The average American's credit score has never been higher, but rising levels of consumer debt have some analysts worried a bubble is forming. The Wall Street Journal reported Monday that the average credit score hit 700 in April to reach its highest level since such information was first tracked by Fair Isaac Corp. [-] back in 2005. On top of that, the share of consumers with scores below 600 dropped to about 40 million, representing 20 percent of U.S. adults with FICO scores. That percentage peaked at 25.5 percent in 2010. Americans' personal savings rate – which tracks the percentage of disposable income a consumer stashes away in a given month – soared during and after the crisis. And at 5.3 percent in April, it still sits above any level reached in 2005, 2006 or 2007. Now, consumer default rates are significantly lower than they were even just a few years ago. A composite S&P/Experian consumer credit default index in April was slightly elevated from where it sat through much of 2016. Consumers' debt portfolios simply look different than they did 10 years ago, as mortgage obligations have taken a backseat for many while student, auto and credit card loans have soared. A household debt tracker published earlier this year by the Fed's New York regional bank estimated total household indebtedness sat at $12.7 trillion at the end of the first quarter. That's up $50 billion from the previous peak reached in the third quarter of 2008.
The Trump administration is considering moving responsibility for overseeing more than $1 trillion in student debt from the Education Department to the Treasury Department, a switch that would radically change the system that helps 43 million students finance higher education, the New York Times reported today. The potential change surfaced in a scathing resignation memo sent late Tuesday night by James Runcie, the head of the Education Department’s federal student aid program. Runcie, an Obama-era holdover, was appointed in 2011 and reappointed in 2015. He cut short his term, which was slated to run until 2020, after clashing with the Trump administration and Betsy DeVos, the education secretary, over this proposal and other issues. A shift in handling federal student aid is being weighed as the Trump administration and DeVos consider overhauling the Department of Education. Trump’s proposed budget for 2018 slashes funding for the department by nearly 50 percent.
The U.S. Supreme Court’s decision that debt collectors can file “stale” claims in bankruptcy without violating federal law may have raised more questions than it answers on issues like exposure to sanctions and malpractice claims. The May 15 decision “creates a lot of confusion and burden on the bankruptcy system” that didn’t exist before the opinion, Thad O. Bartholow, a partner with Kellett & Bartholow PLLC, Dallas, said. Bartholow primarily represents consumer debtors. There was “no allegation at the pleading level” in court documents that Midland Funding knew it’s claim was time-barred when it filed its proof of claim, Bartholow said. Debt collectors fall under the ambit of the FDCPA and are subject to “higher scrutiny,” he said. “Debtors are worse off as a result of the decision, Bartholow said, agreeing with Sotomayor’s assessment. There is a “risk of revival of debt,” he said. The payment of a time-barred debt by a trustee could be viewed as allowing the debt to “spring back to life,” Bartholow said. The decision may open up debtor’s attorneys or trustees who fail to object to time-barred claims to malpractice claims.
Federal Reserve Board officials said at a meeting early this month that they wanted to see evidence of stronger economic growth before continuing to increase the Fed’s benchmark interest rate, according to minutes of the meeting published yesterday, the New York Times reported. But the account presented in the minutes did not shake a widespread conviction that the Fed will raise rates at its next meeting, which is scheduled for mid-June. Analysts said recent economic data was strong enough to reassure the Fed, and investors increased their bets on a June rate hike. Investors also learned for the first time yesterday on how the central bank is likely to reduce its holdings of more than $4 trillion in Treasury and mortgage-backed securities. A reduction of those holdings would be the last step in the Fed’s retreat from its economic stimulus campaign. The account of the May meeting reiterated that the Fed would probably begin taking that step later this year.
