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Seniors Continue to Get Slamed With High Interest Credit Card Debt - And It's Getting Worse

2007-06-05T16:47:00.000-06:00

The fastest growing group of credit card debts are seniors struggling with the cost of health care. Social Security is not the answer and the coming population bubble of Boomers is going to seriously impact the numbers as well. Here is an article that pretty well describes what millions of seniors are now being faced with on a regular basis.

More seniors struggle with debt

CREDIT CARDS: Social Security checks often can't cover rising health care and housing costs.


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11:30 PM PDT on Monday, June 4, 2007
By DAVID OLSON
The Press-Enterprise

June Black's financial problems began when she put charges for a doctor visit, medical tests and prescription drugs on her credit card but couldn't pay the full balance of about $300.

A series of late fees and finance charges followed. Three years later, Black, 71, is more than $6,000 in debt. The Riverside woman sold her car, moved to a smaller, cheaper apartment and writes a $127 check each month to pay off a credit card that she long ago cut up. She said she feels an obligation to pay something.

Yet with the 32.24 percent interest rate that her credit-card company charges, Black has little hope of ever becoming solvent.

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Ramon Mena Owens / The Press-Enterprise

Joe and Annie Vasquez, of San Bernardino, say they constantly worry about falling into debt. "They say being a senior is the golden years," Annie Vasquez said. "I'd do anything to be 50. Being old is for the birds."

"It just keeps spiraling," Black said of her debt. "I figure I'm going to die before this gets taken care of."

Faced with large increases in health care and housing costs, and often surviving on a Social Security check that is, on average, below the minimum wage, an increasing number of seniors are falling into debt.

A study to be released later this month by the New York-based research and advocacy group Demos shows that credit-card debt for people over 65 grew more quickly between 1989 and 2004 than for any other age group. Other recent studies also have found big increases in seniors' debt and bankruptcy rates.

"I think it's going to get worse," said Tamara Draut, co-author of the Demos report. "We're seeing more economic insecurity in people's working lives, and that will only spill over into retirement life."

A September 2006 study by the Washington, D.C.-based Employee Benefit Research Institute found that the median amount of debt -- including housing debt -- for a family headed by someone 55 or older rose 121 percent between 1992 and 2004, to $32,000. The increases were greatest among people 75 and older, and among the poor. The institute is a nonpartisan research and education group focusing on employee benefits and economic security.

An institute report released last month found that Social Security comprised 91 percent of the income for the poorest 25 percent of U.S. seniors. The same report found that the median inflation-adjusted annual income for those 65 and older fell 3 percent between 1999 and 2005, to $15,422.

Studies by the institute and other groups have found that seniors are still less likely than younger people to face debt. But the gap is narrowing.

In 1994, people 55 and older comprised 9.6 percent of bankruptcy filers, according to a report released last month by the Administrative Office of the U.S. Courts. By 2002, their share had risen to 14 percent. That's an increase of 46 percent, even though older Americans' proportion of the population only rose 3 percent during that time.

Bankruptcies on Rise

Harvard University's Consumer Bankruptcy Project found in 2001 that the number of bankruptcies among seniors in the previous decade soared 244 percent, by far the biggest rise among any age group. The project is planning to release updated statistics later this year.

Deborah Thorne, director of the project, expects the trend to continue. Many older Americans are not healthy enough to work and have no way of handling increasing expenses, she said. Far fewer retirees today receive pensions than in the past.

"They're locked into a corner," Thorne said. "They don't really have options. My guess is you'll see millions and millions of people retiring into debt."

With a $775 monthly Social Security check as her only income and a $735 monthly rent payment for her San Bernardino apartment, Sandra Earle long ago gave up trying to pay off her credit-card debt, which she estimates is now more than $20,000.

"We dream about having a perfect place with a porch to sit on," Earle, 65, said of old age. "But you can't have that no more. I know I can't have that, and a lot of people are like that. They can't even eat."

Waiting List for Section 8

Earle gets almost all her food from church programs, Meals on Wheels and subsidized meals at the city's Fifth Street Senior Center. She earns a few extra dollars by running errands for neighbors. Earle said she has been on a waiting list for more than four years for Section 8, a federal subsidized-housing program.

Earle never had a credit card until about five years ago. She said she always sent in at least the minimum payment for her five cards, not realizing that just sending in the minimum payment -- instead of the full balance -- could lead to high interest charges.

Many seniors receive credit-card solicitations in the mail and don't realize how easy it is to quickly fall behind on payments, said Sally Hurme, a senior project manager in the financial security department of AARP, the 37-million-member group for people 50 and older.

"The quicksand of the finer details of the credit-card contract can gobble alive people who are not savvy about credit cards," Hurme said. "I'm a lawyer, and I'd be hard-pressed to explain all of the fine print."

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Kym Adams, a Hemet document preparer who has helped seniors file for bankruptcy, said some seniors fall into debt after cashing credit-card company checks that often carry hefty interest rates and fees.

"They tell me they received a blank check and it was so tempting," Adams said. "They said they realized when they got the check they wouldn't be able to pay it, but they say, 'My car broke down and I needed to pay for it. All I've got is $600 a month in Social Security.' I can hear the cry in their hearts for more money."

Credit cards are not meant to be used for long-term loans, said Tracey Mills, spokeswoman for the American Bankers Association, a trade group that represents credit-card companies. Interest charges and fees are necessary to reduce card companies' risk of losing money from nonpayment of bills, she said. The group encourages consumers to compare rates.

Many seniors grew up with a pay-as-you-go ethos and are shocked and embarrassed to find themselves in debt, said Marilyn Lynch, an adviser at the Janet Goeske Senior Center in Riverside. She said at least a half-dozen seniors at the center have sat down to talk with her about their debt problems over the past three years. She suspects the real number of indebted center patrons is much higher, because many seniors are ashamed to acknowledge they're in debt.

Annie Vasquez, 79, recalled how her parents were devastated by debt during the Great Depression. The San Bernardino woman has always heeded their warning to do everything possible to avoid the same fate.

Yet she and her husband Joe, 82, have endless health expenses. Vasquez said she constantly worries that one unexpected medical emergency could push them into the red.

"They say being a senior is the golden years," Vasquez said. "I'd do anything to be 50. Being old is for the birds."

Delayed Retirement

Seniors' financial crunch has forced many to delay their retirement plans and work well into old age, Hurme said. The longtime trend of people retiring earlier and earlier has reversed in the past few years, she said. That's partly because an increasing number of older Americans are choosing to work longer. But many have no choice, she said.

And homes don't offer the same type of financial security that they used to, Hurme said. Seniors who owned homes typically entered retirement with no mortgage payments, she said. Today, many people who are at or near retirement age use their home equity to take out loans. And mortgage payments are much higher.

Many people underestimate how much money they need to save for retirement, said Richard Pittman, housing services coordinator for By Design Financial Solutions, a Commerce-based nonprofit credit-counseling service with an office in San Bernardino. Others don't earn enough to save. Expenses that are reasonable during working years become onerous after retirement, he said.

"If you're relying on a Social Security check, God help you if you have to pay rent," Pittman said.

Some seniors increasingly rely on high-interest payday loans and are unable to pay them back, he said.

Targets of Scams

Elisabeth Sackmann, supervisor for the Banning Senior Center, said she regularly talks with seniors who are targets of scams. Many seniors are especially vulnerable to fraud -- such as giving out a bank-account number to receive money won in a "contest" -- because they are desperately lonely, she said.

"They have nobody to talk to except maybe their pet, and someone is interested in them and interested in what they have to say," she said.

Some seniors fall into debt because they had depended on their spouses to manage money and have a hard time dealing with bills after the spouses die, said Judith Vails, executive director of the Goeske center.

Sara Jamison said she inherited about $5,000 in credit-card debt that her husband, Richard, accumulated before he died last year at age 67. Her name was on the accounts. The Grand Terrace woman also owes more than $3,000 for hospital expenses for visits in March and in 2005.

Jamison is 54, but a back problem prevents her from getting a full-time job. She said she applied for Social Security disability and widow benefits but was turned down. She is appealing the decision.

Jamison said her daughter pays her rent for now, but she won't be able to do so much longer. She said she fears she'll spend her old age on the streets.

"It makes me cry," Jamison said. "I get depressed. Sometimes I want to die. What do I do in this situation? I don't have many options."

Reach David Olson at 951-368-9462 or dolson@PE.com

Finally! Legislation That Makes Sense and Holds Credit Card Companies Accountable

2007-05-21T08:28:00.000-06:00

This is the finest and most comprehensive piece of legislation I have seen to curb the abuses of the credit card industry. If this regulation would pass, we would see an unbelieveable change in the industry with consumers reaping the benefits. These two Senators need to hear from us and get our support. Fabulous work!

News

Monday, May 21, 2007

McCaskill, Levin introduce credit card legislation

Published: Saturday, May 19, 2007 11:29 AM CDT
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Sen. Carl Levin, D-Mich., and Sen. Claire McCaskill, D-Mo., today introduced legislation to stop some of the most egregious credit card practices that unfairly deepen or prolong credit card debt held by consumers. The Stop Unfair Practices in Credit Cards Act follows an investigation and hearing by the Permanent Subcommittee on Investigations, which Levin chairs and on which McCaskill serves.

“Credit card issuers too often sock consumers with sky-high interest rates and excessive fees, making it harder and harder for families to climb out of debt,” Levin said. “The goal of this legislation is to put an end to unfair and abusive credit card practices that outrage so many American families. I'm afraid these practices have become too entrenched and too profitable to the credit card companies for the companies to change them on their own. Congress needs to enact pro-consumer legislation to put an end to these unfair practices.”

“Credit card companies must be stopped from preying on the most vulnerable Americans with unfair and confusing practices. We have to fight for those who have not hired dozens of lobbyists to make sure that American consumers are not getting ripped off and are fully informed of how these companies are manipulating their financial security,” McCaskill said.

In October 2006, Levin released a Government Accountability Office (GAO) report analyzing credit card fees, interest rates, and disclosure practices by major credit card issuers. Following the release of the GAO report, Levin directed the Subcommittee to investigate unfair credit card practices that mire so many Americans in debt. In March, Levin chaired a subcommittee hearing and called as witnesses the chief executive officers of the three largest credit card issuers in the country - Bank of America, JP Morgan Chase Bank and Citigroup - and an Ohio consumer whose personal credit card experiences exemplified many of the outrageous practices.

Levin added: “Credit card companies are so profitable that they can afford to give up unfair practices like charging interest on debt that is paid on time, charging consumers a fee to pay their bills, doubling or tripling interest rates to penalize late payments or over-the-limit charges, imposing repeated over-the-limit fees for a single over-the-limit purchase; and applying consumers' payments to the parts of their accounts with the lowest interest rates first. It's past time for Congress to protect consumers from such unfair and abusive credit card practices.”

The Stop Unfair Practices in Credit Cards Act has been endorsed by Consumer Action, Consumer Federation of America, Consumers Union, National Consumer Law Center, U.S. PIRG, and the Center for Responsible Lending.

A summary of key provisions in the Stop Unfair Practices in Credit Cards Act follows.
Interest Rates

No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.

No Trailing Interest. Prohibit added interest charges on credit card debt which the card holder paid on time and in full.

Limits on Penalty Interest. Prohibit interest rate hikes on a credit card account unless the card holder agrees to them at the time, and in any event, limit penalty interest rate hikes to no more than a 7 percent increase.

Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

Credit Card Fees

No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit, and allow such fees to be charged only when a card holder's action, rather than a penalty, causes the limit to be exceeded.

No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.

Reasonable Currency Exchange Fees. Require currency exchange fees to reasonably reflect the credit card issuer's actual costs.

Other Protections

Prompt and Fair Crediting of Card Holder Payments. Require consumer payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibit late fees if the card issuer's action caused the delay in crediting a payment.

Fixed Credit Limits. Require that card issuers must offer consumers the option of having a fixed credit limit that cannot be exceeded.

Abuse of "Piggy Backing"

2007-05-02T08:48:00.001-06:00

This article is about the recent abuse of what is termed as "Piggy Backing" and is a legitimate means for a person to add credit history and improve their scores. However, as with everything it seems these days, someone found a way to abuse it. Rather than used sparingly or appropriately such as with a parent/child relationship or close friend, some Internet marketers are exploiting it to the maximum by selling credit histories to anyone willing to pay the price in order to get a decent mortgage rate.

Let's be clear. I hate this abuse and the regulation it could cause. It is also important to point out, that "Piggy Backing" is nothing more than adding your child or someone you know to your credit card account as an authorized user and all the positive payment history you have built up over the years shows up on the authorized user's credit history as well.

It is a loop hole that the credit card issuers didn't think through evidently and it has helped many, many children start out with good credit history. When it is used as fraud with the intent to deceive and misrepresent, then I am against it. I'm sorry this has happened, i.e. the abuse, but "Piggy Backing" should not be outlawed. It is a tool I recommend, I just don't recommend using it to commit fraud. A word to the wise, avoid this like the plague.

(04-08) 04:00 PDT Washington -- When your credit scores don't qualify you for the mortgage you want, where do you turn? That's an especially timely question now, as banks and mortgage companies tighten underwriting standards for applicants with less than perfect credit.

But federal and state authorities fear that some borrowers are turning to a fast-growing business on the Internet -- companies that claim to boost credit scores by transplanting the credit DNA of people with excellent payment histories into the credit files of people with subpar histories -- ostensibly without breaking any law.

The companies claim to raise FICO credit scores by 50 to 250 points or more by adding low-scoring borrowers as "authorized users" onto the credit card accounts of people with FICO scores well in excess of 700. The positive payment information from such cardholders then flows into the files of the persons with subpar credit.

Federal law permits authorized users to be added to credit card accounts. Typically the users are relatives or friends of the primary cardholder. For example, a parent might add a son or daughter to a Visa card in order to provide access to credit for the child or for use in emergencies.

Federal law, however, does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized user designations. Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit card "trade lines" or accounts of credit card holders with high limits combined with perfect payment histories.

Big bucks -- and a strong potential for fraud on mortgage applications -- are involved. Some Web site promoters say they can add 80 to 120 authorized users onto a high-quality credit card account before banks or lenders get suspicious. Each account can rent for as much as $1,500 to $2,000 for a 180-day usage. The primary credit card holder receives a cut of the rental fee, often hundreds of dollars for each authorized user added to the account.

The person seeking a higher credit score does not obtain actual access to the credit card. But within 30 to 90 days of being added to the account, the national credit bureaus incorporate the primary cardholder's ongoing account information into the files of the authorized user. The score-raising attributes of the primary cardholder's stellar payment record then flow through to the new user.

One company based in Tampa recently solicited mortgage brokers promising FICO score boosts of 150 to 205 points for applicants "in as little as 30 days" for the "discounted" price of $750 per trade line.

That widely distributed pitch prompted one state financial regulator to issue a "fraud alert" warning that "consumers, brokers and lenders that complete, submit or participate in the completion and submission of an application for credit that contains misrepresentations or false information are subject to administrative actions and potential criminal penalties by the state."

The Nevada Mortgage Lending Division termed the inflating of FICO scores through additions of authorized user accounts "deceptive" because it makes credit-impaired applicants appear to be more creditworthy than they actually are. Mortgage lenders might grant them lower interest rates and lower fees than they otherwise could obtain.

Some Web sites advertise and price high-quality credit card trade lines on the basis of their credit limits and time on the account. A site called AddaTradeline.com recently offered a card history with a $25,000 credit limit and 2 3/4 years of perfect payments for a fee of $1,025.

Adam Wheeler, who identified himself as the owner of AddaTradeline.com, based in Orange County, said his business "is legal, although some people might say it's unethical." He insisted that his firm does not approve of efforts by clients to mislead lenders. "If they are going to lie to lenders," he said, "that is not good."

Asked for comment on the rental of trade lines to artificially inflate mortgage applicants' FICO scores, Steven Baker, Midwest director for the Federal Trade Commission, would say only: "We are aware of it. We are concerned about it, and we are looking into it."

Donald Girard, spokesman for Experian, one of the three national credit repositories, said, "These are nothing more than new credit repair scams." However, he said, Experian "does support authorized user relationships such as ... parents helping a son or daughter establish credit with their first credit card."

Fair Isaac Corp., developer of the FICO score, said that the "inappropriate use" of trade lines is "an industrywide issue" and that the company is in discussions with the FTC.

E-mail Kenneth Harney at kenharney@earthlink.net.

This article appeared on page K - 4 of the San Francisco Chronicle

If Sub Prime Loans Were The Problem, What Is The Solution?

2007-04-12T11:41:00.000-06:00

We have created another web site to address credit re-establishment, http://www.freshstartcreditscores.com. To me, most of the sub prime loans are not necessary if the people caught in them can take some steps to improve their credit scores before it is too late.

Believe it or not, there are ways to add points to credit scores and refinance before it is too late. Secured loans are the most favored instrument to me, because of the low cost as opposed to the secured credit card route which is often incredibly expensive.

If Sub-Prime Loans Were the Problem, What is the Solution?

Pat Hicks

Once upon a time long, long ago I sat across the desk from a banker and listened to the clock tick as he scanned my loan application for my first house. As the vest buttons of his three piece suit strained, he looked over his reading glasses at me and with the experience of having looked at hundreds, maybe more, of these applications he said,

“You didn’t borrow any of this down payment, did you? We’ll be able to find out if you didn’t save it yourself?”

“Oh, no sir. All twenty percent of the down payment is mine.”

“Well, you’re pushing it with your monthly payment being 27% of your gross income. We prefer the payment to be no more than 25% of your net income. We might be able to do something but I can’t guarantee it.”

I ended up not buying the house simply because I couldn’t see myself, as a twenty six year old, saddled with a $500 a month PITI mortgage for a 2,400 square foot home. However, at no point did he want to know my credit score.

Fast forward to today and we are quick to blame the sub-prime crises we face now on the plethora of people that can’t discipline themselves financially or the predatory lenders that have created mortgage banking products that are, at best, questionable in nature.

But, how did this situation develop in the first place?

First, look back to the Supreme Court decision in 1978 that allowed usury credit card interest rates to be exported from North Dakota. Soon, other states joined the bandwagon and, adjusted for inflation, from 1968 to 2000 credit card debt increased by 6,000 %. That’s right, I needed a comma. One more time; a six thousand per cent increase. Now, 20% of all twelve year olds in this country carry a credit card.

Is it the personal responsibility of the consumer to cease and desist using credit cards and going further into debt? Sure. Absolutely. Is there corporate responsibility for banks to scale back on the two billion mail solicitations a year for credit cards to American consumers and ask themselves is it morally right to require credit card agreements to have thirty pages of terms which allow more and more creative ways to trap the customer into deeper debt? Agreements which Harvard Law School professors that teach contract law can’t read? I think the answer has to be “yes” in both cases.

But, what does this have to do with sub-prime mortgage loans? Well, in a word, everything.

Sub-prime loans just like the out of control credit card industry are the direct result of banking de-regulation, and after two decades of this de-regulation, home owners of today are three and one half times more likely to lose their homes to foreclosure than their counterparts a generation ago. With home loan payments that are 40% to 50% of a family’s gross monthly income, with more available credit, more complex credit and more expensive credit we suddenly find ourselves in a mess of foreclosures and bankruptcies. And, we are now surprised?

Sub-prime loans are not the problem, they are a symptom of the problem and the problem is that, “Just a generation ago, the average family simply couldn't get into the kind of financial hole that has become so familiar today. The reason was straightforward: A middle-class family couldn't borrow very much money. High-limit, all-purpose credit cards did not exist for those with average means. There were no mortgages available for 125 percent of the home's value and no offers in the daily mail for second and third home equity loans. There were no "payday lenders," no "live checks," no "instant money," and certainly no offers to "consolidate" all that debt by moving it from one credit card to another.”, because it would have been against the law to do so, according to Elizabeth Warren of Harvard Law School who recently testified to Congressional hearings.

So, what is, or, maybe the better question: is there a solution? To me there is, and it is two fold.

First, some banking regulation is absolutely necessary. It is no accident that Congress is investigating credit cards which charge what would have been usury interest rates prior to de-regulation with incomprehensible terms, trick billing cycles and “traps” to squeeze ever more profit and fees out of the consumer. It seems $29 Billion in revenues were not enough for the banking industry in 2005, so interest and penalty fee revenues were increased using these predatory tactics to attain $79 Billion in revenues. There is no reason to believe that revenues went down since these numbers were reported.

