Play Your Winning Hand at 2016 NDBA/SDBA Annual Convention
Have you registered yet for the 2016 NDBA/SDBA Annual Convention--"Winning Together?"
Don’t miss out on the opportunity to network with fellow bankers and business partners at the Associations' largest event of the year on June 12-14 at the Best Western Ramkota Hotel in Bismarck, N.D.
Visit ndbaconvention.com for the complete agenda and registration forms. Questions, contact the NDBA Office at 701.223.5303.
CFPB Proposal Could Cripple Innovation in Small-Dollar Credit
The Consumer Financial Protection Bureau today released a proposed rule that would sharply curtail short-term, small-dollar consumer loans. The rule would define certain small-dollar loans as “abusive and unfair” if lenders fail to reasonably determine borrowers’ ability to repay the loan or satisfy an exception.
While principally targeted at payday and auto title loans, the rule would cover a wide swath of short-term, small-dollar credit, including all loans with a term of 45 days or less, as well as longer-term loans that have an all-in APR exceeding 36 percent and that are repaid directly from a borrower’s account or secured by a car.
Virtually no banks currently offer deposit advances, the principal bank-based product covered under the rule, but--according to a recent ABA survey--most banks make small-dollar loans either as part of an established program or, more frequently, as an accommodation to serve a customer upon request. Overdraft protection services would be excluded from the rule.
ABA expressed concern that the CFPB’s highly prescriptive proposal could impede innovation by banks--as urged by other regulatory agencies--in small-dollar lending. “While the bureau has frequently expressed interest in expanding banks’ trusted role in this market, the proposal fails to do so in a meaningful way and will significantly limit the availability of small-dollar credit,” said ABA SVP Virginia O’Neill.
To demonstrate ability to repay, lenders would be required to verify income, customer debt obligations and housing costs; forecast basic living expenses; and project customers’ income, obligations and expenses over the term of the loan. Borrowers with one outstanding covered loan would be presumed unable to repay a new, second loan unless documented by the lender.
The bureau proposed a “safe harbor” from ability-to-repay calculations that includes a $500 cap on the first short-term loan and lower caps on subsequent loans. The bureau would also provide safe harbors for longer-term loans, one modeled on the credit union industry’s “payday alternative loan” model and another for longer-term loans with a maximum 36 percent APR, single origination fee of $50 or less or that is reasonably proportionate to the lender’s underwriting costs, and projected annual default rate of 5 percent or less for all loans made under the safe harbor.
The CFPB would also define as “abusive and unfair” making a third attempt to debit a customer’s account for a loan payment after two previous attempts had failed for insufficient funds. To continue making debits, the lender would have to seek new authorization to debit the account. Comments are due by Sept. 14. Read the proposed rule. For more information, contact ABA's Jonathan Thessin.
ABA: OCC Effort Sends Positive Message
In its response Wednesday to the regulatory initiative in support of banking innovation, ABA welcomed the promised cooperation of the OCC as banks strive to enhance service to their customers and streamline innovation.
“Banks have always been involved in innovation,” said ABA EVP Wayne Abernathy. “That‘s how we stay relevant to our customers and their changing needs and interests. The OCC’s white paper sends a clear message that OCC wants to be on the 'helps' side.”
In light of the growing importance to banks of financial industry technology--“fintech”--ABA commended the OCC for taking a wider view of innovation that can include collaborative efforts from regulators regarding responsible bank innovation.
ABA noted that the white paper correctly focuses on how banks deploy new products and services--whether with old, current or new technology--to accomplish a traditional objective: meeting constantly evolving customer needs for financial services. ABA also stressed that successful principles for innovation in technology must be part of overall regulatory supervision. Read the letter. For more information, contact ABA's Hu Benton.
FDIC Expects Economy to Spur De Novo Activity
The FDIC anticipates “an increase in chartering activity as general economic conditions continue to improve,” the agency said in response to a letter from Sen. Dean Heller (R-Nev.) questioning the agency's effort to create a favorable environment for new de novo bank institutions.
In the letter, Sen. Heller specifically requested information on possible FDIC actions that could be taken to remove regulatory barriers and compliance issues that currently deter de novo charters. He also requested that the FDIC focus on encouraging the formation of new industrial loan companies.
Among the agency’s efforts to support de novo activity, the FDIC identified a publication that will serve as a guide for the de novo application process, designated staff within regional offices to respond to proposals, outreach meetings across the country about the application process and the FDIC’s resources available to help the process, as well as a forthcoming review of the Economic Growth and Regulatory Paperwork Reduction Act.
ABA has long raised concerns about the lack of new bank approvals in recent years and strongly supports the FDIC’s recognition of improved industry conditions and commitment to fostering de novo formation. Read the letter.
ABA Kicks Off American Housing Month with Free Resources
In observance of American Housing Month, which kicked off yesterday, ABA has developed a variety of resources to help bankers promote consumer awareness about housing options, including a social media toolkit, graphics, tip sheets (many of which are available in Spanish), customizable news releases and financial calculators. These free materials address a broad range of housing issues, from saving for a down payment to improving credit scores. Learn more and access the resources.
ABA Offers Tips for Stopping Elder Abuse
In recognition of World Elder Abuse Awareness Day on June 15, the ABA Foundation has developed a customizable press release banks can use to educate senior customers and their caregivers on the steps they can take to safeguard their money and personal information against the thread of fraud. Download the release.
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