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AFSA Signs Joint Letter to Senate on Student Loans
In advance of a March 20 Senate Judiciary subcommittee hearing on “The Looming Student Debt Crisis: Providing Fairness for Struggling Students,” AFSA and other financial services trade groups sent a joint letter opposing Sen. Dick Durbin’s (D-IL) “Fairness for Struggling Students Act of 2011” (S. 1102).
Pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, all “qualified education loans” are currently exempted from discharge under the federal bankruptcy code. However, student debt may be discharged if “undue hardship” to the borrower or his dependents can be demonstrated. S. 1102 would amend the bankruptcy code to limit the exemption to direct federal loans or federally-backed loans, thereby making it easier for borrowers to discharge private educational loans like other unsecured debt.
The joint letter asserted that enactment of S. 1102 would discourage private lenders from making student loans or force them to find ways to offset the greater uncertainty and risk, ultimately increasing the cost of credit to students whose educational expenses are not fully met by federal loans.
At the hearing, witnesses discussed the rising cost of college tuition as a major problem that students face. “Unfortunately, what this committee is contemplating – changing bankruptcy law concerning private student loans – will do almost nothing to address the root cause of rampant tuition inflation,” testified Neal McCluskey, associate director of the Center for Educational Freedom at the Cato Institute.
AFSAEF Submits Comment Letter to CFPB on Financial Literacy
On March 19, the AFSA Education Foundation (AFSAEF) submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) in response to their notice of proposed information collection to identify effective financial education strategies. The AFSAEF reiterated its position that personal finance needs to be a required course with credit hours attached prior to high school graduation in all 50 states and U.S. territories. The letter highlighted MoneySKILL as a versatile free program that can and has been utilized by employers, community groups, senior centers and parents. AFSAEF pointed out that it surveys MoneySKILL instructors each year to measure the effectiveness of the course from both the teachers’ and students’ point of view.
Financial Services Related Issues Discussed at CFA Meeting
AFSA staff attended the Consumer Federation of America’s (CFA) Consumer Assembly held in D.C. on March 15-16. Although this meeting does not focus on financial services issues, topics of interest to the industry were raised, including mandatory arbitration, privacy issues, deceptive and unfair auto sales, student loans, and mobile payments practices. Guest speakers included Sen. Richard Blumenthal (D-CT), who addressed congressional legislative priorities, and Tony West, acting associate attorney general, Department of Justice, who discussed the department’s consumer protection efforts.
MoneySKILL Highlighted in Annual Quiz Contest
Nearly 70 students from 14 Buffalo-area high schools participated in the fifth annual MoneySKILL Mania. Based on AFSAEF’s MoneySKILL® curriculum, MoneySKILL Mania tested the students’ knowledge of personal finance concepts on credit, investing, insurance and current events.
Keenan Hoover from Orchard Park High School won the grand prize, an Apple iPad 2, and members from the winning team at Harkness Career & Technical Center each won $250 toward their college educations.
In April, MoneySKILL Mania will be expanding to South Carolina, where approximately 50 students will participate in the contest.
CFPB Issues First Annual FDCPA Report to CongressInsideARM (03/21/12) Lunsford, Patrick
On March 20, the Consumer Financial Protection Bureau (CFPB) delivered its first annual report to Congress summarizing its activities to administer the Fair Debt Collection Practices Act (FDCPA) in 2011. The Federal Trade Commission (FTC) had previously been responsible for the reports. Since the CFPB only began its program in July 2011, the FTC submitted a letter to augment the report to the CFPB that detailed its work under the law over the past year.
The CFPB’s report included background information on the FDCPA, consumer complaints, and FTC enforcement actions. When discussing its enforcement and advocacy efforts, the CFPB noted the three amicus briefs it filed in cases arising under the law. The CFPB’s supervision of large debt collectors also made up a large portion of the report, particularly the Bureau’s proposed rule, which would subject debt collectors and credit reporting agencies qualifying as larger participants to the supervision process of banks and other nonbanks.
