So-called “Convenience Checks” are Convenient . . . for the Banks

You know those “convenience checks” that come with your monthly credit card statement?

Convenience checks

Convenience check promotion with an low introductory rate

They’re for suckers. Here’s why. When you use them you’re usually charged the daily cash advance interest rate of 12, 15, or even 20 percent. Often they come with a 3-4 percent fee. When you make purchases with them you don’t usually accrue the benefits—like airline miles, cash back, and the extended warranty benefit —that come with credit card purchases.The low introductory interest rate may quickly disappear and if using one of these checks causes you to exceed your credit card limit, it could cause the check to bounce and to hurt your credit score.Shred any checks that you receive. Better yet, resist temptation, as I have done, by calling your card issuer and telling it to stop sending the checks.

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The Consumer Gal and I just had our book, Enough of Us – which deals with another realm – published. In order to concentrate on that project I will be suspending my semi-monthly Consumer Guy full-length blog posts and, instead, providing  a short consumer tip each week (I hope).

If you would like to learn more about our book that deals with issues of ethics and procreation, please visit our other website, www.enoughof.us. Many thanks for your interest.

 

You may Have $ Coming to You!

Unclaimed money site

Unclaimed money site

All types of financial transactions go awry. Perhaps a bank, or retirement fund, or former employer owes you money, but they’ve lost track of you. Such funds end up “on hold” in the treasuries of respective states.

For instance, I just discovered that my late mother-in-law has pension money from a former employer here in California coming to her. It amounts to a whopping 13 cents! Oh well. In a few short moments you can find out if you or one of your relatives has some serious cash coming.

Just go to www.unclaimed.org to find out if your Caribbean vacation awaits you.

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The Consumer Gal and I are about to have our book, Enough of Us – which deals with another realm – published in a few weeks. In preparation for the big event we need to concentrate on that project. So for the next eight weeks or so, I will be suspending my semi-monthly Consumer Guy full-length blog posts and, instead, providing  a short consumer tip each week (I hope).

If you would like to learn more about our book that deals with issues of ethics and procreation, please visit our other website, www.enoughof.us. Many thanks for your interest.

Look out for Sneaky Contract Terms

I recently came across a magazine article that goosed me into writing about something that has rankled me for a long time. I guess I had to come across this issue elsewhere before I heard my internal wake-up call to write about this issue.

I’m talking about the one-sided contracts with unconscionable clause that most of us sign because we are – or perceive ourselves to be – powerless. The worst of the worst are arbitration clauses. If you want to open a bank account, use an Internet service, or sign onto Netflix, you’ll probably have to agree to a clause that says if you have a dispute with the company, you agree to take it to arbitration, often an arbitration company selected by the vendor. The problem is that arbitrators are notorious for siding with the parties that give them the most business. And that ain’t likely to be you. Adding insult to injury, you may have to share in paying the arbitrators’ fees.

A typical contract arbitration clause

Arbitration clause. photo- CreditInfocenter.com

Recently, each time I logged onto Netflix I saw a banner at the top of the page telling me to read and agree to a change in the Netflix contract. I read the change. It was a requirement that all disputes be settled by arbitration. So I ignored it. The notice was there each time I logged on. After a while I was warned that time is running out. So I let time run out. I never agreed and the banners went away. I guess Netflix would rather have the business of those who wouldn’t agree than lose them as customers. After all, they know we can visit our local Redbox.Here are some tricks you can try to avoid arbitration requirements. If you must agree to an online contract, go ahead. Then email the company’s customer service department and tell them you rescind your agreement to subject disputes to arbitration and that you reserve your right to take disputes to court. Send the email from your own email account; not the company’s “Contact Us” link, and keep a copy of your message. If you don’t hear back, you may be in good shape. If they send you an “either, or” response, you’ll have to make a choice.If you are signing a paper contract, cross out and initial the arbitration clause. If they don’t notice the change, you may be in like Flynn.If you receive a contract by email that you are to print, sign and mail back, yahoo! (Not the Internet service provider – just old fashioned “yahoo.”) Delete the arbitration clause, print the contract, and sign it, and mail it in, keeping a copy for yourself. If the company doesn’t notice the change, too bad for them.  It should have read it before it signed. Just make sure you get a returned copy signed by the appropriate company official. If they can try to slip one by you … turnabout is fair play.

