 |
|||
|
|||
Updates:January 24, 2011CFPB Examination Procedures for Payday Lending StoresMembers and Friends of MFSA: Attached please find the examination procedures that have been published by the Consumer Financial Protection Bureau ("CFPB" or "Bureau"), relating to its examination of payday lending stores. The Bureau is of the opinion that it currently has the authority to examine payday lenders for compliance with existing federal statutes and regulations, since the oversight authority of your prior federal regulator (the Federal Trade Commission) has been ceded to the CFPB under the Dodd Frank Wall Street Reform Act. In theory and in practice, payday lenders have always been responsible for strict compliance with all of the federal laws, rules and regulations which are referenced under this Examination Procedure. Whether your particular stores are in compliance is a factual question. What is more challenging to the industry is the concept of unfair, deceptive and abusive acts and practices ("UDAAP"), that are also being regulated by the CFPB. Defining what constitutes a UDAAP in the payday lending industry is coming. That is the purpose of the Field Hearings, such as the one conducted by the CFPB in Birmingham last week. Meanwhile, you should focus on compliance with the existing laws, rules and regulations. Stay tuned. Maury June 14, 2011Minutes of the 5/17/11 MFSA Annual Membership Meeting and Industry Update: Click here for attached PDF November 18, 2010A New Payday Loan Alternative – Small Dollar Loans The Small Dollar Loan Program was launched in 2009 after a rigorous two-year pilot program and was designed by the FDIC specifically to address and compete against payday loans. Here is a brief overview of the terms: Amount: Small Dollar Loans (or SDLs) can be in any amount up to $2,500. The minimum loan amount will vary by lender as will the minimum payment amount. Some lenders have no minimum whereas others will require that your monthly payment be at least $50, for instance. Duration: SDLs are required to be at least 90 days in length. The idea is to make repayment affordable so that consumers will consider borrowing money when they may not otherwise, such as to pay for holiday gift giving or simply to create an emergency fund or nest egg. The maximum loan duration will depend on the bank, and possibly the minimum monthly payment required, if the bank imposes one.
Annual Percentage Rate (APR): The APR on this type of loan is higher than many other bank products (as high as 36 percent), but this number may be skewed somewhat by those who receive these loans with bad credit. For most people, the APR on an SDL will be on par with most credit card purchase APRs. Fees: Fees tend to be extremely low with SDLs and in some cases are nonexistent, other than a small administration or origination fee. Underwriting: The underwriting process is also very simple. Decisions are usually made within 24 hours. (This is one of the primary selling points of SDLs.) The only information required is proof of identity, proof of address, proof of income, and a credit report Maury Shevin October 24, 2010The MFSA held its annual Education and Industry Update on October 20, 2010, in Birmingham. The Program offered participants a wide range of information including a discussion of the Dodd-Frank Wall Street Reform and Consumer Protection Act, discussion of Best Industry Practices, a report from the Supervisor of the Bureau of Loans of the AL State Banking Department, a review of applicable federal regulations and a summary of trends in the Industry and consumer activism. Industry experts Amos Green (Advance America), Charles Hunter (The Money Store), Elaine Enis (Money in a Flash Check Advance) and Jan McDuffie (Check Depot) reviewed their companies' best practices. Topics included security, social media, regulatory compliance, mentoring collections, and expectations and hiring of employees. The information shared by these presenters was very valuable. Supervisor Corscadden reported that there are 1022 Deferred Presentment licensees currently in Alabama. He covered other departmental statistics and information. Corscadden then took questions from the attendees, promising to respond to the various questions concerning printing of checks within a DP office, completing a DP transaction through a debit card and using ACH authorization as a check substitute. Jeff Smith and Shanna Wycoff led the discussion of Industry Trends, and Sam Friedman led the discussion of federal regulatory compliance. Maury Shevin reported on Dodd-Frank. These discussions provided useful information. If you were unable to be with us, please consider attending our next meeting. The Association's next meeting--the Annual Meeting--is set for May 2011. More information will be forthcoming. Maury Shevin June 11, 2010Minutes of the 5/26/10 MFSA Annual Membership Meeting and Industry Update: [link here] June 18, 2009From: Shevin, Maury Sent: Thursday, June 18, 2009 11:08 AM Subject: FW: Economic Impact of the Payday Lending Industry - Final Members and Friends of MFSA: Attached is an important study that addresses the economic impact of payday lending in the USA. I urge you to review it and share with your Members of Congress and State Legislators. Thanks. Maury To: CFSA Board From: Rebecca Adler Subject: Economic Impact of the Payday Lending Industry Release CFSA will release findings of the economic impact study to 3,000 reporters tomorrow through CapWiz. We will issue a news release just prior to the Gutierrez mark up that will put the economic impact study in context with what's at stake by over regulating. State facts sheets will also be made available and state leaders/PR firms in key states will be asked to assume responsibility for publicizing the numbers while Dezenhall will work states without PR support. Click here to view the full report. June 9, 2009Friends of MFSA -- You may find the attached video helpful. Subject: View Video with Excellent Explanation of APR and Pass it On! Check 'N Go has posted a great video on YouTube that really nails the issue of an APR as it applies to short-term credit products. You can help raise the video's search engine ranking by viewing and then sending to everyone you know including media contacts and lobbyists. Pass it on! Maury Shevin April 3, 2009Federal Reserve Board Survey Looks at Changes in U.S. Family Finances
The Federal Reserve Board's Survey of Consumer Finances,Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances, provides insights into changes in family income and net worth since their 2004 survey. For the first time, the survey collected information on whether a family member had taken out a payday loan in the past year. They defined payday loans as a loan "that was supposed to be repaid in full out of that person's next paycheck."
