Wednesday, December 21, 2016

From The Reader: The High Cost of Being Poor

The High Cost of Being Poor: Aggressive creditors exploit Nebraska law

Monday, December 19, 2016

From Dallas Business Journal: Banking from the Shadows: Does the Texas banking industry discourage undocumented customers? The answer might surprise you

Banking from the Shadows: Does the Texas banking industry discourage undocumented customers? The answer might surprise you

For Fernando, buying something on eBay was the first time he felt like an American.
His sister told him to open a bank account when he was a senior in high school because he needed an account to shop online.
It was a simple transaction – routine to the teenagers he grew up with in border towns in South Texas. But for the undocumented immigrant, it was one of many reminders that his status was different.
He remembers the Bank of America card with his name embossed on it more than he remembers what he bought.

“It legitimizes you,” said Fernando, now an immigration attorney in Fort Worth. He agreed to speak with the Dallas Business Journal under the condition that his actual name not be revealed.

Click the slideshow to see the nation's top unbanked cities and the nation's top underbanked cities.

Many undocumented immigrants believe they can’t open banking accounts, fearing the bank will flag their status to law enforcement or that they’ll simply be turned away.

Instead, many rely on cash, which leaves them vulnerable to being robbed. They also are preyed upon by payday lenders and other credit services with high fees.

What most people don’t know is that banks, especially those in Texas, quietly recruit undocumented Hispanic customers. The banks assure that all a customer needs to open an account is their passport issued by another country or a U.S. tax identification number.

Bankers interviewed say they never ask about citizenship status. The industry as a whole is agnostic on the immigration issue that played a central role in the election of Donald Trump as president.
Trump will sweep into the White House next month on the promise of building a border wall with Mexico and accelerating deportations of some 11 million undocumented immigrants in the U.S. – with an estimated 1.5 million in Texas alone.

Those communities say the powerful banking lobby should stand up for them.

“They do have an obligation to have a stance,” Fernando said. “They are stakeholders. We are their clients.”

‘We don’t find it risky’
As a boy, Leo Lopez translated for his mother when she tried to open an account in Dallas. Now he is vice president and bilingual branch manager in the Bank of Texas Dallas office near Farmers Branch.
The Hispanic Chamber of Commerce member helps locals who are “unbanked” open accounts.
He doesn’t know how many accounts Bank of Texas has opened for undocumented immigrants, as the bank doesn’t ask. But he said about 75 percent of their Hispanic customers opened their accounts using a passport.

“There isn’t any more risk for them [as opposed to] anyone else,” Lopez said of customers who aren’t in the country legally. “There is an opportunity to give more access to those who are unbanked.”
Lopez confirmed that banks rarely know a customer’s immigration status. They aren’t required to take that information and it’s not often volunteered.

But Fernando did tell Bank of America. He said a younger generation of undocumented immigrants, many of them brought here as children, are eager to open bank accounts and build credit. Some banks, he said, even offer mortgages to undocumented immigrants to buy a home here.

“We went and said, ‘We’re undocumented. What can we do?’ ” he said. “They were very friendly.”
Bank of America declined to comment for this story and instead directed questions to the American Bankers Association, the industry’s main lobbying arm in Washington, D.C.

“Banks don’t track whether or not someone is legally in the U.S.,” said ABA’s Senior Counsel Rob Rowe.

He said the group hasn’t lobbied on the immigration issue and doesn’t plan to do so.

Pushing lawmakers for a more progressive stance on immigration may jeopardize their influence over which banking rules will be relaxed.

Republicans have pledged to dismantle the 2010 Dodd-Frank law, which was put in place after the banking crisis to make the system safer and prevent future bailouts by taxpayers.

Additionally, policymakers haven’t required banks to determine whether their account holders were in the country legally. “It’s something that’s outside the banking industry,” Rowe said.

At Bank of Texas’ Dallas office, the firm’s senior vice president and consumer regional manager for DFW East Scott Bishop, spokeswoman Jacquie Donovan and Lopez paused when asked if the bank or the industry as a whole should take a stance on immigration.

