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Credit card debt tops $1.28 trillion — consistent with 'K-shaped' economic divide, New York Fed research shows

• Collectively, Americans now owe $1.28 trillion on their credit cards, according to a new report by the Federal Reserve Bank of New York.
• However, despite the overall increase, there is a growing divide among consumers, other research shows.
• "The longer this persists, the more the gap widens," says Achieve's Andrew Housser.

Americans ended 2025 more in debt than ever before.

Credit card balances hit a fresh high in the fourth quarter, rising by $44 billion to $1.28 trillion, according to a new report on household debt by the Federal Reserve Bank of New York released Tuesday. That's a 5.5% jump from a year earlier.

The central bank's monthly Survey of Consumer Expectations, released Monday, also found that fewer consumers expect their households' financial situations to be better off a year from now — and a larger share expect to be worse off.

'Evidence consistent with a K-shaped economy'

Read more at CNBC

Buy Now, Pay Later: Recent Developments and Implications: Federal Reserve

Key Takeaways

• The total transaction value of "buy now, pay later" (BNPL) loans, measured in real terms, has grown roughly 20 percent per year since 2021, reaching an estimated $70 billion in 2025, or about 1.1 percent of total credit card spending.
• Given its current scale, debt outstanding and observed default rates, the impact of BNPL on financial stability appears limited at present, and while spillovers to other consumer credit markets are possible, there is no clear evidence of elevated stress to date.
• BNPL users generally retain access to traditional forms of credit and tend to carry higher balances on other unsecured credit products, but there is no clear evidence of a causal relationship between BNPL usage and unsecured debt balances, and the welfare effects of BNPL appear mixed.

"Buy now, pay later" (BNPL) is a form of point-of-sale consumer financing that lets shoppers split a purchase into multiple installments paid over time.

Read more at Federal Reserve Bank of Richmond

Financial Literacy Disparities are Driven by Parental Education and Income

U.S. States continue to make progress in adding financial literacy curriculum

Key Points

• SPARK’s Financial Literacy Committee aims to improve young Americans’ financial knowledge and habits.
• Recent surveys show financial literacy gaps tied to family income and education.
• Treasury Secretary will join SPARK’s financial literacy month kickoff event to boost awareness nationwide.

Read more at The Street

Auto Demand Surges, But Credit Risk Remains in Nonprime Tiers

he 2026 Consumer Auto Survey by TransUnion shows a large number of consumers planning to buy a vehicle in the next year. Despite continued concerns about affordability and interest rates, consumer demand for vehicles remains very strong.

There is a growing body of industry data suggesting that while the demand for vehicles remains strong, the underlying credit risk that existed before the pandemic has not materially decreased.

This credit risk is frequently in the market segments experiencing the most incremental growth. Many borrowers remain constrained in their ability to take on additional auto debt despite an improvement among lower income consumers in confidence in their finances and a general increase in their cash reserves since 2020.

Read more at BadCredit.org

AI Gives Credit Unions the Edge Banks Can’t Buy

The future of personalization is coming at the credit union movement fast. Powered by artificial intelligence and new regulatory capacity around data sharing, credit unions have entered an era where predictive personalization is the competitive baseline. Members expect their financial institution to know who they are and what they need next.

The forces driving this shift aren’t entirely new, but their convergence has accelerated, driving the industry from backward-looking analytics toward forward-looking member engagement that anticipates member needs.

“Digital excellence is nonnegotiable,” said Finalytics Chief Strategy Officer Baron Conway. “A frictionless and engaging digital experience is today the critical factor in whether an institution will win or lose its members.”

Read more at The Financial Brand

Senate Bill Would Let States Cap Credit Card Interest Rates

Key Takeaways

• A bill has been introduced in the U.S. Senate that would allow states to cap interest rates for the consumers in their states.
• The aim of the bill is to lower interest rates charged on credit cards. 
• Opponents say the bill would make compliance complex and lead to a fragmented lending system.

Legislation that would allow individual states to cap interest rates was recently introduced in the U.S. Senate. U.S. Senators Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Jack Reed (D-RI) and Jeff Merkley (D-OR) introduced the legislation on Jan. 30. 

The goal of the legislation is to protect Americans from high interest rates on credit cards and consumer loans. A press release from Whitehouse pointed out that Americans hold $1.23 trillion in credit card debt.

Read more at BadCredit.org

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Cruz, Britt seek to raise smaller banks’ debit card fee cap

Two key Republican senators have proposed a measure that would overturn a rule that exposes banks with more than $10 Billion in assets to limits on debit card swipe fees.

The legislation, sponsored by Senators Ted Cruz of Texas and Katie Britt of Alabama, would tie asset restrictions, enacted after the financial crisis, to the rate of inflation. 

