New CFPB Director Kathy Kraninger

We’ll miss you Mick Mulvaney and your common sense approach.  He took the CFPB from Robin Hood mode into a do no harm approach.  The agency will focus more on bad actors now.  The days where they nuke an entire industry are gone, hopefully.  Trying to make things “fair” in business is truly a recipe for disaster.  My opinion, in the end, both sides will lose.  

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CFPB Payday Loan Rules Delayed

Midterm elections are more-or-less done and we received good news.  I’m not against safeguards that can help both consumers and lending businesses, but the rules that were set to take place were total amateur hour.  It was going to make credit access tougher, regulation costs go way up, and less competition.  I filed this in the category of “To small to succeed” and the consumer was going to get stuck with the bill.

The Credit Union Times (pay-wall) reported “Judge Issues Stay on CFPB Payday Loan Rule.”  Essentially, he pushed out the effective date of August 19, 2019 until the agency could revise the rules.

“In issuing the ruling, Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, reversed a ruling he made earlier this year.

Yeakel said he was changing his decision based on the bureau’s Oct. 26 announcement that it intended to issue a new rule in January governing the regulation’s ability-to-pay requirements. In that announcement, the bureau said it would not issue a new rule governing lenders’ withdrawing payments from a borrower’s bank accounts.

The bureau said it would issue a rule governing payments closer to when the payday rule goes into effect.”

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Operation Choke Point – Newly Released Documents

The CFSA published “UNSEALED GOVERNMENT DOCUMENTS PROVE FEDERAL COVER-UP IN OPERATION CHOKEPOINT” and it’s eye popping.  It’s proof that the OCC and FDIC tried to choke out lenders operating legally.

  • “These ‘undisputed facts’ show not only that the lenders have standing to sue according to their filings, but also that the lenders had their due process rights violated and deserve judgment in their favor.”

— Law360

  • “By weaponizing regulators at the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency, the administration realized, it could block entire industries from the banking system.  This would make it difficult – if not impossible – for businesses to operate.”

— Daily Signal

  • “The case shows the chilling impact that regulation alone can have on lawful businesses.  Despite the fact the they had not engaged in any wrongdoing, banks were convinced to drop customers targeted by the Obama administration.”

— Inside Sources

  • “With this new evidence, it has become even more clear how invested the Obama administration was in Operation Choke Point.  If an industry stood against their political agenda, it was only a matter of bringing the full force of the administrative and regulatory state against that industry as a means of coercion and punishment.  Operation Choke Point was ‘Chicago-style politics’ brought to Washington.”

— Washington Examiner

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Are the CFPB Rules Going to Happen?

An article in American Banker titled “CFPB goes back to the drawing board on payday rule” does a nice job discussing the rules.  My personal opinion is that they’re waiting out for the next presidential election to fire us all up.

The effective date of the rules are August 2019.  The article expects Mulvaney to redo the rules around February, 2019.  My hope is that they do put some basic rules to stop the most egregious acts, and leave it at that.  The current rules hurt the lender and borrower.

 

 

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Are Robo Dialers Worth the Risk?

It’s worth reading this Op-ed on American Banker titled, “Real issue for debt collectors is the irrelevance of telephones

Is it worth the risk?

“TCPA litigation increased 31.8% from 2015 to 2016 while Fair Debt Collection Practices Act litigation decreased during the same time period.”

Does it work?

“Phone calls are losing relevance as consumers migrate to communicating with companies over digital channels. Indeed, the tech company Neustar reports that 97% of business calls go unanswered.”

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Ohio bill takes aim at CSO model

HB 123 is floating around.  It’s unlikely that in it’s current form it could pass.  House Bill 123 would allow short-term lenders to charge a 28 percent interest rate plus a monthly 5 percent fee on the first $400 loaned — a $20 maximum rate. Required monthly payments could not exceed 5 percent of a borrower’s gross monthly income.

Speaker Pro Tem Kirk Schuring is recommending these changes.

  • Refusing a new loan if a borrower has an active loan
  • Requiring a three-day waiting period before taking a new loan
  • Allowing a three-day right-to-rescind a loan
  • Creating a payment plan through interest free payments

It’s hard to say what will happen.  A group is trying to get this on the ballot as a way to get around the legislative process.  This rarely works out for lenders because it’s people throwing their opinion around when it does not affect them.

You can read more in the Columbus Dispatch, “As Ohio payday lending law fails, some lawmakers ready for new regulations.”

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So what’s up with the CFPB?

It’s clear that the CFPB is taking a new direction, but what can we expect.  This article titled “THE CFPB UNDER NEW LEADERSHIP: WHAT TO EXPECT IN 2018” is a good read.  Let’s hope the CFPB’s Robinhood past goes away.

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Richard Cordray and the Inside Scoop

Alan Kaplinsky wrote a great article titled What the D.C. Circuit decision vacating stay of EPA rule could mean for final CFPB arbitration and payday loan rules.  What is helpful is the inside scoop on Richard Cordray:

Director Cordray will leave the CFPB in the fourth quarter of this year to run for Ohio governor.

Essentially, he’s going to push the arbitration and payday rules out, but will be out of his position before they go into effect.  Essentially, he’s grandstanding on two rules that will never see the light of day b/c the new director will be appointed by President Trump and will shelve them.  This is a good strategy for Cordray, but it’s also a poor use of tax payer dollars given the situation.  It’s the equivalent of loafing it at your current job while you try to find a new one.  The problem is that he’s been loafing it for a few years now.

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Is the CFPB in trouble? It’s eerily quiet.

 

I enjoyed a speculative article in Market Watch on Richard Cordray.  Is Cordray a sitting duck until after Ohio elects a new governor?  Seems far fetched, but it is juicy.  John Kasich can not run again to term limits in Ohio law.  Like Kasich, but kudos to Ohio for creating term limits.  We need more term limits.

“Despite several calls by House Republicans for President Donald Trump to fire Consumer Financial Protection Bureau Director Richard Cordray, the president could decide to keep his friends close and his enemies closer.”

Last week, USA Today chimed in with “Changes loom for America’s consumer watchdog”  President Trumps executive order on the core principals for regulating the United States financial system never mentions the CFPB.  If you have not read the executive order, you should. It’s good stuff.

It would be terrible if the CFPB had to die a long and painful demise b/c of a lack of funding 🙂

 

 

 

 

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Hudson Cook Analysis on Fintech National Charter

This would be UUGE!  You can see the full article HERE.

“The OCC proposal, eagerly awaited by online lenders and participants in marketplace lending platforms, outlines a way for such entities to enjoy the same preemption authority of national banks over various state licensing, usury, and disclosure requirements.”

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