Current Events in May 2023

National discount chain Tuesday Morning has announced it is closing all of its stores and going out of business. It’s just the latest move in the struggling home furnishings retailer’s downward spiral.

In December, the company voluntarily delisted from the Nasdaq stock exchange when it could no longer meet financial requirements. Earlier this year it filed for Chapter 11 bankruptcy protection.

For shoppers, it could be an opportunity to scoop up some bargains. The company’s website has announced “everything must go” and merchandise has been marked down by up to 30%.

Use gift cards now

Consumers who have Tuesday Morning gift cards should plan to use them right away. The company says gift cards and returns will not be accepted after Saturday, May 13.

With a goal of liquidating all merchandise, the sales event offers a variety of discounted home décor – things like bedding, bath, furniture, lamps, and kitchen. These sales also offer a large assortment of toys, pet supplies, luggage, beauty, crafts, and seasonal decorations.

Bankruptcy filings among retailers have begun to pile up this year as interest rates rise and the industry adjusts to the post-pandemic economy. Bed Bath & Beyond recently filed for bankruptcy, as did David’s Bridal and Party City.

Tuesday Morning did not offer a timetable for closing all of its stores in 25 states. A complete list of the stores that will close is contained in the company’s press release.

Perhaps you’ve worked hard to improve your credit score because it can make all sorts of improvements to your financial situation. But then you’ve begun to hear that the government has changed some fees to increase costs for people with good credit scores.

What’s up with that? Well, that’s not exactly the case.

It is true that back in January the Federal Housing Finance Agency (FHFA) announced that beginning in May, mortgage fees on low-down payment loans would rise for some borrowers, while others with less-than-perfect credit would see costs go down. The fees, imposed by the government enterprises Fannie Mae and Freddie Mac, are designed to mitigate the risk of the borrower defaulting.

The fees are based on a percentage of the mortgage amount. People with high credit scores generally pay a lower rate than people with lower scores. That was the case before the change and FHFA says that’s still the case, even though there have been media reports to the contrary.

What’s changing is the gap between the rate for good credit scores and not-so-good scores has shrunk a bit. Someone with a 760 credit score putting down 5% will pay a fee of around 0.5% of the loan amount. Someone with a 660 credit score, making the same down payment and borrowing the same amount, would pay a rate of 1.625%.

FHFA statement

 FHFA Director Sandra Thompson issued a statement, with these bullet points, in an effort to explain the change.

• ​Higher-credit-score borrowers are not being charged more so lower-credit-score borrowers can pay less. The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.

• Some updated fees are higher and some are lower, in differing amounts. They do not represent pure decreases for high-risk borrowers or pure increases for low-risk borrowers. Many borrowers with high credit scores or large down payments will see their fees decrease or remain flat.

• Some mistakenly assume that the prior pricing framework was somehow perfectly calibrated to risk – despite many years passing since that framework was reviewed comprehensively. The fees associated with a borrower’s credit score and down payment will now be better aligned with the expected long-term financial performance of those mortgages relative to their risks.

Fees are paid by buyers making small down payments

Thompson says the new fee structure does not provide incentives for a borrower to make a lower down payment to benefit from lower fees. Borrowers making a down payment smaller than 20% of the home’s value typically pay mortgage insurance premiums, so these must be added to the fees charged by Fannie and Freddie when considering a borrower’s total costs.

The changes also mostly affect borrowers who are making smaller down payments since the whole idea is to reduce the risk for the lender. Still, there are critics of the change.

David Dworkin, CEO of the National Housing Conference, says he thinks there should be more assistance to expand housing access but that he also believes the changes are not in keeping with the purpose of the fees. 

“It’s no longer risk-based pricing, it’s income redistribution,” Dworkin told Forbes. “It’s picking who’s going to pay [more] so someone else’s mortgage is cheaper.”

Target has launched the upgrade of its Drive Up services announced earlier this year. The expansion allows customers to both pick up and return items without leaving their cars. 

The return Drive Up option is the latest installment for Target shoppers, and the retailer has made it available in over 500 stores in 21 states across the country. By the end of the summer, all Target stores will allow shoppers to return items from their cars. 

“Our journey to expand our fulfillment options starts with making it easier for our guests to shop with us,” said Mark Schindele, executive vice president and chief stores officer at Target. “That’s why we’re launching Returns with Drive Up. Allowing our guests to process a return from the comfort of their car underscores our commitment to helping our guests shop – and return – however they choose.” 

More convenience, less time in store

With Returns with Drive Up, Target is hoping to achieve two primary goals: make returns more convenient and faster for shoppers. 

