Access to Credit Builds Consumer Confidence

tight-moneyFast on the heels of the release of the CFPB’s Proposed Rule, which could effectively shut down the small dollar lending market, comes the news that consumers’ spending expectations dropped, after an upswing in September. Perhaps not surprisingly, there was also a decline in consumers’ outlook on credit availability in the year ahead, according to the Federal Reserve Bank of New York.

The New York Fed’s Survey of Consumer Expectations is a monthly, internet-based survey of approximately 1,200 household heads. It contains insight about how consumers expect overall inflation and prices for food, gas, housing, education and medical care to change over time. It also provides Americans’ views about job prospects and earnings growth, as well as their expectations about future spending and access to credit.

Access to credit is a practical necessity in today’s economy. Many consumers increasingly need credit, not for frivolous purchases, but to cover basic, everyday needs. The CFPB’s paternalistic attitude toward “protecting” consumers from the encumbrance of small dollar loans misses one very important point: denying access to credit does not make the need for credit go away. Removing a legitimate, albeit expensive, source of credit will just force consumers in great need to look elsewhere – possibly driving them into the arms of less scrupulous lenders.

The Survey of Consumer Expectations is one of the methods used to measure consumer confidence. Access to credit is a very basic factor in building consumer confidence, and should be available to all socio-economic groups.

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CFPB’s Payday Lending Rule Could Block Consumers’ Access to Small Dollar Loans

We here at CCS understand, perhaps better than most, the important role credit plays in the economy.  Consumer borrowing fuels economic growth. Credit, when used responsibly, allows consumers to spend money on goods and services, which in turn allows businesses to grow and expand, creating jobs and increasing income. So it is good news that consumer borrowing grew at a record pace in August, as reported by ACA International:

“The non-revolving credit increase was the highest since September 2015, Bloomberg reports. Economists estimated total consumer borrowing would increase $16.5 billion in August, according to the article. ‘Steady hiring and income growth may be making Americans more willing to borrow, helping to sustain consumer spending and the economic expansion,’ it states.”

The CFPB released the Proposed Rule in June, which could essentially shut down the small dollar lending market, forcing businesses to close and denying access to credit for millions of Americans who have nowhere else to turn.

At issue here are two critical points:

  • The CFPB has a predetermined viewpoint on the small dollar lending market (it is “harmful” to consumers) from which it will not be swayed by actual evidence.
  • As a result of this attitude, the CFPB approached the Small Business Regulatory Enforcement Fairness Act panel process in a purely perfunctory way. This absence of a good-faith effort to obtain meaningful feedback from small business compromises the lawfulness of any Final Rule.

It is heartening to note that the CFPB has received an unprecedented number of comments on this proposed rule from both small businesses and borrowers. We sincerely hope they will conduct serious additional research before releasing their Final Rule, especially since the Federal Appeals Court found the CFPB to be unconstitutionally structured.

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Debt Collection Complaint Average Continues to Decline

chartAs an ethical and professional company within the debt collection industry, we here at CCS were very pleased to see that, according to the Consumer Financial Protection Bureau, consumer debt collection complaints have declined over the last six months. This is great news for the industry; what is not so great is the manner in which the CFPB reports on the data they collect.

As detailed in this article, ACA International (The Association of Credit and Collection Professionals) is very concerned about the Consumer Financial Protection Bureau’s flawed consumer complaint handling process. Some examples:

  • Since 2012, the CFPB has been sharing individual-level complaint data on their website.
  • In 2015, they began providing consumers with the option to include “complaint narratives” for publication in the Consumer Complaint Database.
  • CFPB’s monthly complaint reports now include a list of the “most-complained-about-companies” based on raw number of complaints.

There is a serious problem with this. These lists provide no information to put the complaint data in context. For instance, it is a fact that the more consumer contacts a business or industry makes, the more consumer complaints it will receive, regardless of the quality of those contacts. This raw data can mislead consumers, and paints an unfair portrait of the debt collection industry.

However, despite these biases, the latest CFPB monthly complaint snapshot showed a three-month decline in debt collection complaints: April to June 2016 is down 3 percent compared to April to June 2015, and likewise for March to May 2016 versus March to May 2015. It is interesting to note that the three-month average of credit card complaints, on the other hand, increased by 9 percent.

We here at CCS will continue to be in the vanguard of debt collection companies that provide an excellent service to our clients, while adhering to our pledge to treat consumers with dignity and respect.

CCS Attends CFPB Field Hearing

A CFPB debt collection field hearing was held in Sacramento on July 28, 2016On July 28, our own Rodney Meeks, CEO of Credit Consulting Services, attended a Consumer Financial Protection Bureau (CFPB) debt collection field hearing in Sacramento in an effort to humanize the collection industry and put a face on companies like CCS. He talked about our employees, our relationships with our clients, and our involvement in the community, in an effort to enlighten the CFPB on the true nature of legitimate collection agencies. The CFPB is expected to release an outline of proposals under consideration for debt collection rulemaking.

The CFPB is a government agency created in 2008 to “protect consumers from unfair, deceptive, or abusive practices by banks, lenders, and other financial companies.” On the face of it, this is a good thing. A market works best when all sides are informed and compliant. Even the CFPB acknowledges that debt collection serves an important role in the proper functioning of consumer credit markets. As stated on their website “If people owe money that they borrowed they are obligated to pay the money back and they should do so.” Sadly, the entire debt collection industry has been demonized because of the unscrupulous activities of a few, and the sheer volume of consumer complaints over those activities, warranted or not. These activities are not representative of the debt collection industry as a hole.

Professional debt collectors usually live and work in the communities where they conduct business. They work directly with clients and consumers to resolve unpaid accounts. Credit Consulting Services is one of those companies. We strive to provide excellent customer service for our clients and still maintain good consumer relationships. It is the cornerstone of our business. We attempted to paint a picture of this reality for the CFPB in an effort to insure that their rule making not tie the hands of legitimate debt collectors all over the country.

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