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News Scan May 2014

Credit Card News, Economy News, Banking Industry News - May 2014

MasterCard expands fraud protection

Source: Reuters Category: Credit Card News
  • MasterCard is strengthening fraud protections for consumers by extending its zero-liability policy to cover more card transactions and dropping restrictions on who is eligible -- putting pressure on Visa to follow suit.
  • It tells banks that MasterCard is very serious about fraud, and very serious about protecting cardholders' interest.
  • It will extend its zero-liability policy for fraudulent transactions to PIN-based and ATM transactions, starting in October.
  • Card users already have zero liability for fraudulent signature debit and credit transactions, meaning they are not exposed to losses if a fraudster runs up charges on transactions that require a signature
  • Perhaps just as important, MasterCard said it would drop two restrictions on the zero-liability policy for all transactions.
  • No longer will accounts have to be in good standing to qualify, or have fewer than three previous fraud problems within the past year.
  • Low U.S. inflation is slowly advancing and will reach 2 percent by late this year, according to a Reuters poll of economists that underscores how the Federal Reserve may soon come under increasing pressure to raise interest rates.
  • Conviction is growing that the U.S. economy is back on a stronger growth path that eventually will fuel stronger gains in wages and prices, and with them, higher rates. Strong hiring and inflation data for April appear to have hardened that view.
  • The economy is shifting gears, and the biggest risk to business profits is the failure to recognize that labor turnover rates and compensation could soar in the latter part of this year and especially in the first part of 2015.
  • Monthly growth in hiring is now expected to hit 221,000 on average in the current quarter, up sharply from 200,000 in the previous poll.
  • Quarterly growth rates for gross domestic product are expected to be at or above a 3 percent annual pace starting in the second quarter of this year.
  • Still, the Fed will probably wait until the third quarter of 2015 before they raise interest rates.
  • Households without credit card debt tend to be more educated than those with credit card debt.
  • Nearly half (47 percent) of the households that include at least a bachelor's degree have no credit card debt.
  • Just 27 percent of such households do have credit card debt. That's the only educational group in which no-debt households outnumber have-debt households.
  • Compare that to households where a high school degree is the highest educational level. In them, 27 percent report having no credit card debt, while 38 percent do have card debt.
  • The study examined data on adults up to 65 years old. Its margin of error is plus or minus 4.4 percentage points on households with credit card debt, 5.3 percentage points on households without debt.

Missouri is Best Banking Market, Nevada is worst: Report

Source: Reuters Category: Banking Industry News
  • Missouri is the best state for banking conditions and Nevada is the worst. There are more than 350 banks operating in Missouri quality of service and competitive rates.
  • On the opposite end of the spectrum was Nevada, which is still feeling the lingering effects of the real estate bust.
  • Only 46 banks had operations in the state as of June 2013, according to the Federal Deposit Insurance Corp., and that relative lack of competition appears to have affected service.
  • Arizona, also hit hard by failures, was the second-worst rated state for banking conditions. Rounding out the bottom five were Connecticut, Washington and Alaska.
  • Findings were based on the number of active banking institutions based in each state according to FDIC statistics; stability, as determined by the percentage of state banks that failed during 2013; quality of service according to the 2014 J.D. Power U.S. Retail Banking Satisfaction Study; and MoneyRates.com's quarterly surveys of best savings account rates and money market rates in the country.

U.S. Fed warns of more bank scrutiny over leveraged loans

Source: Reuters Category: Banking Industry News
  • The central bank may have to take further action to ensure compliance with U.S. guidance on leveraged lending, in the clearest sign yet it is seeking to dispel a perception that it is lenient.
  • Banking and regulatory sources told that the Office of the Comptroller of the Currency (OCC) is zealously pursuing the implementation of leveraged loan guidelines it and the Fed issued jointly last year. By contrast, the Fed is more relaxed.
  • Recent industry level data suggest that despite the issuance of the leveraged lending guidance and the MRAs, terms and structures of new deals have continued to deteriorate in 2014.
  • A lot of work has been done to date by the agencies to assess compliance with the guidance, but clearly much more work remains to be done and stronger supervisory action may be needed.
  • Banks received $1.47 billion in fees in 2013 for U.S. leveraged loans, a 17 percent increase from 2012, according to Thomson Reuters and Freeman Consulting data.
  • A difference in approach between the Fed and the OCC, which even some regulatory sources privately admit exists, has meant that banks are able to be more aggressive in making leveraged loans just because they are regulated by the Fed, not the OCC.
  • As a result, these banks could gain ground at the expense of rivals that are regulated by the OCC.
  • Complicating matters, the guidelines are not prescriptive enough and leave room for interpretation, bankers have complained.
  • Americans racked up more debt in the first quarter, the third straight quarterly increase, thanks in large part to heftier mortgages.
  • The report on household debt and credit showed however that mortgage originations dropped to their lowest level since the third quarter of last year, which could buck the overall trend of growing confidence among U.S. consumers.
  • Outstanding household debt rose by $129 billion from the previous quarter, boosted by a $116 billion jump in mortgage debt and smaller rises in student and auto loans.