Former FDIC Head Joins Board of Online Lending Group

In a move that may prove to be quite surprising to some financial analysts and experts, Sheila Bair – formerly the head of the United States Federal Deposit Insurance Corp. – is taking on a new role. Bair is set to join on as a member of the board or an online lending group called Avant. All of this comes at the same time that the CFPB and others in the government are making serious efforts to regulate the world of online lending. Of course, with online loans quickly becoming more and more popular in recent years, it is somewhat easy to understand why certain government watchdog groups are interested in creating new, more stringent regulations. After all, that seems to be one of the only things our government consistently does.sheila-bair

Avant was founded by a former payday lender; one who made millions in this industry. And the company is growing rapidly. It just launched about three years ago and has already originated upwards of $3 billion in loans. Most of these loans were given to American consumers who did not exactly have spotless credit histories, either.

In a recent interview Bair said, “I really want there to be more innovation and competition serving this segment… it’s underserved.”

Online lending has been taking off like crazy in recent years. This industry is growing rapidly due to a number of startup companies that are working to make online lending a better experience for both individuals and small businesses. All of this growth, related to money as it has been, has certainly drawn the attention of financial regulators, like the Treasury Department and Consumer Financial Protection Bureau. Just recently, the U.S. Comptroller Thomas Curry stated that his group is on a mission to create a framework that will regulate what is often referred to as the “fintech” industry. This industry includes a wide range of services, like online loans and mobile payment processors.

As regulators and watchdog groups continue to scrutinize the industry, new lending company startups have been doing what they can to land former regulators and to bring them on board. Prosper Marketplace Inc. now includes Raj Date as a board member. Date was previously the deputy director of the Consumer Financial Protection Bureau (CFPB.) LendingClub Corp recently pulled in former Treasury Secretary Lawrence Summers.

Bair was the leader of the FDIC from 2006 until 2011. She often had clashes with leaders of the Treasury. These clashes were often related to how the government dealt with large banks during the last financial crisis. She fought hard for new rules that would make lenders add capital and to cut back on risky behavior. Some of the changes Bair championed wound up being included in the Dodd-Frank legislation and has led to stricter financial regulation in the United States.

Back in 2015 Bair became a board member for the largest lender in Spain, Banco Santander SA. She winded up parting ways with this lender after just a year and accepted a position as the president of Washington College, near Baltimore.

According to Avant CEO and co-founder Al Goldstein, “Sheila’s proven track record and expertise in the financial services and regulatory spaces will be invaluable to the Avant team.” Goldstein has stated that he would like Avant to ultimately turn into “the Amazon of financial services.” The company was valued by investors at about $2 billion when funds were raised for it back in 2015. The company puts a heavy focus on providing installment loans to consumers, with the average loan amount being about $8,000.

Can You Budget Smarter and Keep Finances under Control with a Prepaid Card

While nearly every financial “expert” out there seems to go on and on about the importance of sticking with a budget, and with nearly all of us agreeing this is important, we all have to admit that sometimes we fall short of sticking with our budgets. Even the most frugal people in the world have weaknesses, and may find themselves spending too much on eating out, pursuing hobbies or simply overspending sometimes. When these types of spending sprees get too out of control it can be difficult to reach your long term financial goals.6280507539_f32a72be10

If this all sounds like doom and gloom, remember that you are not alone. Millions of consumers all over the country have a hard time getting their spending habits under control. The traditional method of putting extra money aside and accounting for every penny spent and earned just does not work for everyone.

There is another way to keep your spending under control – prepaid cards! Reloadable debit cards can empower some folks with the money management skills that they need to keep their spending on the straight and narrow. Remember, prepaid cards are not like traditional debit cards, which are connected to your checking account, with all the funds in that account at their disposal.

