On August 28th, CFSA and CSAT filed “Amended Complaints” that were focused on the payment provisions of the CFPB rule.  I read a thorough summary from Jeremy Rosenblum at Ballard Spahr.  This is some good stuff! I mean, who doesn’t love when someone uses the terms “arbitrary and capricious?  That’s when us laypersons really know there is some serious lawyer-ing going on!   


The amended complaints have some teeth which were good to see strike home and sink deep.  And, the inclusion of debit card debiting in the payments provision got its fair share of attention.  I for one hope that continues, maybe even gets put at the top of the list.  Without thinking deeply, I can say that if that facet were removed from the rule I would be breathing easily on the entire topic.  I know that others with a different business model may differ, but it is by far ours and our customer’s favorite payment method for convenience reasons, and also because it does not cause NSF charges if the payment returns.  It does not seem likely that the industry will have to “go live” with these provisions as they are now, by November.  There is still much to be worked though in this legal process which has been long and winding. With all of the questions at this point how can it be known what the rule will look like anytime soon?  Operators still need fair time to install the proper procedures and notifications and that window is now far too tight for a November go live date. 

 
See below for some takeaways from Jeremy’s blog post:


“Trade Groups File Amended Complaint In Texas Lawsuit Challenging CFPB Payday Loan Rule.

In the Amended Complaint, the plaintiffs (our industry) allege that the Rule violates both the Constitution and the Administrative Procedures Act (the APA).  Starting with the Supreme Court’s decision in Seila Law that the Director of the CFPB who adopted the Rule was unconstitutionally insulated from discharge without cause by the President.

The Amended Complaint argues that a valid Rule requires a valid notice and comment process from inception and not mere ratification of the final result by a properly serving Director.

It further asserts that ratification of the payment provisions is arbitrary and capricious because the payment provisions were based on a UDAAP theory expressly rejected by the CFPB in its revocation of the underwriting provisions of the Rule and the CFPB has failed to explain how a lender can commit a UDAAP violation, consistent with the theory of the revocation of the underwriting provisions, when the consumer is free to eschew a covered loan based on a generalized understanding of the risk of multiple NSF fees.

The Amended Complaint takes issue with the payment provisions based on a number of additional alleged infirmities, including the following:

The CFPB provided a lengthy period for the industry to comply with the original Rule but failed to provide any compliance period for the ratified Rule.  Thus, the current Rule differs from the original Rule it purports to ratify in a key respect.

The 36% APR trigger for covered installment loans is fundamentally at odds with the provision of the Dodd-Frank Act explicitly prohibiting the CFPB from establishing usury limits.

The alleged harms the payment provisions are designed to forestall are caused by the banks holding the consumers’ deposit accounts and not by the lenders who initiate payments declined due to insufficient funds.

The Bureau acted arbitrarily and capriciously in extending the payments provisions to multi-payment installment loans, where consumers have lengthy periods of time between installments to respond to failed payment-transfer attempts (and where, we would note, consumers are already free under the Electronic Funds Transfer Act to decline to authorize loan payments through recurring electronic fund transfers).

The Bureau also acted arbitrarily and capriciously in extending the payments provisions to debit and prepaid card transactions, where failed payment-transfer attempts typically do not, if ever, result in fees.  (We have repeatedly expressed the view that this key aspect of the Rule is indefensible.)

The CFPB evidence supporting the payment provisions was insufficiently robust and reliable, especially with respect to storefront and installment loans since the CFPB relied upon evidence about online single-payment loans.

The timing requirements for notices under the Rule arbitrarily prevent consumers from scheduling earlier payments.

The CFPB did not consider whether enhanced disclosures could have adequately prevented the perceived consumer injuries.

We believe that the Amended Complaint represents a powerful attack on the payment provisions of the Rule.

We have only one point we would emphasize to a greater extent:  There is no apparent link between the UDAAP problem identified in Section 1041.7 of the Rule—consumers incurring bank NSF fees for dishonored checks and ACH transactions after two consecutive failed payment transfers—and the burdensome notice requirements in Section 1041.9 of the Rule.

To our mind, these elaborate notice requirements are arbitrary and capricious for this further reason.”

Here is a link to the article – thank you Ballard Spahr! https://www.consumerfinancemonitor.com/2020/08/31/trade-groups-file-amended-complaint-in-texas-lawsuit-challenging-cfpb-payday-loan-rule/

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Tax Prep Season is here let’s get after it!

by The CAB Man Texas on January 9, 2020

We are nearing the end of the Holiday Season’s high demand period that coincides with the beginning of Tax Season.  Many CAB Consulting clients and TOFSC Members offer Tax Preparation services, and some will be doing it for the first time this year.   I know many who are ready to get after it so let’s go!

