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CFPB's 'Creepy' Data-Gathering Worries Lawmakers
American Banker (04/23/13) Witkowski, Rachel

During a Senate Banking Committee hearing on April 23, Republicans accused the Consumer Financial Protection Bureau (CFPB) of amassing a dangerously large and sprawling database of consumer information, which would be  a gold mine for hackers and identity thieves.

CFPB Director Richard Cordray replied that the database was necessary. “You want us to do careful, cost-benefit analysis. We can't do that without good data," Cordray said. "And frankly, for the mortgage rules, we found that we need to develop a national mortgage database so that data is even better in the future."

Still, Republicans like Mike Johanns (R-NE) charged that the database was not only a huge liability issue for the CFPB and government, but “just downright creepy” that a government agency was amassing so much information about consumers’ loan repayment activities. Sen. Mike Crapo (R-ID) noted that he was not given information that he asked for from the agency. "Last month, I specifically asked the agency about this data collection, but the responses I received downplayed the nature and extent of it. Now, we learn from the press that it is 10 million accounts and perhaps even more." Director Cordray countered by arguing that big banks and lenders had all of the same information and the idea that regulators would not counter to ensure they remained on top of their enforcement responsibilities was silly. "We have no interest in… watching consumers," Cordray said.

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New AFSA Template to Assist Members Handle Consumer Complaints

AFSA has produced a template to assist members with consumer complaint handling. The template provides an overview of the Consumer Financial Protection Bureau‘s (CFPB) work on consumer complaints as well as efforts being undertaken by the industry under the same area. I It also lists recommendations for AFSA member companies.

The template will be regularly updated as AFSA continues to monitor the bureau’s work on consumer complaint handling.

Please contact Alejandra Siles, AFSA Manager of Operations Compliance, at 202-466-8605 or asiles@afsamail.org with any questions.

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AFSA Updates 50-State Survey on Regulation of GAP Products

On April 22, AFSA updated its 50-state survey on the regulation of Guaranteed Auto/Assets Protection (GAP) products. The survey displays state views on whether GAP products are considered insurance only, or if GAP waivers are not regulated under the state’s insurance code, allowing vehicle finance companies to offer them in connection with a retail installment contract. For the purpose of the survey, a GAP waiver is defined as the agreement between a retail installment seller and a borrower. The survey includes updates in Alaska, Arizona, Arkansas, Iowa, Kansas, Maine, Montana and Ohio. It also provides an overview of pending legislation relating to GAP in five states – Alaska, Montana, North Carolina, Oregon and Texas.

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Inside the Beltway
Regulators to Rein in Bank Payday Lending
Washington Post (04/24/13) Douglas, Danielle

Regulators at the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are set to unveil new regulations on April 25 that would restrict the ever expanding number of banking institutions that engage in payday lending activities. Fifteen states already prohibit the practice and many others restrict it; the new federal regulations will not ban it outright, but will place serious restrictions on the way in which loans are made and serviced.

Regulators are expected in institute a cooling-off period, which would prohibit borrowers from taking out more than one loan in each monthly payment cycle. Additionally, borrowers would be required to repay an active loan before taking out another and lenders would be required to consider a consumer’s ability to repay when underwriting a loan.

The Consumer Financial Protection Bureau (CFPB) released a new study on April 24 that illustrates the burden that payday and deposit advancement loans are creating for consumers. Individuals familiar with the new FDIC and OCC regulations say that the CFPB closely advised the two agencies on their new regulations over the industry. The CFPB, for its part, only has supervisory jurisdiction over storefront and bank payday operations with more than $10 billion in assets. Industry groups note that they are offering a necessary service and welcomed the study, saying it creates a starting point for additional conversation.

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National and State News
Down Payment Rules Are at Heart of Mortgage Debate
New York Times Dealbook (04/24/13) Eavis, Peter

Both lenders and consumer advocate groups are cautioning against the growing trend of down payment requirements on mortgages, arguing that they would limit lending to lower income individuals, ultimately slowing economic growth. Since the housing bubble, larger down payment requirements have been used as a way to keep homeowners more invested in homes, based on the idea that if consumers have increased equity they would be less likely to walk away from a home if they run low on funds.

