Financial Keys to 2010

With credit scores, student loans, mortgages, credit card debt, car loans, bank accounts, retirement funds and everything else you have to worry about to keep up with your finances, it’s no wonder if you feel overwhelmed from time to time.

Luckily, the General Services Administration’s Office of Citizen Services publishes a Consumer Handbook for American citizens every year – and, as a taxpaying consumer in the U.S., the book is absolutely free to you. Order your copy at http://www.consumeraction.gov/.

Financial Help at Your Fingertips

If you don't have the time to sort through everything in the 172-page book, here’s a brief look at what this year’s handbook offers:

• Sample complaint letter: The one-page template can serve as a guide when you feel moved to lodge a complaint against those you suspect of unfair or fraudulent practices.
• Corporate consumer office contact information: This section details how to get in touch with organizations and outfits designed specifically to help with whatever concerns or problems you have.
• Car manufacturers and resolution programs: Car questions? This section lists the digits for every manufacturer included in the handbook.
• State government resources: When you need information about local laws or other pertinent information specific to your state or region, this section is the place to turn: it has contact details for non-national government entities.
• Banking: Need help figuring out your account, opening a new account or adapting your saving strategy? Take a look at this section, where you’ll find information for State Banking Authorities.
• Insurance: Unsure where to turn for coverage? Unsure whether you need more insurance? Check out this section, which will give you contact options for State Insurance Regulators.
• Securities: Contact information for State Securities Administrators is offered here.
• Utilities: Need to know more about your utility bills and options for getting power and water in your home? This section lists State Utility Commissions and how to contact them. If you need utility bill debt relief, while this section may help, you may also want to consider bankruptcy.
• Federal agencies: Maybe you’re not sure whether there’s a government entity that can help with what ails you. Check out this section for listings.
• Better Business Bureaus: This section lists the BBBs you may need to contact with consumer complaints or concerns.
• Consumer organizations: Turn here to find out which groups are working to help you – and contact them to see how you can offer assistance.
• Trade Associations: This section offers listings for Trade and Professional Associations mentioned in the handbook.

Posted in Financial Literacy, government help | Comments Off

LifeLock Fined for Inappropriate Identity Theft Protection Claims

A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.

Posted in FTC, Financial Literacy, Identity Theft, lifelock | Comments Off

Credit Cards 101: Visa

If you're a Visa cardholder, you probably received a packet of updated policies and terms of use for your card, related to the new credit card laws. However, even if you did read all the fine print, you still may be curious of the intricacies of how your Visa card works.

An interesting post from FiveCentNickel.com offers a look at Visa’s rules that merchants must follow if they accept Visa cards. Here’s a summary.

• What to take: Vendors can choose whether to accept credit and business cards, debit cards and gift cards, or both.
• No price limits: If a merchant accepts Visa cards, it is required to accept the cards for any transaction, regardless of its dollar amount. However, many merchants ignore this policy and set a minimum purchase amount to encourage spending. If you’re irritated by a specific vendor’s policy, consider speaking to a manager.
• Near equality: Items bought with Visa cards cannot be subjected to any special charge, but vendors can offer customers discounts for paying with cash (you may notice this especially at gas stations).
• Convenience fees: Online and over-the-phone transactions may be subject to extra charges, so long as they’re disclosed and not applied to any in-person transactions.
• No cash tax: Sellers cannot collect taxes from Visa transactions in cash.
• Tip not included: When you pay with a Visa card and intend to add a tip, vendors can only authorize your account for the amount of the service minus tip.
• No cash returns: If you buy something with a Visa card, sellers cannot give you cash should you return it.
• Time crunch: Merchants have to report Visa sales receipts within five days of purchase.
• Privacy limits: Receipts for Visa transactions should only show the final four digits of your card number and should not show your card’s expiration date. Further, sellers have to keep all account number information private.
• Policy disclosure: Vendors must explain (or make available) return and exchange policies before a customer makes a purchase.
• Signature required: Unsigned cards are considered invalid. If a cashier encounters one, she is supposed to make the customer sign the card and compare the signature to one on an ID card. Writing “ask for ID card” in lieu of a signature is considered an invalid substitute.
• ID optional: Merchants may ask for a photo ID, but cannot require buyers to have one in order to complete a transaction.

It’s always a good idea to make sure you know the rules of your debit or credit card, so if you don’t have a Visa, check out your cardholder’s website!

