September 26, 2019


64% of Americans Aren't Prepared For Retirement - and 48% Don't Care

Retirement prospects seem grim for over half of America, according to the latest results of a GOBankingRates survey. The 2019 retirement survey revealed that even more people will retire broke than initially projected.

GOBankingRanks asked over 2,000 respondents about their savings. Sixty-four percent of Americans are now expected to retire with less than $10,000 in their retirement savings accounts, versus the 42% reported back in January. Yet, the people at risk of a stormy retirement don't seem to see it that way - nearly half of all survey respondents were not concerned about the size of their retirement savings accounts. Find out why many Americans are delaying saving for retirement.

64% of Americans Will Retire Broke
When asked to estimate how much money they had in retirement savings, close to half of all respondents - 45% - claimed they had no money put aside for retirement, while 19% said they'll retire with less than $10,000 to their name. If these trends hold, that means 64% of all Americans will essentially retire broke. Twenty percent will retire with anywhere from $10,000 to $100,000. As for the remainder, well, let's just say they have more wiggle room with their retirement savings.

CFSA Conference

U.S. consumers' access to credit may be worse than previously thought - Fed study

Sept 24 (Reuters) - As many as 60 million Americans tend to have a hard time qualifying for credit cards and other loans, making it more difficult for them to recover from financial setbacks, according to a report released on Tuesday by the New York Federal Reserve.

The findings show that the number of Americans who cannot easily access loans may be twice as many as previously estimated, when people who cannot easily qualify for loans because of blemishes in their credit histories are taken into account.

Previous studies analyzing access to credit have focused on the roughly 26.5 million adults in the United States who cannot qualify for conventional loans because they do not have credit reports or credit scores, according to the study.

But the number of people who cannot easily obtain credit doubles when factoring in consumers who do have credit reports but are rejected because they have low credit scores, a maxed-out credit card or fell behind on payments, the report found. Read more at REUTERS


The impact of consumer finance reforms since the Great Recession

Penn Law Professor Natasha Sarin researches the impact of key consumer finance reforms implemented in the wake of The Great Recession. "Making Consumer Finance Work," forthcoming in the Columbia Law Review, details her findings about the successes and failures of reforms aimed at debit and credit cards and overdraft fees, and offers crucial insights to guide policymakers in future regulatory efforts.

Sarin is an Assistant Professor of Law with a secondary appointment in the Finance Department at the Wharton School. Her teaching and research interests are at the intersection of law and finance, with her recent research focusing on financial regulation.

"The Great Recession was the worst economic downturn in the United States since the Depression," writes Sarin. "More Americans lost their jobs than at any time since World War II. Over two million businesses closed their doors because they could not make payroll. Nearly eight million families lost their homes. The average American household lost one-third of its net worth."

In response to the crisis, President Barack Obama created the Consumer Finance Protection Bureau and tasked the agency with better regulating the financial markets to protect consumers.
Read more at Penn Today, University of Pennsylvania


How Does the Surge in Subprime Auto Loans Impact the Accounts Receivable Management Industry?

According to the Federal Reserve Bank of New York, the steady rise of people falling behind on their auto loans has resulted in over 7 million Americans who were 90+ days late on their payments at the end of 2018. These millions of account holders will most likely enter collections and have the delinquency reported to a credit bureau, negatively impacting credit scores and potentially forcing more consumers into subprime loans.

An analyzation of auto loan origination data revealed $585 billion in newly originated loans by the end of 2018. However, of those originating loans, there were more subprime auto loans than ever before. Subprime interest rates on new and used vehicles are rising faster than the overall market and subprime borrowers are facing interest rates that are double that of prime loans (for new and used cars, respectively). These interest rates are the highest they've been since 2011 and parallel the surge in the number of auto loan and lease participants. To counteract the effect that increased interest rates have on monthly payments, some lenders are lengthening loan terms and offering borrowers terms that exceed 60 months to keep payments within consumers' reach.
Read more at National Debt Holdings


Start-ups to grab $280 billion in banking payments revenues by 2025, study says

LONDON (Reuters) - Banks are set to miss out on as much as $280 billion in revenue from their payments operations by 2025, as new start-ups muscle in and more of the business of sending money to individuals and companies becomes instant and free, according to a new report.

The global payments business, which covers anything from card payments to wiring money overseas, is dominated by banks and this year was worth around $1.5 trillion, professional services firm Accenture said in a report published on Monday.

That is expected to grow to $2 trillion globally by 2025 but banks are likely to lose out on $280 billion, or 15% of their global payments revenues, Accenture estimates.

