July 25, 2017

AILA Members and Friends: With Jonathan Paret’s permission, I share with you the following information concerning the likelihood of a CRA intervention in the CFPB’s proposed Arbitration Rule. Maury

BEGINNING OF THE END FOR CFPB ARBITRATION RULE? – House Republicans today are expected to pass legislation that would block a CFPB rule banning mandatory arbitration language in consumers’ contracts with credit card companies and banks.

The White House “strongly supports” the resolution. It said the CFPB’s rule “would benefit trial lawyers by increasing frivolous class-action lawsuits.” Read more.

Compass Point analyst Isaac Boltansky on what’s next – “We now peg the odds of the mandatory arbitration rule being reversed through the [Congressional Review Act] at 60 percent. The House will easily clear the measure, but the whip count in the Senate is still fluid at this juncture and appears to be losing its footing.”

July 11, 2017

CFPB Pulls the Trigger on Arbitration Agreements Rule

Yesterday, July 10th, the Consumer Financial Protection Bureau released its Arbitration Agreements Rule pursuant to the Dodd-Frank Act. The release of this Rule has been much anticipated since the publication of the Proposals last year. True to the Proposals, the Rule does not prohibit mandatory arbitration on a non-class wide basis. However, it does eliminate the imposition of mandatory, class-wide arbitration by those who provide consumer products and services on a repetitive basis (for example, “creditors” as that term is used in the Truth-in-Lending Act, and those participating in credit decisions, acquiring consumer contracts, leasing automobiles, providing debt management services, debt collection and more).

The Rule imposes specific language to include in a pre-dispute arbitration agreement to make crystal clear that the agreement does not prevent a consumer from being part of a class action case in court. It also imposes requirements on those who are subject to the Rule, to submit detailed records of arbitrations and arbitration related information to the Bureau.

The effective date of the Rule is March, 2018, at the earliest. And, there is still the possibility that Congress will act under its powers to reject the Rule within the next 60 days.

In preparation for an effective final Rule, creditors using pre-dispute arbitration agreements in their consumer finance transaction contracts, should consider the benefits of such agreements absent class-wide waiver, particularly in light of the “submission of records” requirement.

If a creditor determines that an arbitration agreement, without class-wide arbitration, is still of benefit, then the form of the agreement currently in use will require modification. If a creditor determines that arbitration without the component of mandatory class-wide arbitration is not of value, a “jury trial waiver” provision is a matter to be considered. The rules concerning jury trial waiver, differ from jurisdiction to jurisdiction.

Please let me know if you have questions. Maury

March 1, 2017


Today, Rep. Fincher and 44 co-sponsors introduced HB 321 into the Alabama House, calling for a Constitutional Amendment to set the maximum interest rate a lender may charge “on a consumer loan, line of credit, or other financial product” at 36% APR.  A copy of the Bill is linked above.

As consumer finance companies well understand, such a limit would end most all sub-prime consumer loans and sales made in Alabama, including traditional installment loans, credit appliance, furniture and other product sales, and automobile and boat financing.  The ramification of such a law would have draconian consequences to Alabama’s consumers.

While I understand the intent of the proponents of this measure — to reign in consumer loan products that create a cycle-of-debt — the result of the passage of this Bill and the adoption of such an Amendment would cripple the very people the Bill is intended to help.

There are other more appropriate approaches to address loan products that are problems for Alabama’s consumers.  The Governor’s Task Force on Consumer Credit Laws has been hard at work on effective solutions.  This Bill’s approach is not one of them.  The Alabama Installment Lenders Association will be joining with others to explain the serious problems with this Bill and the severe implications for Alabama’s consumers that would result from its becoming law.

Maury Shevin

December 14, 2016

A Message to

Alabama Installment Lenders Association Members and Friends

We are drawing to the end of another year; and, it has been a good one for our Association and most of our members. Despite some concerns early in the year about the direction of the Alabama Legislature and notwithstanding some poor press reporting in the summer, the Alabama Installment Lenders Association has prevailed as a strong trade association that provides valuable and fair loan products to our customers. Because of our work this past year, I think that all stakeholders in the consumer finance world — lenders, customers, regulators, consumer advocates and academicians — have a better understanding of what a traditional installment loan is and how it works to the needs of our customers. And this is important.