Additional Resources

Just the Facts about Credit Cards (PDF)

A Consumer’s Guide to Credit Cards (PDF)

Posted in Credit Cards, Financial Literacy, credit card fees, visa | Comments Off

Sen. Jim Bunning Holds Up Unemployment Benefits Extension

Unemployment benefits for 400,000 Americans are set to run out in the next week, and a bill that could extend them is being held up by a lone Senator.

Sen. Jim Bunning, a Republican from Kentucky and former Major League Baseball pitcher, has objected to extending jobless benefits, which are attached to a larger spending bill that was past unanimously by the House last week.

The New York Times reports that 4,300 of Bunning's own constituents will exhaust their unemployment benefits in the next week, and that number will surely continue to rise over the coming weeks and months.

In New York, about 54,300 jobless workers are set to see their benefits run out next week, the most of any state, according to the Labor Department. Florida and Georgia follow, with approximately 49,600 and 41,000 workers losing benefits after March 13, respectively.

Bunning, who is not seeking reelection this year, has received praise from fellow Senate Republicans for taking his controversial stance.

The $10 billion bill up before the Senate would use stimulus money to extend unemployment insurance for jobless workers, and resume work for 2,000 Department of Transportation workers on highway construction projects.

About The Bankruptcy Blog

The Bankruptcy blog provides news and information on the economy, financial trends and bankruptcy information.

Posted in Financial Literacy, bunning bill, jim bunning, unemployment benefits | Comments Off

Consumer Protection Alert: Scammers Using BBB Name

The Better Business Bureau (BBB) is a private company that works to promote honesty in the marketplace so that both buyers and sellers can conduct business in a trusting environment. The various branches of the BBB assess businesses on their dependability and warn consumers about scams.

Unfortunately, according to msnbc.com, a new scam cropping up has been using the BBB’s logo to swindle people out of money. Here’s what you need to know to protect yourself and your money.

• It starts with an email or phone call. Like many similar scams, the one using the BBB’s logo reportedly involves a scammer contacting you and indicating that you’ve won a lottery or contest.
• It pays attention to detail. Some victims have noted that scammers used names of real BBB employees and even included in their emails links to bios on real BBB websites.
• A check will arrive. When it does, the scammers will ask that you deposit it and wire them a certain amount of money to cover taxes or fees or some other imaginary cost associated with the imaginary contest.

If you deposit the check, it may clear, but that doesn’t mean the scam is legitimate. If you wire away money, consider it gone forever—this is a classic maneuver some scammers make.

Protect Yourself: Know the Facts

While this scam can be devastating for those who lose money, it’s entirely avoidable. The following are classic warning signs that what you’re being offered is a scam:

• Unknown contest: If you’ve been told you’ve won something you don’t remember entering, ignore it. Hang up the phone, delete the email and walk away. Consider filing a complaint with the FTC.
• Money wires: Any time you have to pay to collect your winnings, know that something is up. Federal law prohibits charging to join sweepstakes and any legitimate organization would take out taxes and fees before sending you a check – how do they know you’d send the money back?
• High emotions: Many scammers rely on drumming up excitement or fear in their victims because when we’re in elevated emotional states, even the savviest among us can make poor financial decisions.

Be on the lookout for any of these signs or anything else that strikes you as off. Sources indicate that some scammers have gotten very sophisticated and use realistic-looking seals, watermarks and color printing, but remember: legitimate offers will still be good after you review them with a trustworthy source.

Be sure to check out businesses on the BBB web site. Legitimate businesses will also let you know their BBB rating. Total Bankruptcy has a BBB A+ rating, its highest rating.

Posted in BBB scam, Better Business Bureau, Financial Literacy, scams | Comments Off

Medical Bills: Beware of Discount Health Coverage Scams

As healthcare costs continue to skyrocket in comparison to household earnings, many Americans are looking for ways to save on medical bills. However, not every deal is worth pursuing, and the Coalition Against Insurance Fraud reports some healthcare scams currently plaguing the nation.

Background

Because health insurance in the U.S. is most commonly linked to jobs, a high rate of unemployment means higher numbers of people are going without health coverage. And, thanks to lowered income for many households, affording healthcare can be a huge stumbling block.

According to sources, some companies are apparently taking advantage of vulnerable Americans by offering discount health products, which may not be a very good bargain.

Discount Plans vs. Health Insurance

Health insurance, as many people know, works like this: you pay a certain amount of money each month (called a premium) and when you need access to medical care, you only pay a portion of the price (called a deductible) because you’ve insured yourself against doing so.

