The president and CEO of the American Financial Services Association (AFSA) said a new tool released by his organization found ‘pessimism’ about the current state of consumers’ access to credit, and one reason is a “lack of clarity” regarding rules and regulations from the Consumer Financial Protection Bureau (CFPB).
“For the first quarter of 2024, they (creditors) were pretty pessimistic about how the consumer was doing in terms of access and performance,” AFSA president Bill Himpler told the American Legal Record Podcast. “They're optimistic about the remainder of the year, but quite frankly, probably the main concern goes back to your initial question as to what are some of the concerns that we have with the CFPB, and that is mainly that there's a lack of clarity in terms of rules and regulations."
The full podcast episode can be found on Apple Podcasts and Spotify.
AFSA released its first-ever Consumer Credit Conditions (C3) index on April 18, reported American Credit News. Conducted through a survey encompassing major players in mortgage, vehicle finance, personal installment, and credit card sectors, the report sheds light on prevailing business sentiments and future outlooks within the industry.
The survey found that 38.6% of lenders said business conditions "worsened" in Q1, while only 19.3% said conditions improved. Survey respondents said that conditions worsened in every category of lending, including loans, funding costs, and performance of oustanding loans.
33.9% of lenders, however, said they expect conditions to improve during the next six months.
Himpler’s comments on the CFPB come a month after he said his members would like ‘clarity, not confusion’ from the bureau.
“Instead of attempting to set rules through one-off and nontransparent enforcement proceedings or overly broad and unclear guidance, AFSA and its members want the CFPB to use the well-accepted administrative rulemaking process when needed so that all players – consumers, businesses, advocacy groups and policymakers – can provide input,” said Himpler. “Consumers and our industry need clarity, not confusion, to ensure all consumers can access the credit they need.”
“Our industry is already highly regulated at the state and federal levels and makes every effort to play by the rules and serve customers well,” Himpler said. “All we’re asking is that the CFPB fulfill its responsibility and give us clear rules to follow.”
The CFPB was established in 2011 following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It operates as an agency of the United States government with the primary mission to enforce federal consumer financial laws and protect consumers in the financial sector.
The bureau's jurisdiction encompasses banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating in the United States. The bureau spent $2.75 billion in FY 2023, according to the Government Accounting Office (GAO).
Established in 1916, AFSA is a national trade association for the consumer credit industry in the United States. Headquartered in Washington, D.C., AFSA represents a wide range of financial services companies, including consumer and commercial finance companies, auto finance companies, mortgage lenders, credit card issuers, and industry suppliers. The association advocates for its members at both the federal and state levels, focusing on legal, regulatory, and legislative issues related to consumer credit.
Leyla Gulen: [00:00:00] Welcome to the American Legal Record podcast. I'm your host, Laila Ghulen. In this episode, we welcome our guest, Bill Hempler. Bill is the President and CEO at American Financial Services Association, where he's been since 2004. He formerly headed the Congressional Relations Office at the Department of Housing and Urban Development and was Director of Legislative Affairs for BGR Holding, LLC. Bill, welcome.
Bill Himpler: Hey, thanks for having me, Leyla. It's great to be with you.
Leyla Gulen: Great to have you. First, I want you to tell our audience about AFSA, what you do there, and how it advocates for both business and the consumer.
Bill Himpler: Fantastic. Well, thanks for asking. The American Financial Services Association has been around since 1916.
We were actually formed with both industry and some early stage consumer advocates, if you will. To make sure [00:01:00] that consumers were able to get a hold of and utilize effectively safe, affordable, long term credit. And so we did that and formed an association, like I said, a little over a hundred years ago.
We started in the personal loan space with the industrial revolution and folks getting early versions of refrigerators, washers and dryers. Ovens and stoves that needed to be financed and really didn't have any other sort of outlets. So started kind of a sales finance with the inception of Mr. Ford and the, uh, Model T, uh, we quickly moved into vehicle financing in the twenties and thirties.
