Price Coherence and Adverse Intermediation
Source: Harvard Business School Working Papers (via SSRN)
Suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary’s technology. We develop a model to show that the intermediary will want to restrict sellers from charging buyers more for transactions it intermediates. We show that this restriction can reduce consumer surplus and welfare, sometimes to such an extent that the existence of the intermediary can be harmful. Specifically, lower consumer surplus and welfare result from inflated retail prices, over-investment in providing benefits to buyers, and excessive adoption of the intermediaries’ services. Competition among intermediaries intensifies these problems by increasing the magnitude of their effects and broadening the circumstances in which they arise. We show similar results arise when intermediaries provide matching benefits, namely recommendations of sellers to buy from. We discuss applications to travel reservation systems, payment card systems, marketplaces, rebate services, search engine advertising, and various types of brokers and agencies.
Consumer advisory: Co-signers can cause surprise defaults on your private student loans
Source: Consumer Financial Protection Bureau
Today, we released a report that describes complaints we received related to the private student loan industry’s practice of placing borrowers in default even when their loans are current and in good standing. We’re also warning consumers that they can avoid surprise defaults by pursuing a co-signer release.
The vast majority of private student loans today have a co-signer (typically a parent or a grandparent). Having a co-signer can often lead to a lower interest rate, which can save you money in the long-term, because the co-signer will have to repay the loan if you don’t.
However, your loan might also contain provisions that allow your student loan servicer to put you in default — even if you’ve been making your payments on time.
That’s because your co-signer is also on the hook for your loan and therefore changes in their behavior can impact your loan, causing your loan to default and making your entire balance due all at once. We’ve received complaints that private student loan servicers are placing borrowers into default when their co-signer dies or files for bankruptcy.
Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005–2013; and Labor-force Participation Rates of the Population Ages 55 and Older, 2013
Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005–2013; and Labor-force Participation Rates of the Population Ages 55 and Older, 2013 (PDF)
Source: Employee Benefit Research Institute
Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005–2013
- The population of adults within consumer-driven (CDHPs), high-deductible (HDHP) and traditional health plans was split about 50–50 between men and women in 2013.
- The CDHP population was more likely than traditional-plan enrollees to be in households with $150,000 or more in income in every year except 2006, 2009 and 2010. They were also more likely to be in households with $100,000–$149,999 in income in most years.
- CDHP enrollees were roughly twice as likely as individuals with traditional coverage to have college or post-graduate educations in nearly all years of the survey.
- CDHP enrollees have consistently reported better health status than traditional-plan enrollees, exhibiting better health behavior than traditional-plan enrollees with respect to smoking and (except for 2010 and 2011), exercise, and sometimes obesity rates.
Labor-force Participation Rates of the Population Ages 55 and Older, 2013
- The labor-force participation rate for those ages 55 and older rose throughout the 1990s and into the 2000s, when it began to level off but with a small increase following the 2007–2008 economic downturn.
- For those ages 55–64, the upward trend was driven almost exclusively by the increased labor-force participation of women, whereas the male participation rate was flat to declining. However, among those ages 65 or older, the rate increased for both males and females over that period.
- This upward trend in labor-force participation by older workers is likely related to workers’ current need for continued access to employment-based health insurance and for more years of earnings to accumulate savings in defined contribution (401(k)-type) plans and/or to pay down debt. Many Americans also want to work longer, especially those with more education for whom more meaningful jobs are available that can be performed into older ages.
- Younger workers’ labor-force participation rates increased when that of older workers declined or remained low during the late 1970s to the early 1990s. But as younger workers’ rates began to decline in the late 1990s, those for older workers continuously increased. Consequently, it appears either that older workers filled the void left by younger workers’ lower participation, or that higher older-worker participation limited the opportunities for younger workers or discouraged them from participating in the labor force.
Interim Results of the 2014 Filing Season
Source: Treasury Inspector General for Tax Administration
IMPACT ON TAXPAYERS
The filing season, defined as the period from January 1 through mid-April, is critical for the IRS because it is during this time that most individuals file their income tax returns and contact the IRS if they have questions about specific laws or filing procedures.
WHY TIGTA DID THE AUDIT
The closure of Government operations between October 1 and October 16, 2013, reduced the time the IRS had to implement tax law changes and bring tax return processing systems online. The objective of this review was to provide selected information related to the IRS’s 2014 Filing Season. TIGTA plans to issue the final results of our analysis of the 2014 Filing Season in September 2014.