There are still significant “threats” out there that have to be addressed in 2017. The Consumer Financial Protection Bureau remains high on the list of threats along with some consumer advocates who have difficulty distinguishing beneficial consumer loan products and services from those that are problematic. We will continue our outreach to regulators, legislators and consumer advocates to encourage their understanding of how traditional installment loans work for the good of our customers.

Next year will likely see changes in our industry. On the federal level, there is the possibility that the Trump Administration will oversee the dismantling of significant aspects of the CFPB through legislative changes to Dodd-Frank. But, don’t jump for joy quite yet. It remains to be seen whether the pieces of Dodd-Frank that are altered only apply to Wall Street and Money Center Banks, or whether the changes also affect Main Street consumer finance companies. We will look for some regulatory relief as “compliance” has become a significant cost of doing business for traditional finance companies, despite little showing that traditional installment loans are any real problem for consumers. Our sister trade association, the American Financial Services Association, is hard at work on our behalf in Washington, pushing for regulatory relief. The National Installment Lenders Association works diligently on our issues as well.

On the state level, those who would impose rate caps at unworkable levels will, no doubt, continue in their efforts. We’ve seen some of this approach promoted at the Governor’s Task Force Meetings on Consumer Credit held last October and November. We just need to stay the course, explaining how traditional installment lending works, and why rate caps do not. Our Association will meet in Montgomery on February 21, 2017, to discuss industry developments and meet our Legislators. This annual program is always one that I look forward to. I trust that this date is already on your calendar.

I hope that all AILA members enjoy this Holiday Season with good deeds, with good cheer, with family and with friends. And, may the New Year bring you peace and happiness.


Maury Shevin, Association Director

November 23, 2016

AILA Members and Friends:

The Internal Revenue Service has eliminated one of the more troubling regulations affecting consumer finance companies, dealing with the 36-month “deemed discharge of indebtedness.” For the past several years, confusion has resulted as to whether the expiration of the 36-month rule is equivalent to the actual discharge of the indebtedness—resulting in uncertainty by creditors as to whether they may lawfully continue to pursue debt after issuance of a 1099-C based upon the 36-month deemed discharge.

The IRS has now issued its final rule that will eliminate the required issuance of form 1099-C based upon the finance company not receiving debt repayment for 36 months.

The final regulation applies to information returns and payee statements required to be filed after 12/31/2016. Therefore, for calendar year filers any 36-month expiration period that occurred during 2016, will no longer trigger the 1099-C filing. However, 1099-C’s must still be filed when debt is discharged. The remaining seven “identifiable events” that trigger information reporting obligations continue in full force and effect.

Happy Thanksgiving to all.


November 1, 2016

Kevin Gardner, President, has announced that the Alabama Lenders Association has officially been renamed the Alabama Installment Lenders Association.

The Alabama Installment Lenders Association, the oldest and most respected Alabama trade association devoted to the consumer finance industry, was originally founded in 1960.

“The name change reflects the importance that we attach to being traditional installment lenders,” Gardner said. “We want to clearly differentiate our loan products – which are fully amortizing, payable in equal installments and without prepayment penalty and balloon payment – from the more troubling loan products on the market today, such as payday and title pledge loans. This ‘rebranding’ should help us explain to customers and regulators exactly who we are and what we do.”

The website of the Association remains www.alabamalenders.net.

October 11, 2016

ALA Members and Friends:

I thought we had a great Committee Day Meeting last week. It’s always good to get together to discuss the status of the industry. I appreciate our new Secretary Shane Turner’s quick turn-around on the minutes and will be happy to share a copy with any member who may have missed. (Susan Rochester did the same thing for many years!)

We had a serious discussion about our finances and it was very enlightening. I am convinced that we need to expand our membership if we want to be in the position of continuing to provide good and timely information to our Association’s members. To this end, I want to repeat Mike Whitaker’s invitation to let the Membership Committee know of any prospects for both regular Members and Associate Members. We also discussed changing our name to the “Alabama Installment Lenders Association.” Several of us are working on that now to make it happen.

