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CFPB Outlines Exam Procedures for Credit Bureaus
American Banker (09/05/12) Adler, Joe

On Sept. 5, the Consumer Financial Protection Bureau (CFPB) released a 55-page guide outlining its examination procedures for “Larger Participants of the Consumer Reporting Market.” The Bureau will begin its examination program on Sept. 30. “Consumer reporting, and especially credit reporting, plays a significant role in a consumer's life. It can dictate whether or not a consumer is able to get a credit card, a mortgage, or a student loan,” said CFPB Director Richard Cordray. “Our supervision program will benefit hundreds of millions of consumers by making sure these companies are playing fairly and by the rules, and our field guide will ensure that all companies are held to the same standards.”
 
Consumer reporting companies are the first industry segment subject to the Bureau’s authority to designate certain “larger participants” in nonbank sectors for supervision. The Bureau will be supervising credit-reporting agencies with more than $7 million in annual receipts – approximately 94 percent of the industry.
 
Examiners will determine if credit reporting companies have taken steps needed to verify the information in reports is accurate and if they have conducted reasonable investigations into consumer disputes about their files. They will also assess whether companies are complying with requirements to disclose credit scores and information about a file to a consumer and if they are taking necessary steps to help prevent fraud and identity theft.

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AFSA News
AFSA Publishes White Paper on State Foreclosure Legislation

On Sept. 4, AFSA’s State Government Affairs department published a white paper on foreclosure legislation. While foreclosure numbers are slowly declining, lawmakers across the country are continuing efforts to reduce and regulate the foreclosure process. In the 2011-2012 session, 1,537 bills with foreclosure related provisions have been considered in all 50 states, U.S. Congress and the District of Columbia. Of these, 295 have been enacted in 48 states (AK and NJ excluded), U.S. Congress and the District of Columbia, with 449 still pending in 10 states. The legislation covered by the white paper includes foreclosure consultant and rescue initiatives, foreclosure prevention, tenant protection and state and local regulation of vacant and abandoned properties.

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AFSA and CMC Submit Letter on Consumer Complaints

AFSA and the Consumer Mortgage Coalition (CMC) sent a joint letter to the Consumer Financial Protection Bureau (CFPB) asking that the Bureau and the Office of Management and Budget reconsider the appropriateness of releasing consumer complaints, which contain confidential information.
 
The CFPB is publishing on its website information obtained from consumer complaints about financial services and products. The CFPB invites consumer complaints, which are routed to the indicated financial services provider for response, and then forwards the response to the consumer. The CFPB publishes the identity of the financial services provider, the consumer’s ZIP code, the date and category of the complaint, and the category of the outcome. The CFPB does not otherwise verify the factual basis for the complaints or the reasons they are filed. Currently, the CFPB only is publishing information related to complaints about credit cards, but plans to release complaint information about other products and services in the future.
 
The joint letter stated that the Gramm Leach Bliley Act prohibits financial service providers from making complaint information public. “If a financial services provider receives a complaint from a customer about a product or service, the provider cannot make that complaint public, and cannot even make public the fact that the customer lodged a complaint,” the letter stated. “Congress was clear that when a financial services provider cannot divulge protected information, the CFPB cannot avoid that protection by obtaining the information and releasing it directly itself.” The letter also noted that the CFPB does not inform consumers accurately about what the CFPB does with their personally identifiable information.

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MoneySKILL Upgraded for Start of 2012-13 School Year

The high school version of the MoneySKILL® personal finance course was upgraded Sept. 5 to reflect new statistics and changes in federal law. Content has also been added on student loans, identity theft, wills and entrepreneurship. Teachers who start a new class will be seamlessly transferred to the new version, while teachers who have already enrolled students in the course will complete the current version. More than 4,000 teachers were notified of the upgrade.
 
In addition to the content update, MoneySKILL also received a technology upgrade. The course’s processing power more than quadrupled with the addition of new servers and other equipment. Bandwidth was increased to handle up to 600 percent of the current traffic levels generated by student activity. The new version of MoneySKILL is compatible with all handheld devices and browsers.
 
MoneySKILL is a free course that teaches money management fundamentals in the content areas of income, expenses, credit, saving and investing, and insurance. The course’s content is delivered online through a series of 36 modules with written text reinforced by audio narration. Teachers have access to an electronic grade book that records each student’s module test scores and course grade.

