2014 Could be Turning Point

By William Sellery
Executive Directir, FiSCA

If 2013 is any kind of gauge, there is no doubt that 2014 will be another extremely active year for the Financial Service Centers of America.

Fortunately, in 2013, significant and worthwhile progress was made on a wide variety of issues. However, much work lies ahead. Looking to the future, 2014 could easily be a real turning point on several issues of major importance to our industry, from potential payday loan regulations, to the ability of government beneficiaries to choose a paper check, to addressing new fraud vulnerabilities from remote deposit capture, to responding to unwarranted bank terminations, among many issues currently being addressed.

Congress Role Vital

While there seems to be an increasing likelihood of even more day-to-day regulations — especially from the Consumer Financial Protection Bureau — the involvement of Congress will also continue to play a key role as many final decisions are made.

FiSCA has long recognized the link between public policy and our members’ businesses. Legislation, and its ensuing regulations, can dramatically affect how our members run their businesses on a day-to-day basis.

As we’ve always asserted, we want decisions to be based on facts, not misperceptions. Providing facts to decision-makers in Washington has always been one of the key goals of FiSCA. The importance of successfully providing those facts in a meaningful way, before proposals are finalized or decisions made, is magnified as federal actions increasingly address our products and services — and now even procedures and processes.

Recognizing the need to play a meaningful role in the debate of public policy issues, FiSCA has strategically structured itself to provide the right resources, at the right time, on the right issues. Springing from the original decision to move FiSCA’s headquarters into Washington, FiSCA is fully engaged on several levels to ensure that key facts, positions, and reasoning are brought forward on a timely basis for consideration of decision-makers.

Again, facts, not misperceptions, need to drive decisions. FiSCA is committed to making that happen.

Overall, since passage of the Dodd-Frank bill that legislatively created the CFPB, much of the immediate focus has shifted from legislative issues to the regulatory environment. Taking CFPB as the most prominent example, the new agency has regulatory authority over all our products and services under the guise of consumer protection – coupled with broad examination and powerful enforcement capabilities.

So it is critically important that decision-makers within CFPB clearly understand the nature of our business, how it works, and how our customers are appropriately protected.

Members Need Knowledge

In that regard, as an association, one of our missions is to assist our members to better understand the unfolding regulatory environment and to provide timely information on compliance procedures from the various agencies that regulate our business.

As we have indicated to many regulatory agencies over time, our members want to comply with all applicable regulations, but they need to know clearly what is expected of them. It’s critical when that knock on the door comes that you will have already implemented the correct policies within your company.

FiSCA has implemented strong, comprehensive and leading-edge compliance programs for our members. Although reserved for members only, the FiSCA website (fisca.org) contains comprehensive compliance tools designed to help our members meet current regulatory requirements, from AML/money laundering regulations to newly issued rules from the CFPB.

FiSCA’s Annual Conference now contains two separate compliance tracks for those regulatory areas, and those workshops have become among the most popular and well attended.

Let’s take a look now at some of the key issues for our industry for 2014, the status, outlook, and how those issues may affect the business of the neighborhood financial service center industry. This is Washington, of course, so Congress and the regulatory agencies can both be involved on different levels as policies are developed.

Financial Choice

On March 1, 2013, all government beneficiaries were required to receive their benefits electronically — either directly deposited into a bank account, or placed on a government-issued prepaid card.

The option of being able to choose a paper check was not available except for a small number of very narrowly defined exemptions. And even those exemptions contained onerous process requirements, making them nearly impossible to obtain.

The U.S. Treasury Department then began using heavy-handed, almost intimidating, messages to beneficiaries to sign up for electronic delivery. However, bank accounts and prepaid cards don’t work for everyone, and the fairness of “Choice,” the ability to choose a paper check, made great sense as a reasonable and fair alternative.

Although FiSCA worked with Treasury to examine possible solutions, we found that Congress was more receptive in understanding the fairness of Choice. Hearings have been held in both the House and Senate, highlighting the problems for millions of beneficiaries, and supporting the principle of Choice.

