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Op-Ed: This Federal Proposal on Car Loans Is a Lemon
The Wall Street Journal (04/28/13) Campbell, Jason

Vehicle loans had absolutely nothing to do with the 2008 financial crisis, writes Rep. Jason Campbell (R-CA). Yet, the Consumer Financial Protection Bureau (CFPB) is attempting to change the way Americans buy cars for the worse. Presently, a borrower’s creditworthiness is based upon their credit score, income and current debt load. The CFPB, however, wants to change this very functional system. In an attempt to ensure that protected classes are receiving the same rate as everyone else, the CFPB wants lenders to guess borrowers’ race and ethnicity. “Put bluntly, they want lenders to profile you,” Campbell writes.

During a March 21st conference call, CFPB authorities stated that they would use "proxies to give probabilities of the race, ethnicity and gender of borrowers." According to Campbell, the guidance is stupid, offensive and “contrary to standards of fairness and equality upon which our society is based.”  The CFPB should withdraw this absurd and offensive guidance and focus on helping consumers who actually need their assistance, Campbell concludes.

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CFPB Deputy Associate Director and Senior Counsel to Speak at AFSA SGA Forum

Consumer Financial Protection Bureau (CFPB) Deputy Associate Director of the Division of Supervision, Enforcement & Fair Lending David Bleicken will address attendees at the 15th Annual AFSA State Government Affairs and Legal Issues Forum. Bleicken is responsible for overseeing examinations of large bank and non-depository financial services companies, enforcing federal consumer financial laws, and ensuring fair, equitable, and nondiscriminatory access to credit. Before joining the CFPB, Bleicken served as a regulator for the state of Pennsylvania. He will speak on a panel with Robert Niemi, deputy superintendent, Ohio Department of Commerce, on how states can best interact with the CFPB.

Rebecca Gelfond, senior counsel in the office of Fair Lending & Equal Opportunity with the CFPB, will also speak on a panel with John Redding of Buckley Sandler, LLP and Will Lund of the Maine Bureau of Consumer Credit Protection. The panel will discuss vehicle finance issues and the bureau’s concerns over fair lending practices. Before joining the CFPB, Gelfond served as counsel for the Washington, D.C.-based law firm of WilmerHale.

Other sessions will explore regulating small-dollar credit in the Internet age, debt collection, and payment innovations. The forum will be held June 11-13 in San Antonio, Texas. Registration is now open here.

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Inside the Beltway
CFPB Clarifies How it Will Use Civil Penalty Fund
American Banker (04/26/13) Witkowski, Rachel

The Consumer Financial Protection Bureau (CFPB) issued a final rule clarifying how it will use its Civil Penalty Fund, which consists of the fines it collects from financial institutions. The fund was intended by Congress to compensate victims and provide financial literacy and education, but details have been vague.

The rule will require the bureau to compensate victims every six months. The allocations, which will be posted online, will be based on an individual’s out-of-pocket loss if the value cannot be determined. In addition, the rule establishes a single administrator of the fund who will be assisted by a committee of senior CFPB staff to advise in the disbursement of the funds. The CFPB is also required to brief Congress on the disbursements of the fund quarterly. Any money that remains after all disbursements of a particular enforcement action have been made can be applied to financial literacy and education.

"Congress directed the bureau to establish the Civil Penalty Fund in order to compensate people who were harmed by illegal actions," said CFPB Director Richard Cordray. "Today's rule will allow us to do this in a transparent, responsible way." The CFPB levied its first fine against Capital One last year and will receive $24 million. The first funds will be allocated to victims by May 30. The rule is final as written, but the CFPB is seeking public comment on the rule for the next 60 days.

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U.S. Consumer Bureau Tweaks Credit Card Rule for At-Home Parents
Reuters (04/29/13) Stephenson, Emily

The Consumer Financial Protection Bureau (CFPB) made critical changes to its credit card rules on April 29, after unintended consequences of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act resulted in many qualified individuals being turned down for credit cards. Stay-at-home parents, whose income is reliant upon their partner, were being declined for credit because issuers were required to consider only the individual’s ability to repay, as opposed to the entire household’s income.

"Stay-at-home spouses or partners who have access to resources that allow them to make payments on a credit card can now get their own cards," said CFPB Director Richard Cordray. Consumer groups, industry and members of Congress – three groups who rarely see eye-to-eye – came together to call for the rule tweaks to ensure that qualified stay-at-home partners have access to credit. Credit card companies have six months to implement the new regulations.

