Spotlight on Financial Services

"MBNA Corp., the second largest U.S. credit issuer, announced at the end of January that it will begin issuing American Express cards."


Michael E. Staten		Robert W. Johnson

FEBRUARY 2004

Preemption Wars

As we begin 2004, preemption promises to again be the most important regulatory issue facing the credit granting industry. This time the issue revolves around the extent to which states can pass laws that affect the operations of national banks. State and municipal government attempts to impose regulations that would curb abusive mortgage lending have brought the issue to a head.

Household Wealth Rebounds

A year ago in this column we wrote that "uncertainty is the enemy of growth," and so it apparently was. The looming conflict with Iraq was depressing expectations, holding down stock prices, and discouraging business investment. Otherwise, fundamentals for a strong recovery were in place.

Holiday Spending Made Retailers Smile

U.S. retailers enjoyed a happy holiday season after all, according to the National Retail Federation (NRF).... NRF Chief Economist Rosalind Wells said "a variety of economic and social factors came together just in time for the most important shopping season of the year."

Growth in Debt

Over the past three quarters, households have increased their debts faster than any other entity except the federal government. The accompanying table shows that in each of the past seven quarters, households increased their debts by a seasonally adjusted annual rate of more than 8.6 percent.

Personal Bankruptcies off to Slow Start

Yet another sign of an improving economy is the decline in the rate of personal bankruptcy filings during the early weeks of 2004.... The acompanying chart displays week-by-week filings over the past four years.

Growing Popularity of Debit Cards

A new national survey of over 2,000 consumers found that the popularity of debit cards has been increasing among consumers. The Study of Consumer Payment Preferences found that between 1999 and 2003, the proportion of consumers using debit cards to make in-store purchases increased from 48 percent to 57 percent for PIN-based purchases and from 42 percent to 54 percent for signature-based debit purchases.

Gift Cards

Many of our readers either purchased or received a gift card during this past holiday season.... For retailers, gift cards are a plus for three reasons.

Bank Card Revenue Breakdown

Data released by R.K. Hammer Investment Bankers provide a recent snapshot of credit card financials.

The Wallet Wars

In her excellent article in the New York Times, Jennifer Bayot explores the effect of the many bank mergers on the holders of those banks’ credit cards. Essentially, the merger boom will yield fewer card-issuing banks.

The Replacement Demand for Motor Vehicles

Readers who are involved in financing the purchase of motor vehicles will be interested in a recent publication: The Replacement Demand for Motor Vehicles.

Increase in Home Equity Withdrawal
Improves Household Spending Ability

The Federal Reserve Bank of New York’s December 2003 edition of Current Issues in Economics and Finance examines the impact of the recent historic volume of mortgage refinancings on household balance sheets. Specifically, Margaret M. McConnell, Richard W. Peach, and Alex Al-Haschimi look at the effect of the rise in home equity withdrawal on near-term consumer spending.

Preemption Wars

In 2003, the single most important legislative issue for retail financial services was the Fair Credit Reporting Act, specifically, the renewal of federal preemption of state laws in several key areas of credit reporting. As we begin 2004, preemption promises to again be the most important regulatory issue facing the credit granting industry.

New Truth-in-Lending Case Before the Supreme Court

On January 20, the Supreme Court agreed to review a decision by the U.S. Court of Appeals for the Fourth Circuit (Richmond, VA). In Koons Buick Pontiac GMC, Inc. v. Bradley Nigh, the Supreme Court will consider if, as affirmed by the Appeals Court, language that set a $1,000 cap on damages awarded for violations of the federal Truth in Lending Act (TILA) was removed by a 1995 congressional amendment to the law.

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