In both written and oral testimony, Treasury has now indicated that paper checks would continue for those who have not established a bank account or signed up for a prepaid card. Further, Treasury agreed to tone down and scale back intimidating notices to beneficiaries.

Nevertheless, more work needs to be done. The law still requires electronic delivery, and choosing a paper check needs to be an option, not an unclear and uncertain default. And troubling instances are emerging of government agencies blocking enrollments for direct deposit on certain prepaid cards, forcing people onto the government-endorsed card.

Further, more and more employers are now requiring employees to receive their pay electronically – not by paper check. Again, the fairness of Choice needs to be provided to those who prefer a paper check.

FiSCA will be continuing to work in 2014 on the issue of Choice, with the goal of providing a fair and reasonable ability for everyone to choose a paper check when that option suits them better.

Consumer Financial Protection Bureau

The potential for payday loan regulations will be a major area of interest and activity for FiSCA in 2014. Under the Dodd-Frank Act, the CFPB has direct authority to engage in rulemaking, issue industry guidance, examine payday lenders, and commence enforcement actions based on violations of consumer protection laws. In fact, the very first field hearing of CFPB addressed payday lending.

A CFPB “white paper” released earlier this year concluded that further regulatory action is warranted to provide consumer protection.

While no official confirmation has yet been provided, it is widely anticipated that payday, in some form, will be addressed by the bureau in 2014. How it’s addressed, and how it may impact our members, will be a significant focus of FiSCA activity in the coming year.

FiSCA has worked hard to establish a strong, credible working relationship with CFPB. We are hopeful that relationship provides an appropriate forum to work with CFPB on the critically important payday issue.

Additionally, FiSCA continues to be active with the bureau on other MSB issues, such as check cashing and money transmitting, and prepaid card regulations, as those areas become more prominent in the bureau.

Again, FiSCA will provide relevant facts to assist the bureau in the consideration of any new regulations.

Bank Discontinuance

The wholesale and unwarranted termination of MSB bank accounts will continue to be a major issue focus for 2014. Bank accounts are the life blood of the industry and any contraction in the availability of banks in the MSB marketplace is of significant concern. The issue of account terminations has resurfaced, focused on the increased use of the ACH payment system to provide payments on payday loans. Several ACH processors and banks have terminated MSB relationships in response to regulatory pressure. FiSCA is committed to working with regulators, banks, and third-party ACH processors to ensure that the appropriate use of legal and approved procedures do not result in any further unwarranted account terminations.

Remote Deposit Capture

As more wide-spread use of technology naturally progresses, and more consumers use their smartphones to deposit checks electronically, the issue of fraud has increased simultaneously. FiSCA’s members are becoming vulnerable as liability issues arise, and fraud continues to increase.

Therefore, 2014 is likely be an important year in addressing the remote deposit capture issue as FiSCA works with banks and trade associations, such as the American Bankers Association, to develop policies and procedures to better work with established and emerging consumer banking technology.


Both the House Financial Services Committee and the Senate Banking Committee will continue in 2014 to exercise their respective oversight authority to review the regulatory activities of various agencies, particularly the CFPB.

While the current partisan approach to politics may prevent many bills from being signed into law, it will not prevent the active consideration of many proposals. In fact, the House Financial Services Committee passed several bills changing dramatically the way CFPB operates.

While it is unlikely the Senate will take up any of those bills, the House, nevertheless, will continue to keep the focus on many regulatory agencies even more in 2014. How agency witnesses answer certain questions sometimes provides an insight into agency thinking, which can be helpful.


As FiSCA continues to fight for its membership and the industry in 2014, the resolution of these issues and many more will likely play an important role in how our industry operates into the future. With a seat at the table, FiSCA will continue to advocate that facts, not misperceptions, be the basis of all sound decisions going forward.

2014 Year to Solidify Industry

By Lisa McGreevy
President and CEO, OLA

The online short-term, small dollar credit industry has certainly had its ups and downs over the last year. Yet, we continue to see ongoing growth and innovation within our industry.

