Very great example of how innovation can happen in the short-term credit market, and a look at the many alternatives that are available to all consumers who seek payday-like loans. We applaud those in the space who disclose fees and APR upfront (a Best Practice of CFSA Members is “Full Disclosure,” click here to find out more). Only consumers win when this is done, allowing them to easily comparison shop.

BillFloat and ZestCash are two online start-ups who “are introducing new versions of these loans that also carry significant fees,” and we’re happy to see that consumers have many options when shopping for a short-term credit loan.

In this New York Times article, Ann Carrns highlights the following about these two companies who are offering innovative products in this space:

“BillFloat, based in San Francisco, doesn’t pay any money directly to the customer. Rather, it pays its customers’ bills — say, a utility bill or cellphone bill — and then automatically deducts the amount of the bill, plus fees and interest, from the customer’s bank account within 30 days.”

…

“Customers apply by filling out an online questionnaire, and are then contacted by a ZestCash representative to complete the process. ZestCash, Mr. Merrill said, uses a proprietary underwriting process that looks at hundreds of variables to determine if the customer is likely to pay back the loan. If approved, the customer chooses an amount to borrow — up to $800 — and selects not only the length of the loan, but also the amount of the payments. The payments are automatically withdrawn from the customer’s account when a paycheck is deposited. The approach gives borrowers more flexibility…”

The Senate Banking Committee voted along party lines today to push Richard Cordray’s nomination to lead the new Consumer Financial Protection Bureau ahead, although Republicans have vowed to block his confirmation, according to the New York Times.

The panel voted 12-to-10 to approve Cordray’s nomination.

“We are simply seeking common-sense changes,” Mr. Shelby, the committee’s ranking minority member, said in a statement after the vote. “Today’s vote by the Senate Banking Committee was premature. No nominee for the director of the Bureau of Consumer Financial Protection should receive consideration until the Democrats are ready to stop playing politics and work with us to make the bureau accountable. It’s their choice.”

Elizabeth Warren recently sat down with the New York Times’ DealBook to discuss the attacks on the bureau, the delay in naming its director, and her dog Otis. Click here to watch the interview.

Director or not, the CFPB will be up and running come July 21st.

On July 21, the bureau will formally open its doors and will be able to send its examiners into Goldman Sachs, JPMorgan Chase and other financial titans — whether or not it has a director. It can also issue new rules for big banks, examine their books and file enforcement actions, all crucial steps for an agency that was born only a year ago.

“They have almost unlimited ability to go after the banks on consumer issues,” said Jaret Seiberg, a policy analyst at MF Global. “They’re saying, ‘We’re the new sheriff in town.’ ”

Seiberg goes on to say that Bureau’s powers will be “muted” and that it will lack the weight in needs (meaning a director) to oversee some less regulated corners of the finance industry. We’re not too sure we agree with “less regulated.”

Our industry operates currently in 32 states and CFSA is working to be regulated on all 50 states. While the industry does not want to be regulated out of business (as industry critics would like), it has always supported responsible and balanced regulations that protect consumers, while preserving their right to financial options and access to credit.

Over the past decade, most states have created or maintained a regulatory environment that satisfies the robust consumer demand for small dollar, short-term loans. Working with CFSA, state policymakers have balanced the interests of the industry with substantive consumer protections that ensure responsible and informed use of the product. As a result, millions of satisfied consumers have enjoyed the convenience and economic benefits of payday advance services without complaint. In fact, a 2009 analysis of consumers’ use of payday loans found that 88 percent were satisfied with their last loan.

Of course … down at the bottom of the article, Steven Schlein, CFSA’s spokesperson said this:

“We are not participating in the politics of this … We want to see the Bureau staffed with qualified people who will take the short-term lending industry and needs of consumers seriously.”

“Lawyers and accountants who were once the proud pillars of our financial system have become the happy architects of its circumvention.”

This op-ed in the New York Times discusses the role of lawyers and attorneys and today’s approach in fee generation, specifically as it relates to what role outside professional firms played in the genesis of the 2008 financial crisis.

A couple recommendations from the op-ed writer:

1. “For starters, Congress should take a hard look at the doctrine of attorney-client privilege as it applies to corporations.”

2. “A second idea is for corporations to reassess their compensation practices for financial and legal executives. Just as some large businesses are moving to separate the position of board chairman from that of chief executive in order to provide for stronger governance, companies might also consider development of a new pay scheme for their financial and legal personnel.”

A very interesting perspective coming from this New York Times article re: the debt collections industry. Tired of being harassed, threatened, and cursed at, the industry’s trade association is going on a “charm offensive” to educate the public and the financial services’ new regulator: ‘Hey, we are people too.’

“There really ought to be a law on how consumers behave towards debt collectors,” said Mr. Neeb, whose employees routinely use aliases on the phone to protect their identity from hostile debtors.

ACA International has beefed up its lobbying operation in Washington to pursue a wish list of laws and regulations that it would like changed, and has even set up a Web site called: Ask Doctor Debt.

Nearly half the financial regulations required by the Dodd-Frank law are behind schedule, according to the New York Times. Will it be a death by delay?

So far, 28 of the financial overhaul rule-making deadlines have been missed, according to Davis Polk, a law firm that is tracking the rules. Of the 385 new rules to be written, the law firm says, regulators have completed only 24 requirements; they were supposed to have taken 41 such actions by now.

“There’s an attempt to kill this through delay,” said Michael Greenberger, a law professor at the University of Maryland and a former official at the Commodity Futures Trading Commission, which is in charge of writing batches of the rules. “The difference between eight or nine months and 24 months could be cataclysmic here.”

Many stories are circulating about the hot seat Elizabeth Warren faced yesterday as she testified before Congress. This New York Times article gives its readers a look at what went down during the awkward moment (an argument about the hearing time) that the Payday Pundit was referring to yesterday.

“Congressman, you are causing problems,” Ms. Warren said. “We had an agreement.”

“You’re making this up,” Mr. McHenry replied, eliciting gasps from the audience. “This is not the case.”

As Mr. McHenry and Ms. Warren traded accusations, a senior Democrat, Representative Elijah Cummings of Maryland, tried to smooth things over. “Mr. Chairman,” he said, “I’m trying to be cordial here — you just accused the lady of lying. You need to clear this up with your staff.”

Mr. McHenry did not back down. After the meeting broke, he said in a statement: “I was shocked by Ms. Warren’s blatant sense of entitlement. She was apparently under the assumption that she could dictate a one-hour time limit for her testimony to Congress, and that we were there at her behest instead of the other way around.  This is just further example of her disregard for Congressional oversight.”

 

A new report by the Pew Charitable Trust’s Safe Checking in the Electronic Age Project analyzed the policies of the nation’s 10 largest banks. A New York Times Editorial says it shows why checking account holders — in other words most adult Americans — are in desperate need of better protections. Required disclosure documents run an average of 111 pages and often hide penalty and fee information in several places so that customers cannot easily find it. Checking overdraft fees are not “reasonable and proportional,” as late fees must now be for credit cards. According to the study, the average overdraft charge of $35 on an average overdraft of $36 amounts to an annualized interest rate of more than 5,000 percent. Click image below to see the full infographic from Pew.