Today's Headlines

    U.S. consumer financial watchdog's chief makes case for embattled agency

    Reuters, Lisa Lambert (May 31, 2017)

    Consumer Financial Protection Bureau (CFPB) Director Richard Cordray staunchly defended the bureau Wednesday, saying that it provides important protections for consumers. Without mentioning specifics, like the current court case against the bureau or an administration that views it with skepticism, Cordray argued at length for maintain the CFPB’s rulemaking authority, its enforcement powers, and its public complaint database.

    "Consumers want and need to have someone stand on their side to see that they are treated fairly. We seek to protect them against unfair surprises, frustrating runarounds, and bad deals that ruin their credit, cost them their homes, and saddle them with further problems," Cordray said.

    Republicans and industry trade associations have long criticized the agency for overstepping its bounds. The House of Representatives is poised to pass legislation next week that would eliminate the CFPB’s consumer complaint database, remove much of the authority on regulating “deceptive” practices, and make a number of other changes.

    The Trump Administration has argued against the agency, saying that its single-director structure is unconstitutional in a lawsuit involving mortgage company PHH that may reach the Supreme Court.

    Director Cordray also argued that the CFPB helps companies too. "They are protected by reasonable regulation and oversight against the worst excesses of unfair competition perpetrated by those who are willing to violate the law or cut corners to get an unfair edge in ways that harm consumers," he said.

    Pending home sales drop 1.3% in April as spring housing market shows weakness

    CNBC, Diana Olick (May 31, 2017)

    According to new data released by the National Association of Realtors, homebuyers held back in the month of April, as they signed 1.3 percent fewer contracts to buy existing homes compared with March.

    “Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market," said Lawrence Yun, chief economist for the Realtors.

    The drop is slightly larger than economists expected. More sellers listed their homes in April, but listings are still nine percent lower than the same time in 2016. Weaker home sales are not due to a lack of homebuyers as the large millennial cohort age into the home market.

    "We know two things heading into the summer selling season. One, home prices continue to leap forward. Two, homebuyers continue to jump into the market," said Redfin chief economist Nela Richardson. "A pop of new listings only encourages more homebuyers to barge their way into this crowded and competitive, low-inventory market in order to take advantage of still-low mortgage rates."

    NACCA/AFSA Forum Touches On Key Topics for Regulators, Industry

    AFSA Staff

    The 19th Annual NACCA/AFSA State Government Affairs & Legal Issues Forum was held last week in Seattle, Washington. The conference brought together AFSA and National Association of Consumer Credit Administrators (NACCA) members to discuss key issues facing both sides of the consumer credit marketplace.

    The Forum was a resounding success but there were some key highlights from sessions.

    Joint State and Federal Regulatory Efforts

    State regulators have developed a working a partnership based on common goals. Historically, states have acted autonomously in exams and supervision - joint regulatory efforts have increased recently. Multistate mortgage exams began shortly after the Conference of State Banking Supervisors’ (CSBS) creation of the Nationwide Mortgage Licensing System. Multistate vehicle finance exams are just beginning and the Joint State and Federal Regulatory Efforts session provided attendees with insight into such exams.

    The session also outlined the perceived benefit to each party involved in the exam: regulators cue each other in to potential findings by learning from other states’ findings; the CFPB benefits by learning from experienced state examiners; industry may benefit by having only one entrance conference, one exit conference, and other key information.

    What Millennials Really Want from Work—and What to Do About it

    Millennials are comprised of people born 1980-2000 and are currently 17-37 years old. As it turns out, there are more similarities among generations than within a particular generation. The Millennials session focused on millennials in the workplace and presented results from a recent study on the generation’s characteristics. Millennials want to do good and do well, meaning they are motivated by work and the social comparison. They also want autonomy and to be appreciated for their hard work. Millennials understandably believe technology increases productivity and saves time, but at the same time, they prefer face-to-face contact for critical conversations. To retain millennials, employers should focus on the people, the work, and the opportunities they provide.

    Cybersecurity

    When it comes to cybersecurity, companies generally overspend in certain areas and underspend in others. The Cybersecurity session provided suggestions to attendees on areas companies should focus on to prevent an attack on their network. Among the suggestions for companies included: reducing dwell time by spending adequately on detection and paying hackers to find holes in their system and then taking the results and acting on them. The future of cybersecurity, it was noted during the session, would be where there would be no passwords, but some sort of secondary authenticating device.

