Happy New Year!
Jobless claims edge up. Baby boomers opt to retire. Home prices continue to slide as pending home sales keep dropping. Inflation hitting middle-income households hardest. Consumers see paltry payout from Equifax’s 2017 data breach. Consumer advocates file amicus brief in CFPB discrimination case. Mastercard enters consent order with FTC over debit routing. Fidelity eyes the metaverse. FTX fallout doesn’t take a break for the holidays.
New here? Subscribe here to get our newsletter each Sunday.
Jobless Claims Edge Up
Initial jobless claims edged up by 9,000 last week to a seasonally-adjusted 225,000. While up from last spring’s lows, unemployment claims remain at historically low levels. Meanwhile, baby boomers are continuing to exit the job market by opting to retire. Retiring Boomers are a major factor behind about 3.5Mn “missing” workers vs. pre-pandemic trends. Increasing death rates and lower immigration are also driving the trend. Policymakers are not expecting a reversal of the worker shortage in the near term.
Image: Wall Street Journal
Home prices are continuing to slide as interest rate hikes continue to bite. According to the Case-Schiller index, home prices fell 0.5% in October vs. September, making for the fourth straight month of price declines. Pending home sales also fell for the sixth month in a row, hitting the second-lowest on record.
Finally, inflation is continuing to hit middle-income households hard. Purchasing power for the group dropped 2.9% in 2022 vs. 2021, whereas purchasing power rose 1.5% for the bottom quartile and 1.1% for top earners.
Consumers Finally See (Some) Cash From Equifax Data Breach
Remember that huge Equifax data breach in 2017? Some of the 147Mn Americans who had their data compromised are finally beginning to see compensation from the incident. Some $425Mn was set aside in a consumer restitution fund. Individual consumers could attempt to claim up to $125, but some are receiving as little as $3 to $40, per reports on social media.
Consumer Advocates File Amicus Brief in CFPB Discrimination Suit
Seven consumer groups filed an amicus brief asking a federal court to dismiss a lawsuit filed by the U.S. Chamber of Commerce and several bank trade groups against the CFPB. The suit, Chamber v. CFPB, argues the bureau violated the Administrative Procedure Act when it adopted a policy that would define discrimination, “on the basis of age, race, or sex as violation of the federal prohibition of unfair, deceptive or abusive acts and practices.” The trade groups reject that the CFPB has broad authority to examine firms for alleged discriminatory conduct under UDAAP.
In their amicus brief, the consumer groups argue that discrimination in a wide variety of financial products is pervasive, citing racially-biased algorithms, use of racial profiling, higher interest rates and fees, and lower approval rates in credit decisions.
Mastercard FTC Consent Order
Last week, the FTC voted 4-0 to issue a complaint and approve a proposed consent order alleging that Mastercard’s business practices in processing ecommerce transactions violate the Durbin amendment to 2010’s Dodd-Frank Act.
The amendment aimed to promote payment processing competition by requiring banks to enable two unaffiliated networks on the debit cards they issue. But the FTC alleges that Mastercard’s “tokenization” practices made it difficult, if not impossible, for merchants to choose to route ecommerce payments through networks other than Mastercard.
The consent order requires Mastercard to provide competing debit networks with the information necessary to convert tokens into consumers’ actual card numbers, which are necessary to process the transactions. Mastercard acknowledged it has entered into a consent agreement with the FTC but denied that it violated any laws. An FTC spokesperson declined to answer questions if it was pursuing a similar action against Visa.
Fidelity Eyes Metaverse
Fidelity seems to be gearing up to give advice to investors – in the metaverse, according to trademark filings. The brokerage filed at least three new trademark applications covering a host of “web3” products and services, including a crypto trading platform and NFT marketplace in the metaverse. Possible capabilities include matching buyers and sellers of digital media, referral services for investment advice and financial planning, virtual real estate investing, and crypto trading and exchange services. The filing comes on the heels of Fidelity’s recent announcement of an early access waitlist for Fidelity Crypto, which will enable retail investors to trade bitcoin and ether through their Fidelity accounts.
FTX Fallout Continues Over Holiday Season
The holiday season isn’t slowing down developments in the FTX case. A group of FTX Trading customers filed suit, alleging that the company’s top execs stole their digital assets and blocked customers from making withdrawals. The potential class action suit was filed by FTX users in the U.S., the U.K., the Netherlands, and Turkey. The plaintiffs argue misconduct that was in direct violation of FTX’s terms of service and customer agreements.
Meanwhile, Congressional and regulatory scrutiny of banks’ links to FTX continues. The list of banks that had some kind of connection to FTX is lengthy: yes, crypto-focused banks like Silvergate, Signature Bank, and Deltec, but also household names like Bank of America, BMO Harris, and JPMorgan Chase. Senators Elizabeth Warren and John Kennedy, as well as Representative Roger Marshall have already sent a letter to Silvergate CEO Alan Lane demanding answers. Regulatory scrutiny for banks that are already or want to work with crypto companies is likely to increase. And banks that did business with FTX could face lawsuits from shareholders.
In the News:
Negative-Yielding Bonds Could Be Approaching Their Final Days (Wall Street Journal, 12/28/2022) High inflation has caused negative-yielding debt to almost completely evaporate.
What to Know About the Latest 1099-K Tax Reporting Change for Venmo, PayPal (CNBC, 12/27/2022) There will be a one-year delay on the 1099-K tax reporting rule that requires payment services to issue the form for business transfers of more than $600.
‘Financial Freedom’ App Updraft Raises $131M (PYMNTS, 12/19/2022) The London-based app that uses open banking technology to build a full picture of users’ spending raises its Series A.
Barclays and Maven Invest in Manchester-Based Fintech Startup Nivo (Finextra, 12/22/2022) Nivo’s tech combines secure instant messaging with digital ID and verification.
Banks Expanding Special-Purpose Credit Programs (American Banker, 12/27/2022) Last December, the Department of Housing and Urban Development said that these programs do not violate the Fair Housing Act.
The Rapid Evolution of Buy Now/Pay Later Loans (American Banker, 12/27/2022) BNPL loans are still growing in popularity with 28% of U.S. consumers using BNPL as of August 2022, up from 18% at the start of the year.
Credit Unions put Training over Hiring to Boost Loan Results (American Banker, 12/27/2022) Credit unions have been increasing the amount of commercial loans on their books.
How Deposit Competition Reignited — and Why it Should Continue in 2023 (American Banker, 12/28/2022) With the Fed hiking interest rates, competition in the deposit market heated up as banks felt pressure to pay more for deposits.
Recession, Rate Hikes, Diversity: What’s Ahead for Banks in 2023 (American Banker, 12/28/2022) After a challenging 2022, we look ahead to the new year.
The Astronomical Events You Don’t Want to Miss in 2023 (DailyMail, 12/28/2022) Keep your eyes to the sky in the new year for events from meteor showers to solar eclipses.