Helpful finance tips, or sneaky payday loan ad?
Posted: Wednesday, July 1 2009 at 04:00 am CT by Bob Sullivan
The Econ4u Web site includes a blog with helpful tips and other personal finance tools.
Econ4u.org seems like a happy place to learn simple lessons about money. The Web site is full of smiling faces and quick, fun questions like: How long will it take to double your money if you are earning 5 percent interest? (14 years, by the way).
So what’s a fun Web site like that doing in the middle of a bitter battle over the payday loan industry, or for that matter, the smoking industry?
Research commissioned by the Econ4u.org’s operator, The Center for Economic and Entrepreneurial Literacy, has made its way into newspapers around the country – fewer than 1 in 5 members of Congress have any formal economics training, the organization said after a recent study. The Wall Street Journal, The New York Times, Bloomberg, Reuters and dozens of papers have all cited the center's research.
Econ4u's owners say the site has a straightforward, noble mission: to "teach important economic concepts." But while the site offers plenty of useful money basics, there is one oddity: information on controversial payday loans is unusually positive.
And more curious: The man behind the site is Rick Berman, a notorious Washington, D.C., publicist famous for taking up the cause for unpopular industries like alcohol and tobacco. In fact, many believe Berman –- who’s known by opponents as Dr. Evil -- was the model for the lobbyist viewers loved to hate in the 2005 movie “Thank You for Smoking.”
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Debt cut in half? Don't count on it
Posted: Friday, June 26 2009 at 05:00 am CT by Bob Sullivan
Like anyone with a radio or TV, Lorena Altamirano heard the ads promising quick and painless debt relief. If there was a way to settle her debt for 50 cents on the dollar, she sure needed it. A recent divorce had led to a nasty financial surprise: Her ex-husband's unpaid bills had pushed her almost overnight from having virtually no debt to being $17,000 in the hole.
"I was paying everything perfectly, no problem, until the divorce,” she said. “Then the skies fell on me. These were bills he never told me about. We were married and I was responsible, but that put me totally out of balance."
Altamirano still had a decent job as a benefits claims processor, but she was now living paycheck to paycheck. With a son in college, and $1,600 a month rent for her San Mateo, Calif., apartment, she had nothing left at the end of the month to pay down the debt. The interest rates on her credit cards climbed, and the late fees started to pile up.
A friend had enjoyed great success with a debt consolidation loan, so Altamirano started researching debt workout plans on the Internet. She quickly found Debt Remedy Solutions in Boca Raton, Fla., and sent an inquiry. The response seemed like an answer to her prayers.
"We are generally able to settle debts for about 40 cents on the dollar and have our clients debt free in a very short period of time on a low monthly payment plan," said the letter, which Altamirano provided to msnbc.com. "We charge the lowest fees in the industry."
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Beware the loan modification merry-go-round
Posted: Friday, March 6 2009 at 05:00 am CT by Bob Sullivan
There’s been a lot of talk lately about loan modifications for homeowners facing foreclosure, a discussion that reached a crescendo on Wednesday when the White House announced details of its “Making Home Affordable” plans.
A woman I’ll call Mags (we’re preserving her anonymity) had heard the talk too. The suburban Virginia woman in her 60s is homebound, recovering from ankle surgery. Her husband has recently declared bankruptcy. Three months ago, she started contacting her lender to ask for help. She ran into a wall of busy signals and vague answers. So when she heard about a private company that said it could help work with her bank to modify her loan and save her home, she began to investigate. That’s how she landed in my inbox.
"How can we tell that this company is legitimate, will do what they say they will?" she asked. "We desperately want to modify our mortgage, but we don't want to be stupid!”
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Bailout money used for tax refund loans?
Posted: Friday, January 9 2009 at 05:00 am CT by Bob Sullivan
It happens every year: As soon as consumers begin gathering their tax information, tax preparation companies begin trying to talk them into taking out costly loans against any refunds they might have coming. The so-called refund anticipation loans are controversial in the best of times, but critics are turning up the heat on the practice this year, saying that taxpayers’ money – courtesy of the $700 billion banking bailout by Congress -- is helping to fund the business.
