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The CFPB has outlined their first draft of regulations to rein in payday loans. The proposal gives lenders two underwriting options designed to limit unsustainable debt. Under the first option, the lender would need to verify customers’ ability to repay by assessing income, other financial obligations and borrowing history. Under the second option, the lender would forgo those checks and accept safety limits on the loan products, including a $500 cap on loan size. Under this option, lenders would also be prohibited from rolling over loans more than two times during a 12-month period. The proposal would apply to payday loans as well as certain loans backed by car titles and some installment loans that stretch longer than 45 days.
Promontory Financial Group has opened the 2015 round of its Empowerment Awards, a program designed to recognize and support projects that increase access to responsible banking services in underserved communities. The awards will be offered in two categories: the Community Development Banking category aimed at certified CDFI banks, and the Access category aimed at CDFIs, nonprofit organizations and small to midsize entrepreneurs. Each winner will receive a financial award of $100,000 and pro bono consultations with Promontory. Information about the Empowerment Awards and application materials are available online at empowerment.promontory.com. Applications are due June 12, 2015.
The House Financial Services Committee approved 11 regulatory reform bills for community banks and credit unions last week with bipartisan support. The legislative package includes bills intended to streamline privacy notifications and check-clearing as well as a measure to keep privileged information shared between state and federal regulators confidential. The panel also passed bills that would refigure how the CFPB calculates certain points and fees under its "qualified mortgage" rule, require the CFPB to hold open meetings, create a small business advisory board at the agency and establish an appeals process for areas to be designated as "rural" under the QM rule. Additional legislation in the package is intended to streamline and expand mortgage lending.
Special Needs Assistance Program (SNAP) grants from BankPlus and FHLB Dallas are helping income-qualified special needs homeowners pay for home repairs. Jenice Luckett, 60, had been living on disability after suffering an injury to her back. She didn't have enough money to repair a roof so leaky that her grandchildren would joke it was raining in the living room. A $6,000 SNAP grant from BankPlus and FHLB Dallas allowed Luckett to pay for a new roof. "I am delighted to work with FHLB Dallas each and every year," said Mark Ouellette, first vice president and director of Affordable Housing at BankPlus. "By giving members access to meaningful programs like SNAP, we are able make a significant, visible impact on the lives of our neighbors and communities."
According to a report by Pew Charitable Trust, nearly two million American’s spent a total of $3 billion at auto title storefronts across the country to borrow money against the value of their cars. Predatory auto loans can be even more dangerous than payday loans because they are much larger; the typical auto title loan averages $1,000 and comes with an annual percentage rate of about 300%. The typical auto title loan represents nearly 50% of a borrower’s gross monthly income. Pew proposes several regulations for safe auto lending, including measures that would ensure that the borrower has the ability to repay the loan, restrict the use of balloon payments and eliminate harmful collection practices.
Carver Federal Savings Bank CEO Michael Pugh is making a major push to attract customers back to the 67-year old Harlem institution. For many years, Carver was the bedrock of the neighborhood's business community, one of the only banks that would work with Harlem’s black businesses. But in the post-crisis years, Carver struggled to recover from a portfolio filled with failed subprime loans. To reinvigorate the bank, Mr. Pugh is engaging the community, asking churches and nonprofits to connect it with new customers. Pugh also plans to introduce a new line of business loans of $10,000 or less. "If a person who's running a kiosk on 125th Street came looking for a loan, another bank might offer him a credit card—or nothing," he said. "We're going to provide something better."
A bipartisan attempt to regulate payday lenders in South Dakota has been halted, the latest in a series of state-level efforts to be dismantled by payday industry lobbyists. The South Dakota bill was led by conservative state legislator Steve Hickey and former Obama campaigner Steve Hildebrand — ideological opposites unified against predatory lending. Despite being deeply involved in the crafting of the bill, payday industry lobbyists suddenly turned against the effort, which was killed in committee. When Hildebrand and Hickey tried to revive their effort with a ballot initiative, State Senator Corey Brown put forward a bill doubling the amount of signatures required to enact the caps, effectively killing the effort.
Ross Alan Hill, founder and CEO of Oklahoma City based Bank2, tells a story of hope and redemption in his new book Broken Pieces: Nothing is Wasted. Hill explains that he takes inspiration from Redento Raffinato, a style of blown-glass art in which broken glass fragments are reused to create elegant vases. Hill says that he sees his vase as a spiritual symbol, a physical reminder of redemption in his own life — and of the redemption that is part of Bank2's mission. “We respect our employees, customers, our friends and our community,” Hill said. “We know that brokenness is part of life, and when people are going through broken times, we try to be a friend.”
The House Financial Services Committee has renewed its look at regulatory relief for small financial institutions, pressing bankers and credit union representatives for details about their compliance burdens. “We are losing more than one [community bank] a day and they are not perishing of natural causes,” said Rep. Jeb Hensarling (R-Texas), chairman of the committee. “The sheer weight, volume, cost, complexity and uncertainty of federal regulation is a burden that is killing them off,” he warned. Although Democrats have said they are wary of any relief that undermines Dodd-Frank and have cautioned against placing too much blame on the measure, some support the need for targeted reform.
The CDFI Fund is soliciting comments on its evaluation of the Bank Enterprise Award (BEA) Program. The BEA helps banks provide credit and financial services in areas with high poverty. The BEA Program Evaluation assesses the effectiveness of the BEA Program as a mechanism for providing performance-based awards, the influence of the BEA Program on bank behavior and the impact of BEA Program-eligible investments in CDFIs and in distressed communities. The deadline for comment submission is May 18, 2015.