Business Crypto, BNPL could face regulation; Inflation causing debt...

Crypto, BNPL could face regulation; Inflation causing debt increases


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Americans are accumulating more and more debt

US consumers continue to cope with rising prices and support the declining economy with their credit cards. Total consumer debt rose another $23.8 billion in July to a record $4.644 trillion, according to the latest data from the Federal Reserve. On an annual basis, consumer debt rose 6.2%, moderating somewhat from recent months as the CPI cooled on the back of a decline in energy prices. The Federal Reserve’s consumer debt figures include credit card debt, student loans, and auto loans, but do not take into account mortgage debt. If you count mortgages, American consumers are buried under more than $16.2 trillion in debt. [Schiff Gold]

CFPB plans to regulate buying now and paying later

The US Consumer Financial Protection Bureau plans to regulate “buy now, pay later” companies like Klarna and Affirm over concerns that their burgeoning finance products harm consumers. The watchdog, which does not currently oversee BNPL companies or products, will issue guidelines or a rule to align industry standards with those of credit card companies. The development will be a blow to the sector, which is already under pressure from rising borrowing costs and lower US consumer spending amid rising inflation. [Reuters]

Treasury Will Warn White House Crypto Needs Important Regulations

The Treasury Department will warn the White House that cryptocurrencies could pose significant financial risks that outweigh their benefits unless the government rolls out major new regulations, according to two people familiar with the matter. Treasury’s reports will highlight the economic danger of cryptocurrencies in several key areas, including the fraud risks they pose to investors. Treasury’s assessments conclude that cryptocurrencies do not yet pose a stability risk to the broader financial system, but that the situation could change soon. [The Washington Post]

Average credit score hasn’t risen this year for the first time in more than a decade

Credit Scores saw a jump during the first year of the pandemic. Now, amid high inflation and rising consumer debt, they are holding up, and that’s not necessarily a good thing. The national average FICO credit score is at 716, which is still an all-time high but unchanged from a year ago, according to a new report from FICO. The average credit score has partly remained stable due to an increase in missed payments. In April, just over 15% of the population had been in arrears of more than 30 days in the past year. Then there is the rising level of consumer debt. Average credit card usage was 31% in April, compared to 30% in April 2021. Finally, more consumers are getting credit cards, bringing new credit activity back to pre-pandemic levels. [Money]

Goldman’s Apple Card Company Has a Surprising Subprime Problem

The weakest US borrowers are starting to miss out on payments and defaults on their loans, and that comes in a surprising place: Goldman Sachs. While competitors such as Bank of America enjoy repayment rates at or near record levels, Goldman’s loss rate on credit card loans reached 2.93% in the second quarter. That’s the worst among major US card issuers and “far above subprime lenders,” according to a Sept. 6 note from JPMorgan. More than a quarter of Goldman’s card loans have gone to customers with a FICO score of less than 660, according to the files. That could expose the bank to higher losses if the economy goes into recession, as many forecasters expect. [CNBC]

Credit card companies will adopt new sales code for weapons transactions

US credit card giants said they will introduce a new merchant category code for the country’s gun stores. The International Organization for Standardization, based in Geneva, approved the code Friday. The system will categorize sales in gun and ammunition stores separately, which proponents say could help track suspicious transactions of firearms and ammunition. Almost every retail item has a merchant category code. Prior to Friday’s decision by the ISO, gun shop sales were classified under a general merchandise or sporting goods category. Seller codes keep track of where a consumer has used a credit card, but do not indicate which specific items were purchased. Gun rights activists have argued that the code would unfairly oversee legal gun purchases. [CNN]

Walmart, Target urge lawmakers to approve bill and target Visa, Mastercard fees

More than 1,600 merchants, including Walmart and Target, are urging U.S. lawmakers to pass legislation that aims to break Visa and Mastercard’s hold on the credit card market. The bill, which Sen. Richard Durbin (D., Illinois) and Sen. Roger Marshall (R., Kan.) in July would give merchants the right to route many credit card payments through networks other than Visa and Mastercard. In a letter this week to all members of Congress, the merchants said the proposed legislation would increase competition, leading to a reduction in the fees they pay when they accept credit cards. [The Wall Street Journal]

Zero Deposit, No Credit Checked Mortgages Can Come To A City Near You

A mortgage without down payment? For some it is now possible. Bank of America is launching a new program to help first-time homeowners in select neighborhoods. The program offers mortgages with no down payment, no closing fees, and no minimum credit score. Rather than a credit check, it takes into account other factors, such as paying rent and utilities on time. The bank is doing a test run in major cities that are predominantly black and Hispanic. The plan is being rolled out in Los Angeles, Dallas, Detroit and Charlotte. Anyone who lives in those neighborhoods, regardless of race, can apply. The program is based on how much people earn and their location. [KATU 2]

California says Amazon has ruined online shopping, suing it for inflating prices

Amazon is again under fire for its policy that would prohibit its online retailers from selling their products for lower prices on other websites and retail platforms. Critics say this has led to years of higher prices for consumers rather than allowing markets to set fair prices. Last year, the District of Columbia sued Amazon for the same reason, losing in court in March 2022. But in April, the Justice Department issued a statement in support of DC’s case, and shortly after, DC appealed in August. Now California Attorney General Rob Bonta has put more pressure on by announcing a lawsuit against Amazon for allegedly blocking price competition in California as well. [Ars Technica]

JP Morgan Acquires Fintech Payments to Rival Stripe and Block

In an effort to fend off its fintech rivals, JP Morgan has acquired payments firm Renovite. The acquisition will make the cloud-native payments fintech part of JP Morgan Payments, combining corporate treasury services, trade finance, and card and commerce services. The bank said the company’s acquisition will accelerate its ability to roll out new offerings to merchants. While JP Morgan is the largest trading services provider in the world in terms of transaction volume, its fintech competitors, including Stripe and Block, are growing rapidly and approaching the top 10 acquirers in terms of volume. [Alt Fi]

Apple Card chief of credit leaves for X1 credit card startup

Apple’s head of credit for the Apple Card, Abhi Pabba, has left the company. Pabba will join California-based credit card company X1 as Chief Risk Officer starting next week. In recent years, there have been a number of exits from Goldman Sachs’ consumer business, which handles Apple Card lending and issuance. But defectors on Apple’s part were less clear. The tech giant’s goal with the Apple Card is not to monetize strong credit decisions, but to make the iPhone more essential for its customers. The map is mainly accessed and managed via the iPhone. [CNBC]

Lease-to-Own Fintech Startup Kafene Raises $18M to Beat BNPL

Kafene, a lease-to-own startup targeting low-bank consumers who don’t have access to traditional credit, raised $18 million in a Series B financing round. Many argue that BNPL is just another form of debt, but packaged differently. According to their CEO, Kafene’s agreements are rather debt-free. Another way it differs is that BNPL is often used for more “nice-to-have” purchases, while lease-to-own is mainly for “must-have” purchases, such as refrigerators or tires for example. Essentially, Kafene’s model is based on the premise that the primary consumer at the point of sale is likely to go for BNPL, while the subprime consumer does not have the credit score to do so and would typically lease-to-own as their alternative financing mechanism. . [Tech Crunch]

Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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