Personal Finance

Baltimore bridge collapse could wipe out emergency federal highway fund

Published

8 months ago

April 12, 2024

Maryland and Baltimore may jump ahead of states that have waited more than a decade for emergency highway funding, as the federal government swoops in with aid after the collapse of the Francis Scott Key Bridge.

The Federal Highway Administration’s emergency relief fund, which reimburses states for expenses to repair or reconstruct roadways after disasters, has a $2.1 billion backlog of projects and only $890 million on hand, according to data obtained by The Washington Post.

That money is not paid on a first-come, first-served basis, leaving some states waiting years to be made whole after a disaster. Baltimore’s needs could both move to the top of the list and also wipe out the money left in the FHWA’s emergency account, pressing Congress into urgent action to replenish the agency’s coffers.

“We have to come to the realization that it needs to be tripled, quadrupled, just to have that money ready so we’re not debating it while one of our key arteries is broken,” Rep. Mike Quigley (Ill.), the top Democrat on the House Appropriations transportation subcommittee, said in an interview. “We have to be honest with ourselves. This fund always needs more money. It’s critical for people, for our economy, for safety. And now, this should be bipartisan. I hope it will be.”

Maryland could require more than $1 billion to rebuild the Key Bridge, which collapsed on March 26 after it was struck by the massive container ship Dali. But state and federal officials still aren’t sure of the exact needs — 12,000 tons of steel and concrete lie at the bottom of the murky Patapsco River, and 5,000 tons lie atop the grounded Dali, according to the Army Corps of Engineers.

Federal transportation officials have already given Maryland $60 million in “quick release” funding to divert traffic away from the roadway and assist other highways that are absorbing the nearly 30,000 vehicles that traversed the bridge each day.

President Biden immediately after the collapse said the federal government should pay for the full cost of reopening Baltimore’s shipping channel and reconstructing the bridge, consistent with past catastrophic bridge collapses, including the 2007 failure of the Interstate 35W bridge in Minnesota.

Sen. Ben Cardin (D-Md.) and Rep. Steny H. Hoyer (D-Md.) introduced legislation Thursday evening to authorize the federal government to cover the full cost of the bridge rebuilding.

But there’s a long list of other projects also waiting for federal support.

California, for instance, is still waiting on $1.5 million to recover from statewide storms in 2005, $7.4 million in highway relief funding from a 2012 rainstorm and flooding, and $722 million total, according to data obtained by The Post. Hawaii is awaiting $3.7 million from a 2012 storm, $77.7 million for recovery after fires ravaged Maui in 2019, and $123 million total.

“We also have a responsibility to support every other community that has been devastated by a disaster because we are all in this together. No state or county, big or small, red or blue, wealthy or not, can shoulder the burden alone,” Sen Brian Schatz (D-Hawaii), chair of the Senate Appropriations transportation subcommittee, said on the Senate floor Wednesday. “When a disaster is so big, so catastrophic for any one state or locality to handle, it falls on the federal government to step up and help.”

Puerto Rico has not been reimbursed for $257 million in highways damage from Hurricanes Irma and Maria in 2017. Tennessee is entitled to $61.8 million after severe storms, floods and landslides in 2019.

FHWA officials declined to comment on the record.

Some backlog in emergency roadway funding is normal. States are reimbursed for work already completed to restore highways, which means there’s a natural lag as projects are finished. The FHWA pays for 90 percent of expenses for federal highways and 80 percent for state highways. The fund is automatically replenished each year with $100 million, and some repairs take years to complete, cushioning the emergency account from immediate payouts most of the time.

“The imperfect arrangement is, you will have a federal commitment to get paid at some point, but you don’t know when that point is going to be,” said Greg Nadeau, who served as the Federal Highways administrator in the Obama administration.

That can create struggles among states to secure that funding, he said, as each presses the case that its project is vital. Maryland Gov. Wes Moore (D) came to Capitol Hill on Tuesday and again Thursday to lobby members of Congress on his state’s behalf.

