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Lenders Want Answer on Auto Loans
PoliticoPRO (04/14/14) Davidson, Kate

As the Consumer Financial Protection Bureau (CFPB) continues to seek evidence of discrimination in indirect auto lending, financial institutions have been stuck in the middle for some time. Short of switching to a flat-fee format – something that CFPB Director Richard Cordray has said the bureau is not looking to mandate – banks and financial institutions have no guidance as to how to compensate dealers that arrange financing on their behalf.

The CFPB and the Justice Department have used disparate impact theory to argue that even though no direct discrimination is taking place, a pattern of discrimination has emerged such that protected classes of citizens have received higher interest rates than others.

Congress has questioned the bureau’s lack of guidance on the matter. Representative Spencer Bachus (R-AL) sent a letter on April 1 asking the bureau to identify at least one example of an acceptable method for compensation.

Given the absence of guidance from the bureau, industry has attempted to find solutions. For example, the National Automobile Dealers Association (NADA) unveiled a model compensation plan that would impose a standard markup and then adjust the rate downward only in defined, documented circumstances. Cordray noted the plan was “encouraging,” but other officials at the CFPB have said it does not go far enough. Officials at the Department of Justice, however, voiced their support for the plan, leading many in the industry to ask if it is good enough for the Department of Justice, why is it not good enough for the CFPB?

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Tim Stanley Receives Outstanding Independent Award

Timothy Stanley, president & CEO, Heights Finance Corporation, received AFSA’s Outstanding Independent Award on April 9 during AFSA’s 31st Annual Independents Conference & Exposition in Palm Springs, Calif.

The Outstanding Independent Award is given to an individual who has contributed significantly to the success of the financial services industry and the AFSA Independents Section through active involvement and participation in the community and the association. Stanley led the association as the 2013 chairman of the board. On behalf of the association, he interviewed Consumer Financial Protection Bureau director Richard Cordray during the 2013 Independents Conference and met with key members of Congress.

Stanley has been involved in the association’s leadership since 2004, when he joined AFSA’s Board of Directors and Independents Section Advisory Board. From 2007-2009, he chaired the Independents Section Advisory Board. Currently, Stanley chairs the Advisory Board for the AFSA Education Foundation’s EDGE professional development program at Mercer University.

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MoneySKILL Reaches Half Million Mark

Since its launch ten years ago, the AFSA Education Foundation’s personal finance course MoneySKILL® has steadily increased its reach among high school, college and middle school students. Enrollments recently surpassed the 500,000 mark.

The free online course is used by teachers, parents and community leaders from every state, the District of Columbia, and several foreign countries to teach personal finance concepts to young adults. More than 74,000 students have been enrolled in the course in the 2013-2014 school year alone.

MoneySKILL teaches money management fundamentals in the areas of income, expenses, credit, saving and investing, and insurance. The high school/college course content is delivered online through a series of 36 modules with written text reinforced by audio narration; the middle school version consists of 12 modules.

Each year, the course content and technology are upgraded to reflect changes in federal laws, new statistics, and relevant events in financial services. Dr. Lewis Mandell, professor emeritus and former business dean, SUNY Buffalo, authored the course and conducts the annual reviews and revisions.

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Inside the Beltway
Yellen Says Job Weakness Forestalls Raising Rates
The New York Times (04/16/14) Schwartz, Nelson D.

The economy continues to improve and point to stronger times ahead and yet Federal Reserve Chairwoman Janet Yellen noted during remarks on April 16 that she expects interest rates to remain relatively low for the foreseeable future in order to ensure that the American economy is on firm footing. She noted during the remarks that a robust and healthy job market seemed to be “more than two years away” and thus the “economic conditions for some time, warrant keeping short-term interest rates below levels likely to prove normal in the longer run.” Yellen made the remarks to the Economic Club of New York.