So, when this is combined with predatory fees, interest rates and deceptive practices used by credit cards companies, the consumer is getting steered, squeezed, mislead and their economic viability drained. Two decades of deregulation has taught us that market forces left to themselves, simply are incapable of finding within their structure the morality to do what is right. With more and more regularity, when describing the dire circumstances of debtors, we are discussing and addressing the person next door in suburbia. It is no longer a low income problem.

Without a change in the laws, it is my opinion that combined consumer and lender based action is needed for short term and a long term strategy to positively impact those most affected by all predatory lending.

At first blush the program we have created would seem counter intuitive. However, if an abundance of credit is here at least for the foreseeable future and possibly forever, and if the laws in place are soon to be changed, then credit re-establishment to improve credit scores in particular seems to me to be the means to move “higher risk” borrowers away from predatory sub-prime loans of all kinds to main stream or “A” category loans with much lower interest rates.

Such action is based on a moral understanding that economics is the core of “Family Values”, that divorce due to financial strains, missed child support payments due to bankruptcy and families without economic independence destroys the vitality of the family and the ability of families to care for their children.

Such action is suggested with the knowledge that debt free lifestyle is preferable, admirable and some suggest very attainable. While I certainly don’t discredit or disagree with this goal, the facts are, that most workers will not attempt to achieve a debt free life. So, the reality for most consumers is that the best option available at this time is to secure the lowest possible cost of credit available to them. And do so, as soon as possible while targeting the overall goal of debt reduction.

The very first thing asked of a borrower now, is their credit score number. With credit scores taking over as the major determining factor for establishing the interest rate which a consumer must pay, and with cash purchases of automobiles, appliances and other large ticket items being out of the reach of most middle to lower middle income buyers, it is imperative to improve their credit or they will continue to be enslaved in usury interest rates for years to come.

If some of these usury rate loans were at normal interest rates, even with job layoff or any other life emergency, the consumer has a much better chance of not defaulting on a mortgage payment. And, with credit scores closer to the national average of 679 which qualify for better loans, the cost of credit is lowered resulting in better debt to income ratios.

To accomplish credit re-establishment, we have assembled a program designed to address what we consider to be the three major problematic areas of someone being steered into sub-prime rates.

The first area is creating consistent payment history, establishing new credit and producing permanent positive marks with “paid in full” status. To do so, the lending product or vehicle of choice is secured loans. Typically, these kinds of loans fall into another type of predatory lending as they want significant fees up front and/or deposits that are never returned in exchange for providing secured credit card accounts. Banks, if they have a secured loan program in place, are incredibly difficult to find and virtually all will not work with potential customers who do not posses significant amounts of capital with which to secure the loans.

However, with the backing of a consumer friendly lender, which we have found, that is willing to work with customers to raise their scores, the chances of success suddenly skyrocket. Using inexpensive secured loans rather than expensive secured credit cards, the program brilliantly adds points to credit scores. Payment history is consistent, timely and complete. New credit has been created responsibly as is the type of credit. At the end of the secured loan term, the participant has improved credit scores by completing a six month repayment plan on a secured loan with a final status of “Paid in Full”. With diligence, perseverance, and commitment to the program, the effort pays off handsomely. For our subscribers, a twelve month process is capable of adding triple digits to a credit score with minimum expense.

With the security and confidence one feels when a lender figuratively puts their arm around a shoulder and helps establish a positive credit history without an exorbitant cost associated with it, one can see hope and encouragement exacting a positive influence in a ripple effect spreading much further than the immediate recipient.

The second area addresses inaccurate items listed on credit reports. The credit challenged often are seduced by and sold a dream. They just want someone else take away all the bad from their record so that they don’t have to deal with it and then, magically hope and expect their credit scores will shoot skyward. Sometimes, someone whispers in their ear exactly what they want to hear.

Very often, in the hard, cold, light of dawn that kind of pillow talk turns out to be an illusion. However, the sizzle that sells the steak of such promises is that the credit reporting agencies can be intimidating, the reports confusing, the companies themselves inclined to protect their corporate interests and not that of the consumers, are much more knowledgeable of their rights than most consumers, and typically are operating from a position of superior knowledge. Not to mention, they profit from negative items remaining on consumer credit reports. It is no wonder people don’t want to face down what they consider to be a man-eating troll hiding under the credit reporting bridge. To the uneducated or unsophisticated, it can be an impossible task.

But, with applied knowledge comes power, so we have created a program to educate and empower in this discipline. Inaccurate information can be removed and there is nothing wrong, illegal or immoral with requesting inaccurate items be investigated and if unable to be verified, to have each one of them deleted. Such protection for the consumer and requirements on the credit reporting agencies is afforded all of us under United States federal law and specifically, the Fair Credit Reporting Act.

When a credit report doesn’t look like a foreign language, it becomes clear why some estimates place the number of reports containing errors at 70% (probably more). And, if an item contains an error and is inaccurate, it has to be removed.

Then we added what we think is the final component: education, guidance and encouragement for making better decisions about credit, goal setting and having a positive attitude. To say there is no social stigma or psychological scars attached to filing bankruptcy anymore is simply not true. The fact is, it is hard to overcome any obstacle if you are despondent, but with the right tools, one can make some positive changes.

Credit re-establishment is the application of all three components we have outlined to figuratively create a three legged stool. With each of them in place and working, a person’s credit scores can increase by as much as 100 to 200 points or more in a calendar year, goals can materialize when none existed before and financial stability can be attained.

Poor credit does not have to remain an economic death sentence, or necessarily a mandatory seven year sentence of servitude while in credit solitary confinement. Nor is it reason to expect or accept second class citizenship status.

The truth is, there is no stopping someone that chooses achievement and then works to implement it in their life. And, when willing to apply knowledge, exert some effort and follow a plan, there is no need to live a “sub-prime” position in life now or ever.

Pat Hicks is the creator and author of, “The Complete Guide to Credit Re-Establishment” program found on the web site, http://www.freshstartcreditscores.com.

Real Estate professionals, mortgage lenders, builders, on site sales staff and anyone interested in improving their client’s or their own credit scores are invited to visit and to enroll. His email address is: jphicks@sbcglobal.net.

Financial Literacy Course to Copy Across America!

2007-04-07T18:05:00.000-06:00

This is fantastic! Every school in America should look at this program and do their own version. Financial literacy is arguably the single greatest issue for young adults today and I am thrilled to see something like this in place!

College Credit
Schools must address financial literacy in the face of increased personal debt.
By Julia O'Donoghue
April 6, 2007

George Mason University student Ross Varndell is unusual for a college junior in the United States. He has no credit cards.

"I personally don't carry credit cards. I am afraid if I have one, I will spend a lot of money," he said between bites of a chicken sandwich in the Fairfax university's student union last week.

The electrical engineering student said he earned about $6,000 last summer working three jobs as a tennis teacher, furniture mover and a golf course caddy. He has used that money to pay for textbooks, food, gas and entertainment during the school year.

Varndell said he may ask his parents for financial help if money gets really tight but he won't apply for a credit card, even though he receives one to two offers per week.

The 24 year-old, who grew up in Arlington, is the exception to the rule. 95 percent of college students carried credit cards in 2000, according to Business Week, but many experts say have not been taught how to manage their money.

"There are more credit card offers and more credit card issues. There are cell phone bills and a number of other financial issues that generations before have not had to deal with," said Todd Romer, executive director of "Young Money," a money and lifestyle magazine for young adults.

"There is a strong need for financial education," Romer said. "We think it would make sense for every high school or college to mandate a personal finance class."

For the most part, Virginia appears to be doing exactly what Romer and other experts have requested.

In 2005, the General Assembly passed legislation that mandates financial literacy training for public middle school students, high school students and freshman attending a Virginia public university or college.

Introduced by Sen. Russell Potts, the mandate requires the state Board of Education to incorporate financial literacy into Virginia’s Standards of Learning for secondary school.

STUDENTS WILL learn about topics such as judging the quality of a financial institution’s services, balancing a checkbook, the implications of inheritance, the basics of personal insurance policies, debt management, and how to contest an incorrect bill.

The legislation also requires public universities and colleges to teach financial literacy either through a required general education course or freshman orientation.

The college component would focus on some of the same topics as those taught in secondary school but also includes managing student loans and credit card use.

The legislation was expanded this year. Delegate Dwight Jones (D-70) introduced legislation to expand the university financial literacy program to include predatory lending practices, consumer fraud and identity theft and protection. Gov. Tim Kaine has also declared April 2007 financial literacy month.

Potts has "always been concerned about the solicitation of credit cards to college students," said his legislative aide Lana Westfall. The senator decided to introduce legislation after he met Muriel Siebert – a New York City businesswoman who was pushing similar legislation around the country – at a cocktail party.

Siebert – who, in 1967, became the first women to join the New York Stock Exchange – had successfully pushed to have a financial literacy program included in the New York City public schools curriculum. As superintendent of New York’s banks in the late 1970s and early 1980s, she discovered that some people were being taken advantage of through check-cashing programs because they never learned how to open a checking account.

"People who have the least pay the most for everything. There was a lack of education of anything financial for kids," said June Jaffe, executive director of the Muriel Siebert Foundation.

In addition to New York City schools, the public school systems in Miami-Dade County and Palm Beach in Florida are adopting a financial literacy curriculum and Austin is testing a pilot program. Connecticut is also on the verge of pass legislation similar to Virginia’s, said Siebert.

"I want to make it national. We need to send these people into the real world prepared," said Siebert.

IN VIRGINIA, the state Board of Education has incorporated financial literacy – particularly programs about budgeting and credit card debt – into the state’s Standards of Learning, though the material is not included on Virginia’s annual standardized assessment.

Individual school systems can decide how the material will be incorporated in middle and high school.

"Some schools are going to have a mandated semester requirement but that is not going to be possible in Fairfax. [In Fairfax] financial literacy will be taught in middle school math and social studies and in high school math and government," said Mary Shaw, spokesperson for Fairfax County Public Schools. Shaw added that the school system plans to fully implement the new financial curriculum next school year.

Currently, Fairfax and other Northern Virginia school systems teach a significant portion of their financial literacy programming in business and consumer finance electives in high schools.

Students in the Academy of Finance at T.C. Williams in Alexandria have opened a credit union at school and learn basic financial skills like how to plan for renting or buying a house. The program – which includes 72 students – also teaches students about responsible loans and taxes, said Matlea Parker, the academy’s director.

"This is not something that the general population receives," said Parker, who explained the classes in the Academy of Finance are only open to select students. She added that most of the material is also covered in a business finance class open to the student body but the class is an elective and only certain students take it.

WITH THE NEW mandate through the legislation, Parker said the Alexandria school system is looking to incorporate financial literacy into required courses, such as government.

Arlington County Public Schools currently provides a series of activities to all high school math teachers covering topics such as credit card responsibility and how to read a pay stub, said Patricia Robertson, the school system’s mathematics supervisor. Robertson said she did not believe financial literacy was taught at the middle school level.

Fifteen Arlington students can participate in the Banking, Finance and Investment program at the Arlington Career Center that operates an in-school credit union branch, said the director of the program Lisa Moore. The center also runs a program about how to buy car, which is open to all seniors.

"Many of them are eager to buy their first car. We tell them to be wary of high interest rates or putting no money down," said Moore.

Mary Ellen McCormick said she tries to instill the dangers of credit card debt in all the students enrolled in her entrepreneurship class at Marshall High School in Fall Church. McCormick, whose 90 students come from all over the county to take the course, said she emphasizes that accumulating debt could affect more than just a student’s credit score.

"Employers are checking their credit rating. It’s important for parents to understand that," said McCormick.

Great News! Sunlight is being allowed in on the Sub Prime Credit Cards!

2007-04-01T08:00:00.000-06:00

Well, here we have Jane Bryant Quinn of Newsweek looking into the sub prime credit card abuses. This is great news for those of us that want some regulation back to curb the tactics used to bilk consumers. With the elections coming, this is an issue that will strike a chord with a lot of voters. Pardon my giggle, but I think I see some scurrying for cover starting. Yes!!

Quinn: The Nasty World of Subprime Credit Cards
By Jane Bryant Quinn
Newsweek

April 9, 2007 issue - In recent weeks, you've heard plenty about the sleazy side of the subprime mortgage business. Rising numbers of borrowers are losing their homes after being lured into high-cost mortgages they couldn't afford. But there's another piece of the painful subprime story that hasn't hit the headlines yet: costly—sometimes abusive—subprime credit cards. They're bleeding millions of borrowers who didn't know what they were getting into.

Subprime borrowers tend to have credit scores under 660. They've missed or defaulted on payments in the past and already carry a lot of debt. But even prime borrowers, with credit scores solidly in the 700s, can slide into subprime status if they're late on a couple of payments.
Subprimes come in two types: Cards that are crazily costly to begin with and cards that look good but hide big traps. You know about traps if you've paid some bills late and are now being charged with interest at 30 percent. In general, here's how the business works:
The bottom-feeding cards—for people with damaged credit—offer you a decent interest rate on credit lines "up to" $3,000. When the card arrives, however, your line might be only $250. And then come the fees! "Program" fees. Account set-up fees. Participation fees. Annual fees. They're charged to your tiny credit line, leaving you almost nothing to spend.

Take the First Premier Bank Gold Card, at 9.9 percent interest with a $250 line. After charging upfront fees, however, you start out with a debt of $178 and just $72 extra to spend. Or the First Bank of Delaware's Continental Finance card, at 19.92 percent interest, where a $300 credit limit shrinks to $53 after upfront fees. When you start using either card, you'll be charged $6 or $10 a month. One little purchase puts you over the limit. That unleashes a $25 or $30 over-limit fee, plus another $25 or $30 if you pay late. As a further penalty, First Premier can double your interest rate. You could wind up owing thousands of dollars in compounding fees.
First Bank of Delaware didn't respond to questions. Miles Beacom, First Premier Bankcard's CEO, says the cost of these cards reflects how risky the borrower is. But if someone can't afford a small payment, why is he getting more credit at all? These cards target people of modest means, says credit expert Robert Manning, adviser to the film "In Debt We Trust," to be released this month. At some point, aggressive lending turns into abuse.

Two better-known card issuers with a big subprime business are Capital One and HSBC's Orchard Bank. They charge lower upfront fees than other cards do. But if you fall behind, it's tough. Cap One's penalty rate is currently 28.15 percent. Orchard Bank doesn't disclose its penalty rate online and wouldn't tell me what it is (that didn't engender confidence!). Cap One has a reputation for issuing multiple cards to people who bump up against their credit limits. That gives them two cards, with two low limits, to overspend. John Finneran, Cap One's general counsel, says that customers choose to have multiple cards for various reasons and have the option of combining them into one.

Lenders have figured out many ways of extracting fees. There's "universal default," where a late payment on one card can trigger high penalty rates on every card you own. There's the "endless late fee," where your payments never catch up with the new penalties you're charged. (Banks don't cancel your cards, as they did in the old days; they just keep charging until you break.) There's "two-cycle billing"—too complicated to explain here, but which amounts to charging interest on balances that you've already paid. And "retroactive price hikes," where banks impose higher rates on old balances as well as new ones. "What other business can get away with raising the price of something you already purchased?" says Travis Plunkett of the Consumer Federation of America.

These practices startle consumers who think such high fees and interest rates must be against the law. But the Supreme Court effectively deregulated credit card rates 30 years ago, and 10 years ago it deregulated the size of the fees a bank could charge. Prior to fee deregulation, late fees hovered between $13 and $15, says Robert McKinley of CardWeb.com, which tracks the business. Now they run from $30 to $40. "It's out of control," he says. "Banks know they've pushed this too far."

So far, they've gotten away with it. Congress ignored it and the regulators slept. Occasional court cases pop up. Last year, New York State fined Cross Country Bank (now the Applied Card Bank) $9 million for various deceptive practices. Applied's attorney denies the allegations. Capital One recently settled a class-action lawsuit, also alleging deceptive acts. (To read what consumers say about these and other cards, go to Consumeraffairs.com).

This year, however, the new Congress started holding hearings. Suddenly Citi dropped universal default and JPMorgan Chase ended two-cycle billing. But those are just gestures. Without fee caps or usury laws, we're in the bankers' hands.

Reporter Associate: Temma Ehrenfeld
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Banks, Feeling the Heat from the Democratic Congress Begin to Address Universal Default Abuses

2007-03-12T14:06:00.000-06:00

Finally the credit card companies are taking some action, but it's just to get the heat off them. Hopefully, Congress will not let them squirm their way out of being on the receiving end of tighter regulations, which are sorely needed.

This is an article by Pamela Yip of the Dallas Morning News addressing the responses being touted by the banks which, in my opinion, are nothing more than just a couple of displays of basic decency that has been lacking for way too long. They should have never allowed additional credit history to affect the rates of credit cards as long as the payment history was acceptable in the first place.

When I see the banking regulations in place that should have addressed the industry abuses long before now, I will actually have cause for celebratory cheers.

Credit card companies pushed to change

07:39 AM CDT on Monday, March 12, 2007

Credit card companies are starting to feel the heat from Congress.

Democrats, aiming to fulfill their promise to improve the financial lot of average Americans, have cast a sharp eye at the lending practices of financial institutions, particularly in the area of credit cards.

"The credit card industry thrives on the confusion and powerlessness of consumers to both nickel-and-dime the average cardholder and to commit highway robbery of anyone who slips up even in the slightest," said Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, which held a hearing last week on credit card practices.

Credit card issuers are taking notice – and action.

Citi Cards said recently it's ending "universal default," the policy of increasing your interest rate if it discovers any late payments on your credit report. It didn't matter if you'd never made a late payment to that particular credit card company.

Citi also said it's doing away with "any time, for any reason" increases to the rates and fees of its cardholders.

Chase Card Services, meanwhile, has announced its "Clear and Simple Initiative," which includes expanding its program of contacting cardholders having financial problems and recommending options to solve their problems. The bank also said it's studying ways to make its disclosures clearer.

"We are both looking at our practices and looking at public perception and what our customers are saying about things," said Paul Hartwick, Chase spokesman. "We thought this was the right time to take a look at how we could be more clear with our customers."

Chase also plans to offer online payment calculators to help customers understand how their credit card payments will affect their account balances over time. It's reminding consumers about their ability to get free online alerts to help them stay current on their card payments.

Capital One boasts that it has "never had a universal default policy."

"There is only one circumstance in which a customer might be subject to default repricing – if they pay us more than three days late twice in a 12-month period," John Finneran, general counsel for Capital One, told Congress. "The decision to reprice is not automatic. For many customers, Capital One often chooses not to do so. If we do reprice someone for paying late twice, we will let them earn back their prior rate by paying us on time for 12 consecutive months."

Raising rates, fees

Credit card issuers traditionally have taken the position that they can increase the rates and fees of a cardholder's account at any time for any reason for things as nebulous as "general conditions in the financial markets."

Under Citi's new policy, the bank won't increase the rates and fees of a card account until the card expires and a new card is issued, which typically is in two years.

The company said now it will hike rates and fees before a card expires only if you pay your bill late, exceed your credit limit or pay with a check that bounces.

Another exception is if the prime rate moves up. Most variable-rate cards are tied to the prime rate.

"We believe that making changes to what have been – until now – basic credit card practices is proof of our ongoing commitment to put our customers first," said Vik Atal, chairman and chief executive at Citi Cards.

Yeah, right.

Industry responds

The only reason card issuers are doing all this is because they can smell the scent of tougher regulation on their heels. They frame it as wanting to remain competitive in the marketplace – what they're really doing is realizing that Congress is listening to consumers who are fed up with the heavy-handed tactics of credit card companies.

"The industry is sensitive to congressional needs," said Ken Clayton, managing director of card policy at the American Bankers Association. "It's also sensitive to the marketplace. Clearly, the hearings bring a greater focus on some of these practices and the industry response to it."

Bigger steps needed

Consumer advocates haven't been impressed with the credit card companies' actions.

"So far, many of the proposals center around providing more consumer education, greater disclosure and are Web-based," said Norma Garcia, senior attorney at Consumers Union. "These changes, however, are no substitute for the real reform consumers need to make the marketplace fair. What good is it to tell consumers in a more clear fashion that your company engages in unfair practices when what really needs to happen is to stop engaging in the practices in the first place?"

Credit card companies also needed to clean up their act on their own, not just after politicians and regulators started breathing down their necks.

"Congress is finally taking a hard look at the credit card industry," said Ed Mierzwinski, consumer advocate in the Washington office of the Texas Public Interest Research Group. "The industry is simply taking minimal prophylactic steps to deter actual reform legislation and protect the most profitable form of banking – credit card banking."

