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Thursday, November 12th, 2009

Federal Reserve Sets Limits for Debit Card Fees

Debit card users will have to opt-in to overdraft fees for ATM withdrawals and one-time purchases, according to a new set of ruled unveiled by the Federal Reserve Board.

The measures, which will take effect July 1, 2010, are part of a series of decision issued by the nation's central bank to limit abusive practices by banks announced over the past year.

Authorizing Fees

Under the new rules, all debit card holders must be given notice of the bank's policies, including those on overdraft fees, in plain language. Cardholders can sign up to be charged fees or not, and banks cannot change the terms of service afterward.

Banks will still be allowed to charge overdraft fees for recurring debt card purchases, such as recurring utility bills that are automatically charged, as well as on bounced checks.

The measure is mainly aimed at one-time debit card purchases or ATM withdrawals that can often result in fees greater than the purchase amount.

Protecting Consumers

"The final overdraft rules represent an important step forward in consumer protection," said Federal Reserve Chairman Ben S. Bernanke in a press release. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."

Declining Transactions?

Of course, those who overdraw their bank accounts won't be given free money by their banks.

Overdraft protection allows banking customers to make payments even when their funds are limited, and are charged a fee for the convenience.

Those who opt-out of overdraft protection may instead see their transactions declined if they attempt debit card purchases when their accounts are low. However, any overdraft transactions approved by the bank cannot result in fees.

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Posted in Bankruptcy and Predatory Lending, Financial Literacy | 5 Comments »

Saturday, October 17th, 2009

More Seniors Struggling with Debt

A recent Newsweek article highlights the problem of older Americans struggling with debt. It seems that those aged 55 and older have become the group most likely to file for bankruptcy.

Retirement and Debt

The reasons for senior citizens' financial struggles may not be immediately obvious, but they are telling. Consider these factors that can sap a nest egg:

  • Credit card debt. This comes as no surprise – many Americans are strapped with serious credit card debt. This is part of the reason why the Credit CARD Act of 2009 was passed.
  • Large mortgages & home equity loans. Those who refinanced their mortgages during the real estate boom – whether to redecorate, fund children’s education, or pay down other debts – may find themselves faced with massive mortgage payments. In some cases, seniors may owe more on a house than it’s worth.
  • Cash-strapped kids. Like it or not, you may be contributing to your parents’ financial woes. In many cases, parents try to help their children financially even when they can’t afford to do so. Or they may be too embarrassed to refuse a child’s request for aid.
  • An end to income. Once you stop working, the paychecks stop flowing in. This isn’t problematic if you’ve got enough money socked away for your golden years, but since the stock market’s crash, many nest eggs aren’t quite as hefty as they once were. And paying down debt without regular paychecks can be difficult.
  • Predatory lending products. Unfortunately, nobody is immune to financial disasters like payday loans. People on fixed incomes (like many senior citizens) can find such loans especially damaging, since sky-high interest rates make them difficult to repay.

Getting Help for Yourself or a Loved One

The good news is that helpful agencies are available to provide credit counseling or debt management to those in need.

The bad news is that many con artists are also out there, ready to take money from whomever they can.

Check out various credit counseling services in your area (The Association of Independent Consumer Credit Counseling Agencies has a searchable database of accredited firms) and visit the Better Business Bureau’s website to check out any operation you discover.

If you think an older person in your life may need debt assistance but not have access to online resources, consider offering your skills to that person.

Additional Resources

The Plastic Safety Net (PDF)

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Posted in Bankruptcy and Predatory Lending | 2 Comments »

Tuesday, September 15th, 2009

FTC’s Ban on Robocalls in Effect

The FTC reported last week that its rule prohibiting automated phone calls about vehicle maintenance took effect September 1, 2009. What does that mean for you? Hopefully, one more way to prevent scammers from tricking you into giving away your money.

The Scam: Threats of Ending Car Warranty

According to the FTC, the scam worked like this:

  • Customers received pre-recorded phone calls suggesting that their vehicles’ warranties were about to expire.
  • Scammers then prompted victims to pay for pricey and unnecessary car service contracts unrelated to their original warranties.

Thanks to legal action taken by the Federal Trade Commission, such telephone calls are no longer legal, and the companies accused of setting them up could face criminal penalties.

Who’s Involved and the Penalties They’ll Face

The chief company named by the FTC is Transcontinental Warranty, Inc. It and its parent company have reportedly been banned from making any more prerecorded calls. The first of September was significant to this case because it marked the beginning of the FTC’s planned enforcement of the ban on prerecorded commercial calls enacted a year ago.

Some organizations are exempted from the prerecorded call ban, though. These include:

  • Groups delivering strictly informational messages
  • Politicians
  • Banks
  • Telephone Carriers
  • Most charitable organizations

Debtors should know that debt collection agencies fall under the "informational" group, and will still be allowed make make automated calls. Debtors may only be able to end these calls by making arrangements to repay the debt or by filing bankruptcy.