“For [state transportation departments], there’s never enough money and there’s always a need. It’s really a function of budget timing and competition for resources with the rest of the government,” Nadeau said.

Federal transportation officials have other avenues to funnel money to Baltimore in addition to the emergency relief fund, said Jeff Davis, senior fellow at the Eno Center for Transportation think tank. The state received $828 million from the FHWA for general highway upkeep in the 2024 fiscal year and got another $88 million specifically for bridges.

The Infrastructure Investment and Jobs Act, one of Biden’s chief legislative achievements, also created federal bridge grant programs for which Maryland would now be a strong candidate, Davis said. The state could receive between $5 billion and $6 billion in the next two fiscal years, if selected.

That 2021 law also renewed the $100 million in annual funding for the emergency relief program, but its balance is far from enough to keep the program solvent, experts and lawmakers say, and to keep enough cash on hand for both quick-release funding in the immediate aftermath of disasters and long-term funding to rebuild crucial roadways.

“There are lots of other states of all political persuasions that rely on that fund, so we look forward to working together on a bipartisan basis to making sure that fund is available for all those projects,” Sen. Chris Van Hollen (D-Md.) said Tuesday.

Congress has appropriated $11.5 billion for the FHWA emergency fund since 2011, including $800 million most recently in 2022, according to the Congressional Research Service. Biden in October sought $634 million for the fund as part of a larger spending request that included money for child care, broadband access and energy security priorities.

That request hasn’t yet passed Congress, but it could gain momentum as lawmakers look to tackle a growing number of spending concerns, including some that have gotten more acute since October. The Affordable Connectivity Program, which has helped roughly 23 million American households receive free or heavily discounted high-speed internet, is set to expire at the end of the month, and it is a major funding priority for some Democrats, including many in the Maryland delegation.

That has the potential to complicate the funding picture for Baltimore. Senate Republicans and the new House Appropriations chair are broadly in favor of aid for Maryland and new federal highways funding, but skeptical of authorizing resources for other programs.

“This is not just a local or regional problem, this is a national problem because of the amount of trade that goes through the port. I think we need to be supportive,” Sen. John Boozman (R-Ark.) said Tuesday. “ … But I think we need to stick to what’s at hand. There’s all kinds of things that could go in there, but that’s where people get upset when you put all those other things that are unrelated in there.”

Erin Cox and Tony Romm contributed to this report.

Personal Finance

Student loan transfer led to credit reporting errors: Lawmakers

Published

18 hours ago

December 19, 2024

Business Finance News

Chair Elizabeth Warren, D-Mass., conducts the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth hearing titled Promoting Competition, Growth, and Privacy Protection in the Technology Sector, in Dirksen Building on Tuesday, December 7, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

A “faulty” transfer of student loan accounts from NelNet to Mohela in 2023 led to “millions of consumer credit reporting errors,” lawmakers say in a new letter to government agencies reviewed by CNBC.

The change in loan servicers caused nearly 2 million duplicate student loan records to appear on borrowers’ credit reports, while hundreds of thousands of borrowers’ credit scores were reported incorrectly for up to a year and a half, according to the letter. Sen. Elizabeth Warren, D-Mass., Ron Wyden, D-Oregon, and other lawmakers sent the letter on Wednesday evening to Consumer Financial Protection Bureau Director Rohit Chopra and U.S. Department of Education Secretary Miguel Cardona.

As part of their investigation, the lawmakers sent inquiries to NelNet, Mohela and three credit reporting companies: Equifax, Experian and Transunion. They asked the companies about what had gone wrong and how many borrowers were impacted.

In their letter, the lawmakers urged the government agencies to investigate the problems.

“We respectfully request that the CFPB and ED use their supervisory and enforcement authority to ensure that the appropriate parties are held accountable for these errors,” the lawmakers wrote.

Mohela appears to have failed to inform the credit reporting companies of each loan transfer from NelNet, the lawmakers said they found in their investigation. As a result, many borrowers had their single loan balance reported twice, once by each servicer.

