Courtesy of By Samuel J. Robinson, MLive.com
Michigan State Capitol
A ballot committee is working to put a question on the November ballot that would stop payday lenders from charging “predatory” interest rates if approved by voters.
The Michiganders for Fair Lending campaign officially launched its petition drive effort Wednesday to cap high payday loan interest rates advocates say create a cycle of debt that becomes impossible to escape. The group said it wants to change the current payday loan landscape to one that gives access to small loans to those that need them, not one that creates a debt trap.
“Payday lenders target Michigan’s most vulnerable communities by offering quick cash that traps people into an endless cycle of debt with outrageously high interest rates,” said Michiganders for Fair Lending Spokesperson Josh Hovey.
“State lawmakers have been urged for years to put a stop to predatory lending practices. The people being harmed by these loans cannot afford to wait any longer. That’s why we’re bringing the issue directly to voters this November.”
In Michigan, the typical payday loan carries the equivalent of a 370% annual percentage rate (APR). Michiganders for Fair Lending’s proposal would cap payday loans at no more than 36% APR.
Payday loans are marketed as short-term, but the vast majority of borrowers get caught in a long-term debt cycle, fair lending advocates say. Roughly 70% of payday borrowers in Michigan borrow again the same day they pay off a previous loan, according to research from the Consumer Financial Protection Bureau. The same study found that the average payday loan borrower ends up taking out 10 loans over the course of a year.
Michigan Attorney General Dana Nessel describes a payday loan as a short-term, high-cost transaction where customers borrow money for a service fee. Michigan law calls this type of loan a “deferred presentment service transaction,” because the customer’s check is held for a period of time before it’s cashed. The loans aren’t like car payments, as borrowers aren’t able to make installment payments.
Payday loans have high service fees and a short repayment period. For example, a customer who borrows $100 for two weeks and is charged $15, will pay a service fee equal to a triple-digit APR. The actual cost of the two-week loan is $15, which equals a 391 percent APR. And that’s still not included additional fees for “eligibility checks” or processing.
Payday loan stores often let customers unable to repay the loan take out a second payday loan to pay off the first. Service fees can cause the customer to be stuck in a cycle of debt.
“It’s a slippery slope,” Nessel said in a consumer alert focused on the process.
Fair lending advocates say payday loan stores are undoubtedly predatory. Stores deploy manipulative tactics and enter customers into a process that creates a cycle of debt that traps people into poverty, Hovey said.
“Stopping predatory lending is an issue in Michigan that resonates across parties, geographic regions, age and income levels. Even in the divisive climate of today, this is one issue that the vast majority of people can agree on,” said Jessica AcMoody, policy director at the Community Economic Development Association of Michigan.
(Aug. 6, 2021) Miguel A. Polanco, a former Army officer and investment banker, is now the top workforce and supplier diversity officer NCUA, the agency announced this week. The agency said Polanco will serve as director of the agency’s Office of Minority and Women Inclusion (OMWI); he most recently served as deputy director. He replaces Millie Avalos, who was serving as acting director.
Polanco’s other roles at the credit union regulator included managing the agency’s supplier diversity program. He also worked for the Small Business Administration (SBA) and its 8(a) program (a business assistance program for small, disadvantaged businesses). Prior to that, he worked in investment banking at Citibank Puerto Rico, and served as U.S. Army intelligence officer, NCUA said.
He is a graduate of the U.S. Military Academy at West Point and the Kellogg Graduate School of Management at Northwestern University.
LINK:
Polanco Named NCUA Director for the Office of Minority and Women Inclusion
(July 2, 2021) Rules described as designed to help prevent a surge of foreclosures as federal protections expire were finalized this week – to become effective Aug. 31 – by the CFPB, effectively putting an end to an extension of a foreclosure moratorium by the agency at the end of this month.
The bureau said its amendments to federal mortgage servicing regulations would help protect mortgage borrowers from “unwelcome surprises” as they exit forbearance following the end of the federal foreclosure moratorium, set to end July 31. The rules cover loans on principal residences and generally exclude small servicers.
The protections only apply to first legal or first notice between the effective date of Aug. 31, 2021 and the sunset of Jan. 1, 2022.
Under the new rules, borrowers will have at least three options to bring mortgages current and avoid foreclosure: Resume regular mortgage payments; lower their monthly mortgage payments or; sell their homes, the bureau said.
