Credit Sesame’s personal finance weekly news roundup February 25, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Credit card companies accused of suppressing consumer info
- Warnings from key retailers send stocks plunging
- Housing market weakness continues
- Attack on credit card late fees could backfire
- Regulators warn banks about risks of crypto-related deposits
- Consumer default rates rise for third month in a row
- Mortgage rates trend higher
- Fourth quarter economic growth less than originally thought
1. Credit card companies accused of suppressing consumer info
The Consumer Financial Protection Bureau (CFPB), a government watchdog organization, is questioning why credit card companies have stopped reporting payment histories that show which customers pay more than the required amounts. Previously, credit card companies typically included this detail. Their reporting to credit bureaus usually reflects whether consumers have met the minimum required payments. The CFPB suspects credit card companies are leaving out details on people who make larger payments to prevent competitors from poaching their most reliable customers. What makes the CFPB especially suspicious of the card companies’ motives is that some of the biggest credit card companies made this reporting change within a short time of one another. See article at ConsumerFinance.gov.
2. Warnings from key retailers send stocks plunging
Disappointing earnings and cautionary comments from Walmart and Home Depot sent the stock market down by 2%. These stocks are considered bellwethers for consumer spending, so their negative news resonated widely among investors. Although consumer spending has remained strong so far, Walmart’s chief financial officer cited declining household financial fundamentals as the reason their outlook for this year is cautious. See article at Yahoo.com.
3. Housing market weakness continues
According to the National Association of Retailers, home sales fell 0.7% in January. That was the 12th straight monthly decline in sales volume and the longest streak of declining sales volume since 1999. Existing homes sold at a seasonally-adjusted annual rate of 4 million in January, the lowest since 2010. As mortgage rates have been driven higher by inflation, properties are taking longer to sell. Properties sold last month had been on the market for an average of 33 days, up from 26 days in December. See article at Yahoo.com.
4. Attack on credit card late fees could backfire
A report by S&P Global Intelligence describes how the Consumer Financial Protection Bureau (CFPB) attack on credit card late fees may have unintended consequences. These are fees that credit card issuers charge customers who miss a payment deadline. The CFPB seeks to cap those fees at $8 per occurrence – less than a third of the current cap. Banking executives point out that late payments cost credit card issuers money. If they cannot charge fees that compensate for that, they will have to “close the gap” in other ways. Those responses might include raising additional fees, cutting rewards or making credit cards less available to customers with lower credit scores and/or unreliable payment histories. See article at SPGlobal.com.
A joint statement by the Federal Reserve, FDIC and Office of the Comptroller of the Currency advised banks to make special liquidity provisions for deposits linked to cryptocurrency assets. An example would be deposits that support the value of stablecoin assets. Because there can be a rush to redeem such holdings due to extreme fluctuations in cryptocurrency values, banks must take extraordinary measures to account for the liquidity risk associated with sudden high volumes of redemptions. See article at ABA.com.
6. Consumer default rates rise for third month in a row
The S&P/Experian Consumer Default Rate composite rose in January. It was the third consecutive rise in the composite. Each index component – auto loan, mortgage, and credit card defaults – was up in January. Each component is also higher than a year before, as is the composite as a whole. This means more consumers are failing to meet their debt obligations. See article at SPGlobal.com.
7. Mortgage rates trend higher
After falling close to the 6% level at the beginning of this month, 30-year mortgage rates have now risen for three consecutive months. 30-year rates reached a year-to-date low of 6.09% on February 2. They since have risen for three weeks in a row to 6.5%. A year ago at this time, 30-year rates were at 3.89%. Mortgage finance company Freddie Mac noted that rate differences among lenders tend to widen as rates rise, so consumers have more to gain by shopping around for a mortgage. See update at FreddieMac.com.
8. Fourth quarter economic growth less than originally thought
The Bureau of Economic Analysis issued a revised estimate showing that Gross Domestic Product (GDP) grew at an inflation-adjusted annual rate of 2.7% in the fourth quarter of 2022. That was slightly less than the original estimate of 2.9%. That put GDP growth at 2.1% for the calendar year. See full release at BEA.gov.