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AFSA Submits Brief in Massachusetts Arbitration Case
On March 27, AFSA submitted an amicus brief supporting the use of arbitration to the Massachusetts Supreme Judicial Court (SJC). The case, McInnes v. LPL Financial LLC, presents a direct challenge to the supremacy of the Federal Arbitration Act (FAA) and the U.S. Supreme Court’s interpretations and applications thereof. It may be significant that the SJC took this case, and even requested amicus briefs. At stake are the integrity of arbitration agreements in Massachusetts and elsewhere, if the SJC decides this case incorrectly and thereby encourages the same sort of decisions in other states. In past decisions and during oral arguments of other cases, the SJC has exhibited an antipathy to arbitration and an interest in finding ways around the FAA and the Supreme Court's directives on enforcing the FAA.
CFPB Touts Significant Expansion of Complaint DatabasePolitico PRO (03/28/13) Davidson, Kate
The Consumer Financial Protection Bureau (CFPB) will be significantly increasing its consumer complaint database, making it the largest in the nation. “The database is good for consumers and it is also good for honest businesses,” said CFPB Director Richard Cordray. “We believe the marketplace of ideas can do great things with this data.”
The database will be expanded to include 90,000 individual complaints concerning student loans, home mortgages, bank accounts and consumer loans. The database will expand by nearly 71,000 complaints up from its current 19,000.
The database was designed to allow consumers to see any complaints filed after a company responds or after 15 days of receipt from the CFPB.
A Mortgage Practice Gets a Closer Look by RegulatorsThe New York Times (03/26/13) Wyatt, Edward
Forced-place or lender-placed insurance will likely be getting a closer look by a number of regulators in the coming months. The practice allows lenders to protect their investment in mortgages they offer to consumers by purchasing an insurance policy and charging the consumer for the policy if they default on the loan.
Regulators, including the Consumer Financial Protection Bureau (CFPB) and National Association of Insurance Commissioners (NAIC), contend that the fees and premiums associated with the policies can be as much as double as opposed to a consumer obtaining a policy on their own. This week, N.Y. Governor Andrew Cuomo announced a $14 million settlement with Assurant, one of the largest providers of lender-placed insurance, citing inappropriate fees.
The Federal Housing Finance Agency (FHFA) proposed a new rule on March 26 that would prohibit insurance companies for paying commission to employees who sell forced-place insurance. The hope is that prohibiting commission will keep companies from pushing consumers into insurance plans that may not be the most cost-effective option for their situation. The rule is open for comment for 60 days.
Fannie, Freddie to Offer Mortgage Aid PlanPolitico PRO (03/27/13) Prior, Jon
The Federal Housing Finance Agency (FHFA) announced that it is removing some red tape from the process of troubled borrowers modifying the terms of mortgage loans backed by Fannie Mae and Freddie Mac. The plan, which aims to reduce a process that has become incredibly lengthy, allows consumers who are underwater on their mortgage to modify the terms of their loan and avoid foreclosure.
The program, which starts in July and run through August 2015, will allow homeowners who are at least three months delinquent on their mortgages to reduce their monthly payments without having to prove their income or financial status. To join, borrowers need only send a first payment after receiving an offer letter from Fannie or Freddie, after which a three-month trial will begin. If the consumer makes three successful payments, the modification is made permanent. Borrowers who have a large amount of equity or who have received modifications in the past are not eligible.
Industry representatives have expressed concerns that the program will result in consumers purposely missing payments to take advantage of it. The FHFA argues that consumers who are not late on payments can take advantage of more lucrative refinancing tools than the agency offers.
House Panel Hears Tweaked Payday-Like Loan BillAssociated Press (03/27/13) Kaminsky, Jonathan
A payday loan alternative is making its way through the Washington state legislature. SB 5312, currently being heard by the House Business and Financial Services Committee, would allow for loans of up to $1,500 that could be paid off over the span of a year. Representative Steve Kirby, who is sponsoring the bill, cites that loans like these are responsible alternatives to payday loans and allow consumers to gain access to cash quickly in emergency situations. The loans’ interest, on average, would be around 100 percent of principal.
A form of the bill has already passed the Senate, but the House committee is poised to add more consumer protections, like an APR rate cap of 36 percent and limiting the number of loans a consumer can take out to between 10 and 12 a year.
Opponents argue that the loans are simply circumventing a 2009 law that restricted payday loans to $700 with a 45-day repayment period. The bill is likely to pass out of the committee, according to Kirby, and receive a full vote in the House.
Student-Loan Defaults Soared in Past Year, Report ShowsAmerican Banker (03/28/13) Cumming, Chris
A new research study from Equifax shows that the number of students defaulting on their school loans has exploded nearly 36 percent in the last year up to $3 billion. The total amount of student debt in the nation increased from February 2012 to February 2013 by 14 percent to $853 billion.
"Driven heavily by economic factors, including unemployed or under-employed consumers going back to school along with the rising cost of tuition, student lending has demonstrated consistent, year-over-year growth," said Equifax Chief Economist Amy Crews Cutts. She went on to cite a continually weak job market for recent graduates as a leading factor for the increase in defaults.
In the interim, however, home loan delinquent accounts have fallen sharply, by nearly 28 percent year over year.
18 States Considering Bans on Credit Card SurchargesAmerican Banker (03/28/13) Wack, Kevin
While few merchants have begun collecting credit surcharges, many states have moved to outlaw the practice. Eighteen states are now considering prohibiting the collection of surcharges when consumers choose to pay with a credit card. Arkansas, Hawaii, Illinois, Indiana, Kentucky, Maryland, Michigan, Missouri, Nevada, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont and West Virginia are all considering legislation.
The legislation on the subject in Utah has progressed the farthest, with a bill currently in the governor’s office for review. Mississippi already has enacted a ban on surcharge fees when payment is made using a state-issued credit card.
Merchants were granted the ability to collect the fees as part of a settlement signed last year. The settlement allows merchant to charge the fee in order to recoup interchange fees charged by credit card companies.
Schwartz to Become President of Both Manheim and AutoTrader as Perry to DepartSubPrime Auto News (03/25/13)
Sandy Schwartz, currently the president of Mannheim, will also assume the same role over the AutoTrader Group, all of which are owned by Cox Enterprises. “I'm excited to work alongside the talented teams at AutoTrader and Manheim, as we work together to more effectively collaborate on strategy, share industry knowledge and better serve our customers in the automotive sector," Schwartz said.
Schwartz joined Cox in 1985, and rose through the ranks to serve as president of the Cox Media Group. He became president of Mannheim in 2011. Current president of AutoTrader Chip Perry, who has been with the company since 1997, announced that he will be leaving the company effective May 1.
AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to firstname.lastname@example.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.