Finance

The Consumer Financial Protection Bureau signaled Wednesday it may try to rewrite rules governing fees for late credit card payments, with the aim of saving cardholders billions of dollars a year.
The CFPB issued an advance notice of proposed rulemaking. A final rule isn’t likely by the end of 2022, officials said.
More than 175 million Americans hold at least one credit card, according to the CFPB. In 2019, consumers paid $26 for each late payment, on average.

Rohit Chopra, director of the Consumer Financial Protection Bureau, testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on April 26, 2022.
Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau signaled a crackdown on late fees charged by credit card companies on Wednesday, as inflation threatens to increase those so-called “junk” fees levied on consumers.
The watchdog, a federal agency created in the wake of the 2008 financial crisis, issued an advance notice of proposed rulemaking seeking information from card issuers, consumer groups and the public on late fees.

The data will help the regulator draft new rules aimed to shore up “weak spots” in existing laws governing “back-end penalties” imposed by card companies, CFPB director Rohit Chopra said in a press call Wednesday.
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Public comments are due by July 22. Timing on a formal rule proposal (and ultimately a final rule) is unclear, but agency officials said they don’t expect the process to conclude before year end.
Officials expect changes to reduce total late fees by billions of dollars each year, they said Wednesday. They also signaled future regulations on other types of fees, without offering specifics.

Credit card late fees

Oscar Wong | Moment | Getty Images

More than 175 million Americans hold at least one credit card, according to the CFPB.

Companies generally levy late fees when a customer doesn’t make the minimum card payment by their due date.
In 2019, consumers paid $26 for each late payment, on average, according to the CFPB. The fee rises if another late payment is made within six billing cycles, to an average $34.
Total late fees amounted to $12 billion in 2020, down slightly from a $14 billion record set the prior year, the CFPB said in a recent report.

The costs disproportionately impact users in low-income and majority-Black neighborhoods, according to the regulator.
The watchdog characterizes late fees as a type of “junk” fee charged by credit card issuers. The agency had issued a separate request in January asking consumers for input on hidden and excessive fees from a range of lenders.
“This is just one project relating to one type of junk fee,” according to a CFPB official, who spoke on background. “I think it’s fair to say there will be other projects relating to other fees in the near future.”

Missing from this announcement is the fact that banks — more than any other industry — have taken concrete steps to make their products more affordable and accessible for millions of Americans.

Richard Hunt
president and CEO of the Consumer Bankers Association

Richard Hunt, president and CEO of the Consumer Bankers Association, said additional restrictions would harm customers and could ultimately push them to riskier types of credit.
“Today’s announcement is another reminder the Bureau appears more interested in advancing a particular agenda than developing fact-based policies that improve the lives of hardworking families,” Hunt said in a statement. “Missing from this announcement is the fact that banks — more than any other industry — have taken concrete steps to make their products more affordable and accessible for millions of Americans.”

What would the CFPB do?

Current law disallows credit card issuers from charging customers a fee for a late payment, except in certain cases. To levy a fee, the company must determine that the fee is a “reasonable” proportion of the total costs the company incurred to process a late payment.
But the law also offers a legal safety net: Issuers can generally avoid the cost analysis (and regulatory scrutiny) if they charge $30 or less for a late payment, and up to $41 for each subsequent late payment made within the next six billing cycles.
“In today’s advance notice of proposed rulemaking, the CFPB is asking for information on these fees in order to assess whether they really are reasonable and proportional,” Chopra said.

The Consumer Financial Protection Bureau headquarters in Washington, D.C.
Joshua Roberts/Bloomberg via Getty Images

These maximum “safe harbor” fees are adjusted for inflation each year — giving urgency to the CFPB’s rulemaking at a time when consumer prices are rising at their fastest pace in about 40 years.
“This effort is particularly timely given the rule allows banks to increase their fees based on inflation,” according to a CFPB official. “Many [people] are struggling to make ends meet at the moment and struggling under higher costs.”
Most smaller banks and credit unions charge a maximum late fee of $25 or less, but almost all of the largest issuers have fees at or near the maximum allowed, according to CFPB data.
“The truth is that late fees have been capped by federal regulation since they were put in place by the Obama administration in 2010, and those caps have been updated annually by the CFPB including last fall,” Sarah Grano, a spokesperson for the American Bankers Association, said in an e-mailed statement. “In addition, the banks that issue credit cards are routinely supervised by the CFPB for compliance with those rules.”
Chopra questioned whether the cost to process late payments increases with inflation, or if it’s more reasonable to expect those costs to decrease due to improvements in technology.