Please note that our next Association meeting will be our Meeting and Legislative Reception in Montgomery on February 21st, 2017.

I also want to report that Kevin Gardner, Mike Whitaker and I went to Montgomery for the inaugural Governor’s Task Force on Consumer Credit, immediately following the Committee Day Meeting. The Task Force Meeting held in the Old Capitol Building was a good beginning. Rep. David Faulkner is the Chair and he is relying heavily on Banking Department Supervisor Scott Corscadden and Associate Counsel Anne Gunter. The Task Force is composed of legislators, regulators, consumer advocates, industry representatives and academics. It is the first time in my career that I’ve sat in a room with all of the “stakeholders” represented. It really was a good start. Chairman Faulkner wants to focus first on Title Pledge. I think that he reasons that we may be able to secure general agreement on the need to break-out title pledge from the Alabama Pawn Shop Act, and lower its rate. We’ll see.

Then, he intends to move on to Payday. The traditional installment lenders on the Panel were very clear in differentiating installment lending from title pledge and payday. While some of the more strident consumer advocates don’t want to see a difference (and the payday industry wants to “blend-in”), I think that the majority of the Task Force noted and understands the distinction. This bodes well if the Task Force is going to succeed in modifying the Deferred Presentment Services Act.

I will keep you advised of our progress. Meanwhile, please let me know if you have any questions. Thanks for your support of the Association.


August 31, 2016

ALA Members and Friends:

For those of you who will continue to make Covered Loans to Covered Borrowers after October 3rd, the following information from AFSA and the attached Military Lending Act Guidance from the Department of Defense will be useful. Remember that even if you do not intend to be making loans to Covered Borrowers, you must “scrub” your applicant to make certain that he or she is not a Covered Borrower. Checking with your credit reporting agency, or checking the Department of Defense Database are the basic methods for retaining a “safe harbor” after October 2nd. (The current separate statement signed by the applicant will no longer protect you after that date.) And, the penalties for violating the law and regulation are severe including: imprisonment for creditors who knowingly violate the law, the contract is void, a civil penalty of not less than $500, and attorneys’ fees and court costs.

Please let me know if you have any questions. Maury

The DoD issued the attached guidance interpreting its regulation implementing the MLA. The guidance answers some questions posed by AFSA and its members, but unfortunately does not address all of our concerns. The DoD has said that it remains open to talking with the financial services industry. However, we do not expect more guidance at this time. We’re looking for opportunities to work with the DoD as they educate service members and their families about the MLA.

July 5, 2016

ALA Members and Friends:

The end of June and beginning of July have started out with several important developments for Alabama’s consumer finance industry.

John Harrison, who has served as Superintendent of the State of Alabama Banking Department for 11 years, resigned his office effective June 30th. Mr. Harrison has been an excellent leader of the Banking Department serving with distinction under two Governors, garnering the respect of consumer activists, industry members and legislators. He has worked tirelessly to continue Alabama’s rich tradition of excellence among state banking departments across the nation.

We are delighted with Governor Bentley’s selection of Rep. Mike Hill to replace Mr. Harrison. Mr. Hill has been very active in the banking and finance world for many years. He has served in the Alabama Legislature for 30 years, where he chaired the Banking & Insurance Committee in years past, now known as Financial Services. He has been involved in most every significant legislative act important to the consumer finance industry and the consumers of Alabama for years. We do not think that the Governor could have found a more appropriate replacement for Mr. Harrison.

With the creation by the Governor of the Alabama Consumer Credit Task Force designed to study all consumer lending laws in Alabama, Mr. Hill will have a unique opportunity to shape the future of the consumer finance industry in Alabama. We look forward to working with Mr. Hill in this effort.

CFPB Small Dollar Loan Rule Proposal—What the Director Said Next

By Maurice Shevin • Friday, June 24, 2016

Several years ago, one of our local traditional installment lenders said that payday and title pledge lenders were going to cause a serious disruption in traditional installment lending. Boy was he right.