She highlighted several economic indicators that continue to point to a weaker economy despite the fact that the headline unemployment rate continues to fall. It currently stands at 6.7 percent. She emphasized the need for the Fed to remain vigilant and nimble as the nation continues its recovery. She admitted also, that the recovery has been frustratingly slow. “So we have, indeed, had a disappointingly slow recovery, and our consistent expectations for a pickup in growth have been dashed over a number of years,” she said. “And the labor market is behaving in some perplexing ways and showing patterns that are novel,” Yellen said.

As spring warms temperatures, analysts expect spending and economic activity to increase. Yellen also addressed this subject in relation to the Fed’s survey of its regional banks and noted that she believes warmer temperatures and more pleasant weather will contribute to more favorable economic climates. She also noted that she hopes that the economy will be able to match Fed projections for unemployment to fall to 5.2 to 5.6 percent by the end of 2016.

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National and State News
Economy Thawing Out, but Pockets of Weakness Remain
The Wall Street Journal (04/16/14) Morath, Eric and Portlock, Sarah

According to the Federal Reserve’s regional economic survey known as the beige book, which was released on April 16, the economy continues to strengthen across the nation and across a number of industries. Warming temperatures around much of the country pushed many consumers into stores, which also increased demand for business loans. Some sectors continue to grow more slowly than analysts would like, but the report points to a broad spring break out.

The Federal Reserve banks in eight of the 12 districts reported positive economic activity. Chicago and New York reported that spending and investment had made important rebounding efforts after a longer and colder winter than typical of both regions. Washington, D.C. reported stronger than normal spring tourist traffic, and ski resorts in the United States reported positive economic conditions due to the extended snow season.

The Fed noted in the report that it continues to monitor the “scattered” reports of price increases in food and other key indicators of inflation. The overall labor market condition remains “generally positive.”. Housing, however, has yet to break out from the grips of winter, as Chicago-area realtors report that real estate home sales declined due to the frigid temperatures and Atlanta brokers noted that higher prices and limited selection led to negative activity.

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U.S. Auto Sales Rebounded to Lively Pace in March
The Wall Street Journal (04/01/14) Rogers, Christina and Kell, John

After two months of less than stellar reports, auto sales ticked upwards in March to one of the highest levels in the last several years. Light-vehicle sales rose 5.7 percent to 1.54 million, elevating the annualized rate to 16.4 million. The sales brought some relief to the auto industry, which has experienced sales below expectations for the first few months of the year due to colder weather. Dealers and financers alike are optimistic about the spring and summer months. Analysts forecast that new-vehicle sales could reach more than 16 million this year.

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Nebraska Senator Introduces 2 Bills to Reform CFPB
SubPrime Auto Finance News (04/16/14)

Sen. Deb Fischer (R-NE) has introduced two bills that would fundamentally change how the Consumer Financial Protection Bureau (CFPB) is structured and how it operates. The Consumer Financial Protection Act of 2014 (S. 2213) would replace the CFPB’s single director, currently held by Richard Cordray, with a bipartisan, five-member commission appointed by the president and confirmed by the Senate. Commissioners would serve staggered five-year terms and no three commissioners could be from the same political party. The legislation would not take effect until after Director Cordray’s current term has ended on July 16, 2018.

The second bill, entitled the CFPB Improvement Act of 2014 (S. 2212) would change the requirement for the Financial Stability Oversight Council’s (FSOC) voting members to overturn CFPB regulations from two-thirds to a simple majority. The bill also would exclude the CFPB director from the vote.

The same reforms were recently passed in the House by Rep. Sean Duffy (R-WI), a member of the House Financial Services Committee. The action by Sen. Fischer is the first legislative attempt in the Senate to restructure the bureau.

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April 17, 2014

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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.

The American Financial Services Association, or AFSA, is the national trade association for the consumer credit industry, protecting access to credit and consumer choice. The association encourages and maintains ethical business practices and supports financial education for consumers of all ages.