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| [04-21-2009] |
| By DAVID STREITFELD NYTimes.com |
Tyna Carter, burdened with $25,000 in credit card debt, did not want to be a deadbeat. After looking for help on the Internet, Mrs. Carter, a West Virginia homemaker, wound up in the hands of a sweet-talking “credit specialist” from Texas.
He claimed his company, Credit Solutions of America, could set her on the road to a debt-free life. But what really happened, Mrs. Carter says, is that Credit Solutions pocketed nearly $4,000 of the couple’s income, a little bit each month. Now they are in a deeper hole than ever.
It is a pervasive problem these days. With the economy on the ropes, hundreds of thousands of consumers are turning to “debt settlement” companies like Credit Solutions to escape a crushing pile of bills.
As many as 2,000 settlement companies operate in the United States, triple the number of a few years ago. Settlement ads offering financial salvation blanket radio and late-night television.
Consumers who turn to these companies sometimes get help from them, personal finance experts say, but that is not the typical experience. More often, they say, a settlement company collects a large fee, often 15 percent of the total debt, and accomplishes little or nothing on the consumer’s behalf.
State attorneys general are being flooded with complaints about settlement companies and other forms of debt relief. In North Carolina, complaints doubled last year, while in Florida they tripled, spokeswomen for the state attorneys general said. In Oregon, complaints have quadrupled since 2006.
The rapid rise of debt settlement is the result of two colliding forces: Americans owe more on their credit cards than ever, a result of the spending binge of the last decade. But as the recession deepens, their ability to pay is declining.
Kaulkin Ginsberg, a consulting firm, estimated that the amount of consumer credit at risk of default increased in February by $5 billion, to $24.5 billion.
High credit card rates and fees have been a point of contention for consumer advocates. On the NBC program “Meet the Press” on Sunday, the administration’s chief economic adviser, Lawrence H. Summers, said President Obama planned to crack down on abusive credit card lending that forces Americans to pay excessive interest rates.
For many consumers, their only hope for solvency is to get their balances down to a manageable level. But the card companies — concerned for their own solvency — are not inclined to let them off the hook.
Debt settlement companies claim they help both creditor and consumer by bridging the abyss between them.
“There is overwhelming demand for this service,” said Robby H. Birnbaum, a lawyer who is a board member of the Association of Settlement Companies, a trade group. “People want to avoid bankruptcy, and this is their last resort.”
In practice, however, the debt settlement firms frequently manage to please no one. An executive of the American Bankers Association, representing the credit card industry at a recent forum, labeled debt settlement companies “very harmful” to both creditor and consumer. Even debt collectors are upset, saying the settlement companies prevent them from collecting.
The premise of debt settlement is simple: A consumer stops trying to pay even the minimum on his cards. Instead, he accumulates money in an account that the settlement company promises to use to strike a bargain with creditors. Confronted with the certainty of some money now versus the possibility of no money later, the card company settles for 40 cents on the dollar or less.
Even if the goal makes sense, achieving it can be difficult.
Once the consumer stops paying the minimums, the card companies increase efforts to collect. Their fees and interest charges do not stop. They may sue. The consumer’s credit score falls through the floor.
Long before making any attempt at a deal with creditors, the settlement companies take a fee. Credit Solutions deducted $233 from the Carters’ checking account for three months, and then $116 a month for the next 27 months — a total of about $3,825 by early this year.
It was a fee Mrs. Carter and her husband, Willard Carter, a miner who retired after he was injured, could ill afford — especially since, by their account, the company put little effort into their case.
“After they got their money, they ran,” said Mrs. Carter, 51.
The Carters went to the West Virginia attorney general’s office in January, joining a flood of that state’s citizens complaining about debt relief schemes. “We’re being overwhelmed,” an assistant attorney general, Norman Googel, said.
Since 2005, Mr. Googel and his colleagues have successfully pursued cases against 14 companies promoting debt relief and debt settlement, resulting in refunds to 3,443 consumers, and they are pursuing more. And yet, he said, the complaints keep coming.