Discount plans, on the other hand, offer discounts on the normal full price of medical services. They are usually restricted to specific caregivers and specific medical facilities. After receiving consumer complaints about some discount plans, investigators reportedly found that discount plans tended to:

• Overstate benefits: Advertisements for some plans misled consumers with claims about potential savings. For example, a plan might advertise itself as offering savings up to 60 percent, but provide a 60 percent discount on only one service.
• Offer insufficient savings: Those with chronic health problems or who make frequent doctor’s visits may see little or no financial benefits from these plans.
• Provide incorrect information: Some plans apparently guaranteed access to medical professionals who were no longer affiliated with the plan.

Making the Decision

If you don’t have access to or cannot afford health insurance, you may benefit from signing up for a discount plan – the important thing to do is research the plan before committing to it.

These precautionary steps to anyone considering such a plan:

• Read everything. Look at the forms you’d be required to fill out and scrutinize the fine print. Make sure you know exactly what the plan includes – and leaves out.
• Don’t jump the gun. Before opting out of another insurance plan, make sure the new plan you’re looking into will offer the kind of protection you need.
• Make some calls. Ask for the list of physicians that you’d have access to and call to make sure they’re still participating.

Remember: commercials tell you only what they want you to know so do a little digging before choosing any new medical product.

Additional Resources

Medical Bills and Bankruptcy

Posted in Financial Literacy, health insurance, medical bankruptcy, medical debt, medical scams | Comments Off

Online Scams on Reputable Web Sites?

If you're committed to managing your finances, you likely know how to spot questionable offers. However, simply shopping at trustworthy web sites may not stop you from seeing surprise charges.

A recent press release from the office of New York Attorney General Andrew Cuomo details an online scam that seems to be shockingly widespread among big name, well respected online retailers.

According to the press release, Cuomo has subpoenaed 22 companies for information about their relationship with companies executing the scam. Here’s the deal.

The Scam: Sharing Your Card Info

The online scam reportedly works like this:

• You make an online purchase. You buy something at one of your favorite web sites. As part of the transaction, you enter the number of either a debit or credit card.
• You proceed to checkout. Once you’ve completed your purchase, you’re offered a promotional or discount deal for future purchases.
• You follow a link. In order to redeem the offered "deal," you must navigate away from the web site of the company with whom you just did business.
• Things get murky. Once you’ve clicked a link that takes you away from the initial shopping site, you don't have to enter any more information. You may only have to click an "accept" button, or do nothing at all.
• Your bill has unexpected charges. Next time you receive your bill or statement, you may notice charges on it that you don’t recognize.

What has apparently happened during the "murky" stage is this: trusted retailers sell your card information to third party sites, which offer you a membership or subscription to something you probably don’t want.

Because you never have to re-enter your credit card details, you likely will not realize you ever signed up for anything. And the details about the terms and costs of the service or product are likely hidden in fine print on the third party website.

What's Being Done

Luckily, Cuomo’s office has taken steps to address these practices (though, according to sources, no law currently exists that prevents retailers from selling your card information to others).

The New York AG’s office reports that the following companies have been contacted for information related to this scam (though they have not been charged with anything): Barnes & Noble, Orbitz.com, Buy.com, Ticketmaster.com, MovieTickets.com, FTD.com, Shutterfly.com, 1-800Flowers.com, Avon.com, Budget, Staples.com, Priceline.com and more (see site).

Bottom line: Proceed with caution when shopping online. When in doubt, don’t click on any link, especially those offered at checkout. And if you suspect foul play, file a complaint with the FTC.

Additional Resources

Online Identity Theft: Changing the Game (PDF)

Types of Scams (PDF)

Posted in Financial Literacy, credit card fraud, ecommerce, online scams | Comments Off

Protecting Your Best Financial Interests

Part of becoming truly financially responsible and independent involves accepting responsibility for your financial situation. Not only do you have the power to improve your finances, you’re the only person who can (and will) consistently watch out for your rights as a consumer.

This point was driven home once again in this post from CreditBloggers.com, in which the author examines one aspect of banking that people probably don’t realize can cost them serious money.

Understanding Overages

Here's a look at how you could end up losing a couple thousand dollars in a few minutes (without even realizing it):

• You go into your bank to apply for a mortgage loan. A loan officer presents some numbers to you and offers you a loan, which comes with an interest rate that is determined largely by your credit score.
• If you’re lucky, you were offered the lowest interest rate that your credit status qualified you for.
• If you’re unlucky (as many thousands of Americans are), you were offered an interest rate with an "overage"—an interest rate slightly higher than the best rate your credit score allowed.