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Fed rate cut hurts savers, again
Posted: Thursday, October 30 2008 at 05:00 am CT by Bob Sullivan
Not everyone is happy about the Fed's half-point rate cut on Wednesday. Anyone who relies on interest income from bank certificates of deposits or other savings tools is about to see that income slashed. With each step down the Fed takes in interest rates, savers get pinched.
Bank CDs and money market rates are not formally tied to the targeted federal funds rate, but they generally move in parallel. The last time the Fed rate was at 1 percent -- for a year from mid-2002 to mid-2003 -- CD rates plummeted to a little over 2 percent.
"I remember there was quite a bit of pain," said Liz Weston, personal finance expert and author of "Deal With Your Debt."
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Bailout ignores all the empty houses
Posted: Friday, September 26 2008 at 09:30 am CT by Bob Sullivan
It's the empty houses, stupid.
In case anyone has forgotten the core of the current economic crisis, here's a reminder: empty homes, both present and future. Empty homes are behind all the supposedly worthless mortgage-backed securities that no one wants to buy on Wall Street. Fear of the coming avalanche of empty homes -- what the Center for Responsible Lending calls the “tsunami of foreclosures” -- has made Wall Street’s mortgage-related paper nearly worthless.
It seems that filling those empty homes by dealing with foreclosures and stoking demand to buy homes should be the first order of business. So why -- as we discuss the most dramatic government intervention in nearly a century -- is there only passing mention of all these vacancies?
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Millions at risk of foreclosure fraud
Posted: Monday, September 22 2008 at 05:00 am CT by Bob Sullivan
Angela Carter outside the Chicago home she may lose because, she says, she fell for a foreclosure rescue scam. (Chris Ocken for MSNBC.com)
Angela Carter's family has lived for 46 years in the same small two-story home in Chicago, perhaps a 15-minute ride from Barack Obama's adopted Hyde Park neighborhood. But today a piece of paper says someone else owns the property, and a judge will soon decide if Carter and her mom get to stay in her home.
The reason Carter, 55, is facing eviction, she says, is that she fell for a high-stakes scam that’s sweeping the nation, preying on the 1 in 11 consumers who are either behind on their mortgage payments or already in foreclosure.
Interviews with legal aid offices and law enforcement officials around the nation indicate the problem of so-called “foreclosure rescue scams” has spread like wildfire, neatly paralleling the downturn in the mortgage market.
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Consumers deserve greed bailout
Posted: Friday, September 19 2008 at 01:05 pm CT by Bob Sullivan
When a college student who has just run out of money and maxed out her credit card gets that bailout from dad, what's the first thing she does? Throw a party, of course.
And so it is on Wall Street. The federal government just slapped its plastic on the table and said, "Put it on my credit card."
Banks, you see, recently cried "Uncle," and our money has been volunteered to save them. To no one's surprise, that means you and I are now going to pay hundreds of billions of dollars in small increments over several decades to backstop the excesses of the banking industry. My questions are: Will we at least get frequent flier miles and will they be worth anything?
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Beware of stimulus check offers
Posted: Tuesday, June 10 2008 at 06:00 am CT by Bob Sullivan
Whenever mom gave you money as a child, she probably issued this simple, sage advice: "Don't spend it all in one place." Now that government stimulus checks are arriving in mailboxes around the country, major retailers are trying to rewrite mom's advice.
You should stick with mom.
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Free credit scores for all consumers? Almost...
Posted: Friday, June 6 2008 at 06:00 am CT by Bob Sullivan
Finally, free credit scores for everyone. Well, sort of.
Credit bureau giant TransUnion recently agreed to give virtually every adult American free, unlimited access to their credit score and credit report for six to nine months. Right now, consumers must pay to get the all-important score, and can only see their credit reports for free once each year. TransUnion's offer, mandated as part of a class-action lawsuit settlement, may provide many Americans with their first-ever peek at their score.
Consumer advocate Ken McEldowney of Consumer Action was practically giddy after the settlement was announced, calling the news "astonishing." It just might be. It also could lead to the demise of the FreeCreditReport.com guy, for example. But that’s getting a bit ahead of ourselves.