The buzz over credit cards comes at a time when the issue is starring in the movies: Maxed Out, a documentary now playing at the Inwood Theatre at 5458 W. Lovers Lane, is about how easy it is to fall into credit card debt and the sometimes tragic consequences.

Some credit card executives should buy a ticket.

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An Answer to Conservative Critics that Call for More Personal Responsibilty for Individual Consumer Debt Increases

2007-03-09T15:29:00.000-06:00

Some of this is old news but it is what the congressional committees are investigating at this moment, i.e., Tricks and Traps to squeeze every last dime out of the credit card customer.

There is a term one finds in the real estate industry that, if ignored, can get one sued very quickly. It is, "Operating from a position of superior knowledge". If a professional Realtor takes advantage of a less knowledgeable client by using their superior knowledge to steer or fail to advise a client in order to benefit from a transaction, then they are operating from a position of superior knowledge and are subject to criminal penalities imposed by the legal system.

While I recognize that there are many critics that are upset when there is no mention of "Personal Responsibility" for the users of credit cards while the banking industry is vilified by articles like this one, I also think one can use the same thought process when making a comparison to the cigarette companies. It was personal choice and not the fault of the cigarette manufacturers to choose to succumb to constant marketing, half truths and lies about nicotine addiction and become a smoker; usually at an early age before one was capable of making truly mature choices (Please see credit card application booths on Spring Break beaches).

So, to me the issue is moral accountability. If it is somehow morally reprehensible or morally deficient to purchase any goods or services but then choose not to pay on a credit card at usury rates with exorbitant Tricks and Traps fees, there is also a corporate moral obligation for the credit card companies as there was with the tobacco companies, to show some accountability, restraint and self regulation as well.

The three main reasons for 92% of bankruptcy in America is job lay off, divorce and medical emergency. There is no statistical proof that the percentage of impulse buying has increased in forty years and bank profits have tripled since 1970 even adjusting for inflation after the introduction of credit cards.

So, how about the banks and credit card companies do some self regulating of their own, if they think the consumer should as well, and cease inundating every mail box in America with six billion "pre-approval" offers as they did last year.

The fastest growing segment of the population with credit card debt are seniors and the fastest growing group within this category are seniors seventy five years of age and older. Why? Health care costs. Just what do we expect people of that age group to do when they simply don't have the income to pay for adequate health care? A recent study found that 29% of families caring credit card debt attributed medical expenses as a major contributing factor.

Again, personal responsibility is certainly something that should be addressed in this discussion, but if that is true, and I do believe it is, then there is corporate moral accountability as well. I personally am indignant and angry that the individual, operating from a position of inferior knowledge to the banking, credit card and collections industry is expected to show personal responsibility by choosing inadequate health care or no health care over using their credit card which they are struggling to pay.

If the individual is expected to show personal responsibility for incurring debt to buy groceries for their families if the husband or wife has been laid off or if there is no child support payment in the mail, then we, as a nation, should expect the same corporate accountability and moral compass to govern the actions of the issuers of credit cards rather than the truly indefensible and morally bankrupt tactics used to pad their profits even more from the wallets of those least able to afford it for which the banking industry currently labels as acceptable common business practices.

The following touches on just some of the tactics used by the banking industry, but certainly not all of them and really, not the worst.

Credit Card Tricks and Tactics: What You Should Know

Rated:

Credit cards are regarded with high suspicion by many people. However, some of these same people use multiple credit cards! If you can't avoid using credit cards (perhaps due to necessity), it's wise to at least watch out for the shady tactics some credit companies employ.

The bottom line is this: Consumers are not properly informed. Rising credit card fees and interest rates, coupled with barely understandable credit card disclosure statements and agreements, make for customers who are easily lured into the jaws of debt.

Some stats to give you an overview: according to this 2004 article, there are more than 641 million credit cards in circulation, and this "plastic money" accounts for an estimated $1.5 trillion of consumer spending in the USA. Alarmingly, penalty fees (e.g. for late payment) nearly tripled from $13 in 1995 to as much as $34 in 2005, as stated in this Consumer Affairs report.

The List of Dread

Watch out for these tricks and tactics, as falling into one might be enough to ruin your personal finances. Some of these might not apply to your credit card company, but as a rule, the big boys of the credit card industry employ a slew of these.

Incomprehensible, unreadable fine print -- Even lawyers have a tough time deciphering credit cardholder agreements, because companies have spent huge bucks on making sure they're hard to understand. The true risks and fees are all there alright, but covered up in alien text, they're effectively hidden from you.
Encouraging you to pay late -- This includes mailing your statement as close to the due date as possible, suddenly changing the due date (e.g. from the 25th of each month to the 23rd), setting the due date on a Sunday or holiday, setting a specific time of day when your payment must arrive (and a minute later, you're already considered late!), and even not mailing out statements at all.
$29 late fees -- Is this a little bit high or what?
Balance transfer fees -- You might be enticed to transfer debt from an existing card to one with a low interest rate. Beware, as there's usually a high transaction fee (for example, 5%).
Over-limit fees -- With every month that you're over the credit limit, companies will charge you as much as $39 in over-limit fees. Ah, what happened to the time when they'll just deny any card transaction that puts you over the limit?
Jacking up your interest rate -- Some companies do this when you carry a big balance (under the guise that you're a "high risk") or when you pay your statements late.
Low introductory rates that quickly shoot up the stars -- Many people fall for this, but don't realize that once the shortintroductory period is over, they'll suffer rates as high as 24%.
Not-using-your-card-enough charge -- If you won't use their card for several months (and thus deprive them of earnings), they'll still earn from your account, no matter what, through an inactivity fee.
15 days' notice to change the contract -- The terms and conditions of your agreement with the credit card company can be changed at any time, for any reason with 15 days' notice. Who changes the terms? The company, of course. Is this legal? Unfortunately, yes. What can they change? Your interest rate, above all things.
Minimum payments -- This one might sound good, but when you're only required to pay 2% of your total balance each month, your run the risk of paying off for a long, long time, even passing off your debt to your kids and grandkids.
Monitoring your credit report -- Yes, some companies check your overall credit history. If they see you've got huge debts and/or late payments with other credit companies, they can slap you an interest rate hike.
Preying on young consumers -- College students have long been fodder for credit card solicitations, but now companies are reaching out to high school students, who are not only financially dependent most of the time, but are also psychologically and logically unprepared.
Preying on poor consumers -- Companies do this because know they'll be able to reap all sorts of fees and penalties from these "sweet spots". And if these poor chaps have just emerged from bankruptcy, companies know these customers won't be able to declare bankruptcy for another six years.
Closure fees -- Because they if you're parting with the credit companies, they'll at least want to milk your wallet one last time.
Issuing multiple low-limit cards instead of increasing your limit -- This raises the odds of you going over your credit limit, and thus paying more penalties. This article describes one such awful, real life case.
Anti-customer 'customer service' -- We're guessing that the sooner you give up on the frustrating customer service call, the companies' chances of getting away with their elaborate traps and tricks are better.

What Can You Do?

By reading this article, you've taken an important action to protect yourself and your finances. At least by now, you're aware of these nasty credit card pitfalls. Here are a few more pieces of advice:

Read the fine print -- The credit card's terms and conditions might look convoluted (not to mention miniscule), but this is the first and most important step. Know what you're getting into. If your brain can't handle the stress of reading such hieroglyphical fine print, ask a close relative/friend of yours to read it for you.
Opt out from junk mail and telemarketing calls -- Save yourself the temptation of pre-approved credit card offers and other too-good-to-be-true things.
Check your credit report and score often -- As mentioned earlier, some companies check on your credit report, looking for an excuse to charge you more. What they know, you should also know, right?
Read up on the latest news and federal policies relating to credit cards
Check your monthly statements -- It won't do any good for your debt if improper charges and penalties make it to your bill, and you actually pay for them in ignorance.
Avoid 'debt elimination' scams -- Case in point can be found here. Always remember that there are no magic quick fixes to credit card debt. It takes time and discipline, among other things.
Don't max out your credit cards -- A simple tip that isn't observed by a lot of cardholders.
If you have been wronged, report it to the proper authorities
Don't accept new credit cards, especially from the same company -- Instead, ask for a higher credit limit on the card you already have.
Call up your company and ask for lower rates -- Sounds difficult? Surprisingly not. You are the customer, after all, and they want/need your money. Be polite but firm when talking to the representative (or supervisor, if you work your way up the chain). Tell them of great offers from other creditors (and be sure to know these offers well, don't lie, don't just bluff!), and if they aren't budging, tell them you'll take your money elsewhere.
Know your consumer rights -- A good place to start would be the Federal Trade Commission website.

Of course, the best tip we can give you is to use your credit cards sparingly!

This was found at Article Interest:
http://www.interest.org/article/interest-basic-information/credit-card-tricks-and-tactics-what-you-should-know.html

Ten Secrets Banks Don't Want You to Know About Credit Cards

2007-03-07T19:49:00.000-06:00

Don't you just love it?! More tricks by the Credit Card companies you need to know about.

Ten Secrets Banks Don't Want You to Know About Credit Cards

Interest Backdating Most card issuers charge interest from the day a charge is posted to your account if you don't pay in full monthly. But, some charge interest from the date of purchase, days before they have even paid the store on your behalf!

Remedy: Find another card issuer, or always pay your bill in full by the due date.
Two-Cycle Billing: Issuers using this method of calculating interest charge two months’ worth of interest for the first month you failed to pay off your total balance in full. This issue arises only when you switch from paying in full to carrying a balance from month to month.

Remedy: Switch issuers or always pay your balance in full.
The Right to Setoff: If you have money on deposit at a bank and also have your credit card there, you may have signed an agreement when you opened the deposit account that permits the bank to take those funds if you become delinquent on your credit card.

Remedy: Bank at separate institutions, or avoid delinquencies.
Fees Are Negotiable: You may be paying up to $50 a year or more as an annual fee on your credit card. You may also be subject to finance charges of more than 18 percent.

Remedy: If you are a good customer, ask the bank to drop the annual fee and reduce the interest rate. Otherwise, you can switch issuers to a lower-priced card.
Interest Rate Hikes Are Retroactive: If you sign up for a credit card with a low "teaser" rate, such as 7.9 percent, when the low rate period expires, your existing balance will likely be subject to the regular and substantially higher interest rate.

Remedy: Pay in full before the rate increase or close the account.
Shortened Due Dates: Most card issuers offer a 25-day grace period in which to pay for new purchases without incurring finance charges. Some banks have shortened the grace period to 20 days -- but only for customers who pay in full monthly.

Remedy: Ask to go back to 25 days.
Eliminating Grace Periods: That fabulous offer you received in the mail for a gold card with a $10,000 credit limit and lots of features may not be so great. The most common "string" attached is the card has no grace period. You are charged interest on everything from the day you buy it, even if you pay on time.

Remedy: Throw the offer out!
Disappearing Benefits: Many banks entice you to sign up with extra benefits such as lifetime warranty, a 5 percent discount on all travel or protection if an item purchased is lost. Now, some banks have cut back on these extras without the fanfare that launched them.

Remedy: Read annual disclosure of changes, and switch cards if need be.
Double Fees on Cash Advances: Most credit cards impose both finance charges and a transaction fee on cash advances. Interest starts from the day of the advance, and the transaction fee can be up to 2.5 percent of the amount taken. Beware of cards advertising "no finance charges." Transaction fees may still apply.

Remedy: Limit cash advances.
Misleading Monthly Minimums: You may think it is beneficial to have a card where you only need to pay 2 percent to 3 percent of your balance monthly. It is just the opposite. The bank stands to make far more money from finance charges the longer you carry out payments -- and you foot the bill.

Remedy: Pay all you can monthly.

Congress Investigates Credit Card Interest Rate Abuses

2007-03-07T19:32:00.000-06:00

Congress is investigating the imcomprehensible language in credit card agreements that address the interest rates to be charged. Here is the latest salvo.

Panel slams banks over credit practices

By MARCY GORDON, AP Business Writer 1 hour, 42 minutes ago

WASHINGTON - An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

Executives of three major banks defended their credit card practices as responsible and responsive to consumers' needs in testimony at the hearing of the Senate

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Homeland Security and Governmental Affairs' investigative subcommittee. Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.

The interest charges and fees on Wannemacher's account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin (news, bio, voting record), D-Mich., the subcommittee's chairman.

"Unfair? Clearly, I think," Levin said. He said an investigation by the panel found that "sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers."

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said.

Srednicki said the company has decided it no longer will charge over-the-credit-limit fees to customers who have been in a chronic over-limit position for 90 days.

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.

"Debt seems to invoke a feeling of hopelessness unlike any other problem I've encountered," Wannemacher testified at the hearing. "When a debtor calls you on the phone and you make a minimum payment, you know that you've made no real progress and that in a month, they will be calling again."

Sen. Norm Coleman (news, bio, voting record) of Minnesota, the panel's senior Republican, said high interest rates on credit cards, "hefty fees and crippling penalties impede more and more hard-working families from pursuing their American dream."

The problem is worsened by the "impenetrable" language of credit card disclosures provided to consumers, he said.

While the credit card practices in question are legal, Levin is threatening possible legislation to outlaw them as a spur to the banking industry for voluntary changes.

Senate Banking Committee Chairman Christopher Dodd (news, bio, voting record) and other Democratic senators challenged credit card executives at a hearing in January over rising late fees and other penalties and marketing practices they portrayed as predatory. Dodd, D-Conn., said he was putting the industry on notice that if it doesn't improve practices on its own, legislation may be warranted.

Since Democrats assumed control of Congress in January, they have put a number of consumer issues on the legislative agenda. With Americans weighed down by some $850 billion in consumer debt, the practices of the robustly profitable credit card industry are a compelling subject for scrutiny.

Citigroup, the nation's largest financial institution, announced last week that it was eliminating the practice of so-called universal default — raising interest rates for card customers because of their failure to pay other creditors on time. In addition, Citigroup said it would eliminate some types of interest rate increases that have been criticized.

Credit card issuers raise customers' rates and fees, for example, when they believe it is warranted by conditions in the financial markets. But under Citigroup's new policy, rates and fees will be increased before a card expires only if the customer pays late, exceeds his credit limit or pays with a check that bounces. Or if the rate is linked to the prime interest rate, it would rise or fall in tandem.

Verification/Validation

2007-03-04T11:56:00.000-06:00

I recently received a request for advice from a member of one of my groups as follows:

"Any help would be welcomed. I have an old debt. One that was at a local [Name Withheld], then the [Name Withheld] closed down. I had a 300 credit limit. This was exchanged to a new company [Name Withheld]. By the time I had received it the debt was jacked up in interest and late payment rates, to the tune of 1001.75. I recently got a letter from a new debt collection agency, So I used the validation letter, sent it certified mail. They opened it and signed for it 1 day after the 30 days even though I sent it in ample time. This was signed for Nov 13. I just received a letter from them typed,

"Our records indicate the account was opened on Nov 22, 1998, last purchase Oct 9, 1999 and last payment May 25, 2002. We have no record of returned mail sent to the current or previous billing address on this account. The fair credit billing act requires that any dispute be received no later than 60 days after the first bill was transmitted that reflects the alleged billing error and the Fair Credit Reporting Act requires that information sufficient to identify the specific information in dispute be provided. This information should included the exact date of the transaction and amount in dispute. Additionally, the Fair Credit Collections Practices Act does not state that we have an obligation to forward copies of previously sent billing statements. We have no record of your disputing the account balance or specific transaction during the applicable time periods and your letter does not provide sufficient information for us to investigate any possible dispute, we shall consider our provision of the information above as validation of the debt. If you have information concerning a specific dispute, please forward it to us for consideration. Due to the serious level of delinquency, the account was charged off on February 17,2003 and placed with the first of several outside collection agencies. The unpaid balance will remain on our records and the account will continue to report as an unpaid charge off for the period of time permitted by federal law.

Please be advised that we reserve the right to take whatever action are legally available to protect our interest. "

It is with a collection agency. I'm really confused. I thought that I send a letter to have them prove the charges, I only used 300 on my old [Name Withheld] card. Then if they couldn't prove it Poof. What legal rights do they have here with a charge off???"

I feel this letter serves as an excellent example of how a collection agency should NOT respond to a request for validation and my response to the poster was as follows:

"First … lets address the issue of whether or not your dispute of the debt was timely.

Timely Dispute

30 Days run from the date “validation letter” is received … not from the date it was sent.

"The Supreme Court has stated that "[a] statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." U.S. v. Campos-Serrano, 404 U.S. 293, 92 S.Ct. 471, 30 L.Ed.2d 457 (1971) (quoting Washington Mkt. Co. v. Hoffman, 101 U.S. 112, 115-16, 25 L.Ed. 782(1879)). All provisions of the statute must be considered and each term must be interpreted equally, so as not to deflect from the meaning of the statute. West v. Nationwide Credit, 998 F.Supp. 642, 644 (W.D.N.C.1998). Specifically, as to 15 U.S.C. § 1692, every clause and word must be given force" http://caselaw.home.comcast.net/files/BLAIR-v-SHERMAN.doc

The courts do not simply ignore words within statute.

Fair Debt Collection Practices Act 1692g a 3 > http://www4.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00001692---g000-.html

(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

You have 30 days from the date you RECEIVED the “validation letter”, not from the time they sent it, no matter what claims or demands are made along with the above required statements.

Dispute must be mailed within 30 days, not be received by the Collection Agency within 30 days.

They need not receive your dispute letter within that 30 days so long as you mailed it within 30 days. To claim otherwise would undercut the validation period clearly specified within the Fair Debt Collection Practices Act.

“Nothing in Section 1692g requires, and we have found no other court decision which has required, that the debt collector must receive notice of the dispute within thirty days as defendant insists….. If we were to hold that the validation request must be received by the thirtieth day, we would be rewriting Section 1692g, which we are not entitled to do.” http://caselaw.home.comcast.net/files/CHAUNCEY-v-JDR.rtf

You have proof of when you sent your letter; do you still have the postmarked envelope their letter came in? Or, did you mail your dispute within 30 days of the date of the letter? You can also safely add 3 days to the postmark date ... if you don't recall exactly what date you received the letter.

Having all three dates … Date you received the letter, Date of the postmark and Date of the letter are all nice to have. The date you received the letter is the important date but the other dates can help establish the date it was received if you don’t know the date it was received. A notation of when it was received is best, Date it was postmarked is the next, Date of the letter itself is the least important. If you mailed your dispute within 30 days of the date on the letter itself you are in the clear. I have personally seen a letter sent by a Collection Agency where the letter was dated 10 days before the postmark, which is why that date is the least important or reliable.

Having established that you did in fact timely dispute the debt, we move on to whether or not the collection agency appropriately verified the debt.

Verification of the Debt

Does reiterating information from the Collector Own database suffice as verification?

1692g b states as follows: “(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”

As noted above, “every clause and word must be given force”.

The use of the word “until” by the drafters clearly indicates that the Collection Agency does NOT currently posses what is required to provide appropriate verification of the debt. To assume otherwise would render the word “until” meaningless within the context of the statute. The same applies to the word “obtains”. One does not need to obtain what they already posses. To assume they already have what is necessary to provide appropriate verification would render the word “obtain” meaningless within the context of the statute.

To conclude that the Collection Agency must only refer to the information already in their possession would not only render the words “until” and “obtain” meaningless but would render entire sections of the statute meaningless. Namely: 1692 g a 3, 1692 g a 4 and 1692 g b.

ver·i·fy to ascertain the truth or correctness of

If we concluded that the Collection Agency does already posses the information required to verify … what would they be ascertaining the correctness of? That the printer in fact printed correctly and/or that the post office is actually capable of delivering a letter to the correct address? (no comments from the peanut gallery!)

The conclusion is that the Collection Agency MUST (if they wish to continue to attempt to collect) contact the original creditor to obtain the necessary information and documents to verify the debt. This must then be forwarded to the Consumer.

A Collection Agency who merely parrots information already contained in their database in response to a dispute violates the statute as soon as they make another demand for payment.

What information must be obtained and forwarded to verify the debt?

This is an elusive answer. This issue has been relegated to being judged on a case by case basis in the courts. As such it is extremely difficult lay out in no uncertain terms what constitutes appropriate verification. We can look to court cases for guidance.