The agency noted that the rules announced this week will establish “temporary special safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes.”
According to the bureau, the rules will:
- Give borrowers a meaningful opportunity to pursue loss mitigation options. “As borrowers exit forbearance, they need time to process their current options and consider next steps,” the agency stated. “As such, to ensure that borrowers can pursue foreclosure avoidance options, servicers must meet temporary special procedural safeguards before initiating foreclosures for certain mortgages through the end of the year.”
- Allow mortgage servicers to help borrowers faster. “Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option,” the agency stated. “These streamlined loan modifications cannot increase borrowers’ payments and have other protections built into them. With this flexibility, servicers can get borrowers into affordable mortgage payment plans faster, with less paperwork for both the servicer and the borrower.”
- Tell borrowers their options. “Servicers will be required to increase their outreach to borrowers before initiating foreclosure and tell borrowers key information about their repayment or other options when they communicate with borrowers who are exiting forbearance or struggling to make mortgage payments,” CFPB said.
Not all foreclosures are avoidable, CFPB said, noting such action can start if the borrower: has abandoned the property; was more than 120 days behind on their mortgage before March 1, 2020; is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.
LINKS:
Final rule, federal mortgage servicing regulations
(May 28, 2021) An overview of the letter to credit unions on the future of the LIBOR reference rate is the latest summary to be posted by NASCUS; it is available to members only.
Last week, NCUA issued the letter (21-CU-03) essentially telling credit unions stop using LIBOR (the London Interbank Offered Rate) as soon as possible. Failure by credit unions to prepare for disruptions of LIBOR “could undermine a federally insured credit union’s financial stability, and safety and soundness,” the NCUA letter stated. “The LIBOR transition is a significant event that credit unions should manage carefully.”
The agency last week also issued on the same subject its first “Supervisory Letter” of the year, which NCUA said “provides the supervision framework examiners will use to evaluate a credit union’s risk management processes and planning regarding the transition from LIBOR.”
The supervisory letter outlines the background, potential LIBOR exposure for credit unions, and examination considerations – but offers no endorsement of a specific replacement for USD LIBOR.
LINK:
NASCUS Summary, Evaluating LIBOR Transition Plans (members only)
(Jan. 22, 2021) Suspicious activity reporting and other anti-money laundering (AML) requirements are subjects of new frequently asked questions (FAQs) issued by NCUA, federal banking regulators and the Treasury’s Financial Crimes Enforcement Network (FinCEN) this week.
The questions were developed, the agencies said, in response to recent Bank Secrecy Act Advisory Group (BSAAG) recommendations, as described in last September’s Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness, published by FinCEN.
According to the agencies, the FAQs clarify the regulatory requirements related to suspicious activity reporting to assist credit unions and other financial institutions with their compliance obligations. The FAQs also enable financial institutions to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of Bank Secrecy Act (BSA) reporting, the agencies said.
The FAQs also address questions about maintaining accounts at the request of law enforcement, suspicious activity report (SAR) filing and the receipt of grand jury subpoenas or other law enforcement inquiries, maintaining customer relationships following the filing of an SAR, SAR filing and monitoring on negative media alerts, data fields, the SAR narrative, and SAR character limits.
The agencies said the FAQs do not alter existing BSA/AML legal or regulatory requirements and they do not establish new supervisory expectations.
LINK:
NCUA, Federal Banking Agencies, FinCEN Issue FAQs on SAR and Other AML Requirements
(Dec. 23, 2020) New requirements for certain transactions involving convertible virtual currency (CVD) or digital assets with legal tender (LTDA) status were proposed by the Treasury’s financial crimes arm today, which would require financial institutions to submit reports, keep records and verify customer identifies under certain circumstances.
The proposal is meant to curb the use of virtual currencies to move illicit funds.
The Treasury’s Financial Crimes Enforcement Network (FinCEN) said its proposal would affect transactions involving assets that are held in both “hosted” wallets (those held at a credit union or bank) as well as “unhosted” wallets (those that are not hosted by a third-party financial institution).
Under the proposal by FinCEN (which is taking comments until Jan. 4), credit unions and banks would be required to file a report to the agency with certain information related to a CVD or LTDA transaction and counterparty, and to verify the identity of their customer, if a counterparty to the transaction is using an unhosted or otherwise covered wallet and the transaction is greater than $10,000.