They declined to answer, but said they welcome undocumented immigrants as clients. In the event that account holders are deported, their funds are not seized under current law, and their debit cards and other services will still work, they said.

“Because we’re in that industry of risk, we don’t find it risky to bank folks that are undocumented,” Bishop said.

‘He won’
Fernando didn’t watch the election results come in. He went to bed early when his brother texted, “he just won Florida,” referring to Trump’s collection of electoral college votes in the Sunshine State.
At 2:11 a.m., Fernando got another text from his brother: “he won,” then later, “wtf just happened?”
Fernando’s status in the Deferred Action for Children Arrivals program is now in jeopardy. He was brought to the U.S. when he was 7, and his parents overstayed on their visa. They had owned several furniture stores in Mexico, but when the economy turned south, they moved north.

His mother cleaned houses and his father mowed lawns. With the stroke of a pen, Trump could eliminate the DACA program, which has provided a haven for roughly 700,000 immigrants, including Fernando and his brother.

The phones in Fernando’s office have been ringing constantly since election night. Many are clients Fernando and his colleagues had lost touch with. They’re now hurriedly calling back, hopeful to move their immigration cases forward.

Some are new clients wanting to squeak into the program while it’s still active, but Fernando said they’re not sending in new applications. They don’t want to put the addresses of undocumented immigrants into the system in the event there are raids.

It’s unknown what Trump will do. He has indicated there could be mass deportations, but has also signaled that those with a criminal history would be deported first and the rest taken on a case-by-case basis.

Many economic experts say allowing immigrants to stay will benefit Texas and local banks.

Helping the economy
Foreign workers immigrating to the state – legally and illegally – have made up roughly 40 percent of the state’s labor force growth between 1990 and 2010, Federal Reserve Bank of Dallas President Robert Kaplan said in a Nov. 7 speech.

Kaplan defended the influx as “substantially beneficial” to the economy and pointed to research that showed immigrant workers are more likely to file patents and are more entrepreneurial with higher rates of self-employment.

As the Mexican economy has rebounded, more Mexicans are leaving the U.S. than migrating here, according the Pew Research Center.

In total, about 9 percent of the Texas labor force is undocumented.

Dallas-based nonprofit Transformance helps undocumented immigrants open banking accounts, making it easier to enter the immigration system. But Transformance CEO Ken Goodgames hesitated to say whether Trump’s immigration policies would hurt the economy or the banking industry.
“There is always a possibility that with a new administration the existing policies would change,” he said.

Banks are eager to attract more customers as profit margins have shrunk since the financial crisis.
About 70 percent of new accounts are opened in banking buildings, though few customers ever go inside a physical location again. This means that banks must still maintain the costly real estate of their branches in order to boost new accounts.

Wells Fargo tried to stay profitable by opening fraudulent accounts for existing customers, resulting in a recent $185 million fine, a Justice Department investigation and the resignation of CEO John Stumpf.

But there are still new account holders who can be recruited.

About 14 percent of residents in the City of Dallas are unbanked, according to a nonprofit project of the Corporation for Enterprise Development. Another 21.7 percent are “underbanked,” meaning those who have a banking account but have resorted to using other financial products such as payday loans.
Despite the uncertainty surrounding immigration policy, Fernando has chosen to remain stoic with his clients.

He finds comfort in going about his day-to-day duties as any other American would, such as paying his bills with his bank account and keeping up with his credit score.

After the election, Fernando was on a conference call with other immigration attorneys. He was told that if his work status was revoked, it could cost him the law license he earned earlier this year. He’d wanted to be a lawyer since before his family moved to the U.S.

After the phone call, he shut the door to his office and cried.

“I felt like I had accomplished the American dream,” Fernando said. “Until now.”

What's the minimum documentation you need to open a bank account in Texas?
Undocumented immigrants can open a bank account if they provide:
  • Proof of their name
  • Billing address
  • Names can be presented with a passport, a consular ID, or even a Texas ID if the account holder has qualified for one
  • An identification number (A social security number isn’t required. Banks will accept an ITIN, or an individual taxpayer identification number, which is issued by the IRS.)
Jon Prior covers finance for the Dallas Business Journal.