However, Hunt of the Consumer Bankers Association framed inflation as a big reason why the CFPB should not impose additional rules on the industry.
“Imposing more restrictions on bank-offered credit products will hurt hardworking families most, forcing them to meet their needs outside of the well-supervised banking system,” Hunt said. “This risk is even greater now as families contend with the effects of inflation.” 
The CFPB said it’s seeking information on the following points, among others: factors used by card issuers to set late fee amounts; companies’ costs and losses associated with late payments; the deterrent effects of late fees; cardholders’ late payment behavior; methods firms use to facilitate or encourage timely payments (like autopay and notifications); and their use of “safe harbor” provisions.

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People walk past a store of the sporting goods retailer Nike Inc. at a shopping complex in Beijing, China March 25, 2021.
Florence Lo | Reuters

Check out the companies making headlines in midday trading Wednesday.
Nike — Shares of the athleticwear retailer fell more than 3% after Seaport downgraded the stock to neutral from buy. The Wall Street firm said Nike faces rising inflation and supply chain disruptions.

La-Z-Boy — Shares of the furniture maker jumped more than 8% after La-Z-Boy reported its fiscal fourth-quarter results. The company, which is covered by few Wall Street analysts, reported consolidated net sales up 32% year over year, with net income also rising, powered primarily by strong wholesale sales growth. The company’s CEO did say in a release that La-Z-Boy expected demand to be “volatile for the foreseeable future.”
Altria Group — The tobacco company dropped 9% after The Wall Street Journal reported that the Food and Drug Administration is preparing to order Juul Labs to take its e-cigarettes off the U.S. market. The Biden administration also plans to propose a rule to establish a maximum nicotine level in cigarettes.
Coinbase – Shares of the crypto services firm fell 7.6% on Wednesday after rival crypto exchange Binance.US said it’s dropping spot bitcoin trading fees for customers. Coinbase historically has relied heavily on trading volumes for revenue but in recent months has been looking to diversify its revenue streams.
Revlon — The cosmetics stock surged more than 35%, extending a rally that came after the company filed for Chapter 11 bankruptcy protection last week. Revlon soared 62% in the previous session.
Airbnb — The vacation rental company saw its shares drop 2% after JMP Securities downgraded it to market perform from market outperform. The analyst said the post-pandemic jump in travel demand is already reflected in Airbnb’s valuation.

Dow – The chemical maker’s shares fell 5.8% after Credit Suisse downgraded them to underperform from neutral, saying the stock’s valuation looks pricey amid potentially unsustainable results and that several pandemic-related factors that boosted Dow could reverse in the coming years.
Jack In The Box — Shares of the fast food company slid more than 3% after Cowen downgraded the stock to market perform from outperform. The Wall Street firm cited concerns about slowing same-store sales growth.
— CNBC’s Jesse Pound and Tanaya Macheel contributed reporting.

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Federal Reserve Chair Jerome Powell on Wednesday began two days of testimony in front of Congress.

The central bank chief is expected to provide updates on the state of the economy and on how the Fed plans to curb inflationary pressures not seen since the early 1980s.
The consumer price index last month rose by 8.6%, its highest increase since December 1981.
Earlier this month, the Fed hiked rates by 75 basis points, or 0.75 percentage point. “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said then. He added, however, that he sees the central bank raising rates by another 50 or 75 basis points next month.
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Check out the companies making headlines before the bell:
Winnebago (WGO) – The recreational vehicle maker saw its stock jump 3.4% after it beat top and bottom-line estimates for its latest quarter. Winnebago earned an adjusted $4.13 per share, compared with a consensus estimate of $2.96, helped by higher prices and a jump in its gross profit margins.

La-Z-Boy (LZB) – La-Z-Boy rallied 8.2% in premarket trading after posting better-than-expected quarterly results that included record sales for the furniture maker. The company also said it is focusing efforts to reduce its backlog and shorten lead times.
Revlon (REV) – Revlon shares surged 32% in premarket trading, continuing a rally that began after the cosmetics maker filed for Chapter 11 bankruptcy protection last week. Revlon soared 91% Friday and jumped another 62% yesterday.
Korn Ferry (KFY) – The consulting firm reported an adjusted quarterly profit of $1.75 per share, beating consensus estimates by 20 cents, with revenue also topping Wall Street forecasts. Results were boosted by a 30% jump in fee revenue compared with a year earlier. Korn Ferry also announced a 25% dividend increase, and its stock rallied 3.1% in premarket trading.
Airbnb (ABNB) – Airbnb fell 2.4% in the premarket after JMP Securities downgraded it to “market perform” from “market outperform,” saying that the post-pandemic jump in travel demand is already reflected in Airbnb’s valuation.
Dow Inc. (DOW) – The chemical maker’s shares fell 4.2% in premarket action after Credit Suisse downgraded the stock to “underperform” from “neutral.” Credit Suisse said several pandemic-related factors that boosted Dow and its peers could be in the process of reversing.