A prepaid card begins with no balance and you control how much money goes in by “loading” the card with money that you will use to make purchases, pay for meals and to take care of any expenses you choose to tackle. Once the prepaid card reaches a zero balance, you can no longer make any purchases. These cards effectively work as a stop-gap against overspending, and allow you to set your own, personal limits on how much discretionary spending you do on a monthly basis. It is easy to figure out how much you usually spend and need as “walking around” money. You simply load the card up with that amount when you have the money, and you are all set.

When you use a credit card for this type of spending, it is easy to wind up over your head in debt. When you use your bank debit card, you could spend too much and wind up with expensive overdraft fees. And when you use cash, it is often tempting to spend too much and to keep hitting up the ATM for more. With a prepaid card, once your funds are gone, you are done spending.

Prepaid cards are not the ideal solution for everyone. But for people who can’t seem to stick with a self-imposed budget using other financial products, they may be the missing piece of a successful spending plan equation. These types of cards even offer online tools and apps that you can use to track your spending and to see how much you have in your account. Remember, though, that prepaid cards will not earn any interest on your money. Therefore, a prepaid card should not be used to replace a savings account that allows you to accrue interest on the money in your account. Other than for daily discretionary spending and maybe spending on a vacation, it is probably better to stick with other alternatives.

If you have tried and tried to get your daily/weekly/monthly spending under control, a loadable, prepaid debit card may prove to be a valuable tool that will help you to keep your finances on track. Consider trying one for a while. If it works for you – great! If it doesn’t work for you – it is easy enough to get the card to a zero balance and then to switch to another method of budgeting your cash.

Comcast Sends Paying Customers to Collections Agency

Comcast is one of the largest cable providers in the world. You’d think that a company like that would have their act together. However, it appears that they have made some serious slip-ups as of late; slip-ups that have a large portion of their customer base very upset. People who have been happy customers of the company for years have been forced to spend hours of their own valuable time to try to fix billing mistakes that the company has caused. It turns out that Comcast has taken additional money from some customers by way of automatic payment technology and they have even turned some of these paying customers over to collections agencies. These agencies have contacted these wronged consumers to demand payment – on bills that people didn’t even legitimately owe on.confused

According to one customer who was wrongly accused of not paying his bills, “I called Comcast a total of 10 times beginning 5/31/2014 and wasted at least 10 hours of my life trying to fix a problem that they created. In making those calls I was hung up on, transferred, and dismissively told to just wait it out.” Talk about being mistreated by a huge company: this guy not only got accused of not paying his bills, but he was subject to being dismissed by customer service employees who should have been more than happy to help him out.

The customer that we just told you about reported that the problem was supposed to have finally been fixed back in November of last year. However, he has had to continually call Comcast up to this very month and has still not had any satisfaction on the issue. This Comcast customer went on to say, “It blows me away that the burden is on me to fix their mistake and that it is taking so much of my resources. I really would like to bill them for my time.” He went on to explain that he is very concerned that these issues are going to lead to his credit score getting dinged in the very near future…

Journalists contacted Comcast after hearing about this situation. They were referred to the PR group for the company. A spokesperson for Comcast indicated that research was being done on the issue. After that statement, it was not too long before the company contacted the jilted customer to let him know that the issue had, indeed, been resolved.

It seems that this billing mistake took place when the person moved two times over the course of only three months. He had spent some time living with his parents, while he waited for closing on his new home to be complete. The error was supposed to have been caused by the cancellation of his existing account and the moving to a new home.

According to the Comcast customer, “Apparently they need to link your accounts when you move, and Comcast neglected to link my first location to the second and so continued to bill me for service I no longer had. They did, however, link my second to third location and so there was no problem with that move.”

This person realized that Comcast was still charging him for service at his previous address, and contacted them to get it fixed in late spring of 2014. He happens to have also stopped automatic payments to the company to stop them from taking even more of his cash. However, before he did this, the cable provider took an extra $176.77 from his bank account without telling him about it.

People need to pay close attention to the companies that they make payments to every month. Comcast may not have been charging this person extra on purpose, but they sure took their time in actually resolving the issue for him. Don’t let the big companies take advantage of you like this.

