Vital Financial Updates Credit – Is it good or bad?

Three Ways to Maintain Good Credit

WASHINGTON, Aug. 18, 2015 /PRNewswire-USNewswire/ –Your credit history is your financial reputation. And just like your professional and personal reputations, your credit history takes many years to cultivate, can be easily damaged, and will follow you the rest of your life.

Sound intimidating? Good. Are you scared? Dont be.

Yes, maintaining good credit is important. Nearly everyone will need to borrow money from a lender at some point say, for buying a car and your credit history determines whether you qualify for a loan and, if you do, what interest rate you pay. It can make or break your application for a credit card. A prospective landlord can check it to judge whether youll be a responsible tenant. Potential employers may request your credit reports to see if there are any red flags.

Luckily, many resources are available to help you learn how to successfully establish and maintain a healthy financial reputation. Here are three tips for creating a stable foundation for good credit.

1. Monitor your credit reports. Understanding your financial habits such as payment history and spending patterns can help you improve them! Your score is generally based on information in your credit reports. Mistakes on your credit reports could hurt your credit score, so check them regularly. Make sure to check that your reports dont contain any errors, such as incorrect contact information, closed accounts listed as open, or an item like an unpaid debt listed twice.

If you find something wrong in a credit report, you should contact both the credit reporting agency that produced it and the creditor that provided the information.

2. Pay your bills on time. This is one of the simplest ways to keep your credit score strong yet, with the bustle of everyday life, it can be easy to lose track of time and miss payment deadlines. Set up auto-payments or electronic reminders to ensure that you wont be hit with late-payment penalties. Paying bills late can hurt your credit score, which in turn can raise your interest rate meaning that youre out even more money.

Its a common misconception that the best way to improve a credit score is to pay off all of your accounts and close them. Get up to speed on your payments and stay on schedule, but be careful when closing accounts. Doing so eliminates some of the credit available to you, making balances appear higher when compared with the combined credit limit of all of your accounts. Also, if you managed an account well and made payments on time, closing it will remove all the positive benefits of your responsible credit behavior on your reports and score.

3. Dont get close to your credit limit. Credit scoring models look at how close you are to being maxed out, so keep your balances low in proportion to your overall credit. Experts advise keeping your use of credit to no more than 30 percent of your total credit limit. That means that if you have $12,000 of available credit on one open account, you shouldnt use more than $3,600.

You can decrease your credit utilization ratio over time by paying as much of your credit card balance as possible each month. If you can, pay more than the minimum balance due; this will increase your available credit and decrease your utilization ratio faster.

Just like a shining professional reputation can take you far in your career, your credit score can make or break your financial status. To learn more about how to establish a stellar financial reputation, visit FinancialProtection.USA.gov.

To learn about more topics, go toUSA.gov andGobiernoUSA.gov, the US Governments official websites in English and Spanish, and part of the US General Services Administration (GSA).

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SOURCE USA.gov

3 Money-Saving Tips When You’re Earning Minimum Wage

Source: Pictures of Money via Flickr.

Earning minimum wage can be difficult on an individual or their family for a variety of reasons. One of the big ones is their likely inability to save for retirement. While some minimum wage workers might think that theyll just work forever, our physical health, an unexpected emergency, or even our employer may interfere with that plan. Thats why its important for everyone, even workers earning minimum wage — of which there were 3.3 million in 2013 according to the Bureau of Labor Statistics — to take steps now to save for retirement. 

With this in mind, we asked three of our top retirement contributors to offer guidance geared toward minimum-wage workers that could hopefully put them on the path to saving money. Heres what they had to say. 

Sean Williams
Living on minimum wage isnt easy, but one tactic that can make it easier (and this goes for Americans of all incomes) is formulating a budget.

I know what youre probably thinking: A budget sounds difficult and time-consuming. Nowadays its neither, since you can find computer programs that take care of the addition and subtraction for you. All it takes is you entering your expenses and revisiting those expenses once a month (give or take) for a few minutes to determine whether or not youre still on track.

Source: Social Security Administration.