When folks came back from world war II, we really got heavily into mortgage finance started before that, but that's when it really took off and kind of the new kid on the block are credit cards that diners club's been around for a while, but folks really [00:02:00] took off with a vast utilization of credit cards in the late 70s and really into the 1980s.
So we advocate both on behalf of the industry. As well as the consumer wanting to make sure that we've got a great marketplace, it's very vibrant, that consumers know the products that they're undertaking to utilize, and we have a good working relationship with those customers, and educate policymakers and regulators on what we're doing and how we can improve and how we can work in partnership with them to effectuate that optimal marketplace.
Leyla Gulen: Indeed. Now, you and your federal government relations team at AFSA have had a significant impact on issues that influence member companies ability to offer affordable credit options to American consumers. Can you give us some recent examples of the work that you've been doing?
Bill Himpler: Well, I'd say that probably we've spent the last [00:03:00] 10 going on 15 years now responding, believe it or not, to the financial crisis of 2008 and the passage of the Dodd Frank Act, which really kind of changed the whole landscape.
We had a panoply of different regulators, both at the federal level and the state level, regulating our industry. Mostly the banks, the federal level and finance companies at the state level. But that changed with Godfrank with the creation of the Consumer Financial Protection Bureau. We've worked with them on mortgage regulations affecting the vehicle finance industry and how that's Because this is the first time, uh, that vehicle finance has been regulated at the federal level.
By and large, it's been over the, almost a hundred years, it's been regulated at the state level. Uh, where finance companies are regulated in each and every state in which they do business. So, uh, Getting used to a whole new framework, working more at the federal level, getting to know [00:04:00] the CFPB, and the CFPB kind of conglomerated a whole host of consumer credit regulations, be it fair credit, equal credit opportunity, truth in lending, all which had been at various banking regulators were now consolidated at the CFPB.
And they really kind of brewed the organization from the ground up. Uh, starting with just a few staff back in 2010, and they've grown exponentially, and then we look forward to a continuing, prosperous partnership with them, which in the current environment has been a little tough to achieve.
Leyla Gulen: Yeah, and I wanted to get your thoughts, kind of a macro picture on the current state of credit in the U.
S. as it pertains to debt, credit cards, interest rates, and the mortgage industry. Absolutely.
Bill Himpler: Uh, well, the you're hearing a lot from the administration by nomics and how successful the economy is doing that [00:05:00] inflation has come down from its high of three years ago, getting close to double digits now back and, you know, In the 3 percent range, but as you're seeing in a variety of different outlets, Americans are still struggling with higher prices, be it gasoline and utilities, or even a dozen eggs at the local grocery store.
So their dollar is not going as far as a pre pandemic and They have need for access to affordable credit, but the CFPB is actually making it harder for us to deliver that on a regular basis.
Leyla Gulen: Yeah. And I want to get into that. So, so why do you say that? Because the CFPB, like you said, it was started in 2010.
It was sort of the answer to what was going on as far as the subprime mortgage meltdown. And as far as credit cards are concerned, they were placed there to help the consumer fair practices amongst. The [00:06:00] banks for the consumer. So how do you work hands in hands? How, where do you butt heads? What is the relationship exactly between AFSA and the CFPB?
Bill Himpler: Well, it's one that continues to develop, and quite frankly, Director Rohit Chopra and I get along pretty well on a personal level. We don't always see eye to eye in terms of the regulatory structures, but it's a good starting place that we're able to actually discuss some of these issues in a civil fashion and try and move in a direction of greater clarity.
But quite honestly, As I said, with the inception of the CFPB in 2010, and kind of in the throes of the mortgage crisis, a lot of the staff really came from the mortgage bent, if you will. And that needs to be [00:07:00] a very vibrant segment of consumer credit. It's probably, well, not probably, it is the biggest segment.
component of consumer credit, but seeing everything through the mortgage lens is really not the way to best deliver meaningful products. A mortgage loan is not the same as, which is 30 years. And fixed rate, for all intents and purposes, is not the same as a credit card, which is high turnover, it's got variable rates, where you can make minimum payments and stretch out your credit access, nor is it like the vehicle finance space.