Banks face rising competition from tech start-ups like Silicon Valley payment providers Stripe and Square, as well as technology platform PayPal, and the likes of London-based TransferWise that offer foreign exchange payments to retail and small business customers with lower fees.

More payments are becoming instant - removing the need for credit cards that earn banks revenue - and they will increasingly be made directly to the end merchant using new technology, Accenture said. More competition also means a squeeze on margins and accelerates the trend toward free payments. Read more at REUTERS


Credit Unions double the amount offered in payday alternative loan

The National Credit Union Administration (NCUA) agreed Thursday to let credit unions double the amount of money they offer in a payday alternative loan (PAL).
The new PALs II does not replace the existing loan option but expands on it. Whereas the PAL allows credit unions to offer loans between $200 and $1,000, PALs II sets the upper limit at $2,000. And while the term of a PAL can range from one to six months, PALs II allows customers to carry the loan for up to a year, according to the final rule. PALs II maintains its predecessor's maximum interest rate of 28%. Borrowers can take out up to three PALs II over a six-month period, but they're limited to one type of PAL at a time.

Dive Insight:
PALs and PALs II are meant to steer credit union members away from predatory payday loans that, according to Pew Charitable Trusts research, hold annual percentage rates averaging 391%. The NCUA's loan vehicles give borrowers considerably more time for payback than payday loans, which mature in 14 days.

Payday loans also tend to catch borrowers up in a cycle of debt. About 80% of payday loans are taken out within two weeks of repayment of a previous payday loan, the Consumer Financial Protection Bureau (CFPB) found. And three-quarters of payday loans go to customers who take out 11 or more of the loans per year, according to the CFPB.
Read more at BANKING DIVE


Data scientists evaluate credit risk to help lenders, borrowers. ValidiFI

To lend or not to lend, that is the question.

With the increase in online lending, financial service companies face the daunting task of determining which consumers will repay their loans and, more importantly, which will not.

Traditionally, the risk was determined based solely on credit history. However, ValidiFI, a Florida-based company, provides lending companies an alternative means of evaluating risk, in part, through predictive modeling expertise from the South Dakota State University Department of Mathematics and Statistics.

"We help financial service companies make better decisions when providing a financial product to a consumer," explained ValidiFI Chief Operating Officer Jesse Berger. "We are a few years into it and already working with some of the largest personal lenders in the nation."

Using vast amounts of complex data to detect patterns can help lenders determine which applicants will repay loans-and it's one of the strengths of the SDSU data science program, explained associate professor Tom Brandenburger. Read more at South Dakota State University


The $100 Trillion Opportunity: The Race To Provide Banking To The World's Poor

Two years ago, Amylene Dingle lived with her husband and 7-year-old daughter in Payatas, an impoverished Manila neighborhood with the largest open dump site in the Philippines. Her husband worked on the security staff in a government building, earning 4,000 pesos a week, the equivalent of $80. She had always wanted to start a business, but she was unemployed, had no money saved and couldn't get a credit card or a bank loan.

Dingle's fortunes took a dramatic turn after she responded to a Facebook ad for Tala, a Santa Monica-based startup that makes small loans through a smartphone app. After granting Tala access to her phone, through which the app cleverly parses mobile data to assess a borrower's risk, she got a 30-day, $20 loan. She paid 15% interest and used the money to buy cold cuts, hamburgers and hot dogs. She marked them up 40% and sold them door-to-door, earning $4 in profit after paying back the interest and a small processing fee.
Read more at FORBES


1 in 55 U.S. Adults Is on Probation or Parole

Probation and Parole Systems Marked by High Stakes, Missed Opportunities

Incarceration has long dominated the national conversation on criminal justice, because the U.S. prison population skyrocketed between the 1980s and late 2000s. Starting in 2007, policymakers seeking to protect public safety, improve accountability, and save taxpayer dollars initiated a wave of bipartisan reforms that has reduced the number of people behind bars in many states. Yet this movement has largely overlooked the largest part of the correctional system: community supervision.

