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BMO Harris Bank Switches to Flat Fees in Fair Lending Push
Automotive News (05/30/14) Henry, Jim

BMO Harris Bank switched to flat fees for compensating dealers for arranging vehicle financing. Last week, the Chicago-based bank instituted a flat fee of three percent of the amount financed, up to a maximum fee of $2,000, for contracts that are 36 months or longer.
For more than a year, the Consumer Financial Protection Bureau (CFPB) has been encouraging lenders to switch to flat fees or other nondiscretionary pricing. CFPB Director Richard Cordray praised BMO Harris Bank on April 30 for adopting flat fees. “It is encouraging to see BMO Harris taking this proactive step to protect consumers from discrimination,” he said.
“We believe the new guidelines create greater pricing consistency at the dealer level and demonstrate the bank’s deep commitment to fair lending,” said BMO Harris Bank spokesman Patrick O’Herlihy. “We consider a variety of factors before making any changes to our services and products. The evolving regulatory environment would be one of those considerations.”

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Inside the Beltway
House Financial Services Committee Subpoenas CFPB Employees
Politico Pro (04/29/14) Lee, MJ

The House Financial Services Oversight Subcommittee voted 20-0 on April 29 to compel the testimony of several Consumer Financial Protection Bureau (CFPB) employees as part of the panel’s investigation of allegations of discrimination. Subpoenas will be issued to Stacey Bach, assistant director of the CFPB’s Office of Equal Employment Opportunity; Liza Strong, CFPB director of employee relations; and Ben Konop, executive vice president of the National Treasury Employee Union’s Chapter 335.

Chairman Patrick McHenry said that the three employees expressed a preference to be subpoenaed to avoid having to testify voluntarily. While stating that CFPB Director Richard Cordray’s testimony may be valuable at some point, particularly since he expressed a willingness to testify, McHenry thought it was important to hear first from employees at the operational level.

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Senate Banking Delays Housing Finance Markup for a Few Days
The Hill (04/29/14) Needham, Vicki and Schroeder, Peter

The Senate Banking Committee was set to mark up a housing finance reform bill on April 29, but postponed it in order to work out concerns between stakeholders. The bill, crafted by chairman Tim Johnson (D-SD) and ranking member Mark Crapo (R-ID), reportedly has broad committee support, but some minor tweaks could garner additional support. A strong show of support from the committee would increase the bill’s chances of a floor vote thie year. Both Crapo and Johnson said the delay was a positive outcome, allowing both sides to come to common ground. “There continue to be important discussions to build a larger coalition supporting the bill,” Johnson said. Sen. Bob Corker (R-TN), whose previous iteration of housing finance reform coauthored with Sen. Mark Warner (D-VA) served as the groundwork for the current bill, noted that a “solid” majority is behind the bill.

The bill as written would eliminate GSE mortgage giants Fannie Mae and Freddie Mach over the span of five years and replace them with a new Federal Mortgage Insurance Corporation (FMIC). The bill has also garnered broad support from the housing industry. All sides agreed the delay was the right thing to do in order to garner greater support before moving forward. 

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National and State News
Top New York Judge Toughens Debt-Collection Lawsuit Rules
American Banker (05/30/14) Aspan, Maria

On April 30, New York's chief judge Jonathan Lippman proposed new rules aimed at reforming the way creditors sue consumers over unpaid bills, following several state and national regulators. Lippman pointed to problems plaguing this process, such as incomplete or inaccurate paperwork and borrowers failing to appear in court to defend themselves. Creditors and third-party debt collectors regularly turn to the courts when trying to recoup money from customers who have stopped paying their bills, and state courts are overwhelmed with the cases. According to Lippman, more than 100,000 credit collection suits are brought annually in New York. The number peaked around 200,000 in 2011, according to estimates from the nonprofit New Economy Project.
Under the proposed rules, creditors seeking default judgments will have to support debt claims with more documentation, including the original agreement between the creditor and the borrower. Other proposed rules include ensuring that creditors do not sue over debts that have exceeded the statute of limitations, ensuring that borrowers are properly served at their current addresses, and reforming how state courts handle debt collection lawsuits and defendants without legal representation.
The proposed reforms will be open for public comment for 30 days and are expected to be implemented by mid-June.

