Today's Headlines

    Hensarling: Tax Reform can be Achieved this Year

    AFSA Staff

    In remarks made this morning at an event hosted by Axios, House Financial Services Committee Chairman Jeb Henrsarling (R-Texas) said that he believed tax reform would be enacted this year. Chuck Todd, Moderator of NBC’s Meet the Press, and Jim VandeHei, CEO of Axios, interviewed Hensarling.

    “I am absolutely convinced we will see some tax reform or at least some aspect of dramatic tax reform will happen,” Hensarling said. “We need business enterprise tax reform and I think we can get bipartisan buy-in. I think we can get tax reform done in the calendar year.”

    Hensarling said he was pleased to see aspects of the Financial CHOICE Act in the recently released Treasury Report. Hensarling sponsored the CHOICE Act, which was introduced in the House in April, was approved on a party-line vote, and sent to the Senate’s Banking Committee in June. AFSA supports the CHOICE Act.

    “The goals of CHOICE and the Treasury Report are aligned with greater simplicity in the financial system and higher capitalization for banks,” he said. “CHOICE has a substantial amount of policy.”

    In a brief discussion on a possible replacement for Federal Reserve Chair Janet Yellen, Hensarling said he liked John B. Taylor, Professor of Economics at Stanford University. “He believes that the Fed should adhere to a monetary policy that is predictable and should work in the background,” Hensarling said. “I’ve worked with him in the past.”

    Taylor has done research that points to the economic crisis of 2008 was partly due to the flawed economic policy of the U.S. government and other governments. Hensarling believes that the policies of former Fed Chair Ben Bernanke were a contributing factor to the 2008 financial crisis. Bernanke was Fed Chair 2006-20014 under President Bush and President Obama.

    “Bailouts beget bailouts,” Hensarling said. The remedies of 2008 have become the monetary policy of 2017. I am concerned with the precedents that were set.”

    Todd and VandeHei, also interviewed Sen. Debbie Stabenow (D-Mich.) a member of the Senate Finance Committee. She said the Senate Finance Committee traditionally proposes bipartisan tax reform.

    “This is the time to do it [tax reform],” she said. “We are not competitive internationally. We need tax reform that focuses on where we can grow the economy.”

    AFSA Supports FCRA Liability Harmonization Act

    AFSA Staff

    On Tuesday, AFSA, in conjunction with several other trade associations, submitted a comment letter to Reps. Jeb Hensarling (R-TX) and Blaine Luetkemeyer (R-MO), chairs of the House Financial Services Committee (HFSC) and subcommittee on Financial Institutions and Consumer Credit, respectively, voicing its support for the FCRA Liability Harmonization Act.

    The legislation seeks to modernize the Fair Credit Reporting Act (FCRA) and align it with other financial consumer laws by capping the amount of damages allowed in class action lawsuits, while eliminating punitive damages.

    Under current law, plaintiffs in a FCRA class action lawsuit may pursue unlimited damages including punitive damages and attorneys’ fees. The Electronic Fund Transfer Act (EFTA), Fair Debt Collection Practices Act (FDCPA), Equal Credit Opportunity Act (ECOA), and Truth in Lending Act (TILA) establish parameters of economic liability in class action litigation.

    The letter highlights that this imbalance invites class action lawsuits, which allege technical violations, the purpose of which is only to generate millions of dollars for attorneys. The risk of uncapped liability forces many businesses, particularly small businesses, into settling claims, even if the claims have very little merit.

    The bill would continue to permit consumers who are harmed to bring class action lawsuits and allow them to be appropriately compensated for their injury. Luetkemeyer noted that markup on the legislation may take place this fall.

    AFSA-supported Bill Discussed in Congressional Hearing

    AFSA Staff

    On Wednesday, the House Financial Services Financial Institutions and Consumer Credit subcommittee met to examine a number of pieces of legislation. Subcommittee Chairman Blaine Luetkemeyer noted that, “The bills that were discussed today are all designed to take the first steps in relieving pressure on our nation’s community financial institutions and preserving choice and financial independence for all consumers.”

    One of the bills discussed during the hearing is H.R. 2396, the Privacy Notification Technical Correction Act. The bill, which was introduced by Rep. Dave Trott (R-MI), would ease the notification burden on financial institutions if said notices had not changed. AFSA has been a strong advocate of the bill and expects markup on H.R. 2396 before the end of July.

    New AFSA 50-State Survey Focuses on GAP Products

    AFSA Staff

    On July 11, AFSA’s State Government Affairs (SGA) department released a 50 state survey examining state laws regarding creditor obligations for providing a refund for unearned GAP income. Although GAP products have been available for at least three decades, how they are regulated varies widely among the states.

    Issues surrounding the responsibility for refunding unearned GAP income in the event of early termination of the finance agreement remain a hot topic in the states, as some states require financial institutions to provide the refund directly, while others specify no responsibility.

    For this survey on GAP refunds, AFSA’s SGA team examined state statutes, regulations, advisory bulletins, and interpretive opinions addressing GAP products looking for refund obligations specific to creditors or contract holders.

    The survey is meant to provide general information only, not legal advice or legal opinion, and companies should seek legal advice for specific compliance questions. As this issue continues to develop, AFSA welcomes feedback and suggestions that can further enhance the information in the survey. For comments or questions, please contact Matt Kownacki.

    This survey and others like it, as well as any white papers, talking points and issue briefs, can be found on AFSA’s website under the State Government Affairs Resources section.

    Arbitration Ban Harms Consumers

    AFSA Staff

    On Monday, the Consumer Financial Protection Bureau (CFPB) issued a final rule prohibiting the use of class action waivers in arbitration clauses. The CFPB also published an information page on their website.

    An initial review of the final rule shows that it is similar to the one that was proposed in May of 2016. The final rule would impose two sets of limitations on the use of arbitration agreements. First, it would prohibit financial institutions from using class action waivers and would require financial institutions to insert language into their contracts reflecting this limitation.

    Second, although the CFPB is not proposing to restrict the use of arbitration agreements with respect to individual arbitrations, the final rule would require financial institutions that use arbitration in these agreements to submit records relating to arbitral proceedings to the CFPB.

    Financial institutions will have around eight months to come into compliance with the rule.

    AFSA is disappointed that the CFPB has finalized a rule on arbitration that ignores the CFPB’s own research and harms consumers, while enriching plaintiff’s attorneys. The bureau was given a mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act stating that the CFPB may only limit arbitration if that prohibition is “in the public interest and for the benefit of consumers.”

    An independent analysis of the CFPB’s own study shows that arbitration overwhelmingly benefits consumers as compared to class-action lawsuits.

    • Arbitration is far cheaper, averaging just $206 in total fees for the consumeras compared to thousands for litigation. Financial institutions often end up picking up this fee.
    • Arbitration is more convenient, with sessions held over the phone or, on average, within 15 miles of the consumer. Litigation often requires the consumer travel hundreds of miles.
    • Arbitration is quicker; issues are generally resolved in five months, as compared to 690 days – or two years – with litigation.
    • Arbitration results in higher monetary relief, with consumers averaging $5,389, as compared to just $32 with litigation.

    The real winner under the bureau’s new rule is plaintiff’s attorneys, who with class-action lawsuits rake in millions of dollars per case while consumer’s see very little compensation.

    AFSA, in conjunction with a number of other trade associations, are working hard on a variety of responses to the final rule.