This Week In Credit Card News: A Beneficial Change In Credit Scoring; Big Banks To Develop New Digital Wallet

Banks Plan Payment Wallet to Compete With PayPal, Apple Pay

Big banks are teaming up to launch a digital wallet that people can use to shop online. Wells Fargo, Bank of America, JPMorgan Chase and four other banks are working on a new product that will allow shoppers to pay at merchants’ online checkout with a wallet that will be linked to their debit and credit cards. The digital wallet will be managed by Early Warning Services, the bank-owned company that operates money-transfer service Zelle. It will operate separately from Zelle. EWS, whose owners also include Capital One, PNC, US Bancrop and Truist, plans to begin rolling out the new offering in the second half of the year. One goal of the new service is to compete with third-party wallet operators such as PayPal and Apple Pay, according to people familiar with the matter. Banks are worried about losing control of their customer relationships. [The Wall Street Journal]

This Credit Score Change Could Work to Your Benefit

As of July 1, 2022, there’s a required one-year waiting period before unpaid medical debt is allowed to show up on your credit report. This change was put into place largely to give consumers more time to appeal rejected insurance company claims before having their debt show up as delinquent. Also, as of July 2022, credit bureaus must remove all paid medical debts from consumer credit reports. That’s a big deal, because normally, debts in collections can take seven years to drop off your credit report, even once they’re paid in full. [The Motley Fool]

Generation X Carries the Most Credit Card Debt

When it comes to credit card debt, Generation X may be struggling the most. The average amount owed by people in that cohort is $7,004, according to a new report from New York Life. That compares with $6,785 for baby boomers, $5,928 for millennials and $2,876 for Gen Zers. Research from also shows more members of Gen X (77%) have any type of personal debt compared with other age groups. Baby boomers are defined as people ages 59 to 77; Gen Xers, ages 43 to 58; millennials, ages 27 to 42; and Gen Z as age 11 to 26. [CNBC]

New to Credit Consumers Are ‘Good Risks’

Qualifying for a loan or credit card for the first time can be a challenge because lenders are wary of extending credit to those with no credit history. But once they’ve been approved, new-to-credit (NTC) customers tend to perform as well or better than borrowers with established credit, according to a new study from TransUnion. In the United States, NTC consumers with credit scores in the near-prime tier had lower delinquency rates than credit-served consumers with the same age and risk profiles on the initial credit cards they opened—an indication that many are careful to make timely payments on their first-ever credit cards in order to preserve ongoing access to this new source of credit. [GOBanking Rates]

Credit Card Charge Disputes on the Rise as Consumers Cheat Businesses

Consumers are cheating businesses out of payments at increasing rates by fraudulently disputing credit card charges that they genuinely made. Incidents of “friendly fraud” are up anywhere from 20% to 30% in 2022 depending on the market. Friendly fraud includes an array of situations in which a customer improperly disputes a charge on their credit card bill, including when they forgot about a purchase or don’t recognize the name of the merchant on their bill; don’t realize that a friend or family member used their card to buy something; or intentionally spend money with the intent of disputing the charge after the fact. [Axios]

Credit Karma Tricked Customers into Thinking They Were Pre-Approved for Credit Cards

The Federal Trade Commission ordered personal finance company Credit Karma to pay $3 million to customers the agency alleges were deceived into applying for products they weren’t eligible for. Credit Karma used “dark patterns” to trick consumers into thinking they were “pre-approved” for credit card offers that they usually did not qualify for. Dark patterns refer to website and app interface designs that can be used to manipulate or mislead consumers. [CBS News]

Walmart-Backed Fintech Startup Plans to Launch Its Own Buy Now, Pay Later Loans

A Walmart-backed startup is looking to compete with buy now, pay later companies. The venture, called One, is gearing up to launch its own version of the payment service as soon as this year. One, which is majority-owned by Walmart, wants to launch a service that shoppers could use at Walmart’s website and stores, as well as at other retailers, the source said. The effort was motivated in part by a more challenging economic backdrop and consumers feeling pinched by inflation. [CNBC]

PayPal Accounts Breached in Large-Scale Credential Stuffing Attack

PayPal is sending out data breach notifications to thousands of users who had their accounts accessed through credential stuffing attacks that exposed some personal data. Credential stuffing are attacks where hackers attempt to access an account by trying out username and password pairs sourced from data leaks on various websites. This type of attack relies on an automated approach with bots running lists of credentials to “stuff” into login portals for various services. Credential stuffing targets users that employ the same password for multiple online accounts, which is known as “password recycling.” [Bleeping Computer]

Credit Card Debt Prevents Nearly 20% of Americans from Becoming Homeowners

As Americans deal with high inflation and a heated housing market, growing credit card debt poses a major barrier to homeownership. Credit card debt has prevented one in five or around 18% of those with credit card debt from purchasing a home in 2022, according to study by Clever. Credit card debt was a larger threat to homeownership than student loans and medical debt, a Rocket Homes survey also noted. [Fox Business]

How Long Do Collections Stay on Your Credit Report?

A collection account, sometimes referred to as a charge-off, can occur if you miss payments or ignore a debt you owe. If you neglect to pay a bill, whether it’s your credit card, medical bill or utility bill, it can end up going to a collection agency. With a credit card balance, the lender usually waits until your payment is overdue by at least six months. When the creditor decides there’s little chance of collecting the money you owe, your account could be sold to a collection agency. The agency then likely reports your delinquent account to the credit bureaus. A debt can be sold to a collection agency if you miss several payments on an account. A collection account stays on your credit report for approximately seven years. Collection accounts decrease your score, but the impact lessens after two years. [U.S. News and World Report]

FTX Owes Money to Netflix, Binance, Wall Street Journal

It’s the list everyone has been waiting for, minus 9.7 million redacted customer names. But the 116-page FTX creditor list, which names companies such as Netflix and Apple, still paints a comprehensive picture of the now-bankrupt crypto enterprise’s reach and the impact of its collapse. Among those listed are media companies like the Wall Street Journal, Fortune, Fox Broadcasting and CoinDesk as well as big crypto firms such as exchanges Coinbase and Binance. American Airlines, Spirit Airlines and Southwest Airlines, as well as Stanford University were also listed in the document. The list also names Gisele Bundchen Charitable Giving as a creditor. The Brazilian supermodel and then husband Tom Brady were famously invested in the company, even appearing in its Super Bowl ad. [CoinDesk]

CFPB Wants Information About Consumer Credit Cards

The CFPB is asking consumers and others about their experiences with credit cards. The information is to be used in a review of the industry that the CFPB does every other year. The report that is to include this feedback is mandated by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) and aims to help determine if regulatory adjustments are needed. Examples of things the CFPB would like to hear about are terms of credit card agreements, practices of credit card issuers, effectiveness of disclosures and the adequacy of consumer protections. Other examples include credit cards’ cost, availability and product innovation. [PYMNTS]

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