Duplicate student loan balances on a borrowers’ credit report can reduce their credit scores and make it more difficult for them to obtain mortgages, car loans and other credit, the lawmakers note in the letter.

Mohela and Nelnet did not immediately respond to requests for comment.

The credit reporting companies identified “over 100,000 cases” in which the reporting errors led borrowers to have an incorrect credit score, according to the lawmakers’ investigation. Thousands of borrowers had their credit scores drop by more than 20 points, they said.

They added that borrowers submitted around 7,500 complaints and disputes to Mohela and the credit reporting companies in attempts to fix the errors.

The credit reporting companies told the lawmakers the duplicate balances “have been resolved now,” the letter said.

An Equifax spokesperson said they were aware that some student loan servicers “did not report loans in adherence to the consumer reporting guidelines.”

“We are working with the Department of Education and the servicers to correct misreported accounts and ensure that student loans are being appropriately reflected on consumer credit reports,” the spokesperson said.

Experian and TransUnion did not immediately respond to requests for comment.

Personal Finance

CFPB takes aim at credit card issuers over ‘bait-and-switch’ rewards

Published

19 hours ago

December 19, 2024

Business Finance News

CFPB cracks down on rewards tactics

About 90% of all credit card spending is on rewards cards. But according to the CFPB, an increasing number of consumers have reported that some rewards are hard to redeem or are not worth as much as they thought. In 2023 alone, complaints involving credit card rewards jumped 70% over pre-pandemic levels.

“Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they’ve earned,” CFPB Director Rohit Chopra said in a statement. “When credit card issuers promise cashback bonuses or free round-trip airfares, they should actually deliver them.”

According to the Consumer Bankers Association, only a small share of credit card users report problems with rewards: Complaints regarding rewards made up just 2% of all credit card complaints reported to the CFPB since January 2020.

“The only bait-and-switch that’s happening here is from the CFPB once again misrepresenting its own data,” CBA President and CEO Lindsey Johnson said in a statement.

“As the CFPB’s own research shows, credit cards are — by far — the best tool for the one-fifth of Americans that lack access to credit to begin building their financial lives,” Johnson said.

Consumer complaints about credit card rewards are exceedingly rare, the American Bankers Association also noted.

“Despite widespread evidence that credit card rewards programs are highly popular and deliver tremendous value to tens of millions of U.S. cardholders from all walks of life, Director Chopra has once again chosen not to let facts get in the way of his decision to tarnish a hugely popular consumer product,” Rob Nichols, the ABA’s president and CEO, said in a statement.

Consumers like reward cards

Even with credit card interest rates near an all-time high, when deciding on a new credit card, 83% of cardholders said their final decision comes down to perks, according to a separate report by CardRates.com.

The majority, or 58%, of credit card users polled by CardRates said they preferred cash back over miles or points. But still, not all cardholders used the credit card rewards available to them.

Travel rewards can be more lucrative but are notoriously harder to redeem, Bankrate also found. Only 11% of rewards cardholders redeemed for a free hotel stay, while just 10% redeemed for a free flight, according to Bankrate.

“Failing to redeem your rewards is a major missed opportunity,” said Bankrate’s senior industry analyst Ted Rossman. “While the best rewards can be subjective, the worst reward is getting nothing at all.”

How to make the most of rewards

In the best-case scenario, credit card rewards are “almost like free money,” said Bill Hardekopf, a credit card expert and CEO of BillSaver.com.

But that’s only if you pay your credit card off on time and in full every month. With credit card rates over 20%, on average, the benefits of cash back or other perks are quickly eroded if you carry a balance.

“If you miss a payment or are late on a payment, you get socked with a huge penalty — that interest rate will far outweigh the rewards you are going to get,” Hardekopf said.

When it comes to which reward card to choose, Hardekopf recommends a cash-back card with a low, or no, annual fee. “The best reward you can get is cash back because cash talks — it’s easy to understand and there’s no problem redeeming.”