Following the mortgage crisis, or in, I guess, like a lead up to the mortgage crisis, you had probably 10 large mortgage finance sources. In the vehicle finance space, no one company has more than 3%. And [00:08:00] once you get past, First 10 or so in the vehicle finance space, the percentage of market share drops off dramatically.
So we've got thousands of different players who actually serve different components in new versus used, direct versus indirect, super prime, sub prime, and everybody in between. And the, whereas you have appraisals associated with real estate transactions, it's much harder. Once you roll a car off the lot at a dealership, so dealing in the used car space and finance space, everything is very particular.
You could have new tire, new tires on an old car, new battery, old battery. It all depends. So there's a lot of moving parts, which is why you have a lot more specialization in the vehicle finance space than you do when it comes to traditional fixed rate [00:09:00] mortgages, if you will.
Leyla Gulen: Now, AFSA recently released its inaugural Consumer Credit Conditions, or C3, index.
What is that?
Bill Himpler: Uh, well, what you have from the Federal Reserve on a regular basis is a snapshot of consumer confidence, uh, which has been rather pessimistic lately with consumers not sure if they will even qualify mortgages, car loans, and credit cards. What we've done with the Consumer Credit Conditions Index, the C3 index that was rolled out this week, is really.
Taken a survey from the creditor perspective as to how they see the framework of the economy and how the consumer is doing. And for the first quarter of 2024, they were pretty pessimistic about how the consumer was doing in terms of access and performance. They're [00:10:00] optimistic about the remainder of the year, but quite frankly, Probably the main concern goes back to your initial question as to what are some of the concerns that we have with the CFPB, and that is mainly that there's a lack of clarity in terms of rules and regulations.
The CFPB director, as I mentioned, when, has been pushed on, why don't you issue more rules and regulations? And he quite frankly said, rules and regulations take a long time. Well, that's the whole point. We don't expect our regulators to want to produce a regulatory environment by shortcut because I sure as hell could tell you that they would not allow my members to do shortcuts when it comes providing All of the documentation and the disclosures to the consumers and we're happy to do that.
We want an educated customer. This is not a [00:11:00] shortcut process, both in the delivery as well as in the regulatory environment. They issue press releases and post blogs and use enforcement actions by which our members have to kind of read the tea leaves. There's no clear rules of the road. It's kind of like being pulled over by a sheriff for speeding when there's no speed limit posted that you're supposed to follow.
All we're looking for is a clearer environment. rules of the road that kind of state where we know we're in compliance. And that creates a more favorable environment, provides greater flexibility to provide consumers with access to safe and affordable credit tools. But they're not sure they're going to be able to get in the current environment.
So improving the regulatory environment, I think at the end of the day, will improve the consumer confidence and their ability [00:12:00] to utilize credit effectively.
Leyla Gulen: So using your metaphor, setting the speed limit, who does that? Is it Congress? Is it the lobbyists that work on behalf of the credit companies?
Bill Himpler: Well, the, in passing the Dodd Frank Act and creating the CFPB, the CFP, Congress really created a format that we haven't seen before with a single regulator, not a commission type of format.
And so when you have a Republican administration, Democratic administration, there's big swings in the regulatory environment. So the Congress created this mess, at least in part, but that doesn't mean that The chairman Rohit Chopra of the CFPB can't issue the regulations. They've been given all of the statutory authority to promulgate effective regulation, be it in fair credit, equal credit opportunity, or truth [00:13:00] in lending.
All of that. And it's got a long track record with some of the other agencies that they've inherited. If they want to tweak some of these. regulations that are out there, that's fine by us, but do it through the normal rulemaking process that allows for a proposal to be put forward for industry and all the stakeholders, the consumers, policy makers, and the like, to give their input and then produce a final rule.
