Consumer Debt

Biden Administration Urges Supreme Court to Reinstate Student Loan Relief Plan in Emergency Appeal

The Biden administration has filed an emergency appeal at the Supreme Court urging the justices to reinstate the president’s latest student loan relief plan, The Hill reported. The appeal asks to temporarily lift a lower court ruling that currently prevents President Biden from implementing his Saving on a Valuable Education (SAVE) Plan, which would lower student loan payments for millions of borrowers. If the Supreme Court is not inclined to intervene on their emergency docket, U.S. Solicitor General Elizabeth Prelogar alternatively requested the justices take up the legality of the plan on the merits and expedite consideration so oral arguments can be held this fall. The court ordered the SAVE Plan’s challengers to respond by Monday afternoon. The posture mimics how the Biden administration handled challenges to its earlier student debt plan, which would’ve forgiven at least $10,000 in debt relief to individual borrowers. Last year, the Supreme Court struck down that plan in a 6-3 vote along ideological lines after agreeing to take up the matter in full once it received a demand for emergency action from the Justice Department. The SAVE plan was first introduced after the Supreme Court’s decision.
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Consumer Agency Cracks Down on Seller-Financed Home Sales

A federal regulator signaled that it would take a tougher stance with seller-financed home sales, saying that they were subject to many of the same consumer protections as a home bought with a more traditional mortgage, the New York Times reported. The Consumer Financial Protection Bureau (CFPB) released an advisory opinion that put sellers on notice that it would not tolerate the predatory practices that have come to dominate the so-called contract for deed market. These seller-backed sales have become popular in poor neighborhoods with rundown single-family homes, where mortgages are hard to come by. The CFPB made clear that contract-for-deed sales were subject to federal truth in lending laws that required sellers to first assess a person’s ability to buy a home as well as provide full disclosure of the risks and hidden costs associated with these deals. “The government is taking action to ensure that these products do not turn the dream of homeownership into a nightmare,” CFPB Director Rohit Chopra.The regulator also released a research report documenting the market’s abusive practices. Among them, a buyer can be evicted for missing a single monthly payment and builds up no equity in the home. Contract-for-deed sellers have targeted ethnic and religious communities. (Subscription required to view article.)
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Inflation Milestone: Consumer Price Index Slows Below 3% for First Time Since March 2021

Price hikes slowed more than expected in July, and, for the first time in more than three years, the Consumer Price Index has landed below 3%, CNN reported. Consumer prices rose 2.9% for the 12 months ended in July, slowing from June’s 3% annual gain, according to the Bureau of Labor Statistics’ (BLS’) latest CPI report released today. On a monthly basis, prices rose 0.2% after posting a 0.1% decline the month before. The cost of owning and renting a home rose 0.4%. That so-called shelter index accounted for nearly 90% of the monthly increase, BLS said in the report. Economists were expecting a 0.2% monthly increase and an annual rise of 3%, according to Fact Set consensus estimates. Excluding gas and food, categories that tend to be quite volatile, core CPI rose 0.2% from June and saw its annual rate slow to 3.2% from 3.3%. Core CPI inflation is now running at its slowest pace since April 2021.
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Three-Year Inflation Outlook Hits Record Low in New York Fed Consumer Survey

Consumers grew more confident in July that inflation will be less of a problem in the coming years, according to a New York Federal Reserve report that showed the three-year outlook at a new low, CNBC reported. The latest views from the monthly Survey of Consumer Expectations indicate that respondents see inflation staying elevated over the next year but then receding in the next couple of years after that. In fact, the three-year portion of the survey showed consumers expecting inflation at just 2.3%, down 0.6 percentage point from June and the lowest in the history of the survey, going back to June 2013. The results come with investors on edge about the state of inflation and whether the Federal Reserve might be able to reduce interest rates as soon as next month. Economists view expectations as a key for inflation as consumers and business owners will adjust their behavior if they think prices and labor costs are likely to continue to rise. On Wednesday, the Labor Department will release its own monthly inflation reading, the consumer price index, which is expected to show an increase of 0.2% in July and an annual rate of 3%. That’s still a full percentage point away from the Fed’s 2% goal but about one-third of where it was two years ago. Markets have fully priced in the likelihood of at least a quarter percentage point rate cut in September and a strong likelihood that the Fed will lower by a full percentage point by the end of the year. While the medium-term outlook improved, inflation expectations on the one- and five-year horizons stood unchanged at 3% and 2.8%, respectively.
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U.S. Consumer Medium-Term Inflation Expectations Drop

U.S. consumers' medium-term inflation expectations eased substantially in July even as their near- and longer-term outlooks for price pressures held steady, although households are increasingly worried about staying current on their debt, a Federal Reserve Bank of New York report showed, Reuters reported. The median three-year inflation expectation dropped to 2.3% from 2.9% in June to register its lowest reading since the New York Fed launched the monthly Survey of Consumer Expectations in 2013. The one-year and five-year outlooks held steady at 3.0% and 2.8%, respectively. Fed officials — who have been battling high inflation for more than two years — track a range of measures of inflation expectations because they worry that if they begin to drift substantially upward, consumers and businesses will alter their spending behaviors in ways that can make inflation harder to tame. Recent measures of inflation have shown it returning toward the Fed's 2% target, and the central bank is now widely expected to cut interest rates next month. The Fed's policy rate — which was raised rapidly from near zero starting in March 2022 — has been on hold in a range of 5.25%-to-5.50% since July 2023. Meanwhile, consumers — especially lower-income households — see a greater chance they will miss a debt payment in the year ahead. The survey showed a 13.3% average probability of missing a minimum debt payment, up 1 point from June and the highest since April 2020 at the onset of the COVID-19 pandemic when unemployment briefly skyrocketed. The increase was most pronounced for those with an annual income below $50,000 and those without a high school degree, the survey said.
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