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uk: payday lending plans November 25, 2013

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The UK government plans to cap the cost of payday loans in amendments to the Financial Services (Banking Reform) Bill. According to the Chancellor of the Exchequer:

It’s all about the government being on the side of hardworking people.

cfpb: payday lending enforcement and final rule on mortgage disclosure November 20, 2013

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The CFPB announced an enforcement action against Cash America International, Inc with respect to its payday lending practices which includes refunds to customers, a fine of $5m for the violation and for destroying records before the investigation and promises with respect to future compliance. I have been feeling grim because I will be discussing McKenzie Check Advance v Betts in class tomorrow, and this is a step in the right direction. The CFPB also announced new rules on mortgage disclosures. There’s lots of information about this rule on the CFPB website, including a blog post which explains how the final rule is different from the proposed rule, a report on the study of old and new mortgage disclosures, and a page for consumers. Much more user friendly than the usual sort of financial regulation rule announcement.

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payday loans – a policy problem on both sides of the atlantic November 6, 2013

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The CFPB invites the submission of complaints about payday loans starting today (and the Pew Charitable Trusts published a report last week on payday lending). Meanwhile, the UK Business, Innovation and Skills Committee yesterday held an evidence session on the regulation of pay-day loan companies (a follow-up to the Committee’s 2012 report).

but then felix salmon lost out with a bank too July 1, 2013

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Not just the poor. Felix Salmon describes his experience with costly “free banking” here. Perhaps we should make the CEOs of employers who pay their employees with prepaid cards pay themselves with those same cards? And subject the CEOs of large banks to the sort of consumer-friendly treatment described in Salmon’s article?

the poor lose out: nytimes on wages via prepaid cards July 1, 2013

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Jessica Silver-Greenberg and Stephanie Clifford have a great (but depressing) article in today’s NY Times. Banks and employers are increasingly paying hourly paid employees via prepaid cards which carry a range of fees which the payees have to incur to access their money. Employers are given financial incentives to use these cards. There’s a great quote from Chuck Harris, the president of NetSpend, the largest issuer of these cards:

We built a product that an employer can fairly represent to their employees as having real benefits to them

He doesn’t say that the cards actually have real benefits to employees but that employers can “fairly represent” that they do. Netspend’s mission is:

to provide products and services that empower consumers with the convenience, security and freedom to be self-banked

Of course this isn’t about empowerment at all, but about cynical exploitation of those with few choices and limited voice.

more on the sec investor advisory committee January 11, 2013

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The SEC published a Sunshine Act notice about the meeting on January 18th because a quorum of the SEC may attend the meeting. Meanwhile, I notice that there seems to be no mention of the Investor Advisory Committee on the SEC’s “website dedicated to retail investors” at investor.gov.

accountability failures September 30, 2012

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If we ever do get a treadmill from Sears after the weeks of waiting, getting up early to wait some more, being woken up early just to be reminded that we are still waiting, it’s pretty likely that we will get another robocall asking us how the delivery went (unless it is easier for Sears folk to disable follow-up calls than reminder calls that tell us we’re still waiting). And here is what is to me the worst part of all this. The people we can manage to speak to are limited by the scripts they are required to follow – they have almost no agency in any of this by design. The only people we may be asked to evaluate in any of this are the people who perform the scripts and not the people who write them. The people without power are made accountable rather than the people with power. But if you only choose to ask customers how they were treated by the script-followers you won’t get real feedback about the consumer experience. The systems may be designed that way on purpose, but if that is so it’s a pretty sad state of affairs.

fsa replacing mis-selling with no-selling August 22, 2012

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In a consultation paper published today (comments requested by November 14) the FSA states:

We have found that the majority of retail promotions and sales of unregulated collective investment schemes (UCIS) that we have reviewed fail to meet our requirements, exposing ordinary investors to significant potential for detriment. This demands action. We are proposing to intervene in the market by changing our rules to ban the promotion of UCIS and close substitutes to ordinary retail investors in the UK.

Many sellers of these funds are not ensuring suitability and do not understand the relevant rules, so the FSA proposes to ban sales of unregulated collective investment schemes and “close substitutes” (including traded life policy investments) to “ordinary retail investors” (sales will be possible to sophisticated investors) (including investment through Individual Savings Accounts, self-invested personal pension schemes, platform services etc) reflecting a change in approach to stop problems arising rather than dealing with problems after they have arisen (and this includes restricting possibilities for regulatory arbitrage). The FSA says:

We are making the judgement that the benefits of improving customer outcomes for most retail investors outweigh the costs to the minority for whom they may be suitable.

Retail investors who genuinely seek out the investments will be able to buy them – the FSA’s concern is with respect to problematic financial promotion.
Under the heading “Who Should Read this Consultation Paper?” the CP says it will be of interest to consumers and consumer organisations. In terms of its subject matter, that is clearly accurate, but the document is not drafted to be accessible to those who are not used to navigating the complexities of the FSA’s rules.

financial opacity August 21, 2012

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Which? says that free banking (in the UK) is a myth, noting that even bank customers in credit are charged for withdrawing money abroad, and argues for more transparency (inviting support for its campaign to ensure the UK’s new regulator is a watchdog rather than a lapdog). The Sargeant interim report on simpler financial products published at the beginning of the month suggested part of an answer, proposing that the first three simple financial products to be approved should include an Easy Access Savings Account and a 30 Day Notice Savings Account. Note no simple current account is proposed – this is about addressing the savings gap:

There has arguably never been a more important time to help people take charge of their finances and manage their money better. With the volatile nature of the global economy, the sharp drop in UK household incomes for 2010-20112 and uncertain employment patterns, having financial provision and protection for today’s needs and the unexpected, is even more of a necessity.
1.3 At the same time there is a change in the nature of the relationship between the individual and the traditional functions of the welfare state. As the Government continues its reforms to promote work and personal responsibility, it is inevitable that more responsibility will be required of the individual to provide a financial safety net for themselves and their family.

But Which? suggests that it’s not that simple for people to make decisions about choosing and managing current accounts, so why not a simple current account?

EuroFinuse, in comments to ESMA about technical advice about possible delegated acts under the prospectus directive, raises some more general questions about inadequacies of summary prospectuses for debt securities and about deficiencies in disclosure with respect to the Bankia IPO in 2011. It’s not clear what EuroFinuse expects ESMA to do with these broad comments made in the context of a focused technical consultation.

misleading advertising? August 1, 2012

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I haven’t seen one 5 hour energy advert that isn’t really irritating. The latest I have seen begins with the statement that they asked over 3000 doctors to review 5 hour energy. It then goes on to say “and what they said is amazing” (seems to imply the over 3000 said something amazing). The ad then says that over 73% of those who reviewed 5 hour energy said they would recommend a low calorie energy supplement to their healthy patients who use energy supplements (note that the script refers to “a” supplement, not to the 5 hour energy product itself). The ad emphasizes the 73% figure (which appears prominently on the screen) but carefully doesn’t state that the 73% is a percentage of the (over) 3000 doctors. And the ad does not state how many doctors actually reviewed the product. And what the reviewing doctors were prepared to sign on to is pretty lame. But the ad then goes on to use the 3000 number again at the end (ask your doctor, we already asked 3000), reinforcing the impression that lots of doctors approved of the product. This sort of carefully constructed message, designed to give a very different impression from the one that the actual words used, carefully parsed, give should, I think, be treated as problematic in law.