And we've seen that, be it in the, uh, promulgation of regulations dealing with small business loan data collection. Where it started out is not where it ended up, and we're, we think it's a much better product in, in their final analysis. Under Richard Cordray, one of Chopra's predecessors, he issued a, an initial payday lending rule that we thought went through.
Too far. We worked with him. And the final analysis, we think that it's a rule that's workable. We didn't get everything [00:14:00] we wanted. That's part of the process.
Leyla Gulen: Now, he's, according to the New York Times, considered one of the most hated regulators on Wall Street. Why is that? Is that because he's doing good things on behalf of the consumer?
Is it? Why would you say? They give him that honor? ?
Bill Himpler: Well, I, I do think it's for, for the lack of clarity we have, uh, using his process of enforcement actions and press releases, he's put forward some restrictions in the consumer credit space whereby he calls companies abusive and risky, I guess, to the customer.
Without defining any sort of rulemaking process, exactly what it is for a company to be abusive. One of the things that they've identified again in a press release, not through normal rulemaking, [00:15:00] is that companies are supposedly abusive if they have drop down menus from their landing page for their website.
Well, dropdowns are how everybody structures websites, because if you put all of the information that a customer needs or any, in any industry, all on the main page, I guarantee you, it'd be an absolute mess.
Leyla Gulen: I think they'd switch to another website.
Bill Himpler: And well, I mean, that's kind of the, the jumbled type of regulatory environment we're involved in right now.
I mean, he actually went so far as to say being profitable could be abusive. Being a large company using fine print on, on lending documents, most of which is required through decades of litigation. If we could Offer all of our products on a single page to a customer that that would be our [00:16:00] preference, but because of the way the consumer credit market has played out over 40 years in particular, with a series of settlements and judgments, some of that stuff is mandated.
So
Leyla Gulen: I think it's pretty well known that most people don't read the fine print. I mean, the fine print is fine. Pray if it's microscopic, nobody's going to take the time to reading it. There's a lot of things you can sneak into the fine print that is going to go over people's heads. They're just not even realize that it exists,
Bill Himpler: right?
No, I fully agree. Like I said, if we had our druthers, we all of our documents. And credit tools would be offered on a single page, but because of the litigious environment that we live in, it's required by court judgment.
Leyla Gulen: But isn't there a way to simplify things? I mean, are we just making things too complicated?
And let me also, not to get too tangential, but in one of the [00:17:00] things that the CFPB recently did is to lower Credit card late fees. I mean, the late fees that credit cards have been taking advantage of for years and years is ridiculous. I mean, to charge it at a Is counterintuitive because if somebody is late because they can't pay their minimum due to then charge upwards of 32 as a late fee, further making it difficult for them to pay.
I mean, I understand penalties need to be in place and sure, but that would be one thing I think that consumers would be completely behind.
Bill Himpler: I don't think anybody. Likes late fees. But I will tell you this, that late fees act as a governor on the entire system, okay? Quite frankly, you've got. About somewhere between 85 and 92 percent of folks [00:18:00] that perform on time and, and make their payments on time.
Chasing after that 8 to 12, 13 percent is very time consuming, very costly. And if without the, the late fees as that governor, what that is going to do, it mean that everybody else pays, uh, more And there, and the credit that is offered to them. It's kind of like Leyla, not sure what your skill level is behind the wheel, but I guarantee you this, that you would not want to pay your auto insurance based on my auto record.
But that's essentially what we're talking about doing, is kind of flattening it out to make sure that everybody can avoid late fees. More folks are going to actually have to pay more at the end.
Leyla Gulen: Right. But then again, I just, are the credit companies losing anything? [00:19:00] Because take that 10, 12, 13 percent of the population that maybe the late fees become too burdensome.
They just decide to default on their entire credit card bill. Uh, the credit card company, they cancel their credit, they can try to sell, well, they sell the debt, be collected by somebody else, and then they write it off their taxes. So, I, what is it exactly that they're losing by lowering, uh, A late fee so that it's not so exorbitant.
