Plans announced on May 15 by the FCC to empower voice service providers to offer more aggressive call-blocking programs could create significant problems for creditors and debt collectors. In addition to allowing providers to block unwanted calls by default, the FCC plans to allow providers to offer opt-in blocking in which a consumer can elect to block calls from any numbers that are not on the consumer’s own contact list. Such opt-in blocking could result in the blocking of legitimate communication attempts, such as collection calls from creditors or debt collectors.
Recently released data from the Federal Reserve Bank of New York’s Center for Microeconomic Data revealed that the first quarter of this year was the mortgage business’ worst quarter in more than four years, but a deeper dive into the data shows that on the refinance side of things, it may have been the worst quarter since the financial crisis.
Cryptocurrency companies shunned by banks often turn to shadowy middlemen for payment processing and other financial services. One of those companies is at the center of the mystery surrounding Bitfinex’s missing customer funds, the Wall Street Journal reported. Bitfinex, a cryptocurrency exchange that controls the popular digital currency known as tether, lost access to $850 million in customer funds after handing it over to Panama-based Crypto Capital Corp. to process customer withdrawals, the New York attorney general said last month. Since then, Crypto Capital’s own legal woes have come into public view. The U.S. Department of Justice in October closed down a number of bank accounts opened by an Arizona man, Reginald Fowler, on behalf of an unnamed company. The description of the company’s website in Fowler’s April 30 indictment matches Crypto Capital’s. Polish authorities, meanwhile, have seized some $270 million in the company’s bank accounts. Bitfinex’s ill-fated arrangement with Crypto Capital highlights a persistent problem for companies in the young cryptocurrency business: lack of access to the financial system. Banks, still smarting from billions of dollars in fines tied to questionable transactions, are wary of getting tied up with digital currencies beloved by drug dealers, scammers and other potentially unsavory characters. As a result, cryptocurrency firms forced to fend for themselves often end up calling on little-known processing firms such as Crypto Capital.
Stalled trade talks between Beijing and Washington are exacerbating a slump in the U.S. Farm Belt, and few farmers believe an aid package being assembled by the Trump administration will be enough to compensate them for the economic damage, the Wall Street Journal reported. Agriculture has been among the U.S. economic sectors hit hardest by the year-long trade conflict with China. Now that a deal has slipped from the grasp of negotiators, farmers are facing the likelihood that the deepest downturn in the agricultural economy since the 1980s could be prolonged. The U.S. Department of Agriculture, in the absence of a deal, is cobbling together a farm-relief program that will total somewhere between $15 billion and $20 billion, according to Agriculture Secretary Sonny Perdue. This is the second such aid package since the trade fight began. Many farmers doubt that the scale of that aid package is anywhere near sufficient to make up for a trade spat that has shut them out of a lucrative Chinese market of 1.4 billion consumers.
Several startups are now offering loans to recent college graduates, professionals moving to a new city and others who want to build credit or could use assistance making rent payments, the Wall Street Journal reported. These companies, which also include Uplift, Domuso, StayTony and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700 percent in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20 percent. The pitfall to such credit is that the loans might encourage some young renters to live beyond their means. Large cities often have a high cost of living that can push residents ever deeper into long-term debt and strain their credit scores. Outstanding consumer credit, which doesn’t include mortgage loans, exceeded $4 trillion for the first time last year, according to data from the Federal Reserve.
The Consumer Financial Protection Bureau is already in the midst of enacting changes to some of its rules, namely the requirements for the data collection and reporting stipulated by the Home Mortgage Disclosure Act and its enforcement practices, but those may not be the only rule changes coming from the CFPB.
The U.S. escalated a tariff war with China on Friday by hiking levies on $200 billion worth of Chinese goods amid last-ditch talks to rescue a trade deal, as U.S. President Donald Trump signaled that talks could drag on beyond this week, Reuters reported. In a series of early morning tweets on Friday, Trump defended his decision to raise tariffs, saying there was no need to rush into a deal and adding that the American economy would be boosted more by the levies than by an eventual deal. But even as Beijing threatened retaliation, negotiators agreed to stay at the table in Washington, D.C., for a second day, keeping alive hopes of an agreement that would remove a major threat to the global economy. Trump issued orders for the tariff increase, saying that China “broke the deal” by reneging on earlier commitments made during months of negotiations. With negotiations in progress, U.S. Customs and Border Protection imposed a 25 percent duty on more than 5,700 categories of products leaving China after 12:01 a.m. EDT (0401 GMT) today.
The federal student loan program will cost the federal government $31 billion over the next decade, according to recent estimates from the nonpartisan Congressional Budget Office, Bloomberg Government reported. That’s a shift from past CBO forecasts that the government would profit from the program. The CBO in April 2018 projected the program would bring in $8.7 billion over the next decade. In 2017, the office estimated a $114 billion windfall within the next 10 years. The latest data shows how the Education Department’s student loan program has slowly grown more expensive for taxpayers. While some of the increase can be attributed to interest rates, the bulk of the change has come from the cost of the almost $1.5 trillion in federal loans students already have outstanding. More loans are in default, and less is being collected on outstanding loans, according to the the department’s budget request. In addition, more borrowers than anticipated are enrolling in income-driven repayment plans. These allow borrowers to pay a percentage of their income for a set number of years, after which the remainder of the loan is forgiven. About 30 percent of borrowers with direct federal loans, the most common type, were in income-driven repayment programs in fiscal 2018, a 29 percent increase from two years before, according to the Education Department. Read more.
The Federal Reserve is further amplifying its warnings about the perils of risky corporate debt, saying in a Monday report that the market grew 20 percent last year and that lending standards continue to slip, Bloomberg News reported. In a particularly striking sign, the Fed said the businesses with the biggest existing debt loads are also the ones taking on the riskiest loans. And protections that lenders include in loan documents in case borrowers default are eroding, the U.S. central bank said in its twice-a-year financial stability report. The Fed board voted unanimously to approve the document. “Credit standards for new leveraged loans appear to have deteriorated further over the past six months,” the Fed said, adding that the loans to firms with especially high debt now exceed earlier peaks in 2007 and 2014. “The historically high level of business debt and the recent concentration of debt growth among the riskiest firms could pose a risk to those firms and, potentially, their creditors.” Since last year, the Fed has been highlighting the increasingly weak standards in leveraged lending — the loans that often underpin mergers and acquisitions involving highly indebted companies. Still, default rates have been low amid a booming U.S. economy.
The numbers: Banks eased lending terms for large and midsized commercial borrowers in the first three months of the year, according to a Federal Reserve survey of senior loan officers released Monday. Standards on most business loans remained unchanged.