A recent study conducted by Stephens Inc. has shown that online short-term loan volumes reached $18.6 billion in 2012, a 30 percent increase from 2011. As demand for our product continues to fuel the growth of the industry, it also sparks innovation.

Our industry is pioneering advances in technology and software which will provide 21st century credit to the 21st century consumer.

Government Outreach

Unfortunately, the growth of our industry has lead to government overreach by state and federal regulators. This summer, federal agencies such as the Federal Deposit Insurance Corporation and Department of Justice began concerted efforts to pressure banks to stop processing legal, authorized payments between online lenders and their customers.

The overreach by these federal agencies was unprecedented, threatening the livelihood of many small businesses across the country and possibly further restricting credit access to millions of American families.

Rogue government bureaucrats who simply don’t like our lending products have been trying to end an entire industry, yet offer no alternatives to those who rely on access to short term credit.

While persistent attempts to misrepresent our industry continue, I am confident that we will become a stronger industry in the end. I believe this because of the way we have stuck together as an industry and persevered in the face of these threats.

We have proven that we are a legitimate and legal industry that provides essential financial products to millions of Americans. There is a path towards permanency and it continues in 2014.

Important Years

The Online Lenders Alliance sees 2014 as an extremely important year for solidifying the permanency of the online lending industry.

We believe the best way to protect and grow is by finding a federal solution to ensure that consumers have access to the credit they need and lenders have the ability to provide them that credit.

Innovation in online lending has always been driven by consumer demand and feedback.

We believe that current state-by-state laws are insufficient to govern the global nature of the Internet. By passing a federal charter to regulate our industry, we would establish a framework that would best protect our industry, ensure nationwide access to short-term consumer credit and preserve consumer protection laws and regulations.

OLA supports bipartisan legislation, the Consumer Credit Access, Innovation, and Modernization Act (H.R. 1566), which would create a federal charter program for nonbank lenders.

H.R. 1566 would establish a clear set of rules for lenders and ensure all consumers have access to new, innovative financial products generally unavailable to them at banks and credit unions.

Win for Consumers

A federal charter would provide protection to consumers by subjecting the chartered lending institutions to federal and state oversight and provides assurance to consumers that they are dealing with licensed lenders who are compliant with all federal consumer protection laws.

H.R. 1566 would authorize the Office of the Comptroller of the Currency and Consumer Financial Protection Bureau with supervisory and enforcement authority.

No Alternative

Additionally, the bill specifically gives states attorneys general investigative and enforcement authority.

No one, including regulators and consumer groups that purport to represent consumers’ interests, has put forth any viable alternative for meeting underserved consumers’ credit needs.

Congress must find a federal solution or nonbank lenders will never be able to adequately meet underserved consumers’ credit needs because outdated, overly restrictive and differing state laws will continue to prevent them from doing so.

According to the FDIC, nearly 70 million American are either unbanked or underbanked. The struggle for credit options is real and our industry provides a solution to that problem.

The upcoming year will provide an enormous opportunity for not only companies across our industry but for elected officials and regulators alike. We have the opportunity to establish a legitimate and thriving industry that provides a vital service to millions across the country.

Working with Regulators on Credit Access, Options

By Dennis Shaul

Over the last few years, and in particular in 2013, the payday lending industry has faced an unprecedented level of attention from regulators and policymakers.

All companies are under heightened scrutiny as the effort to eliminate bad actors that operate illegal, unscrupulous businesses remains paramount.

It is certainly a worthy effort and one that the Community Financial Services Association supports, and the attention from certain state and federal agencies underscores the important collaborative relationship between regulators and our industry.

Ultimately, pragmatic regulatory scrutiny benefits both consumers and legitimate lenders — the vast majority of our industry — and weeds out the bad actors from the reputable lenders and ensures safe, short-term credit options remain accessible.

Further, it brings to the forefront a necessary national discussion of the short-term credit needs of millions of Americans — needs that for too long national policy has failed to address in a productive way.

Filling a Need

As short-term lenders well know and as evidenced by the continued success of short-term lending businesses, alternative financial services, including payday loans, fulfill an important role in the credit market – one which traditional banks are generally unable to fulfill.