PulteGroup (PHM) – PulteGroup slid 3.2% in premarket trading after RBC Capital Markets downgraded the home builder’s stock to “sector perform” from “outperform.” RBC also cut earnings estimates on the expectation that the housing market will further deteriorate as mortgage rates continue to rise.
Equity Residential (EQR) – Equity Residential was upgraded to “outperform” from “sector perform” at RBC Capital Markets. RBC feels the residential property REIT will benefit from its focus on affluent renters.
New Relic (NEWR) – The data analysis platform company’s stock jumped 3.4% in the premarket after Jana Partners disclosed a 5.4% stake. In an SEC filing, Jana said it believes the stock is undervalued and represents an attractive investment opportunity.

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Ian Harnett, co-founder of Absolute Strategy Research, said past crypto rallies show bitcoin tends to fall roughly 80% from all-time highs.
Such a drop in 2022 would likely drag the world’s biggest token down to $13,000 — a “key support area,” according to Harnett.
The crypto world is on edge as investors grapple with the impact of higher interest rates and liquidity issues at major industry players.

If crypto’s past bubbles are anything to go by, bitcoin could be about to fall much further.
That’s according to one strategist, who warns the world’s top cryptocurrency is likely to tank as low as $13,000 — an almost 40% drop from current levels.

“We would still be selling these kinds of cryptocurrencies into this environment,” Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research, told CNBC’s “Squawk Box Europe” Tuesday.
“It really is a liquidity play. What we’ve found is it’s neither a currency, nor a commodity and certainly not a store of value.”
Explaining his bearish call, Harnett said past crypto rallies show bitcoin tends to fall roughly 80% from all-time highs. In 2018, for instance, the cryptocurrency plummeted close to $3,000 after hitting a peak of nearly $20,000 in late 2017.

Bitcoin rallied to a record high of nearly $69,000 at the height of the 2021 crypto frenzy. In 2022, it’s moved in the opposite direction.
Nurphoto | Getty Images

Such a drop in 2022 “would take you back to about $13,000,” a “key support area” for the token, according to Harnett. Bitcoin rose to a record high of nearly $69,000 at the height of the 2021 crypto frenzy.
“In a world where liquidity is plentiful, the bitcoins of this world do well,” Harnett said. “When that liquidity is taken away — and that’s what the central banks are doing at the moment — then you see those markets come under extreme pressure.”

The crypto world is on edge as investors grapple with the impact of higher interest rates on assets that flourished in an era of ultra-loose monetary policy.
Last week, the Federal Reserve raised its benchmark lending rate by 75 basis points, its largest single hike since 1994. The decision from the Fed was followed up with similar moves from the Bank of England and the Swiss National Bank.

That’s taken its toll on digital assets. The combined value of all cryptocurrencies plunged more than $350 billion in the past two weeks. Bitcoin was trading at a price of $20,010 Tuesday, down 5% in the last 24 hours. The No. 1 crypto has lost more than half of its value year-to-date.
The crypto market was already on shaky ground before the Fed’s rate hike last week, with traders roiled by the $60 billion collapse of popular stablecoin terraUSD and its sister token luna.
To further complicate matters, the fall in the value of a derivative token designed to be one-to-one redeemable for ether has exacerbated financial troubles at major industry players like Celsius and Three Arrows Capital.

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U.S. stock index futures fell slightly overnight Tuesday after the major averages jumped in regular trading hours, attempting to claw back some losses following weeks of selling.
Futures contracts tied to the Dow Jones Industrial Average slipped 88 points or 0.29%, while S&P 500 futures declined 0.25%. Nasdaq 100 futures dipped 0.27%.

During regular trading Tuesday, the Dow surged 641 points, or 2.15%. The S&P 500 added 2.45%, turning in its best day since May 4. The jump comes after the benchmark index slumped 5.79% last week in its worst weekly performance since March 2020.
The Nasdaq Composite advanced 2.51% on Tuesday, following its tenth week of losses in the last 11 weeks.
Growing fears that the economy will tip into a recession have recently weighed on stocks. The Federal Reserve last week hiked interest rates by three-quarters of a percentage point, the central bank’s largest rate increase since 1994.
The move came as the Fed tries to cool inflation, which has surged to a 40-year high.
“We don’t see a U.S. or global recession in ’22 or ’23 in our base case, but it’s clear that the risks of a hard landing are rising,” UBS said Tuesday in a note to clients.