It is time to repeal regulations that harm the Unbanked

Financial inequality has become a hot topic in the media recently. It is high time that this important topic began to get more mainstream exposure. Not only are we seeing the perpetually wealthy become more and more financially prosperous, but we are also seeing more United States citizens and households becoming drastically under and un-served by the traditional financial institutions. According to data from an FDIC report published back in 2011, over 10 million households in this country were officially unbanked. This marked a one million American increase since 2009. Add to that the fact that another 20 percent of households in this country being classified as underbanked and it is easy to see that we have a real problem on our hands. Underbanked households are those that occasionally have to rely on alternative financial services, like payday lenders and cash checking facilities, in order to make ends advance online

Hard numbers are not exactly easy to come by, but the number of unbanked households have almost certainly increased since this data was originally posted. All of this has happened despite the fact that the economy has stabilized considerably and the economy has slowly continued to recover. So why is it that so many hard working American families continue to struggle financially? What has caused Americans to lose access to mainstream financial services in droves over the past 10 years or so?

The ongoing effects of the financial crisis certainly attributes to some of these financial woes. But there is also the steady consolidation going on in the banking industry that can be brought to task too. The majority of the blame, however, seems to belong to a provision of the Dodd-Frank law that many people are not aware of. This provision, called the “Durbin Amendment” laid down some hard and fast price controls on interchange fees (a part of the merchant’s discount fee that is paid for by retailers when you use a credit card at their store) that is charged for debit cards from large banks that have over $10 in financial assets.

The implementation of this mandate was supposed to set the price controls at rates that are “reasonable and proportional.” That has not always been the case, however. Appeals have been made that called the language of the amendment “confusing and its structure convoluted.” Another rule making by the Federal Reserve took effect in October of 2011. This changed the averaged interchange fee to fall from 44 cents per debit card transaction to about 24 cents, with average transaction amounts being for about $40.

How has the Durbin Amendment effected Americans? Over two years after it was implemented, studies have found that consumers are paying out more and getting less because of the Durbin Amendment. Low income consumers, it seems, have suffered more than others. To make matters worse, big box stores have seen billions of dollars in savings because of the lower interchange fees, but there is no hard evidence that any of these retailers have passed that savings on to their customers. And it appears that small, locally owned businesses have not benefited at all from this amendment.

Any time laws and regulations are pushed through, you can count on amendments being tacked on that may wind up causing more harm than good. The Durbin Amendment seems to be just such a piece of legal wrangling. If the government is really interested in helping lower income citizens, it is high time for these types of regulations to get repealed once and for all.

Millennials are Making Purchases on Their Own Terms

It seems like the media is onto somewhat of a negative trend when it comes to labeling millennials. They call them lazy, self-obsessed, entitled and ungrateful. In every generation you are going to find people with these negative traits. And even the best of us can be any combination of those descriptors at any given time. However most studies have debunked the whole concept of younger folks being nothing but a bunch of negative, lazy individuals. Could some of these negative personality traits be showing up in higher volume among millennials? That’s a possibility, but a subject best left for another outlet. It is important for lenders, especially auto loan lenders, to take note of some important aspects of people in this country who were born between 1980 and the mid-2000’s.7692630162_383fecbe32_m

To start with, millennials are a huge, always changing and progressive-thinking group of people. The millennials make up the largest, most educated and highly diverse generation in the United States as of right now. They account for a full third of the nation’s population and about 80 million of them are between the ages of 18 and 34. In one, short decade they will make up nearly 75 percent of the country’s workforce.

The second thing for lenders to take note of is that they will be purchasing cars and borrowing money to do this. It is just important to remember, though, that they will be looking to borrow according to their preferred terms and timeframes.

A recent study conducted by Deloitte found that nearly 61 percent of millennial consumers had plans to purchase or lease a new vehicle within the next 36 months. About 23 percent of them planned to purchase or lease a car within the next 12 months. In consideration of these new lending opportunities, let’s take a look at some interesting facts about the lending habits of millennials in the United States.