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Inside the Beltway
CFPB Mortgage Reform Applies Wrong Fix to the Right Problem, Bankers Say
American Banker (08/31/12) Horwitz, Jeff

While many lenders applaud the Consumer Financial Protection Bureau’s (CFPB) proposal to simplify disclosures of mortgage costs because it will likely help end years of lawsuits over whether services should be categorized as closing or financing costs, they argue that the proposal’s reliance on an overhaul of the annual percentage rate (APR) is a mistake. Many would like the Bureau to work through concerns about the APR before tackling all-in financing, according to Richard Andreano, a partner at Ballard Spahr.
 
The Bureau’s proposal would aggregate into the APR title insurance and practically every other closing cost to reflect the overall cost of borrowing. Consumer advocacy groups support the proposal, saying it could induce lenders to press third-party vendors to lower their fees by heightening competition to lower closing costs, although industry officials say it is unlikely to make a difference.
 
Industry representatives want the APR in the proposal to be a more accurate reflection of the cost of credit. They note that it would lead to an increase in APRs, causing more loans to hit state and federal triggers that subject high-cost loans to additional rules. While the Bureau’s proposal tries to address this issue by saying it will contemplate adjusting those triggers to mitigate the effects, industry would like the issue sorted out ahead of time. Many lenders believe that APR is too flawed to be fixed. Even the CFPB's proposed rule notes consumers generally do not understand the difference between interest rate and APR. The proposal states, “The bureau's consumer testing suggests that moving the disclosure of the APR away from the disclosure of the loan's contract interest rate and placing the APR with other long-term metrics may reduce consumer confusion.”

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National and State News
Payday Lending, Minimum Wage Initiatives Won’t be on Missouri Ballot
The Kansas City Star (09/04/12) Hancock, Jason

Supporters of the initiatives to raise Missouri’s minimum wage and impose an interest rate cap on short-term loans have ended their legal fight to get the measures on the November 2012 ballot. Secretary of State Robin Carnahan announced last month that neither measure had enough signatures to be placed on the ballot. Originally, Missourians for Responsible Lending, a group behind the payday ballot petition, vowed to fight Carnahan’s decision, stating that a large number of signatures were improperly invalidated. However, on Sept. 3, the group announced that while they still believe they had collected enough signatures for the initiative to be put on the ballot, they would be dropping their lawsuit against Carnahan because the legal hurdles erected by “the payday lending industry, their allies and their lawyers” were too high to clear before the Sept. 21 deadline for finalizing the ballot.

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Low-Interest Rates Propel Industry Sales
Automotive News (09/05/12)

Driven by low interest rates and favorable financing terms, U.S. light-vehicle sales jumped 20 percent in August – the strongest pace since August 2009. August also marked the highest percentage of interest-free auto loans of any month this year, with more than one of every 10 new cars and light trucks sold in the U.S. financed with a zero-percent loan, according to Edmunds.com. During the first eight months of 2012, 8.5 percent of sales were purchased with zero-percent financing. “August new car sales show the influence of the 'three i's:' low interest rates, ample new vehicle inventory and boosted incentives. Fed Chairman Bernanke suggests low interest rates will remain in place for new car sales for 2013 as well. All of these factors support higher rates of growth of light vehicle sales growth this year and next,” said Paul Taylor, chief economist at the National Automobile Dealers Association.

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Prepaid Plastic is Creeping into Credit
Wall Street Journal (09/05/12) Kapner, Suzanne

Prepaid cards, which were designed to help the less affluent have better control of their finances by limiting their spending to a preloaded amount, are among the fastest-growing types of cards. U.S. consumers loaded $83.3 billion onto prepaid cards in 2011 – 34 percent higher than 2010, according to Mercator Advisory Group. While many nonbank prepaid card providers and large banks offering prepaid cards do not include credit-like features such as overdraft, stating prepaid cards were designed to be a safety net, others have begun adding the features to the cards. Consumer advocates have been lobbying regulators to ban the practice.
 
The Center for Responsible Lending, National Consumer Law Center and Consumer Federation of America joined efforts to lobby the Consumer Financial Protection Bureau to prohibit prepaid cards from offering credit. Consumer advocates say that while many consumers find the ability to spend more than they load on the cards helpful, it causes them to start out the next month behind and all they have done is add monthly fees. The Bureau is currently evaluating the advocates’ proposal as part of their broader effort to more closely regulate prepaid cards. Prepaid card companies emphasize the important service they are providing to some of the 60 million Americans that are not fully participating in the traditional banking system.

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September 6, 2012

Forward To A Colleague





ParaData Financial
Overby-Seawell
XEROX
Counselor Library
Megasys
Allied Solutions
Black Book
Carleton, Inc.
Life of the South
McGladrey
GoldPoint Systems
Wells Fargo Preferred Capital
TCI
About
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.

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