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Trade Associations Seek Guidance on Conflicting Regulations
On June 4, AFSA and seven other financial services trade associations sent a joint letter to the Consumer Financial Protection Bureau (CFPB) and Department of Housing and Urban Development (HUD) requesting written guidance, including a safe harbor from liability, in areas where multiple federal mortgage standards conflict. “Compliance with one regulation should not make it impossible to comply with another,” the letter states.
The letter highlights several rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act that will tighten credit standards through facially neutral requirements that may lead to disparate outcomes for some categories of borrowers. “Yet there is no guidance as to whether and to what extent compliance with these requirements amounts to a sufficient business necessity that would avoid liability under the disparate impact rule. Likewise, there is little guidance on the standards used to assess less discriminatory alternatives in the context of complying with federal requirements.”
Credit Reporting Focus of New AFSA White Paper
On June 3, AFSA’s State Government Affairs department released its newest white paper, which examines state legislative trends relating to credit reporting – a fundamental component of the American banking and financial services system. Bills considered this legislative session focused on increasing consumer access to credit information; regulating the use of credit information by employers, insurers, lenders and state licensing authorities; and enhancing protections and security freeze options for identity theft victims and other consumers. So far this session, 212 bills have been considered in 44 states. Fourteen have been enacted in eight states (Colorado, Georgia, Indiana, Maryland, Mississippi, Montana, North Dakota, Utah and Texas) and one was vetoed in New Mexico. The paper also includes an overview of the effect of the federal Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transaction (FACT) Act on consumer reporting agencies.
Auto Lending: Regulator Must Be Reined inAutomotive News (06/03/13) Editorial
“Congress must rein in the Consumer Financial Protection Bureau, which has overstepped its mandate by squeezing banks and finance companies to limit dealership profits, apparently based on questionable assumptions of widespread discrimination in auto lending,” contends this editorial. Congress has taken notice, as evidenced by a recent request from 13 members of the House Committee on Financial Services for the bureau to substantiate its allegations and share details on its investigation and methodology. Based on claims of evidence suggesting racial minorities have paid higher interest rates on loans, the CFPB began pressuring lenders to move to a flat fee to compensate automobile dealers. But most major lenders capped dealer reserve some time ago.
According to the editorial, “the bureau seems to be driven by stereotypical assumptions that dealerships routinely take advantage of minorities, military personnel, consumers with poor credit histories and the unsophisticated.” However, in a CFPB report by Holly Petraeus, assistant director for the Office of Servicemember Affairs, vehicle or consumer loan complaints made up only two percent of the complaints received from military families in the first quarter of 2013.
Talent Drain Challenges CFPBPolitico Pro (05/31/13) Davidson, Kate
In recent months, a significant number of policymakers, rule writers and attorneys have departed the Consumer Financial Protection Bureau (CFPB) for jobs in the private sector. Many of the employees have gone to law firms, advisory firms and banks, where their insider knowledge of how the bureau operates is in high demand. Some of those who left the CFPB, including veterans from other federal agencies, expressed frustrations with how the bureau was run. One former regulations lawyer compared rule writing to an interagency process, because lawyers had to consult with every CFPB office and brief multiple assistant directors before drafting a proposal. At least five attorneys have quit from the enforcement division, where decisions often reportedly have to be approved by the supervision team.
The most recent high-profile departure was chief of staff Garry Reeder. Along with Chris Haspel, a senior advisor on servicing and securitization, and Mitch Hochberg, a senior counsel on the CFPB rule writing team, Reeder is joining the new consulting firm founded by former deputy director Raj Date. Other recent departures include: Victor Prince, the bureau’s second chief operating officer; Leonard Kennedy, a senior adviser to Director Richard Cordray and former general counsel; Benjamin Olson, the deputy assistant director for regulations;Dana Ehrlich Miller, a senior counsel in the regulations group; and Bart Shapiro, senior adviser in CFPB’s office of community banks and credit unions. Ten of the 13 regulations lawyers that transferred from the Federal Reserve have left the bureau, with three returning to the Fed.
