Quote of the Month:
"The portion of government-insured home mortgages that are more than 30 days past due has risen to more than 10 percent, the highest level in history..."
| Forecasts & Statistics |
| Product Trends |
| Industry Trends |
| Issue Archive |
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| International Economic Outlook |
| The Goldman Sachs Economic Research Group has issued revised growth projections for the global economy. The bottom line: the economic cycle will bottom out in the next 6-9 months. |
| Consumer Borrowing is Accelerating, Despite Mortgage Refinancings |
| Consumer credit outstanding rose sharply in April, according to the Federal Reserve. The amount of non-mortgage credit outstanding (including automobile loans, credit card balances and other personal loans, but excluding auto leases and loans secured by real estate) rose at 10.7 percent seasonally adjusted annual rate to $1.58 trillion. |
| Credit Card Payment Performance Deteriorates |
| Although not entirely unexpected given the surge in bankruptcy filings, credit card delinquency and loss experience continues to deteriorate. Standard and Poor's Credit Card Quality Indexes indicate that the charge-off rate in a pool of about $337 billion of card receivables (nearly two-thirds of the total U.S. bankcard market) rose to 6.7 percent in April, 2001, 110 basis points higher than one year earlier. |
| No Signs of Relief from Rising Bankruptcies |
| As we reported last month, it is getting increasingly difficult to argue that the year-to-date rise in bankruptcies is a temporary reaction to pending bankruptcy legislation. According to Visa U.S.A.'s Bankruptcy Notification Service, personal bankruptcies filed in the U.S. through the end of the 24th week of this year (June 16, 2001) were up 25.5 percent from the same period in 2000. |
| Tax Rates and the Growth of Small Businesses |
| The recent tax cut legislation which passed through Congress will slowly roll-back marginal tax rates over the next decade, provided that some future Congress doesn't reverse the process. One of the arguments often advanced for cutting marginal tax rates is that it would boost both work effort and entrepreneurial activity. |
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| Citigroup Will Halt Sale of Single Premium Credit Insurance on Mortgage Products |
| The heat over alleged "predatory lending" practices has convinced Citigroup to stop the sale of one of a highly criticized product common on subprime mortgage loans. Single premium credit insurance has been the target of community activists and some regulators who accuse lenders of slipping the product past unsuspecting borrowers and lumping the premium into the amount financed, adding thousands of dollars to the outstanding balance. |
| Target to Issue Smart Visa Cards |
| Target Corporation has announced that it will issue millions of smart Visa cards to Target customers. By the end of 2002, it will have installed smart-card terminals in 990 Target stores in 46 states. |
| 0% on Bank Credit Cards |
| In an effort to counteract the low response rates to their credit card solicitations, some banks are offering introductory rates of 0% interest. CardTrak reports that Citibank, First USA and Providian are offering 0% interest on their Visa and MasterCards. |
| Nextcard and Experian to Offer Credit Report Monitoring Service |
| Experian Information Solutions, Inc. will partner with Internet card issuer NextCard to offer consumers an online credit report monitoring service. The new product will let consumers check their credit reports as many times as they wish for a set fee. |
| Credit Card Capsules |
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| New Data on Payday Advance Customers |
| The Credit Research Center (CRC) at Georgetown University's McDonough School of Business recently released the first comprehensive analysis of consumer demand for and use of payday advance loan products. Payday advance products allow customers to get, for a fee, a small amount of cash for a short period of time against their next paycheck. |
| Delinquent Mortgage Payments |
| The portion of government-insured home mortgages that are more than 30 days past due has risen to more than 10 percent, the highest level in history according to a survey by the Mortgage Bankers Association of America. Ten years ago, the delinquency rate was about 7 percent. |
| Boom and Bust |
| Between 1994 and 1999 the manufactured housing firm, American Homestar Corp., opened 11 manufacturing plants and 110 retail outlets. But, shipments of manufactured housing in 2000 fell by 250,550, 28 percent below the previous year. |
| Cash or Credit for Cars? |
| In just the past two years, the portion of new-car buyers that have paid cash, rather than lease or borrow, has increased from 3.9 percent to 8.8 percent. (CNW Marketing/ Research provided the data.) The percentage of cash purchases varies by the cost of the car. |
| Debt Collection Tactics |
| Picture a hot-rod truck with siren blaring and a bright, pulsating light on top. As it pulls up to a clothing store, a very husky man along with a large, barking dog jumps from the truck. The man is wearing a devil's mask and carrying a brief case brightly labeled, "Deadbeat Collections." The accompanying lawyer informs the store's owner, "You have an appointment with Dr. Diablo." Actually, this is only the last step in the collection effort. |
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| Anti-Predatory Lending Laws and Unintended Consequences |
| Consumer credit has provided numerous examples of unintended consequences of government regulations designed to "protect" consumers. Currently, many legislators in American cities and states seem intent on supplementing federal regulations on home mortgages with their own regulations. Many of their proposals to halt "predatory tactics" appear to ignore existing regulations of the Federal Reserve and Department of Housing and Urban Development (HUD). |
| The Monogram Case |
| In the May 2000 issue of Spotlight we reported the Monogram case regarding the export of interest and fees from one state to another. You may recall that Patricia Heaton, a resident of Louisiana, bought video records and other items from Campo Appliances, using her Campo credit card, which had been issued by GE's Monogram Credit Card Bank in Georgia. Ms. Heaton built up a balance of over $1,040 on her account . . . . Monogram sued her in the small claims court in New Orleans. Eventually, the case became a class action suit, with the core issue being whether Monogram was really a bank, a status necessary for Monogram to export an interest rate of 21.84 percent from Georgia to New Orleans. |
| California Privacy Bill Defeated |
| By a narrow one-vote margin, a tough new privacy bill was defeated in the California Assembly's Business and Finance Committee. The bill would have required financial institutions to get explicit consumer permission prior to sharing personal information with both third parties and affiliates. |