Has your bank, brokerage, credit card company, cable TV provider or any other business ever slipped a little sheet into your statement or bill that notifies you of changes in the terms of your agreement? Read it! If you don’t like what you read, call the company and tell it how you feel. If necessary, take your business elsewhere. If the change of terms is significant, it could give you a way out of your contract with your cellular service company, Internet provider, or the like.

I’ll finish with this. When you get a bill for any utility service that is not a government sanctioned monopoly, like for instance, your electricity provider, check the fees on the statement. There may be a lot of small dings on the bill for just pennies or dimes. Call the utility and ask them to explain each fee and whether it is required by the government as a tax or fee. Many may not be. If so, it’s time to negotiate including the polite threat to take our business elsewhere. Think about it this way: If they say your service (exclusive of taxes and government fees) costs 50 bucks, but they are charging you $54, that’s a four-dollar, or 8 percent – rip-off. While the service provider may not reduce those fees, you threat to leave may prompt them to offer you an extra goodie at no charge. Recently, when I threatened to leave my cable company, the phone rep called me back and offered a “tier” upgrade and a 10 dollar monthly price reduction for six months.

Remember my motto: “Whoever holds the money, has the power.”

 

 

Student Loans are Just That . . . Loans. Defaulting is a Risky Proposition – Part II

In part one of this column I described how borrowers of student loans get into trouble and how collection agencies, on behalf of the federal government often make their lives miserable. But just how do the debt collectors go about it?

According to an excellent article by Andrew Martin (“Debt Collectors Cashing in on Student Loan Roundup”) in the September 9, 2012 New York Times, they often start with trolling the Internet for databases that contain information on respective debtors. When they find a suspect, they contact their prey. If a debtor refuses to cooperate, is employed, the agency will try to garnishee their wages. And the government is tenacious. It usually gives a collection agency just six months before transferring the case to another agency.

The article tells the story of Arthur Chaskin of Michigan, who borrowed $3,500 in the 1970s. By last January the debt, along with interest and penalties, had grown to 19 grand. When a government-contracted lawyer tracked him down, he garnisheed Chaskin’s brokerage account. A judge reduced the debt to $8,200, 25 percent of which went to the lawyer. The object lesson here is that student loan defaulters never know who is looking for them, when the hunters will strike, and how deep in doo-doo the debtors may find themselves. And, as a reminder, repayment may even come in the form of deductions from Social Security payments – not a pleasant prospect for those on fixed incomes.

Martin reports, “Government officials estimate that they still collect 76-82 cents on every dollar of loans made in fiscal 2013 that end up in default. That does not include collection costs that are billed to the borrowers and paid to the collection agencies.” A 2007 MIT study, however, estimates that Uncle Sam collects something closer to 50 percent of debt. The bad news for student debtors – but good news for taxpayers – is that the government, year to year, is growing ever more efficient at getting its money back – an 18 percent one-year improvement last fiscal year, totaling $12 billion.

Student debt demonstration, Washington, DC, April 4, 2012 – Photo – campusprogress.org

Many defaulters are in dire straits. They received schooling and then got caught in the quagmire known as the Great Recession, unable to find work. Some are ill. Some are in over their heads with all types of accumulated debt. But with little chance of shedding their government debt through bankruptcy, they find themselves between a rock and hard place.

And even in cases where a person is broke and either ill, disabled, or unemployed, it’s not easy to incentivize collection agencies to help those debtors get into a program that either allows gradual payment – say through gradual income-based repayment – or to forebear on collecting until the debtors are back on their feet. That’s because the collectors make more money by collecting than by merely preventing default.

The creditors and debt collectors frequently don’t tell the borrowers about programs to ease the repayment burden, or the requirements for qualifying are so daunting that they give up in frustration.

Even President Obama acknowledged, “Too few borrowers are aware of the options available to them to help manage their student loan debt,” in a June memo.

Good news for borrowers may be on the horizon. Congress and the Department of Education are considering regulations that would require debt collectors to offer student loan delinquents an affordable income repayment plan. And the department has promised to do a better job of publicizing such plans, starting with those who are still in school. As part of the proposals, monthly payments would be limited to 10 percent of discretionary income.

But, according to Andrew Martin, “Efforts to change the incentive [reimbursement] structure for guarantee agencies have stalled. And the Obama administration’s efforts to impose new regulations on profit-making colleges were initially watered down and then significantly weakened by a federal judge.”

So while some folks are so deeply in debt that foreclosure and/or bankruptcy are the only ways out from under crushing debt, it will be almost impossible for them to shake off their student loan obligations.

