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