There is a much narrower generational gap between millennials and the previous generation – Gen X. In fact, studies indicate that the financial profiles of millennials is very close to what we see with members of Gen X.

Some say that millennials are not quite as stable as other generations. But when it comes to changing phone numbers, addresses, employers and even bank accounts, their numbers pretty much line up with Gen Xers. Of course, the work history of millennials is a bit shorter than other generations. This makes sense, as they are younger after all. That being said, they tend to earn a bit less per month – about $800 less – than their Gen X counterparts. With regards to loans, however, millennials are only borrowing about $120 less than the folks in the Gen X generation.

The most congruent pattern is revealed when it comes to purchasing cars. A study by J.D. Power that was conducted last year reveals that millennial purchases account for about 26 percent of new vehicle sales, while Gen X purchasers made up about 24 percent of purchasers. After all the numbers were crunched it looks like millennials are on a pace to increase their car buying by about 17 percent, once all of the numbers from 2014 are completely tallied.

It is time for lenders to see that selling cars to millennials is not all that much different than selling to other generations. If anything, this generation just seems willing to wait a bit longer to purchase their first new cars than previous generations were. Some tweaks may need to take place in the industry to match up with the purchasing patterns of millennials, but lenders can rest assured that this generation will be purchasing lots of new vehicles in the near future.

Wells Fargo Pulls Back from Subprime Auto Lending

For years now, Wells Fargo has been one of the largest providers of subprime auto loans. It appears, however, that the financial giant is trying to distance itself from the very market that brought it so much business over the years. This move is sending shockwaves that are being felt all throughout the entire auto lending industry.

Wells Fargo, with headquarters in San Francisco, is known for its distinctive stagecoach logo and consistently pulling in big profits. They have also been on the forefront of the boom in offering loans to people who have less-than-perfect credit scores. As they have been doing this, Wall Street has been bundling and selling these types of loans as securities to their investors. This has allowed Wall Street to pull in huge profits. All the while, millions of financially strapped people have been given an opportunity to purchase cars.dv1509055

Now, however, it looks like the subprime auto lending market is getting a bit too hot to handle. Wells Fargo has, for the first time, put a cap in place on the amount of money that it will lend to subprime borrowers. The banks has restricted their lending volume to subprime auto originations to just 10 percent of the total auto loans that they provided. This amounted to a total of nearly $30 billion just last year.

A recent series of interviews with the top executives from Wells Fargo helped to provide more information on this topic. The lender, along with other big auto lenders, has helped to initiate what has to be a sobering moment for the still-popular subprime auto lending industry. It is almost certain that other big lenders will follow Wells Fargo’s lead in the near future. The lender was able to avoid many of the problems associated with recent mortgage losses during the financial crisis. This proves that they know what to do when the going gets tough, and their competitors may very well copy their penchant for making the right moves at the right time to manage financial risk.

Auto loans made to subprime borrowers – people with credit scores of 640 or less – have doubled since the beginning of the most recent financial crisis. In fact, one in four of new auto loans provided have been going to subprime borrowers. Back in the second quarter of 2014, the total number of auto loans were at the highest level ever since prior to the financial crisis. During that quarter, lenders originated over $20 billion in bad credit auto loans. That is nearly twice as much as during the same quarter back in 2010.

There are two main factors that contributed to this surge: Larger banks were experiencing a slow down with other types of loans, so they increased their auto lending market share. Investors were also searching to get higher returns, so they are now buying billions of dollars in investments that happen to be backed by subprime loans as security. This growth has caused Wells Fargo to be concerned that there is too much competition and longer repayment terms, in addition to increased auto loan balances.

With all of this in mind, however, we have to remember that this is America. If the big lenders fail to provide car loans for people with low credit scores, the smaller lending companies will surely rise to the occasion. For better or worse, this is a country filled with people who depend on owning cars. If the big lenders won’t help people to get the cars they need, alternative lending companies may very well experience a huge surge in the very near future.