Bill Himpler: That, I guess that's, there's costs associated with this. And what I'm saying is we could take a 30 late fee, bring it down to, let's say 15 or 17. But are you willing to pay 10 percent more interest on your credit card to cover that for somebody that's late and you're not?
Leyla Gulen: But, and why would we have to increase the interest then?
Bill Himpler: Why can't we? [00:20:00] Because the cost of credit isn't free.
Leyla Gulen: Indeed, indeed. What exactly are the margins that we're looking for? The bottom line, when's enough going to be enough? Because clearly these credit card companies are making billions and billions of dollars. So, I, I understand that. You, you dip into those profits, maybe they're not going to be quite as big, but they're still going to be substantial.
Bill Himpler: I think the, the profit margins, uh, of the credit card companies are pretty on par with most of the rest of corporate America. If they were that much out of whack, you'd be seeing a differential in the, the pricings of their stack valuations. So, yeah, I. At the end of the day, they have to answer to their shareholders.
Each of them has a different risk profile that they're willing to entertain and that their shareholders are [00:21:00] willing to entertain. And I guess what I'm saying is if you're taking something that has been a, an effective tool in terms of Managing the risk associated with a profile and eliminating it, they're going to have to look elsewhere to make sure that their shareholders are getting the return that they want.
Leyla Gulen: Right. So what is next for AFSA and what other policies are you looking at in terms of how this is going to affect either business or the consumer?
Bill Himpler: Well, we're mainly hoping to, and we've, uh, been working with members of Congress on this to get greater clarity out of the CFPB such that. With a more well defined regulatory environment, the customer is going to have products that they can have confidence that they can use effectively, that are affordable to them, that the terms and conditions are [00:22:00] understandable and transparent, and that the customer is secure.
And knowing that the data that they provide to their service providers is secure. So we've been working with members of Congress on that. We actually got something that's rather rare in Washington these days, we got a bipartisan letter both Republicans and Democrats on the House Financial Services to send a letter to Director Chopra asking him to provide.
A clear definition of what it means, what he means by risk. So that as, uh, our member companies continue to move forward, they know when they're in compliance in a clear and straightforward fashion.
Leyla Gulen: Yeah, is that something that I know we touched on that a bit, but is that really something that's lacking significantly is just not understanding, like you [00:23:00] had mentioned those the speed limits?
Yeah,
Bill Himpler: well, I think, quite frankly, every time there's a press release. blog posts, if he brings legal action, rather than looking at the code of federal regulations, my members are individually or having to take a look at this document or that document and figure out, okay, if company a is facing this type of scrutiny, Are we enough like company A that we're going to face that or we're different enough or how do we, it's really a guesswork and patchwork as opposed to understanding, having that clear speed limit sign to know when you're in compliance and when you're
Leyla Gulen: not.
And according to him saying that it's going to take a lot of Time in court to hash things out in your opinion. Do you think that is correct? Is that necessary or can things move along a bit swifter than he says it does?
Bill Himpler: [00:24:00] Well, the I think that can move along at a much more rapid pace They this is a process that has been in place for decades APA rulemaking authority that's available to him putting forward a proposal Getting feedback Uh, from all affected parties and then issuing a final rule, yeah, it might take two, three years, but you end up with a better product, a more regulated marketplace, and something that everybody knows what the rules are.
I mean, it's, yeah, we just went through the WNBA draft this past week. If basketball players were supposed to be, you know, playing the sport, but there was no lines on the court at all. Just doesn't make any sense. You wouldn't know if you're in BIOS or out of BIOS.
Leyla Gulen: What do you think about the disparity in salaries between the WNBA and the NBAA?
Bill Himpler: Well, [00:25:00] I will tell you this. I was thrilled to death. Somebody told me yesterday that. Uh, and I, I apologize. I can't remember what the Indiana team namers were Kate and when, but that prior to her draft, the tickets were selling for 26 bucks a head, and now they're selling for over a hundred bucks. I'm glad to see that.