Why would lenders even offer such loans? Because it can be profitable for them:

• A higher interest rate equals a more profitable loan (because you, the borrower, pay more in interest).
• A more profitable loan is more attractive to investors (because they can collect more money on it).
• The bank gets a higher price for the loan, some of which goes to the loan officer as a reward.

According to the post, issuing loans with overages is fairly common, even at some large, well-established banks, which is why you must act as your own advocate when investigating significant purchases.

Protecting Yourself and Your Money

If you aren’t already monitoring your credit report, consider doing so. At the web site annualcreditreport.com, you can view a free copy of your credit report from each of the Big Three reporting bureaus once per year.

And, if you’re getting ready to apply for a mortgage, you may want to pay to view your actual credit score (visit MyFico.com). To determine what mortgage rate you’re likely to get, do some online research or speak with a financial guru you know before hitting the banks.

Additional Resources

Choosing the Mortgage that’s Right for You (PDF)

Posted in Financial Literacy, Interest Rates, Loans, Mortgage | Comments Off

What Could You Cut in a Pinch?

With unemployment levels still high, many people are looking for ways to trim their household budgets. Dealing with a sudden loss of income can be difficult, especially if you're used to a certain lifestyle. Whether you're dealing with unemployment, recovering from filing bankruptcy or just trying to create a nest egg, where you spend your money can make a big difference.

A recent post from DarwinsFinance.com encourages readers to explore the financial cutbacks they could make if they were laid off. The author crunched numbers and found that his household could save about a thousand dollars per month.

This concept is useful for a couple of reasons. First, it gives you an idea of what kind of emergency fund you ought to have, and second, it opens the door to potential ways to start saving that money more quickly. Here’s a look at some areas where you might be able to save.

• Television: If you currently get a lot of channels, you could drop to a package with fewer frills. If you already have a fairly minimal setup, you could call your company and indicate that you're considering canceling your television service altogether unless they can offer a lower rate.
• Internet and phone: Downshifting to a slower online connection may work if you don't use the Internet much, and there's a good chance you could trim your cell phone package. And remember: negotiating with your provider (or trying to) is always an option.
• Subscriptions: Whether you receive newspapers, magazines or a cheese of the month, chances are your subscription isn't a bare essential. The good news is that if your subscriptions are mostly for reading material, you can likely find much of the content online.
• "Cheap" out food: Cups of coffee, breakfast sandwiches or lunches out may seem inexpensive (especially compared with restaurant dinners), but when purchased regularly, they add up. Packing lunch and brewing coffee are both easy to do—although, if you do lose your job, you'll probably be less likely to be tempted by on-the-go food, since you won't be at work.
• Clubs and activities: If you have children in extracurricular activities or you yourself have an expensive gym membership (or similar), you could always cut them in a pinch.
• Groceries: If you haven't already explored the glorious world of generic food, now is a great time to start. Many store-brand grocery items are actually produced at the same factories as the name brands—and come at a significant discount.
• Clothing: Dry cleaning can eat up serious funds, and so can shopping too often. And if you have difficulty resisting sales (or non-sales), consider avoiding your favorite shopping spots a bit more often.

Additional Resources

Should Households Establish Emergency Funds? (PDF)

The Decline in the U.S. Personal Savings Rate (PDF)

Posted in Budget, Finance, Financial Literacy, Job Loss | Comments Off

Debtor Collects from Creditor Harassment

Anyone who has ever been hounded by a debt collector has probably fantasized about giving the collector a taste of his or her own medicine. That fantasy may be much easier to realize than most people imagine, as the story of a Dallas debtor shows.

Background: Your Rights as a Consumer

Laws are in place at both the federal and the state level to protect all Americans from overly aggressive debt collection practices. In fact, between the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act, a lot of behaviors typical of debt collectors are prohibited.

In addition to other things, debt collectors cannot:

• Lie about their ability to take legal action to collect on a debt
• Call you repeatedly with intent to annoy or harass
• Call you outside of 8 am and 9 pm local time
• Contact you directly when you have indicated that you have legal representation
• Contact you by any embarrassing media (like postcards)

Unfortunately, many consumers are not aware of their rights and so do not take legal action against collectors who break these laws.

A Man with a Plan

According to the Dallas Observer, a man named Craig Cunningham has taken it upon himself to stand up for his consumer rights.

The Observer reports that Cunningham made some poor investment choices when credit was easy and ended up with more than $100,000 worth of debt. But, when collectors began contacting him and asking him to pay up, he decided to fight back.

