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KCFA Member Update - April 2021

KCFA Update

Given the volume of email traffic during the session we held off sending our routine updates, but we wanted to get those back on track. I apologize for the length, but there were several items we wanted to update you on. Thanks for being a KCFA member!

DFI Letter on Alternate Loan Mediums

The COVID-19 pandemic has obviously impacted how we have done business and one item that came up was the need to fund loans to electronic mediums other than checks like debit cards or PayPal accounts. There was no specific legislative language prohibiting this activity, so at the request of a member and with the support of the Advisory Board, we reached out to the Department of Financial Institutions at the end of 2020 seeking a no-action letter confirming the ability for KCFA members to fund loans to alternative mediums.

The DFI has issued this No Action letter supporting KCFA's request. If you choose to utilize the provisions contained in the letter we would encourage you to keep a copy in your records for any compliance issues that may arise.

Final KY Legislative Report

The 2021 Regular Session of the General Assembly adjourned on March 30. This was a particularly active session for issues of interest to KCFA and the three main bills we lobbied on were:

HB 259 - Was a bill pushed by One Main and some other larger consumer loan companies that would have amended the rating structure for our industry by:

- Moving the 36% band to loans up to $5000,

- Creating a new rate band of 28% for loans from $5000-$10,000,

- Allowing the rates to blended across all bands up to $15,000,

- The loan processing fee would have been increased.

KCFA members could support the bill except for the blended rate of which there were significant concerns with that provision. Ultimately we supported House Floor Amendment 1 to remove the blended rate, which was opposed by the bill's proponents. With no agreement amongst the industry the House Leadership ultimately killed the bill and the amendment.

SB 71 - We worked with the insurance industry, the bankers, the transportation cabinet and others to crack down on unscrupulous towing operators. This should be beneficial for our members.

SB 5 - Along with the broader business community we advocated for the legislature to grant businesses relief from liability created by the COVID-19 pandemic. The bill ultimately passed, but not until after the veto recess meaning the Governor can veto the bill without the opportunity for the General Assembly to override that veto because they have already adjourned for the session.

You can access our final session report HERE, where we have provided a list of bills of interest. Please review and let us know if you have questions or concerns.

KCFA Supports SECURE Notarization Act

KCFA was approached by the American Land Title Association (ALTA) to sign on to this letter in support of the SECURE Notarization Act that will be sent to U.S. Senators. This Federal legislation would authorize RON (Remote Online Notarization) nationally. KCFA supports RON, which is a logical modernization of the notarization process that is already the law in Kentucky, and thus we agreed to sign on to ALTA's letter in support of the SECURE Act.

All-In Rate Caps

Across the country many state legislatures have been contemplating legislation to enact all-in rate caps on all consumer loans that would impact installment loans, the most notable being the 36% all-in rate cap that passed in Illinois. We have not seen this sort of legislative effort in Kentucky, but always monitor the 36% rate cap legislation on payday lenders, none of these have passed but we want to make sure they wouldn't impact our industry's loans. We don't anticipate that type of activity in Kentucky, but in order to better educate our members we wanted to provide a few resources from AFSA that you can use with legislators if the topic comes up: AFSA White Paper & AFSA Talking Points.

AFSA Request on PPP Loans

We received a request from AFSA asking if any of our KCFA members applied for and got PPP loans, but have been denied loan forgiveness from the SBA. Apparently this is a big problem across the country and AFSA is asking Congress to reach out directly to SBA to grant loan forgiveness on PPP loans for finance companies. If you find yourself in this situation and would be interested in lending your voice to the work AFSA is doing with Congress, reach out to me directly at dmiller@govplan.com or (859) 227-5800.

News Articles of Interest

Illinois Governor Signs Rate Cap Law

CFPB Set to Crackdown on Payday Lending

Fed Sees No Role for Itself In Consumer Banking
Last year, as the U.S. Postal Service (USPS) saw its delivery times and other efficiency metrics collapse, policymakers in Washington pushed the idea of having the USPS offer small dollar loans and perhaps even bank accounts to consumers.

Given the challenges of doing its core functions well, its inability to keep its own fiscal house in order, never mind implementing the processes required to assist customers and service such loans, the proposal ended up in the “Dead Letter Office.”
Last week Senate Banking Chair Sherrod Brown (D-OH) floated another banking concept: the Federal Reserve entering the consumer banking and financial services market. There are a number of regulatory issues that make this even more unworkable than the USPS proposal: a regulator competing against institutions it oversees. Never mind the odd scene of consumers lining up at the Federal Reserve on Constitution Avenue looking for an “in network” ATM.
Yesterday Senator Steve Daines (R-MT) asked Federal Reserve Chairman Jerome Powell if it was equipped for such a role and Powell’s answer was unequivocal. “No. And of course we’re not permitted under current law. Thats never been our role and it’s not been the role of other central banks. … [I]t would be quite (emphasis Chairman Powell’s) a dramatic change and one that would require careful thought.”
View the full clip here.

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