Credit Sesame’s personal finance weekly news roundup October 14, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Surge in bond yields rattles markets
- Social media is a “golden goose” for scammers
- Americans reduce the wrong kind of debt
- Tipping is a growing burden
- Feds crack down on large banks charging for account information
- Consumers expect spending to continue rising faster than income
- Adjustable-rate mortgage applications increase
- Inflation holds steady but remain above target
1. Surge in bond yields rattles markets
A recent surge in bond yields got additional fuel from last week’s surprisingly strong jobs report. Recent increases have seen 10-year Treasury yields rise as high as 4.9%, their highest level in over 15 years. Bond prices fall when yields rise, and higher yields also act as a drag on stock prices. The rising yields reflect pessimism over persistent inflation and reaction to the news that the Fed plans to keep rates elevated longer than initially thought. See article at Reuters.com.
2. Social media is a “golden goose” for scammers
The Federal Trade Commission (FTC) said social media was a golden goose for financial scams. The characterization came in connection with an FTC report on sources of financial fraud. The report found that social media cost victims more than any other source of financial fraud. Social media was the entry point for scams totaling $2.7 billion since the start of 2021. This was followed by $2.0 billion in losses from websites and apps, and $1.9 billion originating with a phone call. The most common scams involve fake products marketed via social media, followed by investment-related scams and then romance scams. Young adults are the most likely to be victimized by social media scams. See news release at FTC.gov.
3. Americans reduce the wrong kind of debt
Newly released figures from the Federal Reserve showed that seasonally adjusted total consumer debt dropped by $15.6 billion in August. That’s only the second monthly decline in consumer debt in the past three years and the largest such decline since the early months of the pandemic. However, the only bad sign is that while other forms of debt decreased at an annual rate of 9.8%, revolving debt rose at an annual rate of 13.9%. Revolving debt, which is mostly credit card debt, carries especially high interest rates. See data at FederalReserve.gov.
4. Tipping is a growing burden
A new survey found consumers feel they are being asked to tip service providers more than ever – and are getting tired of it. A USA Today poll found that 63% of respondents said too many places are now asking for tips. 48% said they are growing tired of these requests, with young adults especially likely to resent being asked to tip. While tipping for dining in a restaurant has long been customary, consumers are now confronted with tip requests for restaurant take-out and in-store purchases. 61% of poll respondents said these requests are getting too expensive. 57% said too many places are asking for tips, and 53% reported feeling pressured to tip. See article at USAToday.com.
5. Feds crack down on large banks charging for account information
The Consumer Financial Protection Bureau (CFPB) has announced it will take action against large banks that charge consumers for requesting basic information about their accounts. Examples include fees for copies of account agreements, information on recurring payment instructions, and account balances or interest rates. The CFPB issued this warning in the context of guidance on how it would enforce a section of 2010’s Consumer Financial Protection Act. This applies to banks and credit unions with over $10 billion in assets. The CFPB will seek monetary relief for violations beginning February 1, 2024. See announcement at ConsumerFinance.gov.
6. Consumers expect spending to continue rising faster than income
The New York Fed released new survey data showing consumers expect spending to rise faster than income over the next year. The average expectation is for spending to increase over the next twelve months by 5.3%. The average expectation for income growth over the same period is 3.5%. This would imply that more families will rely on credit to make ends meet. This comes as the share of households reporting that it has become more challenging to get credit over the past year increased. See news release at NewYorkFed.org.
7. Adjustable-rate mortgage applications increase
Mortgage applications increased last week, driven by a rise in adjustable-rate mortgages (ARMs). ARM activity increased by 15% last week and now represents 9.2% of all applications. This is the highest proportion of ARM applications since November of last year. ARMs offer home buyers a lower initial rate than fixed-rate mortgages and the possibility of future rate reductions if market rates decline substantially. However, ARMs also put home buyers at risk of future rate increases that could make their mortgage payments unaffordable. See mortgage application report at MBA.
8. Inflation holds steady but remain above target
The Consumer Price Index (CPI) increased by 0.4% in September. That’s an improvement from August’s 0.6% increase but still undesirably high. Over the past twelve months, the CPI is up by 3.7%, the same as the increase for the twelve months ending August 31. Core CPI (which excludes food and energy costs) is up by 4.1% over the past year. If continued for an entire year, September’s 0.4% increase in the CPI would translate to a 4.9% annual inflation rate. These figures are well above the Federal Reserve’s target of 2.0% inflation. See news release at BLS.gov.