    Compliance Catch 22s

    The Compliance Catch 22s session brought industry and regulators together to discuss the challenges faced by both during an examination and their biggest exam pet peeves. Both sides emphasized the importance of proper communication between examiners and licensees and agreed the exam process would go more smoothly if communication improved, as honesty throughout the exam was identified as an expectation from all panelists.

    Economist Looks for Increased Growth This Year in U.S. Economy

    AFSA Staff

    Despite two schools of thought on factors tugging at the U.S. economy, an economist for Cox Automotive predicts overall growth this year.

    Charles Chesbrough, a Detroit-based Senior Economist and Senior Director of Automotive Insights for Cox Automotive, spoke last week at the 19th Annual State Government Affairs and Legal Issues Forum, hosted by the American Financial Services Association (AFSA) and the National Association of Consumer Credit Administrators (NACCA).

    He said the economy would benefit from pro-growth policies of the Trump Administration, including increased government spending, lower tax rates, and reduced regulations potentially paid for with higher tax revenues.

    That confidence, he said, is reflected in the stock market where equities have risen 10-15% since the November election.

    The pessimistic view, he said, is rooted in the possibility of trade wars, higher inflation, higher interest rates and volatility in the exchange rates on the U.S. dollar.

    However, the tangible factors he sees contributing to growth in the economy this year from 1.6% to 2.2% are:

    • Stronger consumer spending
    • Higher labor wages
    • Increased government spending

    He pointed out that consumer spending at a 3% growth rate accounts for 70% of the nation’s economic activity.

    The 2009 recession, he said, resulted in higher job losses in the service sector versus the manufacturing sector. Since the recovery began, he said the U.S. economy has benefitted from 80-plus months of uninterrupted job growth.

    “Despite a strong economic outlook by the Purchasing Managers’ Index, there is still uncertainty due to weakness in business investment and U.S. trade policy going forward,” he said.

    He said overall consumer debt is back to “prerecession levels, except student loan debt now has the highest share, followed by auto loan debt.”

    For the auto industry, he said vehicle growth since the recession has outpaced economic growth because of increased credit availability.

    Auto loan delinquencies are starting to rise and that subprime now consists of 25% of the auto loan market. The popularity of leasing during the run-up in record auto sales over the past few years is resulting in weakening prices of off-lease vehicles at automotive auctions.

    He said the average interest rate on a 48-month auto loan is 4.5%, but the average term on an auto loan is now up to 66.5 months. The average car loan is now up to $29,000.

    He said a 1% increase in a car loan would be about $13 a month and amount to about $864 for an auto loan over 60 months.

    But while borrowers had a strong desire to avoid auto loan delinquency in the last recession, Chesbrough said the new competition for subprime auto loan payments may be cell phone carrier debt.

    “People today depend on their cell phones and being connected to the outside world, so they may prioritize their cell phone payment versus a subprime auto payment in the next recession,” he said.

    AFSA Leadership Development Program Registration Deadline Approaching

    The 2017 AFSA Leadership Development Program will be held July 15-22 at the University of North Carolina at Chapel Hill. The deadline for registration for this key professional development opportunity is June 12.

    The annual AFSA/UNC leadership is a six-day intensive program providing an opportunity to invest in the development of your organization's future leaders. With challenging case studies and lively discussions, role-playing, and team building exercises, your employees will hone their leadership, strategic thinking and performance skills. This fast-paced program allows participants to immerse themselves in innovative principles of management and leadership through class discussions, case analyses, ethics, professional presentations, negotiations and experience change simulation. There is also an outdoor team building exercise.

    The program is taught by professors from UNC’s Kenan-Flagler Business School.

    Program highlights include:

    • Learning the responsibilities of leadership, articulating and communicating your company's vision passion and urgency;
    • Creating a plan for strategic change and receiving immediate feedback on employee buy-in in the context of a challenging computer simulation;
    • Developing an ethical "rule of thumb" for making business decisions quickly and effectively;
    • Mastering critical negotiation skills including principled, interest based and win-win negotiation;
    • Building confidence in the ability to make dynamic and persuasive presentations;
    • Analyzing strategic decision-making in the context of two cases in the financial service industry;
    • Experiencing first-hand the dynamics of building trust, collaborating and creating an effective team.

    Be sure to review the AFSA/UNC Leadership Development Program Brochure and visit the AFSAEF website to register.

    New Member Welcome

    AFSA welcomes Kubota Credit Corporation (KCC), the captive finance company of Kubota Tractor Corporation, a manufacturer of consumer and commercial agricultural equipment and products including tractors, excavators, and zero-turn mowers. KCC provides financing to Kubota customers and floor planning to Kubota dealers.