Unless Congress (you know, the government branch with a 9 percent voter approval rating), gets head out of it’s a_ _ _ _ _ e, many of those students who made some big mistakes a long time ago will suffer for a long time to come. Congratulations to those collection agencies that care more about money than humaneness.

 

Student Loans are Just that . . . Loans. Defaulting is a Risky Proposition – Part I

Millions of Americans are up to their wallets in debt for money they borrowed way back when and thought they’d get around to paying off . . . well . . . eventually. Good luck with that.

Almost 6 million people are at least a year behind in paying off their student loans for post-secondary education. And with new-graduate unemployment as high as it is, the prospects are getting worse. A September 9, 2012 article in the New York Times paints a pretty bleak picture. Sixteen percent of all those with outstanding balances—representing a whopping $76 billion—are in default. So what’s the upshot?

Many of the defaulters are being hunted down, not by the FBI or the local sheriff, but by collection agencies. This is ironic because in my last blog post I discussed the need to regulate collection agencies. Who should regulate them? The federal government (as well as the states). Who is hiring them? The federal government. So while the Consumer Financial Protection Bureau (CFPB) is taking steps to protect debtors from unsavory collection practices, the U.S. Department of Education (DOE) is hiring some of those same agencies the CFPB is trying to get in line. In the last fiscal year, the DOE paid $1.4 billion to collection agencies and other “bounty hunters” in order to recoup its losses.

Many years ago, there was a TV commercial for Chiffon margarine that ended with the catch phrase, “It’s not nice to fool Mother Nature.” Learning she had been fooled into thinking Chiffon was butter, Mom would summon up a thunderbolt. Substitute the U.S. government for Mother Nature and collection agencies for the thunderbolt, and you get a picture of what defaulters are up against. Unlike pitiful little banks and lame mortgage lenders, the fed can muster up some pretty loud thunderbolts of its own. The Times article tells the story of 29-year-old single mother Amanda Cordeiro of Florida, who is in the red on a student loan to the tune of 55 grand. She has had two tax refunds seized (private companies can’t do that) and has changed her phone number several times in the last year to avoid the harassing phone calls the CFPB is trying to put a stop to.

Other defaulters have had Social Security payments garnisheed. This makes life miserable for a lot of former students, especially those who have taken pricey courses at private for-profit schools, like University of Phoenix, ITT Technical Institute, Kaplan University and DeVry University. Many of these schools specialize in Internet coursework with disappointing completion rates for students and less-than-stellar job placement records. The educational institutes frequently coach students into taking out the loans, which are paid directly to the schools. Often, those who fail to find well-paying employment take it on the lam because they have no way to pay back the loans. Students who attended profit-making schools –about 11 percent of all students – account for nearly half of all defaults. Dropouts were nearly four times as likely to default as those who graduate.

While there are programs available to help desperate students pay off their loans over an extended period, with outstanding balance forgiveness at the end of that term, the companies that administer the loans for the government frequently fail to inform the borrowers of those programs. Mounting penalties and accumulating interest rates can lead to huge debt and ruined credit ratings, making life even more difficult when defaulters tries to take out a loan on a car or home, or when they apply for credit cards.

It is very difficult to wipe out government loans through bankruptcy, and they have no statute of limitations. The government has been able to recoup a whopping 80 percent of defaulted debt, about four times the rate of nongovernment lenders.

You may know the acronym ARM as standing for “adjustable rate mortgage.” ARM can also mean “accounts receivable management,” as debt collectors call themselves. The ARM industry is booming thanks to defaulted student loans. ARM companies seek government contracts because of their high rate of return.

When borrowers are delinquent paying for a year, the lender (Uncle Sam) declares them in default. If it cannot find the debtors, the government sics collection agencies on them.

 I leave you and those you care about with a checklist:

  •   Be very, very careful about taking courses from Internet post-secondary schools (see my column of July 17, 2012);
  •  Don’t take out a student loan unless you are damned sure you are going to finish your course of study;
  •  If you do apply for a student loan, get all the information up front about programs to help students who are having trouble paying off their loans;
  •  If you are already delinquent, go to the agency through whom you acquired the loan and ask for the information on extended payback programs;
  • And finally, if you are in debt up to your neck, don’t go making babies, or you’ll be asking for a heap of grief.

To be continued. “See” you in part 2.

