Today's Headlines

    Clinton, Brown Put focus on Arbitration Clauses

    Ryan Rainey, The Morning Consult (October 3, 2016)

    The Morning Consult website reported this week that Democratic presidential nominee Hillary Clinton and Sen. Sherrod Brown (D-Ohio) called for restrictions to the use of so-called “forced arbitration” clauses in consumer contracts.

    In a speech to supporters in Toledo, Ohio, Clinton said one policy solution is to limit the use of contracts that bar consumers from taking companies to court if they believe they’ve been abused.

    Proponents of arbitration clauses (including the American Financial Services Association, AFSA) have said they’re a responsible way to give consumers recourse while maintaining efficiency. In May, the Consumer Bankers Association said in a paper that arbitration is a “significantly quicker process” that is less costly for consumers than class action lawsuits. The group has also criticized the pending CFPB rule as a regulation that would encourage costly and long-lasting class actions.

    To Avert New Regulator Costs Big Banks Tweak Business Plans

    Donna Borak and Emily Glazer, The Wall Street Journal (October 4, 2016)

    Five of the country’s biggest banks detailed tweaks to their business models in hopes of persuading regulators they could absorb significant financial distress without requiring taxpayer funds to stay afloat, The Wall Street Journal reported this week.

    The newspaper reported the stakes are high for J.P. Morgan Chase Co., Bank of America Corp. Wells Fargo & Co., Bank of New York Mellon Corp., and State Street Corp.   If regulators deem these revisions of their so-called living wills—made public by the government Tuesday—to be insufficiently credible, those institutions could be ordered to hold higher levels of capital on their books, or to restructure and shed business lines. 

    Read the regulators’ press release.

    New Member Welcome

    Earnix provides a software platform for pricing analytics and optimization used by leading financial services organizations.

    National General Lender Services is a provider of mortgage and auto risk management services and lender-placed insurance solutions. 

    Peoples Credit Inc. is a traditional consumer finance company in Illinois since 2002.  The company provides direct consumer installment loans and indirect auto financing through independent auto dealers in Illinois.

    Welcome Back!

    Reliable Auto Finance, Inc. an indirect auto finance company located in Grand Rapids, Mich. 

    AFSA Comments on Colorado Proposal Implementing Innovative Vehicle Tax Credit

    AFSA submitted comments to the Colorado Energy Office regarding proposed rules to implement the state’s innovative vehicle tax credit. Legislation signed by the governor in June authorizes the tax credit, and the state sought input before the credit becomes available in 2017. AFSA’s comments requested clarification on several issues related to applying the credit to a consumer’s account and raised concerns regarding contracts. In addition to the written comments, AFSA also held a call with a representative from the Energy Office to give members an opportunity to ask questions and provide additional feedback on the proposal.

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

    AFSA Publishes Small-Dollar Loan Alternatives White Paper

    AFSA’s State Government Affairs department published its subsidized small-dollar loan programs and other payday-alternatives white paper.

    Subsidized small-dollar loan program proposals have become a popular choice for states looking for alternatives to payday loans, despite the failure of existing programs. AFSA’s white paper examines existing state and federal pilot programs, as well as proposed legislation to create new programs and expand existing ones. All of the bills identified in the paper can also be found in AFSA’s legislative tracking system: AFSA*Track at KSE Focus.

    The white paper also includes information on other small-dollar alternatives, including credit union payday-alternative loans and employer-based loan programs.

    AFSA’s State Government Affairs team publishes white papers monthly, and members can find previous papers on AFSA’s website under the SGA Resources section.

    AFSA Releases Cybersecurity Incident Response Procedures

    AFSA recently released procedures that member companies can follow in the event of a data breach. Instead of instructing IT departments on steps to follow to prevent a data breach, the procedures suggest steps that senior management of a company can take before and after a breach.