In GUERRERO-v-RJM the Collection Agency attempted to claim a letter was verification of a debt. It contained only "date that the account was opened, the date that the last payment was posted, the name and social security number listed on the account, and the current balance". The court found that this was not adequate verification of the debt and found that the letter also constituted an improper (given the lack of verification) attempt to collect the debt prior to providing verification and granted a summary judgment for the Plaintiff (consumer) on both issues. http://caselaw.home.comcast.net/files/GUERRERO-v-RJM.doc

In your case they did not provide you with the SS# nor did it state the current balance. As in the Guerrero case ... "The letter did not indicate the amount or basis of the charges underlying the current balance, nor did it indicate the dates on which such charges were incurred. ........The letter also failed to indicate whether interest was factored into the current balance, and, if so, at what rate and for what time period."

We can also look to the statute for some clarification. 15 U.S.C. § 1692 f 1 forbids “The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Similarly, 1692 e 2 A forbids “The false representation of— (A) the character, amount, or legal status of any debt; or…”

The courts also strive to interpret statute so that the results are not absurd or irrational. The assumption that appropriate verification does not include an account statement detailing the amount and basis of the charges underlying the current balance, would lead to the absurd and irrational result that only by filing suit for violations of 1692 f 1 or 1692 e 2 A could the consumer confirm that they have not violated those sections.

Yet despite these failures ... your Collection Agency’s response clearly is a continued effort to collect the debt in stating "The unpaid balance will remain on our records and the account will continue to report as an unpaid charge off for the period of time permitted by federal law. Please be advised that we reserve the right to take whatever action are legally available to protect our interest."

Other violation contained in this letter

There are other violations contained in the letter you have quoted. The following addresses those violations.

15 U.S.C. § 1692 e states as follows: “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.”

"We have no record of returned mail sent to the current or previous billing address on this account."

This is irrelevant ... what is relevant is that you received their letter containing the statements required by 1692g and that you timely responded by disputing the debt. That being the case they are required to cease collection until they have OBTAINED and provided verification, they have failed to do either as noted above. This also violates 1692 e generally and 1692 e 10, by falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute.

They have also stipulated in this letter that “Due to the serious level of delinquency, the account was charged off on February 17,2003 and placed with the first of several outside collection agencies”

It is highly unlikely, especially after having been through “several outside collection agencies”, that they would have any record of any previous communications to or from anyone regarding this account. It is highly likely that the only information they received on assignment of this account was: Name, last known address, last known phone number, SS#, Date of birth, Date of last purchase, Date of last payment, Date of Charge off, current (as of the time assigned) past due balance. The implication that such a record even exists false and deceptive. As such is another violation of 1692 e generally and 1692 e 10.

Any representation of what a record that does not exist does or does not contains is a false and deceptive means to collect a debt. As such, that representation is a violation of 1692 e generally and 1692 e 10.

The Fair Credit Billing Act

“CONSUMER CREDIT COST DISCLOSURE” is a subsection of CHAPTER 41—CONSUMER CREDIT PROTECTION. Fair Debt Collection Practices Act and Fair Credit Reporting Act also fall under the Chapter 41. What is commonly referred to as “The Fair Credit Billing Act” is a subsection of the “CONSUMER CREDIT COST DISCLOSURE” provisions of Federal Law and it can be found here: http://www4.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_41_20_I_30_D.html

Since the Fair Credit Billing Act is a subsection of “CONSUMER CREDIT COST DISCLOSURE”, the definitions contained in “CONSUMER CREDIT COST DISCLOSURE” apply to its subsections unless otherwise specified within a section.

The Fair Credit Billing Act defines “creditor” as follows: “creditor” refers only to a person who both

regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and
is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a finance charge are creditors. For the purpose of the requirements imposed under part D of this subchapter and sections 1637 (a)(5), 1637 (a)(6), 1637 (a)(7), 1637 (b)(1), 1637 (b)(2), 1637 (b)(3), 1637 (b)(8), and 1637 (b)(10) of this title, the term “creditor” shall also include card issuers whether or not the amount due is payable by agreement in more than four installments or the payment of a finance charge is or may be required, and the Board shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms applicable only to creditors offering open-end credit plans. Any person who originates 2 or more mortgages referred to in subsection (aa) of this section in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this subchapter.”

A Collection Agency is NOT a creditor as defined by the Fair Credit Billing Act. The Fair Credit Billing Act applies only to “creditors” as defined by the Fair Credit Billing Act. A Collection Agency cannot enforce the Fair Credit Billing Act.

"The fair credit billing act requires that any dispute be received no later than 60 days after the first bill was transmitted that reflects the alleged billing error"

This is actually true, however, what they are leaving out is that the Fair Credit Billing Act does NOT apply to a 3rd party Collection Agency, it only applies to the Original Creditor and even if it did, the Fair Credit Billing Act does NOT exempt a Collection Agency from compliance with the Fair Debt Collection Practices Act. This situation/dispute is governed by the Fair Debt Collection Practices Act and as such they must meet the requirements of the Fair Debt Collection Practices Act.

If we accepted the contention that the requirements of disputes under the Fair Credit Billing Act could be applied to third party Collection Agency’s it would create an absurd and irrational result, that being … in the case of an identity theft or mistaken identity, the consumer cannot dispute the debt under the Fair Debt Collection Practices Act because they failed to dispute a debt that they likely did not know existed timely under the Fair Credit Billing Act. This would leave the victim of identity theft or mistaken identity powerless to defend their rights.

This would also in effect re-write the Fair Debt Collection Practices Act to exclude those who are collecting any debt, which at any point fell under the Fair Credit Billing Act, from the requirement to comply with 1692 g b. A statute cannot be read in such a way as to effectively re-write a different statute. Also an absurd and irrational result.

The implication that the Fair Credit Billing Act even applies to the current situation is a violation of 1692 e generally and 1692 e 10.

The implication that you have lost your rights under the Fair Debt Collection Practices Act because you failed to assert your rights under the Fair Credit Billing Act is a violation of 1692 e generally and 1692 e 10.

"Fair Credit Reporting Act requires that information sufficient to identify the specific information in dispute be provided."

(Actually, after further review, I stand corrected from my previous post.)

The Fair Credit Reporting Act does in fact require that specific information be provided. However, this situation is also governed by the Fair Debt Collection Practices Act and the Fair Debt Collection Practices Act places no such requirements on consumers.

"Unsophisticated consumers, whatever else may be said about them, cannot be expected to assert their § 1692 rights in legally precise phrases. It is therefore enough to put debt collectors on notice under § 1692 when a consumer states in plain English…." http://caselaw.home.comcast.net/files/HORKEY-v-JVDB.pdf

By implying that your failure to provide “specific information in dispute” under the Fair Credit Reporting Act excuses them from the requirement to comply with the Fair Debt Collection Practices Act they have violated 1692 e generally and 1692 e 10.

“This information should included the exact date of the transaction and amount in dispute.”

Falsely and deceptively implies that the consumer include more than “I dispute this debt” in violation of 1692 e generally and 1692 e 10.

“Additionally, the Fair Credit Collections Practices Act does not state that we have an obligation to forward copies of previously sent billing statements”

Was this a typo on your part?

“Fair Credit Collections Practices Act” Falsely and deceptively names the law that does govern them. I would guess in an effort to prevent you from finding out what your rights actually are.

I would label this not only as False and deceptive but also unfair and unconscionable means in attempting to collect a debt in violation of 1692 e generally and 1692 e 10, and 1692 f generally.

"We have no record of your disputing the account balance or specific transaction during the applicable time periods"

This is again falsely and deceptively implies that you must provide specific information in a dispute in violation of 1692 e generally and 1692 e 10. This also falsely and deceptively implies that you did not timely dispute, which you did, in violation of 1692 e generally and 1692 e 10.

“and your letter does not provide sufficient information for us to investigate any possible dispute"

I believe this is another repeated statement. This falsely and deceptively implies again that you must do more than state “I dispute this debt” in violation of 1692 e generally and 1692 e 10.

"we shall consider out provision of the information above as validation of the debt"

Falsely and deceptively implies that this letter suffices as appropriate verification in violation of 1692 e generally and 1692 e 10.

"If you have information concerning a specific dispute, please forward it to us for consideration."

Again, falsely and deceptively implies that you must dispute specific information in violation of 1692 e generally and 1692 e 10.

“The unpaid balance will remain on our records…”

Section e 5 of 15 U.S.C. § 1692 forbids “The threat to take any action that cannot legally be taken or that is not intended to be taken.”

This constitutes a threat to take an action, which cannot legally (they cannot legally continue to attempt to collect without providing verification) be taken especially since it was not qualified whether or not they consider it disputed. The letter makes it clear that they feel that you have not made a “valid” dispute. A possibly mistaken yet reasonable interpretation by an unsophisticated consumer, especially considering that the letter unequivocally denies that you have made a “valid” dispute. This is in violation of 1692 e generally, 1692 e 5, and 1692 e 10. This is also a separate violation than if they actually continue to collect, which would violate 1692 g b. As noted previously, this letter itself is an attempt to collect.

“…the account will continue to report as an unpaid charge off for the period of time permitted by federal law.”

Section e 8 of 15 U.S.C. § 1692 forbids “Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”

This letter also violates 15 U.S.C. § 1692 e 8 because they clearly states, “the account will continue to report as an unpaid charge off”, without clarifying that it will also be noted as disputed by the consumer. A possibly mistaken yet reasonable interpretation by an unsophisticated consumer, especially considering that the letter unequivocally denies that you have made a “valid” dispute. If in fact they fail to properly report that you have disputed this debt, it would constitute a separate violation of the same section of the statute.

They cannot legally report this debt without also reporting it as disputed. This makes the threat and the action also a violation of 15 U.S.C. § 1692 e 5.

“Please be advised that we reserve the right to take whatever action are legally available to protect our interest."

This constitutes a threat to take an action, which is not intended to be taken, that they will sue you. This statement violates of 1692 e generally, 1692 e 5, and 1692 e 10.

If this debt is time barred, then legal action cannot be taken. Any attempt to do so would constitute a separate violation of 1692 e generally, 1692 e 5, and 1692 e 10. The threat to take legal action on a time barred debt also misrepresents the legal status of the debt in violation of 1692 e 2 A. See http://caselaw.home.comcast.net/files/FREYERMUTH-v-CBS.pdf (also cites several other cases which held that the threat to take legal action on a time barred debt is a violation)

This letter as a whole violates the act generally (yes this is a legitimate legal claim under the act) because the letter as a whole is an attempt to mislead you as to what your rights and what their legal responsibilities are.

In review, this letter contains the following violations: each one is a separate and distinct violation.

15 U.S.C. § 1692 e generally: falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that a record of previous correspondence regarding this debt with other entities exists and they have possession of that record. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that a record of previous correspondence regarding this debt with other entities exists and they have possession of that record. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e generally: making false and deceptive representation as to what a non-existent record contains. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e 10: making false and deceptive representation as to what a non-existent record contains. ("We have no record of returned mail sent to the current…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that the Fair Credit Billing Act applies to the current situation. ("The fair credit billing act requires…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that the Fair Credit Billing Act applies to the current situation. ("The fair credit billing act requires…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that by failing to assert your rights under the Fair Credit Billing Act you have waived your rights under Fair Debt Collection Practices Act. ("The fair credit billing act requires…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that by failing to assert your rights under the Fair Credit Billing Act you have waived your rights under Fair Debt Collection Practices Act. ("The fair credit billing act requires…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that you must “provide specific information in dispute under the Fair Debt Collection Practices Act” (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that you must “provide specific information in dispute under the Fair Debt Collection Practices Act” (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that any failure on your part under a different act (Fair Credit Reporting Act) excuses them from complying with the Fair Debt Collection Practices Act. (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that any failure on your part under a different act (Fair Credit Reporting Act) excuses them from complying with the Fair Debt Collection Practices Act. (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
15 U.S.C. § 1692 e generally: Falsely and deceptively implies that the consumer include more than “I dispute this debt” (“This information should included the exact date…”)
15 U.S.C. § 1692 e 10: Falsely and deceptively implies that the consumer include more than “I dispute this debt” (“This information should included the exact date…”)
15 U.S.C. § 1692 e generally: Falsely and deceptively misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
15 U.S.C. § 1692 e 10: Falsely and deceptively misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
15 U.S.C. § 1692 f generally: Unfairly and unconscionably misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying again that you must provide specific information. ("We have no record of your disputing the account balance…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying again that you must provide specific information. ("We have no record of your disputing the account balance…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that you failed to timely dispute. ("We have no record of your disputing the account balance…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that you failed to timely dispute. ("We have no record of your disputing the account balance…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that you must include specific information disputed. (“and your letter does not provide sufficient…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that you must include specific information disputed. (“and your letter does not provide sufficient…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implying that this letter suffices as appropriate verification. ("we shall consider our provision of the information…”)
15 U.S.C. § 1692 e 10: falsely and deceptively implying that this letter suffices as appropriate verification. ("we shall consider our provision of the information…”)
15 U.S.C. § 1692 e generally: falsely and deceptively implies that you must dispute specific information (“"If you have information concerning a specific dispute….”)
15 U.S.C. § 1692 e 10: falsely and deceptively implies that you must dispute specific information (“"If you have information concerning a specific dispute….”)
15 U.S.C. § 1692 e generally: The letter as a whole attempt to mislead you as to what your rights are and their responsibilities are.
15 U.S.C. § 1692 e 10: The letter as a whole attempt to mislead you as to what your rights are and their responsibilities are.
15 U.S.C. § 1692 e generally: Falsely and deceptively implies again that you have not made a valid dispute. (“The unpaid balance will remain on our records…”)
15 U.S.C. § 1692 e 5: Threatens to take an action which cannot be legally taken, they will continue to collect. (“The unpaid balance will remain on our records…”)
15 U.S.C. § 1692 e 10: Falsely and deceptively implies again that you have not made a valid dispute. (“The unpaid balance will remain on our records…”)
15 U.S.C. § 1692 g b: Failure to cease attempts to collect the debt until they have provided verification of the debt. (“The unpaid balance will remain on our records…”)
15 U.S.C. § 1692 e generally: Again Falsely implies that you have not made a “valid” dispute. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e 5: Threatening to take an action which cannot legally be taken, failure to report as disputed. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e 5: Taking an action which cannot legally be taken, failure to report as disputed. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e 8: Threatening to communicate credit information which is known to be inaccurate, failure to note as disputed. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e 8: Failing to report this account as disputed by the consumer. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e 10: Again Falsely implies that you have not made a “valid” dispute. (“the account will continue to report as an unpaid charge off”)
15 U.S.C. § 1692 e generally: Again, falsely implies that you have not made a “valid” dispute. (“Please be advised that we reserve the right….”)
15 U.S.C. § 1692 e 5: Threatens to take an action which is not intended to be taken. (“Please be advised that we reserve the right….”)
15 U.S.C. § 1692 e 10: Again, falsely implies that you have not made a “valid” dispute. (“Please be advised that we reserve the right….”)

If the debt is time barred ….
15 U.S.C. § 1692 e generally: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.
15 U.S.C. § 1692 e 2 A: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.
15 U.S.C. § 1692 e 10: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.

The National Average Credit Score

2007-02-26T14:22:00.000-06:00

Check out this article about New Hampshirirites having more debt but being more responsible about it! The national average for credit scores is now 673. Do you know where you stand compared to others? If you don't, go to my web site and get yours now, http://www.iwantafreecreditreport.com.

Study: N.H. residents have more credit cards, debt, better credit
February 25, 2007

CONCORD, N.H. --A study by credit reporting agency Experian finds New Hampshire residents have more debt and charge cards than people in other states, but also are better at managing their credit.

An analysis of 3 million people who sought credit reports from the agency included 12,000 New Hampshire residents. It found the typical New Hampshire resident owes $17,200 in revolving payments for credit cards, cars and home equity loans while the national average is $12,100.

The study also found that the average New Hampshire consumer keeps 5.3 credit cards, higher than the national average of four. But while New Hampshire residents might be deeper in debt, they appear to handle it more responsibly than others -- the state ranks sixth best in the nation for credit scores. The average score here is 701, or 28 points higher than the national average of 673.

"While it might be surprising (that New Hampshire consumers) might have more debt on average, more credit cards on average, in general, on average, they're managing that debt," said Pete Bolin, who conducted the Experian study.

The trend corresponds to a regional profile -- New Englanders as a whole have more debt but better credit scores than their fellow Americans.

Gerald Little, president of the New Hampshire Bankers Association, calls it a modern-day twist on the old stereotype of the penny-pinching Yankee.

"The flinty Yankee is clever about the way they use the cards and understands them and is probably taking advantage of things like points programs," he said.

Of course, there are exceptions.

Dave Deziel of Credit Counseling Services of New Hampshire and Vermont sees the people trying to get their credit under control. The average client has more than 9 credit cards owes around $21,000. Many are elderly and got into trouble by relying on credit cards to get through an emergency, he said.

"As a state, we're pretty well off, so it doesn't surprise me that we might have a significant number of people with more credit cards in their wallet than in other parts of the country," he said. "You've got to remember that credit cards are financial tools. Some people use those tools very well, and some don't."

------

Information from: Concord Monitor, http://www.cmonitor.com

Insurance companies quoting "astonishing" higher rates to lower income applicants based on credit scores but having identical driving records.

2007-01-30T16:58:00.000-06:00

Credit scoring, used in Florida in part to determine insurance rates is being challenged by Florida Insurance Commissioner Kevin McCarty. Seems a blind study has shown a fictional blue collar vs white collar driver with identical records were given a 15% higher quote in Florida and a 40% higher quote nationally. The only difference was occupation and educational levels but the applicants were placed in high risk pools and not even allowed "preferred" pricing because low income profiles indicate lower credit scores.

From the Daytona Beach News Journal

EDITORIAL

January 30, 2007

A logical leap

Job, schooling shouldn't affect insurance

For years, Florida has prohibited automobile insurance companies from discriminating on the basis of race, income or other factors that have no bearing on a person's trustworthiness.

For years, insurance companies have tried to weasel around those restrictions.

And they've been successful -- astonishingly so, given the straightforward nature of the anti-discrimination rules. The most onerous provision allows Florida insurers to base rates partially on credit scores. Because low-income people are far less likely to have established credit (or to have troubled credit histories) this provision ensures that they pay more.

The most agile mind would have trouble establishing a cause-and-effect relationship between paying Visa bills late and crashing your car into a light pole. But that stretch looks easier, compared to the practice uncovered last year by the Consumer Federation of America, and under investigation now by Florida Insurance Commissioner Kevin McCarty.

Last year, the federation conducted an investigation, comparing rates for fictional drivers whose history, vehicle and other factors were nearly identical. The only variants the group used were occupation and education level.

The differences were astonishing. Nationally, rate quotes for blue-collar workers averaged 40 percent higher than quotes provided for highly educated professionals. The gap in Florida was less, but a blue-collar price quote still came in $112 higher for a six-month policy -- a gap of more than 15 percent.

The federation targeted GEICO, a company that advertises car insurance nationwide, for its study. The rate differences were largely due to the fact that GEICO, like many insurance companies, divides its business among sub-corporations. Blue-collar workers -- even with spotless driving records -- were not eligible to be covered by GEICO's "preferred" company and were shuffled into subsidiaries with higher base rate structures.

GEICO isn't alone. Other companies -- Allstate, Progressive and Liberty Mutual -- also use some form of occupational and educational rating.

Companies argue that there's a numerical correlation between occupation, education level and the number of claims filed. In fact, they may be able to demonstrate a statistical coincidence -- but it's hard to imagine how the companies could prove a solid, causative relationship between driving skill and education or occupation. Particularly one that doesn't trace back to the forbidden factors of race or income.

The federation makes a compelling case that these policies do constitute illegal discrimination. Black and Hispanic Floridians are less likely to have advanced degrees, and more likely to work blue-collar jobs. Even if the insurance companies didn't intend to discriminate based on race or income, this policy may well do so.

In the long run, state leaders should see good public policy isn't behind a move to make insurance less affordable for the people who can least afford it already. McCarty is right to be looking into this -- and lawmakers should take heed, making these illogical rate structures off-limits -- a prohibition that should include credit scores as well as occupation and educational level.

Distinguished Professor of Law Testimony to the Senate Banking Committee

2007-01-29T10:38:00.000-06:00

Here is the link to Dr. Elizabeth Warren's testimony to the Committee on Banking, Housing and Urban Affairs of the United States Senate. Ms Warren is the Leo Gottlieb Professor of Law at Harvard Law School. She is also the author of, "The Two Income Trap: Why Middle Class Mothers and Fathers are Going Broke". Her testimony is gripping and powerful.

http://banking.senate.gov/_files/warren.pdf

Teens are paying with plastic but know you can get burned.