A 2011 study by the National Bureau of Economic Research found that half of American households could not come up with $2,000 from all available sources for an unexpected expense in a 30-day period.

Roughly half of all American families are living paycheck-to-paycheck, and lack adequate savings to cover unplanned expenses. Millions of Americans simply do not have the cash flow to pay all their bills at the beginning of the month.

To serve these millions of Americans today and with an eye on the future, members of CFSA have upheld the highest standards in our industry. All our members follow a mandatory set of Best Practices to help protect our customers. As part of these Best Practices, all our members are licensed in every state where they operate. Because of these standards, none of our members were in the crosshairs during the recent crackdowns on illegal lending.

While we are proud of our Best Practices, we see 2014 as a year to expand upon them — working within the industry and with our partners in the regulatory space – toward the ultimate and singular goal of improving the customer experience.

At both the federal and state levels, we are well-positioned to help inform a conversation on short-term credit. Our members, after all, have been providing these products for more than 20 years and have the analytic experience and expertise.

We are fully committed to working in 2014 to push forward several initiatives that will improve the loan experience for our borrowers.

For example, more substantive research is needed to understand the various ways in which consumers use short-term credit products and how this use impacts upon their financial welfare. While regulators and consumer advocates released several reports in 2013, those studies presented very little in terms of hard or meaningful data that could inform product changes. Many of these reports are based on anecdotes and perceptions rather than a thorough, scientific analysis that stands up to academic rigor.

In order for regulators to develop effective rules, we need a better, data-driven understanding of how these products actually affect borrowers for better or worse. With this information in hand, both the industry and state and federal governments can work to enhance the customer experience.

Further, both industry and regulators should work hand-in-hand over the next several years to explore product innovations. This will ensure that we are evolving to meet changing consumer needs. The states have for long served as a laboratory for regulatory experimentation and product development and, indeed, states have the most experience regulating short-term credit products.

As an example, several states have authorized additional loan products with different terms that provide consumers with options. Continuing to experiment and innovate can only benefit consumers in the form of more products and more choices.

Underwriting is another important issue for the industry, and it is a primary concern of the Consumer Financial Protection Bureau, as evidenced by its white paper released earlier this year. Better, more stream-lined underwriting is needed for short-term credit products in order to discern those borrowers who are likely to default or may have difficulty with repayment.

However, traditional underwriting is too time-consuming and expensive for short-term, small dollar loans. With the unique structure of our loans and the immediacy in which they are needed, complex underwriting could create a barrier to entry.

Instead, we need to develop new ways, using new data sources, to evaluate a borrower’s ability to repay a loan. Several companies are already exploring alternate forms of underwriting, which will help to better evaluate who will benefit from using short-term credit.

Regulation will always come with challenges and opportunities. Overregulation can lead to limited choice for consumers or onerous standards that make it difficult to do business. Balanced regulations, which are the result of well-reasoned discussion and debate, create markets in which consumers benefit and businesses can succeed.

Next year will be an important one, as regulators at all levels develop rules that will define credit markets for years to come. CFSA looks forward to participating in these discussions to improve short-term credit for consumers, and continue to offer products that meet their unique needs.

Court Considers Trauma After 2 Robberies


When most check cashers think of Workers Compensation claims, the usual array of broken arms, skull fractures, and sprained ankles come to mind.

But Workers Compensation is usually much more expansive than mere broken body parts. Recently, the issue of the mental trauma that can accompany two closely spaced check cashing store robberies was taken up by Oklahoma’s high court.

An Oklahoma check cashing store was robbed twice: the first time on Dec. 31, 2008, and the second on April 7, 2009. A woman, whose first name was Leslie, was the branch manager and the only employee on the premises during both robberies.

The first was an armed robbery by a man wearing something covering his face and a ball cap.

Leslie said that during that robbery, the man made her go into a back room and sit down when he pulled a gun out of his back pocket. She said she thought she “was dead.”

After he left, she discovered the store’s panic button was not working and telephoned the police.