Cruz, who chairs the powerful Senate Commerce Committee, and Britt, who leads the Banking Subcommittee on Housing, Transportation and Community Development, say the revision would free smaller banks from fee limits, as Cruz put it, “intended for much larger institutions.”

They propose to raise the $10 Billion asset cap — from the so-called Durbin Amendment — against the Consumer Price Index, retroactive to the 2010 passage of the Dodd-Frank bill, which introduced the original cap.

“The Durbin Amendment was not designed for the current economic and regulatory reality,” Cruz said in a statement. “My legislation modernizes the interchange fee cap to reflect inflation, helping small banks support local economies while lowering banking costs for Americans.”

Read more at BLOOMBERG

Banks Grow Auto Credit Exposure as Subprime Risks Mount

Lenders are rapidly expanding auto credit — even as subprime delinquency rates remain elevated and comparable to delinquency rates in past recessions.

In doing so, lenders now find themselves facing difficult questions. Is this a responsible way for lenders to respond to a borrower’s need to increase their affordability, or has it become a precursor to another round of subprime lending due to volume rather than performance?

In 2025, banks surpassed captive finance companies as the largest lenders for auto loans. Banks now account for roughly 28% of total auto financing. Despite worsening affordability and rising costs for consumers, many lenders continue to grow and do not seem willing to retreat.

For subprime lenders, this change is important. Competition for paper is intensifying as borrower stress grows. The risk is not simply higher delinquencies. It is the possibility that margins compress at the same time losses become harder to predict.

Read more at BadCredit.org

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Merchant Service Provider for Your Business EC

Senate Bill Would Cap Consumer Interest Rates At 36%

A new Democratic Senate bill—the Predatory Lending Elimination Act—has been introduced to impose a nationwide 36% APR cap (including fees) on most forms of consumer credit, effectively extending the Military Lending Act standard to all consumers.

What the bill does

• Sets a permanent 36% APR ceiling on “consumer credit,” defined broadly to include credit cards, payday loans, auto‑title loans, and most installment loans, with fees counted in the APR calculation.
• Extends the 36% cap that currently applies only to active‑duty servicemembers under the Military Lending Act to everyone, nationwide.
• Targets triple‑digit APR products and “rent‑a‑bank” arrangements by applying the cap to all lenders, including banks, and by closing loopholes and junk‑fee structures.

Coverage and exclusions

Covered products: credit cards, payday loans, auto‑title loans, and other non‑mortgage, non‑auto‑purchase consumer credit, with all finance charges and many fees included in the APR cap.

Read more at CreditandCollectionsNews

Bipartisan Enforcement Is Rising In Consumer Finance: by Hudson Cook, LLP

In December, the Democratic Attorneys General Association, or DAGA, announced that it hired Rohit Chopra to lead its new Consumer Protection and Affordability Working Group. In this role, the Biden-era director of the Consumer Financial Protection Bureau now leads a team of researchers and policymakers to recommend nationwide strategies for enforcement cases based on companies' abusive practices.1 In other words, Chopra once again has a formal role in identifying and prioritizing issues for consumer finance enforcement and oversight.

Many in the consumer finance industry breathed a sigh of relief in February 2025 when the Trump administration made clear that it would drastically curtail the CFPB's enforcement and supervisory activities. Given the sharp contrast between Chopra's aggressive approach and the Trump administration's attempts to shutter the CFPB, some might expect Chopra's appointment by Democratic states to foreshadow a partisan split in state enforcement.

Read more at JD Supra, LLC

Private Equity Investment In Fintech Up 44% In 2025

Summary

• Global private equity and venture capital investments in the fintech sector grew 43.7% YoY to $18.54 billion in 2025, even as deal volume declined.
• The trend of AI adding value to fintech solutions is reflected in the median private equity deal size in the sector, which was up about 29% YoY to $9 million, according to Market Intelligence data.
• The US and Canada were the leading locations for fintech deals in 2025, with 130 transactions totaling about $14.1 billion.
• The fintech sector in the Middle East, particularly within the Gulf Cooperation Council, is well positioned for more investment, driven by regulatory modernization.

Global private equity and venture capital investments in the fintech sector grew 43.7% year-over-year to $18.54 billion in 2025, even as deal volume declined.

Read more at SEEKING ALPHA

Amazon rolls out new payment method - but consumer expert says you should think twice

You might have seen or used it - pay by bank is a new way to buy products online without the hassle of entering any of your card details.

This week, we learnt that Amazon had become the latest mega merchant to roll out the payment method for shoppers to use when purchasing products or setting up Prime subscriptions.

Here's an example of what it looks like...

Pay by bank allows customers to transfer funds directly from their bank accounts to retailers, without the need to enter any credit or debit card details.