A budget is critical, because far too many Americans dont understand their cash flow. You might have a good idea of how much youre making on a weekly or bi-weekly basis when you get your paycheck, but ask American workers where their money has gone by the end of the month and youll likely get a shoulder shrug. Formulating a working budget allows minimum wage workers to better understand their cash flow so they can maximize their saving potential.

Two important points worth noting here: First, a budget can be fluid — life changes happen all the time, and your budget doesnt have to be a set in stone spending pattern that can never be altered. Second, the power of time and compounding can improve anyones retirement situation.

Imagine this: a worker who can save just $20 per week, or $1,040 per year, over the course of 49 years (assume our fictitious worker manages to start saving at age 18 and retires at age 67), and who nets 8% per year on their money (the historical return of the stock market), would have more than $600,000 waiting for them upon retirement. That money, along with Social Security benefits and some budgeting, could lead to a comfortable retirement.

Dan Caplinger
Most minimum wage jobs dont give you the chance to save for retirement through a 401(k) or other employer-sponsored plan. But the federal government gives low-income workers a matching contribution of its own through whats known as the Retirement Savings Contributions Credit, or the Savers Credit for short.

Source: Social Security Administration.

The Savers Credit offers you money back for up to $2,000 in contributions to an IRA or other retirement plan account. The amount you get depends on your income, with joint filers in 2015 earning $36,500 or less and single filers earning no more than $18,250 getting a 50% credit. Smaller credits of 20% or 10% apply to those earning as much as $61,000 for joint filers and $30,500 for single filers, so even those who make somewhat more than minimum wage can take advantage of the Savers Credit provisions.

The one downside of the Savers Credit is that its not a refundable credit, so if you dont have any tax liability, you wont get any benefit from the credit. Nevertheless, even some minimum-wage workers earn enough income to owe at least some income taxes; if that applies to you, then a good way to wipe your taxes out is by saving whatever you can afford to set aside for your long-term retirement needs.

Brian Stoffel
There are lots of excuses that people give for not having saved up enough for retirement. But I believe one of the least appreciated reasons is simply that we are terrible at knowing what makes us happy, and spend far too much on stuff that doesnt really add any value.

Source: Flickr user Andrew Stawarz.

Obviously, when you are earning minimum wage, this type of problem is the least of your concerns — as just getting bye is far more pressing. But if you believe that better days (financially) are ahead for you, this period of minimum wage work could represent a golden opportunity.

Because you dont have the resources to make impulse buys, you are forced to figure out what your own level of Enough really is. Then, when you do get a raise or better paying job, you can maintain your level of consumption and bank the rest of your income into investments.

If youre looking for inspiration, Tesla CEO Elon Musk once spent a month living on just a dollar per day to prove that he could physically survive if his entrepreneurial pursuits went bust. As we all know, he didnt have to worry about that. But because he found his level of Enough, everything beyond that has been icing on the cake.

AHA Issues ICD-10 Homestretch Checklist for Hospital Leaders

The American Hospital Association (AHA) has released an ICD-10 Homestretch Checklist to help hospital leaders finalize their action plans for October 1, 2015 ICD-10 implementation. The AHA urges hospital leaders to share this checklist with their ICD-10 transition team as yet another means to promote active readiness discussion. The AHA confirms a tri-fold objective of focus at this stage in the ICD-10 game is imperative for future success: checking internal systems, verifying external partner readiness, and considering financial protections.

Check internal systems

  • The AHA recommends authenticating whether or not an organizations systems and applications including vendor software updates are prepared when the ICD-10 deadline hits.
  • Evaluate if more training needs to be conducted to make sure staff members, coders, clinicians, etc. are well prepared.
  • Collectively assess documentation improvement efforts. Consider the currently implemented tools used to assist physicians plan and prepare supportive ICD-10 documentation.
  • Ensure accessibility on behalf of your coding team to access coding guidelines, confirms AHA.
  • Guesstimate to what extent coding productivity will decrease. Consider hiring additional short-term staff to close alleged future gaps.

