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AFSA Asks CFPB to Modify Mortgage Servicing Rules

AFSA staff met with the Consumer Financial Protection Bureau (CFPB) on Oct. 5 to discuss the Bureau’s proposed rules on mortgage servicing. AFSA also submitted a comment letter on the proposed rules on Oct. 9. The proposed rules amend Regulation Z (which implements the Truth in Lending Act) and Regulation X (which implements the Real Estate Settlement Procedures Act). The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the CFPB implement certain mortgage servicing requirements and gave the CFPB the authority to write additional rules.
The CFPB’s rules aim to bring greater transparency to the mortgage servicing market with: (1) clear monthly mortgage statements, (2) a warning before interest rate adjusts, (3) options for avoiding costly “forced-placed” insurance, and (4) early information and options for avoiding foreclosure. The CFPB stated that its rules will impose “common-sense” requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure.
AFSA told CFPB staff that the many new requirements would be costly and time-consuming for servicers to implement. Additionally, AFSA argued that a number of the requirements would hurt, rather that help, the special relationship that branch-based servicers have with their borrowers. In light of these considerations, AFSA asked the CFPB to limit this rulemaking to the requirements imposed by the Dodd-Frank Act and allow servicers two years to implement the final rule.

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NMLS Expansion Examined in AFSA White Paper

On Oct. 8, AFSA published a white paper on the expansion of the National Mortgage Licensing System (NMLS). The NMLS was originally implemented to regulate and license mortgage loan originators. However, in April 2012 the system was modified to allow states to use it for licensing of entities and individuals engaged in consumer financial services other than mortgage finance. The expansion makes it likely that the NMLS will emerge as the system through which most, if not all, state licenses for consumer financial services providers will be processed in the future. The white paper lists the states that plan to expand the NMLS and summarizes current legislation related to the topic.

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AFSA Attends Consumer Financial Services Seminar

AFSA staff attended the American Bar Association’s (ABA) third annual seminar on consumer financial services Oct. 8-9 in Washington, D.C. The two-day seminar, organized by ABA’s Business Law Committee, provided attorneys with an overview of the sweeping changes in consumer financial laws along with compliance and enforcement regulations. Speakers included staff from the Consumer Financial Protection Bureau and the Federal Trade Commission. Session topics covered the new “abusive conduct” standard, review of the Dodd-Frank Wall Street Reform and Consumer Protection Act’s substantive and procedural rules on preemption, new developments and possible future regulation of prepaid cards, and what priorities to expect from financial regulators and Congress.

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New Member Welcome

Based in Saginaw, Mich., Gateway Financial Solutions is the vehicle finance division for Garber Automotive Group. Gateway Financial provides financing options for customers of the eight dealerships and 17 franchises under the Garber brand. In operation since 1996, the company currently has more than 100 employees. website

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Inside the Beltway
CFPB Complaint System Comes Under Federal Scrutiny
InsideARM (10/10/12) Lunsford, Patrick

The Federal Reserve Board’s Office of the Inspector General (OIG) issued a report evaluating the Consumer Financial Protection Bureau’s (CFPB) Consumer Response Unit – the Bureau’s collection, tracking and reporting system for consumer complaints – and making recommendations on how to improve the system. Consumer Response began taking credit card complaints in July 2011, and later expanded to include complaints about mortgages, bank accounts, private student loans and other consumer loans. It is expected to begin taking complaints for other nonbank products by the end of 2012. The OIG’s evaluation, which ran from Oct. 2011 to May 2012, found that the CFPB had a “reasonable process to receive, respond to, and track consumer complaints.” The report also noted that Consumer Response unit could improve and strengthen its processes and controls to address inaccurate manual entry of consumer complaints, inconsistent complaint management system data, and a lack of a finalized agency-wide privacy policy, a comprehensive quality assurance (QA) program and a centralized tracking system for QA reviews. The Bureau agreed with the recommendations in the OIG’s report and will provide updates on advancements made to meet the objectives listed in the report.

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CFPB Consumer Complaint Database Out of Beta Stage
American Banker (10/10/12) Davidson, Kate

On Oct. 10, the Consumer Financial Protection Bureau (CFPB) announced that its consumer complaint database is no longer in the beta stage – the phase prior to the final release of a product. The Bureau had operated the beta version since launching the database on June 19. "While we will continue to expand functionality, data fields, and the 'look and feel' of the database, after performing for three months as designed and without incident, the database is no longer a beta product," stated Scott Pluta, the Bureau’s chief of staff and acting assistant director for consumer response. Pluta also said that the Bureau could still make changes to the system, such as releasing consumer narratives and making the database more user-friendly. They are also considering expanding the database to include additional products and services – an idea they accepted public comment on this summer. The CFPB will make a final decision in early 2013.