“Even if the economy does slip into a recession, however, it should be a shallow one given the strength of consumer and bank balance sheets,” the firm added.

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Goldman Sachs, meantime, believes a recession is becoming increasingly likely for the U.S. economy, saying that the risks of a recession are “higher and more front-loaded.”
“The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply,” the firm said in a note to clients.
Tuesday’s rally begs the question of whether the action is short-term relief after weeks of selling, or a meaningful change in sentiment. Tuesday’s strength was broad-based. All 11 S&P sectors registered gains on the day, with energy leading the way, climbing 5.8%.
“Our expectations are that market volatility will likely persist near term until the actions taken by the Federal Reserve thus far…and the actions it takes going forward have had time to work through the system,” Oppenheimer said Tuesday in a note to clients.
Fed Chair Jerome Powell will appear before Congress on Wednesday, kicking off two days of testimony. On the earnings front, KB Home will post results after the market closes on Wednesday.

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Beyonce released a new single, “Break My Soul,” on Monday. The song talks about quitting a job and worker burnout, alluding to the pandemic era’s Great Resignation labor trend.
The track is a continuation of other mainstream discussions around quitting in the age of Covid-19, such as so-called “Quit-Toks” on social media site TikTok.

Beyoncé released a new single, “Break My Soul,” on Monday. The song references quitting a job and employee stress, alluding to the recent Great Resignation trend.
Larry Busacca | PW18 | Getty Images

The Great Resignation is part of the zeitgeist. If you need proof, just ask Beyonce.
The superstar singer’s new single, “Break My Soul,” which was released Monday night, taps into the worker malaise that has helped lead to a record number of Americans quitting their jobs. It’s the first song from her seventh studio album, Renaissance, set to drop on July 29.

Beyonce’s ode to leaving your job is the latest cultural reference to the Great Resignation labor trend that began in spring 2021, around the time the U.S. economy was reopening more broadly after its pandemic-era lull.
Since then, Americans have used social media site TikTok to quit their jobs publicly, in so-called “Quit-Toks.” In a popular Reddit forum, users have shared stories about quitting and resignation text messages to bosses.
“It’s been interesting the extent to which the phenomenon has seeped into the zeitgeist,” Nick Bunker, an economist at job site Indeed, said of the Great Resignation.
Beyonce’s track “is one instance of a broader public awareness or discussion about people quitting their jobs, which is reflective of what’s happening in the labor market and society,” Bunker said.
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‘Beyonce wants us to quit our jobs’

“Break My Soul” ranked No. 1 on the iTunes Top 100 songs chart on Tuesday, according to PopVortex.
In the song’s first verse, Queen Bey riffs on employee burnout over a driving house beat:
“And I just quit my job / I’m gonna find new drive / Damn they work me so damn hard / Work by nine / Then off past five / And they work my nerves / That’s why I cannot sleep at night.”
Shortly after, Beyonce uses a vocal sample from Big Freedia’s 2014 song “Explode” to reiterate that theme:
“Release ya anger, release ya mind / Release ya job, release the time / Release ya trade, release the stress / Release the love, forget the rest.”

Many fans called out allusions to the Great Resignation on social media Tuesday. “An hour into the work day and I see why Beyonce told me to quit my job,” one wrote on Twitter. “Beyonce telling me to quit my full time job and become a full time streamer and like … I might … just do it …??” another tweeted.
Fiverr, which offers services to freelancers, used the song as a launch pad for marketing, tweeting: “Beyonce wants us to quit our jobs and make a living on our own terms. You heard the woman.”

Burnout, pay continue to fuel the Great Resignation

Audtakorn Sutarmjam / Eyeem | Eyeem | Getty Images

More than 47 million people voluntarily left their jobs last year, an all-time record, according to the U.S. Department of Labor.
The torrid pace continued into 2022. More than 4.4 million people quit in March, a monthly record; a similar number did so in April, the latest month for which federal data is available.
Anthony Klotz, the University College London School of Management associate professor who coined the trend’s nickname when he taught at Texas A&M University, recently cited widespread burnout among workers as one of four pandemic-related factors driving elevated levels of quitting.
More time at home gave workers an opportunity to reevaluate their priorities and values, and employees are reluctant to give up remote work.

The overarching story of the last two years is more [one] of workers finding more opportunities and seizing them rather than due to burnout and abandoning work at large.

