Credit Card Conundrum — Half of Americans Can’t Understand their Agreements

Posted By: Elizabeth Rowe | September 23, 2016 | 0 Comments

CONSUMERS AND CONSUMER CREDIT

Half of American Consumers Can’t Understand Credit Card Agreements

September 22, 2016, The Arizona Republic

Credit card agreements are written for an 11th-grade reading level, take 20 minutes to read and have a very weak plot line. However, about half of U.S. adults read at a 9th-grade level or below, and a full 46% of new card recipients “never” or “hardly ever” read their card agreements. What to do? Encourage folks to read the one-page summary that accompanies the agreement. The CFPB encourages consumers to forget about cash back, miles, and points, and to shop around for an issuer that offers a plain-English agreement.

CREDIT UNION AND RETAIL BANKING INDUSTRIES

Fed Holds Off For Now, But CUs Believe Rate Hike Imminent

September 21, 2016, Credit Union Journal

While consumers are doing well, businesses’ fixed investments continue to be soft which means that overall, the economy is still sluggish enough that on the final day of this week’s FOMC meeting, the Governors announced that the Fed funds rate would remain unchanged. But the consensus is that the Fed will raise the key rate before year’s end. Many are pointing to the fact that 3 of the seven governors voted to raise the rate, and that dissention is seen as sending a strong signal to the markets that rates are going up. And the dissenters advocated for a target fed funds rate of 0.50% and 0.75%.

PAYMENTS TECHNOLOGY

With Same-Day ACH Looming, Dwolla Unveils a Payout Feature for its White-Label API

September 21, 2016, Payments News

Today, Friday, September 23, banks will begin crediting ACH funds the same day that they are received, rather than holding them for a day, as is current practice. For businesses with day laborers (taxi drivers, gardeners, roofers), same day payouts help employee retention by putting actual money into their pockets on payday. For companies in the payroll platform business, speed is the competitive differentiator.  For months, Stripe has been winning market share by using the Visa and MasterCard debit rails to provide “real-time” payout services while some competitors believe same day availability is fast enough. Whether employers opt for ACH (like Dwolla) or “real-time” (like Stripe), they’ll be charged a premium for the same day feature. So the market will decide if really, really fast is worth a premium of 1.5% or if same day ACH (fast-ish) is okay because it’s charged only $0.25/transaction.

Banks Test Blockchain Network to Share Data

September 21, 2016, The Wall Street Journal

Citigroup, Credit Suisse, and HSBC are using a private blockchain network to assign and attach identification tags to their trades. While this use is ready to roll, these same banks are also testing blockchain technology to handle international money transfers, derivatives, syndicated loans, and agricultural commodities. “Banks are struggling to find ways to increase revenues at a time of record-low interest rates, reducing trading volatility, and muted capital markets. So cost-cutting through new technology is seen as one of the best hopes for boosting profits.”

REGULATION, JUDICIARY AND LEGISLATION

Prepaid-Card Rules Ahead — U.S. Regulation of the Growing Sector to be Brought More in Line with that of Banks

September 20, 2016, The Wall Street Journal

The CFPB has been working on its terms for prepaid card regulation for the past four years and will soon roll out its new rules to bring prepaid card disclosures and protections more in line with other card products. The funds loaded on GPR cards have doubled since 2010 and this year, Mercator predicts that $300B will be loaded before year’s end.  Moving forward, the CFPB will require prepaid card companies to “provide more detailed fee disclosures and easier access to account information, limit consumer losses when funds are lost or stolen, and resolve errors in a timely fashion.” While many/most prepaid card products include these protections, they’ve been provided voluntarily rather than as a legal requirement.

In Wells Fargo’s Bogus Accounts, Echoes of Foreclosure Abuses

September 21, 2016, The New York Times

For years, Wells Fargo has promoted itself as a customer-friendly bank, but as the public is discovering, Wells has a long history as an abusive, win-at-all-costs institution unwilling to back down on its aggressive tactics even when faced with a court order. Yes, Wells was fined $185M for systemic fraud in the opening of bogus depository and credit card accounts by employees driven to meet the bank’s aggressive cross-sales quotas. But in the recession’s foreclosure crisis, Wells turned pro-bank judges against it by levying improper fees, incorrectly foreclosing on homes and forging borrowers’ signatures on documents. And its lawyers were ferocious – no backing down, no apologies and even when sanctioned, no reimbursement for inappropriate fees. In fact, in 2013, a federal district court judge was so frustrated by the bank’s attorneys and their tactics that he required them to obtain a “corporate resolution signed by its president and a majority of its board stating that they stood behind the conduct of the bank’s lawyers in the case.”

Breaking Down the Financial Overhaul Bill

September 21, 2016, Credit Union Times

The House Financial Services Committee has sent a 512-page bill dealing with overhauling the financial regulations to the House floor. That bill is seen as easily passing in the House, but for the remainder of this session, it’s seen as a symbolic gesture. There is no companion bill in the Senate, and even if there were, it would be blocked there. Our industry continues to watch the overhaul bill which will indubitably reemerge next session and next President.

U.S. House Bill Aims to Set Up ‘Sandbox’ for Fintech Innovation

September 22, 2016, The New York Times

Taking a brief hiatus from that whole smaller-government thing, Rep. Patrick McHenry has put forward three bills intended to keep the U.S. competitive with the U.K. in creating financial innovation sandboxes. To that end, McHenry wants the fin tech industry to have access to separate financial innovation officials in many Federal financial regulatory agencies with those officials being charged with helping fin techs navigate the regulatory process.  Working alongside a federal regulator, fin techs could prepare for a limited product launch so they could more accurately anticipate compliance costs, before committing to a full-scale roll-out. While fin techs are psyched about an onshore innovation sandbox, they are wary about the creation of even more regulatory fragmentation, and would prefer that the Commerce Department oversee the project since it’s in a “unique position where their charter is to help drive GDP and commerce in the United States.”

Elizabeth Rowe

Elizabeth Rowe

Elizabeth tracks the shifting payments landscape for both PSCU and its member owners. Focusing on the interstice of the economy, competition, consumers, technology, payment products and channels and regulatory guidance, Elizabeth gleans the key challenges and opportunities facing our industry, our strategic plans and our success fulfilling our mandate of serving the American consumer.
Elizabeth Rowe

 


 

 
 
 

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