovation (CFSI), is intended to replace more complicated prepaid card jargon with simpler language. “We want to make it easy for consumers to compare the fees for various prepaid card services when they are looking at the product in a store, with the disclosure box available on the product’s packaging or on a separate, available sheet,” said David Newville, policy manager for CFSI. The proposed box will list 14 different fees to help compare fees across several categories, such as opening an account and checking balances. The group will be sharing its findings with the Consumer Financial Protection Bureau, which has the authority to monitor and supervise prepaid cards, though it has yet to announce any regulations. “When they inevitably take action on prepaid cards, we’d like to see them mandate a fee-disclosure box along these lines,” stated Neville.

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JD Power: Leasing Remains Stable
Auto Remarketing (03/15/12) Overby, Joe

Lease penetration rates have remained steady during February, due to a relatively stable volume of lease returns and consistency in incentive offers available to consumers, according to J.D. Power and Associates. Despite being down three percentage points from exceptionally high rates in February 2011, lease penetration was at 20.3 percent in February 2012, up from January’s 19.8 percent rate. Thomas King of J.D. Power noted that lease returns are at a lower volume than in the past, partly because it has been three years since lease penetration dropped due to the financial crisis. However, he predicts that we will eventually see a higher return volume after lease mix and industry sales recover. Another trend that King said affected the leasing market in February was that the market share for 72-month financing, which can be a viable alternative to leasing, rose to record levels at 28.5 percent.

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Foreclosure Activity for Judicial vs. Non-Judicial States Flip-Flopped
DSNews (03/14/12) Cho, Esther

Foreclosures in the 26 judicial states rose 24 percent from February 2011, according to RealtyTrac’s February 2012 Foreclosure Market Report. In contrast, foreclosure activity declined 23 percent in non-judicial foreclosure states from February 2011, dropping five percent since January. Overall foreclosure filings – default notices, scheduled auctions, and bank repossessions – fell eight percent since February 2011, which is the lowest annual decrease since October of 2010. RealtyTrac predicts that now that the foreclosure settlement has been filed in court we are likely to see states posting annual increases in the coming months. According to Brandon Moore, CEO of RealtyTrac, “many of the biggest annual increases in February were in states with the more bureaucratic judicial foreclosure process, which resulted in a larger backlog of foreclosures built up over the last 18 months in those states.”

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March 15, 2012

Forward To A Colleague

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