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Nearly 1 in 10 Americans Carry Medical Debt

Submitted by ckanon@abi.org on
A new analysis of government data estimates that nearly 1 in 10 American adults — or approximately 23 million people — owe medical debt, Benefits Pro reported. What’s more, nearly half of those people (11 million) owe more than $2,000, and three million people owe more than $10,000. The Kaiser Family Foundation (KFF) performed the analysis, which was based on data from the 2020 Survey of Income and Program Participation, a nationally representative survey that asks every adult in a household whether they owed money for medical bills in 2019 and how much they owe. It looked at people with medical debt of more than $250. KFF’s analysis suggests that Americans’ collective medical debt totaled more than $195 billion in 2019, with a small share of adults accounting for a huge share of the total. Researchers noted that estimate is significantly higher than other commonly cited estimates, which generally rely on data from credit reports that may not capture medical debts charged to credit cards or is included in other debts rather than being directly owed to a provider.
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Fed Raises Interest Rates for First Time in 3 Years, Projects 6 More Hikes as Inflation Soars

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The Federal Reserve said that it would raise interest rates for the first time in three years as policymakers look to cool red-hot inflation, a move that comes at a precarious time for the U.S. economy as it confronts a continuing pandemic and a war in Europe, Fox Business reported. The widely anticipated move — that the Fed would raise rates by 25-basis points — brings to an end the ultra-easy monetary policy put in place two years ago to prop up the economy through the COVID-19 pandemic. The rate liftoff, which puts the benchmark federal funds rate at a range between 0.25% and 0.5%, is likely just the start of a series of increases intended to curb runaway inflation. New economic projections released after the meeting show that policymakers expected six more, similarly sized increases over the course of 2022 after consumer prices hit a 40-year-high. It marks a considerable shift from just six months ago, when half of the central bankers believed interest rate increases were not warranted until at least 2023. Fed officials also expect inflation to remain elevated, ending 2022 at 4.3% — far above the Fed's annual target of 2.3%.
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Consumer Debt
Mortgage
Finance and Banking
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A Moment of Reckoning on Financial Literacy

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We are living in a new era of investing. Meme stocks, cryptocurrencies, NFTs, SPACs and even ETFs have over the past few months attracted tens of millions of new traders, drawn in with a mix of stimulus money, easy brokerage apps and pandemic-era boredom, Bloomberg reported. Those traders are passionate, sometimes very young, often belong to devoted online communities and in some cases have been very financially fortunate. That doesn’t mean they’re financially literate. Experts have warned since the beginning of the latest retail mania that many new entrants are conflating investing with speculating. The difference can at times feel hazy, particularly at a moment when perspectives are shifting. Take Bitcoin. Just a few years ago, the head of the largest bank in the U.S. called it a “fraud,” reflecting the views of many on Wall Street. But these days it’s increasingly looking like a mainstream investment. ETFs linked to Bitcoin debuted recently and the token has become so large that Wall Street just can’t ignore it. Still, this doesn’t mean Bitcoin is risk-free, or that the tens of thousands of other coins in the cryptocurrency universe are suitable assets for retail traders. To make sense of all this, investors have been turning to some unexpected sources. TikTok is one. There, and in other corners of social media, “finfluencers” can make hundreds of thousands of dollars peddling financial knowledge to young audiences hungry to learn more. Much of this is educational and even entertaining. Yet the social world is rife with financial scams, and they are becoming more sophisticated than ever. If you are a retail investor — or are thinking of getting into the market soon — having strong financial literacy is crucial. But what that entails is changing rapidly. In a fast-developing developing market, you might now want to know more than simply what Bitcoin is. These days you might instead be left wondering about the difference between buying Bitcoin, a Bitcoin ETF and another coin, such as Solana.
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Veterans May Be Tricked into Taking Out Unnecessary Student Loans for College, Biden Administration Warns

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A recent federal review found a troubling trend: Veterans reported college advisers had led them to believe the government would cover the cost of their education, only to find out later that student loans would be necessary, USA Today reported. So the U.S. Department of Education is warning the nation's colleges not to swindle American veterans, and it's inviting vets who have been deceived to come forward with their experience. The warning marks one of the first public actions from a newly restarted enforcement unit within the Education Department. That office is meant to safeguard taxpayer money and ensure students get the education they pay for. Borrowers who feel they were misled into taking out loans should submit a complaint to the Federal Student Aid office. The return of the “enforcement unit” comes after former Education Secretary Betsy DeVos had deprioritized the office. Under DeVos, the government also rejected tens of thousands of people seeking financial relief and saying their colleges misled them. The Education Department was then the subject of a class-action lawsuit that remains ongoing. In October 2021, the Biden administration announced it would again create the office and said Kristen Donoghue, who previously had worked for the Consumer Financial Protection Bureau, would lead it. As of February, the Education Department has sent back nearly $2 billion to students who were able to prove their schools misled them. Most recently, the agency sent millions of dollars to students who were defrauded by DeVry University and other colleges that have since closed. But the Department still had a backlog of nearly 88,000 applications as of September 2021.
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Consumer Debt
Predatory Lending
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Child Tax Credit Expansion Creates Refund Roller Coaster