Verify external partner readiness

  • Make sure health plans and other trading partners are well prepared for the ICD-10 transition. The AHA advises finalizing communication plans and policies among various organizations.
  • Gather emergency Medicare contractor and commercial insurers contact information to help smooth the aftermath of claims being delayed, AHA recommends.
  • Record what may not be amply covered by HIPAA perhaps workers compensation or automobile insurance, for instance. The AHA confirms making sure those specific steps needed to limit payment delays from these payers are clearly confirmed.

Consider financial protections

  • AHA confirms it is vital to track current claims volume with verified metrics tied to monetary amounts. Doing so will formalize a baseline for tracking upcoming claims volume submitted and processed.
  • When October 1, 2015 hits, AHA advises carefully tracking the status of submitted claims to avoid future financial hardship. Consider that claim status inquiries can be obtained via health plans through a web portal or through a health plan utilization of the HIPAA transaction standard for claim status.
  • The AHA additionally confirms the importance of understanding trading partners policies and processes related to advance payments if payment delays become a reality. Consider that the Centers for Medicare amp; Medicaid Services (CMS) has available resources to tuck into your back pocket now to prepare for upcoming financial struggles if a lag with Medical billing or payments occurs.
  • Lastly, the AHA advises establishing credit lines that can be activated if the normalized revenue cycle is negatively impacted by processing delays following the ICD-10 switchover on October 1.

The healthcare industry waits to see what the ICD-10 aftermath will be upon the realm of revenue cycle management. There is still time to amp up preparation needs and perhaps consider one, several, or all of the aforementioned pieces of advice from the AHAas the next approximate 6 weeks unfold and the ever familiar chapter of ICD-9 closes.

Getting a Balloon Loan with Bad Credit

A balloon car loan can mean a lower monthly payment, but consumers with less than perfect credit will find it hard to qualify for one.

Balloon Car Loan

A balloon car loan is much like leasing a vehicle. Typically, borrowers put little or no money down. And while interest rates are about the same as a regular car loan, the monthly payment is lower because, like a lease, it’s usually based on some combination of the vehicle’s depreciation plus the monthly interest charges.

Like a lease, this leaves a large balance at the end of the contract. But unlike a lease, the borrower simply can’t turn in the vehicle to the lender, since the borrower, not the lender, holds the title.

But borrowers at this point still have a number of options:

  • They can pay off the remaining balance and own the vehicle outright.
  • They can refinance the vehicle and continue to make monthly payments until it’s paid off.
  • They can sell the vehicle outright or trade it in on another car.

The only problem with a balloon loan is that consumers who might see an advantage in this type of financing had better have good or even great credit, because high-risk lenders don’t offer this kind of financing. Here’s why:

Why Subprime Lenders Don’t Offer Balloon Car Loans

The reason subprime lenders don’t offer balloon loans is that, like a lease, the value of the vehicle being financed is usually less than its market value during the entire loan term. This means that if the borrower misses or stops making payments, the lender faces a greater chance of losing money if the car has to be repossessed. This makes this type of vehicle loan riskier than a conventional car loan.

As a result lenders, if they offer balloon car loans, usually only approve them for their most qualified customers borrowers with very good to excellent credit. For credit-challenged consumers this means that there is very little hope they will qualify for this type of used or new car loan.

The Bottom Line

While a balloon car loan can reduce the monthly payment on a vehicle, lenders that offer these loans, because of the higher risk involved, usually only approve them for their most credit-worthy borrowers.

Fortunately, for a good many credit-challenged borrowers, there is an option. At Auto Credit Express we match people that have experienced credit difficulties with new car dealers that can offer them their best opportunities for approved auto loans.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online auto loan application.

Short Interest Update on PartnerRe Ltd. (NYSE:PRE)

PartnerRe Ltd. has dropped 0.13% in the last five trading days, however, the shares have posted positive gains of 5.01% in the last 4 weeks. PartnerRe Ltd. is up 3.21% in the last 3-month period. Year-to-Date the stock performance stands at 23.08%.

