July 14, 2022
Paving the Payments Future
Why Banks Are Failing Millions In America: NPR

The Federal Reserve estimates there are more than sixty million Americans who are either unbanked or underbanked.

That means around one in five adults in the U.S. rely on services like money orders, payday loans, or check cashing to manage their finances. They often avoid banks because of short-term fees, but other services can be even more expensive over time. In 2018, the unbanked and underbanked spent nearly $200 billion on interest and fees. Many also avoid traditional banking because of distrust for financial institutions.

As part of this year's Aspen Ideas Festival, we recently spoke to three guests who are all deeply invested in rebuilding that trust and changing a financial system that excludes too many.

Why is traditional banking failing so many Americans? And how can we fix the system?

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Tell us your stories about employer-driven debt: CFPB

The Consumer Financial Protection Bureau (CFPB) wants to hear your stories about practices and financial products that leave you financially worse off as a result of being indebted to your employer or an affiliated third party.

The CFPB has released a Request for Information seeking data about, and worker experiences with, practices and financial products referred to as Employer-Driven Debt. Though it may take other forms, employer-driven debt can include a worker going into debt with their employer or an affiliate for the purchase of equipment and supplies that the employer requires. It can also include a worker going into debt for training required by the employer.

We want to hear about Employer-Driven Debt from stakeholders across the marketplace, including workers, employers, advocacy organizations, and academics and researchers. Potential areas of focus include:

How and why workers enter into credit arrangements with an employer or a third party
Whether the cost incurred appears to reflect the product or service’s fair market value
How the debt is collected if workers don’t pay their employers or a third party back
What effects the debt has on workers’ finances and careers

Big cities saw historic population losses while suburban growth declined during the pandemic: BROOKINGS

Much has been written about the COVID-19 pandemic’s impact on big-city populations. Brookings Metro’s recent analysis of large metropolitan area declines makes plain that during the prime year of the pandemic (from July 2020 to July 2021) there were outsized population losses in the nation’s biggest metropolitan areas. But more recent Census Bureau estimates focusing on cities (rather than metropolitan areas) show the pandemic’s impact to be even more dramatic, with unprecedented losses across the 88 U.S. cities with populations exceeding 250,000 residents.

This analysis places these estimates in the context of recent decades’ trends, when America’s big cities experienced noticeable ups and downs. It then shifts the focus to the suburbs of major metropolitan areas, which—while benefitting somewhat from recent city population losses—tend to display growth slowdowns of their own. 

Promoting competition in our financial markets: CFPB

A year ago, the President issued an executive order to launch a whole-of-government effort to promote competition in the American economy. When families and businesses face limited choices, they can encounter higher prices and worse customer service.

Congress has charged the CFPB with ensuring that markets for consumer financial products are competitive, so the CFPB is participating in this whole-of-government effort, along with other independent agencies. Over the last year, the CFPB has taken a number of steps to promote competition in our markets.

First, the CFPB is working to identify the obstacles for consumers to refinance or switch providers more easily. For example, we have asked the nation’s largest credit card issuers about a change that occurred across the industry that is undermining the ability for consumers to get lower-rate offers from competitors. We are also identifying impediments to refinancing in other markets, including mortgages and auto. The CFPB is also accelerating its work to implement a required rulemaking on personal financial data rights, which we hope will spur competition and switching by giving consumers more control of their data.

How Does Your State Raise Its Tax Dollars? PEW

Taxes make up about half of state government revenue, with two-thirds of states’ total tax dollars coming from levies on personal income (39.9%) and general sales of goods and services (29.3%). 

Broad-based personal income taxes are the greatest source of tax dollars in 33 of the 41 states that impose them, with the highest share—63.2%—in Oregon. General sales taxes are the largest source in 14 of the 45 states that collect them. Texas is the most reliant on these taxes, at 61.8%—in Oregon. General sales taxes are the largest source in 14 of the 45 states that collect them. Texas is the most reliant on these taxes, at 61.8%. Other sources bring in the most tax revenue in a few states: severance taxes in Alaska and North Dakota, and corporate income taxes in New Hampshire.

This infographic illustrates the sources of each state’s tax revenue.

Mix of Tax Sources by State, FY 2021

CFPB Sues ACE Cash Express for Concealing No-Cost Repayment Plans and Improperly Withdrawing Consumers’ Funds: CFPB

Repeat offender kept borrowers in debt and in the dark, generating at least $240 million in reborrowing fees

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) filed a lawsuit today accusing payday lender ACE Cash Express of concealing free repayment plans from struggling borrowers. Because of ACE’s illegal practices, individual borrowers paid hundreds or thousands of dollars in reborrowing fees, when they were in fact eligible for free repayment plans. These practices generated at least $240 million in fees for ACE, while keeping borrowers in debt. The CFPB also alleges that ACE lied to borrowers about the number of times it would attempt to debit their bank accounts for repayment of loans and fees. In a 2014 CFPB enforcement action, ACE paid $10 million in penalties and borrower refunds for using illegal debt-collection tactics, and the company is still bound by the order from that case.

“Deception and misdirection allowed ACE Cash Express to pocket hundreds of millions of dollars in reborrowing fees,” said CFPB Director Rohit Chopra. “Today’s lawsuit is another example of the CFPB’s focus on holding repeat offenders accountable.”

Social Security COLA Could Reach 11% for Next Year

Millions of Social Security recipients got a 5.9% cost-of-living adjustment (COLA) increase in 2022 — the biggest in decades. If inflation continues at its current rate, next year’s COLA could be much higher.

According to a new prediction from the non-profit Committee for a Responsible Federal Budget (CRFB), the COLA for 2023 could be as high as 10.8%, which would be the highest increase in four decades. The average monthly Social Security monthly benefit is $1,540, but a 10.8% COLA increase would raise that benefit amount to $1,694.

However, this prediction assumes that the COLA for 2023 is 10.8% if inflation remains unchecked.

The Motley Fool noted that there are signs that inflation could be moderating. A cooling housing market combined with falling commodity prices and lower consumer spending could indicate that inflation may not be rising at such a quick rate later this year. The Federal Reserve also raised its benchmark interest rate by 75 basis points in June, the biggest rate hike in nearly 28 years, The Fool added.

As people struggle to pay for food, rent, Florida pawn shops are busy

MIAMI - Thanks to the price of gas, food, and rent, business at pawn shops is booming. People are selling what they have to pay their bills.

"Sadly, with the economy and everything in the uptake, fuel prices, inflation, and everything. Yeah, we've seen a lot of new faces, we've seen a transition," said Jose Leyva with Larry's Estate Jewelry & Pawn.

He's been in the business for more than 20 years and said the last six to eight months have been tough on his customers.

"It hurts, it hurts sometimes, because you hear some of the stories and it touches your heart," said Leyva.

He said it used to be that people would come in looking to find that rare treasure. Now, people arrive hoping to sell, and too often take what they can get, to make ends meet any way they can.

Alternative Financial Service Providers Association
315 Tuscarora St., Lewiston, NY 14092