Today's Headlines

    AFSA Board Member promoted at JP Morgan Chase

    Thasunda Duckett, previously CEO of Chase Auto Finance, was recently named as the head of JPMorgan’s consumer bank, overseeing around 5,300 branches, more than 50,000 employees, and about 23 million households.

    While head of the auto finance group since 2013, Duckett boosted the bank’s dealer partnerships and launched its direct-to-consumer auto-financing business. She also joined and served on the AFSA Vehicle Finance Board of Directors in 2013. 

    Duckett succeeds Barry Sommers who is moving to a new unit called Wealth Management and Investment Solutions. 

    In a memo announcing Duckett’s appointment, Gordon Smith, CEO of consumer and community banking recognized Duckett as “an extraordinary leader and talent."

    California credit repair firm hit with CFPB lawsuit

    American Banker, Kate Berry (September 23, 2016) 

    On September 23, Prime Marketing Holdings, LCC, a credit repair company, was sued by the CFPB. The CFPB has taken action against the credit repair company for allegedly taking part in unfair, deceptive or abusive acts or practices (UDAAP).

    Through sales calls and online, the CFPB states that Prime Market Holdings marketed to consumers that they could remove almost any negative information from their credit reports and increase the consumers’ credit scores. The claims they made were found to be misleading by the CFPB, as the company had no proof that it could do either of these things. The company would go after those who had recently applied for credit, and would also charge illegal advance fees. 

    The CFPB alleges that Prime Market Holdings, at times, would also fail to disclose that consumers would be charged a monthly fee. On top of this, the CFPB stated that the company failed to disclose the limits of their “money-back guarantee” offer.

    CFPB Fines TitleMax Part Company $9 Million

    Consumer Financial Protection Bureau Press Release (September 26, 2016)

    On September 26, TMX Finance LLC, the parent company of TitleMax, was given a $9 million penalty. TMX Finance, a company that has more than 1,300 locations across the nation, was allegedly found to have taken part in unfair, deceptive, or abusive acts or practices (UDAAP). As auto title-lenders, the subsidiaries of TMX Finance make loans that usually are due within 30 days and can have triple digit annual percentage rates. The loans are made using the title of the vehicle as collateral, and if the consumer cannot pay off the loan the car can be repossessed.

    Customers of TMX Finance subsidiaries were often given a “Voluntary Payback Guide,” stating that they could partake in a monthly payment option that offered smaller payments. The “Guide” did not detail the cost that the payment options would have on consumers. The total cost of the loan would greatly increase if the consumers chose to renew the loans and partake in the monthly payment option. 

    The CFPB also alleged that the company carried out debt collection practices that would expose consumers’ sensitive debt information. The company would make “field visits” to the consumers’ homes, place of employment, or references. They would share the debt information of the consumer in order to collect debt. According to the bureau, this information could damage a consumers’ reputation at work or at home. The debt-collectors were also not permitted in workplaces.

    Can Washington control high tech lending?

    Politico, Danny Vinik (September 28, 2016) 

    On Tuesday, the Consumer Financial Protection Bureau (CFPB) issued a $3.63 million fine against Flurish, the parent company of San Francisco-based online startup LendUp. The bureau argued that LendUp collected data as borrowers repaid their loans, but never delivered that information to credit bureau agencies until February, 2014. In a separate but concurrent settlement, California’s Department of Business Oversight ordered the company to pay an additional $2.79 million.

    The bureau’s enforcement action is the first against financial technology lending startups, just one part of the new tech-driven financial businesses collectively known as “fintech."

    LendUp launched in late 2012 and pitches itself as a cross of short-term lender and a credit-improvement service for people with bad or no credit history. Borrowers who paid their small-dollar loans back on time and took online financial education courses would get progressively better terms on their loans and eventually become eligible for LendUp to send their credit information and payment history to credit bureaus.

    In response to the action, the company said in a statement that the CFPB complaint was based on problems in 2012 and 2013 in “days when we didn’t have a fully built out compliance department. We should have."

    While fintech still remains a small component of the overall lending industry, the total value of loans financed through online fintech lending range from $20 billion to nearly $40 billion, and projected to increase 300 percent by 2020.

    As the online lending industry continues to grow and evolve, so too should the nation’s banking laws, according to Aaron Klein, a fellow at the Brookings Institution.

    “Most of the consumer protection fair credit laws were written in the 1970s, in the age of punch-card computers–and trying to apply them into a world of iPhone and wearable technology and Big Data is very challenging,” said Klein. “There are serious gaps forming in how our consumer protection laws work.”

    AFSA Comments on New Jersey Legislation Allowing Early Lease Termination in the Event of Death

    On September 28, AFSA submitted a comment letter to the New Jersey Legislature regarding Assembly Bill 2495, which would allow for the early termination of a lease in the event of death. AFSA’s letter noted that this legislation would create an alarming precedent by allowing for the extinguishing of an existing consumer credit obligation. As the legislation would prohibit early termination fees, AFSA’s comment outlined why such fees exist and explained that the legislation may result in increased credit costs for New Jersey’s consumers. The comment was submitted to bill’s sponsor, Assembly leadership, and the sponsors of the bill’s Senate companion.