TV appearance tonight

I’ll be appearing tonight on NBC Bay Area news at 11:00 p.m. It’s a story on hidden fees used by merchants in various transactions.
You can find it tomorrow at www.nbcbayarea.com/news and search for “Stephanie Chuang” (reporter).

Want to Bitch About Credit Card Issuers? Have we got a Site for You!

You have probably heard about the Dodd-Frank Act. It aims to regulate speculative and unfair practices on the parts of financial institutions. Most Congressional Republicans are out to kill it. Many Democrats want it strengthened. Part of that act is the creation of the Consumer Financial Protection Bureau (CFPB). How silly! Complaints against lenders? Why on earth would we big, bullying consumers need protection from those sweet little-bitty banks like JP Morgan Chase, Bank of America and Citibank?

When financial consumer advocate and Harvard Law Professor Elizabeth Warren advocated before Congress for the creation of the CFPB she was raked over the coals by the free market boys (and girls?). It soon became clear that if and when the bureau was created, she had a Klondike Bar’s chance in a microwave of being approved for the post of director. That position eventually went to Richard Cordray, the former attorney general of Ohio, a well-known consumer protection guy. President Barack Obama had to appoint Cordray with a recess appointment to avoid the free-market contingent in the House. Warren went back to Massachusetts to run for the U.S. Senate.

It looks like Cordray is taking this job seriously. The CFPB made a formal announcement today that it has set up a web site that allows

CFPB Director Richard Cordray
Richard Cordray

consumers to post grievances against companies that provide credit cards, mortgages and student loans. The grievances are posted in the form of databases.

Since the bureau opened for business last July, it has received 45,000 grievances – 17,000 about credit cards alone – through June 1, 2012.

“By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market,” Cordray said in a statement. ‘‘Each and every time we hear from American consumers about their troublesome transactions with financial products, it gives us important insight.”

The public database includes complaints made since June1. Working with the credit card issuers, the CFPB created a number of response categories that show how each complaint has been dealt with and how quickly.

For each category, companies can respond to a consumer in one of four ways. Once the complaint is routed to a company, it has 15 days to respond and 60 days to resolve the complaint. Consumers should expect to receive a refund, an explanation, a correction, a change in account terms, or simply have the case closed.

If you have a complaint against a bank, mortgage lender, student loan provider, or credit card issuer, take it to http://www.consumerfinance.gov/complaintdatabase.

For the time being, you will also be able to see the recent record concerning credit card complaints. The other categories should come online by the end of the year.

 

 

All that credit card info they ask for online keeps your account safe . . . NOT!

I had an agenda of topics laid out for this web site for months to come. But last week I had an eye-opening experience that taught me that as low as my esteem for big banks was, it still had a long way to drop.
I have a Chase Freedom Visa card. I haven’t used it in more than three years. I keep it as a backup in case I misplace my two primary cards (I lose a lot of stuff. In fact, the only thing I ever had trouble losing was my virginity – but that’s probably more than you need to know). When the card came up for renewal about a year and a half ago, I decided to not activate it.

Freedom from what?

