Credit Sesame’s personal finance weekly news roundup August 27, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.
- IRS to wipe out $1.2 billion in late filing fees
- FDIC issues cease-and-desist letters to 5 crypto firms
- Mortgage lenders taking more risk as housing market slows
- BBB issues warning about hidden dangers of buy-now-pay-later
- Key indicator signals slowing inflation
- German central bank issues bleak forecast
- President Biden announces partial student loan forgiveness
- U.S. economy did better in 2nd quarter than originally thought
- Clothing retailers cut prices amid lagging sales
1. IRS to wipe out $1.2 billion in late filing fees
The IRS announced that it will wipe out late filing fees that were charged to people who had trouble filing their returns due to the pandemic. The move will cover $1.2 billion worth of fees charged to 1.6 million taxpayers. That works out to an average of $750 in cancelled fees per taxpayer involved. In order to be eligible to have these fees forgiven, taxpayers must file the late returns by September 30, 2022. See full article at Bloomberg.com.
2. FDIC issues cease-and-desist letters to 5 crypto firms
The Federal Deposit Insurance Corporation (FDIC) has issued warnings to 5 websites involved in cryptocurrency trading. The issue is false and misleading statements the sites allegedly made concerning whether deposits in their accounts are federally insured. Investment accounts are not federally-insured, even when they are at FDIC-participating banks. The FDIC gave the 5 firms 15 days to demonstrate that they have complied with the request to remove false or misleading content regarding FDIC insurance from their sites. See full article at Blockchain.news.
3. Mortgage lenders taking more risk as housing market slows
A combination of high home prices and rising interest rates has slowed the housing market down this year. A technical analysis of new mortgages suggests that lenders are responding to lower volume but taking more risk. The analysis was performed by CoreLogic, a specialist in real estate market data. Their analysis shows that a number of risk characteristics for new loans increased in the first quarter of this year. Specifically, a higher share of new mortgages are being written with risk characteristics like low documentation, high loan-to-value and debt-to-income ratios and ownership by investors rather than occupants. The concern is that lenders may be lowering standards in order to keep loan volume up as the market slows. See full analysis at CoreLogic.com.
4. BBB issues warning about hidden dangers of buy-now-pay-later
The Better Business Bureau (BBB) of Washington has issued a warning to back-to-school shoppers concerning buy-now-pay-later (BNPL) payment programs. BNPL has become a popular way of paying for things because of the perception that it is a no-cost way of deferring payments. The BBB of Washington pointed out that there are some hidden risks to these programs. First, hidden interest charges and/or late fees can make these payment programs very expensive to borrowers who do not make their payments promptly. Second, while payments into BNPL programs won’t typically help a consumer build credit, missed payments could count against their credit score if referred to a collection agency. See full article at King5.com.
5. Key indicator signals slowing inflation
The Personal Consumption Expenditure (PCE) Price Index, which measures the prices consumers are paying for goods and services, declined by 0.1% in July. However, the index is still up by 6.3% over the past year. Though less well-known than the Consumer Price Index, the PCE Price Index is an influential inflation metric. The Federal Reserve often cites it as a truer indicator of inflation conditions. Easing price pressures could slow the pace of Fed rate increases, though a single month’s data probably won’t do much to change the upward course of rates. See full release at BEA.gov.
6. German central bank issues bleak forecast
The Bundesbank, which is the central bank of Germany, issued a report saying that a recession in that country is increasingly likely. It also said inflation could rise to double-digits this fall. A major cause of both the slowing economy and inflation in Germany is tight supply of natural gas. Russia has cut its gas exports to Germany in response to sanctions over its invasion of Ukraine. Much of Germany’s industrial economy is highly dependent on power fueled by Russian natural gas. See full article at Reuters.com.
7. President Biden announces partial student loan forgiveness
With an August 31 deadline for federal student loan payments to resume looming, President Biden announced on August 24 that the deadline would be extended until December 31, 2022. He also gave people with student loan debt something even better – partial forgiveness of the amount most borrowers owe. The new plan will forgive up to $10,000 in federal student loan debt for people making less than $125,000 a year. The debt amnesty limit will be $20,000 for people who received Pell Grants. See full article at MSN.com.
8. U.S. economy did better in 2nd quarter than originally thought
The Bureau of Economic Analysis (BEA) issued an improved estimate of second quarter GDP growth. The new estimate is that the economy declined at a real (inflation-adjusted) annual rate 0f 0.6% in the quarter. The original estimate was that it declined at a real annual rate of 0.9%. In other words, the economy declined by less than originally thought. This smaller decline adds to the possibility that the economy might not yet be in a recession despite two quarters of declining GDP. The BEA routinely issues three estimates of GDP each quarter, honing its calculations as more data become available. This is the second of its three estimates of second-quarter GDP. See full release at BEA.gov.
9. Clothing retailers cut prices amid lagging sales
Clothing may be the odd man out in this year’s climate of rising prices. While inflation has soared, a number of clothing retailers have recently announced price cuts and/or lagging sales. The price cuts are in response for demand not keeping up with inventory. Old Navy, Gap, Abercrombie & Fitch, Victoria’s Secret and Kohls are among the clothing retailers that are struggling to deal with weak demand. One theory is that essential costs such as food and energy have risen so much over the past year that households are forced to cut back on discretionary clothing purchases. See article at Reuters.com.
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