On March 26, Credit Solutions was sued by the State of Texas, which accused it of engaging in “false, deceptive and misleading acts and practices.”
The suit says the company misrepresents its success rate, noting that the company’s own data “show that over 80 percent of the debts enrolled in the program do not settle.” Those debts that are settled, the suit says, are for higher amounts than the promised 40 cents on the dollar.
Credit Solutions said it would not comment on pending litigation.
The settlement companies are the latest response to an old question: How can debt-ridden people avoid bankruptcy?
The first answer was nonprofit credit counseling, which began in the 1960s. The counselors, financed by the credit card industry, helped consumers formulate debt management plans and negotiated lower interest rates.
Counseling lost some of its appeal after creditors largely stopped offering the concessions needed to get people solvent again. The National Foundation for Credit Counseling, an umbrella group for legitimate counseling services, announced last week that the country’s top 10 credit card issuers had agreed to make changes to provide additional relief.
The diminishing effectiveness of nonprofit efforts created an opening for commercial settlement companies. Debt settlement is not regulated by federal law, as debt collection is, though general fraud and deceptive-marketing laws may apply. The Federal Trade Commission has successfully pursued seven cases against debt settlement companies since 2001, but one of the agency’s commissioners, J. Thomas Rosch, said that such cases take time and staff.
“I favor self-regulation that’s not a fig leaf,” Mr. Rosch said.
After inquiries from The New York Times, Credit Solutions sent a full refund to the West Virginia couple, the Carters, saying it was committed to customer satisfaction. The company blamed “communications problems” for troubles with the Carters’ account.
The Carters need every penny of their refund. They now owe much more than when they enrolled with Credit Solutions three years ago. For instance, interest and fees have increased the balance on one of their cards to $18,000, from $8,000.
“I was trying to do the right thing,” Mrs. Carter said, “but it didn’t work that way.”
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| [04-13-2009] |
| by Money Talks |
When it comes to income taxes, most people are rewarded for filing, because most get money back.
“Close to 80% of taxpayers get refunds on an average of over 2000 dollars a year.”
-Mike Dobzinski, IRS
But there are people who are afraid to file, because they owe and can’t pay. If that’s you, listen up. File anyway. Because if you file without paying, your penalty is half a percent a month. But if you don’t file at all, it’s 5% per month: 10 times more.
So if you owe a thousand dollars, file, but don’t pay, you’ll owe Uncle Sam $5 a month until you send in what you owe. But if you don’t file, the penalty is $50 a month.
So always file. And if you can’t pay, consider other options: the best, an interest free loan from boss, family or friends. Next would be a signature loan maybe from a credit union.
You can pay your taxes by credit card, but it will cost you: the fee is around 2 and 1/2 percent up front, plus whatever interest your bank charges.
And one last option: work out a deal with Uncle Sam. The IRS may be nicer than you think.
“The IRS recognizes that some people out there are having some financial hardships and if that is affecting their ability to pay their taxes they need to contact us.”
-Mike Dobzinski, IRS
Bottom line, if you owe and can’t pay Do file a tax return. Do talk to the IRS. Don’t not file anything and put your head in the sand.
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| [09-15-2008] |
| By Carey Denman, American Center for Credit Education |
My husband and I clung to our 1994 Mazda as long as we could. Still, when we began to worry that the clinking (sometimes smoking) engine was going to leave us stranded, we decided it was time for a new car. We started with a call to our local bank to check on loan rates and then contacted several other lenders to compare costs.
A few quick calls revealed that interest rates varied widely, between 7 and 11 percent, for a new-to-us sedan. But had we made a borrowing decision based on interest rate alone, we would have been missing a crucial part of the lending process. This fact can make shopping for a loan of any kind more complicated than what it first might appear, especially when it comes to home mortgages.
Understanding the relationship between the term of a loan and the interest rate is a good place to start when you’re trying to compare mortgage costs. The term of a loan is the number of months or years that you have to pay back the loan. In the case of mortgage loans, most have terms of 15 or 30 years, though it is possible to find loans with longer or shorter terms. Typically, the shorter the loan, the lower the interest rate you will pay. This is because a lender assumes less risk with a shorter term.