Thursday, December 15, 2016

From Fortune: Trump’s Dismantling of Dodd-Frank Would Be 2008 All Over Again

Trump’s Dismantling of Dodd-Frank Would Be 2008 All Over Again

The financial sector will get a brief sugar high, then crash.

During the presidential campaign, President-elect Donald Trump asserted that he would “dismantle” the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. His nominee for treasury secretary, Steven Mnuchin, began to speak out against financial reform from the moment his nomination was announced, suggesting that he would “kill” aspects of Dodd-Frank, roll back the law’s Volcker Rule against proprietary trading, and focus solely on regulating FDIC-insured banks.
Ending Dodd-Frank would be deeply misguided and likely to recreate the very conditions that led to the 2008 financial crisis, shuttered American businesses, and cost millions of Americans their jobs. The financial sector will get a nice sugar high for a few years, and then crash the economy.

But despite these looming consequences, lobbyists have sought to weaken the law for the last six years. Many Republicans in Congress have been attacking Dodd-Frank since its enactment, and have put forward a series of bills to roll it back. Just this month, the House passed legislation to remove most banks over $50 billion in size from the requirement for safety stress testing. Another House bill would block regulators from requiring global capital cushions for big insurers like AIG.

Earlier legislation rammed through the House Financial Services Committee by Representative Jeb Hensarling blocked the Financial Stability Oversight Council from designating nonbank firms like Lehman Brothers and AIG for the Federal Reserve’s regulatory supervision. The bill would also eliminate the FDIC’s ability to wind down firms like Lehman or AIG without either a bailout or a crushing blow to the financial system, block the Fed from oversight of critical nodes in the system, weaken the Securities and Exchange Commission, and undermine the Consumer Financial Protection Bureau, among other risky actions.

That approach seems to be exactly what Trump has in mind by dismantling Dodd-Frank. In doing so, the president-elect will be making three grave errors: eliminating oversight on all but the biggest, FDIC-insured banks, ending oversight of shadow banking, and gutting the consumer bureau.
While cutting back on oversight has been pitched by lobbyists as helping community banks, it has nothing to do with that. The Fed already has a graduated, tailored system of regulation, with increasing stringency, depending on the risk that the firm poses to financial stability, based on its nature, scope, size, scale, concentration, interconnectedness, and other factors. None of these apply to the 95% of banks with under $10 billion in assets, the category commonly described as community banks.

The banks that get relief under these Republican-supported bills include foreign banks, credit card banks, trust banks, and many banks of the size and type that made horrific subprime mortgage loans and failed during the financial crisis. While these aren’t the handful of the largest financial firms, they still pose substantial risks to the system.

A second big mistake would be to ignore shadow banking. The designation of systemically important, nonbank financial institutions is a cornerstone of the Dodd-Frank Act. The reason for the designation process is that such institutions were not subject to meaningful, consolidated supervision by the Fed at all. Shadow banks such as Lehman Brothers and the insurance conglomerate AIG could operate with more leverage and riskier practices and pose a risk to the financial system. Dodd-Frank established a process for bringing such firms under regulatory oversight.

Critics of designation contend that it fosters “too big to fail” by suggesting that firms would be bailed out in a crisis, but the opposite is true. Regulating systemically important firms reduces the risk that such a firm could destabilize the financial system and harm the real economy. It provides for robust supervision, capital requirements, and a mechanism to wind down such a firm in the event of crisis without exposing taxpayers or the real economy to the risks of the firm’s failure.

Lastly, we can’t let a Trump administration gut the Consumer Financial Protection Bureau. The bureau has been the target of brutal attacks by lobbyists and ideologues since its founding, but the truth is that the bureau has done a remarkably sound job bringing enforcement actions against abuses like those revealed in the Wells Fargo scandal, writing rules on mortgages and payday loans, and cleaning up bad practices in debt collection, credit reporting, and other areas. Attacks on its structure, budget, director, and authorities are a pretext for weakening consumer protections in general.
We can’t afford to develop amnesia about the causes and consequences of the financial crisis, or we’re bound to repeat our past mistakes.