The reasoning behind the new service is simple. Shoppers out with their kids or pets in the car won’t have to stress about the return process. With the new Drive Up feature, shoppers never have to get out of the car to check the errand off their to-do list. 

Additionally, the Drive Up feature speeds up every part of the return process – including the refund. Rather than having to wait in lines in a store or ship something back to a warehouse, shoppers can drive to their local Target store and return their item from an existing Drive Up spot and the refund will start processing immediately. 

Where it’s available

Currently, Target shoppers can return items from Drive Up spots in 21 states, including: 

• Colorado

• Idaho 

• Illinois

• Kansas

• Kentucky 

• Michigan

• Minnesota

• Missouri

• Montana

• Nebraska

• North Dakota

• Ohio

• Oklahoma

• South Dakota

• Utah

• Washington

• West Virginia

• Wisconsin

• Wyoming

How it works

For Target regulars who have used the Drive Up feature to pick up items, returns will work in the same way. Once the app is open, tap “Details” to start a return, and then choose “Drive Up return.”

From there, the options will look familiar – you’ll tap the screen to alert your Target store you’re on your way, and then again when you’ve pulled into a Drive Up spot. A Target employee will meet you at your car, collect your item, and you’ll receive an email confirming the return.  

Target shoppers will see the Drive Up return option appear in the Target app, and there is no charge associated with using the feature. All refunds will be processed to the original form of payment for the order, and orders are eligible for return whether they were made in person, online, or on the Target app. 

Flying on American Airlines (AA) anytime soon? You better keep tabs on your flight because the 15,000-strong Allied Pilots Association (APA) has voted in favor of authorizing a strike.

This push-come-to-shove couldn’t happen at a better time for those pilots. They have a busy travel schedule around the corner and that will no doubt give them some leverage in working out an agreement.

“The summer travel season is almost here, and we’re all wondering whether this will be another summer of uncertainty for American Airlines,” said Ed Sicher, APA President. “Fortunately, there is an alternative. By embracing the win-win scheduling and work rule improvements APA has presented at the bargaining table, management can take steps to improve the airline’s operational reliability and efficiency.”

In a demonstration of their resolve, APA members will conduct informational picketing today at all 10 of the airline's major hubs: Boston (BOS), Charlotte (CLT), Chicago (ORD), Dallas/Fort Worth (DFW), Los Angeles (LAX), Miami (MIA), New York (LGA), Philadelphia (PHL), Phoenix (PHX), and Washington, D.C. (DCA).

"We remain confident that an agreement for our pilots is within reach and can be finalized quickly. The finish line is in sight," American Airlines said in an email to ConsumerAffairs.

"We understand that a strike authorization vote is one of the important ways pilots express their desire to get a deal done and we respect the message of voting results. Importantly, the results don’t change our commitment or distract us from working expeditiously to complete a deal. We remain focused on completing the handful of matters necessary to reach an agreement our pilots deserve."

What American customers need to know

A spokesperson for APA said that there shouldn’t be an immediate effect on travel plans, but that all depends on what happens at the negotiating table. 

The APA spokesperson said the 67 canceled and 92 delayed AA flight interruptions currently shown on FlightAware are not related to the picketing and that all of the pilots participating in the picket line were already scheduled to be off-duty on Monday. 

Anyone holding a ticket on American flights should frequently check their AA app or the airline’s website for any changes in their scheduled departure.

First Republic Bank failed over the weekend and regulators sold its assets to JPMorgan Chase. It’s the third bank failure since March. Silicon Vally Bank and Signature Bank failed earlier.

To protect depositors, the Federal Deposit Insurance Corporation (FDIC) agreed to a purchase arrangement with Chase, the nation’s largest bank. In part of the deal, Chase will assume much of First Republic’s debt as well as its deposits.

First Republic’s 84 branches are concentrated in California and the West Coast. There are also branches in Florida and the Northeast. Some of the branches are expected to become Chase locations as the bank takes over.

For people with deposits in First Republic Bank it should be a fairly smooth process. FDIC insures deposits up to $250,000.

‘Deposits continue to be insured’

“Deposits will continue to be insured by the FDIC, and customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits,” FDIC said in a statement. “Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Chase Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well.”

Industry experts say the reasons for the three bank failures this year differ. In Silicon Valley Bank’s case, much of depositors' money was invested in Treasury bonds that had lost value – on paper at least – when bond yields rose dramatically last year. A run on the bank, triggered by social media, led to huge withdrawals.

The bank had also made loans to many Silicon Valley startups that were not yet profitable and were being squeezed by higher interest rates.

First Republic, which had made a number of loans for expensive real estate, was faced with rising withdrawals by depositors. To make up for that, the bank borrowed heavily from the Federal Reserve in the first quarter.