edition: May 28, 2024

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The Consumer Financial Protection Bureau (CFPB) today issued an interpretive rule that confirms that Buy Now, Pay Later lenders are credit card providers.

CFPB Takes Action to Ensure Consumers Can Dispute Charges and Obtain Refunds on Buy Now, Pay Later Loans: CFPB

Agency’s interpretive rule addresses Buy Now, Pay Later lender obligations to investigate disputes and refund charges

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued an interpretive rule that confirms that Buy Now, Pay Later lenders are credit card providers. Accordingly, Buy Now, Pay Later lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a Buy Now, Pay Later loan. The CFPB launched its inquiry into the rapidly expanding Buy Now, Pay Later market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions. Today’s action will help bring consistency to this market.

“When consumers check out and choose Buy Now, Pay Later, they don’t know if they will get a refund if they return their product or whether the lender will help them if they didn’t get what was promised,” said CFPB Director Rohit Chopra. “Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under longstanding laws and regulations already on the books.”

The Buy Now, Pay Later market has expanded rapidly over the past few years. Lenders advertise buying products over four simple payments. Products are marketed as a way to help consumers pay for expensive products and services over time without having to pay interest. Today, both products, like televisions and gaming systems, and services, like airline tickets and cruises, can be purchased through Buy Now, Pay Later products. Buy Now, Pay Later products are popular across ages, races, and income levels.

Read more at Consumer Financial Protection Bureau (CFPB) 

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Here's the Average Income and Net Worth for American Households by Age

Every three years, the Federal Reserve's Survey of Consumer Finances (SCF) provides a detailed snapshot of financial conditions among American households. The report explores income, asset ownership, debt burden, and net worth across different demographics.

The most recent SCF was conducted throughout 2022 and published in October 2023. The report found that the average income was $141,390 and the average net worth was $1.06 million among U.S. families. Read on to see an age-based breakdown, and to learn why an S&P 500 (SNPINDEX: ^GSPC) index fund is a great way to build wealth.

The average income among American households

The chart below breaks down the average income (before taxes) among American households based on the age of the reference person, defined as the male in mixed-sex couples and the older individual in same-sex couples.

Read more at The Motley Fool


The CFPB is protecting the military community and providing relief: CFPB

Servicemembers have submitted over 400,000 complaints since the CFPB opened its doors

Complaints to CFPB from servicemembers, veterans, and their families just crossed the 400,000 mark. Last year, the CFPB saw total complaints from the military community increase by 27% from 2022 and 98% compared to 2021—with complaints ranging from credit reporting errors to mortgage problems to financial fraud and scams.

Each of these complaints represents a financial issue that a servicemember, military family member, or veteran could not get resolved with the respective company, so they turned to the CFPB for help. When banks and financial institutions flout consumer or military financial protections, the CFPB acts to ensure companies are held responsible. CFPB also conducts research to better understand the issues consumers raise and to identify potential solutions.

How the CFPB helps servicemembers get the financial protections they have earned

The application of interest rate protections under the Servicemembers Civil Relief Act (SCRA) is an important example of CFPB’s work to assist individual consumers and look for systemic solutions. As CFPB reviews complaints and looks for patterns and trends, we continue to hear from servicemembers that they are not getting the military interest rate reductions they have earned and deserve. Under the SCRA, active duty servicemembers, including activated Guard and reservists, can request an interest rate decrease to 6% on loans they took out before active duty.

Read more at Consumer Financial Protection Bureau (CFPB)

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Are Banks Failing to Address the Unique Needs of Women?

Many banks say that they are focused on addressing the needs of women, and some have even overhauled their own leadership ranks to support attention to this market. Yet recent data suggests that financial anxiety among women has only gotten worse. Why have so many strategies proved ineffective to date and what else needs to be done?

In 2020, U.S. Bank surveyed 3,000 investors to better understand their financial needs. The data showed that almost half of women (47%) associated financial planning with negative words like fear, anxiety, inadequacy, and dread, compared to just 31% of men.

