Here's the latest personal finance news, how it may impact your financial plan and what you can do to maintain your financial well-being.
Buy Now, Pay Later Services Must Comply With U.S. Credit Card Laws
The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule classifying buy now, pay later (BNPL) services as credit card providers. As a result, BNPL lenders must provide consumers with some of the same legal protections as credit card issuers, including:
- Investigating customer disputes: BNPL loan borrowers have the right to dispute charges made with service providers. During the investigation, BNPL lenders must pause payment requirements and issue credits when merited.
- Providing refunds: When a customer returns an item or cancels a service purchased with a BNPL loan, providers must credit the customer's account with a refund.
- Providing billing statements: BNPL providers must offer periodic billing statements to customers, making it easier for them to keep track of payments and understand costs.
The federal agency is requesting comments from the public on the rule through August 1, 2024.
Why It Matters
BNPL providers have seen explosive growth in the past few years, but regulators have had a difficult time applying existing consumer protection laws because their point-of-sale loans function differently than credit cards and traditional installment loans.
The latest rule from the CFPB is one step forward for policymakers.
What You Can Do
- Learn about how BNPL loans work.
- Compare BNPL loans and credit cards.
- Read up on how to avoid overspending with BNPL services.
- Understand how BNPL loans impact your credit.
New VantageScore 4.0 Version Has Been Released
VantageScore has announced its newest credit scoring version, VantageScore 4plus™. Building on the base VantageScore 4.0 model released in 2017, the new version can incorporate bank account data to provide a fuller picture of a consumer's financial management.
According to VantageScore, the latest model is 10% more predictive than the base VantageScore 4.0 model. It's currently available for pilot programs with banks, financial technology companies and government agencies.
Why It Matters
With VantageScore 4plus, you can opt in to provide bank account data the credit model can use to generate a more accurate reflection of your financial profile when applying for credit.
Lenders, however, are often slow to adopt new credit scoring models. For example, many lenders still use the FICO® Score☉ 8 model, which was launched in 2009. However, this move by a major player in the credit scoring industry is a significant development—even if it might be a while before we see it widely adopted.
What You Can Do
- Learn more about the VantageScore credit score.
- Understand the differences between VantageScore and FICO® Scores.
- Review Experian's latest report on the state of alternative credit data.
- Take steps to build and maintain a good credit score, regardless of score model.
Consumer Financial Protection Bureau Survives a Legal Threat
The Supreme Court has ruled in favor of the CFPB in a legal battle that threatened the federal agency's powers. In particular, critics took issue with how the agency receives funding, which bypasses the congressional appropriations process in order to provide independence from political pressures.
A majority of Supreme Court justices ruled that the CFPB's funding process is constitutional, allowing it to continue functioning as an independent agency.
Why It Matters
The CFPB is a crucial advocate for consumers in the financial sector, setting rules and taking action against companies they determine are running afoul of their regulations. The agency has provided more than $20 billion in relief to hundreds of millions of consumers since it was created in 2011.
What You Can Do
- Learn about the Dodd-Frank Act, which created the CFPB.
- Read about a recent key CFPB rule on credit card late fees.
- Review educational resources provided by the federal agency.
- Get details on how to file a complaint with the CFPB.
Core Inflation Eases to a Three-Year Low
The core consumer price index (CPI)—the primary measure of economic inflation in the U.S.—rose by 0.3% in April, according to the Bureau of Labor Statistics, down from months of 0.4% increases. Year over year, the core inflation figure sank to 3.6%, down from 3.8% in March and its lowest level in three years.
Why It Matters
Inflation in the U.S. continues to cool at a slow pace. But while the Federal Reserve remains cautious about lowering interest rates, the latest CPI report provides a boost of optimism for both consumers and financial markets.
What You Can Do
- Look for the next inflation report on June 12.
- Understand how inflation impacts you.
- Read up on ways you can fight inflation.
- Learn more about the federal funds rate.
Good Credit Can Contribute to a Healthy Financial Plan
While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.
With Experian's free credit monitoring service, you'll get access to your FICO® Score and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.