Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: The U.S. Population of Unbanked Individuals is Shrinking

Not All Who are Unbanked Want an Account:

The reasons for moving away from traditional credit scores include helping to bring the unbanked into the financial system, extending credit to younger consumers who have not yet built up a history, and reaching undocumented immigrants.

Is this the end of the credit score? It’s certainly been predicted many times over the years, and the idea is back at the forefront after several big banks including JPMorgan Chase, Wells Fargo and U.S. Bank announced this month a plan to offer credit card products to those who lack a traditional credit score.

As first reported in the Wall Street Journal, the plan “is aimed at individuals who don’t have credit scores but who are financially responsible. The banks would consider applicants’ account balances over time and their overdraft histories.”

The advantages of creating a digital currency backed by the Federal Reserve include accelerating benefits payments to Americans, Federal Reserve Governor Lael Brainard said Monday, highlighting the central bank's potential in issuing virtual money.

Migration to digital payments and concerns about financial exclusion are among four developments sharpening the focus on central bank digital currencies, and the Fed this summer plans to publish a paper on its thinking about digital payments, said Brainard in remarks for a conference run by cryptocurrency media site Coindesk.

A CBDC is a type of central bank liability - like the US dollar - issued in digital form. Federal Reserve Chairman Jerome Powell last week said that its discussion paper on the matter is on the way.

Bitcoin, the original cryptocurrency, was launched in 2009. Today, there are thousands of cryptocurrencies with a total value of about $2 trillion. The surge in their prices earlier this year minted tens of thousands of cryptocurrency millionaires—at least on paper. Cryptocurrencies might turn out to be a massive speculative bubble that ends up hurting many naive investors. Indeed, many cryptocurrency fortunes have already evaporated with the recent plunge in prices. But whatever their ultimate fate, the ingenious technological innovations underpinning them will transform the nature of money and finance.

MYTH NO. 1

A cryptocurrency is real money that can be used for payments.

Cryptocurrencies such as bitcoin and Ethereum were designed as a way to make payments without relying on traditional modes such as currency notes, debit cards, credit cards or checks. The bitcoin white paper, which set off the cryptocurrency revolution, envisions an electronic payment system that allows “any two willing parties to transact directly with each other without the need for a trusted third party,” cutting governments and banks out of the financial loop. The website Pymnts claims, “Blockchain IS the future of the payments industry,” a reference to the computational technology that undergirds cryptocurrencies.

Two months ago, debt collectors won a victory when congressional lawmakers allowed stimulus checks to be garnished by creditors and government agencies. Now, as the credit industry hits a jackpot during the pandemic, the leading lobby group for debt collectors has more than tripled the amount of cash it funnels to lawmakers as it campaigns to block upcoming Democratic legislation to protect millions of Americans from the repo man.

At issue is a package of bills designed to restrict the $13 billion debt collection industry, as new Federal Reserve and Census Bureau reports show consumer and medical debt has skyrocketed during the pandemic.

One measure would prohibit the collection of medical debt for the first two years after a medical payment is due. Another would discharge student debt in the event of a debtor’s death. Other provisions aim to block lenders from forcing debtors to sign away their legal rights; outlaw threats of demotion that debt collectors reportedly aim at members of the military; and subject government-contracted debt collectors to the same restrictions as consumer debt collectors.

Lessons from Great Recession can inform strategic choices for allocating American Rescue Plan dollars

Just months ago, many states feared their budgets might face shortfalls for years because of the COVID-19 pandemic. But now most could have temporary surpluses after President Joe Biden signed the American Rescue Plan Act (ARPA) into law in March.

ARPA will provide states with a total of $195 billion in flexible funding (local governments receive an additional $130 billion), with even more dollars designated for specific policy areas such as K-12 education. The money is welcome, but states face the risk that spending will increase to levels that will prove impossible to sustain once the federal relief expires at the end of 2024. But states that plan ahead and act responsibly can avoid that risk, address the immediate challenges posed by the pandemic, and position their budgets and economies to be on stronger footing after the federal help ends.

The choices that states must make on how to use ARPA funds echo the challenges many faced a little more than a decade ago. In 2009, with state finances in distress as a result of the Great Recession, Congress offered them money through the American Reinvestment and Recovery Act (ARRA). The ARRA dollars provided critical immediate relief. But when most of the money ran out at the end of the 2011 fiscal year, states suddenly lacked the funds to support ongoing programs and services. This “fiscal cliff” created a new round of budget shortfalls and forced cuts that set back states’ efforts to recover from the recession.

From McDonald’s to Chipotle, numerous companies in the US have been raising wages for workers at the bottom of the pay scale amid a labor squeeze facing the US services industry.

But now the competitive pressure to raise wages may be hitting higher-wage jobs.

Bank of America announced this week that it plans to raise the wages of its lowest-paid employees to $25 an hour by 2025, putting it on track to surpass its big-bank peers in minimum wage standard.

The bank, which has 174,666 employees in the US, said the raises are expected to impact 50,000 employees who work in jobs such as those in consumer bank, technology, operations, and staff support functions as well as other areas. The bank also said it is requiring all its US vendors to pay their 43,000 employees “dedicated to the bank” at least $15 an hour, according to the press release.