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The next issue of AFSA Newsbriefs will be published on January 2, 2014, due to the Christmas holiday. The AFSA team wishes you a Merry Christmas and a happy and safe New Year!

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Top Story
Boston Police Halt License Scanning Program
The Boston Globe (12/14/13) Musgrave, Shawn

After an inadvertent release of more than 68,000 license plate numbers to The Boston Globe, the Boston police department suspended its use of automatic license plate reading systems (ALPR). The leak immediately called into question the police department’s ability to appropriately store information and if they were using the technology at all. Several vehicles were scanned multiple times for the same offenses over a six-month period with no action taken.

The department used the scanners to track vehicles and drivers with outstanding parking tickets, lapsed insurance and similar violations. By tracking the location of a vehicle at specific dates and times, officers are able to determine driving habits and ensure collection of fines and fees. The Boston PD is the only law enforcement agency in the state that has specific requirements and policies in place for the use and storage of ALPR data. Civil liberties advocates argue that the release of information is evidence enough that law enforcement is incapable of safely using the technology. The Globe was meant to receive data with the individual location and license plate information stripped out, but received reports in July containing that information.

Representative Jonathan Hecht (D-Watertown) has introduced the License Plate Privacy Act, which aims to cut down the period that police can keep the plates on file to just 48 hours.

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FCC Should Clarify Telephone Consumer Protection Act, AFSA Says

AFSA submitted a comment letter on Dec. 19 to the Federal Communications Commission (FCC) regarding the FCC’s interpretation of the Telephone Consumer Protection Act (TCPA). The letter supports a petition filed by the Professional Association for Customer Engagement.

The TCPA prohibits the use of an automatic telephone dialing system (ATDS) to call cell phones unless the call recipient has provided “prior express consent” to receive such calls. One of the issues that AFSA members have been struggling with is the expansive definition of an ATDS. The TCPA defines an ATDS as one that has the “capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Under an extremely broad reading of the TCPA, any modern phone technically could have that capacity. A standard cell phone or landline that has a redial feature could be viewed as having that capacity.

The lack of clarity, combined with penalties of up to $1500 per TCPA violation, has provided plaintiffs’ attorneys with plenty of fodder for lawsuits that enrich the attorneys rather than benefit their clients. Hundreds of TCPA class actions seeking multi-millions of dollars from companies have been filed in recent years, and their number continues to climb. These lawsuits are unnecessarily increasing costs to businesses and consumers.

AFSA’s letter asked the FCC to confirm that “capacity” is limited to what a particular piece of calling equipment is capable of doing, without further modification, at the time the call is placed. This is the third letter that AFSA has submitted to the FCC recently on this issue. On Dec. 2, AFSA submitted letters in response to two other similar petitions regarding the TCPA.

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Executive Joins AFSA Board

Brian D. Fulton of Mercedes-Benz has been elected to the AFSA Board of Directors. Fulton replaces Dietmar Exler, also of Mercedes-Benz, who is stepping down from the association to take on additional responsibilities at the company.

Fulton will assume the role of VP of Mercedes-Benz Financial Services effective January 1, 2014, and will oversee U.S. operations. He currently serves as President and CEO of Mercedes-Benz Auto Finance China. Before joining Mercedes-Benz, Fulton worked at Ford Motor Credit and Toyota Motor Credit. He has held leadership roles around the world.

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New Member Welcome

AFSA welcomes back Business Partners Dixon Hughes Goodman LLP and Spectrum Field Services.

Dixon Hughes Goodman LLP has provided accounting, auditing, tax and consulting services to businesses in a variety of industries for the last 50 years. The firm is headquartered in Atlanta.

Spectrum Field Services, headquartered in Salt Lake City, has provided field inspection solutions for the last 20 years for the real estate and financial services industries.

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Inside the Beltway
Regulators Accuse Cash Call of Improperly Collecting from Borrowers
Los Angeles Times (12/16/13) Pfiefer, Stuart

The Consumer Financial Protection Bureau (CFPB) on Dec. 16 sued online lender CashCall Inc. for violating a variety of federal laws in eight states. “We are taking action against CashCall for collecting money it had no right to take from consumers,” said Richard Cordray, director of the CFPB. “Online lending is rapidly growing and deserves ample regulatory attention. The Consumer Financial Protection Bureau will take action against online lenders and servicers that engage in unfair, deceptive, or abusive practices."