Essentially, here’s how Cunningham has managed to make the most out of a bad situation:

• He hired a lawyer to represent him and help him understand the intricacies of the consumer protection laws that were relevant to his case.
• He began recording calls from his creditors and saving all forms of contact he received.
• With the help of his attorney, he filed lawsuits whenever a debt collector violated a national or state consumer protection law.
• He began receiving court settlements from successful cases.

Most collection agencies, it seems, prefer out-of-court settlements (which often involve a statutory fine) to taking a case to trial, since settlements save them money. The Observer notes that Cunningham has thus far earned $20,000 from suits against law-breaking collectors.

If you think your rights have been violated by a debt collector, consider contacting an attorney to determine whether you could take steps to receive compensation for the violations.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, Financial Literacy, consumer rights, debt collectors | Comments Off

The Week in Finance From the FTC

The Federal Trade Commission announced this week two new measures to address lapses in consumer protection for U.S. citizens.

Mortgage Lender Required to Hire Consultant

According to a news release, the FTC has modified a settlement with Gateway Funding Diversified Mortgage Services, L.P., a mortgage lending company earlier cited for improper and discriminatory lending.

Gateway will now have to:

• Hire a third-party consultant approved by the FTC to verify that the company complies with fair lending regulations
• Introduce any remedial changes suggested by the consultant
• Submit to annual assessments and detailed analyses of lending information for five years

The new measures are intended to prevent the sort of mortgage lending abuses, such as reverse redlining and predatory lending, that occurred during the subprime boom and paved the way for the real estate bubble, its burst and bankruptcy filings across the country.

Support for Bill Expanding Consumer Funeral Rights

Following a funeral scandal last summer in which workers in the funeral industry stole money from grieving families and disposed of bodies in unsavory ways, the FTC has announced its support of a house bill (H.R. 3655) that would expand consumer rights in the funeral industry.

The incident reportedly involved four gravediggers in the Chicagoland area pocketing funeral money after performing funerals for families. After the ceremonies, the four allegedly dug up bodies and dumped them wherever they found space.

The bill, if it passes, would do the following:

• Give the FTC the authority to regulate cemeteries across the country
• Expand consumer protections under the FTC’s existing Funeral Rule by expanding its application from funeral homes to crematories and sellers of caskets, urns, monuments and markers
• Require those in the funeral industry to disclose and itemize prices upfront and identify any state laws that require certain purchases or expenses

The funeral industry has historically been one in which strict consumer protection is essential, since people are often forced to make financial decisions in a short amount of time and while under great emotional stress.

Posted in Financial Literacy, consumer alerts, federal trade commission | Comments Off

Obama’s Plans for Your Retirement Savings

In an age of disappearing pensions and rapidly shrinking Social Security funds, individual retirement accounts are more important than ever – but many Americans have no official retirement accounts, connected to their jobs or otherwise. The Associated Press reports that President Obama is launching a plan to change that.

The plan has at its center one serious statistic: almost half of American workers have no retirement savings option through their jobs. That’s frightening, considering that, as a nation, we don’t have a great track record of saving money.

Four Main Points for Retirement Savings

The retirement savings legislation, still in the drafting phase, at this point includes four main parts to improve Americans’ chances of living comfortably after they stop working. The four prongs are:

• Automatic IRAs at work: Employers who do not already offer Individual Retirement Accounts (IRAs) to their workers would be required to do so. All employees would be automatically enrolled in such programs, with a chance to opt out. Studies have shown that participation in retirement savings plans is much higher when it’s automatic. To ease the administrative costs associated with the program, employers would reportedly be offered tax breaks for introducing the IRA plans.
• “Saver’s credit” for contributions: Sources indicate that the Obama Administration wants to include a provision that would incentivize retirement savings for lower-wage workers by introducing tax breaks and potentially including government-sponsored matches for initial contributions. Some critics suggest that this measure will face too many obstacles because of the potentially high cost to the government.
• Lifetime income: One aspect of the retirement measures that has been proposed would introduce investment products into retirement accounts that work on annuities and guarantee income for an investor’s lifetime. This measure would be intended to eliminate the possibility of a person’s money running out before their life, but could face challenges since accounts that offer such returns are often laden with fees. This might even include stronger retirement account protections in bankruptcy.
• Heightened 401 (k) regulations: Lastly, the administration has mentioned introducing more transparency into the regulations governing 401(k) plans, so that investors would be better informed about the fees and costs of their accounts and avoid unnecessary expenses.