WHAT TIGTA FOUND
As a result of the Government closure, the IRS delayed the start of the filing season from January 21, 2014, to January 31, 2014. As of March 7, 2014, the IRS had received more than 67.1 million tax returns—more than 62.2 million (92.6 percent) were filed electronically and nearly five million (7.4 percent) were filed on paper. The IRS has issued more than 55.4 million refunds totaling more than $164 billion.
The IRS continues to expand identity theft filters to identify fraudulent tax returns. As of February 28, 2014, the IRS reports that it identified and confirmed 28,076 fraudulent tax returns involving identity theft. In addition, the IRS identified 57,316 tax returns with $385 million claimed in fraudulent refunds and prevented the issuance of $336 million (87.3 percent) of the fraudulent refunds it identified. The IRS also identified 36,801 prisoner tax returns for screening.
The use of the split refund option to direct deposit a refund into multiple bank accounts continues to grow. Through March 6, 2014, a total of 585,331 individuals chose to split refunds totaling more than $2.6 billion into multiple accounts. However, TIGTA continues to identify that some taxpayers and return preparers misuse this option to direct a portion of a tax refund to a preparer for payment of services.
TIGTA also found that some paid tax return preparers continue to be noncompliant with Earned Income Tax Credit due diligence requirements, but the number has decreased substantially when compared to the same period last filing season.
Finally, the IRS plans to assist 5.6 million taxpayers through face-to-face contact at the Taxpayer Assistance Centers during Fiscal Year 2014, which is one million fewer taxpayers than were assisted during Fiscal Year 2013. As of March 8, 2014, approximately 46.3 million taxpayers had contacted the IRS by calling one of the various toll-free Customer Account Services lines. The IRS continues to offer more self-assistance options that taxpayers can access 24 hours a day, seven days a week, including its IRS2Go app; YouTube channels; interactive self-help tools on IRS.gov; and Twitter, Tumblr, and Facebook accounts. However, the IRS did not always ensure that the self-help tools were updated with the most current tax information before the start of the filing season.
WHAT TIGTA RECOMMENDED
This report was prepared to provide interim information only. Therefore, no recommendations were made in the report.
Explainer: Federal student loan interest rates to jump
Source: Consumer Financial Protection Bureau
Right now, many students and families across the country are receiving financial aid offers and deciding how to pay for college. Most students will need to shop for student loans now, and some of you have asked us what the new rates will be. While rates aren’t set in stone yet, interest rates on new federal student loans are expected to jump this July.
We’ve updated our Paying for College tool using our best guess of what the rates will be, so you can have a better estimate of what your monthly payment might be after graduation.
Interest rates on most federal student loans are based on a certain type of bond that the Treasury Department issues, known as the ten-year note. The yield is the rate at which investors charge the federal government for borrowing money. Next month, there will be a Treasury bond auction, and that rate will set federal student loan interest rates.
Health Literacy and Numeracy: Workshop Summary (2014)
Source: Institute of Medicine
Although health literacy is commonly defined as an individual trait, it does not depend on the skills of individuals alone. Health literacy is the product of the interaction between individuals’ capacities and the health literacy-related demands and complexities of the health care system. Specifically, the ability to understand, evaluate, and use numbers is important to making informed health care choices.
Health Literacy and Numeracy is the summary of a workshop convened by The Institute of Medicine Roundtable on Health Literacy in July 2013 to discuss topics related to numeracy, including the effects of ill health on cognitive capacity, issues with communication of health information to the public, and communicating numeric information for decision making. This report includes a paper commissioned by the Roundtable, “Numeracy and the Affordable Care Act: Opportunities and Challenges,” that discusses research findings about people’s numeracy skill levels; the kinds of numeracy skills that are needed to select a health plan, choose treatments, and understand medication instructions; and how providers should communicate with those with low numeracy skills. The paper was featured in the workshop and served as the basis of discussion.
Federal Agency Charges for Reports Available Free Online
The National Technical Information Service (NTIS) is something of a federal dinosaur, charging money for government reports that can be obtained elsewhere for free on the Internet.
Around since 1950, NTIS was set up as a clearinghouse for technical papers produced by the government. It has continued to sell these reports to the public even though many of them can be had for free through other agencies.
For instance, anyone interested in the National Institute for Occupational Safety and Health’s handy report on chemical hazards can order a free copy here. Or they can pay the NTIS $30.