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How Watt's FHFA Nomination Helps Obama in Housing Debate
American Banker (05/01/13) Finkle, Victoria

On May 1, the Obama administration nominated N.C. Democratic Representative Mel Watt to head up the Federal Housing Finance Agency (FHFA), the government organization that oversees Fannie Mae and Freddie Mac. The two companies together currently back just over half of all American mortgages. The nomination is already receiving significant pushback from Republicans who charge that Watt is too close to the administration and will simply be a pipeline for its housing priorities, including issuing mortgages to less than qualified borrowers.

The Obama administration, however, may be alright with Watt’s nomination stalling in the Senate, as nominating anyone to the post changes the tone of the conversation. Opponents of the Obama administration have used the fact that outgoing director Edward DeMarco is still in his post to claim that the president is holding up progress on removing Fannie Mae and Freddie Mac from conservatorship. By nominating Watt – even if he is not confirmed – the Obama administration can charge Republicans with holding up the process of moving forward with Fannie and Freddie and the mortgage industry as a whole.

Mark Calabria, director of financial regulation studies at the Cato Institute, said, "If DeMarco is there, the conversation over the next six months is, ‘Why doesn't the administration have a plan?' Now they can spend six months saying, ‘Why are they blocking us … those obstructionist Republicans?” DeMarco, the outgoing director, has won significant praise from industry for his focus on expanding the role of private companies in the mortgage marketplace.

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National and State News
North Carolina Senate Panel Approves Consumer Loan Bill
Associated Press (05/01/13) Robertson, Gary

North Carolina Senate Bill 489, which would allow for higher fees and interest rates on installment loans in the state, passed out of the Senate Commerce Committee on April 30. The bill now heads to the full Senate for approval, and, if accepted, would allow industry to lend up to $15,000 per individual up from $10,000. The maximum interest rate cap on loans would fall from 36 percent to 30 percent, but popular loans between $1,000 and $5,000 would see higher rates, allowing industry to recoup the cost.

Primary bill sponsor Senator Rick Gunn (R-Alamance) said, "I believe after 30 years of inflation and normal business increases, some reasonable adjustments are necessary." "Credit should be available and at reasonable terms."

A similar 2011 bill was defeated in the House after commanders in the military took issue with various aspects that they say would have harmed young service members. Additional protections were added to SB 489, and the commanders have neither opposed nor endorsed the bill. Consumer advocates continue to argue that the increased fees and higher allowable debt limits will adversely affect consumers.

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Chicago Foreclosed Renter Protections Measure Moves Forward
Chicago Tribune (05/01/13) Podmolik, Mary Ellen

Under a new proposal being considered by the city of Chicago, lenders who repossess foreclosed buildings that are currently rental properties would have to offer tenants either $12,000 per rental unit to relocate or leases with annual rent increases of no more than two percent.

The sponsor of the ordinance, Alderman Richard Mell, views the ordinance as necessary to protect tenants who may be unaware that the property they are living in may be underwater. “I don't want to be an adversary [with the banks],” said Mell. “I want to be a partner… All I want is the banks to come in this city and say 'let's work this problem out."

Alderman Matthew O’Shea does not support the current ordinance as written because he feels it will depress home values in the area. “I believe we may have missed the mark," O'Shea said. "This ordinance seems to solve one problem while creating a larger one." The ordinance, which is supported by Mayor Rahm Emanuel, is being held in the committee until June 5, 2013, to allow lenders to discuss issues with the city, though Alderman Mell does not expect substantive changes.

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Nationwide Acceptance Pushes Footprint to 23 States
SubPrime Auto Finance News (04/29/13)

Nationwide Acceptance has expanded their business into Alabama and its sales finance program to service dealers, making them active in 23 states. "We are very excited to continue our expansion and to offer our subprime point-of-sale program to franchised and independent dealers throughout Alabama," said Martin Less, president and chief executive officer of Nationwide Acceptance.

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Chrysler Capital Commences Official Business Today
SubPrime Auto Finance News (05/01/13)

Chrysler Capital, a joint venture between Chrysler and Santander USA, officially launched in all 50 states on May 1, providing consumers with competitive financing for Chrysler, Jeep, Dodge, Ram Truck, SRT and Fiat models. Additionally, the new stand-alone company will provide financing services for dealers, including dealership construction, real estate, working capital and revolving lines of credit.

"Our top priority is providing best-in-class service to Chrysler's dealers and consumers while staying true to our entrepreneurial culture and focus on innovation," said Thomas Dundon, chief executive officer and president of Santander Consumer USA. Chrysler Capital will also be poised to offer marketing, online and mobile sales tools, and need-based customer/vehicle matching.

The agreement between Chrysler and Santander USA was originally announced on Feb. 6, and is a 10-year private label agreement.

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May 2, 2013

Forward To A Colleague

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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.