Bill to Fix Payday Lending Glitch Rejected by Lawmakers

A Hinds County Democrat, Representative Adrienne Wooten, led an unsuccessful bid, once again, to repair a glitch in a payday lending law in Mississippi. This law was slated to give borrowers a longer repayment term of 30 days to repay loans that exceeded $250. As it now stands, borrowers have two weeks to repay loans before new fees are added, instead of the proposed 30 days.

As part of a provision made to Mississippi’s 2012 Check Cash Cashing Act, two tiers of loans were put into place. The first tier applied to loans that were for $250 or less, and gave borrowers a two week repayment term. The second tier was for loans with combined fees that do not exceed $500. These types of loans were supposed to feature a 30 day repayment period.broken-piggy-bank-loose-change-mdn

To get around this law, some short term lenders issued two or more loans with two week repayment terms, with each loan charging fees of between $23 and $100. This allows lenders to take in as much money from a two week loan that totals more than $400 than for a single loan for the same amount.

When the 2012 Check Cash Cashing Act was created, an act that gave permanent authorization to payday lending in Mississippi, state legislators put a cap on loans that range from $400 to $500. The exchange for this allowance was that borrowers were going to get 30 days to repay their loans that exceeded $250.

No one is sure if the loophole was created intentionally, but it ensured that lenders would not make loans for more than two weeks at a time. Some lenders complained that the 30 day loan repayment terms would severely limit their cash flow, forcing lenders to limit loans or to even shut down their businesses in some cases.

Representative Wooten expressed that she expected the payday lending loophole to get stopped by the House Banking Committee, as it has for the previous three years. Wooten said, “It’s not going to come out,” referring to House Bill 790 a few days before the deadline for bills to get out of committee. “It’s not something the majority wants to take place.”

If the bill had been successful, it would have limited payday lending companies into issuing borrowers a single check for all loans that exceeded $100.

A Banking Committee Chairman, Hank Zuber III, along with his colleague at the Senate, Gary Jackson, stated in official interviews that the payday lending glitch should be fixed. However, neither of these gentlemen took action to get it resolved. They said that they were going to wait to see what the CFPB announces as its official rules for payday lending. By way of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, payday lending is subject to the CFPB.

Jackson expects that the CFPB will, as he said on record, “… take a fairly strong stance in the future.” Jackson predicted that this type of official action would come back in November, but it has not happened so far. Zuber clarified his stance by saying that he would wait “to see what they do.”

Zuber had discussed the fix for the check cashing law with Chairman Jackson, and even considered introducing a bill that is similar to HB 790. He did not comment on whether or not he would actually back HB 790.

Experts do anticipate that payday loans will be subject to new restrictions very soon, but completely banning these types of loans is not likely at all. Payday loans, as much as some people do not like them, are often the only option that lower income people have when they need to access fast money to pay bills or take care of other expenses.

How Do You Know if Your Credit Score is Wrong?

No matter how hard we may try to avoid it, our credit scores are always going to follow us around. Taking into consideration the impact that your credit score has on your life, it is a good idea to know what your scores is, and to take action to bring it up if it is on the lower side of the credit score spectrum. It seems almost like one minor financial mistake can have repercussions that could haunt you for years. It is usually easy enough to get back on course after most financial mistakes. But how do you go about finding out if your credit score is correct or not?

Here is a step-by-step guide to help you find out if your credit score is correct…

Step One – Get Your Credit Report

You cannot find out if your score is right if you don’t know what your score is. To get all the details you need, it is important to pull a copy of your credit report. The major credit bureaus are required by law to provide consumers with at least one copy of their full credit report each year. If you have pulled your report within the last 12 months, you can pay a small fee to get a fresh copy. Remember, though, that each of the major credit bureaus uses different information and calculations to determine your score. But if you do find something that is inaccurate on one of your reports, you will know that your current credit score is not correct. You should get copies of all three of the major credit bureau reports to make a proper determination.

