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Leasing Helps Fuel Highest U.S. Sales Since 2007
Automotive News (07/31/13) Durisin, Megan & Trudell, Craig

Leasing has become a common practice across all segments of the automotive industry and is the driving force behind the highest U.S. auto sales in nearly six years. Once a practice reserved for moving luxury vehicles into consumers’ driveways, leasing has risen sharply over the past few years as an excellent tool to get consumers into new vehicles. Leasing has accounted for 22.5 percent of U.S. auto sales in each month of this year, according to a recent study.

The current trajectory of sales, powered mainly by increased leases, keeps the U.S. on track to meet and exceed the country’s 2007 sales record of 13.1 million vehicle sales. The reason leasing has become such a popular option for consumers is a stronger than usual used-car market, which allows new car dealers to project a higher value when leased vehicles are returned. This, in turn, pushes consumers into leases. Leasing also allows consumers to get into vehicles they may not be able to afford if they were purchasing.

Most importantly, leasing provides a way for automakers and dealers to jump into the market of consumers who may be risk-averse and are not yet ready to commit to a longer term and higher car payment.

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AWARE Highlights How Teens' Quest for First Car Can Be Educational Opportunity
SubPrime Auto Finance News (07/31/13)

As back-to-school season gets under way, Americans Well-informed on Automobile Retailing Economics (AWARE) urged parents to provide their children with financial guidance, so that teens can be more involved with the selection of a vehicle. "The vehicle shopping and financing process puts key financial concepts into practice for young adults," said AWARE spokeswoman Susie Irvine. "Teens can calculate how much insurance, gas and routine maintenance will cost and budget for these expenses."

AWARE provides a number of financial literacy and educative tools at their website, including understanding how insurance works, recognizing the difference between buying and leasing a vehicle, skills on how to read and understand the fine print in vehicle contracts and important information on add-on products that are sold with vehicles.

AWARE is a coalition of vehicle finance companies and trade associations.

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AFSA/UNC Program Cultivates Future Leaders

Thirty-two aspiring leaders from AFSA member companies learned valuable business skills at the 2013 AFSA/UNC Leadership Development Program, which was held July 17-24 at the University of North Carolina in Chapel Hill. With challenging case studies and lively discussions, role-playing and team-building exercises, the participants had the opportunity to hone their leadership, strategic thinking and performance skills and think outside the box. This fast-paced program allowed the participants to immerse themselves in innovative principles of management and leadership through class discussions, case analyses, professional presentations, negotiations, experience change simulation and the outdoor team-building exercise. The participants also had an opportunity to network with new acquaintances.

Willie Green, with World Acceptance Corporation, was elected class representative by his peers.

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Inside the Beltway
For CFPB, a Question of Lawyer Oversight
PoliticoPRO (07/29/13) Davidson, Kate

The Consumer Financial Protection Bureau (CFPB) is facing considerable pushback from a Connecticut-based lawyer who it attempted to bring enforcement action against because of her work with one of her clients. The issue of how much oversight regulatory agencies have over the practice of law is an old one, and an exemption in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act makes clear that the CFPB cannot regulate lawyers who are working directly on behalf of a client. However, lawyer Kimberly Pisinski still received a subpoena for all of her records, as well as those of Morgan Drexen, the company she hired to assist her with settling her clients’ debts before entering bankruptcy.

Pisinski has filed a complaint in federal court in the District of Columbia citing that the CFPB has no jurisdiction over the practice of law which both she and Morgan Drexen provide to their clients. The key question in the case is whether Pisinski and Morgan Drexen were simply providing legal services or acting as third-party debt settlers. If the latter is true, note experts, than the CFPB may have jurisdiction over the practice.

The CFPB has targeted lawyers before, including an investigation in 2012 of California-based Gordon Law Firm that alleged the group took money from clients while assuring them that they would restructure their mortgage, but failed to do so.

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U.S. Senate Panel Approves Bill to Bolster FHA Finances
Reuters (07/31/13) Stephenson, Emily

Facing the possibility that it will need a bailout from U.S. taxpayers, the Federal Housing Administration (FHA) may be getting a shot in the arm, as the Senate Banking Committee approved a bipartisan bill to allow the FHA to raise funds. The FHA faces more than a $16 billion budgetary pitfall because of mortgages it backed between 2007-2009 as the housing market collapsed.

The bill would require minimum annual mortgage insurance premiums, create critical new apparatuses for the FHA to punish lenders that commit fraud and require the Department of Housing and Urban Development, which oversees the FHA, to review underwriting standards at the administration. The bill will now go to the full Senate, which is unlikely to vote on it until after the August recess. The bill could either be voted on by itself or as part of a larger housing reform package, which Senators have been attempting to craft for some time.

