Credit Sesame’s personal finance weekly news roundup November 11, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- Survey finds resumption of student loan payments adding to consumer stress
- Government accuses Amazon of artificially inflating prices
- 2023 suffers its fifth bank failure
- Bankman-Fried found guilty of fraud
- Bank loan officers are tightening standards
- 85% of consumers take a dim view of the housing market
- Consumer debt levels continue to rise
- Processing glitch delays paychecks for customers of several big banks
- 30-year mortgage rates take a giant step back after sustained rise
1. Survey finds resumption of student loan payments adding to consumer stress
The TransUnion Consumer Pulse study found that just 58% of student loan borrowers said they expected to be able to make their payments in full. A further 30% said they would make partial payments. 65% of those who had benefited from student loan payment forbearance said they were caught off guard by the summer announcement that payments would resume in October. 33% of those facing payments say they will have to cut other spending to make their payments; 28% said they would seek a second job or temporary work to fill the gap. Looking at the broader population, inflation was the leading concern of consumers. Only 34% said their incomes were keeping up with inflation. 29% say they expect to be unable to pay at least one of their current bills. See report at TransUnion.com.
2. Government accuses Amazon of artificially inflating prices
The Federal Trade Commission (FTC) has accused Amazon of using a confidential program, code-named “Project Nessie, “to artificially inflate prices paid by consumers. The practice revolved around an algorithm that used the behavior of other retailers to determine the prices that Amazon could charge consumers for specific purchases. As a retail platform that supplies products directly to consumers and acts as a channel for other retailers, Amazon is alleged to be in a unique position to take advantage of pricing opportunities. The FTC claims Amazon overcharged customers by more than $1 billion through these practices. See article at Reuters.com.
3. 2023 suffers its fifth bank failure
Citizens Bank of Sac City, Iowa, was closed on November 3 by the Iowa Division of Banking. The FDIC has arranged for Iowa Trust & Savings Bank to take over its deposits. Citizens was a small bank with just two branches and $59 million in deposits. Those branches will reopen as branches of Iowa Trust & Savings Bank. This bank failure was the fifth so far in 2023, which is the most since 2017. See press release at FDIC.gov.
4. Bankman-Fried found guilty of fraud
A jury has found former FTX head Sam Bankman-Fried guilty of seven counts of fraud. The charges centered on allegations that Bankman-Fried transferred customer assets from the FTX cryptocurrency exchange into a trading company for his personal use. FTX and the trading company Alameda Research have since declared bankruptcy. Bankman-Fried now faces jail time. See article at NPR.com.
5. Bank loan officers are tightening standards
A quarterly survey by the Federal Reserve found that bank loan officers are demanding higher credit standards from loan and credit card applicants. The survey found that significantly more loan officers are tightening standards for the fifth straight quarter than loosening them. Loan officers also report charging higher interest rate spreads over their banks’ cost of capital. These moves are a response to the growing risk of lending money. Consumer debt balances are rising, and delinquency rates are also increasing. See survey results at FederalReserve.gov.
6. 85% of consumers take a dim view of the housing market
The Fannie Mae Home Purchase Sentiment Index found that 85% of survey respondents said this was a “bad time” to buy a home. That’s the highest level of home buyer pessimism in the 12-year history of the Index. Consumers most frequently cited high home prices and high mortgage rates for their negative view of the housing market. See press release at FannieMae.com.
7. Consumer debt levels continue to rise
Despite sharply higher interest rates, The Federal Reserve Bank of New York’s third quarter Household Debt and Credit Report shows that consumers continue to add to their record debt balances. Total consumer debt now stands at an all-time high of nearly $17.3 trillion. Mortgage balances represent the biggest chunk of that total at $12.14 trillion, but credit card debt had the highest percentage increase. During the third quarter, credit card balances rose by 16.65% to $1.079 trillion. The percentage of balances whose payments have become delinquent has now risen for eight straight quarters, led by credit card accounts. 8.01% of credit card balances became delinquent in the third quarter of 2023. See report summary at NewYorkFed.org.
8. Processing glitch delays paychecks for customers of several big banks
An information transfer outage caused a delay in depositing paychecks at several of the nation’s biggest banks. The Fed has encouraged those banks to help customers affected by the problem. The Consumer Financial Protection Bureau (CFPB) has stated that banks should not penalize customers who have been affected. For example, the CFPB suggested that overdraft fees should not be charged if the overdraft resulted from delayed processing of a paycheck deposit. JP Morgan Chase, for one, has pledged not to charge for overdrafts caused by the delay. See article at CNN.com.
9. 30-year mortgage rates take a giant step back after sustained rise
30-year mortgage rates fell by more than a quarter percentage point this week. The decline of 0.26% left 30-year rates at 7.50%. The steep decline comes after a 0.03% drop in rates last week. To put this in perspective, before the recent declines, 30-year rates had risen by 0.67% over seven straight weekly increases. See mortgage rate information at FreddieMac.com.
