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Big banks including Citigroup, Suntrust and Bank of America are trying to learn from Amazon's use of predictive analytics to target customers more accurately. Like Amazon, banks collect vast amounts of information about their clients' spending and savings. That kind of information could be used to anticipate whether a customer needs a credit card, car loan or mortgage. This individualized approach runs counter to the traditional big bank model that relies on a high volume of transactions rather than marketing tailored to individual customers. Predictive analytic services could be more akin to the personalization associated with smaller institutions -- if it can be done without coming off as creepy or intrusive.
A survey of checking account holders by Pew Charitable Trusts has found widespread confusion and dissatisfaction about financial institution's overdraft policies. Current regulations require financial institutions to obtain affirmative consent (an “opt in”) from consumers before enrolling them in an overdraft penalty plan that makes automatic short-term advances to cover transactions. The survey, however, found that more than half of respondents who had incurred overdraft penalties did not believe they had opted in to the plan. The penalties fell disproportionately on younger, lower-income and nonwhite account holders and 28 percent of respondents who paid an overdraft penalty report closing a checking account because of the fees.
The U.S. housing recovery should regain its footing, but faces a number of challenges according to a new report from Harvard University's Joint Center for Housing Studies. Tight credit, elevated unemployment and mounting student loan debt among young Americans are moderating growth and keeping millennials out of the market. Although the housing industry saw notable increases in construction, home prices and sales in 2013, household growth has yet to fully recover from the effects of the recession. Nevertheless, the report predicts that millennials will be key to reviving housing demand as they age into their more owner-oriented 30's.
Intense competition for limited lending opportunities in a slow-growth, low-interest-rate environment is fueling looser, riskier underwriting standards among banks, the OCC warned in a new report. The OCC highlighted two areas in particular where banks took on more risk in the pursuit of profit: high-yielding loans issued to more speculative borrowers and indirect auto loans made through car dealers. Banks are also easing lending standards in commercial loans, the report said. Despite an effort by regulators to clamp down on so-called leveraged lending by warning banks against funding debt-laden deals, leveraged-loan issuance reached a record in 2013.
City First Bank of D.C. has released their 2013 annual report, marking a year of growth that featured a record $66 million in new loans and the completion of four New Markets Tax Credit projects that deployed $61 million in reinvestment. Among the borrowers City First has helped is Washington Latin Public Charter School. Since 2006, Washington Latin had been giving elementary and high school children top-notch educations -- but operated out of three rented sites. Thanks to financing from City First Bank and assistance from the New Markets Tax Credit Program, Washington Latin has rehabilitated an aging school building which had been in disuse since 2008. The new campus contains a renovated school building, library, gymnasium and two large playing fields.
A study by the Philadelphia Federal Reserve found measurable benefits to one-on-one pre-purchase homeownership counseling in comparison to a single brief classroom session. The study compared examined the experiences of 425 first-time homebuyers, all of whom received only a two-hour pre-purchase workshop. Half of the participants received additional ongoing one-on-one counseling. The analysis showed that participants who had received the one-on-one counseling demonstrated greater creditworthiness as they prepared to qualify for a home mortgage. Researchers saw the clearest difference when they compared the two groups' credit scores, total debt, and various delinquency days on payments.
The Senate Appropriations Subcommittee on Financial Services and General Government has approved its fiscal year 2015 appropriations bill. The bill would set aside $230 million for the CDFI Fund, a substantial increase from the President’s proposed funding level of $224.9 million and in-line with the House Financial Service Subcommittee’s proposed funding level. Also included was a $1 billion authorization for the CDFI Bond Program and $18 million for the Bank Enterprise Award Program. The two subcommittee bills will now be taken up in full House and Senate appropriations committees.
Attorney General Eric Holder has confirmed that the Justice Department is preparing to bring more cases against banks and payment-processing companies as part of its Operation Choke Point probe. The probe is aimed at shutting down financial frauds, including scammers and Internet-based short-term lenders, by cutting off their access to banks. "In the months ahead, we expect to resolve other investigations involving financial institutions that chose to process transactions even though they knew the transactions were fraudulent, or willfully ignored clear evidence of fraud," Holder said. His remarks come amid a backlash by lawmakers and business groups who say the probe and parallel efforts by bank regulators are squeezing out legitimate businesses.
Prepaid mobile phone carrier Boost Mobile is trying to enter the prepaid card market. Boost executives say the prepaid phone stores will have a unique appeal to unbanked customers. Shops that sell prepaid mobile phones often are in close proximity to check cashers and money-transfer stores. The shops tend to have employees who can speak their customers' language and understand their needs. Boost's basic financial product includes international money transfers, bill pay and the ability to add minutes to the customer's mobile phone plan. Customers can upgrade to a more extensive product which includes a reloadable prepaid card that enables direct deposit, free person-to-person mobile payments and mobile check deposit at $4 per check.
Come January, when companies in Minnesota can officially register as benefit corporations, Sunrise Banks hopes to be one of the first in line. B-Corps are able declare social impact goals along with profit goals and are shielded from shareholder lawsuits charging that social impact has come at the detriment of profit goals. A growing number of states now offer the classification. “What this means from a local standpoint is over 60 percent of our loans are made each year in low and moderate income communities,” Sunrise CEO and CDBA Board of Directors member David Reiling says. Reiling thinks the designation could boost Sunrise Banks' brand -- and profitability.