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News roundup September 30, 2023

Weekly Personal Finance News Recap - SEPTEMBER 30, 2023

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Credit Sesame’s personal finance weekly news roundup September 30, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. IRS goes after unscrupulous tax preparers
  2. Bank deposits show unusual decline
  3. Americans have burned through their pandemic savings
  4. Survey finds many Buy Now Pay Later users struggling with debt
  5. Congress brings the government back to the brink of shutdown
  6. Mortgage rates rise to highest level since the year 2000
  7. Mortgage applications continue to decrease
  8. Consumer confidence in the economy is falling

1. IRS goes after unscrupulous tax preparers

The IRS has announced that it is investigating the “questionable practices” of some professional tax preparers. The practices center around a pandemic-era small business tax credit for employee retention. The IRS has announced that it’s pausing processing of the Employee Retention Credit due to a “surge of questionable claims.” The tax agency is concerned that payroll records are being manipulated to make it appear more employees were retained during the pandemic than was the case. The IRS is also concerned that unscrupulous tax preparers target less sophisticated business owners. Fraudulent claims can ultimately lead to those business owners incurring audits, tax penalties and other consequences. See article at CNBC.com.

2. Bank deposits show unusual decline

The total deposits at U.S. banks declined for the year ending June 30, 2023. That’s the first 12-month decline since the Federal Reserve’s deposit data series began in 1994. Less than half of the top 50 U.S. banks could grow their deposits during the period, and those that did often grew primarily through mergers and acquisitions rather than by attracting new deposits. The four largest banks – JP Morgan Chase, Bank of America, Wells Fargo and Citigroup – all experienced deposit declines during the period. Despite this, the total market share of the big four increased slightly, indicating that deposit declines were the norm for the industry. See analysis at SPGlobal.com.

3. Americans have burned through their pandemic savings

Liquid assets of American households are currently lower than before the pandemic. A Federal Reserve study found that household liquid assets (cash, bank deposits, etc.) were lower as of June 30, 2023 than as of March 31, 2020. Only the top one-fifth of households have been able to increase their liquid holdings since that date. See article at Yahoo.com.

4. Survey finds many Buy Now Pay Later users struggling with debt

A survey by business intelligence firm Morning Consult found significant numbers of Buy Now Pay Later (BNPL) users are having trouble keeping up with their payments. More than 40% of BNPL users have unpaid debt in the programs. Over 25% missed a payment and paid a late fee within the past month. 27% saw their credit score decline, and 22% have had to deal with a debt collector. BNPL users are generally young adults. 37% of Gen Z adults and 32% of millennials reported making a BNPL purchase within the past month. The numbers fall off with older generations to 16% of Gen X and 6% of baby boomers. See article at USAToday.com.

5. Congress brings the government back to the brink of shutdown

A dispute over funding the U.S. budget for the upcoming fiscal year has brought the government close to a shutdown again. The new fiscal year begins October 1. The source of the dispute is a power struggle among House Republicans over Speaker Kevin McCarthy’s leadership. Bipartisan talks are underway to provide temporary funding to extend the deadline. However, previous fiscal brinkmanship has resulted in downgrades of the nation’s credit rating. So, even with an agreement, the repeated threats could raise America’s borrowing costs. See article at BBC.com.

6. Mortgage rates rise to highest level since the year 2000

30-year mortgage rates increased by 12 basis points last week to 7.31%. That’s the highest they’ve been in 23 years. Mortgage rates have been rising fairly steadily for the past eight months. They are now 1.22% higher than when they hit their low point for this year, at 6.09% on February 2. 15-year mortgage rates rose even more sharply last week. They climbed by 18 basis points to 6.72%. See rate details at FreddieMac.com.

7. Mortgage applications continue to decrease

Mortgage applications declined last week and are down sharply from last year. This reflects the continuing impact of higher interest rates. Applications for new purchase mortgages dropped by 2% last week and are 27% lower than it was a year ago. Applications for refinance mortgages dropped by 1% last week and are 21% lower than a year ago. See news releases at MBA.org.

8. Consumer confidence in the economy is falling

The Conference Board’s Consumer Confidence Index fell by 5.2% in September. This was the second consecutive monthly decline for that index. The index component, based on consumers’ assessment of current conditions, rose slightly in September. However, the index component, which measures expectations for the next six months, fell by more than 11% in September. That brought the Expectations Index down below 80, a level traditionally presaged recessions. See press release at Conference-Board.org.

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Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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