2007-01-28T18:22:00.000-06:00

The good news is that this generation of teens are seeing the massive amount of debt their parents and friends are incurring with credit cards and 38% don't think it is a good idea. The bad news is, 62% think it is ok to have credit card debt as a teen.

Plastic is a hot teen accessory
Credit, debit card youths' increasing use concerns many
By LESLIE A. PAPPAS, The News Journal

Posted Sunday, January 28, 2007

Amanda Jett (left), 17, was a little older than her 14-year-old sister, Brittany, when she started paying with plastic. Though Amanda uses a debit card, she said she's not ready for a credit card, and her parents agree.

The News Journal/WILLIAM BRETZGER

Amanda Jett has paid with plastic since she was 15 years old.

The 17-year-old from Bear uses her PNC Bank debit card, linked to a checking account her mother co-signed, to buy gas and occasionally clothes.

"I'd rather carry it than cash," she said.

She's not alone. Whether their wallets hold debit or credit cards, teenagers under 18 are using plastic more than ever.

According to Teenage Research Unlimited, a research firm based in Northbrook, Ill., 15 percent of teens ages 16 to 17 have their own debit card, and 5 percent have a credit card in their name.

"Recent research shows that the fastest growth of credit-card use is among 16- to 18-year-olds," Robert Manning, the author of "Credit Card Nation," told the U.S. Senate Committee on Banking, Housing, and Urban Affairs last week.

Children under 18 are unable to apply for a credit card on their own, but can become an authorized user on a parent's card.

Now credit card companies are trying to increase the amount teenagers put on plastic by introducing new products like prepaid credit cards, such as the VISA Buxx card or MasterCard's Allow card, which are essentially gift cards that teens can use at any retailer. Parents and authorized adults, such as grandparents or employers, can load money onto the card. Card companies profit through fees.

Credit-card issuers "definitely are aiming at teenagers," said Ellen Cannon, who covers the credit card industry for Bankrate.com. "It's an untapped market. There are millions of them."

And they're spending more every year. America's 33.5 million teenagers (ages 12-19) spent a record $179 billion in 2006, Teenage Research reported in its fall 2006 survey.

Some financial educators worry that teenagers won't be able to handle credit cards.

"Cognitively to really understand the nature of credit, it doesn't really hit until we're 23 or 24 years of age," said Maria Pippidis, who teaches financial literacy classes at the University of Delaware's Cooperative Extension. As a group, teenagers are often unaware of the pitfalls of credit, she said.

Part of the problem is that many teenagers don't have good examples to learn from, said Robin Smith, who teaches personal finance classes at Smyrna High School. She advises her students to freeze their credit cards in a block of ice if they're not able to pay the entire bill off each month.

"Many of them comment, 'My father should be in here,' " Smith said.

Credit-card debt in the United States has skyrocketed to $872 billion. As a nation, Americans now charge over $1.8 trillion on more than 640 million cards annually.

Senate Banking Committee chairman Christopher J. Dodd, D-Conn., pointed out last week the average American household has more than $9,300 of credit-card debt.

But there are signs that America's teenagers may be growing up more financially savvy than previous generations.

Hannah Rittenhouse, 17, of Newark, said she buys what she wants with the cash she earns at her job at Friendly's restaurant. She doesn't have a credit card and doesn't want one.

"I'd end up getting in debt with it," she said. "Once I get cash it burns a hole in my pocket."

Amanda said she's not ready for a credit card either, and her parents agree.

"We would probably never consider credit cards at that young age," said Amanda's father, John Jett. "We're trying to instill in her that you only purchase what you can afford."

A Teenage Research survey in 2004 showed that teens, though familiar with plastic, are wary of credit card debt. About 38 percent of adolescents 12 to 19 said cards should be limited to adult use. Only 3 percent believed it was OK to make purchases on a credit card without having the money to pay off the full monthly bill.

"I think they're very realistic about debt," said Teen Research's vice president Michael Wood. "If there's one word to describe this generation of teens, it's pragmatic."

Wood also said that this generation, which has grown up counting cell-phone minutes, has learned earlier how to manage credit-card-type accounts. Open discussions with their parents about finances has made many more aware of the dangers of debt. And the increasing use of cards in general has taken the cachet out of owning a credit card.

"Their wallets are full of plastic, whether it's a phone card or a gift card or an ATM card," Wood said. "It's no big deal."

Contact Leslie A. Pappas at 324-2880 or lpappas@delawareonline.com.

WHICH IS RIGHT FOR MY TEEN?

DEBIT CARD

Pros: Uses money in checking or savings account. Easy to set up.

Cons: Risk of overdrafting account and incurring fees. Does not build credit history. Must report lost or stolen card within two business days or may be liable for $500 of unauthorized transactions.

PREPAID OR STORED-VALUE CARD Pros: Spending limited to amount loaded on card. Online checking of balances and spending. Authorized adults can load funds. Employers can load wages onto some cards. Can be used many places.

Cons: Fees are charged for activation, loading money, monthly maintenance and many more actions. Does not build credit history.

JOINT CREDIT CARD Pro: Builds credit history.

Con: Parent and teen responsible for debt.

SECURED CARD Pros: Credit limit set by savings account balance. Builds credit history.

Con: Fully collateralized account may have higher interest rate than noncollateralized account. Really.

AUTHORIZED USER

Pro: Easy to set up.

Cons: Teen can piggyback on parent's credit history. Parent solely responsible for debt. Potentially puts parent's credit score at risk.

Source: Bankrate.com

Senate Banking Committee looks at credit card rates and fees. And not favorably!

2007-01-25T17:13:00.000-06:00

Presidential elections are still two years off but I predict this kind of Congressional oversight is going to intensify as Democrats continue to gain control of committees. The situation is affecting just too many people adversely and is a viable issue of major concern for voters of every demographic and age. Oversight is long overdue and abuse is now plainly visible to anyone that has a credit card. And now, with 640 MILLION cards in circulation, pretty much everyone has experienced the abuse of credit card companies with their contemptible practices of hidden fees and usury rates. Even members of Congress.

Critics urge Congress to rein in credit card companies
Posted 1/25/2007 12:50 PM ET

WASHINGTON (Reuters) — Consumer advocates urged Congress on Thursday to limit the rates and fees that credit card companies can impose, saying the industry's heavy-handed tactics are piling on debt for many Americans.

"No industry in America is more deserving of oversight by Congress," Travis Plunkett, legislative director of the Consumer Federation of America, said in prepared testimony for a Senate Banking Committee hearing.

The panel, led by Democratic presidential hopeful Christopher Dodd of Connecticut, is looking at billing, marketing and disclosure practices in the U.S. industry.

Critics say some credit card issuers use practices that victimize lower income households with an unexpected rise in interest rates or extra fees because of a drop in their credit scores. Meanwhile, richer Americans are able to pay off charges each month and enjoy perks such as frequent flier miles.

For example, if a consumer is late in paying another credit card bill, home mortgage, utility bill or even a book club membership, some credit card issuers declare a "universal default" and trigger higher interest rates on their credit card.

Dodd put the credit card industry on notice.

"If you currently engage in any business practices that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice," Dodd told credit card executives at the hearing.

But Dodd also said that consumers must take more responsibility for understanding their credit card contracts.

In 2005, about 44% of credit card issuers surveyed by the non-profit group Consumer Action assessed universal default interest rates. Those issuers included Citigroup, Washington Mutual, HSBC Holdings and Wells Fargo, according to the group.

"Even consumers who always pay on time cannot avoid the price abuses," said Michael Donovan, an attorney at the National Consumer Law Center.

Donovan and Plunkett urged senators to protect consumers by limiting rates and fees charged by credit card issuers.

Credit card companies defended the industry.

Richard Vague, chief executive of Barclays Bank Delaware, a unit of Barclays, said it is not in his company's interest to issue credit cards to consumers who cannot pay back money they have borrowed.

"For that reason issuers strive to provide credit cards only to consumers who can handle the credit offered them," Vague said.

Capital One Financial, the fifth-largest issuer of credit cards with 30 million accounts, said it does not use the practice of universal default.

Capitol One General Counsel John Finneran told the panel the company has limited what circumstances can trigger higher rates. "There is only one circumstance in which a customer might be subject to default pricing — if they pay us more than three days late twice in a 12-month period," Finneran said.

JPMorgan Chase's Chase Bank USA acknowledged that some credit card disclosures are too complex for consumers to understand.

"Disclosure language should be simple, clear and focused on the most relevant terms and conditions consumers need to understand," Carter Franke, chief marketing officer at JPMorgan Chase, said in testimony.

Critics said many credit card issuers have lowered the monthly minimum payment amounts to about 2% from about 5% in the 1970s. This has encouraged consumers to accept more credit offered by the companies, resulting in lengthier periods to pay off the debt, they said.

Other questionable tactics involve applying penalty interest rates retroactively to prior purchases and lowering loan limits that trigger fees and higher rates.

Based on Federal Reserve figures, Plunkett estimated outstanding credit card debt amounted to $750 billion to $800 billion in November 2006. The industry has more than 640 million cards in circulation.

Copyright 2007 Reuters Limited.

Millionaire in the making: Sherelle Derico Valuable Lessons to be Learned

2007-01-25T10:00:00.000-06:00

What I love about this lady is that she has accomplished all that she has without CREDIT CARDS!! While she has sacrificed more (and therefore appreciates what she has) than may be required of the average person, she is demonstrating what is really the key to staying out of the quicksand of "bad" debt. She also understands what "bad" debt is and what "good" debt is as evidenced by her $460,000 in home equity and almost $140,000 in savings!

Millionaire in the making: Sherelle Derico
Single mother sacrifices, then savors, prosperous course for herself and her daughter.
By Christian Zappone, CNNMoney.com staff writer
January 25 2007: 9:48 AM EST

NEW YORK (CNNMoney.com) -- Sherelle Derico, 36, had a three-week-old daughter and no job when she and her husband split in 1996. But the challenges of the separation and single motherhood didn't deter her from seeking financial success.

"It was frightening. Most definitely," said Derico of the experience.

At the time of her divorce Derico, who held an accounting degree, was already considering earning a master's degree.

"As soon as the baby turned one I started on a Masters in Financial Management at the University of Maryland," she said.

The period brought changes not just in her educational and career goals but in her spending habits, too. Derico, who enjoys interior design, says she used to spend a lot of money on clothes and furniture. She used to travel more.

Today, she prefers to pay off debt and to save money down to the penny. When this journalist contacted Derico on her cell phone, one of the first things she asked is, "Can you call me back on my land line? I want to save on my minutes."

Derico's personal history helps explain her habits. After becoming a mother and getting divorced she returned to a former employer who hired her back - for a lower-paying job. Then 9/11 happened, and she got laid off.

"I found myself in lots of debt. That's when I started to save a lot of money," said Derico, who now works as senior consultant in project management for Booz Allen Hamilton in the Washington, D.C., area.

25 rules to grow rich by
Derico has paid off roughly $25,000 in student debt, personal loans, and credit cards debt she racked up in 10 years. She paid for her master's degree mostly in cash along with matching plans from her employers.

Also, five years ago she started receiving a small amount of child support which is now $700 a month.

As for her own money, Derico puts 20 percent of her income into her 401(k) and IRA.

She says she's adamant about paying into her savings like she would any other bill.

She has $95,000 in an account with TIAA-CREF. Her Booz Allen 401(k) account has $36,000. She keeps about $8,000 in her regular savings.

"My friends say I'm pretty obsessive [about my savings]," Derico says, pointing out that she 'loses it' if her savings fall below a certain amount.

Buying a home
Although Derico faced lean times, she has managed to set and keep financial goals - like homeownership.

But Derico's 1999 purchase of the four-bedroom, two-bath, 1,300 sq. foot Fairfax, Virginia, town home didn't come without sacrifice.

She was enrolled in her master's program at the time and had to ask for a refund on that semester's tuition in order to come up with the down payment for the house.

To scrimp for the rest of the payment, she says she didn't go to the grocery store for three months and instead ate only the food she had stockpiled in her pantry.

"The majority was canned food," she said. "Spam. Ramen noodles soup."

But her daughter Sharmon didn't mind. Sharmon, who was 4 years old at the time, wanted to be able to jump; living in an apartment with neighbors in the unit below meant she couldn't.

Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.

Not long after, she refinanced and brought the length of the mortgage down to 15 years.

More Millionaires in the Making
The value of the property has soared in Fairfax County's overheated real estate market. Similar homes in the area sell for $500,000-$600,000.

Derico has racked up $460,000 in equity in the town home.

She wants to pay off the mortgage in 10 years, which would mean she would own the home outright by 2009.

She points out that "any extra money goes towards [her] mortgage."

Although Derico still sacrifices today, she no longer has to buy ramen.

Money handling
Today her one indulgence is a new 2007 LS460 Lexus. She bought it after paying off her 1996 ES300 Lexus. She financed the new car through her credit union.

Derico has no credit cards and pays for everything in cash with the exception of her Lexus. If she can't use cash, she uses a debit card. She also uses coupons and savings cards when eating out and for groceries and toiletries.

She eats turkey sandwiches every day at work and never eats out during the week. Her entertainment/dining out budget is $100. For the month.

One trick that has helped Derico, who still confesses to a weakness for impulse buys, is to save money in her ING money market account. Once you contribute money to it, you can't touch it for two or three days, which she says prevents spur-of-the-moment purchases.

In terms of stretching dollars, "my friends try to figure out how I do so much on my little income. I've been called a penny-pincher, a thrift-saver, a cheapskate."

Derico says she learned little about financial management from her parents. Instead, her money education came from financial literacy lessons she took at her church.

She wants to pass those lessons on to her daughter.

Sharmon doesn't get a fixed allowance, but Sherelle makes sure she always has some money on hand. Sherelle expects her daughter to save at least 10 percent of the money. As an incentive, at the end of each month, Sherelle matches whatever Sharmon takes to the bank. Including change.

Sherelle then shows Sharmon what's going into her account every month and how much her money has grown.

"My friends say [Sharmon] knows a lot more about finances than they do now," Sherelle says, noting, "she understands credit cards aren't a good thing."

Sherelle does the same with the 529 education plan she opened up for her daughter last year, which so far has more than $3,000 in it.

And finally, Sherelle has Sharmon tithe 10 percent to the church, as Sherelle does when not contributing to the renovation of her grandmother's 30-year-old house.

Future plans
Since Derico is on track to be debt-free in five years, including her mortgage, her prospects of a comfortable retirement are substantially raised.

She says she would like to retire from her current profession one day and move back to her home state of Georgia to teach financial literacy in the schools there. She'd also consider working part time.

She toys with the idea of starting an interior design business if it didn't mean going back to school. Sharmon, now 11, would one day like to be a graphic designer.

With the financial lessons applied to her own life, Sherelle Derico says she doesn't understand people who don't pay attention to their money. "It's nothing you can ignore," she said.

She marvels at people who can't make their finances work while they're employed, because if they can't succeed now that they're making an income how will they survive when they're not working?

"You can finance everything else," said Derico. "But retirement is the one thing that can't be financed."

Here is a lesson plan for teaching financial literacy from the previous post.

2007-01-25T09:54:00.000-06:00

This is one of the courses from the previous post.

Money Math: Lessons for Life
is a teacher's guide for helping middle school math students learn how to manage their money, stay out of debt, and save for retirement. Lesson plans, reproducible activity pages, and teaching tips are included in the 86-page guide, which draws on real-life examples from personal finance. (Department of the Treasury)

20% of 12 year olds have at least one credit card!

2007-01-25T09:39:00.000-06:00

The most recent statistic that I have seen says that 20% of 12 year olds in this country have a credit card! Fifty percent of 18 year olds have at least one but more often have two.

This is a FREE site that teaches Financial Literacy and is provided by the Federal Government. It targets teenagers to them finance basics. Educators and others can obtain these materials free of charge and is a good resource.

The link is: http://www.free.ed.gov/
subjects.cfm?subject_id=189&res_feature_request=1

"Credit card companies have a special word for the customers who pay in full every month. They're called deadbeats."

2007-01-24T15:28:00.000-06:00

This couple, the Peterson's, story was shown on ABC and their situation is not atypical for many Americans even though the numbers are higher than most. While the couple profiled do bear personal responsibility, it also true that credit card company's don't want the average consumer to pay off their credit card debt each month. Hence, the term "deadbeats" because these people don't make them any money.

"Nothing helps the credit card companies' bottom line more than the fees and high interest rates they earn from consumers who are struggling with their payments.... According to the Government Accounting Office, credit card issuers make 70 percent of their profit from the interest payments made by cardholders who carry a balance every month."

The issue for me and for many consumer advocates, is that if the Peterson's bear some responsibility for their circumstances, so too do the credit card companies both on a personal level and corporately for charging usury interest rates and exorbitant fees.

Certainly, the corporate culture and mentality that classifies anyone that pays off their monthly bill as a "deadbeat" because the prohibitively excessive fees and interest rates are lost on them, is a violation of two hundred years of American business ethical standards and in any other setting are and would be considered criminally predatory.

I also vehemently disagree with the strategy of selling their home and rental property to pay off unsecured debt. While downsizing to cut expenses is not a bad thing, there are alternatives to trading the roof over their heads and most of their home equity to pay unsecured credit card debt. Short term gain, long term mistake in my opinion and very poor one dimensional advice.

By LEE HOFFMAN, JONEIL ADRIANO, and JESSICA HORNIG

ABC News

Jan. 19, 2007 — Meet the Petersons. Matt is a software engineer and Suzie works mostly at home raising their three daughters: Julianne, 12, Rachel, 11, and Caroline, 9.

They live in an upscale California neighborhood in a 4,000-square-foot home with a pool, a huge walk-in wine cellar and even its own movie theater. They drive nice cars and own a second home and two vacation time shares.

How do they do it? They're in debt up to their eyeballs.

"I know that we don't make ends meet each month, and to make ends meet, we use credit cards, and then the credit card payments start increasing, and you just can't make ends meet even doing that," Suzie said.

Their monthly household income of $8,750 isn't enough to cover all of their expenses, which total $15,000 a month. For over a year, the Petersons have relied on credit cards to keep afloat financially.

Using one card to pay off the other, their credit card balances eventually ballooned to $60,000. Their Bank of America Visa alone has a balance of $19,000, at an interest rate of nearly 33 percent.

The burden of their debt is something that keeps Suzie up at night. "I woke up at 2:30 a.m. this morning because yesterday we went to the diner and tried to use the debit card and it didn't work."

An Epidemic of Debt

The Peterson's financial situation may sound shocking, but they are not alone. Nationally, credit card debt is growing — almost tripling since 1989. Today, American consumer debt is over a trillion dollars. More than half of all cardholders don't pay their cards off each month and carry an average balance of around $2,000.

Ironically, families like the Petersons — who struggle to make the minimum monthly payments — are more valuable to credit card companies than customers who pay in full every month. According to the Government Accounting Office, credit card issuers make 70 percent of their profit from the interest payments made by cardholders who carry a balance every month.

Still, credit card companies insist they are not banking on customers' inability to pay.

"Credit card issuers are concerned about people who are only able to make the minimum payment because those people are at significant risk of not repaying the loan in the short term and that means the bank loses the money," said Nessa Feddis, a lawyer with the American Bankers Association, an industry trade group.

For that reason, Feddis says, credit card companies are constantly adjusting their policies to minimize the number of customers paying only the minimum amount.

Read the Fine Print

Elizabeth Warren, who teaches bankruptcy and commercial law at Harvard University, disagrees. "Credit card companies have a special word for the customers who pay in full every month. They're called deadbeats."

Nothing helps the credit card companies' bottom line more than the fees and high interest rates they earn from consumers who are struggling with their payments. For example, one of the Petersons' credit cards charges a $39 fee for going over the spending limit or being late on a payment.

And even if the Petersons always pay their bill on time, the bank can still increase their interest rate to 32 percent if the Petersons are late with a car or mortgage payment, or any other payment to a creditor. That's because a "universal default" clause is buried in the fine print of the Peterson's credit card agreement, the terms of which can be changed by the credit card company "at any time for any reason."

"There's no contract like that anywhere else in America," said Warren, a contract law expert who admits that even she has trouble understanding some of the terms of credit card agreements. "They're deciding all the rules."

"We agree that the disclosures could be better," said Feddis. But she also argued that some responsibility has to fall on the consumer. "Pay off at the end of the month and pay no interest. Every cardholder has that opportunity. They make that choice."

