Spotlight on Financial Services

"Over two thirds (68.2%) of identity fraud in 2004 was committed with information obtained offline."


Michael E. Staten		Robert W. Johnson

FEBRUARY 2005

Too Much Domestic Economic Strength?

The latest economic data paint a rosy picture of the ongoing U.S. economic expansion. The picture is, perhaps, too rosy given the mushrooming trade deficit and all the talk in Washington about expensive solutions for both foreign and domestic problems (e.g. Iraq and Social Security reform).

Too Much Domestic Economic Strength?

Bankruptcies Continue Modest Downward Trend

Personal bankruptcies during the first month of 2005 continued the modest downward trend that characterized 2004.

Auto Sales Outlook

Sales of light vehicles which include cars, light trucks, minivans, and sport utility vehicles reached 16.86 million units in 2004—the fourth highest sales mark in the industry's history and an increase of 1.4 percent over 2003.

Wal-Mart and Discover Partner to Issue Card

Discover Financial Services announced in late January that it will partner with GE Consumer Finance and Wal-Mart to issue a co-branded, no fee Wal-Mart Discover card.

Rule Change Gives Visa PIN Debit Cardholders
Better Protection

Until late 2004, consumers that used PIN-based debit cards for retail transactions did not enjoy the same protections as users of credit cards or signature-based debit cards.... However, in December 2004, Visa USA's Interlink network changed its policy on cardholder disputes, allowing consumers to initiate the same chargeback procedure as for credit cards.

New Study Says Most ID Theft Is Offline

A new study commissioned by the Better Business Bureau (BBB) finds that most ID theft has nothing to do with online e-commerce transactions or Internet usage..... Over two thirds (68.2%) of identity fraud in 2004 was committed with information obtained offline.

Red Hot Home Equity Market Foreshadows the Future

Readers of this newsletter in recent months know that consumer lenders, especially credit card issuers, are responding to an apparent sea-change in the way that consumers borrow. Home equity lending is offering lenders the best growth opportunities for the mass market over the next decade.

Rise in Credit Card Debt

The January 2005 issue of Spotlight reported on the rise in noncash payments and the prediction of 2007 as the year in which plastic payment (both credit cards and debit cards) will overtake checks as the preferred payment method at the point of sale. A recent working paper by Federal Reserve economist Kathleen W. Johnson takes a close look at the "convenience use" of credit cards as payment device, and the contribution of credit card transactions to the growth of credit card debt in the past decade.

FTC Issues Final Ruling
on Pre-Screened Credit Disclosures

The Federal Trade Commission (FTC) apparently paid almost no heed to a recent Federal Reserve report in crafting its final rule on the necessary consumer disclosures in prescreened credit offers. The result, in the opinion of your editors, is yet another case of disclosure run amok.

Settlements in Auto Loan Pricing Suits

In late January, four lenders accused of discriminatory auto finance practices settled class-action lawsuits. American Honda Finance Corp., Bank of America Corp., the Bank One unit of JPMorgan Chase & Co., and U.S. Bancorp were accused of allowing car dealers to charge higher annual percentage rates on auto loans to black consumers than white consumers with similar credit histories.

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