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Saturday, December 12th, 2009

Personal Finance News Roundup: 12/12/2009

This week, many November numbers about money and credit were released, with some surprising findings. Here’s a summary of a few important figures.

November Consumer Bankruptcy Filings Down 18 Percent

The American Bankruptcy Institute (ABI) reports that personal bankruptcy filings decreased 18 percent last month, compared to October’s numbers. Specifically:

  • Total filings: 112,152 consumers filed for bankruptcy in November 2009, compared with 135,913 in October.
  • Increase from 2008: A year ago, in November 2008, 99,925 consumers filed for bankruptcy. This year’s figure represents a 12 percent jump.
  • Chapter 13 filings: Only 29 percent of consumers who filed for bankruptcy did so under Chapter 13 of the U.S. Bankruptcy code last month, a rate unchanged from October.
  • Yearly estimate: Sources predict that total bankruptcies in 2009 will total more than 1.4 million.
  • Rate of cyber fraud: Of all online sales, 1.2 percent were found to be fraudulent in 2009, the lowest figure recorded in the 11 years CyberSource has been keeping track.
  • Online revenue lost: This year, $3.3 billion was lost to cyber fraud, compared to $4.0 billion last year and $3.7 billion in 2007.
  • Some areas still problematic: Online sales of electronics still have fraud rates approximately double those of other retailers.

Retail Sales Drop Surprise 0.3 Percent in November

However, this figure is not considered comprehensive, and will be reevaluated after the government releases its sales data on December 11th. Still, the initial figure has some retailers worried that this year’s holiday shopping season will mirror last year’s, when many Americans were holding onto their money after the tumult of the stock market’s crash.

The retail figures, quoted in this msnbc.com article, apparently don’t include online sales, sales from electronics chains or sales from Wal-Mart Stores, Inc., three groups the government’s figures will cover.

Report: Online Fraud Down Overall

In a survey out this month on online scams, the security company CyberSource reports that web fraud has decreased by about 18 percent in the United States in Canada since 2008. Here’s a closer look at the findings:

  • Rate of cyber fraud: Of all online sales, 1.2 percent were found to be fraudulent in 2009, the lowest figure recorded in the 11 years CyberSource has been keeping track.
  • Online revenue lost: This year, $3.3 billion was lost to cyber fraud, compared to $4.0 billion last year and $3.7 billion in 2007.
  • Some areas still problematic: Online sales of electronics still have fraud rates approximately double those of other retailers.

The dip in fraud doesn’t mean you should be any less vigilant when shopping online, though. Be sure to guard your credit card numbers carefully and only shop on secure web sites!

Additional Resources

2009 Online Fraud Report (PDF)

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Posted in Bankruptcy and the Economy | 53 Comments »

Friday, December 11th, 2009

Federal Reserve Proposes New Limits on Store Credit Cards

According to the Wall Street Journal, the Federal Reserve has proposed new regulations that would restrict retailers' ability to issue store-specific credit cards. Many major retailers, it seems, are not happy about the prospect.

Prove You Can Pay

The new proposal, if adopted, would require store-card applicants to prove their ability to pay their bills when they apply for their cards. Many commentators believe this would amount to presenting a pay stub before being able to fill out a form.

  • Based on the Credit CARD Act: One provision of the Credit CARD Act of 2009, set to take full effect in February 2010, requires lenders to verify that borrowers are capable of repaying loans before lending money. The proof of income requirement for in-store cards is, apparently, an application of this provision.
  • Displeasure from retailers: Perhaps unsurprisingly, retailers are less than thrilled about the potential for this rule to change the way they operate. Many retailers currently offer tempting incentives to shoppers to open store cards, including one-time discounts and rewards programs.
  • Support form consumer advocates: On the other side of the coin, though, those concerned primarily with consumer rights have hailed the proposed measure as an important move toward limiting too-easy credit.

How Well Do We Pay?

So how likely are Americans to default on their store-specific cards? Sources indicate that store-branded (also called private-label) cards tend to be higher than general purpose plastic.

This makes sense: if you’re struggling financially and only able to make payments on some of your cards, it’s smarter to stay current on cards that can be used at a variety of locations rather than on one that’s only good at a single retailer.

But, it seems, even this less-than-stellar track record doesn’t make retailers eager for a change. Here’s why:

  • Sales volume: WSJ reports that Macy’s, one major retailer that issues a store card, saw more than half of all its sales bought on store cards in Q3 of this year.
  • Salary is a private matter, and few Americans are likely to be comfortable with handing evidence of their income to a stranger behind a register, no matter how much they make.

The Federal Reserve has not yet announced when this proposed rule will be completed.

Additional Resources

Credit CARD Act of 2009 (PDF)

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Posted in Bankruptcy and the Economy | 3 Comments »

Friday, August 28th, 2009

Recession Changing the Face of Retail?

After decades of continuous consumption and expanding credit, Americans are now learning a new way to shop.

And many retailers are suffering because of it.

Well, Maybe Not…

According to an article from the Associated Press, U.S. retailers have seen a jump in shoppers who decide against purchasing one or more item before they reach the checkout counter.

It’s apparently happening everywhere from the grocery store to upscale clothing outlets, and it’s affecting retail in two major ways:

  • Decreased consumer spending: When we buy less, companies pull in less revenue. And these days, it seems like no company is immune to the belt-tightening undertaken by the American people. But that’s not the only way abandoned purchases hurt retailers.
  • Increased labor costs: When we leave those iced oatmeal cookies in the dairy aisle, realizing we need milk but only want the sweets, someone has to put them back with the desserts. And, sources indicate, retailers have seen higher labor costs because of all the restocking such behavior requires.

Tightened Credit Means the Revival of Layaway

It’s no wonder that we’ve become more cautious about lugging a lot of stuff to the checkout counter: nowadays, many credit card issuers will deny over-limit purchases rather than allow them to go through and charge a fee.

And, because of the shrunken credit market, many retailers are reporting an upswing in layaway, which allows consumers to make gradual, interest-free payments and pick up items when they’re paid in full.

  • K-Mart shoppers have reportedly taken to buying even low-cost items on layaway, including pencils, notebooks and other back-to-school supplies.
  • Sears Holdings apparently re-introduced its layaway program, which had been defunct for twenty years. Sources indicate that the company will also bring back its Christmas Club savings accounts for shoppers interested in saving money for gifts.
  • Google Insights for Search reports that the search term “layaway” was twice as popular among U.S. users this August than a year ago.

Have you scaled down your spending, but you still can't make ends meet? It may be time to consider filing bankruptcy.

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Posted in Bankruptcy and the Economy | 5 Comments »