| Quote of the Month:
"Auto insurance companies have discovered that consumers who are careless in their use of credit are also accident-prone drivers, according to Associated Press writer, Dave Carpenter."
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August 2001
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| Slowing Economy Brings Payment Problems |
| Consumers and their spending kept the economy moving forward for the past 12 months, despite sharp declines in business investment spending. It turns out that much of the strength in spending was financed through greater borrowing.
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| Credit Card Chargeoffs Are Rising
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| The chargeoff rate in the $335 billion pool of credit card receivables rated by Moody's Investors Services rose in May to 6.6 percent, up from 6.02 percent in May, 2000. This was the fourth consecutive month of year-over-year increases in the chargeoff rate. |
| Bankruptcy Growth Continues
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| Lenders who hoped that last spring's escalation in personal bankruptcies would fade have been disappointed. Visa U.S.A.'s Bankruptcy Notification Service indicates that through the week of July 21, 2001, personal bankruptcy petitions in the U.S. are up 22.3 percent over the same period in 2000. |
| Trends in Debt Burden and Delinquencies |
| The Federal Reserve Board publishes a quarterly statistical report on consumers' debt burden. Debt burden is an "estimate of the ratio of debt payments to disposable personal income. |
| The Beige Report |
| The Federal Reserve Board's Beige Report summarizes comments received from businesses and other contacts outside the Federal Reserve System. The latest report is consistent with recent remarks by Alan Greenspan. |
| Internet Saturation? |
| While the percent of U.S. homes with high-speed Internet access remains relatively low, the percent of households with any kind of Internet access may have hit a plateau. According to Gartner Dataquest, a San Jose-based research firm, 63 percent of U.S. homes now have a computer and nearly all of those households have Internet access. |
| Sexual Orientation and Financial Services |
| In the latest issue of American Demographics, an article titled "Homo Economics" by Pamela Paul reports the differences in attitudes towards various financial services among self-identified lesbian, gay, bisexual, or transgendered (LGBT) consumers and heterosexual consumers. |
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| Interest Rates and Religious Principles |
| The Koran forbids "riba," an Arabic word that can be translated into "usury." Strict interpretation of the Koran leads to the prohibition of receiving or paying any interest. According to the article in the New York Times by Shira J. Boss, the original intent of the prohibition was to "protect poorer classes from exploitive money lenders." |
| Huge Demand for Fico Scores |
| Let there be no doubt, consumers are interested in their credit scores. As we reported in a previous issue of Spotlight, Fair, Isaac & Co. (FICO) recently teamed with Equifax to introduce an online site for selling FICO credit scores. |
| Stored-Value Cards to Pay Insurance Claims |
| Several insurers have begun collaborating with Visa to deliver insurance claim payments to policyholders via stored-value cards. The idea originated with insurers who were seeking to reduce the cost of issuing, handling and delivering checks to claimants. |
| Capital One Retreating from Teaser Rates |
| Richard D. Fairbank, Capital One's chairman and CEO, told the American Banker in June that his company would be dramatically scaling back its reliance on "teaser rates." Teaser rates are the low, temporary interest rates that card issuers relied upon heavily during the past decade to attract new customers. |
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| MBNA Buys Credit Union's Portfolio |
| MBNA has purchased the $19 million Visa credit card portfolio of the Xerox Federal Credit Union. Bill Cheney, president of Xerox FCU explained the motive for the sale by pointing out that there were only 16,000 cardholders among the 75,000 members. |
| Credit Reports and Auto Insurance | | Auto insurance companies have discovered that consumers who are careless in their use of credit are also accident-prone drivers, according to Associated Press writer, Dave Carpenter. The correlation between debt management and driving is close enough that auto insurers are relying more and more on credit scoring in their underwriting. |
| Banks' Role in Consumer & Mortgage Credit | | The August issue of the Federal Reserve Bulletin provides its annual retrospective survey of commercial banks. In this report we first review the distribution of banks arranged by size. Then, we turn to the role of banks in consumer and mortgage credit when grouped by the size of their assets at the end of 2000. |
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| Bankruptcy Reform Should Progress During August Recess | | Early last spring the U.S. House and Senate each passed versions of a bankruptcy reform bill. The next step was to appoint a House-Senate conference committee to mold the already-similar bills into one piece of legislation. But, the unique politics surrounding a 50-50 split in the Senate stalled the appointment of a conference committee. Now, resolution of the impasse is at hand. |
| Likely Impact of the FRB HOEPA Proposals | | In December 2000 the Federal Reserve Board invited public comments on its proposed revisions to Regulation Z that would alter the criteria for a mortgage loan to be covered by the Home Ownership and Equity Protection Act (HOEPA). The proposals were intended to curb a variety of mortgage market abuses that have been termed "predatory lending." |
| Internet Gambling | | The Nevada legislature has approved a bill that authorizes the state Gaming Control Board to examine Internet gambling in order to determine how it might be regulated. According to CardLine, Internet gambling has reached about $1.6 billion worldwide. |
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