    AFSA will continue to monitor the legislation and keep members apprised of any future activity or amendments to the bill. 

    AFSA Testifies at Massachusetts Debt Collection Hearing

    On September 22, AFSA Senior Vice President Danielle Fagre Arlowe testified at a joint informational hearing of the Massachusetts Division of Banks (DOB) and the Attorney General’s (AG) Office. The hearing, which focused on debt collection, was overseen by now-former Banking Commissioner David Cotney and the AG Office’s Consumer Protection Chief Max Weinstein. They assured the packed room that the hearing was for informational purposes, there was no proposal on the table, and that they would be mindful of the Consumer Financial Protection Bureau (CFPB) as to not cause confusion for consumers on industry. During the course of the two-hour hearing, 13 people from nine different organizations offered testimony. AFSA offered testimony on why the state’s requirement that creditors validate debt is inappropriate for creditors since they know the identity of the customer. The requirement was put into place in 2012 by AG regulations. AFSA will also be submitting written comments in response to a number of questions posed by the DOB and AG’s office.

    AFSA submits comment letter on proposed changes to consumer complaint process

    The American Financial Services Association (AFSA) this week submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) regarding the upcoming changes it will make to its consumer complaint process. In early 2017, the CFPB plans on replacing the consumer dispute function with a new option for consumers to provide feedback.  Consumers will have the ability to rate the company’s handling of his or her complaint and provide a narrative description in support of the rating.

    As stated in AFSA’s letter, the proposed rating system is fraught with problems with no reasonably objective benefit to the CFPB or to consumers. A complaining customer would rarely grade complaint handling highly, even if the company performed its due diligence when investigating and handling the complaint. Just because the end result of the complaint is not what the customer desired, does not mean that a company’s complaint handling process is flawed. In addition, AFSA opposes the inclusion of another consumer narrative to the CFPB’s complaint process, as it adds no value, and simply provides customers who disagree with the company’s response with an additional platform to be critical of the company.

    AFSA will keep members apprised of any further developments regarding the bureau’s complaint process.

    Senator, Heritage panel cite reasons for CFPB to re-write proposal

    With the Oct. 7 deadline looming for the public comment period on the Consumer Protection Bureau’s (CFPB) controversial small-dollar loan proposal, a panel of industry experts gathered at the Heritage Foundation this week to critique the 1,300-page proposal.

    Participating on the panel was Bill Himpler, Executive Vice President of the American Financial Services Association (AFSA), and Andrew Morrison, Executive Vice President and Director, Brundage Management Co, an AFSA-member company.

    Sen. David Vitter, a member of the Senate Banking Committee and the current chairman of the Small Business & Entrepreneurship Subcommittee, said the proposed rule, commonly known as the “payday rule,” is problematic because it expands federal authority over state legislatures and state regulators to “solve problems which don’t exist.”

    “Complaints about small-dollar lending account for .02 % of the CFPB’s complaints, but it has come up with a 1,300-page rule,” to regulate the industry, he said.

    Vitter said he is pushing for the CFPB to have bi-partisan commission leadership rather than a single director, as well as advocating for the CFPB to ask for its budget from the Congressional appropriations committees so that it can be held accountable in its spending of taxpayer money. Both of these initiatives are supported by AFSA.

    Himpler pointed out differences between traditional installment lenders and the payday industry. 

    “The traditional installment loan industry has existed for 100 years and is as different as night and day from payday lending,” he said. “There is no data to support why traditional installment lending is even included in this proposal. The people at the CFPB have no experience in the traditional installment space, but they are writing rules that negatively impact the industry and millions of customers.”

    Dennis Shaul, Executive Director of the Community Financial Services of America (CFSA), the trade association of the payday industry, provided insight on the creation of the CFPB as a former aide to retired Congressman Barney Frank (D-Mass.) during the drafting of the Dodd-Frank banking law.

    He said problems typically arise when legislation is sent to “rule-writers” and that large pieces of legislation, like Dodd-Frank, result in “big unintended consequences” as is the case today with the unchecked power of the CFPB.

    “Politically, Dodd-Frank was a legislative response to the bank crisis,” Shaul said.

    Morrison used a restaurant industry metaphor to illustrate what could happen if the CFPB’s small dollar regulation is adopted in its present form. 
    If the federal government mandated that all restaurants charge $1 for steaks, he said, then everyone would expect to see steaks on menus for $1. 

    The reality, he said, is that no restaurants would be able to afford to serve steaks costing $1, because they would lose money, similar to what would happen to the small-loan industry if the onerous rules proposed by the CFPB are put in place.