News about Business

Beware the Credit Reports You've Never Heard Of

You probably know that Equifax (EFX), TransUnion, and Experian (EXPN) are consumer reporting agencies that track your credit history. But do you know about Milliman IntelliScript, First Advantage, and Infocubic? What about Innovis, L2C, and DataX? I can keep going, or you can take a look at the list compiled by the Consumer Financial Protection Bureau of 40 different reporting agencies (pdf) that track your behavior.

Each of the reporting agencies compiles different bits of data, such as whether you bounced a check, made your rent payments on time, collected insurance claims, or have taken prescription drugs. They sell that data to different companies that want to size you up—an insurance company deciding how high to set your premiums, a health insurer looking to understand if you have preexisting conditions, a potential employer trying to determine if you’re trustworthy, or a bank calculating where to set your credit limit.

The CFPB released the list on Thursday as part of its warning to remind “specialty consumer reporting companies” that, as with the big three credit bureaus, they must follow consumer protection laws. Under the Fair Credit Reporting Act, national reporting bureaus must give people easy access to a free copy of their report once a year and have a formal process to let consumers dispute the potential errors in a report. In a review, the CFPB “identified several problems, such as companies that are not listing toll-free numbers, and companies that have toll-free numbers but do not make it easy for consumers to request reports.”

As I reported this summer, credit bureaus and lenders are looking for new algorithms and data sources to find profitable customers as they start lending after the Great Recession. “Every bank is looking for more and more ways to understand what is a client’s payment behavior,” David Bowen, senior vice president at Cleveland-based KeyBank (KEY), told me at the time.

“It is really challenging for consumers because there are so many different companies,” says Persis Yu, a staff attorney at the National Consumer Law Center. She says it’s hard for consumers to be proactive and keep tabs on all of the different companies that might track them. Take the background checks used by nine out of 10 employers. Yu has found they are “riddled with errors,” so it’s particularly important for job seekers to check for accuracy. She says if you’re about to go on the job market, “it would be worth it to check the really big  [agencies], but it doesn’t guarantee that you will check the one that the employer will choose to use.”

The CFPB’s list represents one-tenth of the approximately 400 consumer reporting agencies in the U.S. It’s pretty much impossible to know every company that’s tracking you, though in some cases you have a right to know if the data are used against you. For example, if an employer says a background check is the reason they won’t give you a job, you are entitled to see—and challenge—the report they used. The bureau also reminds consumers that they have the right to request and fix errors in the reports even before they’re used by companies. I’d better stop this post now, so you can hop to it.

Yahoo 'ordered to pay $2.7bn' by Mexican court

Internet group Yahoo says it has been ordered to pay $2.7bn (£1.68bn) by a Mexican court.

The reported ruling follows a lawsuit stemming from allegations of breach of contract and lost profits related to a yellow pages listing service.

Yahoo said it "believes the plaintiffs' claims are without merit and will vigorously pursue all appeals".

The lawsuit had been brought by Worldwide Directories SA de CV and Ideas Interactivas SA de CV.

In a statement on its website Yahoo said the 49th Civil Court of the Federal District of Mexico City had "entered a non-final judgment of US $2.7 billion against Yahoo! Inc. and Yahoo de Mexico" in the case.

Shares in Yahoo, which is based in Sunnyvale, California, fell by 1.4% in after-the-bell trading following the news.

Rousseff vetoes part of Brazil oil royalty plan

  

Brazilian President Dilma Rousseff has vetoed part of a law intended to share royalties from Brazil's oil fields across the country's 26 states.

Rio de Janeiro governor Sergio Cabral had warned the measure could bankrupt his state ahead of the 2016 Olympics.
President Rousseff vetoed that part of the legislation which would have affected existing oil concessions.

But she retained a measure spreading wealth from yet-to-be-explored oil fields which are still to be auctioned.
The development comes after some 200,000 people protested in Rio de Janeiro against the bill, which they said would deprive Rio state of much of its oil revenue.
Local politicians had said it could cost the state $1.7bn (£1.06bn) next year.
They also said that the changes would affect Rio's ability to host the 2014 football World Cup and the 2016 Olympics.
Some of the largest oil finds in recent years have been discovered off the Brazilian coast.
Brazil's main oil-producing states had threatened legal action over the measure.
A new structure for distributing royalties has to be in place by January in order for auctions of "explorations blocks" to go ahead.
Brazil's Education Minister Aloizio Mercadante says 100% of the profits from new oil concessions should be used to improve education in Brazil.

Economic growth slows in India, Brazil and Canada

A string of major economies have reported disappointing data.