PartnerRe Ltd. (NYSE:PRE): The mean estimate for the short term price target for PartnerRe Ltd. (NYSE:PRE) stands at $132.15 according to 10 Analysts. The higher price target estimate for the stock has been calculated at $141 while the lower price target estimate is at $111.

On a different note, The Company has disclosed insider buying and selling activities to the Securities Exchange, The director, of Partnerre Ltd, Twomey Kevin M had unloaded 19,663 shares at $138.4 per share in a transaction on August 5, 2015. The total value of transaction was $2,721,359. The Insider information was revealed by the Securities and Exchange Commission in a Form 4 filing.

PartnerRe Ltd. (PartnerRe) is the ultimate holding company for its international reinsurance group. The Company provides reinsurance on a global basis through its wholly owned subsidiaries, including Partner Reinsurance Company Ltd. (PartnerRe Bermuda), Partner Reinsurance Europe plc (PartnerRe Europe) and Partner Reinsurance Company of the US (PartnerRe US). Its risks reinsured include property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy, marine, specialty property, specialty casualty, multiline and other lines and mortality, longevity and health. The Company also offers alternative risk products, which include weather and credit protection to financial, industrial and service companies on a global basis. In January 2013, the Company acquired Presidio Reinsurance Group. In March 2013, the Company announced the formation of Lorenz Re Ltd.

Is Bad Credit Harming Your Quality of Life?

You may be aware of the fact that damaged credit can make it difficult to get approved for a loan or a credit card. But having a low credit score can have a negative impact on parts of your life that you may not have considered vulnerable.

Categories Affected by Finances

When you stop and think about the limitations that credit problems can impose, it seems impossible to deny the importance of keeping your credit rating strong. And you may not even realize that your finances are as troubled as they are until you are denied a particular privilege.

  • Car Insurance: Some insurance companies have determined that there is a connection between poor credit ratings and reckless driving, so they penalize bad credit drivers with higher premiums. Individuals with the worst credit have even been denied coverage entirely. Fortunately, some states have deemed this practice illegal.
  • Renting: This is an interesting kind of arrangement. While paying your rent regularly and on time will do nothing to improve your credit, your tarnished credit can keep you from being allowed to rent a property. Very often, landlords perform credit checks on potential tenants and deny applicants with significant credit issues.
  • Employment: You can be denied a job due to a subprime credit score, and actual statistics support this claim. It appears that 1 in 4 Americans have had to go through an employer credit check, and 1 out of 10 job seekers have been denied work because of bad credit. Defending this practice, many employers claim that there is a correlation between financial difficulties and work performance. However, there is currently a huge push to prevent employers from using credit as a factor when filling job positions.
  • Stress: Yes, there is the inconvenience that comes with having limited purchasing power, but there is also a great deal of shame attached to the burden of ruined credit. Even though the Recession normalized bad credit to a certain extent, consumers are still embarrassed by the inability to buy certain things. And anyone who has ever had a credit card declined, had their wages garnished, or received collection calls at work knows that financial woes can cause a tremendous amount of anxiety.

Getting Back in the Game

It will take time and considerable effort, but you can repair your credit and get your life back on track. And one of the best ways to build credit is to use credit, ideally in the form of an installment loan. With this kind of financing, every timely payment that you make will increase your credit rating. This arrangement works extremely well if you are in the market for reliable transportation to serve your daily needs. A bad credit auto loan offers the perfect type of installment plan for credit repair.

Getting Started

When you decide to get your credit back on track with affordable vehicle financing, Auto Credit Express can help you find a loan that is the perfect fit for your situation. Our process is easy and open to applicants with every type of credit background.

Put your past behind you and move towards the future that you deserve by filling out our fast and secure online application.

Miami-Dade officer pleads guilty to fraud for role in credit-repair ring

Moonlighting on the job, a Miami-Dade County cop wrote 159 police reports claiming people with bad credit histories were “victims” of identity theft, according to court records.

The reality: Veteran Miami-Dade police officer George Price fabricated the reports and sold them so they could be used to remove blemishes from the purported victims credit histories.