Another example is Terrorism and Other Public Health Emergencies: A Reference Guide for Media, available for free from the Department of Health and Human Services.
The NTIS charges $16 for the report.
The agency has agreed to stop charging for reports produced by Senator Tom Coburn (R-Oklahoma), one of Congress’ most vocal critics of government waste, after his office complained. But it will continue to require payment for reports produced by other lawmakers (presumably unless they, too, tell it to stop).
Student Loan Safety Nets: Estimating the Costs and Benefits of Income-Based Repayment
Source: Brookings Institution
The plight of underemployed college graduates struggling to make their student loan payments has received a great deal of media attention throughout the recent economic recession. The primary safety net available to borrowers of federal loans facing unaffordable monthly payments is income-based repayment, in which borrowers make monthly payments based on their earnings rather than a traditional schedule of flat payments.
The importance of these programs is widely recognized. How much these programs will cost and how the benefits will be distributed among borrowers, however, is not well understood— in large part because these costs and benefits will be realized over multiple decades. Without this knowledge, it is difficult to know whether these programs are meeting the goal of effectively and efficiently protecting borrowers without creating significant unintended consequences.
This report seeks to fill that gap by providing some of the first detailed evidence about the predicted costs and benefits of existing income-based repayment programs. Authors Beth Akers and Matthew Chingos develop an empirical framework for understanding the costs and benefits of these programs and use simulation methods to apply this framework to a nationally representative sample of bachelor’s degree recipients. These methods cannot accurately estimate the overall cost of the programs, but they provide fairly robust estimates of the relative cost of different program components, and of the share of benefits received by different groups of borrowers.
Report Card on State Price Transparency Laws (PDF)
Source: Catalyst for Payment Reform and Health Care Incentives Improvement Institute
Some states have robust price transparency laws and regulations, requiring them to create a publicly available website with price information based on real paid claims information; but in reality, the public can’t readily access that information because the website is poorly designed, or poorly functioning. Given that so many state-mandated websites are inadequate, once we included websites into our review and grading, no state received an “A” in this year’s Report Card. Unfortunately, New Hampshire—a state that received an A in last year’s Report Card—dropped to an F this year, because its website is inoperative and may remain so for an extended period.
Several states have “voluntary price transparency websites,” hosted by hospital associations, foundations, or nonprofits. While these sites can be a valuable resource to consumers, if they are not legislated they can be short-lived, dependent on the good will and resources of the organization that hosts them. For this reason, we did not factor in these websites when awarding the 2014 state grades; however, we did provide a review of them in Appendix I for comparison purposes.
Debt and Debt Management among Older Adults
Source: University of Michigan Retirement Research Center
Of particular interest in the present economic environment is whether access to credit is changing peoples’ indebtedness over time, particularly as they approach retirement. This project analyzes older individuals’ debt, debt management practices, and financial fragility using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, we examine three different cohorts(individuals age 56–61) in different time periods, 1992, 2002 and 2008, in the HRS to evaluate cross-cohort changes in debt over time. We also draw on recent data from the National Financial Capability Study (NFCS) which provides detailed information on how families manage their debt. Our goal is to assess how wealth and debt among older persons has evolved over time, along with the potential consequences for retirement security. We find that more recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments. In addition Boomers are more likely to have engaged in expensive borrowing practices. Protective factors include having higher income, more education, and greater financial literacy. Factors associated with financial fragility include having had more children and unexpected large income declines. Thus shocks do play a role in the accumulation of debt close to retirement, but it is not enough to have resources: people also need the capacity to manage those resources, if they are to stay out of debt as they head into retirement.
AARP Online Travel Study
Source: AARP Research
Those who are 50 or older take about six non-business related overnight trips of at least 50 miles from home per year.
Preliminary Opinion of the European Data Protection Supervisor — Privacy and competitiveness in the age of big data: The interplay between data protection, competition law and consumer protection in the Digital Economy
Privacy and competitiveness in the age of big data: The interplay between data protection, competition law and consumer protection in the Digital Economy (PDF)
Source: European Data Protection Supervisor
EU approaches to data protection, competition and consumer protection share common goals, including the promotion of growth, innovation and the welfare of individual consumers. In practice, however, collaboration between policy-makers in these respective fields is limited.
Online services are driving the huge growth in the digital economy. Many of those services are marketed as ‘free’ but in effect require payment in the form of personal information from customers. An investigation into the costs and benefits of these exchanges for both consumers and businesses is now overdue.