As reported recently, the CFPB’s Proposal released for comment on June 2nd treats vehicle secured loans of more than 45 days with a Total Cost of Credit (i.e., an “all-in APR”) of greater than 36% as a “longer-term covered loan.” The significance of this designation is that a lender of such a loan must jump through a series of analytical hoops before it may make such a loan.

So, what is wrong with that? That answer lies in the nature of the traditional installment lending business itself, and how consumer loans are made and their cost structure determined. Economics dictate that smaller dollar consumer loans (basically under $2500) cannot be made profitably and securely today within the all-in APR guidelines set forth in the Proposal. And, when additional costs of compliance are layered onto such loans, such increases will be passed along to the borrower. It is also a certainty that the break-even point for lenders will dictate the need for a higher loan amount.

These issues were covered with Director Cordray when he attended the meeting of the National Installment Lenders Association (“NILA”) in Washington earlier this week. The take away by attendees is that the Bureau’s Proposal is not cast in stone, and the Bureau is open to rethinking its positions—but only based on data. Recall that the CFPB prides itself on being a data driven agency.

The Director generally introduced the Proposal and explained that the CFPB intends to require an ability to repay determination for consumer loans creating and existing for repetitive roll-overs, whether the characterization of the loan is payday, title pledge or installment. The Director heard from the group that the traditional installment lenders represented by NILA do not make consumer loans that abuse via a cycle-of-debt, because traditional installment loans are underwritten, fully amortizing with equal installment payments, made with no prepayment penalty nor balloon payments, made with no required leveraged payment mechanism, and generally reported to credit reporting agencies.

While acknowledging that this type of loan product in general may be beneficial to consumers, the Director said that the bureau is concerned that very high-cost lenders can adapt to include these indicia; and, if the Rule ultimately adopted with respect to vehicle security in particular does not address these loans as “covered” then the intent of the Rule to rein in abusive loans will not have been achieved.

The Director was aware that high-cost lenders have already succeeded in a legislative effort to avoid the Proposed Rule. An installment loan made under the new Mississippi Credit Availability Act would not be a covered loan if vehicle security is not taken. The Director invited NILA to address this issue and make suggestions in any comment letter that it chooses to write.

Director Cordray was generous with his time and NILA made its presentation efficiently in recognition of the Director’s busy schedule. The hard work begins now: That is, we need to suggest changes in the Proposal, backed by data, because as one presenter said earlier in the meeting, “The demand for credit cannot be legislated away, but the source for credit can be.”

October 23, 2015

ALA Members and Friends:

The Alabama Lenders Association is committed to differentiating ourselves from payday and title pawn lenders, who are not traditional installment lenders. Our website at www.alabamalenders.net clearly sets forth who we are and what we are about:

We are traditional installment lenders. Our lending is based on three principles: (i) equal installment payments (ii) for customers who have the ability to repay (iii) with a clear pathway out of debt. Installment loans show with clarity precisely when the loan will pay out based upon the payment schedule. We help our customers build their credit record by reporting to credit bureaus. This encourages both responsible borrowing and responsible lending. Our loans are customer driven—no prepayment penalties and understandable repayment terms are the rule. Our loans are transparent, making them the safest loan product for consumers. And, we make loans from local offices with local lenders, offering much more personalized service than a bank.

Our members—whether large or small–are committed to traditional installment lending. The Association adopted a policy that our Members may not hold licenses under the acts permitting these other types of lending. The Executive Committee, now joined by the chairman of the Membership Committee, carefully vets all applicants for membership to ensure that their business methods comport to our Association’s Code of Ethics, adopted over 10 years ago. Our Code of Ethics is clearly presented on our website.

We recognize that it is vitally important that the good name of installment lenders, and the Alabama Lenders Association in particular, not be confused with payday and title pawn lending. We work hard to distinguish ourselves, and tell the story of our good work.

Should you have any questions concerning membership or the mission of the Association, please raise them with me, President Kevin Gardner, or any member of the Board of Directors.