US consumers on lower incomes face loan stress while banks pull back

NEW YORK (Reuters) - U.S. borrowers on lower incomes are increasingly struggling to keep up with their loan payments, according to recent data and bank executives, prompting banks to become more cautious about dishing out credit cards and car loans.

A growing number of Americans have seen their savings dwindle as rising prices squeeze budgets while interest rates stay high, bankers and economists said. The deterioration in household finances for those earning less than $45,000 contrasts with financial resilience among those on higher incomes.

Austan Goolsbee, Chicago Federal Reserve Bank President, said on Friday that consumer delinquencies were one of the most concerning economic data points at the moment.

"If the delinquency rate of consumer loans starts rising, that is often a leading indicator things are about to get worse," he said.

Read more at REUTERS

Have a tax law question?

Our #IRS Interactive Tax Assistant has answers.

Watch this short video to learn more:

https://youtu.be/y6HkaBkdKdU

I would like to share with you important information on Offer in Compromise.

When a taxpayer can't pay their full tax debt or if paying would cause financial hardship, they should consider applying for an Offer in Compromise. For assistance filing for an OIC from a legitimate representative, taxpayers are encouraged to check for a licensed enrolled agent or a reputable accountant in their area.

In this email you will find a Ready-to-use article on Offer in Compromise repayment options. Below will find a link to www.irs.gov as well.

Jose L. Santiago

Public Affairs Specialist

Tax Outreach, Partnership and Education

Email: jose.l.santiago@irs.gov

New Data From the CDC Reveals the Optimal Age to Claim Social Security for the Average Retiree

One of the biggest decisions you'll make while planning for retirement is when to claim Social Security.

Most people can claim at any point once they reach age 62. However, if you wait to claim your benefit, you'll receive a higher monthly check. So, even while you go without a Social Security check during the early years of your retirement, it can pay off in the long run.

The catch is you have to live long enough to make it worth delaying benefits.

While nobody can be certain how long they'll live, new data from the Centers for Disease Control and Prevention (CDC) has some insights about the average senior citizen you'll want to consider. It may make a huge difference in your decision to claim Social Security.

Read more at The Motley Fool

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DOL will raise overtime salary threshold to $44K in July, $59K next year

The final rule expands overtime pay eligibility to millions of U.S. workers, the department said.

Dive Brief:

• The U.S. Department of Labor said Tuesday it will publish a final rule raising the Fair Labor Standards Act’s minimum annual salary threshold for overtime pay eligibility in a two-step process. Starting July 1, the threshold will increase from $35,568 to $43,888 per year. It will then increase to $58,656 on Jan. 1, 2025.
• The changes will expand overtime pay eligibility to millions of U.S. workers, the agency said. DOL’s 2025 threshold represents a jump of about 65% from the Trump administration’s 2019 rule and is slightly higher than the $55,068 mark that DOL proposed in 2023.
• The threshold will automatically update every three years using current wage data — which would next occur on July 1, 2027 — but DOL said in the proposed rule that updates may be temporarily delayed if the department chooses to engage in rulemaking to change its methodology or update mechanism.

Read more at HRDIVE

CFPB Takes Action to Stop Illegal Junk Fees in Mortgage Servicing: CFPB

Homeowners forced to pay for “services” that were prohibited or unauthorized

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today published an edition of Supervisory Highlights describing the agency’s actions to combat junk fees charged by mortgage servicers, as well as other illegal practices. CFPB examinations found servicers charging illegal junk fees, such as prohibited property inspection fees; sending deceptive notices to homeowners; and violating loss mitigation rules that help struggling borrowers stay in their homes. In response to the CFPB’s findings, financial institutions refunded junk fees to borrowers and stopped their illegal practices.

The mortgage servicing examination work announced today builds on prior CFPB exam work combatting junk fees in the mortgage servicing and other consumer financial markets. In October of last year, the CFPB announced that its examination work from February to August of 2023 resulted in $140 million refunded to consumers for unlawful junk fees in the areas of bank account deposits, auto loan servicing, and international money transfers. Since that time, the CFPB’s supervision junk fee work has resulted in more than $120 million in additional junk fee refunds in the area of bank account deposits.