Groups that choose to ignore the restriction could face fines up to $16,000 per call.  Telemarketers may be able to place automated calls to customers who opt-in to receive them.

It seems that Transcontinental has temporarily been excused from paying the proposed settlement ($24 million) because the company lacks sufficient funds to make payments, but that information is subject to change.

Your Consumer Rights

The Federal Trade Commission and other government entities exist to protect you the consumer from deceptive and unfair business practices. If you suspect you have been victimized by an illegal scam, consider telling a lawyer or filing a complaint online with the FTC.

To learn more about what types of protection you can expect, check out this page on your consumer rights.

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Saturday, August 8th, 2009

Watch out for the Door-to-Door Magazine Scam

The Better Business Bureau has recently warned about a door-to-door magazine sales scam affecting many areas of the country.

What You’ll See

The report indicates that the scam includes these elements:

  • High-school and college-age individuals traveling around neighborhoods offering subscriptions to various magazines.
  • High pressure or misleading sales pitches, which may include the assertion that the seller is trying to raise money for a school trip, a charity or for troops in Iraq.
  • Failure to deliver any magazines after the transaction is completed.

The BBB has reportedly received 1,100 complaints about such scams and has identified the companies Trinity Public Relations, Seedtime and Prestige Sales, LLC as involved with similar scams.

What to Do

If a door-to-door magazine salesperson entices you to purchase a subscription, act with caution.

Luckily, the BBB has several consumer protections in place to make sure you aren’t bilked out of hundreds of dollars:

  • Before writing a check or completing a magazine subscription form, you can check out the business in question for free at the BBB's Web site.
  • Thanks to the Fair Trade Commission’s three-day cooling-off rule, you can cancel purchases over $25 that you made at your home or a place other than the seller’s permanent business location within three days. Your receipt should come with a cancellation form, which you can fill out and return to the vendor. You should get a refund within 10 days of the company’s receipt of your cancellation notice.
  • If you think you’ve been victimized and you’re past the cooling-off period, consider filling out a complaint at the BBB’s Web site, which could prompt an investigation.
  • Know that some door-to-door companies already have “F” grades from the BBB. These include Omni Horizons Inc., Greater Image, Inc., True Visions Inc. and Fresh Start Opportunities.

And don’t think that your complaint won’t matter – the BBB takes such matters seriously.

It has found, too, that besides engaging in deceptive selling practices, some of the companies were mistreating their student workers by withholding wages, forcing them to work long hours and causing substandard living conditions.

--Has a scam resulted in you going broke? Consider the bankruptcy option.

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Wednesday, July 29th, 2009

How to Not Get Bamboozled by Banks

Even though lenders are no longer throwing themselves at consumers and credit is a bit tighter than it was a couple years ago, I think it’s worthwhile to refresh everyone’s memory on warning signs of predatory lending.

Here's what to look out for when you're heading to purchase big-ticket items like cars, appliances and houses:

Warning #1:     Excessive Fees

Excessive fees can be disguised in a variety of ways, depending on what type of loan you’re seeking:

  • Credit cards: Account activation fees, membership fees, service charges, limit-extending fees, yearly fees – if your bill or credit card agreement is littered with similar costs, beware. This is a classic sign of predatory lending. In some cases, the fees charged greatly outstrip the cost of a given service.
  • Home loans: While some points and fees are standard procedure for home loans, exceeding the norm in such charges is considered predatory. To determine whether your lender is charging excessive fees, research typical fees in your area and take a look at your credit report or score (www.annualcreditreport.com).

Warning #2:     Prepayment Penalties

These are most common with mortgages, particularly subprime mortgages .

Generally, if you’re charged a penalty of some kind for repaying part of your loan before its due date, the loan is usually considered to be predatory.

Such penalties prevent you (the borrower) from saving money by minimizing the amount of interest you pay over the life of your loan.

Warning #3:     Out-of-Control Interest Rates

In general, your credit score will determine the kind of interest rates you can expect to pay – higher scores yield lower interest rates. But even for those with weak credit, some interest rates are unacceptably high.

  • Credit cards: Rates for cards vary widely, but many fall within the 15 – 22 percent range. If you’re paying much more than this, especially because of universal default or unannounced changes to your terms, you may need to contact your creditor.
  • Payday loans: These short-term, high-interest loans are infamous for having excessive interest rates. Yearly costs can be as much as 400%, which is why many states have introduced or passed legislation restricting them.
  • Credit card cash advances: These typically have wild interest rates – and are often mailed with your bill to look like personal checks. Avoid them if at all possible.

Warning #4:     Large Print and Very Small Print

Be wary of exciting “bargains” advertised in big print.