I think this is going to be a very interesting season coming forward because we got a lot of great talent that was drafted. Her notoriety, I think, will help things and I guess in the short run, uh, being able to take a family of four to a basketball game may be in vogue again, as opposed to having to pay 400.
Yeah.
Leyla Gulen: Well, I guess it depends on the team. Let's hope the extra dollars that people are willing to fork over for a ticket are going to show up in their salaries. That would, that would be nice to see. That would be nice
Bill Himpler: to see as well. Yeah. I mean, that's, I don't even know. [00:26:00] Where to begin on that, uh, I, I'll be honest, I, I stopped watching the NBA years ago.
I got a little tired of multi millionaires crying about not making enough money.
Leyla Gulen: Yeah, indeed. I know. I mean, I grew up in LA, so all we ever heard about was the Lakers, the Dodgers and so on and so forth, but let's also try to get Disney tickets down too. Those are way too expensive. Okay. Those are way too expensive.
And before we go, You know, there's new financial products coming out all the time. Is there anything that you're keeping your eye on anything that you want our listeners to also maybe do a deeper dive when they have a moment? I, I'm say
Bill Himpler: that principally, make sure you read what you're contracting, uh, for.
That you understand, uh, the tools that you're utilizing. If you've got questions, ask them. If you get behind on something, [00:27:00] reach out to your creditor. At the end of the day, it's Every one of my member companies, if somebody, you know, can't make a payment or has to be late or something, they just want to stay in contact and they want to work with, uh, that customer to make sure that they succeed.
Everybody gets a bump in the road. Everybody. And our guys are no different. We want to help folks work through those little bumps, if you will, and make sure they're not bigger bumps. So read what you're getting into and be confident that creditors want to work with you. To make sure you land on your feet.
Leyla Gulen: In any prognostication, as we look ahead, we're already in mid April. We were all hoping that we were going to see some interest rate cuts by the Fed, but it's looking like it's still months down the road before that actually happens. People have been borrowing like crazy on their credit cards, kind of to the tune of the Great [00:28:00] Recession.
So, so what do you? Prognosticate before the end of the year.
Bill Himpler: I think that it probably, and folks might not like to hear me say this, but it probably makes sense for the Fed to take a little pause because they indicated that they want to move in the direction of cuts. The interest rate hikes. Uh, don't seem to have put enough, uh, of a break on inflation.
Uh, so maybe another few months to kind of let the dust settle may be what the economy needs and may do more good in terms of bringing inflation down as opposed to cutting rates and getting those inflation numbers. back up. There's at the end of the day, I don't think anybody wants to see higher prices at the gas pump or in the grocery line.
Leyla Gulen: No, I was happy to see that. Gas came down a few cents since a few [00:29:00] days ago. So let's hope that continues. Excellent. And where should people go if they have more questions that they like to learn more about AFSA and the work that you're doing there?
Bill Himpler: Oh, well, um, Our website is www. afsaonline. org. We've also got associated with that, our education foundation.
And one of the key tools that's a product of the foundation is a 36 unit free curriculum on financial literacy that was really designed for high school students but has been utilized at the college level. Leon, I don't know about you, I've got Multiple degrees, but I never really got a course in high school or college.
They kind of went through the paces in terms of budgeting. How to, how to balance a checkbook. What to look for in terms of [00:30:00] vehicle finance. What are the pros and cons of different credit cards? It's really a very straightforward, did I mention free, curriculum that folks can utilize. It's called MoneySkill, and folks should check that out on our website because it could be really beneficial.
My kids are grown now, but When they were younger, I tried to instill that in as much of the lessons from that curriculum with them. And hopefully it's something they take away from the rest of their lives.
Leyla Gulen: Absolutely. I think we can all do with a refresher. I think that's great. Well, Bill Hempler, thank you so much for joining us.
Bill Himpler: Thank you, Leyla. Been a pleasure.
Leyla Gulen: Pleasure's all mine.