Pandemic’s “Credit Card Debt Paydown Miracle” May be Ending.
That’s the news from a recent CNBC report noting that while “Consumers pulled off a debt surprise during the pandemic year, paying down credit cards and avoiding falling into delinquency, unlike prior recessionary periods,” analysts expect spending—and credit card debt—to be increasing. “Lots of people made lots of progress paying down debt and we would not have thought that at the outset of the pandemic,” said Ted Rossman, Senior Industry Analyst at CreditCards.com. “I would like to see the newfound frugality last, but we’ve seen this in the past.” Analysts see two factors at play.
One is that with government stimulus checks ending, and with federal supplements to state unemployment coming to an end, consumers will be on their own financially. The other factor is that the pandemic created a forced-savings environment, and people are eager to spend again. “There is a lot of money, a lot of savings and they are out spending it,” Rick Caruso, founder and CEO of real estate company Caruso & Co. which develops malls and resorts, recently told CNBC. “They’re shopping, dining, they are going to the movies and they are doing it consistently. $2 trillion of ‘forced savings’ is just starting to get unleashed.”
The article also quoted JP Morgan Chase CEO Jamie Dimon as saying: “The pump is primed. The consumer, their house value is up, their stocks up, their incomes are up, their savings are up, their confidence is up.”
The CFPB Confirms Nov. 30, 2021 Effective Date for Debt Collection Final Rules.
The Consumer Financial Protection Bureau (CFPB) has announced that two final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned, on November 30, 2021. The CFPB issued a proposal in April 2021 that, if finalized, would have extended the effective dates to January 29, 2022.
The CFPB has now determined that such an extension is unnecessary. Following this announcement, the CFPB will publish a formal notice in the Federal Register withdrawing the April 2021 proposal. This is good news, with insideARM providing this perspective: “Many in the accounts receivable industry were worried that if the CFPB extended the effective date of Reg F, it would use that time to reconsider the rules.
It’s nice to see that although the CFPB received comments urging for reconsideration, the bureau followed appropriate procedures and did not consider anything outside the scope of the NPRM. With this decision, those in the accounts receivable industry should feel some relief that their implementation plans will not be upended without warning.”
“Higher Inflation Is Here to Stay for Years, Economists Forecast.”
That’s the headline from a recent Wall Street Journal article that begins: “Americans should brace themselves for several years of higher inflation than they’ve seen in decades, according to economists who expect the robust post-pandemic economic recovery to fuel brisk price increases for a while.” The article, based on a survey it conducted in July, quotes economist Joel Naroff as saying, “We’re in a transitional phase right now. We are transitioning to a higher period of inflation and interest rates than we’ve had over the last 20 years.”
Diane Swonk, chief economist at Grant Thornton, told the paper: “Inflation is expected to surge longer and longer—longer than the Fed previously thought. The Fed is now likely to raise rates in the first half of 2023, although some Fed presidents will be nipping at the bit to move sooner.” Meanwhile, The New York Times headlines an article “Rising Rents Threaten to Prop Up Inflation.” The article reports “So far in 2021, rental prices nationally have grown 9.2 percent, compared with the 2 to 3 percent that is typical from January to June.”
Final Ruling on Hunstein Could Be a Long Time in Coming.
Earlier this month JD Supra released an in-depth article headlined “Temporary Relief for Debt Collectors: 11th Circuit Withholds Hunstein Mandate” about Hunstein v. Preferred Collection and Management Services, Inc. In Hunstein, the 11th Circuit held that a debt collector faces potential liability under the Fair Debt Collection Practices Act for transmitting a consumer’s personal information to any third party, including a mailing service used by the debt collector to send dunning letters when attempting to collect on a debt.
The article says it can be months—perhaps years—before the ruling is clarified, and notes there have been a flood of filings, including a brief “based on a footnote in the new Supreme Court of the United States case TransUnion LLC v. Ramirez, stating that giving customer information to a mail vendor is not “dissemination” and therefore is not an injury in fact.” The article is a good read, and concludes with a list of actions debt collectors may want to take while waiting for the final verdict on Hunstein.
“10 Million Poised to Lose Unemployment Benefits by Early September.”
That’s the headline for a Fortune article that reads in part: “A study from the People’s Policy Project, citing data from the U.S. Census Bureau’s Household Pulse Survey, finds that roughly 10 million people who rely on jobless benefits will lose them on Sept. 6. And another 10 million will see those benefits drop by $300 per week if Congress allows the Federal Pandemic Unemployment Compensation program to expire.”
The article notes that Federal unemployment programs have paid jobless benefits since March 2020, and that “Congress has not shown an urgency to extend them. That will impact everyone from the longtime unemployed to self-employed and gig workers, who typically aren’t eligible for state unemployment benefits.”
Ray Peloso, Chief Customer Officer at Finvi, brings 25 years of diverse consumer lending experience, having held executive leadership roles at Royal Bank of Scotland, Capital One, Citibank, MBNA and Katabat. Ray’s prior expertise in consumer credit and lending underpins a clear vision and understanding of the challenges faced by our clients in today’s rapidly evolving digital economy.
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