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AFSA Federal Government Affairs Highlights 2014 Priorities
AFSA’s Federal Government Affairs Department published its annual list of federal priorities, which seek key legislative and regulatory reforms. The department will continue to press for several reforms to the Consumer Financial Protection Bureau, including subjecting the agency to the appropriations process, revising its leadership structure from a single director to a bipartisan commission and subjecting new regulations to that commission’s approval before enactment. AFSA also seeks to include a statute of limitations and require evidentiary standards for enforcement actions.
The 2014 federal priorities explain key issues that AFSA supports through legislation in the areas of arbitration, mortgage lending, ancillary products, and privacy. The document also outlines key changes that are necessary in the regulatory process and in maintaining supervisory privilege.
Federal Court Rejects Challenge to CFPB’s ConstitutionalityInsideARM (01/15/14) Kaplinsky, Alan
A federal court in California has rejected a challenge by law firm Morgan Drexen challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB). This case is the first to be ruled on its own merits. Morgan Drexen filed the lawsuit in Washington, D.C., claiming that the structure of the bureau violates the constitution. The lawsuit stems from an enforcement action made by the bureau that Morgan Drexen had charged unlawful advance fees for debt relief services. The D.C. court dismissed the suit, but claimed that Morgan Drexen could raise their constitutional argument. The firm did so in California and claimed that the CFPB failed to state a claim for relief.
In the California decision, the court found that none of the structural elements of the CFPB cited by Morgan Drexen as unconstitutional were so. The court also dismissed Morgan Drexen’s charge that the CFPB’s enforcement does not extend to attorneys. The court found that the services rendered did not support or were not incidental to a practice of law.
How the Senate's Filibuster Change Could Protect Dodd-FrankAmerican Banker (01/14/14) Finkle, Victoria
The change in Senate rules regarding the filibuster late last year could have downstream effects on the financial sector, according to many industry analysts. On Jan. 13, Senators confirmed the last of the judges to fill the U.S. Court of Appeals for the D.C. Circuit, which is the court that hears many challenges to agency rules and regulations. The court has traditionally leaned conservative, but with Democratic appointees filling the vacancies, the tables may tip in the favor of agencies more often. When a case is heard, a random selection of three judges is selected to serve on a panel.
Before the rule change, the court had been split four and four. The three new judges were not being challenged in the Senate based upon their qualifications, according to many, but Republicans charged that the court did not need more judges and that President Obama was attempting to pack the court.
Court watchers note that the appointment of the judges does not necessarily forecast the direction of the court permanently as it is difficult to say where each judge will land on a specific case.
Federal Consumer Agency Ponders Its Next CrusadesThe New York Times (01/10/14) Siegel Bernard, Tara
After a year packed with regulation, enforcement and rulemakings, the Consumer Financial Protection Bureau (CFPB) is set to face new hurdles, including a Congress that wants to restrict some of its broad-reaching power. The CFPB has a full agenda planned for 2014.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the agency, mandated that the CFPB conduct a study on arbitration clauses for consumer financial products and services. The CFPB will be focused on overdraft fees and services. Banks are no longer allowed to charge overdraft fees unless consumers opt in for the service, but consumer advocates argue that banks have not entirely changed their practices.
The agency has identified student loans as a serious issue that must be tackled in 2014. Some of the most common issues highlighted by the CFPB included too few options for reducing payments, inaccurate payment processing, and errors when making early or extra payments to pay down balances. The agency also wants to determine why so many borrowers resort to private student loans when they have not exhausted all of their public student loan options.
The CFPB has received more than 31,000 consumer complaints about debt collection companies and it has begun laying the groundwork for new rules to govern the market. Consumers argue that they are consistently harassed by collectors, even after they pay off balances. Additionally, the CFPB will target credit report disputes; the agency says it has received countless complaints from consumers noting that they find it extremely difficult to correct errors on their credit reports. The CFPB also will target prepaid cards as there is no industry standard for disclosing fees or protections that come with cards.