Price, 42, pleaded guilty to a conspiracy charge Friday for his supporting role in an alleged credit-repair ring. Price, who joined the force in 1999, must resign by next week.

He faces up to 20 years in prison on his fraud conviction, but is expected to receive a significantly shorter sentence because he pleaded guilty and has agreed to assist the FBI and US attorney’s office in their investigation, according to a plea deal signed by Price, his defense attorney, Marshall Dore Louis, and the prosecutor, Michael Davis.

In the end, Price didn’t make much for exploiting his badge: $7,000. He must turn over to the feds the bribery payments he received in 2010-11.

Price was not operating alone.

Through an intermediary, he was working for Vanessa and Mario Perez, a Miami-Dade couple who already pleaded guilty. They made more than $322,000 by clearing up the lousy credit reports of people with bad bill-paying histories, according to court records.

Price and at least three other police officers and an unnamed person wrote 215 falsified police reports for $200 to $250 a pop that the couple used to claim their customers were victims of identity theft — when they were not, court records show.

Vanessa Perez’s “intermediary” in dealing with Price was Mitchell Page, one of her customers and a friend of the officer’s. Last year, Page pleaded guilty for his role. A statement filed with his plea agreement noted that Page “would deliver a portion” of each bribe payment to Price and “keep the remainder for himself.”

Also charged earlier this year with Price: fellow Miami-Dade police officer Rafael Duran, 43, who has pleaded not guilty and is awaiting trial.

Also named in the alleged scheme: the couple’s assistant, Fatima Ruiz. She is accused of helping obtain false police reports and writing letters about the ID theft “victims” to the credit reporting agencies, Equifax, Transunion and Experian. Ruiz is also accused of providing the couple’s funds to Page to pay off Price, and of compensating the officer for false police reports to benefit her own credit-repair business, court records show.

The false ID theft claims provided the couple’s clients — who paid $1,500 each for the Pereze’ services — with an official excuse for their bad credit histories so they could get negative items removed from their reports, according to court records. In turn, the customers could boost their credit scores with reporting agencies and obtain credit cards, loans and other financing again.

Duran is also accused of writing additional police reports for himself and a “personal associate” — claiming they were victims of ID theft — then signing another officer’s name to the documents to avoid getting caught, according to the indictment.

Duran’s defense attorney, Douglas Hartman, said his client was an actual victim of ID theft and hired Vanessa Perez in 2010 to help clean up his credit mess before eventually firing her. Duran, who joined the Miami-Dade police in 1994 and worked in the sexual victims bureau before being relieved of duty, has pleaded not guilty and plans to go to trial.

Two other former veteran police officers, Richard Muñoz, 45, and Lazaro Fernandez, 40, who respectively worked in the cities of South Miami and Miami, also pleaded guilty to participating in the couples scheme.

Why Does the CFPB Want to Curb Auto Lenders’ Discretion to Charge Higher or …

Introduction

On July 14, 2015, the Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ) announced they had reached a groundbreaking settlement with American Honda Finance Corporation (Honda).(1) The settlement resolves allegations that Honda engaged in racial discrimination by charging higher interest rates on auto loans to minority borrowers.

Under the terms of the settlement, the CFPB will not assess penalties against Honda. Instead, Honda will pay $24 million into a settlement fund to compensate minorities affected by Hondas lending practices between 2011 and 2015. See Consent Order, In the Matter of American Honda Finance Corporation, File No. 2015-CFPB-0014, para; 30 (July 14, 2015). Honda also agrees to reduce or eliminate dealer discretion to adjust interest rates for new auto loans. See Consent Order para; 26.

Does this mean Honda admits that its lending practices have been unfair and discriminatory? Not at all. On the same day that the CFPB announced the settlement, Honda issued a press release stating that it strongly opposes any form of discrimination, and that it firmly believe[s] that [its] lending practices have been fair and transparent.(2) Honda also has a difference of opinion with the CFPB regarding its methodology used to determine that Hondas lending practices were discriminatory and harmful to minority borrowers.

