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NAF Urges Resilience, Chats with CFPB

By Jeffrey Bellant March 18, 2020
CFPB director kathleen kraninger CFPB director kathleen kraninger

The president of the NAF Association is urging those in the financing industry to keep moving forward despite the challenge brought on by COVID-19.

“Everyone is kind of in this questioning mode, how long is this going to draw out and how deep it’s going to go,” said Joel Kennedy, president of the NAF Association and COO of TruDecision, a fintech company based in Dallas.

Kennedy’s background is predominantly in operations as a lender.

He said lenders and other businesses cannot abandon all of their plans, especially when it comes to trying to improve the way they do business.

It makes sense to hold off expanding an office or buying new furniture, but financial firms with a plan in place to improve operations should not give up on those efforts,

“As an industry, let’s pull together, support one another and try to keep things moving,” Kennedy said. “We’re all in the same situation.”

Dealers have their own challenges, but lenders should communicate with them and work with them.

“The biggest message from lenders to dealers is, ‘We are still open for business and we are still a reliable source for you to get funding,” he said,

Kennedy added, however, that there will likely be additional scrutiny of contracts. Having a customer come in with their paystubs and pushing to complete a deal because they just lost their job is not the contract you want to send to a lender.

As an association, NAF had a well-timed call with members of the Consumer Financial Protection Bureau on March 17.

“From the trade association standpoint, we had a meeting already scheduled with the CFPB on March 17 to talk about the recession and what it could look like and how our lender community is going to react to that.”

The discussion with CFPB officials included Kennedy and NAF Executive Director Jack Tracey. It discussion focused looking at customers and potential borrowers who are a higher risk.

Customers in the service industries will, at least in the short term, not be getting a paycheck, Kennedy said.

“I think the CFPB was trying to understand how we are set up. Financial services companies are not banks,” Kennedy said. “They don’t have massive deposits or holdings they (rely on) to lend.

They are also restricted by covenants by whomever has provided their debt line.

“They (the CFPB) were really pushing to see how much we could defer for our customers at a financial services level,” Kennedy said.

The NAF Association explained that for companies with portfolios below $20 million or even $50 million, the challenge is formidable.

“It’s increasingly difficult for them to visualize going two months with a massive cut in their cash collections,” Kennedy said. “They need the cash to keep coming in.”

The other restriction is that whomever the company has a line of credit with may not be willing to make concessions with the covenant, Kennedy said

He added there have been rumors at press time about the Federal Reserve bringing out a TARP-like (Troubled Assets Relief Program) option, similar to what was done during the Great Recession more than a decade ago.

“I’m very interested to hear if that comes through and if that can provide a meaningful option for lenders and be a backstop,” Kennedy said.

The discussion with CFPB included a discussion about emergency responses, such as those that followed hurricanes and fire events in California and how business have responded.

“I was able to convey the message to them that our lenders are on the frontline,” he said, “So, we are going to need some plans and some active assistance.”

Kennedy said the key was to let CFPB know who NAF is, inviting them to engage the association and understand the group, its members and their businesses.

“I’m very pleased to see they are doing that,” Kennedy said.

The two officials from the CFPB that NAF has been in discussions with – Damion English, who reports through John McNamara – both have experience in consumer lending. Kennedy said McNamara has a background in debt collections.

“We’re fortunate that we’re dealing with some knowledgeable individuals,” he said,

Kennedy said NAF members are already addressing the changing workplace in the age of coronavirus.

“The good news is the predominance of the lenders that I’ve been speaking to already have cloud capabilities and are able to set up remote work for their employees.”

For the most part, companies are focused on COVID-19. They’ve shut down any travel or conferences.

“I was at a conference last week in Anaheim and that was probably the last one that will be on the books for a month or two,” he said.


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Last modified on Thursday, 19 March 2020 02:37

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