The Department of Defense has proposed an overhaul of rules regulating predatory lending to military personnel. The proposal would expand the 36% APR cap on payday, auto-title and tax refund anticipation loans to cover all closed- or open-end loans, ending the current practice of lenders evading the rate cap by offering slightly longer or more expensive loans. The new rules would also require creditors to provide military borrowers with additional disclosures, including a document encouraging the service member to seek options other than high-cost credit. Creditors would also be prohibited from requiring service members to submit to arbitration or waive their rights under the services members’ Civil Relief Act.
A new study finds that many homeowners neglected a chance to save money by refinancing their mortgages. After the recession, the Fed took action to boost the economy by pushing interest rates to record lows. In December 2010, 20 percent of American households with fixed-rate mortgages should have taken advantage of the low rates by refinancing—but didn’t. The median homeowner could have saved over $45,000 over the life of the loan. When lending non-profit Neighborhood Housing Services of Chicago organized a mailing campaign offering refinancing help, just 17 percent of recipients refinanced. 25 percent later said they never opened the letter. An additional 25 percent said they meant to follow up but never got around to it.
The imminent replacement of magstripes with EMV chips in credit and debit cards will end a golden age of identity theft brought on by flaws inherent in the decades-old infrastructure. Most card scams take advantage of the magstripe’s basic security flaw: that static characters encoded into the stripe hold all the authentication information needed to produce a flawless counterfeit card. In contrast, EMV transactions, which rely on single-use cryptograms, make eavesdropping with a simple card reader fruitless to criminals. Since the UK deployed EMV cards in 2004, card fraud has fallen 32 percent. In the United States, EMV readers are scheduled to replace magstripe readers by 2020.
Subprime auto lenders have adopted a dystopian method for extracting payments from their customers: installing remote GPS trackers and kill switches into borrowers' cars. The so-called starter interrupt devices allow lenders to remotely disable the ignition until borrowers return calls from debt collectors. The devices can also alert lenders to signs of trouble — for instance if the borrower is no longer traveling to their regular place of employment. Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in unfamiliar neighborhoods or stuck in traffic at a stoplight. The volume of subprime auto loans is growing quickly and reached more than $145 billion in the first three months of this year.
Former President of Citibank Illinois Darryl Hendricks has come out of retirement to become director of consumer banking at Chicago-based Urban Partnership Bank. A Harlem native, Hendricks spent 30 years with Citibank, the last 10 of them as Illinois president. “I'm going back to the kind of community I once came out of... We want to be a reasonable alternative to payday loans and check cashing operations in our marketplace,” Hendricks said. He's the latest African-American veteran of larger Chicago financial institutions to join Urban Partnership in order to support lending in low-income urban neighborhoods. CEO William Farrow is a veteran of First Chicago Corp. and Chief Banking Officer Levoi Brown came from GE Capital.
Walmart is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts available nationwide by the end of October. The new accounts, called GoBank, are intended as low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no minimum account balance. The accounts will cost $8.95 a month for customers with direct deposits totaling less than $500 a month. To help attract customers, Walmart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. Walmart expects its new system to allow almost any consumer who passes an identification check to open an account in minutes.
A survey of community bankers by the Conference of State Bank Supervisors finds banks striving to adapt to new developments in technology and regulation at a time of steady growth. The report also contains insights gleaned from town hall discussions in 30 states. Bankers expressed concern about new qualified mortgage regulations but continue to issue residential mortgages, suggesting the rules may generally be in line with bank practices while still requiring significant changes in operations. Banks are now looking to expand primarily in technology, including mobile banking, online loan applications and remote deposits. Despite an improving economy and talk of merger opportunities, the survey found little actual or planned merger activity.
A large data breach at Home Depot has started to trigger fraudulent transactions that are rippling across financial institutions and draining cash from customer bank accounts. The fraudulent transactions are showing up across the U.S. as criminals use stolen card information to buy prepaid cards, electronics and even groceries. Home Depot has said that 56 million cards may have been exposed in a five-month attack on its payment terminals. The size of the Home Depot breach makes the attack significantly larger and lengthier than the 40 million cards that were compromised in the Target hacking that occurred in the three weeks leading up to Christmas last year.
Southern Bancorp in Arkadelphia, Ark. is using mobile technology to offer consumers outside the mainstream a better alternative to payday loans. "The product that strips more wealth and assets from the most vulnerable people in America is predatory lending or payday lending," says Dominik Mjartan, senior vice president of the bank. But payday products have a stubborn appeal; regulatory constraints and disclosure requirements make it difficult for banks to compete with their speed. Now, Southern is closing the convenience gap with a new core-processing system and app developed with help from a company it helped create, Smiley Technologies. Among the app's features are real-time transaction processing and on-demand account information.
The CDFI Fund has opened the FY 2015 funding round for the CDFI and NACA Programs. The Administration’s FY 2015 Budget for the CDFI Fund requests $201 million in Financial Assistance and Technical Assistance awards, including $151 million for CDFI Program awards, $35 million for the Healthy Food Financing Initiative awards and $15 million for NACA Program awards. The awards support CDFIs providing affordable financing and related services to low-income communities and populations that lack access to credit, capital and financial services. The deadline for submission of the CDFI Program and NACA Program applications is Monday, November 24. An application workshop for the programs will be held Thursday, October 2, 2014.