Next, you need to understand the difference between the interest rate and the annual percentage rate, or APR. The interest rate is the yearly rate a lender charges for allowing you to borrow money for a specific length of time. The APR includes your actual interest rate, plus any additional costs, such as private mortgage insurance or closing fees. Accordingly, the APR represents the total cost of credit on a yearly basis after all charges are considered and will typically be higher than the interest rate. This means that you should ask all prospective lenders for the APR when you’re shopping for a loan, which can give you a clearer sense of what the loan is going to cost you.
Even when a mortgage lender quotes you an interest rate, it may be possible to get a lower one, assuming you are willing to pay discount points by paying extra money upfront. This is also known as buying down an interest rate. By definition, a discount point is 1 percent of the loan amount. The amount you would pay to buy the rate down will depend on the interest rate you want and the discount points needed for that rate. If you’re considering paying down points, it’s important to know how long it will take you to recoup your initial upfront investment. Your lender should be able to calculate this for you.
Whatever interest rate you end up being quoted, it is never guaranteed until you lock it in, and in most cases, you cannot lock in your interest rate until you have an accepted Purchase Agreement on a property. Mortgage rates are based on a confluence of factors that can cause them to fluctuate every day, even sometimes several times within the same day. This can make it difficult to know just when to lock in your rate—not to mention making for some nail biting moments.
You’ll ultimately need to decide for yourself when to lock in an interest rate, but most financial experts agree that it’s best not to wait for rates to drop an eighth of a point. Instead, when you’re to the point of locking in a rate, you should do so when the current rate gives you a payment that you can comfortably afford to pay.
American Center for Credit Education—ACCE
Carey Denman
acce@acce-online.com
605-348-3104
The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. CCCS/ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.
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| [09-11-2008] |
| By: Mike LeClear |
I have been counseling financially strapped individuals and couples at CCCS of N.E. Indiana for over 10 years. I have seen and heard about every imaginable financial difficulty that you can think of during the last 10 years. Just about everyone, that I meet with, will tell me that they wished they had come to CCCS months or even years earlier. They also think that they have the absolute worst financial mess ever, so don’t feel like you are alone.
Many people sign up for a Debt Management Program, but not everyone will successfully complete their DMP. Over the last 10 years, I have observed some of the traits, which successful DMP clients have learned to incorporate into their finances. This month I will share with you one of those traits.
Attention to detail. Many people that start a DMP with our agency assume, that since we make payments to their creditors each month, they do not have to review their creditor or CCCS statements. I hear a lot of CCCS clients tell me that they do not even open their creditor statements each month and either just throw their statements away or shred them. I have had clients call me a year after starting their DMP to tell me that they were still being charged late fees on one of their credit cards. My first question, for them, is do you open your credit card statements each month? The answer is usually no!
The majority of individuals and couples, that successfully complete their DMP, review their creditor and CCCS statements monthly and will communicate with our office if they notice a problem.
John Wooden the former head coach of the UCLA men’s basketball team that won 10 national championships in 12 years during the 60’s and 70’s made the following quote: “You will find that success and attention to details, the smallest of details, usually go hand in hand, in basketball and elsewhere in your life.”
By: Mike LeClear
Certified Financial Counselor and Vice President
Consumer Credit Counseling Service
Of N. E. Indiana
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| [08-06-2007] |
| By Carey Denman, American Center for Credit Education |
In a culture of fast food, same-day loans, instant messaging, and one-click shopping, life can whir by at a frenetic pace. If we aren’t careful, we can end up living our lives on autopilot, barely pausing to see anything more than what is immediately at hand.
An experiment staged at Washington DC's L'Enfant Plaza Train Station during the morning's rush hour illustrates just how prevalent our tunnel vision has become. For nearly an hour, violinist Joshua Bell, considered one of the greatest musicians of our time, played his multimillion dollar 1713 Stradivarius.
