Tag: Consumer Finance

Why Fed rate hikes take so long to affect the economy, and why that effect may last a decade or more

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The U.S. economy continues to grow despite the 5.5% benchmark federal funds interest rate set by the Federal Reserve in 2023.

The Fed’s leaders expect their interest rate decisions to eventually slow that growth.

The increase in borrowing costs that stems from Fed decisions does not affect all consumers immediately. It typically affects people who need to take new loans — first-time homebuyers, for example. Other dynamics, such as the use of contracts in business, can slow the ripple of Fed decisions through an economy.

“It might not all hit at once, but the longer rates stay elevated, the more you’re going to feel those effects,” said Sarah House, managing director and senior economist at Wells Fargo.

“Consumers did have additional savings that we wouldn’t have expected if they had continued to save at the same pre-Covid rate. And so that’s giving some more insulation in terms of their need to borrow,” said House. “That’s an example of why this cycle might be different in terms of when those lags hit, versus compared to prior cycles.”

A 1% interest rate increase can reduce gross domestic product by 5% for 12 years after an unexpected hike, according to a research paper from the Federal Reserve Bank of San Francisco.

“It’s bad in the short term because we worry about unemployment, we worry about recessions,” said Douglas Holtz-Eakin, president of the American Action Forum, referring to the paper’s implications for central bank policymakers. “It’s bad in the long term because that’s where increases in your wages come from; we want to be more productive.”

Some economists say that financial markets may be responding to Federal Reserve policy more quickly, if not instantaneously. “Policy tightening occurs with the announcement of policy tightening, not when the rate change actually happens,” said Federal Reserve Governor Christopher Waller in remarks July 13 at an event in New York.

“We’ve seen this cycle where the stock market moved more quickly in some cases, more slowly in other cases,” said Roger Ferguson, former vice chair of the Federal Reserve. “So, you know, this question of variability comes into play, as in how long it’s going to take. We think it’s a long time, but sometimes it can be faster.”

Watch the video above to see why the Fed’s interest rate hikes take time to affect the economy.

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December 12, 2023
Consumers are starting to fire up China’s pandemic-battered economy, two ETF experts find

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China’s pandemic-battered economy is starting to see consumers open their wallets wider, according to KraneShares’ Brendan Ahern.

“We’re seeing the incremental rebound from the Chinese consumer,” the firm’s chief investment officer told “ETF Edge” this week. “[But] it’s not like turning on a light switch.”

The National Bureau of Statistics of China reports retail sales have been increasing since last November.

Ahern, who’s involved with the firm’s China-focused ETFs, expects quarterly earnings for Chinese companies to improve with each consecutive quarter — a forecast that may already be unfolding.

Tech giants Baidu and Tencent beat revenue expectations for the fiscal first quarter of 2023. Alibaba, on the other hand, missed revenue estimates.

“We’re actually hearing that for many of the companies … in the management calls, they’re speaking to how Q2 already is outpacing Q1, which outpaced Q4 of last year,” Ahern said.

China’s reopening is also anticipated to have a positive impact on the airline industry.

Singapore Airlines, Japan’s All Nippon Airways and Japan Airlines all noted demand from China as a factor in future earnings while reporting net profits earlier this month for the financial year ended March 2023.

GraniteShares’ Will Rhind sees a similar growth trajectory.

“Domestic travel [is] rebounding … but we’ve yet to see that from the international sector,” the ETF provider’s CEO said. “It will come, but maybe just not yet.”

Rhind told CNBC in a special interview later in the week that international travel from China could start to rebound this summer following a sluggish start.

His forecast comes as a government-backed epidemiologist said the country’s new Covid wave could infect 65 million a week by the end of next month.

Rhind believes the recent Covid surge won’t affect the reopening’s trajectory, adding past lockdowns seen across China are “very, very much unlikely to be repeated.”

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May 27, 2023
Major Wall Street firm sees a breakout in luxury stocks — and lists three reasons why ETFs are a great way to play it

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As luxury stocks make waves overseas, State Street Global Advisors believes investors should consider European ETFs if they want to capture the gains from their outperformance.

Matt Bartolini, the firm’s head of SPDR Americas research, finds three reasons why the backdrop is becoming particularly attractive. First and second on his list: valuations and earnings upgrades.