Lawsky Pushes for Aggressive Steps Against High-Cost LendersThe Wall Street Journal (01/13/14) Johnson, Andrew R.
N.Y. Department of Financial Services Regulator (DFS) Benjamin Lawsky is pressing the banking industry to take additional steps to regulate the automated clearinghouse (ACH) system that high-cost lenders use to access consumers banks accounts and take payments. Lawsky said a current proposal by trade group NACHA does not go far enough to stop out-of-state payday lenders whose loans are violating state law.
"The Department believes these proposals do not adequately address the current abuses of the ACH network by…payday lenders who make usurious loans in and to New York," Lawsky wrote in a comment letter submitted Jan. 13 to the group. The organization "should adopt stronger measures to prevent online payday lenders and others from using the ACH network to violate state and federal laws."
In November, NACHA proposed new regulations intending to strengthen risk-management measures by banks using the ACH network. The proposed new rules also empowered NACHA to initiate enforcement actions against banks and third-party firms that allow for use of the ACH network to process payments in lending transactions that violate the rate cap.
Regions Exits Deposit Advance MarketWack, Kevin (01/15/14) American Banker
Regions Financial announced on Jan. 15 that it is discontinuing its deposit advances product, Ready Advance. As of Jan. 22, the company will stop accepting new applicants for the product. Regions plans to phase out the product by the end of the year and is working on a transition plan for existing customers.
The move follows guidance issued in November by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. telling banks to either discontinue or overhaul the product. Although Regions is not regulated by either entity, it is the first of six U.S. banks offering deposit advance loans to pull the product. Analysts expect the Consumer Financial Protection Bureau to write rules in coming months related to the product that would apply to all banks.
Regions does not intend to exit the short-term consumer loan market. "It's clear that consumers have a need for small-dollar loans, and we believe banks have a responsibility to meet that need," said John Owen, head of business groups for Regions. The company plans to offer a new small-dollar secured loan for consumers who want to borrow as little as $250. The loans will be secured by a minimum $250 in a customer’s savings account or certificate of deposit. Regions also is developing an unsecured line of credit to meet the needs of a broader customer base.
Parry Departing Exeter Finance; New Chief Credit Officer AnnouncedSubPrime Auto Finance News (01/14/14)
Exeter Finance Corporation founder and chief credit officer Daniel Parry announced on Jan. 13 that he will be leaving the company to pursue other business ventures. He will remain with Exeter as a consultant over the next few months to ensure that a smooth transition takes place between he and his replacement Karyn Lentz.
"We greatly appreciate Daniel's contributions over the past eight years and wish him success in his new endeavor," said Exeter chief executive officer Mark Floyd.
Lentz joined Exeter in 2012 and has led several areas of Exeter’s business in her former position as senior vice president of risk management. Before joining Exeter, Lentz spent 11 years with AmeriCredit Financial Services, where she most recently served as senior analyst to the vice president. "Daniel built an outstanding risk management group at Exeter, which makes the transition to Karyn's leadership a natural one," Floyd said. "Karyn's experience, expertise and leadership will continue to be a valuable asset for Exeter."
The company also announced that chief financial officer Cliff Buster will oversee structured finance responsibilities.
Volvo Finance Chief Becomes New North American President & CEOSubPrime Auto Finance News (01/15/14)
Tony Nicolosi has been named the new president and chief executive officer of Volvo Cars North America. Most recently, he served as president and CEO of Volvo Car Financial Services (VCFS). Nicolosi has served as acting president since October and will continue in his role with VCFS until a successor is named. Nicolosi has been with Volvo since 1987.
"The U.S. market is vital for a strong Volvo Car Group and Tony proved he is a strong and motivated leader who will revitalize our U.S. operation. I am delighted Tony has accepted to lead our U.S. business," said Alain Visser, senior vice president of marketing, sales and customer service at Volvo Car Group. "The U.S. is our largest market globally; VCNA's success is vital to a larger transformation taking place at Volvo."
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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.