But lo and behold – what does “lo” mean anyway? – I recently received a statement from Chase with a charge on it from Mutual of Enumclaw insurance company. I never made a payment to that company. How could I? I had never heard of it. I would remember if I had, since it’s the worst name for a company since Studebaker. And since I had never activated the card, it was unusable anyway. Or so I thought.
I called Chase and canceled the payment. Chase got back to me and informed me that the charge was a mistake. “How could that happen?” I inquired, since M of E had neither my three-digit security code nor the expiration date for the card. Furthermore, how could anything be charged to a card that was never activated?
The rep could not answer so she connected me to the fraud department. The guy at the fraud department told me that if a Chase customer doesn’t activate the card within 60 days, Chase activates it AUTOMATICALLY!  “Why would you do that?” I asked. “What if someone had stolen my card from the mail?”
“We don’t want to inconvenience our cardholders in case they forgot to activate,” was the explanation. “What about the failure to verify the expiration date and security code?” I parried. The fraud rep kicked me upstairs to his supervisor, Audrey. I repeated the question. “You’ll have to ask the merchant,” Audrey advised.
So I called M of E and found a person whose actual name is Sara. I use her real name because she was nice, solicitous, and a good listener. After diligent research she determined what had happened. One of M of E’s “insureds” (that’s what they call their customers in the insurance game) had mis-entered her card number when making a premium payment. The one-digit error meant she entered my unactivated card number. But what about the expiration date and the security code?
“You’ll have to ask your bank,” responded Sara. So I called Chase again. This time Dean was my fraud department supervisor. He explained that some vendors do not ask for the security codes and/or expiration dates for credit card charges and that’s how this charge got through. “How about the fact that the customer had a different name?” I challenged. I’m not sure what Dean said exactly, but it was something like, “Mhllf blah, sheboygan, phlegm.”
So I called Sara at M of E again. I asked if they request expiration dates and security codes for credit card payments.  “We do,” she averred.
So let’s review.
• The person who made her credit card payment to Mutual of Enumclaw, innocently entered my credit card number.
• The card had never been activated.
• She had the wrong name for my account number.
• The expiration date was incorrect.
• The security code was wrong.
• And still the charge went through.
Once again I chased down Chase’s fraud department. This time I got Elvira on the phone. Long story short: Elvira admitted that, “We dropped the ball on this one.” She agreed that the charge never should have gone through and should have been sent back to the merchant. “We use a variety of algorithms,” to verify charges, she claimed.
On behalf of Chase she took full blame for the screw-up, but reminded me that Chase never charges the customer for fraudulent charges and that anytime a cardholder brings a wrong charge to the bank’s attention, the bank makes it right.
What, I asked, if a person has a hundred charges on a monthly statement and, like so many consumers, they don’t check each item? This $385 charge would be paid as part of – let’s say – a $3,000 bill. The cardholder would pay it and never know they had been ripped off.
Elvira admitted that such instances do occur.
Upshot. Check your monthly credit card statements. Match the charges to your receipts. And if you think all those data that merchants ask for when taking your credit card number protect you, think again.

Debit Card Fees by the big Banks may be Just What the Doctor Ordered

While thousands of angry people across America are joining Occupy Wall Street and its nationwide clones, Bank of America seems oblivious to the upsurge. Here’s how it works: If you use your debit card during any month, your account is debited five bucks for that month. If you don’t use your card, there’s no penalty.
The banks are saying they are forced to raise fees because of all the new restrictions on them. The most relevant rule, which went into effect on October 1, restricts the amount banks can charge retailers for debit card transactions to 21 cents. That’s down from 44 cents.

Even the Pentagon has a credit union!

Ohhh, poor banks! Chase Bank and Wells Fargo are testing $3 monthly fees. Sun Trust is jumping on the $5 bandwagon.
Good! Good? The Consumer Guy® likes bank fees? Nah. But I do like the idea that the big boys are making the small ones more appealing. I closed two Chase accounts last year and moved the dough over to the financial institution where The Consumer Gal keeps her money (yeah, we know, it’s strange that a couple has independent solo accounts) – a Credit union across the parking lot from Chase. Now these accounts are subject to virtually no fees. Citibank is standing pat with no debit fee as well.
In case you do not remember, the big banks are partly responsible for the meltdown of the U.S. economy, no small part of which had to do with bad mortgages. Then they took massive bailouts from U.S. taxpayers, only to deny hundreds of thousands of needy homeowners a break on their mortgages. So it warms the cockles of my heart, whatever they may be, to know that as the banks are finding an array of fees with which to hit their depositors, they are also giving those customers an incentive to say hasta la vista, and to look for better deals at local banks and credit unions.
It’s my hope that bank depositors will be willing to look at local financial institutions for free – or at least low cost – services. In other words, support local businesses. Just make sure they don’t charge other fees, like checking account or teller fees.
Here are some other ways to save on debit card charges.
• Pay cash. Just make sure that you extract the money from an ATM that doesn’t charge a fee. Either use your own bank’s ATM or one on its no-fee network.
• Use a credit card, but only if you pay off your entire bill each month. If you carry a balance, that’s costing you interest each month and makes credit purchases impractical. For information on choosing credit cards with the best benefits, do a web search for ‘best credit cards” – avoiding search results paid for by credit card issuers – and decide if you want money back, airline miles, or whether you want to pay an annual fee for expanded benefits.
• Try online banking. I am not a big fan of online banking because I’m fearful of compromising my personal information and becoming a victim of identity theft, or worse. If you are an Internet whiz kid, check out the services at  institutions like Ally Bank, Discover Bank and ING Direct, among others.
If you decide to switch banks, Consumers Union offers a checklist for consumers who want to switch at www.DefendYourDollars.org.
Don’t feel locked into your current financial institution. Free competition can be a very good thing for consumers.