According to a CFPB spokeswoman, staffing issues have not affected the bureau. “We have consistently met our deadlines, put in place strong rules of the road to fix the broken mortgage market, obtained $425 million in restitution for consumers, and handled more than 130,000 consumer complaints,” the spokeswoman said. In 2013, the CFPB hired 300 new employees, putting its current workforce at 1,200.
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CFPB Names States with Most Mortgage ComplaintsHousing Wire (05/31/13) Panchuk, Kerri Ann
The Consumer Financial Protection Bureau (CFPB) complaint database has been expanded again, to include state-by-state information. Researchers have the ability to sort through the data to determine statistics, such as which states have the most mortgage complaints per capita – New Hampshire, Maryland, Washington, D.C., Georgia and Florida. "This data puts valuable information in the hands of consumers to help them understand what is happening in their states," said CFPB Director Richard Cordray. The database now also includes credit reporting and money transfer complaints. The database, which updates nightly, is up to 113,000 complaints.
NC House Gives Preliminary Approval to Consumer Finance BillNews & Observer (06/04/13) Ranii, David
After amending legislation to appease critics, N.C. state representatives gave preliminary approval to a bill on June 4 that would raise interest rates for most consumer finance loans. The revised bill lowered the interest rates from previous versions, prompting two consumer advocate groups that had opposed the bill to become neutral on it. But according to Rep. Susan Fisher (D- Asheville), the attorney general and AARP remain opposed to the bill because its costs to consumers are too high. Proponents note that consumers with poor credit scores rely on consumer finance loans and that the industry’s allowable interest rates have not changed in 30 years. “None of us would ever consider telling a Wal-Mart or a Target or a Costco that they couldn’t raise their prices for 30 years,” said Rep. Ken Goodmon, (D-Rockingham).
The amended bill would permit a 30 percent interest rate on loans up to $4,000. Larger loans would use a blended rate: 30 percent for the first $4,000, 24 percent for the next $4,000 and 18 percent for the next $2,000. Loans over $10,000 would be capped at 18 percent interest for the entire amount. The maximum loan amount would be raised from $10,000 to $15,000. The bill requires a final vote in the House before returning to the Senate to resolve differences.
Experian: Q1 Leasing Reaches Record HighAuto Remarketing (06/05/13)
According to Experian Automotive’s State of the Automotive Finance Market report, new vehicle leasing made up 27.5 percent of all new vehicles financed during the first quarter. The figure jumped 12.5 percent from 24.4 percent a year ago, and marks the highest level since Experian began tracking the data seven years ago. “Consumers tend to shop for vehicles based within the limits of their budget, and leasing is often seen as a viable path to a lower monthly payment,” said Melinda Zabritski, senior director of automotive credit at Experian. “Lenders have seen overall stability come back to the market since the recession, and leasing has gradually returned as a larger part of many lender strategies.”
The report also showed a rise in loan term lengths and a decrease in interest rates. Data showed that consumers within all credit tiers were able to obtain financing in the first quarter. Subprime loans rose to 45.2 percent of the overall loan market, up from 44.4 percent in the same period last year.
Lending on Upswing in Most Areas, Fed Survey ShowsAmerican Banker (06/05/13) Borak, Donna
As reported in the Federal Reserve Board’s Beige Book, consumer loan demand continued to rise in recent weeks, along with increases in automobile and new home purchases. "Overall bank lending increased since the previous report," stated the Fed's quarterly economic survey. "Credit quality and deposits increased, while credit standards were largely unchanged."
However, the improvements were more regional than across the board. Leading the way, the New York district recorded improvements in credit conditions in all areas. The Philadelphia district saw improved demand for commercial and industrial loans as well as commercial and residential real estate loans. By contrast, in the Cleveland district, consumer credit demand for auto loans rose slightly. The Kansas City district only experienced slight increases in loan demand and loan quality, with steady deposit levels. In San Francisco, loan demand "improved slightly on balance," primarily driven by mortgage and auto loans. Lending activity in the St. Louis district remained the same in the first quarter. In the Richmond and Atlanta districts, demand was weaker.
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