The Washington Post - USA (2021-12-22)

A18 EZ RE THE WASHINGTON POST.WEDNESDAY, DECEMBER 22 , 2021

how our products are structured, used, and benefit both consumers and retailers.” In similar statements, the other four companies said they weren’t opposed to the CFPB’s review, and they all touted efforts to be transparent. “For nearly a decade, Affirm has been advancing its mission to deliver honest financial products that improve lives, and we have never charged a late or hidden fee, ever,” the company said in a statement. In a 16-page order, the CFPB asked for a great deal of information, including the total number and amounts of BNPL transactions, whether customers are automatically enrolled in autopay arrangements that might lead to overdraft charges, how many defaults the companies are experiencing and what information is reported to the credit bureaus. The CFPB said it will publish the results of its findings. Even if this examination doesn’t result in new regulations for the buy-now- pay-later industry, it should put all financial firms on notice: A more aggressive, responsive CFPB is back, baby, placing consumers’ interests first. [email protected]

Economy & Business

PACKAGE DELIVERY

UPS agrees to buy

Boeing freighter jets

United Parcel Service agreed
to buy 19 Boeing freighter jets as
soaring e-commerce and snarled
shipping lines lead to a boom in
air-cargo demand.
The package-delivery giant
plans to accept the 767 Freighters
between 2023 and 2025,
according to a statement
Tuesday. The planes have a
combined base value of
$1.5 billion, according to aircraft
appraiser Avitas.
Chicago-based Boeing’s shares
surged 5.9 percent. Shares of
Atlanta-based UPS gained
2.3 percent.
The purchase bolsters the UPS
fleet and adds to a record-

breaking year for Boeing’s freighter sales. Air-cargo demand has surged during the pandemic amid a rise in time- sensitive online shopping that is expected to last even after the coronavirus pandemic subsides. More companies have turned to air transport lately as ocean- cargo routes suffer from delays. — Bloomberg News

MINING

Rio Tinto will buy Rincon lithium mine

Rio Tinto Group agreed to buy a lithium mine in Argentina for $825 million as the world’s second-biggest miner accelerates its push into battery materials. The top mining companies are increasingly looking to expand

into what are known as future- facing commodities such as lithium, copper and even fertilizers as investors and governments increase pressure on more polluting materials that have long been the most profitable. Rio said Tuesday that it will buy the Rincon asset in Argentina from private equity buyers. The lithium brine project is in what is known as the lithium triangle in South America, home to many of the best lithium deposits. Major automakers from Tesla to Volkswagen need a growing supply of battery materials to accelerate the rollout of electric vehicles. The deal, along with the recent acquisitions of Millennial Lithium and Neo Lithium, helps

cement Argentina’s position as a long-term destination for lithium development, said Chris Berry, president of industry consultancy House Mountain Partners. “This acquisition is strongly aligned with our strategy to prioritize growth capital in commodities that support decarbonization and to continue to deliver attractive returns to shareholders,” Rio chief executive J akob Stausholm said in a statement. The company said the undeveloped project has the potential to produce battery- grade lithium carbonate. Rio is already looking to develop a $2.4 billion lithium mine in Serbia as it moves to diversify its business away from iron ore. Yet the company’s plans

there have come under pressure from local activists who have filled streets to protest the project. Those hurdles make the deal in Argentina “especially important,” House Mountain’s Berry said. “One of the biggest mistakes I see mining companies make is that they don’t have a Plan B. Clearly, Rio has thought their lithium strategy through.” Rio’s push into lithium comes as prices surge. The global transition toward electrified transport has fired up consumption, and lithium prices have more than tripled this year to a record high. Miners are scurrying to expand capacity, but they can’t keep up with demand, and market tightness is likely to persist in the near term. — Bloomberg News

ALSO IN BUSINESS

Wells Fargo said Tuesday it has delayed plans for employees to return to the office “given the changing external environment,” according to a statement, the latest bank to adjust plans as the omicron variant spreads. The bank said it will announce new plans for a full return in the new year.

AAR reported fiscal second- quarter profit of $20.8 million. The Wood Dale, Ill.-based airplane maintenance company said Tuesday it had profit of 58 cents per share. Earnings, adjusted for nonrecurring gains, came to 53 cents per share. The company posted revenue of $436.6 million in the period.

