ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: April 18, 2016

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Capital Compliance
Oral Arguments in PHH Case Signal Trouble for CFPB by McGuireWoods LLP
The D.C. Circuit held oral arguments on April 12, 2016 in the case PHH Corp v. Consumer Financial Protection Bureau (CFPB), a case challenging the CFPB's constitutionality as well as its interpretations of the Real Estate Procedures Settlement Act (RESPA), including its view that no statute of limitations applies to RESPA violations challenged by the Bureau in an administrative proceeding. As we noted previously, CFPB Director Richard Cordray, in the Bureau's first appellate decision, imposed a $109 million penalty on PHH for alleged RESPA violations involving improper kickbacks related to mortgage reinsurance where agreements were in place with lenders, a dramatic increase over the $6 million penalty that had been imposed by the administrative law judge at the trial level.
Several aspects of yesterday's oral arguments signal trouble for the CFPB:
DM Metrics
"CFPB's Payday Rule Poses Real Danger to Lenders" by Dennis Shaul, CEO of the CFSA
Published in American Banker's "BankThink" on April 14, 2016
A recent piece on BankThink by Ken Rees endorsing the Consumer Financial Protection Bureau's short-term lending rule calls for it to be issued without any further delay. But Rees incorrectly leads readers to believe that the CFPB is contemplating a modest set of changes designed to enhance competition and improve consumer protection, and that payday lenders want to thwart these regulations through delay. This is simply not the case.
The truth is the CFPB has quickly moved to a regulatory solution that creates more problems than it solves. As was shown through a mandated review of the pending proposal by a small business advisory panel - convened by the bureau - an estimated 80% of small and medium size lenders subject to the envisioned regulation could be driven from the market. Competition and innovation would be greatly diminished.
Rees passes over the many questionable features of the CFPB's approach: using an ability-to-repay standard that exists in no form within a real-world model; adopting an arbitrary 60-day cooling off period between loans for a borrower; establishing a limit on the number of loans for an individual that is both arbitrary and devoid of consideration of the consumers' needs; and ignoring the availability of many alternative, effective reforms that better serve consumers and operators. Read more at CFSA
MicroBilt
House Financial Services Committee Approves Bill to ramp up CFPB oversight by placing it on a budget
The House Financial Services Committee approved a bill that would require the Consumer Financial Protection Bureau (CFPB) on a budget. A relatively new federal agency, the CFPB was created under the Dodd-Frank Act - legislation that was crafted in response to the financial crisis.
Committee Chair Representative Jeb Hensarling commented on the vote; "Every government agency should be accountable to the elected representatives of 'We the People' and the CFPB should not be an exception to that rule. We have the Pentagon which is on budget. We have the Justice Department which is on budget. There is certainly no greater duty we have than to provide for the common defense, and we do not let the Pentagon write its own budget. We should not let the CFPB write its own budget. It is a base matter of congressional oversight and of Article I authority." Read more at CROWDFUNDER INSIDER
CFSA
Looking Ahead to the Rule
EXPECTED NEXT STEPS FOR THE CFPB RULEMAKING

Proposed Rule 
The CFPA has said it plans to announce its proposed rule, or 'Notice of Proposed Rule Making' (NPRM), for short-term lending, in the summer of 2016

Comment Period 
With the announcement of the 'Notice of Proposed Rule Making', a 'Comment Period' will begin and last a few months, allowing the public to respond to the CFPB's proposals. 

CFPB Analysis of Comments 
After the 'Comment Period' is closed, the period of time the CFPB requires for review and analysis of each of the comments it receives will depend upon the breadth and depth of the Comments submitted. 