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Personal Finance

Some shoppers prefer retail credit cards over buy now, pay later plans

Published

21 hours ago

December 19, 2024

Business Finance News

Filadendron | E+ | Getty Images

High interest rates aren’t deterring many shoppers from store credit cards.

When asked to choose between a store card or a buy now, pay later plan, 58% of surveyed shoppers prefer store cards, according to a new report by LendingTree. The remaining 42% picked BNPL loans.

The site polled 2,040 U.S. adults in September.

That choice “speaks to the fact people may be looking for a little bit longer-term help with their financial situation,” said Matt Schulz, chief credit analyst at LendingTree.

In December, new cards offered by the top 100 retailers had an average annual percentage rate of 32.66%, up from 27.7% in 2022, according to the Consumer Financial Protection Bureau. Many short-term BNPLs do not charge interest, but longer-term loans do, and on the higher end, those rates can be comparable to a store card.

Younger shoppers have been early adopters of BNPL, and that shows in their payment preferences.

About 59% of Gen Zers and 51% of millennials prefer BNPL over retail store credit cards, Lending Tree found. To compare, 38% of Gen Xers and 22% of baby boomers prefer BNPL.

“Buy now, pay later really started off as a millennial, Gen Z phenomenon,” Schulz said. “Younger Americans really drove a lot of the growth.”

Whichever payment option you plan to use to finance holiday purchases this year, keep in mind the cost of carrying the debt, experts say.

How store cards and BNPL work

Retail store credit cards and BNPL loans operate differently.

A retail store credit card is a long-term, revolving line of credit that a store offers in conjunction with a bank partner. To entice new users, stores generally offer applicants a discount on their first card purchase, or financing deals. The card may also be tied into the retailer’s loyalty program, sometimes with bonus rewards for cardholders.

A buy-now, pay later loan — issued through a provider the merchant works with — typically breaks up the total cost of a purchase into installment payments over a set period of time. Some providers offer longer repayment periods, too, and charge interest. Users can have multiple purchases with the same BNPL provider at once, but those may be treated as individual loans with their own repayment terms.

With either payment method, make sure to pay off the balance on time — you might face penalties like fees and interest if you don’t stay on track.

Gen X most likely to max out their credit cards, survey finds

A retail credit card can affect your credit history, as the account is reported to the three major credit bureaus: Equifax, Experian and TransUnion.

BNPL has been somewhat “invisible” to credit bureaus in the past, meaning the loan did not show up on users’ credit reports. But AfterPay, Affirm and Klarna are among the providers reporting some BNPL loans to the credit bureaus.

Both payment forms can be attractive for shoppers. Retail store credit cards tend to be easier to qualify for compared to other credit cards, especially as banks have been tightening credit card approval requirements in recent months, Schulz said.

Over the third quarter of 2024, some banks have tightened their lending standards for credit card loans, lowered their credit limits and increased minimum credit score requirements, according to the Federal Reserve.

“It’s a reaction from the banks to rising delinquencies, rising debt and overall economic uncertainty,” Schulz said.

BNPL can also be relatively easy to apply for and qualify.

“The rise of buy now, pay later is the biggest reason why Americans are opening fewer store cards,” according to Ted Rossman, an industry analyst at Bankrate.

‘Consider the total cost of ownership’

The holiday season is here, a busy time to buy gifts for family and friends. If you find yourself in a situation where a retail store credit card or a BNPL can help stretch your budget, consider the “total cost of ownership,” Rossman said.

“Both of these payment methods can be advantageous depending on how you use them, but could also be a pretty slippery slope into debt and overspending,” he said.

BNPL can be tricky because you can have multiple loans running at the same time, and the costs “can add up,” Rossman said. Make sure to keep track of the pay-later loans you have and are able to withstand the automatic deductions.

If you can’t pay a retail card purchase off at the end of the statement period, any discount, reward or perk that you may get is going to be washed over by the interest you’ll owe on top of the outstanding balance, Schulz said.