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SGA White Paper Deals with Tribal Lending
AFSA’s State Government Affairs Committee published a white paper examining tribal lending. Over the last decade, online payday lending businesses have taken over a large part of the market share from traditional brick-and-mortar payday storefronts. State and federal regulators are facing new legal challenges and issues dealing with a business that is owned or affiliated with a Native American tribe. The entities argue the doctrine of “tribal sovereign immunity” allows them to lend via the internet and circumvent the laws of the states.
The paper highlights key legal decisions that establish the doctrine of sovereign immunity and how these decisions affect state and federal regulators’ ability to regulate online payday lending products offered by Native American-backed businesses. The paper also outlines regulatory efforts by federal agencies, such as the Consumer Financial Protection Bureau (CFPB), and several states, including Colorado, Maryland, Missouri, New York and West Virginia.
CFPB Flexes Enforcement Muscles against Payment ProcessorsAmerican Banker (10/03/13) Witkowski, Rachel
Citing that the agency wants to ensure that federal consumer protection laws are being followed at every level of business, the Consumer Financial Protection Bureau (CFPB) announced on Oct. 3 that it had charged one of the largest payment processing companies with processing nearly $11.5 million in illegal upfront fees from debt-relief service providers. "If a business is enabling bad actors that hurt consumers, then we will use our authority to stop them,” said CFPB Deputy Director Steve Antonakes. “We are making the point here and it applies to all companies that do business with consumer financial providers." According to the CFPB, in 2010, Meracord, LLC processed payments for approximately 11,000 customers to debt relief companies, several of which the bureau has already pursued enforcement action against. Industry analysts note that targeting providers such as Meracord is the fastest and most efficient way to effectively cut off business to illegal operations.
The suit, filed in federal district court, alleges that Meracord’s CEO personally profited from the illegal payments. The defendants have agreed to the order without denying or admitting guilt, leaving it for the judge to approve. The order would require the company and its CEO to send detailed reports to the agency for review and require the CEO to notify the CFPB if she changes her personal residence.
Obama Nominates Janet Yellen to Lead the FedWashington Post (10/09/13) Mui, Ylan Q. and Goldfarb, Zachary A.
On Oct. 9, President Obama nominated Janet Yellen to serve as the chair of the Federal Reserve Board of Governors. If confirmed, she will become the first woman to hold the top banking post in the U.S. Yellen has served as the vice chair to current chairman Ben Bernanke since October 2010. Bernanke will step down in January.
Yellen is widely considered to continue steering the nation’s fiscal policy in the same direction as current chairman Bernanke, keeping interest rates low and continuing large scale bond purchases. A close ally of Bernanke, analysts expect that Yellen will continue to treat the economic recovery cautiously. The same analysts note that with unemployment steadily decreasing – currently at 7.3 percent – the Fed will soon have to begin tapering its $85 billion per month bond buying program. Yellen will preside as the central bank enters uncharted territory and will have to manage the country’s exit from stimulus without causing a severe slump in the process.
“While we have made progress, we have farther to go,” Yellen said after President Obama formally nominated her for the post. “Too many Americans still can’t find a job and worry how they’ll pay their bills and provide for their families. The Federal Reserve can help if it does its job effectively.”
Yellen will face Senate confirmation, where she is likely to receive near unanimous support from Democrats and only moderate pushback from Republicans who have cited the role she played in the Fed’s economic stimulus plan immediately following the financial crisis as a stumbling block.
The seven-member board already has one vacancy, and additional spots will open next year. If Yellen is confirmed as chair, the vice chair position will be open. Fed governor Sarah Bloom Raskin has been nominated for a Treasury Department post. Fed Governor Jerome Powell's term ends in January. Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, has announced her intention to leave the post in early 2014. Fed Governor Jeremy Stein could lose his tenure at Harvard if he does not return to the university by May.
CFPB Takes Aggressive Action against HMDA ViolatorsAmerican Banker (10/09/13) Witkowski, Rachel
The Consumer Financial Protection Bureau (CFPB) brought an enforcement action and levied $459,000 in fines against two non-bank mortgage companies that it alleges incorrectly reported data to the bureau. Under the Home Mortgage Disclosure Act, lenders are required to collect and report mortgage information, including applications, originations and denials by the borrower's race, to financial regulators that publicize the aggregate data annually.
