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FHFA Watchdog Opens Force-Placed Insurance Review
American Banker (10/18/13) Wack, Kevin

The inspector general that oversees the Federal Housing Finance Agency (FHFA) as well as Fannie Mae and Freddie Mac announced that it will review the entities’ policies concerning lender-placed insurance products. Opponents of the products argue that the agencies have avoided taking steps to reduce the cost of lender-placed insurance.

Many opponents argue that banks paid inflated premiums for many of the lender-placed policies, but got much of the money back in commissions and fees when they went with certain insurers for coverage. Since Fannie Mae and Freddie Mac are essentially owned by the government, they argue that the American taxpayer has been forced to pay these inflated fees.

Lender-placed insurance becomes necessary when a consumer fails to maintain his or her own insurance on a home, leaving the collateral backing a loan without protection.

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AFSA News
New AFSA Chair Installed at Annual Meeting

During AFSA’s 97th Annual Meeting in Washington, Gary Phillips, chairman & CEO, Republic Finance, LLC, was installed as the association’s 2012-2013 chairman. Phillips will preside over the AFSA Board of Directors and Executive Committee meetings, serve as an ex-officio member of all AFSA committees, and represent AFSA at industry and association-sponsored conferences and meetings during his one-year term.

Phillips has been involved in the association’s leadership since 1993, when he joined AFSA’s Board of Directors. From 1993-1994, he chaired the Independents Section Advisory Board.

Phillips joined Republic Finance in 1985, and was named CEO in 1989. Before joining the consumer finance industry, he was an auditor with Arthur Anderson and held a number of positions at oil company Conoco. Phillips received an MBA from the Harvard School of Business Administration and a BBA from Emory University.

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Timely Topics Covered at AFSA Annual Meeting

AFSA’s 97th Annual Meeting, which was held October 21-23 at the Mandarin Oriental Hotel in Washington, D.C., provided industry, political, and legal updates to almost 400 attendees. Fox News Sunday moderator Chris Wallace shared his insights on gridlock in Washington and the role of the media. U.S. Chamber of Commerce chief economist Dr. Martin Regalia detailed the state of the economy and where it's headed. Thomas Goldstein, publisher of SCOTUSblog, discussed recent and upcoming U.S. Supreme Court decisions. Representative Mick Mulvaney (R-SC) and David Silberman of the Consumer Financial Protection Bureau outlined Congressional and regulatory priorities.

The conference concluded with Capitol Hill visits by approximately 100 AFSA member company executives, followed by a town hall meeting where several Members of Congress shared their perspectives.

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Three Executives Honored with AFSA’s Distinguished Service Award

In recognition of their significant contributions to AFSA and the consumer finance industry, three members were presented with the Distinguished Service Award, the association’s highest honor, during AFSA’s 97th Annual Meeting. The recipients were Jonathon Levin, president & CEO of Turner Acceptance Corp.; John Noone, principal of Noone Consulting Group; and Sharon Mancero, senior vice president of Wells Fargo Preferred Capital.

Levin serves on the AFSA Board of Directors, Independents Section Advisory Board – which he chaired 2011-2012 – the Independent Auto Finance Executives Group, the Vehicle Finance Division Advisory Board and the AFSA Education Foundation Endowment Committee.

Noone served as the 2011-2012 AFSA Chairman and as chair of the association’s Operations & Regulatory Compliance Steering Committee. He helped develop the new committee’s strategy and plot its course for the future. Noone previously served on the AFSA Board of Directors, Executive Committee and Vehicle Finance Division Advisory Board, each for three years.

Mancero serves as the chair of AFSA’s Business Partner Advisory Board and on the association’s Board of Directors. She joined the association in 2000, and has served on the Business Partner Advisory Board since 2004.

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New Member Welcome

AFSA welcomes new Active Members Security National Automotive Acceptance Co. and Porsche Financial Services Inc., as well as new Business Partners defi Solutions Inc., and Protocol Recovery Services Inc. AFSA also welcomes Deloitte Corporate Finance, LLC back as a Business Partner.

Security National Automotive Acceptance Co. is a specialty finance company that purchases and services retail sales finance contracts from auto dealers in the sale of new and used automobiles to military personnel. The company is active in 30 states and is based in Mason, Ohio.

Porsche Financial Services, Inc. provides financing to both dealers and consumers through their Atlanta -based U.S. headquarters.

defi Solutions, Inc., located in Grapevine, Texas, offers several different scalable technology solutions for loan origination and maintenance.