Closer dialogue between regulators and experts across policy boundaries can not only aid enforcement of rules on competition and consumer protection, but also stimulate the market for privacy-enhancing services.
Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions
Source: Federal Reserve Bank of Richmond
This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast future demand for currency. Our estimates based on this large retailer, together with forecasts for the explanatory variables, lead to a benchmark prediction that the cash share of retail sales will decline by 2.54 percentage points per year over the next several years.
Do You Live in a Food Desert?
Source: Walk Score
A food desert is a neighborhood without access to healthy food. Why does this matter? Living in a food desert can lead to higher levels of obesity and other diet-related illnesses such as diabetes and heart disease.
Walk Score helps you make more informed decisions about where to live, like finding an apartment within walking distance of a grocery store.
Many cities are making access to healthy food part of their general plans. For example, Washington D.C.’s sustainability plan sets a goal of having 75% of residents within a 5 minute walk of healthy food.
But how many people can walk to a grocery store in 5 minutes?
Today, we’re announcing a new ranking of the best and worst U.S. cities for access to food based on our database of local places and our Travel Time API and ChoiceMaps technology.
Survey Says… Health Plans Advance Retail Capabilities
“Retail” is a hot topic in the health insurance industry today for good reasons. From the creation of health insurance marketplaces, to the continued growth in Medicaid and Medicare, to the defined contribution movement and the rise of private exchanges, the sale and delivery of health insurance is requiring an increasing focus on the individual consumer. In this context, Deloitte Consulting launched the Health Plan Retail Capabilities Benchmarking Survey to expand our understanding of the industry’s current capabilities and future investment priorities to serve the most dramatically changing segment of the health insurance market – the commercial individual market.
Forty-six health plans participated in an online survey in late 2013. Respondents represented approximately 60 percent of the commercial individual marketplace spanning national, regional, Blue Cross and Blue Shield, provider-sponsored, established and new-entrant plans. Analysis of the survey data reveals three themes:
- Product, pricing and consumer experience capabilities top health plan’s priority investment list
- Near term investment plans focus on regulatory requirements and retention capabilities but widen the aperture to consumer insight, consumer experience and channel in the longer term,
- Technology investments in transparency, mobility, CRM and analytics are fundamental to supporting desired business capabilities.
This study is the first to offer a detailed look at medical spending burden levels, defined as total family medical out-of-pocket spending as a proportion of income, for each state. It further investigates which states have greater shares of individuals with high burden levels and no Medicaid coverage, but would be Medicaid eligible under the 2014 rules of the Affordable Care Act should their state choose to participate in the expansion. This work suggests which states have the largest populations likely to benefit, in terms of lowering medical spending burden, from participating in the 2014 adult Medicaid expansions.
CFPB Orders Bank Of America To Pay $727 Million In Consumer Relief For Illegal Credit Card Practices
CFPB Orders Bank Of America To Pay $727 Million In Consumer Relief For Illegal Credit Card Practices
Source: Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) has ordered Bank of America, N.A. and FIA Card Services, N.A. to provide an estimated $727 million in relief to consumers harmed by practices related to credit card add-on products. Roughly 1.4 million consumers were affected by Bank of America’s deceptive marketing of their add-on products. Bank of America also illegally charged approximately 1.9 million consumer accounts for credit monitoring and credit reporting services that they were not receiving. Bank of America will pay a $20 million civil money penalty to the CFPB.
In Search of Affordability
Across the United States, strong home price affordability has been recently eroded by a combination of rising home prices and mortgage rates. Some areas, particularly on the West Coast, have begun to look unaffordable compared to their historic norms, forcing some household to look to the periphery of urban areas in search of affordable homes.
At Zillow, we measure affordability by looking at how much of a person’s monthly income is spent on a mortgage payment. Historically in the United States, the median household would need to spend 22.1 percent of their income to afford the mortgage payments on the median home. This number fell dramatically during the housing recession, hitting a low of under 13 percent by the end of 2012.
Since then, both prices and interest rates have recovered, increasing the share of income needed to buy the median home to 15.1 (2013 Q4) percent nationwide – higher than in 2012, but still well below its historical average. This share of income is up from 15.0 percent reported in 2013 Q3 for the U.S. Looking forward, the U.S. is forecasted to remain more affordable than its historical average, as long as interest rates remain below 7 percent over the next year – an extremely likely scenario.