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CFPB Issues Rules for Governing Debt Collectors
The Washington Post (10/23/12) Douglas, Danielle

The debt collection industry will come under federal oversight on Jan. 2, when the Consumer Financial Protection Bureau (CFPB) starts its supervision of large debt collection firms that account for 63 percent of the market. As announced in new rules on Oct. 23, the Bureau will regulate 175 debt collection firms that each bring in more than $10 million in annual receipts, assessing whether they provide required disclosures and correct information, as well as investigating whether debt collectors have harassed or deceived consumers in the pursuit of debt. “Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said CFPB Director Richard Cordray. “We want all companies to realize that the better business choice is to follow the law — not break it.” The Bureau’s authority will cover companies that buy defaulted debt and collect the proceeds for themselves; firms that recover defaulted debt owned by another company in return for a fee; and attorneys who collect through litigation.
The Federal Trade Commission (FTC) also enforces the Fair Debt Collection Practices Act and can investigate complaints and levy fines, but does not have supervisory authority. “CFPB examinations of large collectors are a valuable new tool for the government to use in addressing unlawful conduct by debt collectors,” said Thomas Pahl, an assistant director at the FTC. “When examinations are combined with a continuation of the FTC’s history of enforcement...the result will be a more comprehensive and effective protection of consumers.”
The debt collection industry has emphasized the harm additional regulation has on collection companies, which includes many small businesses that will have difficulties with the cost of additional regulation, according to Mark Schiffman, a spokesman for the Association of Credit and Collection Professionals. The association wants the Bureau to raise its threshold for supervision to $250 million in revenue, and has argued against the Bureau’s use of receipts rather than revenue to determine supervision.

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AFSA Education Foundation Endowment Campaign Passes $5 Million Mark

The AFSA Education Foundation (AFSAEF) recognized 33 individuals and corporations for their pledges to the “Foundation for the Future” endowment campaign during an awards ceremony at the 96th AFSA Annual Meeting at the Radisson Blu Aqua Hotel in Chicago. Contributors, who are also known as Founding Members of the Legacy Society, were honored with crystal awards for their support of financial literacy. Under the leadership of AFSAEF Chairman Harry Goff, retired chairman & CEO, CitiFinancial, the endowment has raised more than $5.1 million since it began three years ago. The campaign’s goal is to raise $7.5 million.
Please contact Susie Irvine at susie@afsamail.org or 202-466-8611 for information on how to contribute to the endowment.

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Inside the Beltway
CFPB Expands Consumer Complaint System to Include Credit Bureaus
American Banker (10/22/12) Davidson, Kate

The Consumer Financial Protection Bureau (CFPB) is now accepting complaints on consumer reporting agencies, the Bureau announced on Oct. 22. The Bureau already receives complaints on mortgages, credit cards, private student loans, vehicle loans, consumer loans and bank accounts and services. "Credit reporting companies exert great influence over the lives of consumers," said CFPB Director Richard Cordray. "They help determine eligibility for loans, housing, and sometimes jobs. Consumers need an avenue of recourse when they feel they have been wronged." The Bureau will provide consumers with individual-level complaint assistance if they have issues with incorrect information on a credit report, a consumer reporting agency’s investigation, improper use of a credit report, being unable to get a copy of a credit score or file, and problems with credit monitoring or identity protection services. The CFPB urged consumers to file a dispute with the reporting agency and wait for a response before going through the Bureau’s complaint process, stating that there are important rights under consumer financial laws that are “best preserved” by first going through the reporting agency’s complaint process.

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National and State News
Bank of America Fights Back: Billion Dollar Lawsuit Claims 'Simply False'
Forbes (10/24/12) Touryalai, Halah

In response to the U.S. government’s $1 billion lawsuit against the company, Bank of America (BofA) called claims that it failed to negotiate with Fannie Mae “simply false.” On Oct. 24, U.S. Attorney Preet Bharara filed a lawsuit against the nation’s second largest bank, alleging that its Countrywide unit pushed through defective home loans that it sold to Fannie Mae and Freddie Mac. BofA countered that it has been acting in good faith to work with Fannie and Freddie to resolve the claims.
The bank responded with a statement that “Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters. The claim that we have failed to repurchase loans from Fannie Mae is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that were actually caused by the economic downturn.”
Since buying Countrywide in 2008, the company has paid approximately $40 billion in litigation and repurchase demands.

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Judge Says Swipe-Fee Settlement Appears to Meet Preliminary Approval Requirements
The Wall Street Journal (10/24/12) Johnson, Andrew R.

