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CFPB Fair Lending Director Addresses Record Crowd at AFSA VF Conference

Compliance was a hot topic at AFSA’s 18th Vehicle Finance Conference & Exposition, held Jan. 22-24 in New Orleans. Consumer Financial Protection Bureau (CFPB) Assistant Director of the Office of Fair Lending & Equal Opportunity Patrice Ficklin spoke to a standing room only crowd and answered questions posed by AFSA President & CEO Chris Stinebert. Ficklin emphasized that the Bureau believes compensation models utilizing discretion lead to greater fair lending risk. She also detailed four steps indirect auto lenders could take to implement dealer monitoring that were first mentioned in the CFPB’s March 21, 2013 Indirect Auto Lending bulletin. The four steps are: explaining to participating dealers the Equal Credit Opportunity Act and expectations for compliance with it as well as stating the dealers’ obligation to mark up interest rates in a non-discriminatory manner; conducting regular analyses of pricing data, both dealer-specific and portfolio-wide, for potential disparities on prohibited bases; taking prompt corrective action against dealers if any unexplained disparities are found; and remunerating any affected consumers.
Compliance was heavily discussed during the dealer and CEO panels, and was the focus of several breakout sessions. The conference set a new attendance record, with close to 650 participants. Technology was another hot topic at the conference, which closed with a look at growing trends by Ford Futurist Sheryl Connelly.

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AFSA Installs New Vehicle Finance Division Chair

At the conclusion of AFSA’s 18th Vehicle Finance Conference & Exposition, Joy Falotico, Executive Vice President, Marketing, Sales and the Americas, Ford Motor Credit Company, was installed as chair of the association’s Vehicle Finance Division Advisory Board. Falotico, who also serves on the AFSA Board of Directors and Executive Committee, succeeds Andrew Stuart, President & CEO, VW Credit, Inc.

In this role, Falotico will oversee the division’s initiatives and chair the 2015 Vehicle Finance Conference & Expo, January 20-22, 2015, in San Francisco. More than 800 individuals belong to the division, which recently commissioned a study on indirect auto lending.

Falotico is responsible for Ford Credit’s marketing and sales globally, and business operations in North and South America. She joined the company in 1989 and has diverse experience in all facets of automotive retailing operations.

Falotico holds bachelor’s and master’s degrees in business administration from Truman State University and DePaul University, respectively.

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Vehicle Financing Educational Resource Updated

The American Financial Services Association Education Foundation (AFSAEF) and the National Automobile Dealers Association updated the popular Understanding Vehicle Financing brochure to reflect relevant vehicle finance laws, terms and statistics. Prepared in cooperation with the Federal Trade Commission, the brochure takes consumers through the vehicle financing process and highlights the importance of budgeting, checking one’s credit report, and shopping around.
Originally produced in 2003, the brochure has provided important information to help millions of consumers understand vehicle financing options and evaluate their own financial situations before financing or leasing a new or used vehicle. The brochure contains several useful tools, such as a worksheet to determine an affordable monthly payment, a glossary of common vehicle financing terms, and a checklist of recommended actions to take before, during and after visiting the dealership.

“Buying a vehicle is one of most important purchases that a consumer can make, and this brochure lays the foundation for making a wise financial decision,” said Susie Irvine, AFSAEF president and CEO. “Understanding Vehicle Financing is our most popular resource because it walks consumers through the entire process, from pre-planning to after the purchase.”