They’re usually followed by disclaimers, exceptions, costs, fees and more.

This may not be the most aggressive predatory lending technique, but it can trick those who aren’t paying careful enough attention.

Luckily, part of the Credit Cardholders’ Bill of Rights includes regulations for font size in credit card agreements.

--Have you already been "bamboozled by banks"? Learn about filing bankruptcy

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Wednesday, July 22nd, 2009

Ben Stein and Not-So-Free Credit Scores

The blogosphere has been all over Ben Stein, a financial guru, spokesperson and New York Times columnist, over his involvement with what appears to be a slightly shady "credit-score" site, FreeScore.com.

In advertisements, Stein shills for the group which claim to offer you a free credit score. As several blogs point out:

  1. Your credit score doesn't tell the full story. While your credit score is important, you'll need more information if you want to take action to improve. In order to see what's bringing your credit score down, you'll need to see your credit report, which includes any claims against you.
  2. FreeScore.com isn't actually free. After giving you a "score" for free, they begin charging you monthly fees.

While some people may want to check their credit score monthly, in most cases you don't need this kind of scrutiny. In fact, simply requesting your credit score or credit report can affect your credit score.

You are entitled to a free annual credit report from the government. And the government makes one available at exactly one - and only one! - Web site: Annualcreditreport.com.

Don't be fooled by similar or imitator sites.

If you're in debt and trying to get out, you may become a target of predatory merchants. These groups are looking to make a quick buck off your troubles.

Avoid this by informing yourself, reading the fine print and sticking to reputable, trustworthy sites and sources.

Trying to repair your credit but can't keep up with the bills? Consider filing bankruptcy.

Filing bankruptcy doesn't have to ruin your credit for life. Learn more: Credit After Bankruptcy.

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Monday, June 15th, 2009

Consumer Credit Fairness Act = Hope for Low-Interest Loans?

As too many Americans know, loans with monstrous interest rates can lead to what seems like endless rounds of debt and bills.

And, in some cases, excessive interest rates can push struggling consumers to filing bankruptcy.

The “Consumer Credit Fairness Act,” a bill now before the Senate Judiciary Committee, would give consumers a little help for dealing with such costly loans.

Proposed Terms of the Consumer Credit Fairness Act

As it now stands, the proposed legislation would do two major things for Americans:

  • Limit creditors’ collection rights in bankruptcy: Lenders whose loans came with excessive interest rates (defined by the bill as 15 percent higher than the current yield on a 30-year U.S. Treasury bond) would come last on the list of creditors to be repaid in bankruptcy court.
  • Improve consumers’ chances of bargaining for lower rates: Because of the above change, consumers would likely be able to negotiate lower interest rates with their creditors instead of filing for bankruptcy.

How the Consumer Credit Fairness Act Could Help You

Imagine this scenario: you’ve got one or more loans with interest rates that are through the roof (credit cards, car loan, payday loan, overdraft loan, etc.).

Unless you can get your creditors to lower their interest rates, there’s no way you’ll be able to continue making payments and you’ll have to file for bankruptcy. So you call up your creditor:

  • YOU: Hello, I’d like you to lower my interest rates.
  • CREDITOR: Why should I do that? That means I’d collect less moola from you, a struggling consumer.
  • YOU: Well, you see, if you don’t lower my rates, I’ll file bankruptcy. And, thanks to the Consumer Credit Fairness Act, your loans will be the last on my repayment list. So you might not get any money at all.
  • CREDITOR: Hm. That doesn’t sound too good.
  • YOU: Exactly.
  • CREDITOR: All right. How does [insert lower rate here] sound?
  • YOU: Excellent.

While the above dramatization may illustrate a slightly simpler procedure than you’ll actually go through should this bill pass into law, it does show the essentials of how the legislation may likely work.

Opponents Predict Tighter Credit

Some have criticized the bill as being too generous to consumers, suggesting that, should it become law, it would limit creditors’ overall ability to lend money.

But supporters contradict this claim, insisting that the bill would more likely push lenders to rely more universally on types of loans with more reasonable interest rates.

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Monday, March 23rd, 2009

Warning Signs of Predatory Lending

Predatory lending can devastate consumers.

Predatory loans can come in the form of credit card agreements, mortgages, payday loans and even bank loans.

Although there’s no surefire way to make sure a loan you get is safe, but here are some warning signs that your lender is less than trustworthy.

Lack of Transparency: Any time the terms of your loan are unclear, beware. Some loans come with terms so lengthy and dense with legal jargon that the average borrower has no way of understanding them (think of your credit card agreement).

Hidden Interest: Loan-related costs with names like “fee” or “charge” are often just interest in disguise. These can take the form of “overdraft charges” from a bank, “fees” on a payday loan, or “service charges” on a credit card.

