Caught in Sallie Mae credit glitch? Tough luck!

Posted: Friday, May 16 at 03:59 am CT by Bob Sullivan

A mistake last week by student loan firm Sallie Mae temporarily wrecked the credit scores of a million loan holders, with some victims saying their scores had sunk 100 points or more. While the scores have since been fixed, the Sallie Mae mishap provides a startling look at the impact of credit scores, how fragile the credit-scoring business is and how severe the punishment can be for one credit-related error: a potential cost of hundreds of thousands of dollars to individual consumers.

Earlier this week, Sallie Mae said it had changed the way it sends monthly payment information to the credit bureaus, and that change inadvertently caused about one million loan holders to end up with a serious blemish on the credit reports. The college lending giants offers borrowers graduated payment plans that allow former students to pay a little less in the initial years after they leave school, and a little more later. Sallie Mae's change caused the bureaus to view those on graduated payments as “arrangements made with credit grantor to make partial payments." That sounded to the credit bureaus as if the borrowers had signed up for a reduced payment plan after being delinquent, which carries with it a serious credit score stigma.

As to whose fault the errors ultimately were, take your pick: Sallie Mae, for changing the payment information provided to the bureaus; the bureaus for reporting the errors; or Fair Issac, the company that invented the formula used to calculate the scores?

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Can't cancel service? Blame 'perverse incentives'

Posted: Tuesday, May 13 at 05:00 am CT by Bob Sullivan

The next time you find yourself on the phone with a pushy customer service representative trying to sell you something, remember this: There could be serious cash incentives motivating that hard sell you're getting. And I do mean serious.

One consultant I spoke to recently said that some call-center employees for a national internet service provider were making six-figure salaries, thanks to aggressive bonuses. While customers were infuriated after being deceived while trying to cancel their service, the phone reps were raking in the dough, sometimes doubling or tripling their salaries with incentives.

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Perils of the pocket call

Posted: Friday, May 9 at 05:00 am CT by Bob Sullivan

The other day I got a surprising message from an old source. It was a “declined meeting” notice from Microsoft Outlook. "Bob, Marty is on a flight at that time,” it said. “He could do between 12 and 2 tomorrow."

The problem is, I hadn't invited Marty to a meeting. In fact, I hadn't talked to him in years. So I wrote back to his assistant and said so. She insisted I had, and she had evidence. She wrote again and forwarded my original meeting request. It sure looked as though I had initiated the meeting.

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Less for your money? That’s inflation, too

Posted: Tuesday, May 6 at 05:00 am CT by Bob Sullivan

It's been 25 years since the U.S. has grappled with high inflation -- or has it? There are, after all, two ways to raise prices, but only one involves raising prices. The other involves reducing the value of what you get for your money.

That second method can involve packaging sleight-of-hand, such as reducing the size of a quart jar of mayonnaise by 2 ounces, to 30 ounces. But companies also have an even sneakier way of devaluing your purchases.

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Regulators target credit-card shenanigans

Posted: Friday, May 2 at 04:00 am CT by Bob Sullivan

Federal regulators are taking a stab at reining in "unfair and deceptive" bank tactics. Three federal agencies, including the Federal Reserve, have issued proposed rules that would ban consumer-unfriendly credit card issuer practices like double-cycle billing and unfair interest rate hikes. Some unpopular bank overdraft fee policies would also be banned.

The Office of Thrift Supervision announced its proposals Thursday. The Federal Reserve Board and the National Credit Union Administration made their similar announcements on Friday.

Together, the agencies regulate most banks, meaning new rules would have wide impact. The proposal, however, faces what figures to be a testy public comment period, during which banks are expected to challenge any new rules and ask the agencies to scale them back.

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