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New Member Welcome

AFSA welcomes back Active Member Finance and Thrift Company of Porterville, Calif. and welcomes new active members U.S. Credit, Inc. and Paramount Capital Group, Inc.
Serving the California Central Valley since 1925, Finance and Thrift provides a wide variety of financial products from personal and auto loans to savings and money market accounts to financial literacy courses.
U.S. Credit, headquartered in Newberry, FL, specializes in both commercial and consumer lending in medical mobility, residential generators, vehicles and much more.
Paramount Capital Group, Inc. is a nationally recognized specialty financial services company providing tuition and sales financing for CDL, trade and career schools, elective surgery providers, and merchants since 1997. The company is based near Philadelphia.
AFSA also welcomes 13 new Business Partners:
  • Headquartered in Phoenix, BillingTree simplifies and accelerates the way a business receives payments.
  • Blank & Meenan, P.A. is a Tallahassee, Fla.-based law firm that, for over 27 years, has used its extensive regulatory and litigation experience to serve clients who encounter issues with governmental agencies and other entities to aid them in devising creative solutions.
  • CAC Services is the fastest growing field contact company in the U.S. and serves  auto finance companies, banks, credit unions, mortgage lenders, auto lessors, collection agencies and insurance companies. CAC is based in Irvine, Calif.
  • Clarity Services is a credit reporting agency that provides information to providers and develops efficient and effective data reporting products to help businesses reduce high0risk lending. Clarity was founded in 2008 and is based in Clearwater, Fla.
  • Golden Eagle Insurance, based in Johnstown, Ohio, has been the leading provider of blanket, lender-placed and other loan-related insurance products since 1995.
  • Kelley Blue Book has been the trusted source for car values, car reviews and research tools since Les Kelley produced his first book of car values in 1918. The company is headquartered in Irvine, Calif.
  • Killgore Pearlman, P.A. serves a broad spectrum of industries and professions ranging from small business entrepreneurs to large multinational corporations. The firm's expertise includes every aspect of the automotive industry, real estate developers, banks, title companies, insurance companies, and a variety of other companies.
  • Krieg DeVault LLP has been providing clear, practical legal advice to clients since its founding over 130 years ago in Indianapolis. The firm now serves numerous clients across the Midwest and the country.
  • The NADA Used Car Guide provides its customers with the most comprehensive and market-reflective vehicle information available today. NADA has continuously transformed to meet the ever-changing needs of today’s leading industry professionals.
  • Global banks power their complex operations with Oracle’s integrated platform of intelligent applications and powerful hardware.
  • OSG Billing Services is a full service provider of billing and customer communications needs.
  • Smith Debnam Narron Drake Saintsing & Myers, LLP, established in 1972, has a wide range of expertise, covering both business and personal concerns. The law firm is based in Raleigh, N.C.
  • Zest Finance  uses big data to revolutionize underwriting and credit scoring to expand opportunities to customers that may be overlooked by other companies. Zest is headquartered in Hollywood, Calif.

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Inside the Beltway
CFPB Accuses PHH Corp. of Engaging in Kickback Scheme
American Banker (01/29/14) Witkowski, Rachel

The Consumer Financial Protection Bureau (CFPB) alleged that PHH Corporation ran a mortgage insurance kickback scheme for more than 10 years. The bureau is seeking civil fines and restitutions against the N.J.-based company and its subsidiaries, alleging that it inflated the cost of mortgage insurance to consumers as early as 1995 until as late as 2009.

The CFPB noted that an investigation revealed that PHH had taken reinsurance fees as kickbacks resulting in higher insurance premiums for borrowers. Reinsurance is a common practice throughout the industry, as it spreads the risk for mortgage insurers. PHH was, according to the complaint, originating loans and then referring borrowers to partner mortgage insurers, which then purchased reinsurance from PHH.

PHH vowed to vigorously fight the charges. “We believe the CFPB's allegations grossly mischaracterize the legitimate business activities of our mortgage reinsurance subsidiary, Atrium," said PHH spokesperson Dico Akseraylian.

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Congress Members Turn Tables on CFPB in New Consumer Polling
Congress Members Turn Tables on CFPB in New Consumer Polling (01/27/14) Oliva, Jason

The House Financial Services Committee added a web form on its site to allow consumers, business owners and organizations to share their experiences with the Consumer Financial Protection Bureau (CFPB) and specifically, how the bureau’s policies have affected their business practices. “Holding Washington accountable to hardworking taxpayers is a never-ending battle,” said Committee Chairman Jeb Hensarling (R-TX). “That’s especially true when it comes to the Bureau of Consumer Financial Protection, the most powerful and least accountable government agency in all of Washington."

The committee is currently requesting feedback from individuals and organizations on the CFPB’s qualified mortgage rule and specifically wants to hear how the policies have impacted homeownership opportunities for low and middle income Americans. Those who choose to share their thoughts can do so publicly or confidentially.

Chairman Hensarling highlighted his commitment to keeping information confidential if consumers wished it that way, citing the 2013 IRS scandal. “Since many citizens today justifiably fear reprisals when it comes to speaking their mind about Washington agencies—just witness the IRS scandal—they can tell us if they don’t want their story shared with anyone else,” Hensarling said. “We will not share any story or personal information without permission.”