In the second robbery, during which Leslie was ordered to turn off the security alarm, two men stole all the cash on hand in the office.

These men did not have guns. However, one of the robbers threw an empty plastic cash drawer at Leslie’s head.

Leslie said that the cash drawer hit her in the head, knocked her into the filing cabinets, and caused her to fall backward over a fan, onto the floor.

When they left, she locked the door and called 911. Leslie did not return to work for the check casher after the second robbery.

Files Claim

Leslie filed a Workers’ Compensation claim for a head injury and psychological overlay for post-traumatic stress disorder, depression, and post-traumatic headaches as a result of the robberies on the check casher’s premises.

She filed her claim on Oct. 19, 2009, alleging an accidental injury arising out of and in the course of her employment.

She sought permanent total disability as a result of her injuries, claiming she was unable to work or to be out in public.

The trial court heard testimony, admitted evidence from both parties, and then ruled that Leslie was permanently totally disabled due to injury to her head and psychological overlay.

The trial court found she was struck in the head with a cash drawer and developed post-traumatic headaches. Moreover, the trial court noted that Leslie had severe PTSD and depression.

As a result of her head injury combined with psychological overlay, the trial court agreed with Leslie’s medical expert that she was permanently totally disabled and would be unable to return to the work force in any form or capacity whatsoever. The trial court also agreed that vocational rehabilitation and retraining was not an option for Leslie.

In addition, the trial court awarded Leslie continuing medical maintenance in the nature of four annual office visits and prescription medication under the care of a psychiatrist.

Objects to Report

The check casher objected to the report of Leslie’s medical expert. The check casher timely sought review of the trial court’s order before a three-judge panel of the Workers’ Compensation Court (compensation court).

One of the issues the check casher raised as an error was that the finding of compensable injuries to Leslie’s head and psychological overlay was contrary to the law and against the clear weight of the evidence and should be reversed.

Further, the check casher claimed the trial court determination that Leslie sustained a head injury was not supported by her testimony or treatment records, that Leslie’s medical records failed to recognize long-standing migraines, and that the trial court’s finding should be reversed.

On May 16, 2012, the three-judge panel unanimously affirmed the trial court’s order, finding it was “not against the clear weight of the evidence nor contrary to the law. . . .”

Files Appeal

The check casher appealed to the Oklahoma Court of Civil Appeals. On Nov. 19, 2012, the appeals court held that the permanent total disability award was against the clear weight of the evidence and reversed the trial court’s order.

The case was then moved up to the Oklahoma Supreme Court, which granted the petitions for certiorari filed by Leslie as well as the check casher.

The Supreme Court noted that in the opinion that was under review, the appeals court ruled that a claim submitted by an employee for compensation for permanent disability was required to be “supported by competent medical testimony . . . which must include an evaluation by the treating physician or an independent medical examiner if there was no evaluation by the treating physician.”

The appeals court also ruled that Leslie’s claim for permanent total disability was not supported by a medical report from a treating physician or an independent medical examiner.

The order of the Workers’ Compensation Court finding, said the appeals court, that Leslie was permanently totally disabled was not supported by competent evidence and therefore it must be vacated.

Change in Language

The Oklahoma Supreme Court noted that in a footnote the appeals court explained that a 2005 amendment in effect at the time of Leslie’s injury removed the language previously found stating “a physician, including, but not limited to,” in reference to an independent medical examiner or a treating physician.

The appeals court indicated that although the prior statute’s language was broad enough to include a medical expert’s testimony, the 2005 statute required the report of the treating physician or the independent medical examiner to “support” the award given.

In essence, said the Supreme Court, the appeals court held the amendment eliminated the medical expert as a witness who could give “competent medical testimony” on which to base an award.
Because the appeals court found the treating physician did not give an opinion that Leslie had permanent total disability, it held the trial court’s award could not be sustained.

Intent of Statute

The Supreme Court said it did not believe, however, that the statute was intended to limit the testimony to only the treating physician or an independent medical examiner.