A $7.25 billion settlement between merchants and Visa, MasterCard and several large banks over interchange fees “appears to satisfy the threshold requirements for preliminary approval,” said U.S. District Court Judge John Gleeson. Judge Gleeson did not grant preliminary approval, however, noting that the threshold for preliminary approval is “meaningfully lower” than that for final approval. Gleeson also denied requests by attorneys representing some merchants opposing the deal to allow the formation of a committee to represent objectors, and to specify whether he will set procedures for absent class members who oppose the deal to make their concerns known. Parties opposing preliminary approval will have until Oct. 21 to make their concerns known in writing. In a move out of the ordinary, Judge Gleeson also said he would allow for oral arguments on the motion for preliminary approval on Nov. 9, stating, "it seems clear that there is an expectation among some interested parties that the preliminary approval process should be more involved in this case than in the usual class action."
The named plaintiffs who oppose the deal say it will not stop swipe fees from increasing in the future, that the releases from future litigation granted to the credit card issuers under the settlement are too broad, and the ability to surcharge comes with too many strings attached to be a plausible option for merchants. Supporters of the deal, however, say it represents a best-case outcome for merchants and grants them new abilities to drive down their costs of card acceptance.

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CNW: October Subprime Loan Approvals Rise Nearly 50 Percent Year-over-Year
SubPrime Auto Finance News (10/24/12)

According to CNW Research, subprime loan approvals continue to climb year-over-year. In October, new and used vehicle loan approvals for customers with less-than-stellar credit are 47.8 percent higher than a year ago. In September, the year-over-year increase was 62.5 percent.

Compared to January 2010, when 27 percent of borrowers getting an auto loan had a FICO score below 670, now nearly 42 percent of borrowers are in that range. While subprime approvals have risen, CNW president Art Spinella said the home situation for these potential buyers is uncertain. "The most important of the major categories — food prices, gas prices and the ability to meet day-to-day needs — are significantly higher than a year ago," Spinella said. "In both cases, those surveyed said these were the key items that are most likely to drive other spending decisions." 

Due to new regulations recently passed in California, CNW revised its long-term used-vehicle sales projections to 41 million for 2013 and 41.25 million for 2014. "These projections are lower than previously reported because of the recently enacted buy-here, pay-here laws in California. We fully expect many of those regulations will spread to other states and dampen sales somewhat," Spinella said. CNW said used-vehicle prices continue to decline on both a month-over-month and year-over-year basis.

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Banks Pushing into Small Loans Compete with Payday Shops
Bloomberg Businessweek (10/25/12) Dougherty, Carter

With reduced revenue from debit card and overdraft fees, some banks are offering small short-term loans, drawing comparisons to payday loans. Like payday loans, the banks’ high-cost loans are designed for consumers who cannot obtain other forms of bank credit. Scrutiny of the loans has been growing. In May, the Federal Deposit Insurance Corp. and Consumer Financial Protection Bureau launched an investigation into payday-like products offered by banks. In August, two customers sued Fifth Third Bancorp, claiming the company deceived customers about the cost of its short-term loans. Then on Sept. 21, North Carolina Attorney General Roy Cooper asked Regions Financial Corp. for data proving its loans do not violate the state’s interest-rate cap.
At least five banks are offering this type of loan, but avoid using the term “payday,” emphasizing they offer lower interest rates than payday loans and make sure customers cannot renew the loans indefinitely. Jeffrey Lee, Region’s executive vice president told N.C. officials that they have received “overwhelmingly positive feedback” to the short-term loans from customers. The loans “create a credit record that will enable them to graduate to more mainstream credit products, whether with us or with another reputable institution,” Lee also wrote.
Wells Fargo limits its Direct Deposit Advance loan to $500 and customers cannot take out more than six consecutive loans. The bank does not offer the product in 14 states, most of which ban payday lending.

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Americans Buying Fewer New Cars over a Lifetime, Research Suggests
NBCNews.com (10/25/12) LeBeau, Phil

Americans can now expect to buy fewer new cars during their lifetime, buying almost four fewer new cars by the time they reach 76 year old, according to an analysis by automotive research firm Polk. “The days when you bought a vehicle for 4 or 5 years are likely over,” said Polk’s Director of Forecasting Anthony Pratt. Vehicles now last longer and their prices have increased, making people less inclined to take a monthly payment. Since the recession, consumers have stretched out the length of time to pay off a loan, now expecting to have their vehicle six to eight years after they purchase it – a contrast to past years when automakers could count on Americans buying a new vehicle an average of every three or four years. Consumers holding onto their vehicles longer also reduces opportunities for automakers to persuade borrowers to switch from one brand to another, a crucial part of a company gaining market share.

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Ford Credit Names Successor to Retiring Chairman & CEO
Auto Remarketing (10/22/12)

Mike Bannister, chairman and chief executive officer of Ford Motor Credit Co., will be retiring effective Jan. 1 after 39 years with the company. Bernard Silverstone, who was just named as Ford Motor Credit’s chief operating officer in January, will succeed Bannister, the company announced.

Silverstone has been with Ford Credit for 33 years, holding positions that include leading their sales and marketing operations globally and the company’s international operations as well as serving as chairman of Ford Credit Europe. "Mike (Bannister) is one of the most respected leaders in our business. I am honored to continue guiding Ford Credit along the path set by Mike and our leadership team. I look forward to an even closer working relationship with Ford and supporting the company's plan toward profitable growth for all with unparalleled support for our dealers and customers," said Silverstone.

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October 25, 2012

Forward To A Colleague

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