Research highlights available in a handout form athttp://www.cfsa.net/downloads/Highlights_FRB_Family_Finance_Survey.pdf. Specific to payday lending, the survey found:
*A very small percentage of U.S. families have used a payday loan "Overall, 2.4 percent of families reported having taken out a so-called payday loan." * Younger families are more likely to use payday loans "The fraction of families that had taken out a payday loan declined with age, falling from 4.9 percent of families headed by a person younger than age 35 to essentially 0 percent for families headed by a person aged 65 or older." * Families use payday loans for emergencies or other urgent needs "The data indicate that families tend to take out payday loans to finance immediate expenses." "The most common reason given for choosing a payday loan for families that had taken out such a loan was ''emergencies'' and similar urgent needs or a lack of other options (35.9 percent)." "Roughly equal shares of families cited convenience in obtaining the loan (21.0 percent) or the need to pay for living expenses, including food, gas, vehicle expenses, medical payments, utility costs, or rent (20.6 percent)." "A smaller fraction, 10.8 percent, of these families reported a need to pay other bills and loans..."The remaining 12.6 percent of families with a payday loan in the past year cited other needs, including ''Christmas'' or the need to ''help family.''" * Payday loans are used most often by low and middle income families "Across income groups, the share of families that reported such a loan was between 3.5 percent and 4.0 percent for the bottom three quintiles, but families in the top two quintiles reported virtually no use of this type of short-term loan." Of note: The groups that are created when a distribution is divided at every 20th percentile are known as quintiles. Families in the first income quintile, for example, are those with income below the 20th percentile. In this survey, families in the 20th percentile reported incomes of $20,600; 40th percentile: $36,500; 60th percentile $59,600; 80th percentile $98,200; 90th percentile $140,900. March 9, 2009Rep. Luis Gutierrez has introduced a bill,the Payday Loan Reform Act of 2009, which would amend the Truth in Lending Act (TILA) to establish additional payday loan disclosure requirements and other protections for consumers. The bill, H.R. 1214, would make it unlawful for a payday lender to require a consumer to pay interest and fees that, combined, total more than 15 cents for every dollar loaned in connection with a payday loan. The term “payday loan” is defined a “closed-end credit transaction, unsecured by any interest in the consumer’s personal property and excluding any credit card transaction under an open end consumer credit plan, with a term of 91 or fewer days in which the amount financed does not exceed $2,000 with a finance charge exceeding an annual percentage rate of 36 percent…”
The House Financial Institutions Subcommittee will hold a hearing on the Payday Loan Reform Act of 2009 on April 2. Maury Shevin
Association Director
Feruary 26, 2009A cost comparison of payday loan alternatives has been updated with the latest and greatest numbers. It is available for downloadhere. Payday Advance: A Cost Comparison of the Alternatives Consumer groups and academic researchers agree: Payday advance fees are lower than many of consumers' alternatives, even when expressed as an annual percentage rate (APR). Cost comparison chart Jonathan Zinman, Dartmouth College: "Most substitution [for payday loans] seems to occur through checking account overdrafts of various types and/or late bills. These alternative sources of liquidity can be quite costly in both direct terms (overdraft and late fees) and indirect terms (eventual loss of checking account, criminal charges, utility shutoff)." Sheila Bair, Current Chair, FDIC: "When used on a recurring basis for small amounts, the annualized percentage rate for fee-based bounce [overdraft] protection far exceeds the APRs associated with payday loans." Federal Deposit Insurance Corporation: "...a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520%; a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173%; and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067%." Coalition of 90 Consumer Groups: "Unlike payday lending programs, the extraordinarily high APRs in fee-based overdraft programs are never disclosed as such, and none of the other consumer protections are provided. Moreover, fee-based overdraft programs are aimed at the very same customers that payday lenders are seeking...and the costs rival or exceed those of payday lending." Jean Ann Fox, Consumer Federation of America: "If a bank lends you $100 and charges you a $20 fee -- and then you pay the money back in two weeks -- that's an annualized interest rate of 520%. It's worse than a payday loan." February 23, 2009A handout of the information below is availablehere
Bank and Credit Union Fees: In States without Payday Lending, Consumers Pay MoreNationally, the average American household with a bank or credit union checking account pays $368.51 each year in overdraft protection (ODP) or non-sufficient funds (NSF) fees. In states where payday loans are available, the average consumer pays $240.79 per year in ODP and NSF fees--$127.72 less than the national average. On the other hand, in states where payday loans have beeneliminated, checking account holders pay, on average, $541.65 each year—that’s $300.86 more than their counterparts who live in states with payday loans.
A customer typically pays $15-$17 per $100 for a payday advance. Comparatively, the average ODP/NSF fee is $27, regardless of the amount of the overdraft. Many informed consumers choose to take out a payday loan rather than overdraw their checking account. This explains why, in states where payday loans are an option, consumers pay less.
February 3, 2009
|
|||
©<%=year(date)%>Modern Financial Services Association of Alabama Designed and Maintained by:Screaming Eagle Tech, Inc |