Final Rule 
If the CFPB determines that it has responded appropriately to all public comments it received and completed all of the required steps for rule-making, it will then publish a final rule. The final rule will go into effect a set number of months after the rule's publication.
Congressman-turned-lobbyist, Jim Matheson represents payday lenders, energy company
Now free to chat up his former congressional colleagues, Jim Matheson, the conservative Utah Democratic congressman-turned-lobbyist, has signed a slate of clients in recent weeks that includes Salt Lake Community College, a major energy company and a group of payday lenders worried about new federal rules.
Matheson joined Squires Patton Boggs, a big bipartisan lobbying firm, in January 2015, just a few weeks after he stepped away from his 14-year career in the U.S. House. By law, he was barred from lobbying lawmakers or their staffs for one year. It's a "cooling-off period" that he says has some merit. But since the beginning of 2016, Matheson has cobbled together a diverse group of clients, none more controversial than the one he signed April 1, the Ad Hoc Coalition for Fair Access to Credit.
The coalition comprises four payday lenders - none based in Utah - that have hired Matheson, along with former Georgia Republican Rep. Jack Kingston, to track the actions of the Consumer Financial Protection Bureau.
The bureau, formed in 2011 in reaction to the Great Recession, promises to release new rules governing the short-term, high-interest loans later this year, with the stated goal of ensuring the public isn't preyed upon.
Matheson said his job is to point out to regulators that the Dodd-Frank financial reforms, which created the bureau and which Matheson voted for in the House, not only sets up a process to regulate payday lenders, but also requires "maintaining consumer access to capital."
Read more at SLTRIB
Insight
White House sees 'moral obligation' to halt payday lending abuses
Summary: Senior members of the Obama Administration meet with religious leaders to discuss the moral obligation for stronger consumer protections.
Today, we hosted a remarkable group of religious leaders from around the country at the White House to discuss the need for stronger consumer protections, particularly in the payday lending and short-term consumer loan markets. These leaders represent a diverse array of faith traditions - from Southern Baptists to Reform Judaism - and many traveled here from all over the country. But no matter where they came from or their particular faith tradition, they share a common goal of doing right by the communities they serve.
We heard from the group about what they are seeing in their communities, including specific heart-wrenching stories of members of their congregations whose lives have been devastated by usurious loans. We heard their recommendations for action to address the abuses in payday lending that are visiting hardship upon their communities.
What emerged was a common, powerful theme: that we have a moral obligation as a country to do something to stop payday lenders from preying on consumers by trapping them in an endless cycle of debt. Read more at WHITEHOUSE.GOV
VPCS
Dial to-Own Donates $5000 for College Foundation
As part of its mission to support higher education in the CNMI, Dial Rent-to-Own recently donated $5,000 to the Northern Marianas College Foundation. The donation was made in support of the upcoming 13th Annual NMC Foundation Open golf tournament scheduled for Saturday, April 30, 2016, at the LaoLao Bay Golf & Resort.
"We would like to extend our deepest appreciation to Dial Rent-to-Own for donating to the upcoming NMC Foundation Golf Tournament, especially as NMC celebrates 35 years of providing higher education in the CNMI. We are very thankful that they believe in the importance of supporting the college through our annual golf open event," said NMC Foundation President Mable Ayuyu.
The NMC Foundation is composed of community volunteers committed to the advancement of opportunities in support of higher education for students in the CNMI. The golf tournament is the NMC Foundation's signature event that raises funds to support NMC's academic programs and services. Read the story at RTOHQ
FactorTrust
Peter Thiel Backs Payday Lending Startup
With a $9 million funding round led by Valar Ventures - the investment firm perhaps most notable for the presence of Peter Thiel - Even is forging ahead with its financial services model geared toward lower incomes in the United States.
As reported by Fortune, the company has been targeting "uneven paychecks for hourly workers" in light of the fact that many of those 77 million workers have less-than-consistent schedules, with wild swings in compensation. The reality then becomes that there is not much ability to rely on steady cash flow during weeks with fewer hours. The vagaries of cash flow mean that some bills may not be handled as comfortably as they otherwise might, and this has given rise to the $100 billion payday loan industry. The Even model, said Fortune, acts as an "anti-payday loan," with bank account info and analysis across the firm's technology that helps even out payments so that short weeks wind up being made up by good weeks. Read more at PYMNTS.COM
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