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The New York Times Room for Debate featured articles on regulation of short-term loans. Dennis Shaul of the Community Financial Services Association and Professor Lisa Servon of the New School argue that payday loans provide low-income borrowers essential access to capital and should be allowed latitude within reasonable bounds. Valerie Wilson of the Economic Policy Institute and Gary Kalman of the Center for Responsible Lending are more wary of the risks, arguing that stringent federal regulations are needed to prevent repeat borrowing. Jamie Fulmer of Advance America and Raj Date, former deputy director of the CFPB, are optimistic about new lending innovations and advocate regulations that encourage new practices that increase efficiency and make more capital available.
St. Paul, Minn.-based Sunrise Banks plans to take on payday lenders with an innovative new product that provides loans as an employee benefit. The “TrueConnect Employee Benefit Program” is offered through employers as a loan against future salary and is offered in amounts from $1,000 to $3,000, depending on the employer and how much the employee makes. The loan is retired through pay deductions over the course of a year, with a maximum interest rate of 25 percent. Sunrise developed the program in consultation with the OCC, CFPB and several consumer groups. "It’s a consumer installment loan at the end of the day,” Reiling said. “But it’s a much better deal than a payday loan. And it must be paid off by the end of the year. It’s also fair and transparent.”
A handful of lending start-ups are making near-instant underwriting decisions using sophisticated software that can learn to make "better" loans based on thousands of pieces of borrowers’ information. The start-ups, including personal lender Earnest and payday lender ZestFinance, hope to transform the economics of underwriting, making more loans available at lower cost. By law, lenders cannot discriminate against loan applicants on the basis of race, religion, national origin, sex, marital status, age or the receipt of public assistance. But as startups rely increasingly on complex software algorithms that work autonomously and learn as they go, some worry that the machines could end up discriminating against certain groups without being explicitly programmed to do so.
Southern Bancorp CEO Darrin Williams has been named to the board of Little Rock Technology Park, an innovation district that promotes technology-based ventures in Little Rock, Ark. by advancing entrepreneurship, collaboration and knowledge-sharing. University of Arkansas at Little Rock Chancellor Joel Anderson said Williams' appointment was based on his outstanding leadership in the Little Rock community and his distinguished record in public service, which has included a term as a state representative. “Mr. Williams’ background and experience in finance, law, and politics will be a great asset to the board, particularly at this time. I am grateful for his willingness to accept this appointment,” said Chancellor Anderson.
The Federal Housing Finance Agency's plan to tighten membership rules for Federal Home Loan Banks has raised objections from an array of stakeholders, including state regulators, lawmakers and community financial institutions. The FHFA issued the proposal in September that would for the first time institute ongoing membership requirements. Community banks and credit unions with less than $1 billion of assets would be required to hold at least 1% of their assets in the form of mortgages in order to stay members of a Home Loan Bank. Critics say the proposal ignores the FHLB's mandate to provide liquidity to members and could cause community banks and credit unions to lose FHLB memberships, depriving them of a crucial source of funding.
Carver Federal Savings Bank has announced it will be one of at least ten financial institutions accepting New York City's new IDNYC cards as a valid form of identification. The IDs, intended to provide photo identification to thousands of New Yorkers, will likely become the country's largest municipal identification program. The cards will provide legal documentation to residents regardless of immigration status, providing a new way to access banking services. The cards will be free this year, ramping up to a small fee next year. "Carver Federal Savings Bank is pleased to support the IDNYC card initiative," said Michael T. Pugh, Carver President and CEO. "Carver recognizes the IDNYC card is an important step toward access to mainstream banking services for many unbanked New Yorkers."
Antonio Weiss, a senior investment banker at financial advisory and asset management firm Lazard, has withdrawn his name from consideration as under secretary of the Treasury for domestic finance in the face of staunch liberal opposition. Weiss will instead serve as a counselor to Secretary of the Treasury Jacob Lew. Weiss' nomination ran into a wall of congressional resistance led by Sen. Elizabeth Warren (D- Mass.), who opposed the nomination of a Wall Street executive to a post that oversees Dodd-Frank regulations. Lazard’s work helping Burger King acquire the Canadian chain Tim Hortons, then move its headquarters abroad, presented the greatest obstacle to the nomination. Weiss' new Treasury post, counselor to the secretary of the Treasury, will not require confirmation hearings.
Lending initiatives run by faith-based organizations are shifting the way churches approach charity and creating a new alternative to payday lenders and pawn shops. The programs offer parishioners who have fallen deep into debt with payday lenders a low-interest path to repayment. The Virginia United Methodist Church's Jubilee Assistance Fund offers collateral so borrowers can qualify for a loan through the Virginia United Methodist Credit Union. Loans offered through the program have annualized interest rates as low as 6 percent. The program is still quite small -- just 14 loans from $500 to $8,800 in seven and a half years. But similar programs are developing in pockets across the country including Wisconsin, Texas, Missouri and Louisiana.
President Barack Obama has announced his intent to nominate City First Bank of D.C. President and CEO Brian Argrett to the Administration’s Community Development Advisory Board. Argrett currently serves as the Vice Chairman of the CDBA. He also served as President, CEO and Director of small business investment company Fulcrum Venture Capital Corporation. Previously, Argrett served as Chairman of FirstFed Financial Corp. “These fine public servants bring a depth of experience and tremendous dedication to their important roles,” Obama said. “I look forward to working with them in the months and years to come.”
Richard Shelby (R-Ala.) has been named chairman of the Senate Committee on Banking, Housing and Urban Affairs for the 114th Congress. Shelby previously served as the chairman of the Banking Committee from 2003 until 2006. Shelby is likely to make rolling back provisions of the Dodd-Frank Act a core objective for his committee. He has also spoken in favor of altering the structure of the CFPB and decreasing the power held by its director. But Shelby has also shown a populist streak that could work against big banks. He has in the past leveled criticism against Wall Street firms for their role in the financial collapse and advocated greater punishment for reckless practices.