Nationwide, 4.5 million people are on probation or parole-twice the incarcerated population, including those in state and federal prisons and local jails. The growth and size of the supervised population has undermined the ability of local and state community corrections agencies to carry out their basic responsibilities to provide the best public safety return on investment as well as a measure of accountability. Although research has identified effective supervision and treatment strategies, the system is too overloaded to implement them, so it sends large numbers of probationers and parolees back to prison for new crimes or for failure to follow the rules.
Read more at The Pew Charitable Trusts


See Where Your State Gets Its Tax Revenue

How States Raise Their Tax Dollars

Broad-based personal income taxes are the greatest source of tax dollars in 31 of the 41 states that impose them, with the highest share-70.2 percent-in Oregon. General sales taxes are the largest source in 15 of the 45 states that collect them. Florida is the most reliant on these taxes, at 64.3 percent. Other sources bring in the most tax revenue in a handful of states: severance taxes in Alaska and North Dakota, property taxes in Vermont, and selective sales taxes on particular goods and services, such as tobacco and hotel rooms, in New Hampshire.

This infographic illustrates the sources of each state's tax revenue, showing percentages for the two largest streams. See downloadable data for other percentages.
Read more at The Pew Charitable Trusts

Dreher Tomkies LLP

Alchemy FinTech Lending Operating System - Income Sharing Agreement Case Study

Alchemy's powerful FinTech Lending Operating System has many unique features and functionalities that support a wide range of FinTech concepts and ideas. Income Sharing Agreement is a new concept that's widely adopted for students that want to either find an alternative education route to boost their careers or for those that want to add to their existing academic records. Income Sharing Agreement of ISA is a brand new way of financing one's education.

One of the major benefits of the ISA is that the repayment is indexed based on a person's income post-graduation. For example, if you make $60,000 post-graduation and your repayment index is set at 10% of your salary, your monthly repayment will be ($60,000 x 10% / 12 months) = $500. If the person loses his or her job the repayment will stop until you are gainfully employed again.

NPR, National Public Radio recently ran a podcast episode on Income Sharing Agreement via their Planet Money Show. Click here to learn more. Episode 903: A New Way To Pay For College
Read more at ALCHEMY


Why the Repo Market Is Such a Big Deal-and Why Its $400 Billion Bailout Is So Unnerving

One of the most vital pieces of plumbing that powers the global financial system usually runs so smoothly that it gets overlooked by market watchers. It's the "repo market," comprising the short-term funding that banks and financial counter-parties regularly tap to lend each other trillions.

It's suddenly in the news again, and for all the wrong reasons. The repo market is looking a lot like it did on the precipice of the 2007 housing market crash.

But what is the repo market, anyway, and why has the Federal Reserve Bank this week injected hundreds of billions of dollars into the financial system to stabilize it?

Repos (short for repurchase agreements) are short-term borrowing transactions, often made overnight. Think of them as trades of cash for some kind of collateral.

In a repo transaction, the borrower will sell certain securities in their possession with the agreement to buy them back the next day. If the transaction is not rolled over, then the trade has to be settled the following day, with the borrower repurchasing the collateral from the lender for slightly more than it had previously sold it for, compensating the lender with interest for taking on the risk.
Read more at FORTUNE


McDonald's Has Started Offering an Innovative New Employee Perk. It's Either Genius or a Total Disaster

Innovation or exploitation? Depends on whom you ask.

The U.S. economy is supposedly booming, but according to one recent study, an incredible four-out-five Americans are still living paycheck to paycheck.

A new perk being offered by McDonald's and Walmart, among other large employers, is aimed at helping this large and struggling group of cash-strapped employees. It's called "accelerated pay" and it's either a genius innovation or morally bankrupt exploitation, depending on whom you ask.

Asking your boss for an advance goes 21st century.
Back in the day, "accelerated pay" was simply known as an advance on your paycheck, and you got one by going hat in hand to your boss and explaining you were facing an emergency and needed some of the money from your next paycheck now. These days, the idea has gotten a snazzy new makeover from a handful of startups. Read more at Inc.


5 changes lenders want from CFPB's rewrite of QM rule

WASHINGTON - The Consumer Financial Protection Bureau should not hold back in revamping its mortgage underwriting rule, according to public comment letters from the industry.

The effects of that rule, which requires lenders to verify borrowers' ability to repay and provides legal protection for "qualified mortgages" with low debt-to-income ratios, so far has been limited. That is because Fannie Mae- and Freddie Mac-backed loans are automatically QM regardless of their DTI thanks to a temporary exemption known as the "patch."

But with the CFPB planning to end the patch, lenders want the agency to aim high as it seeks to change the QM rule across the industry. The 93 letters responding to the bureau's request for input call for removing the 43% DTI limit from QM. Lenders are also seeking the elimination of Appendix Q, a set of guidelines for documenting a borrower's income and other underwriting factors. They also back a short-term extension of the Fannie and Freddie patch.

Here are five arguments that commenters make in letters to the CFPB:


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