Among experts, the rule of thumb for down payments has been 20 percent for the last few decades. “If our goal is to prevent foreclosures, I can’t think of anything more effective than requiring a down payment,” said Paul S. Willen, a senior economist and policy adviser at the Federal Reserve Bank of Boston.

While Consumer advocates  do not dispute that the size of the down payment helps keep foreclosures down, they state that  the average affordability of the loan or how much a borrower can afford to pay each month are far better ways to increase homeownership and keep the risk of default down. However, Thomas A. Lawler, a former chief economist of Fannie Mae, argues that the debt-payments-to-income ratio is not even close to being considered a strong indicator of whether a borrower will default on their loan or not.

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Texas Senate Passes Tough Payday Lending Bill
Star-Telegram (04/23/13) Montgomery, Dave

A contentious and heated debate ultimately led to passage of a Texas bill expanding regulation of the influential payday lending industry in the state. The 24-6 vote on April 22 passed a bill that Senator John Carona (R-Dallas) had been working on for many months. The final product, to the chagrin of the payday lending industry in the state, is far stronger than expected after amendments were added to cap interest rates and fees and allow current ordinances in Texas municipalities to remain in place.

The bill still has a long way to go, however, as it faces a tough road to passage in the House. Senator Wendy Davis (D-Fort Worth) warned the senators that they must be prepared to defend the legislation against the payday lobby and industry in Texas. She went on to note that there are more than 3,500 payday and title loan storefronts in Texas and that all of them would be aligned against the legislation.

Senator Carona argues that the bill attempts to break the cycle of debt in which consumers are often trapped when using payday loans. By capping fees, prohibiting refinancing and mandating that loans not exceed 180 days, Carona hopes that consumers will be protected from what he views as dangerous financial products.

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Cherry Hill Approves Crackdown on Vacant Houses
The Courier Post (04/22/13) Walsh, Jim

The Cherry Hill Township council passed a new vacant property ordinance on April 21 that requires owners to register vacant homes and pay a $500 registration fee. The initial fee will continue to increase, eventually capping at $5,000 should the home remain vacant. Mayor Chuck Hahn noted that the nearly 145 vacant properties in Cherry Hill are a serious safety issue and have been the source of many complaints from area residents.

The ordinance describes vacant properties as those that are not currently marketed as for sale or for rent, a term which has caused some consternation among the public as being too loose. Those who refuse or do not pay the registration fee can face a fine of up to $1,000 per day.

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Survey: 22% of Americans Have Never Checked Their Credit Report
DSNews (04/23/13) Cho, Esther

A new survey by Findlaw.com found that nearly 22 percent of adults have never checked their credit reports despite a growing number of transactions relying on favorable credit. The survey, which polled 1,000 adults, found that the 22 percent did not retrieve their credit report despite being aware that they are available for free. The survey also found that higher income households were more likely to check their credit reports and that men were more likely to do so than women by a margin of 25 to 18 percent.

“The accuracy of your credit report can have a major impact on your finances, and even your chances of obtaining a job,” said Stephanie Rahlfs, an attorney and editor with FindLaw.com. The age bracket of 35 to 44 was found to be the most likely to have checked their credit report.

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CFPB Appoints Director for New Office, Announces Leadership Updates
DSNews (04/22/13) Cho, Esther

The Consumer Financial Protection Bureau (CFPB) added two new roles to the bureau and shifted the roles of two existing employees. Dan Smith, who previously served as the director for industry and state relations at Freddie Mac, was hired to be the first assistant director for the newly-created Office of Financial Institutions and Business Liaison. The office is charged with connecting the agency with trade associations for both banking and nonbank members.

With extensive experience in both the public and private sectors, including a stint on the hill with the House and Senate, Catherine Galicia was appointed as the new assistant director for Legislative Affairs. She had a role in drafting the Dodd-Frank Wall Street Reform and Consumer Protection Act. With the bureau since 2011, Lisa Konwinski transitioned from the CFPB’s assistant director for Legislative Affairs to deputy associate director for External Affairs. She previously served as deputy director of legislative affairs for President Obama. Hubert “Skip” Humphrey will no longer be the assistant director in the Office of Older Americans. Now h will work toward expanding the office’s efforts to strengthen relationships with state, local, public, and private organizations as a senior liaison officer.

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April 25, 2013

Forward To A Colleague

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