Protocol Recovery Services, Inc. , which is headquartered in Woodstock, Ga., has been in the collection business since 1999.

Deloitte Corporate Finance specialists bring scale, reach and local market insight, combined with market-leading industry sector and product experience. The company is headquartered in Charlotte, N.C.

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Inside the Beltway
Regulators Issue Joint Guidance on Intersection of QM, Fair Lending Law
PoliticoPRO (10/22/13) Davidson, Kate

The Consumer Financial Protection Bureau, Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and National Credit Union Administration issued joint guidance highlighting the view of the agencies that the qualified mortgage (QM) rule should be considered compatible with the Equal Credit Opportunity Act (ECOA). The regulators also noted that a bank’s decision to only make QM mortgages would not cause it to run afoul of ECOA regulations.

“Creditors should continue to evaluate fair lending risk as they would for other types of product selections, including by carefully monitoring their policies and practices and implementing effective compliance management systems,” the agencies stated. The agencies said that they expect banks to use “demonstrable factors” when determining which mortgages to make and that these factors are not materially different from what the lenders were used to historically.

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National and State News
N.Y.'s Lawsky Offers Tougher Rules for Debt-Collection Suits
American Banker (10/18/13) Cumming, Chris

N.Y. Department of Financial Services Commissioner Benjamin Lawsky sent a letter to the state’s court system proposing new rules to make it much more difficult for debt collectors to win judgments with what he considers “shoddy evidence. The Oct. 18 letter said, "It is intolerable for professional collection companies to abuse the justice system and use the courts as a tool for collecting unverifiable debts from consumers who never had a fair opportunity to contest them."

Lawsky highlighted several areas that need improvement, and recommended requiring affidavits to include information such as the date of the chargeoff and last payment, and requiring plaintiffs to attest that they have personal knowledge of the debtors' records.

Federal agencies and New York have been particularly vocal about cracking down on collection activities and have begun taking steps to require more documentation of debts and to notify consumers about the collections process.

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Banks Pushed by Regulators Send ‘Nastygrams’ to Car Dealers
Bloomberg (10/19/13) Dougherty, Carter

Under pressure from the Consumer Financial Protection Bureau (CFPB), large banks are taking a closer look at the vehicle loans they buy from auto dealers to avoid enforcement action from the bureau. Banks that have found indications of potentially discriminatory practices began issuing warning letters. The Dodd-Frank Wall Street Reform and Consumer Protection Act carved auto dealers out of the areas the CFPB could oversee, but the bureau is extending its reach through the banks it is able to monitor – those with over $10 billion revenue – and holding them accountable if they purchase discriminatory loans. Essentially, the CFPB is using the banks to police an area that it cannot.

Captive auto finance companies also began producing data under a request from the CFPB. The bureau is citing dealer reserve, or dealer markup, as an area where dealers may be discriminating against borrowers. The bureau has suggested moving toward a flat rate of compensation for dealers as an easy way for all parties to avoid discriminatory acts.

The CFPB also has cited ancillary products, such as theft protection or extended service contracts, as an area where they are increasingly looking to ensure that consumers are being fairly treated.

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EBay Probed by Regulator over Loans Pioneered by Payday Lenders
Bloomberg (10/22/13) Dougherty, Carter

EBay, the popular online auction website, announced on Oct. 18 that it received an inquiry from the Consumer Financial Protection Bureau (CFPB) regarding its Bill Me Later service. The service offers loans to consumers for products through a bank in Utah. The loans are then serviced by EBay. The bureau contends that the service mimics a loan program used by many payday lenders to avoid state usury laws.

The service allows customers to pay off products over a period of time. If they pay off the products within the first six months, there is no interest. However, if consumers do not pay in time, the interest and fees accumulate from the origination of the loan. The bureau contends that deferred interest products can end up being more expensive for consumers than a credit card.

Previously, payday lenders would partner with banks in several states where the practice was illegal and then buy the loans from the banks within state borders. The practice was outlawed in the late 1990’s, and the CFPB argues that Ebay and its Bill Me Later service is similar.

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October 24, 2013

Forward To A Colleague





Counselor Library
GoldPoint Systems
QBE
Megasys
Wells Fargo Preferred Capital
Life of the South
Black Book
Allied Solutions
ParaData Financial
XEROX
McGladrey
Overby-Seawell
Carleton, Inc.
FISERV
TCI
About
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.