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AFSA White Paper Examines Payment Innovations
AFSA’s State Government Affairs department published a comprehensive review of the ever-evolving payment innovations space. The paper outlines several payment technologies that are gaining popularity with both American consumers and businesses and details current advantages and drawbacks for each. Mobile payment technologies such as SMS payments, mobile wallets (like Google Wallet) and mobile point-of-sale readers, and online payment service providers like PayPal, have revolutionized the way consumers purchase goods and services. These innovations also challenge state and federal regulators who have been unable to fit the evolving scope of these products into antiquated regulations that are primarily focused on regulating financial institutions.
The white paper provides a comprehensive overview of digital currencies, such as Bitcoin, including the evolution of the technology, how it works in the real world and the actions digital currency players are taking to ensure that the sphere continues to be available. The paper also covers the significant issues surrounding the currency, including non-reversibility, and the approach of various government entities to regulate it.
AFSA Provides Input on Massachusetts Financial Services Regulations
On Aug.20, AFSA submitted a comment letter to the Massachusetts Division of Banks in response to their request for input on regulations governing the financial services industry. The division held informational hearings and is gathering input from the industry in an effort to modernize and streamline the regulations.
In its letter, AFSA suggested that the requirement that a sales finance company notify the commissioner 30 day prior to any proposed change in officers, partners or directors be amended to require notification within 10-30 days after a change (the requirement in most states). Compliance with the current requirement is often not possible because these personnel decisions often are not contemplated within that timeframe. AFSA also suggested that the time for a licensee to provide requested records for an examination be changed from 72 hours to three business days to alleviate problems associated with a request being made on a Friday before a three-day weekend due to a federal holiday. AFSA also raised concerns about the state’s limitation on the number of “doing business as” (DBA) affiliations a licensee can have to one per company, essentially requiring the creation of a new business entity in order to license multiple DBAs. This requirement can cause confusion for consumers in vehicle financing because a captive vehicle finance company that finances both a standard and luxury line would have to do business under multiple parent company names even though it is the same company.
AFSA Introduces New Compliance Committee
To help member companies deal with the multitude of Dodd-Frank rules and regulations, AFSA established the Operations and Regulatory Compliance Committee (ORCC). The committee’s purpose is to address the policies, guidance, enforcement actions and regulations issued by federal government and agencies, with a particular focus on the Consumer Financial Protection Bureau. Chaired by John Noone, retired president of Ford Motor Credit and principal of Noone Consulting Group, LLC, the ORCC will develop industry resources and educational materials.
Currently, the ORCC’s main priority is maintaining a robust compliance management system, which includes reviewing fair lending policies and practices to ensure compliance with fair lending laws, consumer complaint handling, compliance training programs, review of marketing practices and ancillary products, and third-party vendor management.
For more information on the ORCC, please contact Alejandra Siles, AFSA Manager, Operations Compliance, at [email protected] or 202-466-8605.
CFPB Slams Mortgage Servicers over 'Sloppy' TacticsAmerican Banker (08/21/13) Witkowski, Rachel
According to a report issued by the Consumer Financial Protection Bureau (CFPB) on Aug. 21, mortgage servicing issues continue to be a significant issue for the agency. The report cited several large servicers that had “sloppy” or poor practices when servicing loans.
"Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected," said CFPB Director Richard Cordray. "Today's report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law.” In all cases where the CFPB found standards lacking, the agency issued guidance as to how the servicers could rectify issues and make modifications to improve service.
The CFPB also noted several critical steps that nonbanks should take in order to come into line with proper policies and requirements. "The CFPB is committed to helping industry establish good compliance systems and today's report also offers guidance in how to do so," the report said.
CFPB Sues Debt-Relief Company that First Sued AgencyAmerican Banker (08/20/13) Witkowski, Rachel
Morgan Drexen, a debt relief provider, sued the Consumer Financial Protection Bureau (CFPB) early last month, questioning its authority to challenge the agency’s authority to collect information about its clients. On Aug. 21, the CFPB countersued Morgan Drexen, claiming that the company has falsely marketed its products to consumers.