“That’s completely different than what we saw for U.S. firms,” he told CNBC’s Bob Pisani on “ETF Edge” this week.

His remarks come as LVMH became the first European company to surpass $500 billion in market value earlier this week.

Bartolini lists price momentum as a third driver of the investor shift.

His SPDR Euro Stoxx 50 ETF (FEZ) is considered a broad European ETF. The ETF is up about 20% so far this year, with a price increase of nearly 1.2% since the beginning of January.

While the fund’s top holding is LVMH at 7.29%, according to the company’s website, Bartolini contends the shift applies beyond luxury stocks and to lower-end consumer stocks.

His firm’s website lists French cosmetics company L’Oreal — which is up almost 30% this year — as another one of his fund’s major holdings. It also shows FEZ allocating more than 20% to consumer discretionary — 2.5% higher than its second-most allocated industry.

“That’s on a broad-based level,” he said. “So, basically, buy Europe and sell U.S. has been some of the trade that we have seen.”

FEZ closed the week down 0.41% but ended the month up more than 3.1%.

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April 29, 2023
Americans are saving far less than normal in 2023. Here’s why

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The U.S. personal savings rate remains below its historical average, according to the U.S. Bureau of Economic Analysis.

The seasonally adjusted annual rate of personal saving was 4.6% in February. That’s well below the average annual rate of more than 8%, according to the data, which traces back to 1959. In June 2022, the rate had dipped to 2.7%, a 15-year low.

This was a large fall from periods of the pandemic when households across the country were saving as much as 30% of their monthly income.

“Something like $2 [trillion] to $2.5 trillion above what we would have otherwise expected were saved by American households,” said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions.

Collectively, Americans have trillions in excess savings compared with expectations leading up to the pandemic, according to Federal Reserve economists.

“That really has helped to buoy the economy,” said Shelley Stewart, a senior partner at McKinsey & Company, “particularly in a place like the U.S., where consumption is such a big part of GDP.”

Federal Reserve economists note that the lion’s share of excess savings is concentrated in the top half of households by income.

But the lower half built up savings in this time, too, according to the central bank’s October note. They noted at the time that the lower half of earners had roughly $5,500 in excess savings per household. Experts believe these stockpiles of cash will begin to dwindle in 2023.

In the months since, headline inflation stayed stubbornly high, at an annual rate of 5% in March. This weighs on consumer spending, while devaluing savings held in low return positions such as cash.

Watch the video above to learn about how the personal savings rate affects you and the wider economy.

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April 27, 2023
Why Americans are saving less in 2023

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Americans started the 2020s with a personal savings boom. The trillions in excess personal savings built up in the pandemic are beginning to vanish amid high inflation, according to Federal Reserve economists. The annual savings rate fell to a 15-year low in 2022. It started a recovery in 2023, but remains well below long-term trends. Despite this slowdown in saving, consumer spending has remained robust, keeping the U.S. from recession.

11:56

Thu, Apr 27 20239:54 AM EDT

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April 27, 2023
New Report Offers Most Comprehensive Look to Date at LGBTQI+ People’s Financial Lives
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SAN FRANCISCO, March 29, 2023 (Newswire.com)
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The LGBTQI+ Economic and Financial (LEAF) Survey: Understanding the Financial Lives of LGBTQI+ People in the United States, released today, shines new light on the financial experiences and issues faced by lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) people in the U.S. The report fills in critical gaps left by many federal and financial industry surveys that fail to include LGBTQI+ demographics. The report is authored by the Center for LGBTQ Economic Advancement & Research (CLEAR) and the Movement Advancement Project (MAP).

The independent survey and report were made possible with sponsorship and support from Visa and Daylight. Visa and Daylight are committed to working with underrepresented communities and helping provide financial tools to those historically underserved by the financial industry.

The report analyzes results from a survey of 2,505 LGBTQI+ and 503 non-LGBTQI+ adults, conducted December 2022-January 2023. Respondents were asked about their financial well-being, priorities and concerns, experiences with exclusion and discrimination, and costs associated with family formation, gender-affirming health care, or legally changing their name or gender marker.

