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Updates in the World of Consumer Credit. Kimberly Cole, CFE. Who is Navicore Solutions. Founded in 1991 in Freehold, New Jersey, Navicore Solutions is a national leader in the field of nonprofit financial counseling.
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Updates in the World of Consumer Credit Kimberly Cole, CFE
Who is Navicore Solutions • Founded in 1991 in Freehold, New Jersey, Navicore Solutions is a national leader in the field of nonprofit financial counseling. • A national 501(c)(3) organization, Navicore Solutions operates 12 offices in 11 states nationwide and our certified counselors assist more than 100,000 consumers each year through in-person, telephone and Internet counseling across the United States.
What is Consumer Credit? • Consumer credit is a debt that a person incurs when purchasing a good or service. Consumer credit includes purchases obtained with credit cards, lines of credit and some loans. Consumer credit is also known as consumer debt. Consumer credit is divided into two classifications: revolving credit and installment credit. The most common form of consumer credit is a credit card.
How Much Consumer Debt is There is the USA? • In September 2017, U.S. consumer debt rose 6.6 percent to $3.789 trillion. That surpassed last month's record of $3.767 trillion. • Of this, $2.8 trillion was non-revolving debt, and it rose 6.3 percent. • Most of the growth comes from education loans. • Non-revolving debt rose from 62 percent of all consumer debt in 2008 to 73 percent in 2017.
How Much Debt Does the Average American Have? • According to Nerd Wallet, the average American family owes $16,883 in credit card debt. • Student loan debt is $50,626
How Much Debt Does the Average American Have? • Auto loan debt is $29,539 • Mortgage debt is $182,421
Why Do We Have So Much Debt? • The cost of living has outpaced income growth over the last 13 years – income has grown at 28% but cost of living has increased by 30%. • Costs such as housing and medical expenses have significantly outpaced the income growth.
What Does This All Mean? • According to the Federal Reserve*, nearly one in four adults in America are not able to pay all their monthly bills on time. • The same survey found that 44% of adults either could not cover an emergency expense of $400 or would cover it by selling something or borrowing money. * Report on the Economic Well-Being of US Households in 2016 (May 2017)
What is the CFPB • The CFPB or Consumer Financial Protection Bureau is a regulatory agency charged with overseeing financial products and services that are offered to consumers. It was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
What has the CFPB Done? • Set new standards for the mortgage market • Requires most lenders to verify income • Simplified the disclosures that borrowers receive when they take out a loan
What has the CFPB Done? • The CFPB has the authority to enforce rules • They have collected over $11.7 billion dollars in penalties • Forced Citibank to offer $700 million in compensation to customers for unwanted credit “add-ons” • Forced Bank of America to pay out $720 million for the same thing • Fined Wells Fargo $100 million for the opening accounts not authorized by customers
What has the CFPB Done? • Currently targeting abusive practices by payday lenders, limiting overdraft fees, arbitration clauses and to provide tools and resources for student loans.
Who Is In Charge of the CFPB • As of 11/27/17- your guess is as good as mine! • The Director, Richard Cordray just stepped down. • Cordray has named Leandra English • Trump has named Mick Mulvaney • Both claim to have the right to the appointment!
The Equifax Breach • 143 Million American consumers had their personal information exposed in the data breach. • Breach went from May-July of 2017. • Social security numbers, dates of birth, addresses and drivers license numbers were hacked. • 209,000 people had their credit card numbers stolen.
How to Protect Yourself • Visit www.equifaxsecurity2017.com to find if you may have been impacted. • Consider signing up for the free credit monitoring offered through Equifax. • Check your credit reports through www.annualcreditreport.com • Monitor your credit card accounts and bank accounts for fraudulent activity.
Credit Freeze versus Credit Lock • Both a credit lock and credit freeze prevent anyone from opening an account in your name, there are some differences. • The credit bureaus are advocating for the credit lock as opposed to the credit freeze. • Consumer Reports are advocating for the credit freeze as opposed to the credit lock.
What is the Difference between Lock and Freeze Lock One-time fee to freeze, typically less than $20. Separate fee to unfreeze, typically less than $10. Fees vary according to state laws. If you're a victim of ID theft and have filed a report, freezes are free You have certain legal rights under state laws Thawing your report typically takes a few days You need to freeze reports at all three credit bureaus for maximum protection TransUnion: Free Equifax: $4.95/month; free lifetime service expected Jan. 2018 Experian: $4.99 for the first month; $24.99/month thereafter You can lock or unlock your report immediately through a website or app You may be giving up some consumer rights, such as the ability to file a class-action lawsuit against the credit bureau You need to lock reports at all three credit bureaus for maximum protection Freeze
What Have We Learned from the Breach • Many companies need better security protection for their customers. • Companies should not wait to alert the public if they are breached. Equifax discovered the breach on 7/29, but notified the public on 9/7. • We as consumers need to take better precautions.
Are Auto Loans the Next Bubble? • Long term car loans (6 + Years) increased from 26 percent of auto loans originated in 2009 to 42 percent of 2017. • Longer-term loans tend to be used to finance larger amounts. • Default rates associated with longer-term loans are higher than those for shorter-term loans. • The credit scores of borrowers who obtain longer-term loans are lower than the scores of borrowers who obtain five-year loans.