The statute required only that the award be supported by “competent medical testimony which shall be supported by objective medical findings” and which shall “include” an evaluation by the treating physician or an independent medical examiner if there were no evaluation by the treating physician.

The appeals court’s requirement that the permanent total disability award must be “supported” by the treating physician or a court appointed independent medical examiner improperly restricted the trial court from considering any evidence that was “competent medical testimony”.

The Supreme Court said it had previously discussed this very issue in the 2007 case of Conaghan v. Riverfield Country Day School, in which it ruled that a summary facial reading of the statute placed the responsibility for deciding disability with the Workers’ Compensation Court.

The statute mandated that the compensation court must have medical evidence from the treating physician or an independent medical examiner for each claim, and it permitted the compensation court to have medical evaluations and opinions addressing compensability and permanent impairment from other physicians.

It assigned the same meaning to the term “physician” as set out in another section, but added that “physician” included a person licensed by another state who would be qualified to be a licensed physician under the laws of Oklahoma.

The appeals court’s holding, said the Supreme Court, came very close to requiring the trial court to award compensation “within the range” of opinions of the treating physician and an independent medical examiner.

This was formerly required by the statute that the Oklahoma Supreme Court held to be unconstitutional because it restricted the Workers’ Compensation Court’s determination of impairment and disability.

The Supreme Court ruled this invaded the court’s independence and discretion to accord the appropriate weight or evidentiary value to the “objective medical evidence” as the trier of fact.

The trial court must be free to find the facts and apply the law to the facts. The appeals court’s holding also improperly restricted the trial court’s consideration of competent evidence to that of the treating physician who found Leslie did not have permanent total disability.


Leslie had testified she had a problem with headaches, which she associated with the head injury and “triggered” her to recall the robberies, which led to severe headaches. She also said she had developed memory problems which she did not have before the robberies.

She said she rarely left her home unless someone went with her. She slept with a firearm. She obtained a “conceal and carry” permit after the second robbery.

She stayed awake while her husband slept and slept when he was awake.

She had received, and at the time of trial was still receiving, psychiatric treatment for her PTSD. She also developed several phobias.

On cross-examination, Leslie said she had only previously taken antidepressants after the birth of her baby. She had postpartum depression and was going through a divorce at the time.

She stated she had migraines before the robberies during her pregnancies. She also stated she was in a car accident between the time of the two robberies and had sustained a neck and back injury that caused knots in the back of her neck and tension headaches. Although surgery was recommended, she declined the operation.

Leslie also testified she had gone out of town by herself for particular events.

She explained that in April 2010, she went to Kansas, a two-and-a-half-hour drive, because her father had a heart attack. In May 2010, she went to visit her parents in Kansas “for a birthday present.” In June 2010, she traveled to her daughter’s graduation but did not go alone.

She only did yard work if her husband was home. If he was away, a neighbor across the street watched her through the window.

She had held a job, working in a church flower shop, but said she quit because the owner of the shop wanted her to branch out to make deliveries beyond the local area.

She had not told her boss that she took her husband or a family member along when she made deliveries.

Leslie said she quit and never told her boss of her delivery practices.

Medical Opinion

The written medical opinion of Leslie’s expert medical witness was attached to his deposition. The medical expert diagnosed Leslie with post traumatic headaches, depression and PTSD. He gave his opinion that she had permanent total disability. He stated he did not believe Leslie would be able to return to work because of her PTSD.

He based this opinion on his examination of Leslie; the medical opinions of other doctors, including the psychiatrist who was treating her at the time who stated she could not work; and his review of a packet of reports and evaluations from the office of a psychologist and his team who treated Leslie for approximately two years.

In addition, the medical expert considered the report of Leslie’s witness, a vocational rehabilitation counselor who evaluated her, and the evaluation of the check casher’s witness.

The rehabilitation counselor’s report found her to have transferable skills, but because of her PTSD and the medications she was taking, he believed retraining would not be an option for Leslie.

However, Leslie’s medical expert stated he believed the medications she was taking were reasonable and necessary and in accordance with the diagnoses she had been given.

She had also developed several phobias, which led the expert to think she would not be able to return to the work force.