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Credit scores eyed after Sallie Mae mishap
Posted: Friday, May 16 2008 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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Did banks collude against consumers?
Posted: Tuesday, April 29 2008 at 05:00 am CT by Bob Sullivan
Did major credit card firms conspire to change their member agreements and limit consumer rights? Consumers may find out now that a federal appeals court has revived a class-action lawsuit alleging such anti-competitive practices by banks.
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Credit scores 102: A crisis, and some changes
Posted: Tuesday, March 18 2008 at 05:00 am CT by Bob Sullivan
Having taken a look at what credit scores are -- and what they aren't – in Friday’s column, we’re ready to look at how they came to be used for purposes for which they were never intended and how they gave birth to a cottage industry aimed at manipulating them.
You might be surprised to learn that even the people who invented credit scores say their use has gotten out of hand. And if lenders learn a simple lesson – that they should rely a little less on a number and a little more on interpersonal skills when making loans -- the current credit crisis might have a silver lining.
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Credit scores 101: What they are -- and aren’t
Posted: Friday, March 14 2008 at 05:00 am CT by Bob Sullivan
If American consumers feel like they are back in school again, angling for a few more points and good grade, that’s no accident. The aggressive marketing of three-digit credit scores has practically turned a high figure into a status symbol – but it’s so much more than that.
Unlike that English 101 quiz, this grade can have a direct and severe impact on your everyday life. Credit scores now affect everything from car loans and mortgages to credit cards to auto insurance.
With the current credit crunch, scoring formulas are getting more scrutiny. Some lenders are even blaming the credit scores for the lending mess that is dragging the U.S. economy toward or into a recession.
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Banks flout federal laws on fees, GAO says
Posted: Tuesday, March 4 2008 at 05:00 am CT by Bob Sullivan
If bank fees are a mystery to you, you're not alone. Government investigators dispatched by Congress last year to find fee schedules at banks around the country came back empty-handed 22 percent of the time. And at one-third of the banks, information on overdraft fees and procedures was nowhere to be found.
The Government Accountability Office study, which was released Monday, concluded that consumers lack the most basic information to "comparison shop" when selecting banks.
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Experian sues LifeLock, alleges fraud
Posted: Wednesday, February 20 2008 at 04:01 pm CT by Bob Sullivan
Credit bureau Experian is suing the identity theft prevention firm LifeLock, accusing it of deception and fraud in its familiar advertising campaign, which includes a spot in which CEO Todd Davis reveals his Social Security number and then brags about the effectiveness of the company’s protections.
In the lawsuit, filed in U.S. District Court on Feb. 13, Experian contends that LifeLock's advertising is misleading and that the firm is breaking federal law in the way it goes about protecting consumers.
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The doctor will see your credit now
Posted: Friday, January 18 2008 at 04:32 am CT by Bob Sullivan
The folks who invented the credit score for lenders are hard at work developing a similar tool for hospitals and other health care providers.
The project, dubbed “MedFICO” in some early press reports, will aid hospitals in assessing a patient’s ability to pay their medical bills. But privacy advocates are worried that the notorious errors that have caused frequent criticism of the credit system will also cause trouble with any attempt to create a health-related risk score. They also fear that a low score might impact the quality of the health care that patients receive.
Fair Issac Corp., developer of the FICO credit score, is one of several investors in Healthcare Analytics, the Massachusetts start-up that is developing the hospital risk tool. Another investor is Tenet Healthcare Corp, one of the nation's largest hospital operators. Stephen Farber, who resigned as chief financial officer of Tenet in 2004, is the CEO of Healthcare Analytics.
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Bank overdraft fees: Help may be on the way
Posted: Friday, June 1 2007 at 05:00 am CT by Bob Sullivan
A few weeks ago, we shared the story of Rachel Poor, who faced a double-barreled 21st century nightmare when an identity thief stole her money and her bank piled on with penalty fees. In addition to losing thousands of dollars to the thief, Poor faced a maddening set of overdraft charges -- 22 to be exact -- while she tried to dig out of the hole her imposter put her in.
The column resonated with Red Tape readers -- 1,300 comments were left on the blog, a record. Many writers expressed bitterness and frustration toward their banks and described their own overdraft fee nightmares.
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