Remember: it’s never too early to start saving for your retirement, and with fewer guaranteed income sources for the elderly, it’s more important than ever to plan to support yourself financially after you stop working.

Posted in Financial Literacy, Life After Bankruptcy, retirement savings | Comments Off

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

• Contacting a debtor before 8:00 am or after 9:00 pm local time
• Contacting a debtor after receiving a written request not to do so
• Contacting a debtor at her place of work after being told not to
• Calling the debtor with the intent to annoy, harass or abuse
• Contacting the debtor directly when he is known to have an attorney
• Misrepresenting a debt or using deceit to collect money
• Threatening arrest or legal action when neither is an option
• Seeking more than a person legally owes
• Publishing a person’s name on a “bad debt” list
• Reporting information incorrectly to a credit reporting bureau
• Contacting a third party about a consumer’s debt
• Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, FTC, Financial Literacy, debt collection | Comments Off

Elliss Bankruptcy a Riches to Rags Story

Financial lessons are often best learned in retrospect, which can make it difficult to tell when you're going down the wrong financial path. Luckily, we can always learn from the mistakes of others.

The Detroit News reports that former Detroit Lions lineman Luther Elliss was forced to file for bankruptcy thanks to a series of bad investments and debts.

While the story is frustrating to hear—Elliss reportedly earned more than $11 million in a five-year period—it is surprisingly common. So how do the once fantastically rich manage to end up in bankruptcy court? Often enough, simply by making some bad decisions.

Elliss, it seems, got sucked into the real estate bubble and ended up with two homes worth less than what he owed on them. Last summer, he and his wife reportedly filed for Chapter 7 bankruptcy to receive a discharge from their debts.

Taking the Long View on Your Finances

While most of us will never command the kind of salaries professional athletes can expect, we would do well to look at how quickly a fortune can disappear.

• Nothing is guaranteed. If the current employment situation has taught us anything, it’s that no job is permanent, but many of us act as if our life circumstances are not subject to change. When making major purchases (homes, cars, schools, etc.) remember that a stretch now could easily become a financial impossibility if your salary changes.
• Listen to the right people. In the Tribune article, Elliss notes that he didn’t listen to suggestions from his wife or adviser—and that it cost him in the long run. Unfortunately, nobody is guaranteed to have your best interests at heart except you, so be very wary when people ask for financial commitments and promise unrealistic returns. On the other hand, know who honestly cares about your well-being and take their advice to heart.
• It's a marathon, not a sprint. Remember that you're in this thing called life for the long haul. There will always be great investments around, so make sure you learn all you can about one—and feel totally comfortable committing to it—before sinking in your hard-earned cash. It's true that you can't win if you don't play, but you also cannot lose.

There's an old bit of financial wisdom that summarizes pretty much every other guideline for handling money: spend less than you make and save the rest. It's easy to get drawn into upgrades and status symbols and all the rest, but at the end of the day (or the lucrative career as a professional athlete), financial stability is often worth the sacrifices of getting there.

Posted in Bankruptcy News and Events, Financial Literacy | Comments Off

Research Suggests Ways to Spend Smarter

High unemployment rates and sluggish recovery in the job market mean that many Americans are still budgeting carefully and watching every penny that leaves their wallets. It’s times like these when studies like the one conducted by researchers at San Francisco State University can help us make important spending decisions.

Memories Last Longer than Stuff

The new budget study examined recent purchases made by adults enrolled at SFSU. Here's what the researchers discovered:

• Happiness from things fades. On average, researchers found, the thrill brought about by new objects faded in six weeks to three months. This means that, no matter how much you love that new computer, dress or TV, you will get used to it in a few months and the pleasure it brings you will dwindle.
• Happiness from memories lasts. On the other side of the coin, the pleasure induced by spending money on experiences (like sporting events, plays, hikes, etc.) endures, thanks to our ability to remember and relive these experiences.

So how can you use this information to make the most out of the money you have for leisure? Focus on participating in events rather than accumulating goods. And, suggests the study, recruiting friends and loved ones to join you is a particularly useful way to make sure you enjoy yourself and create enjoyable memories.