Nick Bunker
economist at Indeed

“Research shows over and again that people are quitting not because their jobs aren’t well paid enough but because their jobs aren’t meaningful or fulfilling enough,” according to a recent report by Korn Ferry, a global organizational consulting firm.  
Pay does seem to play a role for many workers — and some economists think it’s a key driver.
Hourly wages jumped by 6.1% in May relative to a year earlier, the biggest annual increase in at least 25 years, according to the Federal Reserve Bank of Atlanta.
The dynamic results from record levels of demand for workers, which has pushed businesses to compete for scarce talent by raising pay, especially in certain industries such as leisure and hospitality (bars, restaurants, hotels) and retail.

Job openings are near all-time highs; workers have capitalized on that availability to quit their current roles and take new, higher-paying gigs, Bunker said.
“The overarching story of the last two years is more [one] of workers finding more opportunities and seizing them rather than due to burnout and abandoning work at large,” Bunker said.
In the past, burned-out workers may not have felt they had the power to quit a job and readily find a new one, he added.  
Low pay and a lack of opportunity for advancement tied as the primary motivations for workers to leave a job in 2021, followed by feeling disrespected at work, according to Pew Research Center.

How a cooling job market may affect resignations

Whatever the reason, the wave of resignations seems to be fueling stress and dissatisfaction among remaining staff members — which may, in turn, contribute to more resignations, especially if labor market conditions remain favorable for workers.
More than half (52%) of employees who chose to stay after a colleague’s exit reported taking on more work and responsibilities, according to a Society for Human Resource Management survey.
Nearly a third of them struggle to get necessary work done, 27% feel less loyalty to their organization, 28% feel more lonely or isolated, and 55% wonder if their pay is high enough, according to the survey, published in October.

Of course, there are indications the job market may cool down this year — and, possibly with it, the Great Resignation trend.
For one, the Federal Reserve is raising borrowing costs for consumers and businesses in a bid to slow the economy and tame high inflation, which has been eroding the average consumers’ purchasing power despite higher wages. The U.S. central bank is forecasting a slight increase in unemployment as a result of its policy.

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Gas pumps sit empty at an Exxon gas station in Charlotte, North Carolina on May 12, 2021.
LOGAN CYRUS | AFP | Getty Images

Check out the companies making headlines in midday trading Tuesday.
Exxon Mobil — Shares of Exxon Mobil jumped 6.3% after Credit Suisse upgraded them to outperform from neutral and said they can jump another 45% from current levels. The oil and gas company’s divergent corporate strategy sets it up well to capitalize on the jump in oil prices, the firm said.

Diamondback Energy — The energy company’s shares rose 8.2% after Diamondback’s board approved an increase to its capital return program to at least 75% of free cash flow, from its previous commitment of at least 50% of free cash flow.
Alphabet — The Google parent’s shares gained 4.1% following an AdAge report that the search giant is in talks with Netflix about a potential advertising partnership. Google has emerged a front-runner to partner with Netflix, according to the report.
Kellogg — The cereal company’s shares gained 2% after Kellogg announced plans Tuesday to split into three separate public companies that would be centered around its snacking, cereal and plant-based businesses. The tax-free spinoffs are expected to be completed by the end of 2023.
Tesla — The EV maker’s shares climbed 9.4% after CEO Elon Musk gave more clarity on planned job cuts that were announced earlier this month. Musk said the company will lay off 3.5% of the workforce, calling the amount “not super material.”
Spirit Airlines — The discount air carrier saw its shares jump 7.9% after JetBlue boosted its takeover offer for the company by $2 per share to $33.50 per share. Spirit is also fielding an offer Frontier Airlines. The company has said it expects to decide on the proposal by June 30.

Palantir Technologies — Shares surged 5.7% after Bank of America initiated coverage of the defense tech company with a buy rating. The firm said investors are underestimating the demand for artificial intelligence that should boost Palantir’s stock.
Centene — The health-care company’s stock added 6% after Credit Suisse upgraded it to outperform from neutral, saying its headwinds are already priced in and that it could climb another 10% from its current price.
Charles Schwab — Shares of the brokerage firm rose 4% after UBS upgraded Charles Schwab to buy from neutral. UBS said in a note that Schwab was “well insulated from credit and market risk.”
Lennar — The homebuilder’s stock added 1.6% after Lennar’s fiscal second-quarter results beat expectations. The company earned $4.49 per share on $8.36 billion in revenue. Analysts surveyed by Refinitiv were expecting $3.96 per share on $8.08 billion of revenue. However, the company’s executive chairman commented on the uncertainty in the housing market in the face by saying that third-quarter guidance was closer to “guessing” than “guiding.”
 — CNBC’s Jesse Pound and Sarah Min contributed reporting

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