— F rom news services

DIGEST

BY ABHA BHATTARAI

For many Americans, the casual
holiday exchange is over: No more
White Elephant gifts for extended
family or Secret Santa at work.
Heather Schmidt has trimmed
dozens of names off her gift list —
neighbors, colleagues, her kids’
teachers and coaches — buying
only for a handful of family mem-
bers. And she has no regrets. This
Christmas is about starting over.
“I’m done buying stuff for the
sake of buying it,” the 39-year-old
said. “I don’t mean to sound un-
grateful, but I am tired of coming
home with bags of trinket-y stuff
that lasts for a few days before it
becomes plastic trash.”
U.S. consumers are rethinking
their approach to gift-giving, scal-
ing back on what they buy and for
whom, with a focus on the practi-
cal: small kitchen appliances like
air fryers, books and, increasingly,
gift cards. The pandemic, which
last year put an abrupt halt to
communal gift exchanges of all
kinds and has compelled many
families to reconsider long-held
traditions. Rising prices and sup-
ply chain disruptions that have led
to sparse store shelves have only
accelerated the shift.
More shoppers are buying sec-
ondhand goods, or simply giving
cash or gift cards this year. Others
are doing away with the fuss and
waste of wrapping paper, opting
instead for reusable gift bags or, in
some cases, piling unadorned
Amazon boxes under the tree.
(Amazon founder Jeff Bezos owns
The Washington Post.)
“A lot of obligations — the office
Christmas party and big family
gift exchanges — have disap-
peared,” s aid Milton Pedraza, chief
executive of the Luxury Institute,
a consulting and research firm.
“Instead we’re thinking practical-
ly by focusing on needs and trad-
ing up to higher-quality products.”
That sensibility has fueled a
fundamental change this holiday
season. Research shows that gift-
givers typically favor novelty
items over useful ones, says Julian
Givi, a marketing professor at
West Virginia University who
studies consumer behavior and
gift giving. But the covid crisis has
changed peoples’ priorities both
for themselves and those close to
them.
“Consumers love giving fun,
flashy, unique gifts, but the pan-
demic seems to have turned that

gories s uch as department stores and electronics and appliance retailers posted the sharpest de- clines, of 5.4 and 4.6 percent, re- spectively. Before the pandemic, Schmidt says her extended family would get together for an expansive gift exchange on Christmas. She’d buy presents for dozens of nieces and nephews, and her three children would go home with bags full of toys, lunch bags and other gifts she’d eventually give away. Last year, when the pandemic upended their plans, she says it was a re- freshing change. “One of the silver linings of not having as many in-person parties is that we’re not getting as much junk,” said Schmidt, who lives in Camarillo, Calif. “There’s not as much pressure to spend money on all kinds of wasteful stuff.” This year, armed with a shorter- than-usual list, Schmidt finished all of her Christmas shopping in October. She bought clothes, ear buds and gift cards for her two teenage daughters and Legos for her 5 -year-old son. She picked up a grocery store gift card for her mother. “In past years I remember thinking, this is just absurd. We cannot keep doing this,” she said. “It took a pandemic to finally put an end to the excess.” Shoshanna Teel quit her job as a high school English teacher early in the pandemic to start her own marketing business. Money is tight this year, forcing the 26-year- old to reconsider her purchasing habits. “When you fall on unemploy- ment, it makes you put so many things into perspective,” said Teel, who lives in Dallas. “What’s important? What have I wasted money on? Where could I have saved?” After spending much of the l ast two years cleaning out her home and donating unused items, she says she has a new understanding of just how wasteful gifts can be. She’s buying air fryers and bit- coin for cousins, and CBD gift baskets for friends. Everyone else is getting cookbooks and gift cards. “Everything costs more this year and I just don’t have the same enthusiasm to shop,” she said. “Ev- ery gift I see, I’m so in my head, thinking, ‘Is this worth it? Do they really need this?’ My whole perspective is so different this year.” [email protected]

innate desire on its head,” he said. “People are saying, ‘I really to want to buy my sister a margarita ma- chine or a chocolate fondue set. But I should get her a gift card for gas instead.’ ” Retailers adapted by prioritiz- ing more practical, bigger-ticket items than impulse buys. At J.Crew, the season’s biggest sellers include pricier goods such as cash- mere sweaters and classic jackets, according to chief merchandising officer Lisa Greenwald. And with most customers still working from home in some capacity, “col- league gifting” has yet to make a meaningful comeback. The auction site eBay says it’s selling five used watches and three used handbags every min- ute. “Consumers are actually shopping differently — and taking a more open-minded approach,” Senior Vice President Jordan

Sweetnam wrote in October. At Omaha Steaks, the share of gift sales rose 13 percent early in the pandemic and has continued to climb as families opt for filet mignons, scalloped potatoes and apple tarts in lieu of traditional presents, according to Brian Fowl- er, the company’s vice president of procurement and product development. “People are simplifying the holidays,” he said, noting that the company has added larger gift packages to keep up with demand. Pandemic-related product shortages and shipping delays have also made it increasingly dif- ficult and expensive to track down popular gifts. Overall prices have risen nearly 7 percent in the last year, according to the Commerce Department’s latest data, and retailers of all kinds have begun raising prices and dialing back