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Democrats’ expansion of the Child Tax Credit may have expired, but it’s not gone completely. More than 40 million Americans now must contend with it on their annual tax returns, and it’s proving a curveball for many, Politico reported. People who received the monthly Child Tax Credit checks lawmakers created last year may be surprised to see those payments are now reducing or even eliminating their tax refunds. Some divorced people could be upset to learn they weren’t actually eligible for checks they received and now have to pay the money back. At the same time, some will see fatter refunds, particularly the several million who opted out of the monthly payments. So too will people who’ve had babies in the past year. And thanks to a loophole in the law, it’s possible for some to claim bigger child credits than lawmakers intended. The effects on refunds could be a touchy issue for Democrats, potentially putting them on the defensive over one of the biggest achievements of the Biden administration. People love refunds, relying on them as an important part of their budgets, and notice if their payments are smaller than expected or if they suddenly owe the IRS. Some interpret the size of their refunds as an indication of how well they’re faring under the tax system, even though the payments are really just the difference between what is owed and what was withheld from their paychecks. Most people received tax cuts under legislation Democrats approved last year in response to the coronavirus outbreak. The situation for Democrats is reminiscent of the position Republicans were in during the first filing season after their 2017 tax overhaul, when they came under fire because the size of refunds initially dropped before later rebounding to roughly historic levels.
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Consumer Debt
Family/Divorce Issues
Bankruptcy Taxation
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States Consider Gas Tax Pauses as Prices Spike

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Governors and state legislators are considering moves to suspend state gas taxes as the cost of fuel continues to soar to record levels, a bipartisan effort that comes as high prices hammer household budgets across the nation, The Hill reported. Maryland legislators have fast-tracked a bill to suspend the state gas tax for 30 days. In Georgia, a state House of Representatives that has spent months bitterly divided over everything from voting rights to gun policy and tax reform came together to unanimously approve a gas tax suspension through the end of May. Gov. Brian Kemp (R) said he was pushing the legislature to get a bill to his desk. Florida legislators last week voted to suspend the state’s gas tax for a month — but not until October, when tourism is at its lowest ebb of the year. And Michigan Gov. Gretchen Whitmer (D) said she was in negotiations with the Republican-controlled state legislature, which planned to pass a bill creating a gas tax holiday for six months. California Gov. Gavin Newsom (D) used his State of the State address to pledge what advisers said would eventually be billions of dollars in relief money for those paying higher prices at the pump, though without offering specifics. Newsom and Virginia Gov. Glenn Youngkin (R) have pushed their legislatures to delay gas tax increases. Legislators or governors in Alaska, Colorado, Idaho, Illinois, Maine, Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania and Rhode Island have all floated proposals or introduced legislation related to gas taxes in recent days. Most states tax gasoline at a higher rate than the federal rate of 18.4 cents per gallon. Suspending the local gas tax in those states would go farther to reduce the price of an average gallon than a federal suspension. But even then, eliminating the tax that most states charge would put only a small dent in the cost of fuel.
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Bankruptcy Taxation
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Bombshell Report Claims Student Loan Servicer Misled Student Loan Borrowers

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A new report released by the Communications Workers of America (CWA) and the Student Borrower Protection Center (SBPC) says their investigation into “the world’s largest student loan company” has uncovered new evidence of “systemic mismanagement, failure, and abuse,” Forbes reported. The investigation claims that Maximus, which is a student loan servicer for 13 million federal student loan borrowers and operates under the name “Aidvantage,” allegedly engaged in the following: sloppy student loan servicing; unfair student loan debt collection; and unlawful wage garnishment and improper seizure of public benefits. In response to their investigation, CWA and SBPC launched AidvantageWatch, a project to spotlight alleged misconduct by Maximus and to ensure fair treatment for all student loan borrowers. Borrowers can visit AidvantageWatch online to share their experience with Maximus/Aidvantage and to learn how to alert regulators and enforcement officials if they encounter deceptive or misleading conduct by the student loan company. “This report contains multiple significant errors of fact and context that mischaracterize the work we do for the FSA, including inaccurately describing the number and nature of consumer complaints about our student loan servicing work and falsely asserting that we are a student debt collector,” Maximus spokesperson Eileen Cassidy Rivera said. “We are not.” According to Rivera, Maximus disputes several claims made in the report, including that Maximus: shouldn’t be called a student loan servicing company, but a “government contractor that provides back-office services for the government”; does not perform student loan debt collection and does not make the rules that determine when a student loan is in default; and doesn’t set the rules or policy for garnishment or seizure for student loans in default.
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Consumer Debt
Predatory Lending
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Dov Charney, Founder of American Apparel, Files for Bankruptcy

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Dov Charney, founder of the formerly high-flying retailer American Apparel Inc., filed for bankruptcy along with his latest business venture, a vintage clothing store, Bloomberg News reported. Charney was forced into bankruptcy court because he owed $30 million to a hedge fund involved with American Apparel, which shut down all of its outlets and became an online retailer after going through two of its own bankruptcies. While in bankruptcy, Charney will be able to halt any debt-collection efforts while he works out a plan to repay as much as he can. In the 1990s, Charney built American Apparel into a major retailer known for its made-in-U.S.A. marketing and racy advertising. The Los Angeles-based company became publicly traded in 2007 but within a few years, Charney was forced out as the company began losing money. It filed the first of two bankruptcies in 2015. At its height, American Apparel had more $600 million in sales from hundreds of stores and employed thousands of people, including at a manufacturing plant in California.

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Consumer Bankruptcy
Consumer Debt
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Visa, Mastercard Prepare to Raise Credit-Card Fees

Submitted by jhartgen@abi.org on

Visa Inc. and Mastercard Inc. are preparing to increase the fees that many large merchants pay when they accept consumers’ credit cards, the Wall Street Journal reported. The fee increases — delayed during the past two years because of the pandemic — are scheduled to kick in next month. U.S. merchants paid card issuers an estimated $55.4 billion in Visa and Mastercard credit-card interchange fees in 2021, more than double the amount in 2012, according to the Nilson Report. They pass along at least some of these costs to the consumer in the form of higher prices. More merchants have started charging consumers extra when they pay with credit cards. (Subscription required.)

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Consumer Debt
Finance and Banking
Retail
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