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National and State News
NADA Reveals Dealership Fair Lending Compliance Program
AutoRemarketing (01/24/14) Rubenoff, Sarah

During their 2014 convention, the National Automobile Dealers Association (NADA) announced a new program called the NADA Fair Credit Compliance Policy and Program. The association established the optional program, contending that it will strengthen a dealer’s ability to comply with fair credit laws while preserving their ability to price credit to consumers in a competitive fashion.

The Consumer Financial Protection Bureau (CFPB) has pushed flat fees for arranging financing, which would prohibit a dealer from cutting into their own profit margin to compete with banks, credit unions or other dealerships. Andy Koblenz, NADA executive vice president for legal and regulatory affairs and general counsel, and Paul Metrey, NADA chief, regulatory counsel, financial services, privacy and tax, discussed the announcement during the opening session of the conference.

“Under the template, every transaction starts with a set amount of compensation that the dealer receives from the finance source for arranging the financing, which is the same for every consumer,” Koblenz said. The dealership can also offer discounts to consumers within the proposed structure.

Shortly after the announcement, the American Financial Services Association (AFSA) issued a statement of support for the NADA proposal. “Both vehicle finance lenders and dealers agree that discrimination in any form is unacceptable,” said Chris Stinebert, AFSA president and chief executive officer. “AFSA applauds the National Automobile Dealers Association for taking a proactive approach to address fair lending concerns raised by regulators over the past year. AFSA believes that NADA’s new proposed Fair Credit Compliance Program is a step in the right direction.”

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Western Sky, CashCall Reach Settlement with New York AG
The Wall Street Journal (01/24/14) Todd, Sarah

Under a proposed settlement with the N.Y. attorney general’s office, online payday lender Western Sky and loan servicer CashCall agreed to pay $1.5 million in penalties. Attorney General Eric Schneiderman sued the two companies alleging that they violated the state’s usury and licensed lender laws. If approved, the settlement could provide nearly $35 million in debt relief to N.Y.borrowers. The lawsuit still has to be approved by a N.Y. court.

"With this agreement, thousands of New Yorkers exploited by Western Sky and CashCall will get the relief they are owed," Schneiderman said. "As individuals in New York and across the country continue to face tough economic times, we must keep up the fight against those who exploit and scam them. Illegal collectors and lenders, in particular, must pay a price for their behavior and pay back the New Yorkers they harmed."

Attorneys general in Colorado, North Carolina, New Hampshire and Indiana have also filed lawsuits against CashCall. Western Sky has ceased operations.

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Santander Appoints Former FDIC Chief Sheila Bair to Board
The Wall Street Journal (01/27/14) The Wall Street Journal

Former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair has been appointed as an independent director to the board of Banco Santander, one of Europe’s largest lenders. During the financial crisis, Santander purchased several U.S. companies, including Philadelphia-based Sovereign Bank and several subprime auto loan portfolios.

The appointment of Bair, who served as the head of the FDIC between 2006 and 2011, illustrates how important the U.S. market is to Santander. "I hope that my service on the Santander board will provide yet another avenue for continuing my commitment to reforming the global financial system and contributing to a safer, more responsible, and customer oriented banking system," Bair said.

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Former CFPB Executive Joins Hudson Cook LLP
F&I Showroom (01/28/14) Arroyo, Gregory

Hudson Cook LLP has added former Consumer Financial Protection Bureau (CFPB) assistant director of Research, Markets and Regulations Rick Hackett to its Portland, Maine, office. Hackett will focus on state and federal regulation of retail financial products origination and marketing, . “We think that he adds a dimension to our practice that will improve our ability to serve our clients,” said Tom Hudson, chairman of Hudson Cook LLP. “With his ability to provide insight into the regulatory process and thinking, Rick will be invaluable to our clients.”

Bill Himpler, executive vice president of the American Financial Services Association (AFSA) described Hackett as one of the more “accessible members of the CFPB staff” and a “valuable conduit between the CFPB and the industry.”

Hackett previously served as the ice chair of the Consumer Financial Services Committee of the Business Law Section of the American Bar Association from 2008 to 2011 and currently serves as the regent of the American College of Consumer Financial Services Lawyers. Before he joined the CFPB in 2011, he practiced law for 31 years with Pierce Atwood LLP.

He will join Hudson Cook LLP effective March 1.

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January 30, 2014

Forward To A Colleague

GoldPoint Systems
Wells Fargo Preferred Capital
Black Book
Northridge Software
ParaData Financial
Allied Solutions
Carleton, Inc.
Life of the South
Counselor Library
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.