The White House released its 2018 budget proposal to Congress this week. Buried (the second to last item) in a 171-page Major Savings and Reforms supplement is one half-page that addresses the CFPB. The section is called, Restructure the Consumer Financial Protection Bureau. Here's what it says: “The Budget proposes to restructure the Consumer Financial Protection Bureau (CFPB), limit the Agency's mandatory funding in 2018, and provide discretionary appropriations to fund the Agency beginning in 2019.” The justification is: “Restructuring the CFPB to refocus its efforts on enforcing enacted consumer protection laws is a necessary first step to scale back harmful regulatory impositions and prevent future regulatory hurdles that stunt economic growth and ultimately hurt the consumers that CFPB was originally created to protect. Furthermore, subjecting the reformed Agency to the appropriations process would provide the oversight necessary to impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism.”
The Republican author of a bill to roll back Obama-era financial regulations has agreed to remove a controversial provision concerning debit-card swipe fees that had divided GOP lawmakers and threatened to derail passage of the sweeping legislation next month, the Wall Street Journal reported today. Rep. Jeb Hensarling of Texas, the chairman of the House Financial Services Committee, agreed to remove a provision that repealed a cap on debit-card transaction fees known as the Durbin amendment — an issue that pits retailers and banks against each other and was bitterly fought as the legislation progressed to the House floor. “We won’t let this one provision hinder passage of an important priority bill,” Hensarling said. While the Choice Act is now expected to pass the House along party lines in early June, it faces dim prospects in the Senate, where Republicans are writing their own legislation to ease financial regulations.
A federal appeals court today will consider whether the Consumer Financial Protection Bureau (CFPB) that was created after the 2008 financial crisis is constitutional, and whether the president has the authority to fire its director at will, the Wall Street Journal reported. The oral argument presents an opportunity for the Trump administration to lay out its case for curtailing the power of the CFPB, an independent agency fighting to keep its current structure headed by a single director. The hearing by the full bench of the U.S. Court of Appeals for the District of Columbia Circuit comes after a three-judge panel of the same court ruled in October that the bureau’s structure was unconstitutional and gave the president the power to fire its director for any reason. After a request from the CFPB, the appeals court vacated the panel’s ruling and scheduled a hearing by more judges. Currently, the CFPB chief can be removed only for “inefficiency, neglect of duty, or malfeasance,” a provision designed by a Democratic-controlled Congress to ensure the agency’s independence.
The fate of the Consumer Financial Protection Bureau and its chief, Richard Cordray, is in the hands of a Washington appeals court that will hear arguments Wednesday. The CFPB asked the court to reconsider its 2016 decision involving the agency’s punishment of New Jersey mortgage company PHH Corp. The outcome could take months. It’s expected to provide ammunition for one side or the other in the years-long tug of war over the agency’s existence.
Republicans condemn the CFPB for snuffing economic activity by burdening lenders with red tape, and they’ve intensified their attacks since the election of President Donald Trump. They say that Cordray’s power is unconstitutional -- he can be fired only by the president and only for cause -- and the agency oversteps its mandate. Last year, the appeals court agreed, while at the same time rejecting calls to dismantle the agency.
A fierce internal House GOP dispute over debit-card swipe fees is threatening to delay a sweeping Republican bill to scale back banking regulations enacted after the 2008 financial crisis. The behind-the-scenes tug of war is pitting House Financial Services Chairman Jeb Hensarling (R-Texas), author of the so-called Financial CHOICE Act, against some of his own committee members — all while an army of lobbyists has stormed the Hill to try to kill or save the legislation. The fight centers on a single sentence in the nearly 600-page text that would give banks greater freedom to hike debit card fees for retailers. Those fees were capped as part of the 2010 Dodd-Frank law, which strengthened banking rules after the 2008 crisis
During the year, the U.S. Trustees made 2,158 criminal referrals. Despite the declines in bankruptcy filings in recent years, this was the most referrals made in a year in the 11 years that the EOUST has been reporting this information. The five most common allegations contained in the FY 2016 criminal referrals involved tax fraud (47.8 percent), false oath or statement (24.9 percent), concealment of assets (21.5 percent), bankruptcy fraud scheme (19.7 percent) and identity theft or use of false/multiple Social Security numbers (16.1 percent). The report is located: Criminal Referrals by the United States Trustee Program by Fiscal Year.