They Never Stopped Spending

In the Peterson case, a series of bad choices contributed to their massive debt. Six years ago, Matt lost his job and spent more than a year out of work. During that time, Suzie decided to open two scrapbooking stores. When her business folded last year, they ended up losing about $200,000 — most of it borrowed money. There were also some bad real estate and stock investments.

Even as their financial situation worsened, however, the Petersons continued to spend. Last year alone, they took three vacations — a cruise through the Carribean, a trip to Whistler, Canada and another to Hawaii.

he cruise was a contest prize, while other expenses were covered by their time shares. But all together, those vacations still cost the Petersons $4,000.

Matt concedes the vacations may have been unwise, given their dire finances. "OK, we need to be punished, I guess," he said.

Suzie, however, has no regrets. She saw the vacations as a way to bond with her daughters. "The cruise was my gift to my family."

'The Ship Is Starting to Go Down'

To help them dig out from under all of their debts, "20/20" introduced the Petersons to financial planner Robert Pagliarini, author of "The Six-Day Financial Makeover," a step-by-step guide to transforming your financial life.

After reviewing the Petersons' financial records, Pagliarini calculated that they were about five months away from bankruptcy. All of their debts translated to a loss of $200 each day.

Pagliarini, the president of Pacifica Wealth Advisors in Los Angeles, likened the Peterson's situation to the Titanic.

"You've already hit the iceberg," he explained. "The ship is starting to go down. That's the bad news. The good news is you still have a small window of opportunity to make some changes."

Taking Action

Pagliarini devised a six-month action plan to rescue the Petersons from economic ruin. First, he advised them to dump their expensive time shares, even though this will mean the Petersons will lose $46,000 on their investment.

Pagliarini hopes they can recoup some of those losses by also selling their home and their second rental property. He believes those transactions will net the Petersons about $113,000.

Pagliarini then wants the Petersons to use that money to pay off their $60,000 credit card debts. If they take all of these steps, Pagliarini believes, the Petersons will actually have a few thousand dollars leftover to save and invest.

The catch? It's an all or nothing proposition. "Do all the big things or do none of them, because if you just do one, two or three, it's not going to work," said Pagliarini.

Matt Peterson is excited by Pagliarini's plan. "We can't wait. I mean we literally can't wait," he said.

Suzie was less enthused, saying, "We have no place to live and $3,000."

Digging Out of Debt

But by getting rid of all of their real estate, the Petersons will also unload expensive tax bills, mortgage payments and maintenance fees — drastically cutting their monthly expenses.

When all the dust settles, Pagliarini believes the Petersons will be able to afford to rent a house in their neighborhood on Matt's current salary, and still have about $1,200 extra cash every month to save and invest. Compare that with the $6,250 the Petersons are now losing every month.

Pagliarini told them, "At the end of the day, after the cameras are off, it's you two. And you really have to decide, 'Are we willing to make these kinds of changes?'"

In the last week, the Petersons have begun contemplating some of those changes. They spoke to a real estate broker about listing their house and rental property. Pagliarini says he is always a phone call away to offer support, but whether this family can dig out from all that debt is now up to two people — Matt and Suzie Peterson.

From 1992 to 2004, the percentage of households 55 and older with overall debt grew faster than the rate of the overall population.

2007-01-23T14:28:00.000-06:00

Retirees up against debt

Updated 1/23/2007 2:12 PM ET

Tommie Nell Hettick, 74, of West Palm Beach, Fla., in her senior-living efficiency that she shares with her dog, Myssy, used credit cards to cover medical costs not paid for by insurance. Enlarge By Andrew Itkoff for USA TODAY Tommie Nell Hettick, 74, of West Palm Beach, Fla., in her senior-living efficiency that she shares with her dog, Myssy, used credit cards to cover medical costs not paid for by insurance.

PAY OFF MORTGAGE, GET LOW-INTEREST CREDIT CARDS

By Kathy Chu, USA TODAY

How seniors can get out and stay out of debt: Build up an emergency fund.

Try to save three to six months' worth of expenses in an account you can access for an emergency. This stash will keep you from using high-interest-rate credit cards if you run short of cash for medicine or home repairs. Consider paying off your mortgage while you're working. This will free up cash for unexpected expenses. If you're paying a higher rate on your mortgage than you're earning on investments, you can clear your mortgage debt and focus on growing your portfolio. There is a drawback: You'll lose a tax deduction on your mortgage interest. That might not matter much, though, if you're in a low tax bracket or receiving only a small deduction because your mortgage is nearly paid off. Get low-interest-rate credit cards. Look for a card with no annual fee, low late fees and low rates on purchases and cash advances.

Curtis Arnold of CardRatings.com says consumers with an average credit score around 665 to 685 should be able to find an average interest rate for purchases of 15%. If your score is higher, you should get even better rates. Charge purchases to credit cards only if you can pay them off each month. If you're already in heaps of debt, stop using plastic and pay off as much debt as you can. Also, call your card company and ask for a lower rate. If you have good credit and pay on time, you have better odds of reducing your rate.

Avoid payday loans.

The annual rates on these short-term loans you can borrow money for a week or a month average close to 400%, says Jay Speer of the Virginia Poverty Law Center. Instead, ask your employer if you're working if it will give you an advance on your paycheck. Ask creditors if they'll give you more time to pay or reduce the payment for a month or so. And don't be afraid to ask a relative for help. Seek credit counseling. Counselors try to negotiate lower rates and a flexible payment schedule with your creditors. They can also craft a debt-repayment plan. Avoid credit counseling agencies that charge high fees or offer you advice without reviewing your situation closely. For more tips on finding a reputable counselor, check AARP's website, http://www.aarp.org, and the Federal Trade Commission's site, at www.ftc.gov.

By Kathy Chu, USA TODAY

Across the nation, seniors are becoming the face of the indebted. In Austin, Ronald and Carol Godwin, 65 and 63, depleted their savings years ago and have since turned to credit cards and home equity to pay medical bills. They're struggling in retirement to pay off loans they took out years ago for a grandchild's college education. In Scott Depot, W.Va., Carl Brown, 68, has an impossible decision to make every month because his Social Security check usually doesn't cover all of his mortgage, utility, food and medical costs. "I know there's no way for people to believe this, but there are times when I get my Social Security check and just send everybody I owe $15 to $20," says Brown, a widower who has suffered a heart attack and stroke. "There are times when I can't buy groceries or medicine."

Retirement used to be a time for people to enjoy life without a mortgage or high credit card bills, a time when heavy debts were mostly a thing of the past. Increasingly, that's no longer true. Some seniors are taking on debt in retirement to fund a trip they've always wanted to take. But a growing number are in debt because they have no choice, according to debt counselors and a growing body of research.

Soaring health care costs are hitting seniors at a time when more employers are cutting back on retiree medical and pension benefits. People are living longer. Yet many seniors subsist on fixed incomes and have little means to boost their incomes. For them, debt provides a temporary — and often costly — reprieve from unexpected expenses.

From 1992 to 2004, the percentage of households 55 and older with overall debt grew faster than the rate of the overall population. Those 75 and older packed it on most quickly: The average load for those households with debt shot up 160% to an average of $20,234 during this time, according to research by the Employee Benefit Research Institute, a non-partisan group that studies economic security.

Among households 65 and older, the average amount of credit card debt more than doubled from 1992 to 2004, to $4,907, according to Demos, a New York think tank. Seniors' debt levels are catching up to those of younger people.

Seniors in and approaching retirement — such as the oldest baby boomers — are carrying "debt loads that their parents would not have considered," says Sally Hurme of AARP, the advocacy group for people 50 and older. "This does not bode well for financial health."

Unmanageable debt is forcing some older people to delay retirement. It's nudging others already out of the workforce back in. And it's causing a record number of seniors to seek bankruptcy-court protection.

Seniors 65 and older represent the fastest-growing group seeking bankruptcy protection, though they made up only 5% of all bankruptcy filers as of 2001, the last year for which figures are available, according to research by Deborah Thorne, assistant professor at Ohio University; Elizabeth Warren, a Harvard Law School professor; and Teresa Sullivan, a former professor at the University of Texas at Austin.

As the first wave of the 79 million baby boomers begins retiring, debt problems are likely to swell. "People are having their cycle of expenses later in life," because they're postponing marriage and children, says Deanne Loonin, a staff attorney at the National Consumer Law Center. "They're resolving expenses later."

Mary Alice Jackson, an elder-law attorney in Sarasota, Fla., says, "We're at the tip of the iceberg.This generation will have no problem at all racking up debt and worrying about it later."

Seniors' debt levels began surging in the 1990s as health care, housing and energy costs soared. Their incomes failed to keep up with higher consumer prices.

The booming stock market of the late 1990s offset higher prices by boosting most investors' wealth on paper. But seniors didn't benefit as much because most of their assets were in conservative investments, such as bonds and certificates of deposit.

Fixed incomes

Complicating matters is that many seniors live on fixed incomes. One illness or disability can plunge them into crushing debt. Retirees "don't always have the ability to say, 'I'll work harder, I'll work more,' " if they need more money in retirement, says Howard Krooks, an elder-law attorney in Boca Raton, Fla.

Seniors such as Irvin Towson, 84, find themselves needing a job to pay off debt. Towson, of Goldsboro, N.C., was laid off as a fire-department fundraiser in 2005 after having a heart attack and a stroke. For about a year, he's been unable to pay the minimum on about $15,000 in credit card bills. "They send you credit cards in the mail, and you take them and use them because you don't have any idea that you're going to get sick one day," Towson says. "I had no plans to retire. I was going to go as long as I could."

Card debt is one of the top reasons seniors seek bankruptcy protection, according to an analysis of bankruptcy filings in central Florida by professor Rebecca Morgan and associate dean Theresa Pulley Radwan of Stetson University College of Law in Gulfport, Fla. "We've heard anecdotes of individuals who would get a credit card offer in the mail and didn't understand that when youhave a credit card, you have to pay it back with interest," Morgan says.

Those seniors who are less accustomed to spending on plastic are more vulnerable to falling into a cycle of card debt, fed by rising interest rates and late fees, says Loonin of the consumer law center.

The good news is that fewer older people live in poverty compared with other age groups, largely because of Social Security benefits, experts say. But as baby boomers retire, that may change because of "the combination of higher debt levels and the (possible) erosion of this safety net," Loonin notes.

Gail Storer, 58, and her husband, Donald, 61, left the workforce early because of disabilities. Now, they live on Social Security payments of $1,800 a month. They also receive Medicare because they've both been disabled for more than 24 months. But it's not enough to cover expenses related to Gail's breast cancer and Donald's lung disease.

That's why in 2005 the couple began turning to payday loans — month-long loans with interest rates that work out to a heart-stopping 180% or more annually — to pay rent, car repairs and health costs. The Storers, of Smithfield, Va., owe $4,255 on 12 payday loans. They just want to get themselves out of what they call a "vicious merry-go-round" of debt. So they're talking to financial experts about how to get rid of the debt.

"I say to people all the time, 'Our golden years have a lot of rust on them,' " says Gail. "Major health problems put a dark cloud on what were supposed to be these great years of our lives."

Tommie Nell Hettick, 74, didn't expect to be saddled with credit card debt in retirement. Nor did she figure on being unable to afford to maintain a car or to visit her three kids — who are spread around the country — whenever she wants.

"I had the impression I'd do more" in retirement, says Hettick, who lives on $1,100 a month from a pension and Social Security. With her limited income, "If I have to visit someone, I can't do it. I had to give up the car because it costs so much in insurance."

After breaking her arm, dislocating her hip and hurting her back in recent years, Hettick used credit cards to pay for medical costs not covered by insurance. The debt — accruing at rates of 20% to 30% — eventually became too much to handle, prompting her to seek help last year from a credit counseling agency. She owes more than $6,000 in card debt and pays $200 a month, aiming to erase the debt in three years or so.

"It hit me all of a sudden that I was never going to get it paid off" because of the high interest rates, says Hettick of West Palm Beach, Fla. "I don't have 30 more years." She doesn't ask her kids for help, she adds, because of what she calls "old Southern pride" and the desire to "stand on my own two feet."

Yet Krooks, the elder-law attorney, says roughly half the seniors he counsels receive financial help from their adult children.

Getting help

Across the USA, a rising number of seniors like Hettick are flocking to counselors for help with debt. David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, says he's noticed a "major uptick" in older clients seeking counseling. The trend is most pronounced in states such as Florida and West Virginia, which have the highest proportions of residents 65 and older.

Cathy McConnell of West Virginia Senior Legal Aid says seniors' "unbelievably easy access to credit" makes it all too easy for them to topple into debt. Surging health care costs are also causing more seniors to turn to credit cards as a safety net, experts say.

"The biggest complaint I hear is, 'I pay and pay and pay every month, and my debt doesn't go down much' " because of high interest rates and a slew of penalty fees, McConnell says.

In desperation, some seniors will pay off their bills at the expense of their health and well-being. In Scott Depot, W.Va., Brown says he often makes monthly payments toward his $8,000 in medical bills, $5,000 in credit card debt and $78,000 in mortgage debt before buying groceries or medicine because, "My word ismy bond. You tell someone you're going to do something, you're going to do it."

On Jan. 3, Brown received his monthly Social Security check of $1,100. Two days later, after paying bills, he had $24 left to buy food — less than $1 a day to get him through the month.

Homes at risk

Amid the soaring housing market of recent years, those 55 and older, like others, have piled up record amounts of mortgage debt. They've refinanced their homes and cashed out equity. They've also turned to reverse mortgages, borrowing from home equity to receive a stream of income. From 1992 to 2004, the percentage of households 55 or older with housing debt rose to 36% from 24%, the Employee Benefit Research Institute found. The median amount of mortgage debt rose 63% during this time, to $60,000.

Rising mortgage debt poses a serious threat to seniors' financial well-being, says Craig Copeland of the research institute, because they're "putting at risk their most important asset, their home."

Worse, a growing number of seniors with mortgage debt also carry credit card debt, says Loonin of the National Consumer Law Center. "The two are interconnected, because if you're taking on more debt because you're short of cash, then you're going to be taking on both kinds of debt."

Some seniors use one creditor to pay off another. This strategy becomes especially dangerous if seniors tap out all their lines of credit, debt counselors say.

Over the past decade, the Godwins of Austin used credit cards to pay off about $140,000 in medical bills that insurance didn't cover. The bills piled up after Ronald Godwin lost most of his vision in the late 1990s and Carol Godwin was diagnosed with cancer in 2005. As interest rates on the cards jumped, the Godwins moved into a smaller house. Then they refinanced the house to pay off credit card bills. Now, they're crossing their fingers that they won't have more unexpected health costs.

"I didn't expect all this (debt)" in retirement, Ronald says. "I had saved money, but it just seemed like it went away overnight."

Retirees up against debt - USATODAY.com

The first candidate that stakes out this issue in the Presidential Election will have a substantial block of voters in his/her corner.

2007-01-23T12:53:00.000-06:00

You are going to see this becoming a bigger and bigger issue as the number of Baby Boomers continue to increase. Studies are showing the fastest growing population of credit card debt is seniors and it is for necessities rather than luxuries. Also, unlike their parents, Baby Boomers have no savings, so in times of medical emergency credit cards are now their safety net. This is a huge and growing problem.

Using credit cards to pay medical bills adds to debt, says study

Posted on : Mon, 22 Jan 2007 12:21:00 GMT | Author : Steve Walters
News Category : Health

New ( News Alerts by Email click here )

NEW YORK: Increasing use of credit cards to pay medical expenses in the U.S. is allowing debt levels of families that resort to this measure to escalate and putting them at financial risk, according to an analysis by a public policy advocacy group.

The non-partisan group Demos, in the study titled Borrowing to Stay Healthy: How Credit Card Debt Is Related to Medical Expenses, found that those who identified medical expenses as a factor in their credit card balances had much higher credit card debt than those who did not.

The group, along with another research organization, the Access Project, had analyzed data from a 2005 national survey involving phone interviews of households that had incomes between 50 per cent and 120 per cent of the local median income and credit card debt for three months or longer. The analysis revealed that households with medical debt had an average credit card debt of $11,623, while households without medical debt had an average credit card debt of $7,964.

As much as 29 per cent of households reported that medical bills contributed to their debt and of this group, 69 per cent had a major medical expense in the previous three years.

The analysis also revealed that even those with health insurance are saddled with out-of-pocket expenses for health care as they have no assets or income safety nets to cover these significant costs. Average credit card debt of the uninsured who had medical debt was 32 per cent higher than for insured people who had medical debt. Adults in the age group of 18-34 had the highest levels of medical debt, averaging $13,303, compared to an average credit card balance of $7,450 among young adults without medical debt.

The authors of the report contended that when a person takes out a large loan, the repayment is spread over several years. However, since hospitals and medical services insist payment before providing the service, people have no alternative but to use the credit cards, repayment of the debt having to be made within 30 days.

The report recommended evolving national guidelines for identifying and differentiating medical debt, limiting the entry of medical providers into financial services, increasing oversight for medical credit cards and lines of credit attached to HSAs, improving screenings for financial assistance programs and restricting fees and interest on medical credit cards.

Supreme Court Case to Watch Carefully - Can Insurance Companies Use Credit Reports to Set Rates Without Telling the Consumer?

2007-01-18T09:59:00.000-06:00

This is one to keep an eye on and will have huge implications for consumers throughout the country.

After pouring in millions and millions of dollars on the state level, insurance companies have won most of the highest profile initiatives placed on the ballot during the last election aimed at stopping the use of credit reports to set rates. The most successful tactic used was the claim by the insurance companies that all rates would go up if they couldn't target the reprobates who had bad scores.

This Supreme Court decision would require the consumer to at least be notified if credit reports were used to set the rate and would allow the consumer to sue the insurance companies for violating the FCRA if they don't notify.

With 70% of all credit reports containing serious errors, there is room for significantly higher rates, and therefore higher profits, to be imposed on an uninformed consumer with no knowledge of erroneous information existing on their report. Not to mention the nightmare the consumer will face getting incorrect negative items off their report.

If the insurance companies win this case, rates can be based on credit report information (whether correct or not) without the knowledge of the consumer and without them ever having to be notified. Nice.

Posted: 1/16/2007 10:39:00 AM

Court ponders insurance credit scores
Source: AP

SUPREME COURT -- Should auto insurance companies be required to inform consumers when their credit scores are used against them?

That's the issue today before the Supreme Court in the case of an Oregon man who didn't get a preferred rate from GEICO. He said he should have been told that his credit scores weren't high enough to lower his rate.

The Fair Credit Reporting Act holds businesses liable when they fail to inform customers of adverse decisions made because of credit reports.

GEICO and another insurance company, Safeco, are appealing a federal appeals court's decision that would make it easier for consumers to prevail when they sue corporations for allegedly violating the law.

Much of the business community has lined up behind the insurers. But consumer groups complain that insurance companies are looking for ways to avoid notifying customers when credit reports are used in making a decision.

Minorities Fighting Credit History in Hiring and Insurance Rates

2007-01-18T09:33:00.000-06:00

This is just a wonderful article that addressing the increased use of credit history in the hiring process. The only problem is that studies have validated that there is no correlation to job perfomance and credit history. I hope this lady wins hands down!

from the January 18, 2007 edition - http://www.csmonitor.com/2007/0118/p01s03-ussc.html
The spread of the credit check as civil rights issue

Minorities are starting to fight employers over the use of credit history in hiring.

By Ben Arnoldy | Staff writer of The Christian Science Monitor

BOSTON
Lisa Bailey worked for five months at Harvard University as a temp entering donations into a database. When the university made the job a salaried position, Ms. Bailey, who is black, saw a chance to lift herself out of dead-end jobs.

Bailey's superiors encouraged her to apply, she says, but turned her down after discovering her bad credit history.

Bailey, with her lawyer, has lodged a complaint against Harvard charging racial discrimination. The reason: Studies show that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance.

Some privacy and minority advocates are now seeing credit as a civil rights issue as minorities start to fight employers and insurers who base decisions on credit histories. Their effort could slow the near doubling in credit checks by employers in the past decade, which impacts millions of Americans who are struggling with debt.

"It's definitely a civil rights issue because of the growing use of credit reports and credit scores for hiring, renting an apartment, insurance, and the fact that people of color have not been integrated into the credit scoring system as much as traditional, white, middle-class America," says Evan Hendricks, author of "Credit Scores & Credit Reports: How the System Really Works, What You Can Do."