Michael S. Barr is a professor of law and public policy at the University of Michigan, nonresident senior fellow at the Center for American Progress, and former assistant treasury secretary for financial institutions.

Tuesday, December 13, 2016

From JDSupra Business Advisor: CFPB's First Project Catalyst Innovation Report Addresses FinTech Regulation

CFPB's First Project Catalyst Innovation Report Addresses FinTech Regulation

In October, the CFPB issued its first ever Project Catalyst Innovation Report highlighting "innovation insights" by FinTech companies in multiple areas. The CFPB launched the Project Catalyst initiative in November 2012 with the mission of collaborating with financial technology innovators on marketplace developments and creating programs and policies that support "consumer-friendly innovation." The report is noteworthy as it provided insight as to the CFPB's philosophy for regulating FinTech companies following a recent enforcement action.

One of the critical issues being debated by the CFPB is how to regulate FinTech companies. In prepared remarks discussing the report at a recent conference, CFPB Director Richard Cordray noted that "Everyone who provides consumers with financial products and services must adhere to the same standards and will be held to the same expectations."

This position echoes a recent $3.63 million enforcement action by the CFPB against Flurish, Inc., an online lender doing business as LendUp, for "failing to deliver the promised benefits of its products." LendUp promoted itself as an alternative to traditional payday loans through the "LendUp Ladder," a program pitched to consumers as providing the ability to improve credit scores and obtain more favorable rates over time. However, the CFPB found that many of the products offered by LendUp were not available, that inaccurate information was provided regarding the true cost of the loans and, despite promises that consumers could improve credit scores, the company did not furnish any credit reporting on its loans until more than two years after origination. As part of the consent order, LendUp was required to provide $1.83 million in restitution to impacted customers and a civil penalty of $1.8 million. In the enforcement action, Director Cordray stated that, "The CFPB supports innovation in the FinTech space, but start-ups are just like established companies in that they must treat consumers fairly and comply with the law."

Along with discussing regulation, the Project Catalyst report also noted current initiatives and marketplace developments by FinTech companies in the following areas:
  • Credit Reporting Accuracy The Project Catalyst is placing an emphasis on helping consumers understand negative information on credit reports. The report notes that many FinTech companies are developing applications to allow consumers to "streamline the process for consumers to dispute errors on their credit reports directly." Other companies are offering consumers free credit scores and present hypothetical scenarios for consumers to improve credit scores.
  • Mortgage Servicing Platforms FinTech companies are working to develop more modern platforms to "improve loan servicing and provide more flexibility, scalability, and systems integration capacity." The report notes that many servicers are currently using legacy technology platforms which increase the risk of "data inaccuracies" during servicing transfers.
  • Access to Consumer Financial Data The CFPB remains focused on the ability of companies to access the personal information and financial data of consumers in order to reduce the time spent to verify consumer accounts. This has been met by resistance from financial institutions who want to limit the sharing of consumer data with third parties. Director Cordray commented that the CFPB is "gravely concerned" about the resistance from financial institutions in this area.
  • Cash Flow Management Due to challenges posed by changes in income and expenses, the Project Catalyst has been working with FinTech companies who are developing applications and products to minimize distress. These ideas include: (1) developing services to allow employees to access accrued wages before a payday; (2) allow consumers to "smooth" income by setting aside earnings from above-average pay periods; and (3) deducting a portion of a consumer's wages and applying it to recurring payments.
While the first report from the Project Catalyst emphasizes that it wants to engage with FinTech innovators to develop new products and services, the report and recent enforcement action demonstrate that no regulatory leeway will be given for the sake of innovation. The CFPB will hold all companies, regardless of size, to the same regulatory standards. Whether FinTech Companies and the CFPB will be able to meld the goal of evolving technology with strict regulatory standards remains to be seen.

Monday, December 12, 2016

Guest Blog Post from New American Economy: New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

October 20, 2016
Sarah Roy, New American Economy, Sarah@renewoureconomy.org

New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

Fargo, ND – Today New American Economy has released new research showing that the 10,663 foreign-born residents of the Fargo-Moorhead metro area make significant contributions to the region’s economy through millions of dollars in tax contributions and spending power, and high rates of workforce participation in key local industries.