Some key findings include:
- LGBTQI+ people reported losing the ability to rely financially on their families after coming out. While 73% of LGBTQI+ respondents said they could rely financially on their family before telling them about their sexual orientation, only 62% could do so after coming out. The gap was even greater for transgender respondents.
- Over half (53%) of all LGBTQI+ respondents had taken out a federal student loan to finance their education, versus 31% of non-LGBTQI+ respondents. Among borrowers, only 23% of LGBTQI+ borrowers had paid off their loans versus 39% of non-LGBTQI+ borrowers.
- Four in 10 parents (40%) reported having some out-of-pocket legal costs related to family formation. Additionally, 43% of LGBTQI+ parents had spent $1,000+ on out-of-pocket healthcare costs for family formation; nearly a third (32%) had spent $5,000+.
- Most respondents who received gender-affirming care (82%) reported spending some money out-of-pocket. Nearly half (46%) of people who had received gender-affirming care spent $5,000+ out-of-pocket; one-third (33%) had spent at least $10,000 out-of-pocket.
- LGBTQI+ people were more likely to report negative feelings about their finances than positive ones. Roughly twice as many LGBTQI+ respondents as non-LGBTQI+ respondents reported feeling anxious, overwhelmed, and depressed about their finances.
- One in 10 LGBTQI+ respondents (11%) said they had experienced discrimination in banking or financial services.
“The LEAF report reveals the immense financial pressure many LGBTQI+ people in the U.S. are living under — particularly transgender people and queer people of color. The findings illustrate the urgent need for improvements in the financial industry and in state and federal policies to support the economic needs of LGBTQI+ people and communities who are struggling financially,” said Spencer Watson, Executive Director at CLEAR.

“These new findings show the wide-ranging economic impacts of discrimination on LGBTQI+ people. This underscores the urgent need for strong and decisive efforts to counteract this financial toll and other harms. Especially given the escalating political attacks on LGBTQI+ and especially transgender people, federal protections against discrimination are essential,” said Logan Casey, Senior Policy Researcher and Advisor at MAP.

“Together with organizations like CLEAR, MAP, and Daylight, we’re able to build and advocate for more inclusive financial systems for the LGBTQI+ community around the world,” said Erin Pursell, Vice President of Fintech Business Development, Visa.

The report is available at https://lgbtq-economics.org/research/leaf-report-2023/.

CLEAR is a nonprofit that creates research, education, and advocacy to support the financial needs of LGBTQ people, organizations, and communities and to help them achieve their unique economic goals.

MAP is an independent think tank that provides rigorous research, insight, and analysis that help speed equality for all, including lesbian, gay, bisexual, transgender, and queer people.

Daylight is the first and only digital banking platform for the LGBTQ+ community, creating the U.S.’s first trans-inclusive debit account in 2021. Learn about Daylight’s latest family-building products at www.joindaylight.com.

Visa Inc. is a world leader in digital payments, facilitating payments transactions between consumers, merchants, financial institutions and government entities across more than 200 countries and territories.

Source: Center for LGBTQ Economic Advancement & Research (CLEAR)
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March 29, 2023
Bright Side Loans Announces $100M Expansion Channel

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Press Release
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Feb 15, 2023 09:00 EST

ITASCA, Ill., February 15, 2023 (Newswire.com)
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Bright Side Loans, a proven online, non-prime consumer lender, announced today that it is expanding its loan origination and servicing operations via the Fintech Franchise Network (FFN), LLC, which will consist of a select group of 28 virtual consumer lending branches which will be sold as individual franchises.

Founded in 2018 by long time Consumer Credit Risk and Operations expert Greg Fasana, Bright Side Loans has successfully leveraged and applied data science, custom models, strong analytics and work-flow management across the entire application lifecycle, and now looks forward to the increased opportunities of profitably serving additional customers in the Alternative Financial Services (AFS) market.

“My vision for Bright Side Loans has always been to serve customers’ financial needs with the latest data-driven analytics and bespoke fintech tools that we have refined over our careers,” said Greg.

In regards to Fintech Franchise Network, Greg shares, “With Bright Side Loans now set, we have truly got the band back together as our launch team consists of proven executives and senior operators from several of the largest consumer lending companies, starting with FFN CEO and Capital Raiser, Glenn Hafner. We couldn’t ask for a better marriage of state of the art technology and tools, and broad and deep consumer finance experience from which to confidently advance to our next chapter.”