Here are some ideas to consider when thinking about an experience (rather than an object) to spend money on:

• Take a class. Many community colleges and organizations offer continuing education departments that offer fun classes like ballroom dancing, cooking, yoga or sculpture.
• See a play. Check local newspapers or schools for events put on by community and school theatre or music groups. Bonus: these are often low-cost outings.
• Plan a picnic. Even in bad weather, you can organize a picnic indoors to shake up the monotony of chilly days. Team up with friends and make everyone responsible for one part of the meal. Or have everyone agree to bring a dish they've never had before.
• Be a tourist at home. Spend a day visiting museums or landmarks close to home that you've never actually explored. See what you can learn about your hometown.
• Get lost. Team up with a friend and try to get lost. Then spend the day driving or walking around areas you’ve never seen before. Take pictures as souvenirs.

Posted in Budget, Financial Literacy, saving money, spending money | Comments Off

Cash for Cutting Greenhouse Gases

CNNMoney.com reports that a new proposal before the Senate could mean big news for how energy is bought and sold in the U.S. – and for how much average consumers pay.

Proposed Money Saving Measures

Currently, Congress has made little headway toward passing legislation that would limit production of greenhouse gases, despite various attempts. The new bill offers an alternative to the now familiar cap-and-trade model that could potentially lower energy costs for average Americans.

If successful, the measure would work like this:

• Permits required: Each month, coal, oil and natural gas companies would be required to buy permits to sell their greenhouse gas-emitting products to Americans.
• Money comes back: Naturally, higher costs for energy distributors would mean higher prices for consumers, but the proposed measure would return 75 percent of the companies’ fees to consumers. The remaining 25 percent would apparently go to development of sustainable energy sources.

Supporters have reportedly claimed that this cap-and-dividend program, as it’s called, would provide a much simpler way for energy providers to meet new emissions standards than the oft-discussed cap-and-trade proposals would.

Opponents, on the other hand, fear that removing Wall Street investors from the equation would dry up a significant source of revenue that could otherwise be invested in explorations of new technologies.

One of the most easily understandable explanations of the differences between cap-and-trade and cap-and-dividend reportedly comes from an analyst of the energy sector, who noted that this proposed bill would essentially shift money around within the U.S. economy, whereas cap-and-trade could potentially inject new capital.

How Your Energy Bill Could Change

Sources indicate that the rebate part of the bill would likely translate to about $1,100 returned to each household annually. Of course, some of that money would be funneled directly into covering higher energy costs.

But, it seems, as much as 80 percent of the U.S. population would either save money from this proposal or see no change in their expenditures. The other 20 percent, according to CNNMoney.com, would be wealthier consumers who use more energy (in the form of multiple residences, frequent air travel, etc.) and essentially pay for that privilege.

While energy costs are a big part of any budget, these changes shouldn't cause anyone to file bankruptcy.

Because the effects of the bill would vary in each state, you may want to contact your local congressional office for details.

Posted in Bankruptcy News and Events, Financial Literacy, Personal Finance, green living | Comments Off

FTC & BBB: Avoid Free Trial Scams

The Federal Trade Commission recently released a statement warning about the potential cost of free trial offers that end up costing consumers significant amounts of money. The warning, made jointly by the FTC, the Better Business Bureau (BBB) and Visa, includes red flags to watch out for and action to take to avoid getting scammed.

The “Negative Option”

Offering free trials is a common technique companies use to introduce consumers to new products and services. Sometimes, though, free trials are offered by scammers bent on collecting money from unsuspecting consumers. Often, the scam works like this:

• Emphasis on free: An online advertisement may offer something free (usually for a trial period), available to you by clicking a link. In most cases, you’ll have to enter a credit card number of some sort.
• Excessive fine print: In the fine print, the offer notes that, once the trial period is over, you will be charged for the product or service unless you cancel it. This is known as the negative option, because you must opt out in order to stop paying.
• Charges to your card: Once the trial period ends, your account will be automatically charged on a regular basis for the product or service. Even if you cancel after a month, you can end up paying significant money for something you never wanted.

Avoiding Free Trial Scams

So how can you make sure you aren’t lured in by an expensive online scam? Here are some tips, as posted on the FTC’s web site.

1. Read everything. If there’s more fine print than you care to sift through, that’s usually a bad sign. Any time you’re giving out personal information, make sure you know exactly what you’re getting yourself into.
2. Note the checks. Some offers trick customers by pre-checking boxes that seem insignificant but actually include continued-payment agreements. Uncheck any boxes that offer something you don’t want.
3. Review your statement. When your credit card bills arrive each month, check for strange or questionable charges.
4. Take action. If you do find any charges that you don’t agree with, call the merchant and ask to have the charge clarified, and, if necessary, removed. If you cannot work anything out with the merchant, contact your card issuer and contest the charge.

If you think you’ve been scammed by a free trial offer, don’t hesitate to file a complaint with the FTC or contact the BBB in your state.