Step Two – Check Everything

Once you get your credit report it is important to take a methodical approach to checking all the entries in your report. The entries will break down information about loans and lines of credit that you have. If you spot a loan that you never applied for, you will know immediately that something is wrong. Make note of these types of occurrences. You should also look for any notes of late payments and make sure they are correct. You can contact the lenders to get these types of mistakes resolved, and that brings us to the next step.

Step Three – Contact Creditors

Before you officially file a credit report dispute with the credit bureau, contact the creditor. Many times these types of mistakes can be ironed out with a few phone calls and a bit of persistence. However, there are times when the creditors will not be easy to work with, and that’s when it is time to move on to step number four.

Step Four – File a Claim of Dispute

The three major credit bureaus (Experian, Equifax and TransUnion) allow you to use their websites to file disputes. It is usually better to make a phone call to these bureaus to discuss your issue. Take notes of who you spoke with, the information they gave you and be sure to use certified mail for any hard copy correspondence between you and the bureau. Credit bureaus have 30 days to determine the validity of any disputes that are filed. If your error does not get omitted from your credit report, you may need to make another phone call to the bureau. If another call does not provide the results you hoped for, you may want to discuss your options with an attorney who specializes in these types of matters.

Taking care of errors on your credit report is not always easy, but being as your credit score is so important, it is good to take as much action as necessary to get errors off of your credit report when you are able to.

Payday Loans Really Do Provide Much Needed Help to Millions of People

Even though the United States economy has been on the rebound for some time, and unemployment rates are finally beginning to level out a bit, there are still about 1/3 of the households in the U.S. that earn less than $35,000 a year. Add to that the fact that almost 20 percent of United States consumers have large amounts of unpaid medical bills, and it is easy to see why so many people are still struggling financially.

We also have to consider that U.S. credit card data ranked in at about $882 billion this year, and that is up just about 4 percent from last year; roughly $15,608 per household in this country. When we take all of these financial statistics into consideration, despite the fact that the economy is recovering, we find that about two out of every five American consumers (40 percent) are essentially living from one paycheck to another. Compare that with the stats from 2012 and we see that the number then was just 31 percent.

It’s time for some cold, hard economic facts – and this is not something that is popular to say right now – but payday lending companies provide a very much needed financial service to the people in this country right now. The fees for payday loans are considerably cheaper than overdraft protection fees for small dollar amounts. It is no wonder, then, that so many people turn to payday lenders when they are seriously strapped for cash and their next payday is still a long way off.

Maybe it is because payday loans are more economical than the alternatives offered by mainstream banks that payday lending started getting targeted by Operation Choke Point. If you are unfamiliar with this initiative, Operation Choke Point is an ongoing initiative that was put into action by the Department of Justice, along with the FDIC, back in 2013. Investigators involved with this operation have been investigating the banks and the businesses those banks do business with – payday lenders, ammunition retailers, payment processors and others. The brains behind Operation Choke Point believe that these types of industries are more susceptible to fraud, money laundering and other financial misdeeds, and have taken it upon themselves to drive these types of companies out of business.

Essentially, Operation Choke Point has put pressure on the banks to cut off financial services to these types of businesses. The payday lending companies have been hit very hard, as many members of the FDIC allegedly have personal axes to grind with this industry, and they have made it their mission to put payday lenders out of business once and for all.

The net effect of the pressure that has been put on banks to cut off services to payday lenders has actually resulted in some short term lending companies going out of business. Without access to payment processing and other crucial services, many of these companies can no longer afford to stay in business. And this all completes a vicious cycle where once again the unbanked people of this country are unable to get small dollar loans to cover those times when they are without cash but still need money to take care of expenses.

Some members of Congress have recently taken action to hold Operation Choke Point accountable for its heavy handed approach that has been used to ‘protect’ lower income consumers from the very financial services – payday loans – that they so desperately need to keep their heads above water between pay checks. The bottom line is that people in lower income brackets deserve to have access to short term, smaller dollar loans, and as of right now payday lenders are really the only lenders that provide those kinds of services to low income households.