February 18, 2021
The Gateway For Payroll Data
Aiding America’s unbanked will help stimulus work

NEW ORLEANS (Reuters Breakingviews) - The United States has achieved the feat of having too many banks and yet too few people with bank accounts. It has nearly 5,000 commercial lenders, yet 5% of households are “unbanked” according to government data. Helping these Americans will advance President Joe Biden’s drive to boost the economy and especially the incomes of the poorest.

The share of households with no bank account has fallen since 2011, according to Federal Deposit Insurance Corp data, but is still five times higher than in developed countries like France and Germany. And national numbers mask big disparities. One in seven Black U.S. households is unbanked versus just one in 40 white households.

It’s an old problem with new urgency. Biden wants to close wealth gaps through measures like a $3,600 payment to families with children aged under 6. That is harder to achieve when 7 million people languish outside of the financial system. Some unbanked families who received checks in 2020 could have paid $195 or more to cash them, according to research for Brookings by the Financial Health Network.

Paving the Payments Future
Why personal debt looks healthy despite worst year for jobs

California experts say traditional indicators have failed to capture the pandemic’s true toll, warning of a much more complicated — and unequal — debt story.

On paper, the Golden State appears to have escaped 2020 without a personal debt crisis. Despite an unprecedented 2.4 million jobs lost in the spring, Californians joined their fellow Americans in paying down interest-heavy debt such as credit card bills while acquiring wealth-building loans by taking out mortgages. In California, new mortgages jumped 10% even as real estate prices soared, suggesting an unexpected resistance to a prolonged pandemic. 

Economists and financial researchers across the country aren’t seeing tell-tale signs of financial hardship in the Federal Reserve Bank of New York’s reports of American consumer debt, like the devastating spikes in defaulted debt, bankruptcies and foreclosures suffered during the Great Recession. In fact, they’re seeing near-record lows.

But looks can be deceiving.

Taxpayers can start filing now: Electronic filing, including Free File is the best way to avoid pandemic-related paper delays. E-filing combined with direct deposit is the fastest way to get a refund.

Recovery Rebate Credit: If you’re eligible – and either didn’t receive Economic Impact Payments or if you think you qualify for more than you received – you’ll need to file a 2020 tax return and claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return.
In wake of major data breach, cyber security office proposed

Reeling from a December breach that allowed hackers to access the personal information of roughly 1.6 million Washington residents, state lawmakers are working with Gov. Jay Inslee to establish a new office to protect state data.

Senate Bill 5432, sponsored by Sen. Reuven Carlyle, D-Seattle, establishes a new Office of Cyber Security (OCS).

The bill is set to move on a fast track through the Legislature this session.

Officials from the Office of the Governor said the request was in response to the December breach of data tied to resident unemployment claims filed in 2020. The data was in the possession of the State Auditor’s Office, which was investigating unemployment fraud. Hackers accessed the data through a company called Accellion, a San Francisco-based company tapped for services by the Auditor’s office.

The IRS has sent out all $600 stimulus payments. Here’s what to do if you didn’t get one

The Internal Revenue Service (IRS) has issued all of the “legally permitted” stimulus checks it plans to send to eligible taxpayers, the agency announced Tuesday.

That means taxpayers who haven’t received theirs yet — or received less than they believe they qualify for — will need to claim it on their 2020 tax return.

The IRS says it delivered more than 147 million second-round stimulus checks, worth over $142 billion. Some payments may still be in the mail, according to the agency, but otherwise, eligible Americans who did not receive the first or second payment can claim a Recovery Rebate Credit on their 2020 tax returns, which will be on line 30 of the 2020 Form 1040 or 1040-SR.

FDIC Appoints First Chief Innovation Officer

Sultan Meghji to spearhead agency’s tech lab and financial innovation efforts

WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) today named Sultan Meghji as the agency’s first Chief Innovation Officer, charged with leading the FDIC’s efforts to promote the adoption of innovative technologies across the financial services sector.

“As a recognized expert in financial technology, Sultan brings years of technical knowledge and an entrepreneurial spirit to our FDiTech team,” said FDIC Chairman Jelena McWilliams. “Under his leadership, I am confident we will find innovative ways to utilize technology to modernize our bank supervision, enable community banks to adopt technological solutions, and bring more underserved people into the financial fabric of our nation.”

“I am immensely honored to join a team that is working towards finding innovative ways to meet the challenges of tomorrow,” said Mr. Meghji. “It is important that the FDIC leads at this transformative moment in our nation’s banking history. My personal mission is to engage both public and private sector partners to ensure the financial system of the future is innovative, resilient, and equitable.”

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Biden’s CFPB Focuses On Debt Collection As Early Priority

Every new presidential administration gets to make its imprint on regulations — and by extension, the financial services industry.

In the midst of grappling with the pandemic and the headwinds still buffeting the U.S. economy, the President Joe Biden administration may be gearing up to take a closer look at the way firms, particularly debt collectors and payday lenders, interact with consumers.

That means the Consumer Financial Protection Bureau (CFPB) may become more active in various ways than had been seen under the previous administration, including more scrutiny over how companies charge and collect fees, or go after what’s owed to them. We may even see changes, elsewhere, governing how Wall Street operates as far as retail investors are concerned.

We’re in the midst of an economic downturn (and depending on how you look at it, rebound) that no one could have anticipated, and we’re seeing a shift in the very ways in which financial services firms interact with their end customers. The digital age is fully upon us, and we’ve gotten a glimpse of how digital-first companies may get greater scrutiny moving forward.

Payday loans can have interest rates over 600%—here’s the typical rate in every U.S. state

Over the last few months, several states have moved to limit payday loan interest rates in an effort to protect consumers from getting in over their heads with these traditionally high-cost loans. 

During the November general election, voters in Nebraska overwhelmingly voted to cap payday loan interest rates in the state at 36%. Prior to the ballot initiative’s passage, the average interest for a payday loan was 404%, according to the Nebraskans for Responsible Lending coalition. 

In January, Illinois’ state legislature passed a bill that will also cap rates on consumer loans, including payday and car title, at 36%. The bill is still awaiting Governor J. B. Pritzker’s signature, but once signed, it will make Illinois the latest state (plus the District of Columbia) to put a rate cap on payday loans. 

Yet these small-dollar loans are available in over half of U.S. states without many restrictions. Typically, consumers simply need to walk into a lender with a valid ID, proof of income and a bank account to get one.

3 steps for scaling as an alternative lender

Leaning on a growing segment of borrowers (small-business owners), leaning into digital transformation and picking the right solution can help alternative lenders scale through a downturn.

Alternative lenders differ from banks in that they have no depository, checking or savings account balances, mortgage payments or other forms of significant cash flow. Their growth path relies on one goal: to lend more. Many alternative lenders have impressive loan volume, but most would experience challenges in scaling their current systems, processes and people to handle a surge in applications without ballooning overhead costs or increased headcount.

Efficient growth is still possible despite these challenges.

Customers are available — particularly, small businesses transitioning to the next phase of recovery. Plus, scaling can happen without incurring crushing overhead costs, but it involves a renewed commitment to digital transformation. And while there isn't a one-size-fits-all approach, there are key factors to consider when boosting digital capabilities.

Alternative Financial Service Providers Association
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