This document discusses the potential impact of the Consumer Financial Protection Bureau (CFPB) on traditional installment lending. It provides an overview of a lending company, including its size, loan products, and practices. It then outlines key issues the CFPB may examine, such as loan costs, fees, and specific lending practices. It argues that the CFPB's approach could increase customer costs, reduce some customers' access to credit, and make lenders less flexible, responsive and profitable by questioning established loan structures and practices.

1. Impact on Traditional
Installment Lending
CFPB

2. Key Topics
• Republic Finance
• Who we are, what we do, how we do it
• Consequences
• What we can learn from other similar experiences
• CFPB Hot Button Issues
• What are the questions and concerns?
• Implications

3. Republic Finance
• 168,000 customers
• 135 branches
• 6 states
• 610 employees

4. Average Loans Look Like:
Average
Amount Financed $ 2,799
Payment $ 156
Term 25 months
APR 40.2%
Credit Score 615

5. Structural Elements of Installment Loans
• Underwritten to determine willingness and ability to repay
• Fixed, set term
• Fixed, substantially equal payments
• Fixed rate
• Fully amortizing

6. Regulations DO Have Consequences
• Garnishment
• SAFE Act of 2008; foreclosure restrictions
• Credit CARD Act of 2009
• Insurance licensing

7. CFPB Hot Button Issues
• Elements set by statute or regulation
• Industry-specific practices
• General business practices
• CFPB philosophy and approach

8. Elements Set by Statute or Regulation
• Cost
• Credit insurance
• Closing fees / nonrefundable charges
• Rule of 78s

9. Rate Caps:
1,000 Account Break Even Model
Average Balance Monthly Cost Breakeven Rate
$200 $24.19 145%
$500 $30.47 73%
$1,000 $40.94 49%
$2,500 $72.88 35%

10. High APR = Low Total Cost to Customer
0
500
1,000
1,500
2,000
2,500
3,000
3,500
28%
34%
40%
46%
52%
58%
64%
500 800 1,100 1,400 1,700 2,000 2,300 2,600 2,900 3,200 3,500 3,800 4,100 4,400 4,700 5,000
TotalCostofLoan
APR
Loan Size
Average APR Average Cost

11. Industry-specific Practices
• “Trapped in the cycle of debt”
• Refinancing
• Collections
• Appropriate use of data

12. Credit Cost / Repayment Comparisons
Installment Credit Card
Loan Amount $1,000 $1,000
Term/Payments 24 61
Rate 40% 18%
Payment Amount $61.19 $25.14
Total Payment $1,468.51 $1,533.30
Total Interest $468.51 $533.30

13. Maintaining Communications
Average Calls / Account 3
Average Calls / Branch 3,900
Average Calls / Employee 865

14. General Business Practices
• Marketing generally, solicitation particularly
• Compensation generally, incentives particularly

15. CFPB Philosophy and Approach
• Compliance
• Enforcement vs. Rule-making
• Consumer Complaint Database

16. CFPB Hot Button Issues
• Elements Set by Statute or Regulation
• Cost
• Credit insurance
• Origination Fees / Nonrefundable charges
• Rule of 78s
• Industry-specific Practices
• “Trapped in the cycle of debt”
• Refinancing
• Collections
• Appropriate use of data
• General Business Practices
• Marketing generally, solicitation particularly
• Compensation generally, incentives particularly
• CFPB Philosophy and Approach
• Compliance
• Enforcement vs. Rule-making
• Consumer Complaint Database

17. CFPB:
Impact on Traditional Installment Lending
• Legal and regulatory elements of structure being questioned as
“UDAP” even though lenders have no ability to change any of
these
• Traditional industry practices and general business practices
presumed improper?
• Environment complicated by CFPB approach

18. CFPB:
Impact on Traditional Installment Lending
• Increased cost to customers
• Reduced access to credit for some customers
• Lenders less flexible, less responsive, less profitable