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Fitch Sees Auto ABS in Strong Position
Subprime Auto Finance News (05/30/14)

The latest Fitch Ratings monthly index reports that auto ABS is on the rise and is projected to perform well in the coming months. In March, annualized net losses dropped 37 percent in prime and 28 percent in subprime from a month ago. The improving U.S. economy and healthy used-vehicle values contributed to the upswing. Fitch analysts noted that positive weather conditions could position the ABS market for gains in the spring months.
Prime 60-day delinquencies declined by 21 percent month over month through the first quarter, according to Fitch’s analysis. The subprime sector saw similar positive gains, dropping 100 basis points to 2.8 percent, marking a seven percent year-over-year improvement.

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Homeownership Rate Declines to Lowest Since 1995
Bloomberg (05/29/14)

As property prices rise, the rate of homeownership has fallen to its lowest rate since the second quarter of 1995, according to a new report by the Census Bureau. In the first quarter, 64.8 percent of Americans owned homes, down from 65.2 percent in the fourth quarter of 2013. The homeownership rate for all Americans peaked in 2004 at 69.2 percent.
"The homeownership rate is held back by slow job growth, tight mortgage credit and declining affordability," said Jed Kolko, chief economist of San Francisco-based property-listing service Trulia Inc. "We'll see it stay around this level for some time." Analysts have noted that a driving force for the downturn in homeownership is rising prices and younger individuals electing to rent and putting off getting married, purchasing a house and having children. In 2010, 54 percent of Americans were married as opposed to 57 percent the decade prior. 

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Gilbert Credit-Card Fee Might Save Town $230,000 per Year
The Republic (04/25/14) Leavitt, Parker

The town of Gilbert, Ariz., is expected to tack on a checkout fee for credit card payments to attempt to recoup the cost of processing the payments. To date, the town has been subsidizing the payments, which have cost approximately $20,000. The fee only would apply to transactions within the Development Services Department.

The town has outlined a few options as it seeks to recoup some money. First, do nothing, which costs the town approximately $230,000 a year. Second, the town can outsource its processing, which would create a lag time between when payments are taken and when the town receives them. The delay in turn would slow down when permits are finally awarded. Third, the town could charge a flat fee for every transaction. Fourth, the town could charge a checkout fee, which would base the fee on a percentage of the purchase amount. Finally, it could discontinue accepting credit card payments an option the town does not believe is viable.

The city council was set to approve the checkout fee option at its April 24th meeting, but decided against it to allow for more time for the city attorney to review the legal analysis.

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Are Free Credit Scores Just the Beginning?
American Banker (04/29/14) Wack, Kevin

Ancillary products, such as credit monitoring and identity theft protection, traditionally have been lucrative profit centers for credit card companies. With the Consumer Financial Protection Bureau (CFPB) cracking down on the marketing of ancillary products and new market entrants offering the products for free, credit card companies are experiencing greatly reduced profits in this area. Credit Karma and Credit Sesame, for instance, offer free credit scores and monitoring to registered users. Users of the sites can enter some biographical information, minus a credit card number, and receive a great deal of information about their credit profiles.
In response, several credit card companies have started to offer these services for free as well, with slight tweaks to differentiate themselves. Some companies have focused on forecasting a consumer’s score based on a specific purchase while others are touting financial management tools. 

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3,000 Toyota Jobs to Move to Texas from Torrance
Los Angeles Times (04/28/14) Hirsch, Jerry

Toyota’s move from Torrance, Calif., to its to-be-built home in Plano, a suburb of Dallas, will shift nearly 3,000 finance and marketing jobs from the southern California area. Toyota highlighted the necessity to streamline and consolidate its corporate management onto one campus near its southern manufacturing plants in Texas. While several officials blamed the move on California’s high taxes and regulatory standards, Toyota maintains that the move is purely strategic.

The move will take place in several phases over the next three years. All employees will be able to transfer to the new offices, with Toyota paying for all relocation expenses. About 2,300 workers will remain in a design studio in Newport Beach, Calif., but another engineering and manufacturing location in Erlanger, Ky., will close with its employees shifting to the new Plano location. No layoffs are expected.

Jim Lentz, chief executive of Toyota’s North America region, highlighted the reduced cost of living, centralized headquarters and streamlined business processes as the main driving force behind the move in a meeting with employees. He noted also that Toyota chose Plano because of its proximity to major airports and central time zone location.

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May 1, 2014

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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.