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National and State News
41 States Line Up Against National Charter for Payday Lenders
ConsumerAffairs (10/08/12) Huffman, Mark

A bipartisan group of attorneys general (AG) from 41 states wrote a letter to Congressional leaders on Oct. 5 in opposition of H.R. 6139 – the Consumer Credit Access, Innovation and Modernization Act. The bill would allow nonbank financial services providers, including payday lenders, installment lenders, car title lenders, prepaid card issuers and check cashers, to obtain a federal charter from the Office of the Comptroller of the Currency. According to the AGs, the bill would preempt state licensing laws, many of which strike a balance that “preserves access to alternative forms of credit while protecting consumers from repeated debt cycles and other pitfalls associated with such products,” and in place of these safeguards, would establish only minimal consumer protections. The letter added that while the bill prohibits lenders from extending credit unless they have a reasonable basis to believe a consumer can repay the loan, it does not set any standards for determining a consumer’s ability to repay. “It’s critical for states to both preserve consumers’ access to alternative forms of credit and retain the ability to take quick action against short-term lenders that prey on those already in financial distress,” said Indiana Attorney General Greg Zoeller.

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Wal-Mart Going Head to Head with Banks with Prepaid American Express Card
The Washington Post (10/08/12) Douglas, Danielle

Wal-Mart unveiled a new prepaid American Express card designed to compete with banking products. Users of the Bluebird card will be able to withdraw cash from a network of 22,000 ATMs and make purchases where American Express cards are accepted. Added features will let customers use the card to get roadside assistance, bank from their smartphones and, in the future, write checks from a linked account. In addition, the card will provide fraud protections similar to those of traditional credit cards. Wal-Mart and American Express will not conduct credit checks on applicants, and users will not be subject to a minimum balance requirement or overdraft charges. “What’s interesting about this product is that anybody can manage their money on a day-to-day basis without ever really having to step foot in a bank branch,” said Jennifer Teshcer, president and chief executive at the Center for Financial Services Innovation.
Prepaid cards are growing in popularity. Consulting firm Mercator Advisory Group estimates the prepaid market could reach $150 billion this year. Banks also offer prepaid products, but many cannot match Wal-Mart’s reach and ability to sell credit products to consumers. Consumer advocates warn that prepaid cards issuers do not always explain their products fees or rules. The Consumer Financial Protection Bureau is evaluating whether to write new rules for prepaid cards.

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As Borrowing Rises, Analysts Warn about Long-Term Threat to Auto Sales Growth
SubPrime Auto Finance News (10/08/12)

Total consumer borrowing, including auto loans, rose eight percent in August and jumped $18.1 billion from July to August, according to the Federal Reserve. Improving consumer confidence, pent-up demand and the widespread availability of financing has helped U.S. auto sales exceed expectations in early 2012, according to Fitch Ratings. But Fitch analysts warn the tax hikes and spending cuts that come into effect at the end of the year could unravel several of the factors that helped boost the industry over the past few years.
According to Comerica Bank Chief Economist Robert Dye, improved credit availability and pent-up demand can help improve confidence of deleveraged households. However, he cautioned that the “fundamental improvement to household quality of life is driven by real disposable income growth, which comes largely from job and wage gains.” These factors can be threatened by accelerating inflation, large tax increases and weak labor markets, he added.
Fitch analysts predict that all or some of the tax increases and spending cuts Congress has automatically set for the end of 2013 will be resolved or at least temporarily deferred, but if not, there could be detrimental effects for the auto industry, ending continued growth. "Tax increases would cause an immediate hit to a majority of American incomes, forcing consumers to practice spending restraint that would only be magnified when considering big-ticket items like cars and trucks," Fitch warned. "In addition, a tapering off in consumer confidence and an increase in unemployment would likely lead to further demand concerns for auto manufacturers, who would likely increase incentives in an attempt to prop up demand.” They note that the pricing environment could change quickly if government spending cuts and tax increases take effect, and combined with Europe’s weak economy and a slow in demand in most developing markets, “it could severely hit U.S. auto manufacturers and parts suppliers just as they appear to be hitting their stride."

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St. Louis County Council Approves Changes to Foreclosure Mediation Law
St. Louis Post-Dispatch Gillerman, Margaret

In response to concerns from lenders, on Oct. 9, the St. Louis County Council approved changes to an ordinance that required banks to participate in formal mediation before foreclosing on county residents’ properties. The wording of the ordinance was changed to note that it does not provide grounds for individuals to sue banks over foreclosures. Banks will be given extra time to hold required foreclosure sales, and a second round of mediation if a homeowner defaults a second time in a year will no longer be required. In addition, lenders and homeowners who request mediation would be required only to meet, not reach an agreement. The ordinance is currently the subject of a class-action suit filed by a commercial bank, as well as a temporary restraining order issued by a St. Louis County Judge preventing the implementation of the law. A hearing on the restraining order is scheduled for Oct. 15.

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October 11, 2012

Forward To A Colleague

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

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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.