Sub-Prime Cards Consumer Debt Soar - Rate Caps? • 02/21/2020

Sub-prime cards are gathering more steam as a major deal closes. Credit card debt skyrocketed in December by a record 14%. Majority of Americans want a 36% rate cap. Women in Payments recently recognized exceptionally talented leaders and rising stars in Fintech and Banking. Despite years of warnings, those computers inside your computer remain disturbingly unprotected.

Ally Financial has inked a big deal to buy sub-prime specialist CardWorks in a transaction valued at approximately $2.65 billion. Card works, a specialist in sub-prime cards, is a privately held company with $4.7 billion in assets and $2.9 billion in deposits1. Under the terms of the agreement, Merrick Bank, a wholly owned subsidiary of CardWorks, will merge into Ally Bank.

Sub-Prime Cards

The acquisition of CardWorks and it’s sub-prime cards, will further diversify Ally’s product offerings, adding an established credit card platform, full-spectrum servicing and recovery operation and a nationwide merchant acquiring business. Upon completion of the transaction, Ally will provide over 11 million customers in all 50 states with compelling secured and unsecured banking products, according to Bankcenter.

Driven by a very late Black Friday and a pull-back on consumer tariff taxes. December credit card debt went off the rails As a result. the year-over-year expansion in credit card debt skyrocketed in December by a record 14%, compared to a 3% decrease in November, and a strong 8% gain in October. The $10 billion one-month gain is the largest for 2019, surpassing the $14 billion gain over a two-month period in the summer, reports CardTrak.

Card Debt Skyrockets

U.S. revolving consumer credit stood at $1098.0 billion at the end of December, compared to a revised $1085.3 billion for November, and a revised $1088.3 billion for October. At the end of 2018, Americans owed a revised $1053.5 billion in revolving credit. U.S. revolving credit, (97% credit card debt), increased in December at an annual rate of 14.0%, compared to one-year ago, and follows a revised 3.2% YOY (year-on-year) decline in November, and a revised 8.3% for October, according to RAM Research.

Senior Analyst, Robert McKinley, notes credit card balances for the fourth-quarter, among the Top 4 U.S. issuers, grew a solid 6.0% year-on-year (YOY), compared to 4.3% YOY in the prior quarter, and compared to 2.8% YOY one-year ago.

Among the nation’s Top 4 credit card issuers (Chase [JPM], Capital One [COF], Bank of America [BAC], and Citibank [C]), the annual growth rate for U.S. end-of-period (EOP) credit card outstandings in the fourth-quarter (4Q/19) is the second highest in the past five years, reports CardData and CardWeb.

Robert McKinley adds the erratic nature of U.S. credit behavior in 2019 remains a concern with lenders, mirroring the pattern of the year before the “Great Recession.”

Unprotected PC Gizmos

That laptop on your desk or that server on a data center rack isn’t so much a computer as a network of them. Its interconnected devices—from hard drives to webcams to trackpads, largely sourced from third parties—have their own dedicated chips and code. That represents a serious security problem: Computers inside your computer remain disturbingly unprotected, offering an insidious and nearly undetectable way for sophisticated hackers to maintain a foothold inside your machine. A slew of network cards, trackpads, Wi-Fi adapters, USB hubs, and webcams all had firmware that could be updated with “unsigned” code that lacks any cryptographic verification. In other words, it could be rewritten without any security check, according to CardBuzz.

Rate Cap of 36%

Seventy-two percent of Democrats, 70% of Republicans and 67% of independents expressed some level of support for the rate cap. Just 12% of registered voters polled expressed opposition to the rate cap, while 18% said they were either undecided or didn’t have an opinion about the measure. Even so, Professor Cardworthy says, Republican lawmakers have resisted efforts to impose strict limits on high-interest loans, all but dooming the bill in the GOP-held Senate and to the contrary continue to weaken the Consumer Financial Protection Bureau.

Dobot

Smart savings begins with cultivating daily behavior like cutting back on the morning lattes, skipping happy hours, and savings with friends. Savings is more than just keeping the emergency cookie jar full with $400 or $500 in cash. It’s should include other goals like vacations, an automobile or house downpayment. The new Dobot app users to define their goal and upload a photo. Then they specify how much they want to save and when they need the money. Every week, Dobot automatically transfers small amounts of money from the customer’s checking account to their Dobot savings. The app includes a Scheduled Savings feature, allowing users to control how much and how often they want to save.

Women in Payments

Women in Payments recognized exceptionally talented leaders and rising stars in the payments industry at the annual Women in Payments symposium in Washington, DC. The 2020 U.S.A. awards were presented in partnership with Visa, as part of the annual Women in Payments symposia, to outstanding payments professionals, with recipients commended for their leadership, innovation, and commitment to strengthening the industry and for advocating the success of women in the payments ecosystem.

Lessons from Estonia

U.S. policymakers have long sought ways to boost federal agencies’ capacity to implement cybersecurity and plan for significant cyber incidents. As early as 2002, Senator Ron Wyden of Oregon advocated for the creation of the National Emergency Technology Guard (NETGuard), a corps of volunteers with technology experience who could help following a cyber incident. Fast forward to 2019, when General Robert Neller, former commandant of the Marine Corps, said that the Marines would create a new cyber auxiliary, where it’s OK for members to have “purple hair,” paving the way to attract, recruit, and retain civilian cyber talent. Other branches of the military have already offered cyber warriors steep bonuses to reenlist and the Army has even created a direct accession program in cyber warfare.

Small Business Owners

Small business owner optimism softened a bit for their businesses and future expectations in the latest Wells Fargo/Gallup Small Business Index. Respondents also indicated attracting new customers continues to be a key challenge, as many owners share plans of how they will garner more business this year. The January survey showed a 10-point decrease in overall optimism.

One indicator underscoring this dip in optimism is the finding that fewer small business owners (24%) are planning on adding jobs or positions at their companies this year – lower than last quarter. However, more than 80% of owners said their current financial situation is somewhat good or very good, and 84% said the same would be the case 12 months from now. Additionally, 64% of business owners said they expect their revenues over the next 12 months to increase a lot or a little and 81% say their company’s cash flow will be very good or somewhat good over the next 12 months.