Financial institutions would also be required to keep records of a customer’s CVC or LTDA transaction and counterparty—including verifying the identity of their customer—if a counterparty is using an unhosted or otherwise covered wallet and the transaction is greater than $3,000.
The proposal does not, FinCEN said, modify the regulatory definition of “monetary instruments” or otherwise alter existing anti-money laundering regulatory requirements applicable to monetary instruments.
LINK:
Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets
(Dec. 11, 2020) Shane Foster is the new deputy director of financial institutions at the Arizona Department of Insurance and Financial Institutions (DIFI, a consolidated agency, as of July 1, that includes the former stand-along insurance and financial institutions departments, and the state automobile theft authority). Foster was formerly with the state’s Attorney General’s office, serving as senior litigation counsel in the consumer protection and advocacy section. In a release, the agency said Foster has worked in private practice and has extensive experience in the mortgage industry.
LINK:
AZ DIFI announces deputy director
The SBA has published an Interim Final Rule related to the Paycheck Protection Program. The rule is available on SBA’s website immediately and will publish in the Federal Register in the coming days.
Check back for a forthcoming NASCUS Summary.
The 2020 edition of the “Guide to HMDA Reporting: Getting It Right!” is now available. The guide was developed by member agencies of the Federal Financial Institutions Examination Council (FFIEC), including NCUA, and reflects updates to incorporate content from the HMDA Rule issued by the CFPB in October 2019. The appendices provide additional implementation materials you may find useful.
NASCUS members join CFPB Credit Union Advisory Council
Today, CFPB Director Kathy Kraninger announced the appointment of members to the Credit Union Advisory Council (CUAC). The CUAC is a discretionary council that advises and consults with the Bureau on consumer financial issues related to credit unions. Among the appointees are NASCUS members Teresa Campbell, President & CEO, San Diego County Credit Union in San Diego, CA and Brian Holst, General Counsel, Elevations Credit Union in Boulder, CO.
The other CUAC members are:
- Chair of the CUAC – Sean Cahill, President & CEO, TrueSky Credit Union (Oklahoma City, OK)
- Arlene Babwah, VP Risk Management, Coastal Federal Credit Union (Raleigh, NC)
- Rick Durante, VP, Director of Corporate Social Responsibility and Government Affairs, Franklin Mint Federal Credit Union (Chadds Ford, PA)
- Doe Gregersen, Vice President & General Counsel, Landmark Credit Union (New Berlin, WI)
- Racardo McLaughlin, VP Mortgage Originations/Operations (TwinStar Credit Union, Lacey, WA)
- Rick Schmidt, President & CEO, WestStar Credit Union (Las Vegas, NV)
Director Kraninger also appointed members of CFPB’s Consumer Advisory Board (CAB), Community Bank Advisory Council (CBAC), and Academic Research Council (ARC). Like the CUAC, these panels are comprised of experts advise who Bureau leadership on a broad range of consumer financial issues and emerging market trends.
CFPB Announces Advisory Committee Members
The CFPB will host a symposium on Behavioral Economics. The session will feature remarks from CFPB Director Kathleen Kraninger and Deputy Director Brian Johnson as well as testimony from academic and policy experts on the topics of: (1) the methodological foundations of behavioral economics and (2) behavioral law and economics and consumer financial protection.
This will be the second of CFPB’s symposia series and will be held on September 19, 2019 at 9:00 AM at the Bureau’s headquarters, 1700 G St. NW, Washington, D.C.
The session will be also be live streamed.
There will be two panels of academic and policy experts in the fields of behavioral economics and behavioral law and economics. The first panel will be on “Methodological Foundations of Behavioral Economics,” and the second panel will focus on “Behavioral Law & Economics and Consumer Financial Protection.”
Registration information can be found here.
NCUA has finalized amendments to Part 713 and Part 704 regarding fidelity bond coverage for natural person and corporate credit unions. Part 713 applies to federally insured state-chartered credit unions (FISCUs) by reference in Part 741.201.
The Federal Credit Union Act (FCUA) requires credit unions to maintain fidelity bond coverage for certain employees and officials.
The final rule may be read here and the NASCUS summary can be found here. The rule is effective October 22, 2019.