discounts in response. Meanwhile, sales of gift cards — the ultimate practical present — are up 43 percent from last year, according to fintech company Block. “This year, it’s like, ‘Hey, don’t get me anything for Christmas and I won’t get you anything ei- ther,’ ” said Demi Stratmon, a gov- ernment contractor who lives in Northwest Washington. “With gifts being more expensive, I’m focusing on the primary people in my life.” Stratmon plans to spend $4,000 on herself, her parents and boyfriend. But instead of shelling out for designer wallets, shoes and cologne, she’s focused on more meaningful gifts such as vacation flights and hand-painted portraits by an artist she found on Insta- gram. “It doesn’t feel like you’re get-

ting a bang for your buck on anything this year,” the 23-year-old said. “It makes you want to think hard about what to buy.” Americans are projected to spend an average $648 on gifts this year, less than they did the last two years, according to the Na- tional Retail Federation. All told, the industry group expects holiday spending to climb as much as 11.5 percent to more than $860 billion, though economists say some of those gains will probably be driven by higher prices. But holiday spending has been a mixed bag so far: In October, when many retailers began rolling out Black Friday deals, sales surged 1.8 percent from the month before. But growth was an anemic 0.3 percent in November as consumers spent more on gas and groceries, and cut back on most everything else. Key holiday cate-

Gift-givers s hift to the practical

ANDREW KELLY/REUTERS

With another Christmas affected by the pandemic, consumers are thinking twice about their present purchases this season.

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as affordable small-dollar credit has potentially provided an alternative to more costly forms of credit, these products also have the potential to cause consumer harm,” the lawmakers wrote in a letter to the CFPB this month. “... BNPL products generally do not receive all of the protections credit cards have, including those governing ability-to-repay, monthly statements, reasonable and proportional penalty fees, and the ability to raise merchant- related disputes.” A day later, the CFPB announced it was opening a probe. The companies the CFPB is targeting all said they welcome the scrutiny. “We believe proportionate regulation is a good thing and set the standard by providing consumers with an interest-free, fair, and sustainable alternative to credit cards,” Klarna said in an email. “Through this process, we believe those benefits will be made abundantly clear and will continue our work with regulators to inform them about

less than $50,000 a year said that they are interested in using the service because they would not have been able to afford their purchases otherwise, the SurveyMonkey poll found. Despite the benefits of BNPL, 16 percent of consumers reported having buyer’s remorse — especially younger adults. Those who ended up regretting their purchase cited several reasons, including that they purchased things that were ultimately unnecessary or were too expensive, according to SurveyMonkey. “Whereas the old-style layaway installment loans were typically used for the occasional big purchase, people can quickly become regular users of BNPL for everyday discretionary buying, especially if they download the easy-to-use apps or install the web browser plugins,” the CFPB said in a release about its inquiry. Six U.S. senators, including Elizabeth Warren (D-Mass.), the architect of the CFPB, called for strengthening oversight of BNPL products and providers. “While the emergence of BNPL

The CFPB has asked Affirm, Afterpay, Klarna, PayPal and Zip to collect information on the risks and benefits of the BNPL offerings. Among other issues, the CFPB is concerned about the level of debt consumers are racking up and what data is being collected. “Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists, where the consumer gets the product immediately but gets the debt immediately, too,” said CFPB Director Rohit Chopra. BNPL credit deals allow consumers to split the payments for the purchases, typically into four interest-free installments. Fees may kick in only if payments are made late. The BNPL credit products are popular among younger adults and lower-income consumers, and usage of the payment plans has spiked during the pandemic. Twenty percent of Americans said they had used a BNPL payment plan in the previous 12 months, according to a poll over the summer by SurveyMonkey. More than half of those making

some regrets when you realize you spent too much because you could spread the payments out. The ease of the payment plans might be leading to more impulse purchases — not just during the holidays but all year — and that is making the Consumer Financial Protection Bureau uneasy. Stifled under the Trump administration, the CFPB is resuming its dogged pursuit of companies offering credit products that could adversely affect consumers. The agency was created under President Barack Obama to increase the oversight of consumer financial products. Its top leadership moved away from that mission during President Donald Trump’s time in office, instead choosing to coddle financial companies and give in to their complaints of too much governance. But the watchdog agency, now under President Biden’s control, has signaled it’s not to be trifled with. To that end, the CFPB recently ordered five companies offering “buy now, pay later” credit to answer some questions about their business practices.

My grandmother
Big Mama used
layaway to
purchase our
Christmas
presents.
Big Mama
hated using a
credit card or
being indebted to
anyone, so she
used layaway to
buy gifts for the five
grandchildren she was raising.
Every payday, she would make a
payment on the items held at the
store until she could get
everything off layaway. It was the
one time of year she splurged.
The layaway strategy, which
had been largely retired, is
having a resurgence with
modern-day features. The
current “buy now, pay later”
(BNPL) transactions are done
over apps rather than at a store’s
customer service counter. And
you get the product now, rather
than having to wait to pay it off.
Want that party dress for a
New Year’s Eve event? No
problem. Wear it now, pay for it
later. Except you might have

It’s back! Watchdog sends a message as it eyes ‘pay later’ offers.

Michelle
Singletary

THE COLOR
OF MONEY