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AFSA Addresses License Plate Recognition Systems

The AFSA State Government Affairs Committee submitted a comment letter opposing House Bill 289 to the Md. Judiciary Committee on Feb. 4. The bill as written would prohibit the use of automatic license plate recognition (ALPR) systems except by law enforcement agencies for certain purposes, and restrict the sharing and retention of the captured license plate data. AFSA’s letter stated that the restriction on the use of ALPR and storage of the associated data would have a particularly negative impact on its member companies because the systems play a critical role in identifying and recovering vehicles associated with owners who have defaulted on their loans and are not responding to good-faith efforts to contact them.

The letter argued that, while consumers have an expectation of privacy in their homes, that expectation does not extend to publicly visible license plates issued by the state. Moreover, ALPR technology only records the time, date and location of the vehicle and does not contain any personally identifiably information as defined and protected by the Federal Driver’s Privacy Act. The use of ALPR systems reduces the financial risk to the creditor and, in turn, keeps loan prices low, allowing for a broader field of consumers to access credit.

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AFSA Asks Third Circuit to Review Leasing Case

On Feb. 4, AFSA filed a motion asking the Third Circuit to review the district court’s decision in a Servicemembers Civil Relief Act (SCRA) case. The case, Venneman v. BMW Financial Services, addresses the statutory provision that allows service members to terminate leases in certain circumstances.

Under a provision of the SCRA, service members who exercise their right to terminate a lease are entitled to a refund of all “[r]ents or lease amounts paid in advance for a period after the effective date of the termination of the lease.” The question presented in the petition for leave to appeal is whether a CCR is a “lease amount paid in advance for a period after” the termination date.  In a decision contrary to popular practice, the lower court held that it was, and therefore must be refunded. If the lower court’s decision is not reversed, the potential exists for market disruption and the need to alter lease pricing. Lease prices for service members may increase to account for the potential need to refund the “capitalized cost reduction” (or CCR), which is similar to a down payment.

AFSA’s brief argues that a CCR should not be refunded and points out that the district court’s opinion calls into questions the well-established understanding of CCRs under state and federal law, as well as in common usage by the industry and consumer organizations. “In statutory and lay usage alike, CCRs are down payments that reduce the amount financed – not prepayments on future periodic lease payments,” AFSA wrote.

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Inside the Beltway
Elizabeth Warren Blasts Profits on Student Loans
Associated Press (02/01/14) Ngowi, Rodrique

Sen. Elizabeth Warren (D-MA) expressed outrage on Feb. 1 that the federal government is slated to make approximately $66 billion in profits from student loans originated between 2007 and 2012. The figures come from a recently released Government Accountability Office (GAO) report that estimated the government will take in nearly $185 billion over the next 10 years.

‘‘We cannot bury our heads in the sand and pretend the profits don’t exist, or use accounting tricks to make them disappear,’’ Warren said. ‘‘It’s time to end the practice of profiting from young people who are trying to get an education and refinance existing loans.’’ With eight other U.S. senators, Warren committed to eliminate profits for the government from student loans and address $1.2 trillion in outstanding student loan debt they contend hurts families and strains the economy.

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Senators Call for Update of Data Rules after Target Theft
Bloomberg (02/04/14) Hopkins, Cheyenne

The first of three hearings in the U.S. Congress regarding the recent cyber-attacks and theft of consumer data at Target have shown that U.S. laws designed to protect consumers’ payment information are in desperate need of updating, according to the Senate Banking Committee. The committee members called for a new national data breach notification system and wider authority for the Federal Trade Commission (FTC) to investigate incidents of theft.

“This is a real problem that the FTC’s enforcement authority in this area is so limited,” Sen. Elizabeth Warren (D-MA) said of the agency’s role in data-breach cases. “Data-security problems aren’t going away on their own so Congress really needs to consider whether to strengthen the FTC’s hand.” Two other hearings in the Senate Judiciary Committee and House Commerce Committee followed.

On Jan. 10, Target reported that the home and email addresses and payment information for nearly 70 million Target customers were stolen. Congressional proposals center around enhanced notification and new data security requirements.

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Democrats: Struggling Post Office Branches Could Dabble in Banking
The Hill (02/05/14) Becker, Bernie

Following a report by the U.S. Postal Service (USPS) inspector general last week, congressional Democrats are voicing support for a plan that would allow the USPS to offer basic banking services such as prepaid cards, small loans and check cashing services to customers. The report noted that offering such services in the struggling USPS branches could add billions of dollars a year in revenue.

Sen. Elizabeth Warren (D-MA) and Rep. Elijah Cummings (D-MD) both voiced support for the plan. Cummings noted that he would be in favor of broadly opening pathways that would allow the USPS to seek additional revenue. Warren specifically referenced the USPS idea in a Huffington Post opinion piece. GOP lawmakers have argued, however, that local post offices should not be given more authority to compete with private sector businesses, particularly considering that they enjoy certain tax exempt statuses.

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National and State News
Date Launching Subprime Card Product
PoliticoPRO (02/04/14) Davidson, Kate

Raj Date, the former deputy director of the Consumer Financial Protection Bureau (CFPB), is expanding the offerings of his firm, Fenway Summer. The firm will be launching a subprime credit card in addition to mortgages targeting borrowers who may not meet criteria for a qualified mortgage. Details of the card, which are typically marketed to consumers with credit scores below 660, are still being finalized. To offer the cards, the firm is teaming up with a yet to be named bank.

Marla Blow, the former CFPB assistant director who oversaw card and payments markets, joined Fenway Summer last month to lead the card venture. Congressional Republicans have questioned whether officials leaving the firm are benefiting from rules they wrote while there.

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Good News, Lenders: FHA to Accept E-Signatures
American Banker (01/30/14) Kilgore, Austin

Effective immediately, the Federal Housing Administration (FHA) will begin accepting e-signatures on all mortgage insurance endorsement and servicing documents and will accept e-signatures on promissory notes beginning Dec. 31, 2014. The FHA stated that the new policy would make it much easier for lenders and servicers to interact with the administration. Previously, the FHA only accepted e-signatures on third-party contracts.

Industry analysts note that the increased use of e-signatures will make it far easier for originators to issue documents. Additionally, servicers and originators will no longer have to produce separate documents depending on which backer mortgages are sold to. The electronic versions of the forms are also expected to reduce errors and create more time and opportunity for consumers to carefully review documents before signing.

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Yellen Sworn In as Fed Chair as Bernanke Heads to Brookings
American Banker (02/03/14) Borak, Donna

Janet Yellen was sworn in as the 15th Chair of the Federal Reserve Board of Governors on Feb. 3, becoming the first woman to hold the post. Yellen previously served as vice chair of the central bank, and her tenure will run for four years through 2018. She was confirmed 56-26 in the Senate in early January.

Her predecessor, Ben Bernanke, agreed to join the Brookings Institution as a distinguished fellow in residence with the Hutchins Center on Fiscal and Monetary Policy. Bernanke has received widely positive acclaim for his time as Fed chair, with many commentators noting the instrumental role he played in rescuing the nation from the brink of economic disaster. Bernanke announced that he will write a book while at Brookings.

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Stay Up To Date by Following AFSA on Twitter

For up-to-the-minute industry and association updates, follow the American Financial Services Association on Twitter at @AFSA_DC. For State Government Affairs-specific tweets, follow @AFSA_SGA. To join the conversation about one of our meetings, use our hashtag #AFSAmtgs to interact with AFSA staff and other attendees.

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February 6, 2014

Forward To A Colleague

Northridge Software
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Black Book
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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.