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CFPB to Host Vehicle Finance Field Hearing on Sept. 18

The Consumer Financial Protection bureau (CFPB) announced that it will hold a field hearing on vehicle finance in Indianapolis on September 18 beginning at 11 a.m. Eastern. The CFPB did not provide any specifics on the topics to be addressed, although it typically uses its field hearings to make announcements.

The bureau invited AFSA to participate in the field hearing to provide the industry’s perspective on vehicle finance. A member of the AFSA leadership, yet to be determined, will participate on a panel during the field hearing.

AFSA will keep its members updated as we receive more information on the content and structure of the field hearing.

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AFSA Attends NCSL Annual Legislative Summit

AFSA staff attended the National Conference of State Legislatures’ (NCSL) Legislative Summit in Minneapolis Aug. 19 to 22 and hosted a joint reception with the Card Coalition honoring legislators who serve on financial services committees along with their staff.

During the business meeting of the Communications, Financial Services and Interstate Commerce Committee, a resolution urging Congress to enact legislation reinstating the Glass-Steagall Act was indefinitely postponed by a vote of 17-2-1. The committee also sponsored a session on “crypto-currencies” that explored the policy implications virtual currencies present for the states. NCSL elections analyst Tim Storey gave a comprehensive preview of the upcoming state elections to summit attendees, highlighting Arkansas, Colorado, Connecticut, Iowa, Kentucky, Maine, Minnesota, New Hampshire, New Mexico, New York, Nevada, Pennsylvania, Oregon, Washington, West Virginia, and Wisconsin as state legislative battlegrounds, but predicting very few chamber switches in the fall election.

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AFSA Cautions CFPB Regarding Debt Collection Survey

On Aug. 22, AFSA responded to the Consumer Financial Protection Bureau’s (CFPB) revised survey on debt collection. While the revised survey is an improvement on the previously proposed version, the difference between creditors and debt collectors still needs to be more clearly emphasized. “The final survey should be designed to obtain separate lines of information relating to creditors and debt collectors,” AFSA stated. “This will allow the CFPB to collect and analyze appropriate data and promulgate more appropriate rules for each industry, if necessary."

If the CFPB cannot distinguish between problems consumers may experience with debt collectors and problems consumers may experience with creditors collecting their own debt, the CFPB “may write rules in areas where rules are not necessary,” AFSA stated. This could create unintended consequences for consumers, such as additional red-tape or difficulty in getting future credit.

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AFSA Members Share Expertise through White Papers

A new section of AFSA’s website highlights the expertise of the association’s Premier Business Partners through a series of white papers. Subjects such as credit scoring, accounting for specialty finance companies and data driven collections are addressed in the content-rich white papers. Experian, McGladrey, VantageScore, Black Book, Allied Business Systems and ACI Universal Payments have contributed white papers thus far.

Members can access the white papers on AFSA’s Premier Business Partner White Paper web page. Business Partners interested in contributing a white paper should contact Jenny Bengtson at [email protected].

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SGA Issues 50-State Survey on Convenience Fees

AFSA’s State Government Affairs Department published an extensive 50-state survey on payment convenience fees on Aug. 25. The survey examines on a state-by-state basis whether a debtor can be charged a convenience fee that is paid all or in part to a creditor for taking a payment via an alternative method, and paid entirely to a third-party payment processor for making a payment via an alternative payment method. For the purpose of the survey, an alternative payment method is a method of payment other than a creditor’s regularly accepted free payment method, such as a single credit card phone transaction or internet payment. AFSA members can view the survey here.

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Inside the Beltway
SEC Approves Rules Aimed at Hidden Risks of Asset-Backed Securities
Wall Street Journal (08/27/14) Ackerman, Andrew

The Securities and Exchange Commission (SEC) voted unanimously on August 27 to require banks and other firms to provide investors with more details about mortgages and other loans pooled into asset-backed securities (ABS). The rules also would permit investors more review time before purchasing ABS instruments. The investor information rule will require data such as borrowers’ credit scores, debt levels and other metrics that are designed to assist investors in determining the strength of an ABS. Opponents of the rule have noted severe privacy concerns surrounding the release of credit score and other data.

On a 3-2 vote the SEC also voted to make drastic changes to how ratings firms such as Moody’s Investors Service and Standard & Poor’s Ratings do business. The two firms and similar companies have been sharply criticized for their role in failing to sound the alarm on flawed mortgage ABS leading up to the financial crisis.

The new rules were required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and will cover approximately $600 billion of the ABS market overseen by the SEC. Private placements are not covered under the new rules, although the SEC reserved the right to extend the rules to these instruments later and still will be monitoring them.

