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AFSPA's 'Consumer Financial Education Newsletter'

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Walmart’s Fintech Races to $2.5 Billion Value in Omen for Banks

(Bloomberg) -- Walmart Inc. is pouring more firepower into its fledgling financial venture, scoring a $2.5 billion valuation for the startup and signaling its ambition to wade deeper into financial services.

The world’s largest retailer is leading a funding round of more than $300 million alongside investment firm Ribbit Capital, according to people with knowledge of the matter. That marks a fresh valuation for the firm called One, majority-owned by the retail giant, which has been offering products targeting Walmart’s legions of customers and employees to gain a bigger foothold in financial services.

For the financial industry, the specter of companies like Walmart encroaching on their turf has loomed large. Just last year, JPMorgan Chase & Co. chief Jamie Dimon identified the competitive threat of businesses like Walmart, labeling their hundreds of millions of customers and the enormous resources at their disposal an “extraordinary competitive advantage.”

Walmart’s latest endeavor marks a more deliberate push to expand into financial services after years of fitful efforts with a disparate set of offerings. This time, it’s established One as an independent company that sits outside Walmart, while the retailer still maintains control. And in partnering with Ribbit, Walmart picked an investor that counts fintech darlings like Coinbase Global Inc., Revolut and Robinhood Markets Inc. among its successful investments.

Read more at BLOOMBERG

CFPB Closes Overdraft Loophole to Save Americans Billions in Fees: CFPB

Final rule to save up to $5 billion each year

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) took action to close an outdated overdraft loophole that exempted overdraft loans from lending laws. The agency’s final rule on overdraft fees applies to the banks and credit unions with more than $10 billion in assets that dominate the U.S. market. The reforms will allow large banks several options to manage their overdraft lending program: they can choose to charge $5; to offer overdraft as a courtesy by charging a fee that covers no more than costs or losses; or continue to extend profit-generating overdraft loans if they comply with longstanding lending laws, including disclosing any applicable interest rate. The final rule is expected to add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees.

"For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans' deposit accounts," said CFPB Director Rohit Chopra. "The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they're charging on overdraft loans."

Read more at the Consumer Financial Protection Bureau (CFPB)

Have a tax law question?

Our #IRS Interactive Tax Assistant has answers.

Watch this short video to learn more:

https://youtu.be/y6HkaBkdKdU

IRS warns of holiday scams

• Avoiding clicking on unknown links in emails or texts.
• Verifying the source of any unexpected messages.
• Using strong, unique passwords for your accounts.

IR-2024-300: IRS warns of holiday scams, encourages protecting sensitive

personal information as 9th annual National Tax Security Awareness Week starts

Jose L. Santiago

Public Affairs Specialist

Tax Outreach, Partnership and Education

Email: jose.l.santiago@irs.gov

This surprising barrier prevents Americans from buying homes, building wealth

Making some banking services more inclusive can help lower-income households build for the future.

Over 5 million households — 4.2% of Americans — are unbanked, meaning they do not have access to a bank account. Relying on alternative financial services can impede the ability to build wealth, but the lack of trust in the banking system can make it seem like the best option for some.

Not having a credit score or solid payment history can also severely reduce your ability to get a mortgage to buy a home, apply for student loans to further your education, or even start a business—all of which act as gateways to building wealth.

Read more at The Street

America Is Feeling Underpaid ... but Job Secure: PEW

Younger and lower-income workers are among the least satisfied with their jobs; majorities say it would be hard to find the kind of job they’d want if they were looking today

Amid low unemployment nationwide, U.S. workers are feeling good about their level of job security, and relatively few expect to look for a new job in the coming months, according to a new Pew Research Center survey.

At the same time, only half of workers say they are extremely or very satisfied with their job overall. And a much smaller share are highly satisfied with their pay – 30%, down from 34% last year. 

The survey, conducted Oct. 7-13 among 5,273 employed U.S. adults, explores how workers see various aspects of their jobs, including how they assess the importance of certain skills and their own opportunities for further training.1

Read more at Pew Research Center

How a $1 Billion Community Bank Outperforms Industry Giants

Webster Five's Brian McEvoy discusses how the billion-dollar mutual bank achieved 50% asset growth by combining big-bank technology capabilities with community bank values while successfully completing an 11-month core system transformation.

On an episode of the Banking Transformed podcast, host Jim Marous spoke with Brian McEvoy, chief retail banking officer at Webster Five Savings Bank, about how smaller banks can compete effectively while maintaining their community focus.

Q: What motivated your transition from large national banks to Webster Five?

Brian McEvoy: I started my banking career in high school. I think I was somebody who was heavily interested in the humanities, political science, et cetera, and I had a guidance counselor who said “why don’t you take a class in the vo-tech center?” And I heard banking was easy.

Read more at The Financial Brand

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Missed Payments, Broken Systems: Federal Studies Detail Student Loan Quagmire

The CFPB's dual reports reveal that over three-fifths of borrowers are struggling to make payments while servicers face mounting challenges with basic functions like payment processing and customer service. The findings come at a critical moment as millions of borrowers return to repayment and policymakers debate systemic reforms. Rather than focusing on isolated incidents, the research quantifies widespread issues affecting millions of borrowers and documents specific servicing failures that could point the way toward meaningful reform.

Why we picked them: Student loans, of course, rarely have a direct impact on financial institutions — but the indirect impact is resoundingly powerful. An individual’s ability or lack thereof to make regular monthly payments can affect their ability to successfully take out loans of other kinds. Even more concerning is the likelihood of their defaulting on student payments, particularly following the

Read more at The Financial Brand

Credit Card Delinquency and Balance Growth Will Moderate in 2025

"New normal" has become a post-Covid cliché, but now that stimulus and debt relief have been wrung out of the system, a clearer picture of card credit is coming into focus. The good news: TransUnion says the rate of growth of card debt will slow next year. On top of that, serious card delinquencies will stabilize.

On the roller coaster otherwise known as the U.S. consumer credit economy, have we come to a relatively flat section of the ride?

TransUnion forecasters think the impacts of pandemic-era stimulus and post-pandemic inflation growth are fading, with the former squeezed out of the economy and the latter easing.

The result will be two-fold, according to TransUnion, and both will play out over the course of 2025.

First, take overall credit card balances, still at record levels. The company projects that after seeing credit card usage rates grow, breaking the $1 trillion barrier in 2023, the rate of growth will level off. As shown in the first chart in the next section, after growing at double-digit rates in 2022 and 2023, company projections indicate that growth will fall into low single digits in all of 2024 and will continue in single digits through 2025.

Read more at The Financial Brand

CFPB Report Finds Significant Drop in Annual Mortgage Applications and Originations in 2023: CFPB

High interest rates have contributed to a significant drop in homebuying volume

Washington, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released its annual report on trends in the residential mortgage lending market. 2023 showed a significant decline in mortgage lending activities, with loan applications and originations dropping by about a third from 2022. The decline was more prominent in refinancing activity than home purchase, with single-family refinance originations down nearly two-thirds from 2022. Median total loan costs also jumped significantly in 2023, with a higher percentage of borrowers reported having paid discount points than any other year since tracking of the data began.

Since 1975, the Home Mortgage Disclosure Act (HMDA) requires financial institutions to collect and make public certain loan-level information on mortgage applications and originations. Responsibility for administering HMDA was transferred to the CFPB in 2011.

Read more at Consumer Financial Protection Bureau (CFPB)

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