    As cybersecurity practices and procedures continue to be highly scrutinized by regulators, and given that almost any company can be victimized by a cyber-intrusion, even after taking reasonable precautions, it is critical that management have a vetted, actionable “Cybersecurity Incident Response Plan” in place before such an incident occurs. Some of the items in the procedures include initial actions that a company may take when an incident occurs, and gathering and preserving evidence. The document also highlights the importance of appointing a Chief Cybersecurity Officer, and an incident response team.

    AFSA extols the virtue of traditional installment lending to millions of Americans via national radio interviews

    The American Financial Services Association (AFSA) this week brought its positive message of the benefits of traditional installment lending to millions of Americans via one of the most powerful forms of electronic communication to a wide and far-flung audience – national radio networks.

    First up was an interview Tuesday on NBC News Radio with the potential to be heard by its 10 million plus listeners, followed by an interview with the American Urban Network on Thursday and its 2.1 million listeners.

    Bill Himpler, Executive Vice President of AFSA, went on the air to make the public aware of the benefits of one of the oldest and most reliable forms of consumer credit in the United States and how its access for millions of Americans could be cut off by federal regulations that are intended to curb abuses in the payday and title pawn industries.

    “We want the Consumer Financial Protection Bureau (CFPB) to consider limiting the scope of its proposed small-dollar loan rule to payday and title pawn lenders and leave the oldest and most reliable form of consumer credit – the traditional installment loan – in place and not subject to the same regulations as what many perceive to be predatory lenders,” Himpler said during an interview on NBC Radio. 

    He added that regulations by the CFPB and other federal regulators continue to exert pressure on all lenders, thus tightening access to credit for many people who may need money quickly for a family emergency such as repairs to a vehicle that is the only means to commute to a job.

    “Our hope is that the CFPB will take seriously the concerns we have about these regulations that have the potential to cripple access to small-dollar credit that is being well-served by the traditional installment lending industry,” Himpler said.

    AFSA submits 38-page comment letter to CFPB urging changes in the proposed small-dollar rule

    The American Financial Services Association (AFSA) today submitted its 38-page comment letter to the Consumer Financial Protection Bureau (CFPB) urging the federal regulator to preserve consumers’ access to safe and affordable traditional installment lending (TIL) by modifying the Proposed Rule on payday, title loans and certain installment loans.

    AFSA’s comprehensive letter, which examined in detail the CFPB’s 1,300-page proposed rule and the harm it would bring to the 100-year-old traditional installment industry and its customers, was among the nearly 188,000 comment letters received by the CFPB as of yesterday, according to its website.

    AFSA argued in its letter that “the breadth of the Proposed Rule exceeds the CFPB’s statutory authority and the over-inclusive nature of the Proposed Rule is arbitrary and capricious. The Proposed Rule should be limited to payday, title, and high-cost installment loans."

    AFSA pointed out that TILs, which have been around for a hundred years, should be exempted from the proposed rule. If they are not exempted, “…consumers will turn to unlicensed and unregulated online lenders, trapping them in hopeless financial quagmires."

    If the CFPB chooses not exempt AFSA members in the traditional installment loan industry, AFSA illustrates specific changes for the CFPB to consider to the Proposed Rule, including: 

    • eliminating the prohibition against evasion, 
    • revising the definition of total cost of credit, 
    • eliminating voluntary leveraged payment mechanisms as a trigger for coverage, 
    • modifying the ability-to-repay requirements to allow lenders more flexibility, 
    • modifying the restrictions on refinancing, 
    • revising the payment procedures, 
    • eliminating the mandatory credit reporting requirement, 
    • and extending the effective dates.

    While AFSA shares the CFPB’s concern that certain bad actors in the payday and title pawn industries can lead their customers into a “cycle-of-debt” the trade association pointed out numerous times in its letter that AFSA member companies in the traditional installment loan industry provide safe and affordable loans that are fully amortized in affordable monthly payments that are based on a customer’s ability to repay and therefore, should not be covered under the proposed rule.

    The proposed rule was unveiled on June 2 at a public hearing in Kansas City. The deadline for submitting a comment letter to the CFPB is tomorrow, October 7.