Ranks of the "Unbanked" Decline, FDIC Survey Finds

Fewer Americans are going without bank accounts, according to a new government survey, a trend expected to support consumer spending and housing investment in the coming years, the Wall Street Journal reported today. Reflecting economic recovery, the percentage of Americans without access to banking services fell to 7 percent in 2015 from 7.7 percent in 2013 and a peak of 8.2 percent in 2011, according to the survey by the Federal Deposit Insurance Corp. Last year’s proportion of “unbanked” households was the lowest since the FDIC started the biennial survey in 2009. That year, the share was 7.6 percent. A household is considered unbanked if no one in the family has an account with a federally insured financial institution. The survey also looks at “underbanked” households, which have a bank account but also use services such as check cashing, money transfers, payday loans and pawnshops. The percentage of the underbanked was 19.9 percent last year, little changed from 20 percent in 2013.

Analysis: Implosion of ITT Technical Institute Tough on Students, Taxpayers

The closure of ITT's 136 campuses threatens to throw nearly 29,000 indebted students off their educational tracks and to saddle taxpayers with nearly half a billion dollars in losses, according to a Bloomberg News analysis today. The collapse of ITT Tech, owned by ITT Educational Services Inc., wasn't unexpected: The Consumer Financial Protection Bureau had sued it in 2014, saying that it misled students into taking out loans with false promises about their career prospects; last year, the Securities and Exchange Commission sued, too, accusing it of defrauding investors. ITT has vigorously denied all allegations of wrongdoing. In June, the U.S. Department of Education demanded ITT stump up additional collateral, beyond the $94.4 million on file, to cover the costs of a potential failure. And last month, after the school's accreditor expressed concern about its operations, the agency barred new students from using federal aid to enroll and ratcheted up its demand for collateral—a move experts warned would trigger the school's demise. ITT soon stopped accepting new students altogether. Since another big for-profit college chain, Corinthian Colleges Inc., went under last year, the government has as of June canceled at least $97.6 million in student loan balances on students' requests. That's less than half of the roughly $214 million owed by Corinthian students at the time it shut down. ITT's students carry a total of $478.8 million in federal debt. The Education Department is frantically trying to limit debt cancellations. Students who transfer even one ITT credit toward what the agency considers "comparable" programs at other schools and then complete their studies aren't eligible to have their loans wiped. But federal regulations don't clearly define "comparable"—giving the department the authority to reject borrowers' pleas for forgiveness. The application borrowers must fill out is similarly vague.

BlackRock Says Bond Market Views Puerto Rico Board as Positive

The bond market is viewing a new federal control board charged with overseeing Puerto Rico’s finances as a positive for investors, according to BlackRock Inc.’s Sean Carney, Bloomberg News reported yesterday. "Some of the better-secured bonds had a bit of a relief rally after the board was named,” Carney, head of municipal strategy, said yesterday. BlackRock manages about $124 billion of municipal debt, including Puerto Rico bonds. President Barack Obama last week appointed seven members to the board from lists submitted by congressional leaders of both parties. The panel must curb the island’s recurring budget shortfalls, oversee any restructuring of its $70 billion of debt and address a $43 billion unfunded pension liability. “We don’t know what questions they’re going to have to answer or what hurdles they’ll have to clear," Carney said. "So there’s still a lot of unknown, but I think the market appreciated a little bit of certainty in an uncertain environment.”


For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 
 

Commentary: What’s Next if Payday Loans Go Away?

As the Consumer Financial Protection Bureau prepares to finalize proposed rules cracking down on payday lenders, critics and proponents alike are speculating on what would fill the need for short-term, small-dollar loans, according to a MorningConsult.com commentary yesterday. Payday lending has garnered criticism from progressive Democrats, such as Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, who argue that the practice preys on the poor, trapping low-income borrowers in a cycle of deepening debt. If payday lending were to become less profitable because of the rules, it could result in increased use of installment loans, advocates say. Stronger regulation of payday lending could increase the use of financial technology such as online marketplace lending, said William Michael Cunningham, founder of Creative Investment Research, which studies trends in banking in black communities. Democratic lawmakers have also expressed hope that financial technology will fill credit access gaps in underbanked communities. The proposed CFPB regulation — with a comment period ending in October — would require lenders to confirm that borrowers are able to repay a loan, aiming to prevent borrowers from being stifled by high interest rates and monthly payments. It would also take aim at repeated short-term borrowing practices, require lenders to offer lower-risk loan options and crack down on fees against delinquent borrowers.

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