The CFPB charges that Morgan Drexen charged nearly 22,000 customers millions of dollars in fees, but those consumers did not receive any debt reduction services. "This company took advantage of people who were struggling," said CFPB Director Richard Cordray. "The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions." The lawsuit asks the court to stop Morgan Drexen from continuing to market its marketing practices as well as to issue penalties for its previous actions.
Morgan Drexen’s case against the CFPB, which question the constitutionality of the CFPB’s request for the law firm’s documents, is still pending.
Obama Asks Regulators to Speed up Wall Street ReformsReuters (08/20/13) Stephenson, Emily
On Aug. 19, President Obama met with several key regulators whose role is to implement rules and regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act. With just 40 percent of the law’s implementation completed, President Obama called the meeting to check on the process of implementation and to ensure that regulators are working toward permanent solutions. Since the financial crisis, now five years ago, agencies including the Consumer Financial Protection Bureau (CFPB) have missed countless deadlines. The meeting was meant to spur regulators to action and encourage them to finish regulatory actions. Regulators continue to wrestle with many aspects of financial regulation, including the Volcker Rule, which remains nearly five years behind schedule.
"The president commended the regulators for their work, but stressed the need to expeditiously finish implementing the critical remaining portions of Wall Street reform to ensure we are able to prevent the type of financial harm that led to the Great Recession from ever happening again," the White House stated.
Warren Asks DOJ to Explain 'Timid' FHA SettlementThe Hill (08/21/13) Schroeder, Peter
Sen. Elizabeth Warren (D-MA) pressed Attorney General Eric Holder to explain what she sees as a deficient effort to solve housing issues caused by the nation’s largest banks. In a letter sent Aug. 21, Warren referred to the $25 billion settlement between 49 state attorneys general and the federal government and mortgage servicers that was completed in March. She questioned the portion of the payment – $225 million – set aside to address false insurance claims made against the Federal Housing Administration (FHA), arguing that the amount is not even a fraction of what should have been pursued.
"There are a number of contributing factors to FHA's current financial difficulties, but the potential failure of DOJ to get adequate compensation for fraud committed against FHA is a serious issue," Warren wrote. She continued that if the attorney general had sought a more aggressive solution, the FHA may be in a better fiscal position, which announced a significant budget shortfall earlier this year. The Senate Banking Committee has already passed legislation to provide relief to the FHA and Senator Warren, who is a member of the committee, noted that with more information from the attorney general, the committee may be able to take additional action.
More Students than Ever Rely on Federal College AidPoliticoPRO (08/20/13) Nelson, Libby A.
Nearly 57 percent of college students are receiving some type of federal aid, according to a new report released Aug. 22 by the Department of Education, signaling that more parents and students are willing to borrow money to pay for school. The figure represents an all-time high for students receiving federal aid.
The report shows that the federal government continues to give aid to low-income and disadvantaged populations, while colleges and universities tend to provide their grant money to wealthier students and parents. The report comes as President Obama is set to begin a bus tour to educate borrowers about student loan debt.
The report showed that 41 percent of undergraduates took out federal loans to pay for their education, up from 35 percent just four years ago. Forty-six percent of families making more than $100,000 took out loans and a majority of families making $80,000 a year or less did so. More than three-quarters of students at for-profit universities received federal money, relying mainly on the Pell Grant, which has ballooned in recent years, up from $12.8 billion in 2007 to $35.6 billion in 2011. The report also showed that economically disadvantaged students, on average, received about $8,000 from the university they attended, while wealthier families received nearly $11,000.
Toyota Financial Services Expands Student Scholarship Program to $1 MillionSubPrime Auto Finance News (08/19/13)
Toyota Financial Services (TFS) has presented nearly $1 million in scholarships to students who have undergone incredible hardship in their journey to academic success. Working with Boys & Girls Clubs of America and a number of other partners, TFS celebrated the achievements of 30 students in an event with retired NBA star A.C. Green.
TFS has awarded more than $2.4 million in scholarship money to students in need since 2007, as a part of their Making Life Easier initiative. “Toyota Financial Services is committed to reaching more communities and more promising students through our national philanthropic efforts and partnership with Boys & Girls Clubs of America,” said George Borst, president and CEO of TFS. “This year's program expansion will allow these students to further their education and build on their individual experiences, providing them with better opportunities and a brighter future."
AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to [email protected] 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.
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.