The lawsuit accuses CashCall of violating federal prohibitions on unfair, deceptive and abusive practices. The enforcement action seeks a court order that requires CashCall to refund money, plus additional penalties, to consumers. The court documents would also nullify borrower’s obligation to pay back the loans. CashCall representatives argue that the CFPB is attempting to control interest rates on loans through judicial action, which they are not permitted to do.

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National and State News
Subprime Car Loans Help Fuel U.S. Auto Recovery
Investor’s Business Daily (12/16/13) McEvoy, Ciaran

The U.S. auto industry continued its upward momentum in 2013, thanks in large part to subprime lending. Decade-old cars, a revived economy and affordable rates have contributed to the rise in auto sales. In the third quarter, 26 percent of new loans fell into the nonprime, subprime and deep subprime categories, with the segments accounting for 55 percent of used vehicle consumer sales.

Mortgage debt has steadily fallen for 17 straight quarters, giving consumers more space in their debt portfolio for vehicle loans, which have risen for the tenth straight quarter to $845 billion. The auto financing market recovered far better from the financial crisis than did the housing market. "You had a great deal of what some would call exotic mortgages," said Bill Himpler, executive vice president at American Financial Services Association. "I have yet to have anyone show me an exotic auto loan."

Industry analysts highlight the perception of vehicles versus homes as a main contributor to the crisis. Consumers know that a car loses value when they drive it off the lot, but had the impression that homes always appreciated in value.

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S&P/Experian: Auto Loan Default Rates Remain Stable in November
SubPrime Auto Finance News (12/18/13)

According to a new report by S&P and Experian, auto loan default rates held steady in November, at 1.15 percent. The figure is marginally higher than October’s rate of 1.14 percent. Year-over-year, the rate ticked up 6 points, and the national composite rate was 1.37 percent for the month. Of the five largest cities, three – Chicago, Dallas and Los Angeles – saw decreased default rates. Miami and New York both posted increases.

The first mortgage default rate dipped to 1.28 percent in November and the bank card rate remained unchanged at 2.97 percent.

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Judge Approves Visa, MasterCard $5.7 Billion Settlement with Retailers
The Washington Post (12/13/13) Douglas, Danielle

Following years of litigation, U.S. District Court Judge John Gleason approved a $5.7 billion class-action settlement on Dec. 13. Retailers sued Visa and MasterCard over interchange fees that are charged when consumers swipe their cards. The fees are typically between two and five percent of the purchase price, and merchants have argued that they have very little power to negotiate the fees. The Dodd-Frank Wall Street Reform and Consumer Protection Act allowed the Federal Reserve to cap interchange fees for debit cards, but not credit cards.

The merchants and companies reached a settlement of $7.2 billion in 2012, but several large merchants, such as Target, Amazon and Wal-Mart, left the deal. The settlement will allow the card companies to finally put a huge legal battle to bed and focus more closely on working with merchants to serve consumers. “We are confident that through this agreement we have opened the door to new opportunities for collaboration with our merchant clients,” Said Charlie Scharf, chief executive of Visa.

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Nicholas Financial Accepts Acquisition Offer from Equity Firm for $326M
SubPrime Auto Finance News (12/18/13)

Nicholas Financial, a specialty finance company headquartered in Clearwater, Fla., agreed to be acquired by Prospect Capital Corp., a private equity firm that lends to and invests in private and public middle-market businesses. Nicholas operates in 15 states and maintains 65 branch offices, purchasing loans from more than 1,600 dealerships. Nicholas remains one of the largest branch-based indirect auto lending companies, serving the southeastern and mid-western United States. Prospect elected to acquire Nicholas in order to build its tax-efficient industry experience in both consumer and auto lending.

The two companies entered into a definitive agreement that is expected to close in April, with Prospect paying $16 per share. The total sale price was $326 million.

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December 19, 2013

Forward To A Colleague

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

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.