Meanwhile, the CFPB has set its sights on another auto lender. Recent news reports indicate that the CFPB is urging Fifth Third Bancorp also to reduce dealer discretion for auto loan interest rate markups.(3)

While auto lenders and others in the consumer finance industry follow these developments, some may be asking whether the CFPB has overreached. Some might also wonder what the Honda settlement portends for the expansion of regulatory oversight of auto lenders. These concerns raise two specific questions. First, what is the legal basis for the CFPBs supervision of auto lenders? Second, what methodology did the CFPB use to establish the connection between discretion in interest rate markups and racial discrimination in auto lending?

What is the Legal Basis for the CFPBs Regulation of Indirect Auto Lenders?

The CFPBs general mission is to regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. See 12 USC. sect; 5491(a). Notably, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), which established the CFPB, generally prohibits the CFPB from regulating car dealerships. See 12 USC. 5519(a). Specifically, Dodd-Frank states that the CFPB may not exercise any rulemaking, supervisory, enforcement or any other authority, including any authority to order assessments, over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.

The CFPB is, however, tasked along with several other agencies with the enforcement of the Equal Credit Opportunity Act (ECOA). See 15 USC. sect; 1691c(a). The ECOA prohibits any creditor from discriminating against any loan applicant on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or the exercise of a right under the Consumer Credit Protection Act. See 15 USC. sect; 1691(a)(1). A creditor includes any person who regularly extends, renews, or continues credit and any assignee of an original creditor who participates in the decision to extend, renew, or continue credit. See 15 USC. sect; 1691a(e). Regulation B provides, more broadly, that a creditor includes a person who, in the ordinary course of business, participates in a credit decision, including setting the terms of the credit as well as creditors assignee, transferee, or subrogee who so participates. See 12 CFR. sect; 1002.2(l). The CFPB says that indirect auto lenders are creditors under this definition.

On March 21, 2013, the CFPB issued a bulletin providing guidance on indirect auto lending and compliance with the fair lending requirements of the ECOA and Regulation B.(4) In the bulletin, the CFPB warns that when car purchasers seek financing for an automobile purchase from the auto dealer, which in turn facilitates indirect financing by a third party, that lending is subject to regulation and potential liability.

In the bulletin, the CFPB states that, [e]ven as assignees of the installment contract, indirect auto lenders are creditors under the ECOA and Regulation B if, in the ordinary course of business, they regularly participate in a credit decision. For example, the CFPB found that an indirect auto lender is probably a creditor if it evaluates an applicants information, established a buy rate, and then communicates that buy rate to the dealer, indicating that it will purchase the obligation at the designated buy rate if the transaction is consummated. The CFPB also indicated that an indirect auto lender is likely a creditor when the lender provides rate sheets to a dealer establishing buy rates and allows the dealer to mark up those buy rates if the lender later purchases a contract from that dealer. Most importantly, the bulletin states that [a]n indirect auto lenders markup and compensation policies may alone be sufficient to trigger liability under the ECOA if the lender regularly participates in a credit decision and its policies result in discrimination.

Just a few months after the bulletin, the CFPB ordered Ally Financial Inc. and Ally Bank (Ally) to pay $80 million in damages to harmed minority borrowers and $18 million in penalties.(5) See Consent Order, In the Matter of Ally Financial Inc. and Ally Bank, File No. 2013-CFPB-0010 (Dec. 20, 2013). The CFPB had begun an investigation in 2012, and found that Ally violated the ECOA by charging African-American, Hispanic, and Asian and Pacific Islander borrowers significantly higher dealer markups for their auto loans than similarly-situated non-Hispanic white borrowers.

Finally, the CFPB expanded its regulatory oversight of indirect auto lending by the issuance of a final rule, under Dodd-Frank, to supervise nonbank auto lenders. Prior to the rule, the CFPBs authority reached large banks and credit unions that originated automobile loans and leases, but the nonbank lenders were not yet supervised at the federal level.(6) But under the new rule, the CFPB now has the power to supervise nonbank automobile financing companies (except for auto dealers) that originate 10,000 or more loans per year.(7)

The New York Times editorial board praised the new rule, calling it a regulatory breakthrough.(8) The editorial board criticized hidden finance charges and dealer discretion to quote higher interest rates to a borrower because [t]his discretion has led to minority borrowers paying higher interest rates than white borrowers with similar credit histories. The analysis naturally turns, then, to how the CFPB came to the conclusion that dealer discretion for markups causes discrimination against minority borrowers.