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National and State News
TransUnion Uncovers Unique Dynamic Connecting Payments for Subprime Vehicle Financing and Credit Cards
SubPrime Auto Finance News (07/30/13) Zulovich, Nick

A study recently completed by TransUnion has illustrated a phenomenon that many industry analysts have ascribed to for a long time – consumers who pay off more than the minimum payment on their credit card bills each month had significantly lower delinquency rates on other types of credit obligations, including vehicle loans. This trend, however, reverses in the subprime sphere, where consumers are choosing to pay more than the minimum due on their credit card bills to maintain liquid credit and sometimes forego paying their auto loan.

“TransUnion's study has confirmed the conventional wisdom that transactors - those consumers who pay off their entire balance each month - are better risks than revolvers, i.e. consumers who only pay a portion of their balance, and moreover has quantified just how big an increase in risk revolvers represent," said Ezra Becker, co-author of the study and vice president of research and consulting in TransUnion's financial services business unit.

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Portion of Payday Loan Ordinance Said Illegal
Herald Banner (07/27/13)

A large portion of a Greenville, Texas, payday zoning ordinance has been deemed illegal. The ordinance, which prohibited payday storefront owners from selling their property to any individual who would open another payday loan location, was found to be illegal under Texas law. Payday loan stores and other operations that are considered Alternative Financial Service (AFS) businesses are not permitted to be within 1,000 feet of another AFS business. The businesses are broadly classified as “non-conforming use” locations, which means they do not fall under normal zoning regulations. Texas law has narrowly written rules about terminating “non-conforming use” business licenses and the payday ordinance section does not fall within these rules.

The ordinance was originally written to reduce the number of payday loan locations in the city, and City Attorney Daniel Ray noted that the change will not loosen restrictions on the number of locations; it simply will prevent their reduction. Ray plans to meet with the zoning board to rewrite the ordinance so that it complies with Texas law. The decision potentially opens the city to civil suits by payday storefront owners, and also opens other cities with similar ordinance language to similar legal challenges.

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Calif. City Threatens to Use Eminent Domain with Underwater Mortgages
American Banker (07/30/13) Berry, Kate

Despite repeated warnings from both government officials and industry leaders, the city of Richmond, Calif., is proceeding with a plan to purchase 624 home loans and use the city’s eminent domain power to restructure the underwater mortgages. The city sent offer letters to numerous servicers inquiring whether the homes could be purchased at a reduced rate. If the servicers elect not to sell, Mayor Gayle McLaughlin will seize the homes via eminent domain. The servicers have until Aug. 13 to respond.

California cities San Bernardino, Fontana and Ontario decided against using eminent domain to seize mortgages earlier this year after industry and government pressure became unbearable. The central issue at stake is the securitization of mortgages – or the process by which loans are packaged and sold on the open market as assets. It is unclear how owners of these assets would be compensated if cities elected to use their eminent domain powers. Industry argues that if the process were to be used, home prices would rise sharply because servicers would be unable to securitize loans.

The Federal Housing Finance Agency (FHFA) previously announced that it will take enforcement action against communities and cities that use eminent domain to seize home loans. But Mayor McLaughlin remains undeterred. Servicers and trustees “are holding on to loans that they have been unable or unwilling to fix,” McLaughlin said. “We are willing to take those loans off their hands, purchase them at a fair price and save the city from the devastation that is happening."

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Court Strikes Down 21 Cent Debit Card Fees
CNN Money (07/31/13) Liberto, Jennifer

A U.S. District Court in Washington, D.C., struck down the Federal Reserve Board’s cap on interchange fees that debit card issuers can charge merchants per transaction. The decision represents a huge loss of potential profit for large banks and a win for merchants. The consumer, however, may miss out either way. The initial rule that capped fees was put into place after the financial crisis to ensure that card processing fees were kept in check and that the cost of using cards was not completely passed on to the consumer. However, studies show that even though fees were reduced with the passage of the rule, 67 percent of merchants either kept their prices the same or raised them.

Judge Richard Leon noted that the Fed needed to revisit the fee structure – nothing will change until the regulators come back with a fresh proposal. Retail trade groups cheered the ruling as a landmark day for both small business owners and consumers. Card processors and banks, however, commented that the decision was disappointing.

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Toyota Financial Services Appoints New CEO
Auto Remarketing (07/30/13)

AFSA member company Toyota Financial Services (TFS) has appointed a new chief executive officer to replace George Borst. Mike Groff, who is currently the senior vice president of sales, marketing and development, will replace Borst.

Groff joined Toyota Financial as a TFS field manager in 1983 and has served in many positions since, including vice president of corporate strategy and vice president of customer service. “I am incredibly honored and excited to continue and expand the vision and mission established by George and our over 3,200 associates across the country,” he said of his appointment.

Borst began with TFS in 1985 as a corporate marketing manager and has served in a number of positions as well, including as the general manager of Toyota Financial Services’ Lexus Division. Borst had high praise for Groff. “With his deep industry knowledge, his longstanding and strong partnership with our dealers, and a record of proven leadership during both the best and most challenging years this company has experienced, I know he will guide TFS to even greater success.”

Borst will retire at the end of September and serve as an executive adviser at TFS until the end of 2014.

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August 1, 2013

Forward To A Colleague

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