CFPB’s Cordray Says Middle Class is Getting HammeredBusiness First (03/16/12) Green, Ed
The Consumer Financial Protection Bureau (CFPB), which already has approximately 800 employees, has a lot of work ahead of it, said the Bureau’s Director Richard Cordray at a conference for business writers. The Bureau is using its strong authority to make rules and conduct reviews of a wide variety of financial institutions such as mortgage brokers and credit card issuers. Cordray said this oversight is important because of the growing amount of consumer debt and the need for those borrowers to be protected. “The middle class is getting hammered,” Cordray said, noting that household debt has risen to about $12.5 trillion – more than half of which is in the form of credit card debt. Cordray pointed to the Bureau’s “Know Before You Owe” initiative to simplify loan contracts and disclosures, and its efforts to take complaints from consumers about mortgage lenders and servicers and private student loans, as key steps of the agency. “As we do our work, I believe we will justify the agency,” Cordray said.
March Auto Sales Seen Up 6 PercentReuters (03/22/12) Klayman, Ben
Due to the strong demand in the retail market, March’s new vehicle sales are projected to increase six percent from last year, according to J.D. Power and Associates and LMC Automotive. “Each month of strong sales brings with it increased optimism that the pace of growth represents a true recovery for the sector,” said John Humphrey, senior vice president of global automotive operations at J.D. Power, in a statement. J.D. Power predicts sales will continue on a solid pace for the rest of the year, barring future shocks such as further upward pressure on the price of oil. The first-quarter selling rate is expected to be at 14.4 million vehicles, outperforming the annual forecast of 14.1 million for the full year – marking the first time the first quarter selling rate has outperformed the annual forecast for sales since 2008, said Jeff Schuster, senior vice president of forecasting at LMC. “The vigorous start to 2012 suggests that there is further upside potential if the current pace continues through the summer months,” he added.
Housing, Banking Advocates Hail Measure to Speed Foreclosures of Abandoned HomesThe Star-Ledger (03/18/12) Beeson, Ed
Legislation that banking and housing experts say would provide a significant step in unclogging the extensive foreclosure backlog holding back New Jersey’s housing recovery, by taking a segment of properties out of the state’s judicial foreclosure process, was introduced by Senators Raymond Lesniak (D-Union) and Barbara Buono (D-Middlesex) in February. The state’s foreclosure rate is the second longest in the country – at the end of 2011, it took courts approximately 964 days to complete a home foreclosure in the state – according to RealtyTrac.
New Jersey Senate Bill 1566, and its parallel measure Assembly Bill 2168, would provide an expedited process for foreclosing abandoned residential properties. Mortgage lenders would be able to petition the Superior Court to expedite foreclosure on properties they believe are abandoned and vacant. Lenders would have to provide evidence of the claim, such as a failure to pay taxes or claim certified mail, the presence of overgrown grass or the absence of personal items. If the court agrees, the sheriff, county agency or trustee would be directed to sell the property within 45 days. Currently, abandoned homes are treated the same as occupied properties in the foreclosure process.
The legislation also would enable municipalities to take steps to clear their stock of boarded-up vacant properties and unoccupied foreclosed homes, which Lesniak said is “one of the biggest drags on our economy and one of the biggest devaluers [of our communities].” It is unclear whether Governor Christie would support the measure, particularly because it would require funding for a foreclosure relief corporation.
Prospect Capital to Buy Missouri Finance CompanyAmerican Banker (03/20/12) Stewart, Jackie
On March 20, New York Investment firm Prospect Capital Corp. announced that it is acquiring an 80.1 percent stake in First Tower Corp, a finance company with 150 offices and more than 550 employees in Mississippi, Louisiana and Missouri. The remaining 19.9 percent interest in the company is being purchased by First Tower management, who are investing using personal capital. Under the terms of the deal, First Tower shareholders will gain 11 percent interest in Prospect. However, while Prospect has said they will pay for the interest in cash and 14.5 million shares of common stock, Prospect still has the option to pay cash only at a price per share based on the average trading prices before the deal closes, which is expected to happen within 60 to 120 days.
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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.