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AFSA to Obama: Don't Forget Consumer Finance

February 11, 2009

WASHINGTON — As President Obama prepared to announce revisions to the Troubled Asset Relief Program (TARP), the American Financial Services Association published an open letter encouraging the president to keep Americans' "everyday borrowing needs" in mind by allowing consumer finance companies to benefit from the new guidelines.

"Our hope is that your administration will support an expansion of the Term Asset-Backed Securities Loan Facility (TALF), whose objective is to increase credit availability for consumers and small businesses by facilitating the issuance of asset-backed securities (ABS) backed by auto loans and leases, floor-plan financing, student loans, credit cards and small business loans," wrote Chris Stinebert, AFSA's president/CEO.

"While TALF is a step towards restoring market liquidity, we believe the program’s current eligibility requirements will prohibit most finance companies from participating," Stinebert continued. "Absent the ability to participate in TALF, many financial services companies, especially those within the auto industry, would not be able to finance consumer loans for products and purchases essential to the nation’s recovery."

In addition to providing access to TALF funds for qualified finance companies, AFSA wanted the president to require any banks that accept TARP funds to guarantee they would keep those companies' bank-provided lines of credit open.

On Tuesday, Treasury Secretary Tim Geithner announced the new guidelines, including a pledge to increase TALF funding from $200 billion up to $1 trillion. Geithner specifically mentioned auto-, credit card- and small business-backed loans as part of the plan's expanded consumer and business lending initiatives. Stinebert said that the new plan "does many positive things."

"At the same time, we believe the TALF program must be revised to permit eligibility for investment-grade securities beyond those in the top tier," Stinebert said Wednesday. "This, in turn, would allow greater participation by consumer finance companies, which account for over 40 percent of all non-mortgage related consumer loans ... AFSA will continue to emphasize the important role played by consumer finance companies in any type of economic recovery program."

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