As well as Amazon, the method is supported by several household names, including Ryanair and Just Eat.

Read more at SKY NEWS

We advise financial technology companies at the

start-up, product development, and product evolution stages. PS

$100B in Losses: How First-Party Fraud Hits Lenders Hard

In first-party fraud, the fraudsters may not be who you suspect. In this type of fraud, the bad guys are the borrowers or applicants. 

“They might misrepresent their identity, inflate income, fabricate employment, or simply have no intention of repaying,” Alisdair Faulkner, Chief Executive Officer and Co-founder of Darwinium, told us.

First-party fraud is widespread and a key issue that financial institutions, including subprime lenders, need to face. 

“Also referred to as ‘friendly fraud’ or ‘opportunistic fraud,’ it accounts for more than a third of all reported fraud in recent years, making it one of the most prominent types of frauds,” Daniel Barta, a Principal Fraud and Financial Crimes Consultant at SAS Institute, shared with us.

Read more at BadCredit.org

Equifax Launches Credit Abuse Risk Model to Detect First-Party Fraud

As one of the three major credit bureaus in the United States, Equifax has broad visibility into consumer credit behavior. In recent years, one notable trend has been the rise of first-party fraud, in which consumers knowingly exploit organizational policies for financial gain.

First-party fraud, sometimes referred to as consumer-engaged fraud or friendly fraud, can take many forms. One commonly cited example involves shoppers who purchase items online with the intent to return them and pocket the refund.

Equifax is leveraging its access to credit data to address two other prevalent forms of first-party fraud: loan stacking and credit washing. Loan stacking occurs when consumers rapidly apply for multiple loans with no intention of repayment, while credit washing involves attempts to remove negative information from a credit report.

To detect these patterns, Equifax is deploying its Credit Abuse Risk predictive model. The model’s primary objective is to identify suspicious application behavior in real-time, enabling lenders to be notified immediately and respond accordingly.

Read more at PAYMENTS JOURNAL

Contact Chuck.Sockol@mcrc.biz to discuss your recovery needs

Germany Plans to Eliminate Checks Entirely by 2027

Germany is bidding farewell to the paper check. Once a staple of everyday payments, checks are now all but obsolete, and the government plans to eliminate them completely by the end of 2027—a glimpse of a check-free world that’s unfolding in the U.S.

A report from the Library of Congress underscores just how far Germany has come: checks now account for a mere 0.01% of cashless payments. As recently as 2007, more than 75 million checks were processed annually; by 2024, that figure fell to 2 million.

In response to this steep decline, the Bundesbank, Germany’s central bank, has announced it would switch off the technical infrastructure for automated interbank check processing, reserving checks only for rare, exceptional cases.

Alternative Payment Methods

What caused the demise of paper checks? It wasn’t credit cards, which have never been especially popular in Germany. According to Statista, Germany had just 6.58 million credit cards in circulation in 2023, compared with 143 million debit cards.

Read more at PAYMENTS JOURNAL

From the NCUA to the Penny: The Regulatory Updates Credit Unions Can’t Ignore

If it feels like federal rules have been shifting faster than you can keep up, you’re not imagining it. Let’s break down the latest regulatory updates and what they mean for credit unions right now. We will start by covering what’s happening over at the NCUA; see where things are with the GENIUS Act; give some updates on implementation of H.R. 1(aka The One Big Beautiful Bill); and then finally answer the burning question we have all been asking: what’s going on with the penny? 

The NCUA

There’s a lot going on over at the NCUA. While Chairman Hauptman remains as the single board member with a reduced staff, it was just announced in late January that he has been appointed as a member of the Public Company Accounting Oversight Board (PCAOB). He shared that he intends to remain in his role as NCUA Chairman until his successor is appointed by President Trump and confirmed by the U.S. Senate.

Read more at America's Credit Unions

How Payment Gateways for Businesses Can Help You Offer Your Customers More Options

Running a business shouldn’t mean navigating a maze of payment options. But the sheer variety of ways there are to pay today puts pressure on businesses to accommodate every option—or risk losing a sale.

To meet this challenge, many businesses with simple payment needs are turning to payment gateways for businesses, which help them seamlessly accept a wide range of payment types. These systems manage the entire transaction process, from the moment a payment is initiated at the point of sale to when it’s submitted to the processor. Payment gateways can accept credit and debit cards, eChecks, digital wallets, contactless payments, and transactions made online or via mobile.

You can simplify things even further by choosing a payment gateway that also provides a merchant account.

Read more at PAYMENTS JOURNAL

Rate Caps and Fees - America's Credit Unions

Price controls do not eliminate the cost of credit. They simply shift it. America’s Credit Unions advocates against legislation to impose a 10% credit card rate cap and bills to mandate changes to the credit card processing system.  