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FHA Tweaks Interest Rate Rules to Align with QM
National Mortgage News (08/27/14) Collins, Brian

The Federal Housing Administration (FHA) is tweaking its interest rate rules in order to align them with the Qualified Mortgage (QM) rule. The change will make it easier for home sellers to schedule closings without being penalized by interest charges. The QM rule, which was passed by the Consumer Financial Protection Bureau (CFPB), prohibits the full interest charge payment that was previously required when settling a mortgage on either the 5th or 20th day of the month. The fee, which the FHA previously permitted, usually went to Ginnie Mae mortgage-backed securities investors. The FHA also announced it is changing its requirements concerning notifications on adjustable-rate mortgages.

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National and State News
'No Evidence' of Subprime Auto Loan Bubble, Equifax Economist Says
Automotive News (08/27/14) Henry, Jim

On Aug. 25, Equifax joined a chorus of other firms and organizations decrying claims that a bubble is forming in the subprime auto finance marketspace. “ Our position is simply that there’s an easy tendency to decry subprime in general because of what happened in the past, and it’s not fair to do that,” said Dennis Carlson, deputy chief economist at Equifax, who co-authored a report “Not Yesterday’s Subprime Auto Loan,” with Equifax SVP and chief economist Amy Crews Cutts.

In July, the New York Times published an article linking subprime auto finance with subprime mortgages, a connection which Carlson and many others believes is incorrect.  Like many other analysts, Carlson noted that there is simply no data to support the conclusion that a bubble is forming in subprime auto finance. “The plural of anecdotes is not data,” he said. Industry data shows that delinquencies, losses and repossessions are at historic lows. Analysts with Moody’s Analytics, Standard & Poor’s Ratings Services, and the New York Federal Reserve Bank have made similar statements. “There’s little to no evidence that there’s a subprime bubble, in any way, shape or form,” Carlson said. “That doesn’t mean there couldn’t ever be; it doesn’t mean there’s no need to monitor the market.”

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Economic Growth for the Q2 Revised up to 4.2%
USA Today (08/28/14) Davidson, Paul

According to a revision by the Commerce Department on August 28, the nation’s economy expanded at a larger rate than expected in the second quarter at 4.2 percent, up from 4 percent as was previously announced. Economists had expected a downward revision to 3.9 percent. Business investments and exports both increased, leading the upward tick in growth. Because of the extreme winter, the national economy shrank in the first three months of the year. Following that dismal performance, the market has shifted into high gear as the job market grows, consumer confidence increases and factory output hits all-time highs.

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2014's New Home Market is 'Running in Place'
USA Today (08/25/14) Carroll, Doug

New home sales remained relatively unmoved over the last month, continuing their bumpy road around the same pace over the last ten months. According to the Census Bureau, July’s seasonally adjusted annual rate was down from June’s at 4.2 percent or 412,000. New home sales are running nearly 1.8 percent behind last year’s figures, and only the south is reporting modest gains at 5.4 percent. The northeast region is down considerably at 19 percent. A single bright spot is that the number of new homes increased to its highest point in nearly four years to 205,000 in July.

The latest numbers from the government are reinforcing the belief among economists that the housing recovery continues to be a disappointment, but is strong enough to elicit some hope that a robust uptick is right around the corner. The U.S. average for mortgage rates remains low as well; a 30-year fixed rate mortgage clocks in at 4.10 percent, down from 4.58 percent at this time last year.

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Nonbank Mortgage Lenders Bounce Back
http://www.consumerfinance.gov/blog/ (08/27/14) Wall Street Journal

As traditional banks retreat from the home-loan market, specialty finance companies have stepped in to fill the void. Because of large mortgage settlements in the wake of the financial crisis, large banks have been required to carry more capital and tighten lending standards across the board. As a result, they have taken a break from expanding their mortgage lending business, allowing specialty lenders to get into the business. Companies such as Quicken Loans, which is the largest nonbank mortgage lender, have stepped into the marketplace to fill the space left by the banks, and in doing so, have equaled many of the banks’ profits.

The rise in nonbanks is good news for consumers as well, as those who may not normally be able to get a bank loan are able to secure financing from nonbank specialty mortgage institutions. Nonbank mortgage lenders have made up 23 percent of all mortgages in the first six months of 2014 up from just 17 percent last year. Industry analysts note that because of more restrictive regulation, banks have been less likely to lend to individuals with less-than-pristine credit.

The last time specialty mortgage lenders grasped a hold of the market was during the housing boom, when subprime lenders made risky loans. Now, the finance companies say, they are targeting the safe borrowers who may not be able to get financing from banks that have been forced by excessive regulation to pull back business.

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August 28, 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 [email protected] 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.