In a 2004 study involving 2 million people, the Texas Department of Insurance found that blacks have an average credit score roughly 10 percent to 35 percent worse than whites; Hispanics have scores 5 percent to 25 percent worse than whites.

Credit checks are a growing factor in hiring, with 35 percent of employers checking applicants' credit in 2003, up from 19 percent in 1996, according to the Society of Human Resource Management (SHRM). Typically credit reports are done if a person is going to deal with money, says John Dooney, a manager of strategic research at SHRM.

A case for considering credit

Employers should look at credit only for jobs where the information is relevant, says Lester Rosen, president of Employment Screening Resources, a national background screening firm in California. He cites a few examples:

• For jobs handling money, people may have the motive to steal if their debts surpass their salary.

• For jobs requiring travel, bad credit could bar applicants from renting cars or buying tickets.

• For jobs managing money, the report can offer some clues on how applicants manage their own.

Particularly in that last scenario, he cautions employers to be circumspect since blemishes might be errors or beyond the person's control, such as sudden medical expenses. Legally, employers must receive written permission from applicants to do a credit check, and must give those denied because of credit a chance to respond.

Mr. Rosen defends the careful consideration of credit in the hiring process. "If Harvard hired a person and did not use a credit report and the person embezzled, what would the headline be?" he asks.

So far, there's a lack of data supporting a relationship between bad credit and theft by employees. In perhaps the only study published on the subject, Jerry Palmer and Laura Koppes at Eastern Kentucky University in Richmond in 2003 found no correlation between employee credit reports and negative performance or termination for dishonesty.

Antidiscrimination laws bar a hiring practice that disadvantage minorities – even inadvertently – unless a company can prove it's related to measuring a person's capability to do a job. Bailey's lawyer, Piper Hoffman, has taken on several cases in which companies used credit as a factor in the hiring process. In one 2004 case, she says, an employee's lawsuit against Johnson & Johnson resulted in a settlement that changed the way the company used credit in its hiring practices.

"In the larger picture, we're hoping to get Harvard and other employers to stop using credit as a criterion in hiring," Ms. Hoffman says.

Bailey lodged her complaint in November with the Equal Employment Opportunity Commission (EEOC), which reviews all such cases before any lawsuits can be filed. Agency officials say there's anecdotal evidence these cases are on the rise.

"Employers seem to be assuming that somebody with a poor credit history is more likely to steal, and I don't think there's any kind of evidence that supports that," says Dianna Johnston, assistant legal counsel with the EEOC. "To the extent that the employer has done an in-depth look and found other indices of dishonesty, they would be on more solid ground."

In a statement, Harvard noted that a "relatively small percentage" of jobs at the university require a credit check.

"The university conducts credit history reviews for employment purposes as required by credit card issuers, as well as to fulfill our fiduciary and data privacy responsibilities," says the statement. "Those responsibilities include protecting the private credit card data of our students, faculty, parents, and alumni."

Bailey says that if Harvard was concerned she might steal, the university should have looked at criminal records instead. "I was a cashier for many years and I've never been rich and I've never stolen money," she says.

She ran into credit-card debt she couldn't pay back when she spent some time unemployed. Harvard, she says, offered to reconsider if she could clear up her report in one week.

"The only way I can get it cleaned up in seven days is if I have money, so there was no way," says Bailey.

Catch-22 for poor people

Ernest Haffner, an attorney adviser with the EEOC, notes that employers who screen for credit are setting up a Catch-22 for poor people: They need jobs to get good credit, but employers won't hire them because they don't have it.

The racial component to credit histories has been challenged in the insurance arena, too. The Texas Department of Insurance study found a relationship between credit scores and claims filed.

However, a class-action lawsuit against Allstate has just been settled, which resulted in the company changing the way they evaluate credit reports, says Wendy Harrison, a Phoenix-based lawyer who brought the case.

"What we've argued in our [insurance] cases is that you can adjust for [racial bias]," Ms. Harrison says, who has also handled cases of credit screening by employers.

Employers, however, are probably not relying on a number rating that can be adjusted, since, according to Rosen, agencies only give them specialty reports that don't include a score. Harvard says their report had no score.

As for Bailey, she still wants the Harvard job, and says there would be "no hard feelings." But first she wants to change the system for herself and others. "I hope I win. It might be beneficial to other people, too," she says.

The first of a four part post prepared by the Credit Union National Association

2007-01-17T13:03:00.000-06:00

This is an excellent series! Just fantastic information. I will post each of the four chapters over the next day or so. Even though it was created back in '97, it still has much, much to say.

Credit Union Car Facts
Vehicle Buying Guide
Prepared for CUNA by Remar Sutton

©1997 by Credit Union National Association Inc. All rights reserved, including the right of reproduction in whole or in part in any form.

Contents
What's Really Happening Down at the Dealership?
Buying a Car the Right Way—the Car Facts Way
Dealing With the Dealership—Negotiate the Right Way
Buying a Used Car

Chapter 1 - What's Really Happening Down at the Dealership?

To listen to the ads, you'd think saving money on a vehicle was as easy as going down to the showroom and signing your name. But it's much more complex than that. Did you know a dealer can sell you a car for exactly what he paid the manufacturer and still make $500 to $1,000 on just the car? Or that "zero percent" financing may cost you more than financing at a credit union—even if the credit union's rate is 10%?

The entire automotive market is about the last place in America where you must survive on your bartering skills. To save money, to get the car that's right for you at the best price, you must know what you're up against and how to negotiate in that high-pressure arena. This Credit Union Car FactsSM Vehicle Buying Guide will give you that valuable education. If you will read and work carefully, you might keep up to $3,000 or so hard-earned dollars in your pocket—rather than putting them into the dealer's. Ready to learn how?

Start by looking at what you're up against. You need to understand this first. Then we'll discuss how to find the right car—new or used—and how to negotiate its purchase the right way—the Car Facts way.

The pressure game starts even before you get to the dealership. Just look at dealer ads: They promise low payments, big sales, big money for your trade, and respect for your intellect. But, often, these promises come with some crossed fingers. For example, did you know that many dealers make more during sales than they do at "nonsale" time? That's because we consumers automatically equate the word "sale" with "save." That's dangerous math. Dealer advertising really has another purpose: to get you to rush down in a fit of excitement ("Really? Just $99 a month?!") without stopping to think or, not coincidentally, stopping to compare costs or products.

Then dealers put you in the dealership "track system," a tried-and-true selling process with one objective in mind: to get more money from each part of the transaction than you were planning to pay. Want to spend $250 a month? A savvy dealership will get you to pay $300. Or they happily will sell you a car for $250 a month—but it will be a car you could have bought for $200 a month.

Even if their ethics are clean, face it—they're pros at selling cars, and you're likely an amateur at buying them. The people at the dealership, nice and smiling though they may be, simply have a different objective in the car transaction than you do. Their goal always is to maximize profit.

And that might mean leaving out an important fact or two. To take one example, what would you do if you owned a dealership that sold cars ranked lowest on the government crash safety reports? Would you tell all your customers, "Oh, don't forget—our cars are the most dangerous on the road."

See the problem? To survive, dealerships generally can't give you all the answers you need to questions about such matters as a car's safety, reliability, or resale value, or its cost to the dealer, or the amount you should budget to pay for a new vehicle.

But those questions are important, aren't they? And you'll need the answers before you even look in the direction of the dealership. Why? Because once you're there, the "track system" will take over—whether you like it or not.

What are track systems?
Track systems are simply different ways to control you, confuse you, and put you on the approach to maximum profit for the dealership. Recognize and understand the system, and put yourself on the approach to saving big money. Here are the most popular track systems and selling techniques:

The deposit/driver's license technique. You're barely seated when the salesperson requests your driver's license, or your Social Security number, or a deposit "to show my boss you folks are serious." Two things are happening here: If they get your money, you won't leave; and if they have your driver's license and/or Social Security number, they can run a credit check on you. Oh, did they forget to ask you first? Why would they do that? To plan the amount of profit they'd like to make.

The "T.O." system. T.O. stands for "turnover." You're sitting in a salesperson's office, thinking about how much more fun it would be to live in a dentist's chair than go through this, when your salesperson returns with reinforcements. The new smiling face asks for more money. And then the salesperson asks for more. And then the dealership chaplain comes in.

The T.O. system operates on the principle of "fresh faces can work miracles." A miracle, in this instance, is defined as more profit. And as long as you give, they'll keep asking.

The note system. Rather than send in reinforcements, the salesperson steps out, returning with a nice note from the sales manager asking for more money. And then another note, then another. Usually, they come back with five, and usually the last two ask for raises of odd amounts of money—for instance, $113.29, or, finally, $23.19. The note system has one basic problem. It makes you think the dealership is negotiating when it's really only play-acting.

Consider the odd raises. These are designed simply to make it look like you're really a shrewd bargainer. You know, you think you've got them "down to the pennies." At note system dealerships, customers generally are given all five notes asking for more money—even if the customer already has agreed to pay full list price!

The "foursquare" system. The salesperson divides a piece of paper into four squares and then asks for your "wish list": What do you want to pay a month? What do you want for your trade? What do you want to pay for the new car? However ridiculous the sums, each is written in a square. Then they ask for your signature in the fourth square and a large deposit.

Then they begin to "work" you on each square separately, starting with a figure far from yours and very slowly negotiating down, constantly scratching through figures. By the time they finish, the paper is illegible, you're so frazzled you've forgotten your name, but the salesperson is smiling. You've agreed to pay an additional $1,200 to $1,500 profit.

The foursquare system probably is the worst system in use today because it negotiates the four squares as if they're not interrelated. For instance, as if changing the down payment and trade-in allowance doesn't affect the payment. Baloney. Don't deal with dealerships that use this system.

Spot delivery. "You can take it home today!" That is the most expensive statement any car dealer can make. Spot delivery means emotion is ruling you, rather than good sense. It also means you (very conveniently for the dealer) won't have the opportunity to compare costs and terms. Never buy a car on your first visit. Wait a day and the price will tumble.

The finance manager approach. Even if you have the cash in your pocket, you'll be forced to talk with most dealerships' finance people. Why? Because dealerships make the real profit in the finance office. If the dealership can convert you to its financing, it'll sell you credit life and credit disability insurance that's almost always more expensive than a credit union's but sounds downright cheap on a "pennies a month" basis. Then they'll sell you "protection" packages—rustproofing, undercoating, fabric conditioning—"for just $19 per month." Why, you can afford that! But over 60 months, you will pay more than $1,140 for products you don't need—or if you think you do, could get for $800 less elsewhere. The same approach works for extended warranties or mechanical breakdown insurance, too.

Remember: Finance managers, even if they're called "advisers" or "counselors," are simply high-pressure salespeople.

The "leasing is better" approach is the newest ploy in system selling. Even if you've negotiated a great deal (as a matter of fact, especially if you've negotiated a great deal), most dealerships these days have one final surprise for you: They're going to try to "switch" you to leasing rather than buying. They're not doing this as a public service, either. Leasing a vehicle generally is much more profitable to a dealership than selling that very same vehicle. Most of the time, it's thousands of dollars more profitable.

Leasing can be a smart way for some of us to finance a vehicle. And your credit union may offer either a leasing program, lease-like loans, and/or our Car Facts Vehicle Leasing Guide. But leasing is smart only if you've done your homework. Don't lease a car from a dealership or even from a credit union without really understanding the transaction and its actual costs, both in the short run and the long run.
Track systems, in any shape or form, are not friends of your pocketbook. Please repeat. And daily, the methods grow more sophisticated and subtle. For instance, many dealerships now track customers' movements by computer, rate their moods on scales entered into computers, and flash their progress in the buying process on computer screens so managers and other salespeople throughout the dealership can monitor the careful plan to sell. How can you avoid the traps? Read on.

"This beautiful custom van can be yours for $1 under invoice. Unbelievable! And we got zero percent financing. Even more unbelievable. Take it home tonight! We're open to midnight. No gimmicks, just good deals. Come see us."

This is a good article from MSN Money

2007-01-17T12:42:00.000-06:00

Sometimes I find the "advice" handed out by columnists tend to err on the side of the advertisers that buy large blocks of space in their publications. However, this one is full of good info by Liz Pulliam Weston.

7 home-buying traps - MSN Money
Liz Pulliam Weston
The Basics
7 home-buying traps

First-time home-buyers face an unfamiliar road and risk purchasing the wrong place at the wrong time. Here's a guide to the potholes.
By Liz Pulliam Weston

Buying your first home is an exercise in faith. You don't really know what you're getting into, you're awash in unfamiliar terminology and everyone you meet seems to have strong (and utterly contradictory) ideas about which way the housing market is headed.

You may not be able to avoid every home-purchase mistake, but you can keep your regrets to a minimum by avoiding the following traps:
Blindly using your agent's inspector
Your agent may recommend a home inspector because he does a good job -- or because he keeps his mouth shut about problems that could torpedo the sale.

Yes, it's terrible to have to be so suspicious, but this is a big investment you're making. A good home inspection can keep you from buying a money pit. You can ask your agent for a recommendation, but get referrals from other recent buyers and try to interview at least three potential candidates before making your choice.

Few states regulate home inspectors closely, so real-estate columnist Ilyce Glink recommends you choose someone who belongs to the American Society of Home Inspectors, which requires its members to complete at least 250 inspections (or 750 if they don't have other licenses and experience). Ask about fees (which typically range from $300 to $700) and whether the inspector is licensed, bonded and insured, said Glink, author of "100 Questions Every First-Time Home Buyer Should Ask." Make sure you get a detailed, written report and, if at all possible, accompany the inspector so you can discuss the findings while they're still fresh.
Taking advice about what you can afford
Your agent, your broker and your lender don't know what you can afford. At best, they know the underwriting guidelines for various loans, which are designed to minimize the lenders' losses, not ensure that you'll maintain your financial health.

As I wrote in "8 big mortgage mistakes and how to avoid them," lenders know that you'll do whatever it takes to pay your mortgage, even if that means shortchanging your retirement, forgoing vacations and piling on credit card debt. You need to be the one to set limits on how much you want to borrow and how you borrow it. In general, limiting your housing costs -- including mortgage, property taxes and homeowner's insurance -- to 25% of your gross income will ensure you have enough money left over to cover other goals, like retirement savings.
Getting a 'temporary' loan
I'm hearing this potentially dangerous advice more often now that so many markets are spiraling out of the reach of first-time home-buyers: Get a mortgage with a low payment now, then refinance in a few years when your income is higher. This is the way some brokers and lenders are hawking adjustable-rate mortgages as well as their more exotic cousins, interest-only and flexible-payment loans.

There are a couple of problems with this advice. The first and most obvious is that no one can predict where interest rates will be five years from now. If they're substantially higher, you will have just passed up the opportunity to lock in rates when they were near generational lows. If your payment has been rising with those rates, you may not be able to afford your home even if your income is higher.

The other problem if you opt for one of the exotic mortgages is that you may not be building any equity in your home. If prices drop, you may owe more on your house than it's worth, which is going to make refinancing pretty tough unless you can come up with a ton of extra cash.

More experienced homeowners who are disciplined about money might be able to handle a trickier mortgage.

The better advice for first-time home-buyers may be to opt for a loan that will remain fixed at least as long as you plan to be in the home. If you plan to move after five years, for example, a good choice might be hybrid loan that remains fixed for five years before becoming an adjustable-rate mortgage. If you'll be in the home for a decade or more, or aren't sure how long you'll be there, you might want to opt for the security of a 30-year fixed-rate loan.

"You're locking in your housing costs for the next 30 years," said real-estate investor Gary W. Eldred, author of "The 106 Common Mistakes Homebuyers Make (and How to Avoid Them)." "If interest rates go up, your payment stays the same, and if they go down, you can refinance." Before you decide on a mortgage, spend some time in MSN Money's Home Financing Decision Center and educate yourself about the options.
Opening or closing credit accounts
Both can hurt your all-important credit score, the three-digit number lenders use to help gauge your credit-worthiness. That can result in your getting stuck with a higher interest rate or losing the loan you want all together. (Read more about credit scores at MSN Money's credit rating Decision Center.)

Real-estate columnist Tom Kelly knows how important credit scores are, but didn't think much about the ramifications when he applied for a new credit card while in the process of applying for a home-equity line of credit. That, plus his wife's closure of a few other accounts, shaved more than 30 points off the couple's credit score.

It was "really bad timing," Kelley said. "The lender for our proposed line of credit basically said, 'What have you guys been doing?' after our application had been filed and the new FICO scores had arrived."
Failing to investigate the neighborhood
"One common mistake is not looking at the property and the neighborhood at various times," said Dick LePre, senior loan consultant for RPM Mortgage in San Francisco and author of the RateWatch newsletter. "Look at it during the day, the late afternoon when kids tend to cluster, at night and on both weekdays and weekends."

This ongoing inspection can reveal good news, bad news or both. You may find your home is on a popular shortcut for commuters or near the gathering place for local kids, but only for a few hours a day.

"Something which you construe as a problem might only happen one day a week or at a certain time of the day," LePre said.

He also recommends quizzing a few neighbors about what they like and don't like, and about which direction the neighborhood seems to be going.

"Find out if there are any 'crazies' on the block," he said. "If there is empty space nearby, ascertain what the zoning is for that empty space. Is the next block over ... zoned commercial? Do you want a McDonald's as a neighbor?"
Buying when you're not ready
Buying a home is a great way for the average person to build wealth over the long run, but it's not for everyone in all circumstances.

If your finances are uncertain or your job prospects are up in the air, you might want to wait. Renting is also a better option if you're planning to move in a year or two.
Not buying when you are ready
All that said, you shouldn't let fear or uncertainty keep you on the sidelines if you're otherwise ready to buy a home.

Eldred notes in his book that the media have been decrying the high cost of housing and predicting price peaks at least since the 1940s. Although prices have fallen in various cities at various times, the overall trend has been upward.

Eldred recommends being cautious if your market is showing signs of weakening, such as:

* Properties staying on the market longer.
* A widening gap between the costs of owning and the costs of renting.

Even then, don't put off a purchase if you're able to stay put for several years -- long enough to ride out any downswings.

"In five or 10 years, prices will be higher than they are today," Eldred predicted.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

Banks Gone Wild

2007-01-15T11:53:00.000-06:00

Banks Gone Wild - New York Times

The other day I heard a fact that takes what is said here even to another level. There are now more Payday Loan centers in this country than there are McDonald's hamburger stands. The interest rates these guys are charging are ruinous, shoud be against the law and make the 29.99% he mentions in this article laughable. Try 400% interest.

What this guy recommends is to let some state legislators know you thoughts on a couple of things like usuary interest (which can be controlled on the state level). I agree. Have a look at this article and note that bankruptcies have encreased 443.5% between 1985 and 2004.

Op Ed
By JOE LEE and THOMAS PARRISH
Published: January 13, 2007

Lexington, Ky.

I OWE about $12,000 in unsecured debt, and my payments just keep going up,” a troubled citizen signing himself T. P. recently informed a personal-finance columnist. He always paid more than the minimum amount due on his credit card bill, but “still the balance never goes down,” T .P. wrote. “Is there any way to get the interest rate down?”

The interest rate that so oppressed T. P.? A towering 29.99 percent. At this rate, the columnist said, if T. P. continued to pay little more than the monthly minimum, it could take him more than 30 years to pay off his balance — even if he never went shopping again.

Trying to fight off a collection agency while paying little or nothing on his credit card debt, another desperate borrower, R. Z., appealed to this same columnist. How could he prevent interest charges and late fees from mounting? He couldn’t, replied the columnist, as long as he legally owed the money.

Consumers like T. P. and R. Z. find themselves caught in the complexities of today’s bankruptcy laws. And their predicament is increasingly common.

Thirty years ago, the unlucky R. Z. would probably have struck many of his acquaintances as something of a deadbeat: Hadn’t he voluntarily run up a debt and then tried to slip out of the deal? T. P., on the other hand, would have received sympathy as the victim of a heartless usurer (if interest rates equal to one-third of the principal had been legal in those days).

But in today’s strange alternative universe of credit card banks, the term “deadbeat” refers not to the improvident borrower but to the solid citizen who prides himself on paying off his balance every month. As anybody with a mailbox knows, credit card issuers make unrelenting efforts to lure accounts from one another as well as to establish new accounts. And what these lenders seek are “revolvers,” people like R. Z. and T. P., who are likely to pay little more than the monthly minimum — and who eventually find themselves in thrall to mushrooming interest payments, abundantly garnished with late fees.