Blanket caps could undermine this proven system and produce unintended consequences. Instead, targeted, data-driven solutions that promote competition, transparency, and financial education while preserving access to fair, affordable credit should be pursued.

America’s Credit Unions opposes:

The 10 Percent Credit Card Interest Rate Cap Act (S. 381), which would create an all-in annual percentage rate (APR) cap for credit cards.

The Credit Card Fairness Act (S. 3660), which would codify an $8 cap on credit card late fees. America’s Credit Unions has consistently maintained that such a rule would create increased costs for all cardholders and reduced access to affordable credit. The industry vocally opposed a similar proposal from the Consumer Financial Protection Bureau (CFPB) to cap credit card late fees at $8, which was ultimately vacated by the bureau as part of an April 2025 legal settlement. 

Read more at America's Credit Unions

Senator Warren Presses CFPB Acting Director Over Credit Card Fees and Agency Retrenchment By Alan S. Kaplinsky & Ronald K. Vaske 

Senator Elizabeth Warren has sent a sharply worded letter to CFPB Acting Director Russell Vought that crystallizes an unusual moment in consumer financial services regulation: a populist-sounding call from President Trump to cap credit card interest rates at 10 percent, paired with what Warren characterizes as a deliberate dismantling of the very agency that would be central to implementing any such reform.

The letter, dated January 23, 2026, is less a routine oversight inquiry than a public challenge. Warren accuses Vought of undermining President Trump’s stated goal of making credit cards more affordable and frames the issue bluntly: either the President is not serious about the proposal, or the Acting Director is disregarding presidential direction.

The Backdrop: Record APRs and Consumer Stress

Warren anchors her argument in recent CFPB and Federal Reserve data showing sustained pressure on credit card borrowers.

Read more at Ballard Spahr L.L.P. 

How Payment Gateways for Businesses Can Help You Offer Your Customers More Options

Running a business shouldn’t mean navigating a maze of payment options. But the sheer variety of ways there are to pay today puts pressure on businesses to accommodate every option—or risk losing a sale.

To meet this challenge, many businesses with simple payment needs are turning to payment gateways for businesses, which help them seamlessly accept a wide range of payment types. These systems manage the entire transaction process, from the moment a payment is initiated at the point of sale to when it’s submitted to the processor. Payment gateways can accept credit and debit cards, eChecks, digital wallets, contactless payments, and transactions made online or via mobile.

You can simplify things even further by choosing a payment gateway that also provides a merchant account. Authorize.net has an all‑in‑one solution that means you don’t need to separately contract with a bank or third-party processor to get set up. This can speed up onboarding, reduce administrative overhead, and give you a single point of contact for both payment processing and gateway support. For small and mid‑sized businesses, this often translates to faster access to funds, fewer integration headaches, and a more streamlined payment experience overall.

Read more at PAYMENTS JOURNAL

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Who Wins If the Debit Fee Cap Limit Gets Raised?

More than a decade after the Dodd-Frank Act redrew the regulatory boundaries of the banking industry, two Republican senators are seeking to revisit one if its key thresholds—a move that could steer millions in additional debit card revenue to community banks, credit unions, and their fintech partners.

According to Bloomberg, the legislation, introduced by Sens. Ted Cruz (R-Texas) and Katie Britt (R-Alabama), would allow more community banks to avoid the cap on debit interchange fees by indexing the current $10 billion asset threshold to inflation.

The proposal, titled the Community Bank Relief Act, would also benefit credit unions and fintechs that partner with qualifying banks.

The Durbin amendment to Dodd-Frank capped debit card interchange fees at 21 cents plus 0.05% of the transaction amount for banks with $10 billion or more in assets. When the law was enacted in 2010, roughly 80 banks exceeded that threshold, the senators note. Today, that number is closer to 130, including regional institutions such as Live Oak Bank in Wilmington, N.C., and Bancfirst in Oklahoma City.

Read more at PAYMENTS JOURNAL

Policy, Partnerships, and Payments Rails Will Define Fintech’s Next Act

Fintech isn’t slowing down; it’s industrializing. The sector is moving beyond experimentation and towards an infrastructure phase in which digital assets, payments rails, and compliance functions are becoming embedded in financial plumbing.

What’s next? In the year ahead, the central question isn’t “How long will fintech’s momentum last?” but rather “Under what guardrails, partnerships, and policy conditions?” This next wave of fintech advancements hinges on which innovations are promoted, and which are impeded, by gatekeepers in the ecosystem.

From Ideology to Infrastructure

The current administration has signaled its intention to make digital assets a strategic component of the financial ecosystem. After years of uncertainty, policymakers have become more explicit in framing digital assets not as speculative crypto instruments but as payments and settlement infrastructure.

Read more at The Financial Brand

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