Credit Sesame’s personal finance weekly news roundup April 30, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.
- U.S. economy shrinks in 1st quarter of 2022
- BBB warns of student loan scams targeting new grads
- Mail carrier arrested for credit card theft
- CEOs look on the bright side of the economy
- Banks must now quickly notify customers of data breaches
- Fidelity to offer Bitcoin as a 401(k) option
- Russia’s blockage of natural gas supplies could add to inflation
- Spending on overdraft fees and other banking costs dropped in 2021
- Personal income is not keeping up with inflation
U.S. Economy Shrinks in 1st Quarter of 2022
Economic activity in the United States declined in the first quarter of 2022, a drastic reversal of fortunes after a strong increase of 6.9% in the fourth quarter of 2021The annualized, inflation-adjusted change in Gross Domestic Product (GDP) for the first quarter was -1.4%. The U.S. Bureau of Economic Analysis (BEA) cited a number of factors in the decline. Investment in private inventories slowed, perhaps reflecting caution about the economic environment ahead. Exports also declined, while imports (which subtract from GDP) increased. Government spending declined, in part due to the expiration of special COVID-related benefits. This is just an advance estimate of GDP, the first of three estimates the BEA releases before the number is finalized. Full release at BEA.gov.
BBB Warns of Student Loan Scams Targeting New Grads
As graduation season approaches, the Better Business Bureau is warning of scams centered around student loan repayment programs. These scams enroll student loan borrowers in programs to help them reduce what they owe or build credit. They may cost students by charging fees for these services and/or keeping student loan payments rather than forwarding them to the loan servicer. People with student loan debt are advised to make payments directly to their loan servicer, and to enroll in federal student loan debt management programs directly through the U.S. Department of Education rather than through a third party. Full article at WRIC.com.
Mail Carrier Arrested for Credit Card Theft
Police in Ohio arrested a U.S. Postal Service mail carrier for stealing a credit card from a woman on her route. The customer who had ordered the card noticed charges on the card’s statement even though she had never received it. Upon investigation, the police found surveillance video from a nearby store showing the mail carrier using the credit card while still in her postal uniform. When the suspect was arrested, she was found to have 14 credit cards in her purse which she admitted to stealing. The incident underscores the value of checking each credit card statement for suspicious activity. Also, when ordering a new card consumers should ask when they should expect it to arrive so they can be quick to realize if it’s gone missing. Full Story at the Cincinnati Enquirer.
CEOs Look on the Bright Side of the Economy
A variety of public company CEOs highlighted their quarterly earnings announcements by expressing faith in the strength of U.S. consumers. The heads of Procter & Gamble, Bank of America, American Express and Tractor Supply Co. were among those expressing optimism. This comes at a time when a growing percentage of economists see a possibility of recession within the next year. Among the looming economic storm clouds are the erosion of consumer purchasing power due to inflation, uncertainty over the outcome of the war in Ukraine, continued supply chain snags and more restrictive monetary policy as the Fed ramps up its inflation-fighting measures. Full story at Yahoo Finance/Bloomberg.
Banks Must Now Quickly Notify Customers of Data Breaches
As of May 1, a new FDIC rule will require its member banks to notify their customers of any hacks or data breaches of their information systems within 36 hours. With identity theft, ransomware and other cyber crimes a growing problem, this prompt notification could help consumers take action before their accounts are compromised. Consumers should have a plan for what they would do if they receive notification of a data security issue at their bank. Actions may include changing passwords and checking recent transactions for suspicious activity. Full article at The Weekly Journal.
Fidelity to Offer Bitcoin as a 401(k) Option
Fidelity has announced that participants in 401(k) plans administered by the company will now be able to direct up to 20% of their plan contributions to an option which invests in cryptocurrency Bitcoin. However, the availability of this option will be at the discretion of each plan sponsor. Employers sponsoring 401(k) plans must decide if permitting an undiversified, speculative option is consistent with their fiduciary obligations to those plans. Full article at The Block Talk.
Russia’s Blockage of Natural Gas Supplies Could Add to Inflation
Russia has announced that it is cutting off sales of natural gas to Poland and Bulgaria. This is in retaliation for those countries refusing to pay for the gas in roubles, a request Russia made to prop up its currency as it struggles with sanctions. While this ban won’t directly affect American consumers, it could add to the global inflation of energy prices by further limiting supplies. Full article at Reuters.
Spending on Overdraft Fees and Other Banking Costs Dropped in 2021
A new report from the Financial Health Network found that U.S. consumer spending on overdraft fees declined for the second consecutive year in 2021. Overdraft fees totalled $10.7 billion last year, down by nearly a third from what they were just two years ago. Ironically, the decline in the total cost of these fees comes at a time when the Consumer Financial Protection Bureau is ramping up pressure on banks to drop overdraft fees. The drop in overdraft fees was part of an overall decline in consumer spending on banking last year. This may have been due in part to emergency pandemic measures. Emergency federal assistance allowed consumers to reduce credit card balances in 2021, while a suspension of student loan payments gave consumers a holiday from paying interest on those loans. Full article at Fortune.com.
Personal Income Is Not Keeping Up with Inflation
The Bureau of Economic Analysis (BEA) released its monthly report on Personal Income and Outlays for March, 2022. The report shows that personal income is losing ground to inflation, losing 0.4% in March after adjustment for inflation. Wages are growing, but not as fast as inflation. The BEA’s measure of inflation, the Personal Consumption Expenditure (PCE) price index, rose by 6.6% over the past year. The PCE price index is significant because it is the Fed’s preferred measure of inflation. While the PCE price increase is less than the CPI’s measure of inflation at 8.6% over the past year, the PCE price index rise of 6.6% is still well above the Fed’s 2% long-term inflation target. Full release at BEA.gov.