Economic growth slowed in India in the third quarter, while in Canada and Brazil it dropped surprisingly sharply.
Meanwhile in the eurozone, unemployment hit a new high of 11.7% in October, as German retail sales fell unexpectedly and French consumer spending dropped.
And in the US, citizens saw their incomes stagnate in October, while spending fell slightly, in large part due to disruption from Storm Sandy.
US personal incomes rose less than 0.1% from a month earlier, according to the Commerce Department, while spending fell 0.2%.

The department's Bureau for Economic Analysis, which compiled the report, said that much of the underlying data was not yet available, and the drop in spending largely reflected its own estimates of the likely loss of business due to Storm Sandy, which made landfall near New York City on 29 October.
Other recent data from the US has pointed to a strong rebound in the world's biggest economy, including a surprise upward revision of the country's third quarter annualised growth rate from 2% to 2.7%.

Losing momentum

North of the border by contrast, Canada's economy fared far worse over the summer.
A sudden drop in the country's exports and weakening activity in its oil and gas sector pulled its annualised growth rate in the third quarter down to 0.6%, short of the 0.9% growth rate expected on average by economists.
This was the same growth rate that Brazil manage to eke out during the same period - but a lowly 0.6% growth rate came as a much bigger shock for a country that was growing at a rapid 7.5% clip in 2010. The markets had expected the growth rate to be twice as fast.
The poor showing puts further pressure on President Dilma Rousseff's government to do something. It has already announced up to $50bn (£32bn) of stimulus measures, as the economy has steadily lost momentum over the last two years.
India's government faces a similar headache.
The country's growth rate came in at 5.3% during the third quarter, compared with a year earlier - in line with economists' expectations, but nonetheless disappointing for a country that aspires to a Chinese-style 8% growth rate.
Like Brazil, India has hit a soft patch in the last 18 months, and has averaged less than 5.5% growth this year.
Markets took heart from the data, with shares in Bombay rallying on hopes that the economic slowdown would give the government the political impetus it needs to push through economic reforms, including a long-delayed plan to open up the country's retail sector to international competition and investment.
Of the major developing economies, only China appears to have recovered from what has looked to be a worrying slowdown before the summer, with a string of positive economic data announced just ahead of the country's decennial leadership transition earlier this month.

Euro woes

In Europe, however, the picture remains bleak.
European Central Bank president Mario Draghi said on Friday that the region would not exit its crisis until the latter half of next year, although he conceded that the ECB's recent monetary interventions had helped put an end to the months of financial market stress experienced up until the summer.
The southern European economies of Italy and Spain have been in recession all year, thanks to government spending cuts, troubled banks that have been cutting back their lending, and in Spain's case a steadily deflating property bubble.
Data released by Eurostat showed unemployment continuing to rise in both countries, while in Germany the jobless rate held steady close to a record low.
However, Germany and France - the eurozone's two biggest economies - have not been entirely immune from their neighbours' travails.
Data on Friday showed that consumer spending in France fell 0.2% in October - in line with low expectations for an economy increasingly seen as lacking in competitiveness.
More worryingly, retail sales in Germany - albeit a volatile data series - dropped 0.8% in the same month, catching most analysts by surprise.

Eurozone unemployment rate hits new high in October

The eurozone's unemployment rate hit a new record high in October, while consumer price rises slowed sharply.

The jobless rate in the recessionary euro area rose to 11.7%. Inflation fell from 2.5% to 2.2% in November.
The data came as European Central Bank president Mario Draghi warned the euro would not emerge from its crisis until the second half of next year.
Government spending cuts would continue to hurt growth in the short-term, Mr Draghi said.

'Two-speed Europe'

The unemployment rate continued its steady rise, reaching 11.7% in October, up from 11.6% the month before and 10.4% a year ago.
A further 173,000 were out of work across the single currency area, bringing the total to 18.7 million.
The respective fortunes of northern and southern Europe diverged further. In Spain, the jobless rate rose to 26.2% from 25.8% the previous month, and in Italy it rose to 11.1% from 10.8%.
In contrast, unemployment in Germany held steady at 5.4% of the labour force, while in Austria it fell from 4.4% to just 4.3%.
"The real problem is that we have a two-speed Europe," economist Alberto Gallo of Royal Bank of Scotland told the BBC. "The biggest increase in unemployment is being driven by Italy and Spain.
"It is the same as you are seeing in financial markets," he explained. "The periphery [Spain and Italy] is the area where the banks are the least capitalised and need the most help, and the loan rates are the highest."

Spending hit

Data earlier this month showed that the eurozone had returned to a shallow recession in the three months to September, shrinking 0.1% during the quarter, following a 0.2% contraction the previous quarter.

The less competitive southern European economies, such as Spain and Italy - where governments have had to push through hefty spending cuts to get their borrowing under control, and crisis-struck banks have been cutting back their lending - have been in recession for over a year.