As for the morality involved in lending money at exorbitant rates, the word “usury” itself has taken on a quaint, archaic sound, like “jousting” or “necromancy.” What happened?

In 1978, the United States Supreme Court delivered a landmark decision that freed banks to charge the interest rates allowed in their home states to customers across the country. This decision, at a time of high inflation, unleashed a national credit storm: states scrambled to relax usury laws in order to attract banks, while banks rushed to establish affiliates in states that weakened or abolished such laws. R. Z. and T. P. are the natural products of this unhappy change. One obvious recourse for people like them is to file for bankruptcy. There’s the stigma to consider, of course. But making such a move would allow R. Z. to end the harassment by the collection agency and both men to make fresh starts free of unsecured debts.

Unsurprisingly, in the 25 years since the credit explosion began, personal bankruptcy filings have risen sharply. Bank advocates have argued that this reflected debtors’ increasing abuse of the protections granted by the Bankruptcy Reform Act of 1978. Personal bankruptcies, said the industry, were costing every household a hidden tax of $400 a year, in the form of rising prices and higher interest rates. It mounted a campaign against what banks called an “epidemic” of defaults by debtors.

In 2005, these suffering financial institutions succeeded in securing the adoption of new federal legislation, the marvelously named Bankruptcy Abuse Prevention and Consumer Protection Act. Nobody who favored this bill chose to see that the bankruptcy epidemic had been produced in large measure by the banks, or that the real hidden costs were the usurious interest rates these banks charged borrowers.

Two simple comparisons demonstrate the point: From 1980 to 2004, personal bankruptcy filings increased 443.45 percent, which is certainly impressive. But over the same time, consumer credit debt rose a bit more, by 501.29 percent. In 1980, less than one personal bankruptcy case was filed for each $1 million in consumer credit outstanding; the figure was slightly smaller in 2004.

Bankruptcies tend to rise as amounts of credit rise. No mystery there, and certainly no epidemic. It all suggests that the bankruptcy code was performing remarkably well.

But the banks got what they wanted from Washington. Since the law has been on the books, people like R. Z. and T. P. have continued to receive all kinds of credit offers (no limits there), but they may have a much harder time now fending off disaster through bankruptcy protection.

A group of credit-counseling firms that provide bankruptcy screening — a step the new law requires — report that 97 percent of the clients could not repay any debts at all, and 79 percent sought relief for reasons beyond their control, like job loss and large medical expenses and, notably, rising credit card fees and predatory lending practices.

A boomerang effect has appeared, too. The new law contains a provision forcing many debtors into Chapter 13 compulsory repayment plans. The bill’s backers expected this fresh squeeze on debtors to produce more cash for the banks, but the trend appears to be downward.

In adopting the provision, Congress disregarded the advice of every disinterested group that has looked at the question, including three presidential commissions, the Congressional Budget Office and the Government Accountability Office. It also ignored a past House Judiciary Committee report, which declared that such compulsion might well amount to the imposition of involuntary servitude.

So the lending goes on. People classed as the “working poor,” now beginning to be tapped by the credit card vendors, no doubt constitute a rich supply of coveted potential revolvers — fresh customers for the banks to draw into the credit maze, with its minimums and its unending late fees. In signing the 2005 act, President Bush declared that it would make more credit available to poor people. Unquestionably so. And 30 percent interest was just what they needed, wasn’t it?

Joe Lee is a federal bankruptcy judge. Thomas Parrish is the author of “Roosevelt and Marshall.”

Home Equity Loan to Pay Credit Card Debt, Bad Idea!

2007-01-09T19:55:00.001-06:00

Home Equity Loan to Pay Credit Card Debt, Bad Idea!

I couldn’t help but notice there have been a few articles circulating around espousing the merits of taking a home equity loan out to pay off your high interest credit card debt or other types of unsecured debt. Did you notice they often are written by mortgage brokers?

Here is my problem with consumers taking out these types of loans. One, they are attempting to borrow their way out of debt, which is impossible and overall, just a terrible idea. Secondly, they are borrowing from what is essentially the savings account of their home equity. For most people, this is their single biggest investment and financial asset. So, this loan to pay off unsecured debt is secured by the roof over their heads which costs more each month when a loan is taken out against it.

Let's look at a worst case scenario that is all too common. It might help you if you envision it before taking out one of these types of loans. You get a bigger house payment with the borrowed money, your credit cards get paid off but you don’t cut them up. Six months to a year later, you have them maxed out again but now you get laid off. The cards may never be paid and you have all the credit problems associated with being unable to pay them along with a higher mortgage payment. If you can’t make the payment on it, you are in more danger of losing your home than you were before you took it out. But most tragically, you have nothing to show for the thousands more you now owe on your home. Thousands you may have spent years paying down from the original debt.

Even in the best case scenario, you are now years longer away from paying the house off and if you pay off the cards and cut them up, you have less equity in your home in exchange for items you bought with high interest credit cards. In my opinion, it is a bad trade and only the credit card companies and the companies that originate the home equity loans win. You get stuck with a higher house payment, less money in your equity “savings account” and unsecured creditors get paid with funds taken from your most important asset. What do you really have to show for borrowing more money to pay off money you effectively borrowed at 18% to 29%?

What is the alternative? Negotiate with the credit card companies; that’s what! There are ways to make the creditors and collections agencies stop harassing you instantly and in some cases they are trying to collect a debt from you that you no longer owe. Remember, you have the one thing they want: MONEY. And even if you don’t have much or any, you still can get them to lower the interest rate, maybe even to 0% or knock off the late fees and get the debt to a manageable level. In addition, you have the ability to dictate your terms to them!

If you listen to the collectors, they will have you terrified into thinking the only options are for you to get a loan to pay them or to declare bankruptcy because they will have you convinced they will automatically get a judgment against you and ruin your credit. While a judgment certainly is a possibility and I don’t take the threat of it lightly, it must be done through the courts and you do have options to stop a judgment. When you can’t make your house payments it is much harder to stop a foreclosure. Additionally, your credit can be addressed with the credit reporting agencies and is not necessarily going to cause you problems for seven years as they would have you believe.

So, take the time to think through all the ramifications of a home equity loan to pay off credit cards and go to the trouble to educate yourself on some of your rights along with the protections offered to consumers through federal laws and statutes. You can get out from under the crushing load of credit card debt with a fresh start, without risking your home.

Believe this! You can overcome or solve or successfully live with any problem you will ever have to face including credit card debt. If you are committed to making a plan, setting some goals, working your plan, and doing the things that are proven to work, you will end your credit card nightmare without worrying about a foreclosure nightmare.

Pat Hicks is the author of "The Negotiate Your Way to Financial Freedom from Credit Card Debt Ebook", located at http://www.Iwantafreecrediterport.com, a web site providing competitive priced credit reports and scores with no tricks or misleading advertising.

Minorities Pay the Price

2007-01-09T19:47:00.000-06:00

When Citibank was being sued for abusive credit card charges and collection activities, one of the collectors was quoted as saying that when they got an elderly person or minority on the phone they knew they could abuse them. They looked for the uneducated and the weak. This article clearly shows how minorities are targeted for higher rates and begs the question of why the lending industry is not under closer scrutiny.

As N. Texas minorities overpay on home loans, questions arise

Exclusive: Data shows disparity, prompts fairness concerns

12:00 AM CST on Sunday, January 7, 2007
By PAULA LAVIGNE / The Dallas Morning News

Minorities in Dallas-Fort Worth are buying homes like never before, but they're more likely than whites to accept higher-interest loans that could lead to foreclosure, according to a Dallas Morning News analysis.

REX C. CURRY/Special Contributor
Calvin McDavis attends a class for first-time homebuyers by ACORN Housing Corp., a nonprofit that offers home loan counseling to low- and moderate- income people. The News found that about 34 percent of home loans taken out by minorities in 2004-05 were considered higher-cost, compared with 17 percent for whites.

On average, minorities make less money than whites. However, the interest rate disparity remains even when comparing only middle- to higher-income borrowers of both groups.

TOM FOX/DMN
Thysen Smiley says she got a 10 percent adjustable-rate loan to refinance her Forest Hill home. A loan counselor later told her she should have qualified for a lower, fixed rate. Federal regulators and lending experts say the difference is wide enough to warrant a closer look at whether lenders are taking advantage of minority borrowers.

Even if lender practices aren't illegal, real estate experts say some minority borrowers are still paying more than they should for their home loan. Recent borrowers who took out adjustable-rate mortgages are feeling the pinch right now – or soon will – as rates continue to rise.

"It's definitely a problem because there are borrowers out there who are ending up with loans that are inappropriate for them," said Ann Graham, a professor of law at Texas Tech University who has studied lending patterns.

Only since 2004 has the federal government required lenders to disclose information on interest rates for individual loans when the rate exceeds a threshold set by federal regulators.

The News found the racial divide by analyzing a public Federal Reserve database of more than 600,000 loans from 2004 and 2005. It included rate information and other details on the loan and applicant, such as Hispanic ethnicity and race (white, black, Asian, American Indian or Pacific islander).

However, the data didn't include information on borrowers' debt, credit ratings or sale prices – all of which affect a mortgage loan's final interest rate and terms.

Regulators say a loan becomes problematic when lenders stick borrowers into pricey, riskier loans when they could qualify for something better.

Thysen Smiley, who is black, went to a mortgage broker when she wanted to refinance her three-bedroom home in Forest Hill, a town of 13,000 people south of Fort Worth.

Ms. Smiley, a 47-year-old former postal clerk, said the broker offered her one set of terms and then asked her to sign a contract for different terms. She didn't think she had a choice and agreed to a 10 percent adjustable-rate loan, which could go up after two years.

She later worked with a loan counselor who told her she should have qualified for a lower fixed rate that wouldn't change.

"A lot of people don't know there are other opportunities available to them," said Sherry Randall, office director at ACORN Housing Corp., a nonprofit organization that provides home loan counseling to low- and moderate-income people. "One of the biggies is a promise to set one set of terms once the client applies and then give them another set of terms when they're ready to close."

Denying loans

Concerns about fair lending used to focus on redlining, the discriminatory practice of denying loans based on the race or ethnicity of the borrower or neighborhood.

Lenders still deny loans to minorities more often than white applicants. As a demographic group, however, minorities are steadily climbing the homeownership ladder.

In 1990, minorities owned 17 of every 100 Dallas-Fort Worth-area homes. Last year, that number had grown to 31 of every 100 homes.

More flexible lending rules and increased competition among lenders made it possible for more people to become homeowners. Those changes created an especially big boom for minorities, local lending experts say.

Federal rules require financial institutions, such as banks, to invest in minority neighborhoods. As a result, some will pay a premium to buy loans that other lenders gave to minorities, said Marty Green, general counsel for CTX Mortgage in Dallas.

And, he said, the mortgage industry is so competitive today that lenders are looking for borrowers wherever they can find them.

"The pendulum has swung," said Alfreda Norman, community affairs officer for the Federal Reserve Bank of Dallas. More minorities are getting loans, but they're paying a higher price for what they borrow, she said.

Credit scoring

Credit scoring – which plays a big role in the type of loan anyone can get – could explain some of the disparity. A recent study by the Texas Department of Insurance showed that blacks maintain average credit scores 10 percent to 35 percent lower than average scores for whites; Hispanics were 5 percent to 25 percent lower than whites.

But local loan counselors, real estate agents and brokers say credit scores and finances don't explain the high interest rates for many minority borrowers.

ACORN Housing's Web site estimates that up to half of borrowers who receive higher-cost loans could have qualified for something less expensive.

Cranston Alkebulan, a mortgage broker for All Real Estate who has several minority clients, said he believes that 60 percent to 70 percent of those stuck with higher interest rates or fees should have done better.

"Some lenders look at it as, 'I can charge them as much interest as I want as long as they don't bark,' " he said. "I've seen scenarios where people have full documentation [of income] and their debt-to-income ratio is just solid. A greedy mortgage banker or broker took advantage of them."

Minority borrowers often don't object because they're thrilled that someone would lend to them in the first place, he said.

Mr. Alkebulan blames history, saying that past discriminatory practices have discouraged many minorities from trying to buy a home. He said others feel at a disadvantage when they start the application.

"The African-American community has been able to actually practice in the free-market economy in this country somewhat legitimately for only four decades," he said.

Lenders realize their power and their authority and use questionable methods regardless of the community, he said. It's just that minority borrowers are "not as financially savvy as someone whose family has had this wisdom and knowledge for generations," Mr. Alkebulan said.

'Sub-prime' lenders

Minority borrowers often stumble when picking a lender.

Many simply assumed they could only use a "sub-prime" lender, which specializes in lending to people with credit dings and little savings. They justify making loans that prime lenders would not make by considering things such as future income, time on the job and debt repayment plans.

Prime lenders – often banks and large mortgage companies – tended to give loans only to borrowers who had a solid financial history and higher credit scores, income, and savings for a down payment.

Loans from sub-prime lenders generally charged higher interest rates, in part to compensate for the lenders' risk in gambling on someone whose payments might fall behind.

Changes in lending practices have morphed those categories. Many prime lenders can find loans for people with not-so-hot credit, and some sub-prime lenders can offer terms competitive with prime lenders.

But people in minority neighborhoods still shy away from banks and well-known lenders because they just assume they won't qualify, Mr. Alkebulan said.

"They're not walking into Bank of America or Chase saying, 'Hey, I need a home,' because the tradition is that they'll have to put down 20 percent," he said.

Instead, they'll call the number from a television ad promising, "Bad credit OK, and no money down." Or they'll use the same person their friend, co-worker or cousin used.

A mortgage company representative contacted Derek McCutcheon, 34, and Micaela Cotton, 26, after they filled out an online survey looking for a lender. The couple, who are both black, planned to a buy a house in South Dallas large enough for their three young boys. The family had been cramped in their Irving apartment.

Mr. McCutcheon's credit was OK, but a few missed college loan payments and a credit card hurt Ms. Cotton. Together, they had about $7,000 in debt.

Their annual household income was about $50,000. They spied a newly remodeled house they wanted for $72,000, and they figured they could put 5 percent down.

They didn't realize at first that they were using a mortgage broker – someone who contacts various banks or mortgage lenders to find a loan for a client.

Their mortgage broker's company frustrated them and delayed their closing through paperwork errors, ignored phone calls, a questionable inspection and other mishaps.

They ended up borrowing about $68,000 with a 9.75 percent adjustable-rate mortgage. Since then, others, including someone else's real estate agent, told them they probably could have done better.

Allen Kingsley agrees.

Mr. Kingsley, president of the Dallas Association of Mortgage Brokers and a local broker at Merit Mortgage, looked at the couple's income, loan and credit scores. He said a lender could have done the loan differently and secured a 30-year fixed rate between 6.75 and 7.5 percent.

Mr. Kingsley said some brokers put people into higher-interest loans because they don't understand their own profession.

"Loan officers are loaning by fire," he said. "The training in our industry is terrible unless you, as an individual, take it upon yourself to become educated. Some people are really being taken, but I don't think they're being taken maliciously."

Some lenders break the law when they put borrowers into higher-cost loans. These "predatory lenders" scam customers by misleading them about rates and terms, asking them to falsify information and tacking on excessive fees.

It's not just small-time brokers who get in trouble. Last year, lending giant Ameriquest Mortgage agreed to pay $325 million to 49 states to settle predatory lending allegations.

When higher-cost loans end in foreclosure, that obviously hurts the borrower, but it also takes a toll on the community, said state Sen. Royce West, D-Dallas, who has worked on predatory-lending issues.

If a failed borrower moves into public housing or needs other public assistance to bounce back, then taxpayers will have to foot the bill, he said.

"If we're not our brother's keeper, then we're going to have to pay for our brother," he said.

Mr. West says greater scrutiny of the lending industry would be in the public interest.

Federal regulators say they're constantly reviewing data to weed out predatory lenders and determine whether the industry needs to do more to meet minority borrowers' needs.

In the meantime, consumer advocates, lenders and brokers agree that education is the best way to avoid a higher-cost loan.

People who know how to repair their credit and shore up their finances ahead of time can qualify for a lower interest rate. And they'll know to shop around for the best deal and avoid lending scams, said Ms. Randall with ACORN.

Financial educational opportunities are expanding, as several government and private agencies offer home-buying classes.

And Texas schools now require high school students to take lessons in personal finance, including instruction on credit card debt and home loans.

Ms. Cotton, the new South Dallas homeowner, said she's already looking into credit counseling and plans to quickly pay off her debt.

Both she and her boyfriend have agreed that they're going to check out different lenders and negotiate for a better rate when it's time to refinance.

Right now, she said, she's going to enjoy the privileges of home ownership.

Insurance and your credit scores

2007-01-09T19:36:00.000-06:00

In the past election some states had initiatives to strike down using credit socres for calculating your insurance premiums. The insurance companies spent millions of dollars to defeat the measures and were very successful. However, this is an issue that is not going to go away. I predict there will be continued challanges in the courts on this one as well there should be. Having bad credit doesn't mean you are a bad driver.

Here is an article I found in Insurance News Net by Peter Hull.

http://insurancenewsnet.com/article.asp?n=1&innID=101954843

Why Iwantafreecreditreport.com

2007-01-05T10:06:00.000-06:00

Iwantafreecreditreport.com was created because many so sites sprung up after it was mandated that a free credit report was to be provided by the credit reporting agencies and they tried to mislead the public and trick them into paying for a report.

We started our site with the intent to tell the truth (gasp) and not mislead anyone. That is why the link to annualcreditreport.com is provided on the site. In addition, we placed as much information as we could get our hands on and found a cheaper way to get reports and scores all in one place.

The idea and motivation was to empower and educate. We are constantly changing, evolving and adding to the what that means but the bottom line, is that we wanted the site to be resource for anyone that wants to tackle the daunting task of repairing, reviewing or simply investigating where they stand with the credit industry. To that end, we continue.

IWantaFreeCreditReport

Seniors Continue to Get Slamed With High Interest Credit Card Debt - And It's Getting Worse

11:30 PM PDT on Monday, June 4, 2007

Finally! Legislation That Makes Sense and Holds Credit Card Companies Accountable

McCaskill, Levin introduce credit card legislation

Published: Saturday, May 19, 2007 11:29 AM CDTE-mail this story | Print this page

Abuse of "Piggy Backing"

If Sub Prime Loans Were The Problem, What Is The Solution?

Financial Literacy Course to Copy Across America!

Great News! Sunlight is being allowed in on the Sub Prime Credit Cards!

Banks, Feeling the Heat from the Democratic Congress Begin to Address Universal Default Abuses

Credit card companies pushed to change

07:39 AM CDT on Monday, March 12, 2007

An Answer to Conservative Critics that Call for More Personal Responsibilty for Individual Consumer Debt Increases

Credit Card Tricks and Tactics: What You Should Know

The List of Dread

What Can You Do?

Ten Secrets Banks Don't Want You to Know About Credit Cards

Ten Secrets Banks Don't Want You to Know About Credit Cards

Congress Investigates Credit Card Interest Rate Abuses

Panel slams banks over credit practices

Verification/Validation

The National Average Credit Score

Insurance companies quoting "astonishing" higher rates to lower income applicants based on credit scores but having identical driving records.

Distinguished Professor of Law Testimony to the Senate Banking Committee

Teens are paying with plastic but know you can get burned.

Senate Banking Committee looks at credit card rates and fees. And not favorably!

Millionaire in the making: Sherelle Derico Valuable Lessons to be Learned

Here is a lesson plan for teaching financial literacy from the previous post.

20% of 12 year olds have at least one credit card!

"Credit card companies have a special word for the customers who pay in full every month. They're called deadbeats."

By LEE HOFFMAN, JONEIL ADRIANO, and JESSICA HORNIG

ABC News

An Epidemic of Debt

Read the Fine Print

They Never Stopped Spending

'The Ship Is Starting to Go Down'

Taking Action

From 1992 to 2004, the percentage of households 55 and older with overall debt grew faster than the rate of the overall population.

The first candidate that stakes out this issue in the Presidential Election will have a substantial block of voters in his/her corner.

Supreme Court Case to Watch Carefully - Can Insurance Companies Use Credit Reports to Set Rates Without Telling the Consumer?

Minorities Fighting Credit History in Hiring and Insurance Rates

The first of a four part post prepared by the Credit Union National Association

This is a good article from MSN Money

Banks Gone Wild

Home Equity Loan to Pay Credit Card Debt, Bad Idea!

Minorities Pay the Price

Insurance and your credit scores

Why Iwantafreecreditreport.com

Published: Saturday, May 19, 2007 11:29 AM CDT
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