How did the CFPB Conclude that Discretion in Interest Rate Markups Harms Minority Borrowers?

Although the CFPB is charged with ensuring that lenders comply with fair lending laws, the CFPB sometimes lacks key information for its analysis. In the context of auto lending, borrowers do not provide information on their race or ethnicity. How can the CFPB ensure that lenders are not discriminating against minorities when it does not know which borrowers are minorities?

To address this dilemma, in the summer of 2014 the CFPB released a white paper titled, Using publicly available information to proxy for unidentified race and ethnicity.(9) In that report, the CFPB states that substitute, or lsquo;proxy information is utilized to fill in information about consumers demographic characteristics. According to the CFPB, researchers and statisticians often rely on publicly available demographic information associated with an individuals surname and place of residence from the US Census Bureau to construct proxies for race and ethnicity when this information is not reported. Thus, although a borrower does not report his or her race or ethnicity to the auto lender, the borrowers home and last name provide a certain probabilities as to the borrowers race or ethnicity.

The CFPB does not view these two pieces of information in isolation. The CFPBs Office of Research (OR) and Division of Supervision, Enforcement, and Fair Lending (SEFL) have combined geographic location and surname information into a single probability analysis called the Bayesian Improved Surname Geocoding (BISG). The CFPBs white paper concludes that the BISG proxy probability is more accurate than a geography-only or surname-only proxy in its ability to predict individual applicants reported race and ethnicity and is generally more accurate than a geography-only or surname-only proxy at approximating the overall reported distribution of race and ethnicity.

Prior to its settlement with Honda, the CFPB conducted a joint investigation with the DOJ of Hondas indirect auto lending activities and its compliance with ECOA and the ECOAs implementing regulation, Regulation B. See 15 USC. sect;sect; 1691-1691f; 12 CFR. pt. 1002.

According to the July 14 Consent Order, [t]o evaluate any difference in dealer markup, the [CFPB] and the DOJ assigned race and national origin probabilities to applicants using the BISG method. See Consent Order para; 16. The CFPB then used the race and national origin probabilities obtained through BISG to estimate any disparities in dealer markup on the basis of race or national origin. See id. According to the Consent Order issued by the CFPB, the differences in interest rates were based on race and not on any other objective criteria such as creditworthiness. See Consent Order para; 18-20.

The CFPB concluded that between 2011 to 2015, on average, African-American borrowers were charged interest rates approximately 0.36% higher than similarly-situated white borrowers, resulting in an average of $250 more in interest owed on the loan for the full term of the contract. See Consent Order para; 18. The CFPB also found that Hispanic borrowers and Asian/Pacific Islander borrowers were charged interest rates approximately 0.28% higher and 0.25% higher, respectively, requiring them to pay approximately $200 and $150 more, respectively, for their auto loans. Thus, the CFPBs fact findings, relying on the BISG method, contradict Hondas insistence that it acted properly and did not engage in discriminatory lending practices.

Conclusion

Auto lenders and others in the consumer finance industry should pay close attention to the CFPBs recent actions relating to auto lending, including the CFPBs issuance of a rule expanding its supervisory authority to include nonbank auto lenders and the CFPBs settlement with Honda. Two implications seem clear. First, because the CFPB views disparate impact as sufficient evidence of unlawful discrimination in violation of the ECOA, the CFPB likely will continue to pursue indirect auto lenders whose markup and compensation policies appear to result in higher interest rates charged to minority borrowers. Second, although the CFPB is currently prohibited, with few exceptions, from directly regulating car dealerships, the CFPB may use its rule-making authority to further expand the scope of its supervisory authority in the auto lending arena.