Additional Resources

FTC’s Risk-Based Pricing Notice (PDF)

Posted in Financial Literacy, consumer awareness, online scams, opt-out | Comments Off

True Bargains: What Makes a ‘Good Deal’

While looking for low prices is an important part of financial responsibility, it’s only one component: getting the value you need is the other half. For example, buying the cheapest brand of conditioner may seem frugal, but if you have to use twice as much as any other brand, it may end up costing just as much.

Value Vs. Price

The "value" of an item is subjective, while price is relatively fixed. Two people may see the same item as having different values even when the price is the same.

• Value: How much an item is worth to a buyer/seller (usually determined by how much you need or want an item).
• Price: How many dollars an item costs. Dollars are sort of a generic value unit we’ve all agreed upon.

In many cases, value and price line up pretty well, and merchants will try to keep the two in line. Value really shoots up when a seller is asking for less than you’re willing to pay.

Maximizing Value

So how can you make sure you spend your dollars to maximize their value? Here are some tips.

• Buy second-hand: Thrift stores, flea markets and garage sales are all excellent places to find good values because they’re filled with items that haven’t declined in intrinsic worth but whose owners grew tired of them. Gently used items are often steeply discounted and still perfectly functional (but avoid super-cheap items that are simply junk).
• Spread the word: Let your friends and family members know what you’re looking for – someone may be trying to “get rid of” exactly what you need. When you’re in a store, tell the sales associate what you’re looking for. Ask for advice and find out if any discounts might be available.
• Shop ahead & behind: If you know you’ll need a new pair of sneakers once a year, keep your eyes peeled at all times for bargains – many staples won’t “go bad” from sitting around a while. Take advantage of end-of-season sales to stock up for the next year (think Halloween decorations on November 1st).
• Use the Internet: Craigslist, eBay, Freecycling, Amazon and other websites often offer significant discounts from retail prices. But if you don’t want to buy online or don’t like to pay for shipping, you can still use the Internet to get an idea of what various vendors charge for the item in question (and use that knowledge to bargain).

If you start thinking in terms of value, you'll be able to save money while getting your true dollar's worth—particularly important if you're struggling with debt or rebuilding your finances after bankruptcy.

Posted in Budget, Financial Literacy, after bankruptcy, saving money, spending money | Comments Off

Obama Administration Creates Task Force to Fight Financial Fraud

The White House announced in a press release on November 17th that President Obama has made an executive order to create a Financial Fraud Enforcement Task Force. Part of the reason for the executive order, it seems, is the number and complicated nature of various financial fraud cases related to the current economic crisis.

Sources indicate that the goals of the force are to prevent abuses in the financial sector that could lead to economic turmoil in the future as well as to bring to justice those responsible for the current state of affairs. This task force will reportedly replace the Corporate Fraud Task Force implemented by the Bush administration after the scandal at the Enron Corporation.

The following groups will fall under the wing of the task force:

• Mortgage lenders & modifiers: Groups responsible for initiating and altering the terms of home loans, much maligned for their role in the current crisis, will be under the task force’s watchful eye.
• Securities law: This is the branch of law that regulates money, stocks and bonds.
• Stimulus spending: Government funds intended to perk up the economy, too, will be overseen by this group.
• Government bailout of the financial sector: This especially controversial bailout has been identified specifically as a target for the task force.

Too Much Fraud?

In recent years, growth and innovation in the financial sector (including such innovations as subprime mortgages) have proven to be more than the Securities and Exchange Commission (which is responsible for regulating stocks, bonds and the like) can handle.

And reports indicate that, despite concerns about national security, officials in the FBI and Department of Justice have been shifting resources away from terrorism cases and to financial fraud cases.

The hope, apparently, is that this group will form a more specialized unit, able to deal exclusively with cases of financial fraud.

The Next 30 Days

The Task Force will reportedly hold its initial meeting within the next month. Headed by Justice Department officials, it’s supposed to include help from the Department of Treasury, Department of Housing and Urban Development and the Securities and Exchange Commission, among others.

Geithner: Beyond Prosecution

Treasury Secretary Timothy Geithner has been quoted as asserting that prosecuting fraud cases after the fact is not workable; he apparently sees the Task Force as a comprehensive reform for financial oversight.

Posted in Financial Literacy, Legal Info, Obama, financial fraud | Comments Off

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.

Posted in Bankruptcy and Predatory Lending, Federal Reserve, Financial Literacy, bank fees, debit cards | Comments Off