“When financial institutions report inaccurate information, it obstructs the purpose of the Home Mortgage Disclosure Act and makes it more difficult for the CFPB to discover and stop discriminatory lending," said CFPB Director Richard Cordray. "We are sending a strong signal that no mortgage lending institution — whether bank or nonbank — should be able to mislead the public with erroneous data."
The CFPB stated that while the majority of lenders are in compliance with HMDA requirements, it will push lenders to ensure that they have proper compliance systems in place to audit the data internally.
Minneapolis Adds New Rules for Banks Handling Public DollarsTwin Cities Business (10/08/13) Mahoney, Kevin
The Minneapolis city council approved a responsible banking ordinance that would require companies that provide banking services to the city to contribute meaningfully to the communities in which they do business. The ordinance affects financial institutions that make home mortgage, small business, home improvement, or rehabilitation loans of any type for city programs. Financial institutions include any commercial bank, credit union, building and loan, mutual trust or investment bank.
The new ordinance requires that financial institutions that do business with the city must make information surrounding loan modifications, small and large dollar loans and foreclosure rates and information public by July 1 each year to prove that they are acting in a responsible manner within the city. In addition, large commercial banks will be required to file a community reinvestment plan bi-annually laying out the company’s plan to address financial issues within the city.
Vallejo Foreclosure Registry Frozen in Wake of Federal RulingTimes Herald (10/06/13) York, Jessica A.
A foreclosure registry ordinance mandated by the city of Vallejo, Calif., has been frozen after a federal court ruling in Chicago declared that Fannie Mae and Freddie Mac would be exempt from complying with its registration requirements. The registry in Vallejo has collected approximately $75,000 in fees from 17 properties. City officials estimate that close to 300 more homes are eligible for registration.
The federal judge in Chicago found that the ordinance did not apply to Fannie and Freddie because it essentially “amounted to a tax on the federal government.” Code enforcement officers in Vallejo are nervous, since a large majority of the homes that have been registered or are eligible have mortgages that are backed by the two companies. "I'm kind of on pins and needles right now," said Shakoor-Grantham, Vallejo’s chief code enforcement officer. "If Fannie and Freddie, in my opinion, weren't such big violators, it wouldn't be such a big deal."
As written, the ordinance calls for a $368 fee and requires registration within 10 days of vacancy. It also requires compliance with strict maintenance requirements.
Foreclosures Recede as Housing ReboundsThe Wall Street Journal (10/08/13) Dougherty, Conor
The country’s housing market is slowly edging back to normalcy, powered by the slowing rate of foreclosures, according to a new report released by CoreLogic. The report showed that 48,000 foreclosures were completed in August, down nearly 35 percent from a year ago. In addition, homes that are neither for sale nor listed for foreclosure yet are down 22 percent from a year ago. That figure sits at 1.9 million, which is the lowest level since August 2008.
Analysts note that even a normal housing market has a regular rate of foreclosures and the marketplace is slowly returning to that level as more and more houses are sold from one owner to another through a mortgage. According to the report, a normal delinquency and foreclosure rate is considered to be 5.25 percent, with new housing starts at 1.5 million and existing home sales at 5.5 million.
Volvo Names New U.S. ChiefAutomotive News (10/03/13) LaReau, Jamie
Tony Nicolosi was named acting CEO of Volvo North America on Oct. 3, as current chief John Maloney – who’s held the post since 2011 – announced that he would leave the company due to family obligations. Nicolosi, who has been with Volvo for 26 years, previously served as the CEO of Volvo Car Financial Services, and will be tasked with leading a refresh of the Volvo brand as the company looks to release several new models in the coming months and years.
"Tony is a brilliant businessman, a brand guy and a product guy," said Alain Visser, Volvo’s senior vice president for marketing, sales and customer service. "He's not going to be the bureaucrat. He is going to prove he can win here." Nicolosi will take over the role immediately, with Maloney staying on for a transition period. The new CEO will oversee the U.S. market only, as Volvo spun off the Canadian sales area into a separate division in early 2012.
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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.