Endnotes

1. http://www.justice.gov/opa/pr/justice-department-and-consumer-financial-protection-bureau-reach-groundbreaking-settlement

2. http://news.honda.com/newsandviews/article.aspx?id=8573-en

3. http://www.wsj.com/articles/cfpb-proposes-fifth-third-bancorp-change-auto-lending-practices-1438809888

4. http://files.consumerfinance.gov/f/201303_cfpb_march_-Auto-Finance-Bulletin.pdf

5. http://www.consumerfinance.gov/newsroom/cfpb-and-doj-order-ally-to-pay-80-million-to-consumers-harmed-by-discriminatory-auto-loan-pricing/

6. http://files.consumerfinance.gov/f/201410_cfpb_supervisory-highlights_fall-2014.pdf

7. http://files.consumerfinance.gov/f/201506_cfpb_defining-larger-participants-of-the-automobile-financing-market-and-defining-certain-automobile-leasing-activity-as-a-financial-product-or-service.pdf

8. http://www.nytimes.com/2015/06/14/opinion/sunday/putting-an-end-to-abusive-car-loans.html?_r=0

9. http://files.consumerfinance.gov/f/201409_cfpb_report_proxy-methodology.pdf

CNBC: Credit Card Debt Could Come Back to Bite Amid Fed Rate Hikes

While the Federal Reserve prepares to begin raising interest rates as soon as next month, credit card debt is on the rise.

That may prove to be a toxic combination for the people running up that debt, because Fed rate hikes will push up rates for credit card debt too, CNBC reports.

Credit card debt rose 3.2 percent in the 12 months through May to $901 billion. That represents a 7.3 percent increase from $839.5 billion at the end of 2010.

Many people have major debt loads. The National Foundation for Credit Counseling figures that 35 million people carry at least $2,500 in credit card debt every month.

Sean McQuay, a credit card associate at Nerdwallet, told CNBC a 1 percentage-point Fed rate increase would cost credit-card-debt holders another $9 billion a year.

The Fed is expected to boost rates 25 to 50 basis points this year and to reach a total of 100 basis points next year. The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

Another ominous sign for American consumers is a decline in economic confidence. Gallups Economic Confidence Index fell to negative 14 for the week ending July 26, a 10-month low and down from negative 12 a week earlier.

The index has gradually slid since peaking at positive 5 in late January, a record high since Gallup began tracking economic confidence daily in 2008. The weekly numbers have consistently stood in negative territory since mid-March.

Gallups Economic Confidence Index averages two components: how Americans view the economy currently and whether they see it improving or getting worse.

The current conditions component slid 4 points in the latest week to negative 9. The economic outlook component registered negative 18, unchanged from a week earlier.

So whats causing the pessimism?

A number of factors may be affecting how Americans view the direction of the countrys economy, including unsettled economic conditions in Europe and in China and the volatility of the US stock market, writes Rebecca Riffkin of Gallup.

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Gen X-ers, Baby Boomers Creating Cloudy Future with Added Debt

NEW YORK (MainStreet) — While Gen X-ers and Baby Boomers come closer and closer to retirement, the way both generations think about debt may darken their golden years.

“Over the last three decades, there has been a collective shift in how people view debt – its now perceived as a normal part of ones financial experience and that has fundamentally altered the way people spend and save, said Katie Libbe, vice president of consumer insights for insurance provider Allianz Life, which released the new numbers looking at how Baby Boomers and Gen X-ers see their financial future.

The new research shows that while living with debt has become the new norm, the stigma of being in debt has disappeared. Nearly half of both generations agree credit cards serve as a survival tool, while 43% agree, lots of smart, hardworking people who are careful with spending also have a lot of credit card debt.”

Experts agree not all debt is bad — but credit card debt normally does not fall into that category.

“In general, if you are able to keep your debt at an interest rate lower than a reasonable rate of investment return — about 5% or less–and you are able to service your debt payments with your monthly income, then debt can be a valuable financial planning tool,” said Kyle Ryan, head of advisory services at Personal Capital in Redwood City, Calif.

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