Hidden Add-ons: Some unscrupulous lenders will sneak extra services into a loan’s terms (e.g. home appraisal fees with a mortgage) without telling the borrower that such services may be available elsewhere for less money.

Outright Lies: Writing a borrower’s “stated income” and similar tricks amount only to lying on a loan form. The only way to be certain that information in your loan documents is accurate is to fill them out (or double-check them) yourself.

Redlining: Aiming loans at specific groups of people is illegal. Studies have found that subprime loans disproportionately affected women, racial minorities, less educated people and the elderly. Other groups may be targeted for other types of predatory lending.

Exorbitant Interest: Sometimes, lenders conceal how much interest they’re charging by revealing only short-term interest rates (as with credit card offers) or by disguising interest (see above). Payday loans, for example, can come with a yearly interest rate of more than 300 percent!

The Magic of Negotiation

One way to make sure you aren’t victimized by predatory loans is to know as much as you can about them – that way, you can walk away when warning signs pop up. But keep in mind, too, that part of understanding lending is understanding that almost everything is negotiable.

Asserting yourself by trying to get a lower interest rate or a discount of some kind can signal to lenders that you know what you’re doing and will not be taken in by predatory tactics. Just be sure to do some research first so you know a reasonable rate to request.

Learn more about filing bankruptcy and how it may lessen your financial stress.

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Wednesday, March 11th, 2009

Death and Debt Collectors

In today's economy, budgets are tight in many households. While people are losing their homes to foreclosure and their jobs to the financial crisis, life marches forward.

In addition to financial stresses, family obligations and emergencies can't be avoided.

When a Loved One Dies

The loss of a loved one is devastating.

In addition to the emotional and psychological pain, the financial pain can also be great.

If the deceased had no insurance coverage to cover funeral expenses, it’s typically the responsibility of the immediate family to cover the cost.

This can add an extra burden to a family who may already be struggling.

Debt Predators

At least one company is now actively pursuing payment for debts of the deceased, according to The New York Times.

Some grieving family members are receiving collection calls from DCM Services in New York.

DCM Services employs debt collectors to call relatives of deceased debtors and ask if they would agree to settle the deceased’s balances on credit cards, loans or other final bills—even though the family often has no legal obligation to do so.

Unfortunately, many people don’t know that.

DCM uses this to their advantage.

How Debt Predators Find Their Targets

The collection company uses carefully crafted tactics and scripts to convince a large number of people that coughing up cash they don’t owe is the right thing to do.

The collection agency has been so successful in convincing people to pay up, collection efforts on accounts of the deceased are becoming a bigger trend.

How They Do It

The company first checks nationwide probate court databases to find out if the deceased person has an estate open.

If so, the company may file a claim against the estate and attempt to have the debt settled through the probate court.

However, in cases where there’s no estate, calls are made directly to the next of kin with condolences—and an appeal for them to settle the deceased’s debts.

Debt collectors at DCM receive specialized training to prepare them to confront family members with a loved one's burden of debt and teach them to play the morality card when boldly asking for payment.

Many people don’t know that they don’t have any obligation to satisfy the debt but they agree to pay because they believe their loved ones would have wanted them to, or to avoid any suggested legal or credit problems.

The Facts

In general, unless a family member is a co-signer on an account, they’re not legally responsible for the debts of their deceased family member.

In most cases, there’s no risk of a family member being penalized for refusing to pay a debt left behind by the deceased.

But, unfortunately, this fact is artfully omitted during the collection calls, unless the family member asks the debt collector firmly and directly about their legal obligation to pay.

Learn more about how filing for bankruptcy may help stop creditor harassment.

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Posted in Bankruptcy and Predatory Lending, Financial Literacy, Mortgage Foreclosure | 1 Comment »

Wednesday, October 22nd, 2008

Another Huge U.S. Bank Making More “Mistakes”

After AIG was bailed out by taxpayers and subsequently had a $440,000 AIG spa retreat, Americans were mad.

I’m sure many of us could have used a shoulder rub and spa treatments too after our taxpayer dollars were ripped out from under us.

As we’re recovering from that wave of outrage—we get a bit more outrageous news that we’re supposed to swallow: Countrywide Home Loans Inc. is refusing to follow an Illinois state ruling.

Last week Illinois bank regulators tried to stop Countrywide (which is now owned by Bank of America) from creating new home loans in the state, according to a Chicago Tribune article.

The regulators said they would only allow the company to restructure loans of its existing clients.

Countrywide blatantly said it will continue to be “open for business” and does not intend to follow the state’s ruling.

Haven’t we been hearing that much of the financial crisis is due to unregulated companies acting in their own self-interest?

---Do you need a bailout? Check out this filing bankruptcy information to see if bankruptcy could help you get out of debt.

Will these corporations ever learn that their rebellious actions not only hurt the people of this nation but they also ultimately come around and bite them in the derriere?

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