With nearly 65% of the American workers living “paycheck to paycheck” (CNBC.com Personal Finance, Dec. 15, 2022) expanding Bright Side Loan’s lending capabilities will be key to serving these non-prime customers. As the business expands via Fintech Franchise Network, Bright Side Loans will continue to serve as our customer-facing brand name and identity.

For investment opportunities, and general corporate inquiries, please contact Glenn Hafner at (630) 777- 4005 or GHafner@FintechFranchiseNetwork.com.

Source: Bright Side Loans

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February 15, 2023
Some Wells Fargo customers have already received their share of the $2 billion misconduct settlement. Here’s what you need to know

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wdstock | iStock Editorial | Getty Images

People owed a piece of the $2 billion that Wells Fargo has agreed to pay to customers affected by some of its banking practices could soon receive those funds.

The nation’s fourth-largest bank reached a settlement with the Consumer Financial Protection Bureau, announced Tuesday, to resolve customer abuses related to auto lending, deposit accounts and mortgage lending, affecting about 16 million accounts.

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Wells Fargo also agreed to pay a $1.7 billion civil penalty — the largest ever doled out by the CFPB.

“We have already communicated with many of the customers who may have been impacted by the matters covered in the settlement, and those efforts are ongoing,” a Wells Fargo spokesperson told CNBC.

In other words, if you are among the affected customers, you may already have received your share of the $2 billion, or you will automatically hear from Wells Fargo. You do not need to take any action, the bank said.

The CFPB said that customers of the bank were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed and had payments to auto and mortgage loans misapplied. Additionally, Wells Fargo charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts, and improperly froze some accounts, the CFPB said.

$1.3 billion has already reached 11 million accounts

More than 11 million customer accounts already have received more than $1.3 billion related to auto loan issues. Another 5 million customers with deposit accounts are receiving $500 million in remediation, including $205 million related to surprise overdraft fees, and thousands of customers with mortgages will receive a piece of at least $195 million, a CFPB spokesperson said.

The amount that each harmed consumer will get (or already got) depends on the specifics. For customers whose vehicles were wrongly repossessed, the remediation includes $4,000, but could be higher. For deposit accounts that were wrongly frozen, the settlement calls for $150 for each affected customer.

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“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” said Charlie Scharf, Wells Fargo CEO, in the company’s press release about the settlement.

“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Scharf said.

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December 21, 2022
Landmark Management Group Completes CEO Succession

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Press Release
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updated: Jul 30, 2020

PLANO, Texas, July 30, 2020 (Newswire.com)
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Landmark Management Group, a provider of consumer finance solutions, has completed a CEO transition. Joel Mussat, a longtime executive in the consumer finance industry, has been appointed CEO of the Company.

“Landmark plays a vital role in ensuring access to the proper consumer finance solutions available today,” said Mussat. “I am humbled and honored to join the Company’s leadership team.” As CEO of Landmark, Mussat will be tasked with the management and growth of the family of brands within Landmark.

“Joel is a strategic leader and experienced C-level executive with expertise in driving growth in the consumer finance industry,” said Company spokesman Craig Rodgers. “This experience has positioned him well to help lead the company into its next phase of growth. His experience building consumer-friendly solutions and leading customer-centric teams will help propel us to future levels of continuous growth.”

Mussat joins after a lengthy career which includes 10 years in management consulting (Accenture and IBM/PwC Consulting), and 11 years as an executive at Plano, Texas-based Rent-A-Center, Inc. He holds a BA degree from the University of Michigan and an MBA from Cornell University, where he was a recipient of the Park Foundation Fellowship Award.

About Landmark Management Group

Landmark Management Group is a Plano, Texas-based management firm focusing on consumer finance-related services. Its portfolio of companies was recognized as a “Top 100 Places to Work” and placed fifth by The Dallas Morning News in the Dallas/Fort Worth Metroplex in 2017, and also won the “Best at Communicating” award in 2017. For inquiries, contact craig.rodgers@landmarktx.com.

Source: Landmark Management Group

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July 30, 2020