Read more at Consumer Financial Protection Bureau (CFPB) 

These Apps Allow Workers to Get Paid Between Paychecks. Experts Say There Are Steep Costs

More people are using so-called 'Earned Wage Access' apps to get money to pay bills and buy groceries in between paydays

NEW YORK (AP) — When Anna Branch, 37, had her hours at work reduced at the start of the pandemic in 2020, she suddenly noticed ads for an app called EarnIn.

“You know how they get you — the algorithms — like they’re reading your mind,” Branch said. “The ad said I could get up to $100 this week and repay it in my next pay period.”

Branch, who was working as an administrative assistant in Charleston, South Carolina, downloaded the app, agreed to the flat fee, and added the suggested “tip.” The cash helped her cover expenses until payday, when the app debited the borrowed $100, plus $18 for the fee and tip. Four years later, Branch said she still uses the app, as often as once a month.

Read more at USNEWS

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People From These 3 Communities Are More Likely Not to Have a Bank Account

"Financial inclusion" is a concept in the banking industry focused on helping people get connected to essential banking services, so that people are not left behind and do not get excluded from economic opportunities. One important aspect of financial inclusion is helping people who are "unbanked" -- those who don't have a checking or savings account at a bank or credit union.

Being unbanked is risky, and can put people at a big disadvantage in their personal finances. Sadly, people who are unbanked are also more likely to be from communities that have faced other historic disadvantages like racial discrimination, language barriers, and exclusion from economic opportunity. Being unbanked can compound these disadvantages.

Let's look at a few communities that have disproportionately higher rates of unbanked households -- and see how banks are trying to help.

Which communities are less likely to have a bank account?

Approximately 5.9 million U.S. households do not have a bank account, and more than half of these unbanked households are Black, Latino, and Native American. The good news is that there has been progress. The unbanked rate has come down in recent years, in part because more people started using bank accounts to receive direct deposits of government pandemic relief payments.

Read more at MOTLEY FOOL

The Key to Successful Commercial Banking Lies In Consumerization. Here’s Why

Jacob Leick and Mandy Lopez explore the consumerization of commercial banking, the importance of personalization and relationships and the role of technology in helping community banks and credit unions stay competitive.

In today’s rapidly evolving commercial banking landscape, community banks and credit unions face many challenges and opportunities as they strive to meet their business clients’ changing needs and expectations.

To shed light on the latest trends and strategies for success, The Financial Brand’s Jim Marous was joined by two industry experts from Alkami Technology on the Banking Transformed podcast: Jacob Leick, director of product management and Mandy Lopez, lead product manager.

In this insightful Q&A, Leick and Lopez share their wealth of knowledge and experience, exploring topics such as the consumerization of commercial banking, the importance of building strong relationships, maximizing revenue impact while reducing back-office expenses and leveraging technology to level the playing field with larger competitors.

Read more at The Financial Brand

FTC to ban noncompetes

The FTC said the rule, expected to take effect as soon as late August, received overwhelming public support during a comment period.

The Federal Trade Commission voted 3-2 Tuesday to issue a final rule that would prohibit the enforcement of most noncompete agreements.

According to draft text published by FTC, the rule provides that it is a violation of federal antitrust laws for employers to enter into noncompetes with workers on or after the rule’s effective date. Existing noncompetes with senior executives may remain in force, but those with other workers are not enforceable after the effective date.

The final rule will take effect 120 days from the date of publication in the Federal Register, meaning it in could be in force as soon as late August.

In a public meeting convened Tuesday to vote on the rule, Benjamin Cady, attorney at the FTC’s office of policy planning, said the agency estimated that approximately 1 in 5 U.S. workers is subject to a noncompete agreement, or about 30 million workers total. The commission said it received some 26,000 public comments in response to the proposed rule, with about 25,000 of these being supportive of the rule.

Read more at HRDIVE