The feedback was concerning to the bank, which wanted to find better ways to serve women clients, says Beth Lawlor, president of Private Wealth Management and Affluent Wealth Management. “We took that information and we said, ‘How can we better serve that segment of women and bridge that gap so that they have that knowledge, the comfort level, and the confidence that men have?'” she says.

Read more at The Financial Brand

Accelerate Payments & Lower Processing Costs

RTP vs. ACH: A Guide to the Right Payment Method for Your Business: E-Complish

High-speed internet, a growing appetite for instant gratification and convenience permeating consumerism, and government reforms are changing how we pay and get paid. The shift from hard cash to cashless economies completely redefines the customer experience and enables businesses of all sizes to streamline operations across industries.

Recent studies suggest that 83% of businesses and 75% of consumers already utilize faster payment options, and over 60% indicate they plan to increase their use of immediate payments in the future. Real-Time Payments (RTP) and Automated Clearing House (ACH) are the best options for most.

While both excel at speed and efficiency, there’s no one-size-fits-all solution. The optimal choice in payment solutions depends on what matters most to your unique business operations and workflow. Let’s explore the nuances of each to help you make an informed decision.

What Are ACH Payments?

Automated Clearing House (ACH) is a U.S. financial network that enables electronic payments and money transfers from one bank to another without paper checks, credit card networks, wire transfers, or cash.

Read more at E-Complish

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Wondering Where to Invest in Banking Tech? Here Are Three Case Studies

The technology wish list for a banking executive is never a short one, and the solutions certainly aren’t free. Often, selecting investments becomes a question of priority. As executives decide where to deploy tech budget in 2024, here are three examples of similar projects at institutions in 2023 and the positive results they created.

Financial institutions could drain the vault investing in technology improvements. With finite budgets and a wide array of pain points and initiatives to support with technology, how do executives decide which receives budget dollars?

It can help know what peers have done.

The Financial Brand talked with a bank, a credit union, and a fintech about their chosen investment. Here are their opportunities and challenges and what they learned using technology to tackle them.

Read more at The Financial Brand

Dreher Tomkies LLP

South Carolina embraces new EWA (earned wage access) law

This week, South Carolina became the fifth state to enact a law regulating earned wage access providers, but it doesn’t subject them to lending laws.

South Carolina Gov. Henry McMaster signed a new law Tuesday requiring earned wage access providers operating in the state to register annually with the state’s Department of Consumer Affairs.

As part of that registration, the state will require that the EWA providers list fees to be imposed on the employee or employer in providing the services, and include at least one option by which a user can receive earned wage access services at no cost, the new law states.

While the new law imposes other limitations on such providers, the big win for the industry is that the law specifically says EWA services won’t be considered loans and their providers won’t be treated like lenders. That has been a point of contention for the industry as some states and the federal government consider stricter regulations that would force EWA providers to adhere to existing lending laws.



Bank Business Models Must Evolve to Regain Customers

Banks and credit unions face immense challenges that threaten existing business models. Falling fee income, declining mortgage volumes and eroding consumer trust undermine financial performance. However, financial institutions can evolve to boost engagement and accompany customers throughout their financial lives.

Banks face a perfect storm of headwinds. Fee revenue is dropping steadily, with this deterioration in non-interest income proving difficult to replace as regulators crack down on certain charges. At the same time, new customer acquisition has become more challenging as competition grows and consumers demand simplified account opening and improved value. Adding to these trends, mortgage originations have fallen 50% from peak volumes in 2015, with declines projected to continue amid higher interest rates and slowing housing market activity.

To overcome these headwinds, financial institutions must transform into agile, customer value-driven enterprises initiating strategies that increase their relevance and their role as primary financial provider in consumers’ lives. This will require a doubling down in data and artificial intelligence capabilities that can deliver personalized financial operating systems, accompanying customers across their financial journeys, thereby strengthening trust and loyalty. This scenario comes from new research from EY.

Read more at The Financial Brand

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