Here are some things every business needs to know about 2020’s Tax Prep Season:

  • IRS is expecting more than 150 million tax returns expected to be filed.
  • W2’s are already going out, all must be out by end of January.
  • Tax filing season is Monday January 27th through Wednesday April 15th.
  • Refund advances are happening already.
  • Expect heavy loan payoff trends to start mid-February.  
  • In 2019, we saw largest payoff week of entire year fall on the week of February 24th to March 2nd which was the exact week when the Earned Income Credit consumers got their refunds and paid off.
  • Earned income credit / additional child tax credit – consumers who seek these credits will get their refunds later.
  • In 2020, this means that refunds for these consumers will not happen before February 15th.  In, 2019 it was February 27th so it is good that it is 12 days sooner.
  • This is the 4th year where there has been a delay on tax refunds for those where the “PATH Act” applies (Protecting Americans from Tax Hikes Act). 

With the key information above you should be able to forecast where loan volume will go, when demand will wane, etc.  The Tax Prep market is very competitive but if you are committed it is a nice way to expand services to your existing customer base and grow an attractive additional revenue stream for your business.  If you have interest in adding these services, reach out to CAB Consulting for assistance!

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.

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OCCC set to report to Finance Commission Friday

December 18, 2019

The OCCC is all set to report to the Finance Commission this Friday, December 13th.  Below for the key take-aways for CABs offerring payday, installment, and title loans in Texas.  The report will compare September-October 2018 vs. 2019.  The Septermber-October 2019 part of the OCCC “fiscal year to date 2020”). ·         Examinations are down across the […]

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OCCC is having a special stakeholder meeting on the questions posed to the Attorney General recently about CSO’s.

December 3, 2019

See below for a recent email sent out to OCCC stakeholders: “On December 9, 2019, at 2:30 p.m., the OCCC will hold a stakeholder meeting on credit services organizations and attorney general opinion KP-0277. A stakeholder meeting notice is available at: https://occc.texas.gov/publications/attorney-general-opinions. On this webpage, click the link labeled “Stakeholder Meeting Notice.” The meeting notice provides […]

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Helping Green Dot and other pre-paid card holders get funded on loans…good or bad idea?

November 21, 2019

Lending to Green Dot Card Customers – is this a good or bad idea?  Many feel these and other pre-paid card accounts carry too much risk because the card holders are not as “married” to the card versus the commitment assumed is had with a traditional bank with local branches.  We had one TOFSC member […]

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Keeping an eye on FinTech Lending

November 15, 2019

Why should Texas CABs keep an eye on FinTech Lending?  We need to watch and learn, let’s evolve our businesses by watching their successes and failures.  Where you can, implement their techniques that work, into your CAB’s capabilities! Think marketing, underwriting, process flow, etc.. These recent OCCC MSA report statistics show that FinTech now owns the […]

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OCCC will be reporting to the Finance Commission Friday, October 18th.

October 22, 2019

The quarterly Finance Commission Meeting will be this Friday, mostly information will be reported for September to August 2018 vs. 2019…that is their fiscal year. OCCC will report that: ·         Examinations were down in 2019, went from 638 to 475. ·         CABs went to the bottom in terms of acceptable level of compliance…due to lower examination volume.  […]

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What is a FinTech really? Be one.

October 7, 2019

Seems like over the last year that the industry buzzword has been “FinTech.”  According to BuiltIn.com “”Fintech” is a portmanteau (combination of two words to create a new one) of financial” and “technology.”  It is the application of new technological advancements to products and services in the financial industry.” For those of us in business […]

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The “Lend 360” Conference is coming up in Dallas on the 25th here are the summary details.

September 24, 2019

The “Lend 360” Conference is coming up in Dallas, September 25-27.  Since it is in our back yard versus Florida or California wanted to discuss it a bit and give you some information for you to better decide on whether you will or will not attend.  Many of our vendor and TOFSC sponsor companies will be […]

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Silicon Valley FinTech “Earnin” may need to buckle up for a bumpy ride.

September 11, 2019

The New York Times ran a bit of an “expose” on “Earnin,” an online lending FinTech that may need to buckle up for a bumpy ride… It seems like each week there is a new Silicon Valley FinTech anti-payday loan venture that is launched with millions in funding and all the slick PR you can […]

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