But the economies of Germany and France have also begun to weaken. Growth in the eurozone's two biggest economies came in at a disappointing 0.2%.
And more recent data suggests that both core eurozone economies have continued to skirt recession during the autumn.
Retail sales in Germany shrank 2.8% in October versus the previous month, down 0.8% from a year earlier, according to data released on Friday. Analysts had expected the country to record unchanged or moderately growing sales.
Meanwhile, separate data showed consumer spending in France shrank 0.2% in October versus the previous month, with spending on cars and other durable goods hardest hit.

Calmer markets

The sharp slowdown in the eurozone's consumer price index, to 2.2% in November, is also symptomatic of the weakness of spending.
However, the inflation data may also open the door to further measures by the ECB to boost the economy, as the index fell much closer to the central bank's 2% target rate.
"We have not yet emerged from the crisis," said Mr Draghi, speaking on pan-European radio. "The recovery of the eurozone will certainly begin in the second half of 2013.
"It's true that the budgetary consolidation entails a short-term contraction of economic activity, but this budgetary consolidation is inevitable."
Despite Mr Draghi's warning, and the generally poor state of the eurozone economy, markets have begun to take a far more sanguine view of the single currency's future.

Italy's implicit cost of borrowing in the financial markets has fallen to its lowest level in two years, dropping to an implied interest rate of about 4.5% for 10-year debt.

Spain is able to borrow from markets at a 10-year rate of about 5.5% - far below the 7%-8% rate being demanded over the summer.
Mr Draghi conceded that the announcement of the ECB's willingness to buy up potentially unlimited amounts of government debt had boosted market confidence, even though no eurozone government had actually taken up the ECB's offer yet.

Banking union

However, borrowing costs in southern Europe still remain elevated compared with France and especially Germany. Berlin is currently able to borrow for 10 years at 1.37%, close to an all-time low.
"For now, what the ECB has done is to stop the bleeding," said Mr Gallo at RBS. "The central bank needs to close the gap in loan borrowing costs between the periphery and the core."
However, Mr Gallo said in his view the only way to do this was for the eurozone to move ahead with its "banking union" - which includes putting all eurozone banks under a common regulator, and creating a pan-eurozone scheme for guaranteeing bank accounts.
He was echoing the view of Christine Lagarde, head of the International Monetary Fund, who on Friday said that creating a single deposit guarantee system should be Europe's top priority, more important than getting government budgets under control.
Fears over a possible government default or exit from the eurozone have made it much harder for Spanish and Italian banks to borrow, and put them at risk of a sudden exodus of depositors. This in turn has undermined the banks' role in supporting their respective national economies.

Tax: Starbucks in talks with UK's Revenue and Customs

Global coffee chain Starbucks has said it is in talks with HM Revenue and Customs and the Treasury over how much UK tax it pays.

It is one of several well-known firms that were criticised over the level of their corporation tax payments.

The firm admitted that it "needed to do more" in the UK on tax.

Meanwhile, Chancellor George Osborne has pledged more funds for the British authorities to tackle tax avoidance by multinationals.

He told the BBC that an announcement would be made on Monday about the "extra investment in the part of the Inland Revenue that tackles tax avoidance by multinational companies".

A Public Accounts Committee report on the topic of how much tax multinational firms pay in the UK is due on Monday.

In November the committee took evidence from executives from Starbucks, Google and Amazon over the amount of tax the companies have paid in the UK.

'Competitive'

"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," said a Starbucks statement.

"As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with The Treasury."

Starbucks, which has more than 700 outlets across the UK, said more details would be released later this week.

BBC business correspondent Theo Leggett said the coffee company reported sales of nearly £400m in the UK last year, but paid no corporation tax at all.

"Much of the money it earns in this country is transferred to a sister company in the Netherlands in the form of royalty payments, leaving the UK division to report regular annual losses," he added.

Mr Osborne did not single out any firms while making his announcement on the Andrew Marr Show.

He also said that as well as his extra funding for the UK authorities, it was also necessary to work at an international level on the issue.

"It is actually Britain who has been working with Germany and France to get those rules on the international table," he said.

But he also warned against "pricing Britain out of the world economy", adding that "if we make our taxes less competitive that will just mean more companies stay out of Britain".

Campaign group UK Uncut said Starbucks' announcement was "a blatant admission of guilt" that it had intentionally avoided tax.

Spokeswoman Jane Harvey said: "The government's next step must be to close the loopholes that Starbucks and other companies use to avoid paying billions in tax to the UK, instead of targeting single mums and disabled people through slashing public services, the welfare state and privatising the NHS."

Monday's PAC report is expected to be critical of the current way in which multinational firms used UK tax legislation.

After last month's hearings, PAC chair Margaret Hodge MP said: "One of our concerns is that the ability of global companies to choose where they put their costs and their profits gives them an unfair tax advantage that damages UK-based businesses."