The report, “New Americans in the Fargo-Moorhead Region,” finds:
  • In 2014, foreign-born residents contributed $542.8 million to the metro area’s GDP, including $13.8 million in state and local taxes. This groups also wields $149.4 million in spending power.
  • Foreign-born residents in Fargo tend to have higher levels of educational attainment. In 2014, 27.6% of immigrants in Fargo held at least a bachelor’s degree, compared with 23.6% of the U.S.-born population. About 11.3% of the immigrants held advanced degrees, compared with 5.8% of the U.S.-born population.
  • In fall 2014, 1,597 students enrolled in colleges and universities in the metro area held temporary resident visas. These students supported 343 local jobs and contributed $36.5 million in spending in that academic year.
    • If Fargo retains one half of its international students with a bachelor’s degree or higher after graduation, 373 local jobs will be created within six years, boosting the metro area’s real GDP by $84 million.
  • Because of the role immigrants play in the workforce helping companies keep jobs on U.S. soil, it’s estimated that in 2014, the 10,663 immigrants and refugees living in Fargo helped create or preserve 490 local manufacturing jobs that would have otherwise vanished or moved elsewhere.
  • Foreign-born households also support federal social programs. In 2014, foreign-born households in Fargo contributed $23.5 million to Social Security and $5.9 million to Medicare
With the release of this report, the Fargo Human Relations Commission is announcing the commencement of a process that will engage community leaders in an inclusive discussion of what the City of Fargo can do to ensure that all community members are welcomed and encouraged to succeed.  

Read the full report here.
About New American Economy
New American Economy (NAE) brings together more than 500 Republican, Democratic and Independent mayors and business leaders who support immigration reforms that will help create jobs for Americans today. NAE members include mayors of more than 35 million people nationwide and business leaders of companies that generate more than $1.5 trillion and employ more than 4 million people across all sectors of the economy, from Agriculture to Aerospace, Hospitality to High Tech and Media to Manufacturing. NAE members understand that immigration is essential to maintaining the productive, diverse and flexible workforce that America needs to ensure prosperity over the coming generations. Learn more at www.RenewOurEconomy.org.

Monday, December 5, 2016

Guest Blog From CFED's Assets & Opportunity Network: Assets & Opportunity Network Leaders Make Significant Strides in the Field

Assets & Opportunity Network Leaders Make Significant Strides in the Field

By Dara Duratinsky on 11/22/2016 @ 12:00 PM
During the 2016 Assets Learning Conference, the Assets & Opportunity Network celebrated its 4th birthday. Since its official launch, the Network has expanded its reach and connections considerably, including:
  • Growing from 850 Members to 2,000 Members in every state and DC
  • Having 66 Lead State, Local and Tribal Organizations to 93 Network Leaders in 44 states and DC
  • Reaching 10,953 people with communications to more than 134,000 individuals
  • Reaching over 107,000 people through social media to reaching over 206,000 people
  • Educating 1,308 policymakers in local, state and federal government to educating more than 3,000 local, state and federal policymakers on asset building policy issues
To celebrate the Network’s fourth birthday, we wanted to share with you the 2015 Network Leader Impact Report which discusses the reach, impact and accomplishments of the 93 Network Leaders! Network Leaders Learn, Connect and Act to build an opportunity economy in their communities and nationally by participating in capacity building and learning opportunities; connecting with other stakeholders for greater sharing and collaboration and take action in policy advocacy that will improve programs and policies for low- to moderate-income households. Nearly a quarter of Network Leaders also lead local or state asset building coalitions, convening partners in their communities to advance common economic opportunity agendas. Network Leaders had many accomplishments in 2015. Highlights include:
  • Engaging nearly 6,000 stakeholders nationally through coalitions
  • Successfully implementing, improving or defending 60% of state and local policies that were attempted to introduce, improve or defend
  • Successfully advocating for increased VITA funding and improvements to the EITC and CTC at the federal level
If you want to get more involved, you can join the Network as a General Member to stay informed and find out how to engage in learning and advocacy opportunities. CFED staff hope you can help contribute to even more success in 2017 and beyond!

Read the report here!