More than a thousand people passed Bell that morning—only seven of that thousand seemed to notice. When some of the commuters who passed by were later interviewed, many of them didn't even recall hearing music. It’s not surprising that so few people actually heard Bell. We live busy lives that require much of us, but if we can slow down and learn to live more deliberately, we can experience a greater sense of satisfaction and happiness.
What does it mean to live deliberately? There is no one size fits all approach to deliberate living, but spending your time and money consciously and focusing your energies on what you most value is a good place to start.
Resist Unnecessary Purchases
The next time you put something in your cart at a shopping center or mall, go to buy something online, or head to any retail outlet, ask yourself a few questions. Is this an impulse buy? Am I simply purchasing this item because it’s on sale or because I’m seeking a “retail high?” Is it something that I will have for a long time and that will enhance my life? Would I rather spend the money on something more meaningful? Taking the time to ask such questions will help you to consider what matters most to you and will likely help you to keep more money in your pocket.
Consider Where You Spend Your Time
Do you race breathlessly from one obligation to the next? Is your life full of activities and events that does nothing more than keep you busy? Are your children enrolled in activities that bring more fatigue than fulfillment? Being mindful of how you spend your time is just as important as paying attention to how you spend your money. Devoting time to something because you feel guilty or obligated only robs you of joy and causes unnecessary stress. Evaluate where and how you spend your day and look for ways to free up time to do more of the things you enjoy.
Challenge yourself to slow down, so that like Henry David Thoreau, you will learn how to “suck out all the marrow of life.”
American Center Credit Education—ACCE
Carey Denman
acce@acce--online.com
605-348-3104
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| [07-24-2007] |
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We've all heard news reports about computer hackers who steal confidential information about consumers from business or government agencies. That's an open door to identity theft, which costs businesses and consumers a reported $53 billion per year, according to Consumers Union, a nonprofit consumer advocacy group.
A big chunk of those losses—about $16 billion—happens when identity thieves open new credit using someone else's good name.
Fortunately, a new Indiana law championed by AARP lets Hoosiers protect their credit reports from prying eyes.
That's good news because fewer eyes mean fewer opportunities for crooks to open new accounts in your name or boost existing lines of credit.
The bottom line: More peace of mind for Hoosier consumers.
AARP Indiana worked closely with state lawmakers to pass the security freeze law, which takes effect Sept. 1. We'd like to thank Sen. Gary Dillon, of Pierceton, and Rep. Joe Micon, of West Lafayette, who worked the entire legislative session to pass this simple law.
Here's how it works:
Starting this September, you can send the three major consumer reporting agencies a letter telling them to protect ("freeze") your credit report and credit score.
Within 10 days of your written request, the agencies will mail you a four-digit personal identification number (PIN).
You can use the PIN any time you want to apply for new credit or access your credit report. But without the PIN, an identity thief won't be able to access your credit report.
By law, placing a security freeze will not hurt your credit rating.
Also by law, this is a free service. Indiana is the only state to make this service free for everyone, even people who have not been victims of identity theft.
That makes Indiana a leader.
The law will get even better in 2009. By then, consumers will be able to request a security freeze by telephone or e-mail. You'll also be able to "thaw" the freeze by phone or e-mail whenever you want to release your credit report to a business or other organization.
Until then, written requests will be necessary. Here are the names, addresses, Web addresses and toll-free phone numbers of the three credit reporting agencies that dominate the industry:
Equifax
PO Box 740256
Atlanta, GA 30374
(800) 685-1111
Experian
PO Box 9595
Allen, TX 75013
(888) 397-3742
TransUnion
PO Box 2000
Chester, PA 19022
(800) 888-4213
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| [07-09-2007] |
| By Carey Denman, American Center for Credit Education |
Numbers matter—both in our personal lives and in the financial world. A person’s cholesterol level can have a profound influence on his or her overall health and longevity. Universities use a prospective student’s standardized test scores to assist in making admissions decisions. And lenders, insurance companies, landlords, employers, and others may use a number known as your credit score to determine whether you receive credit, get insurance, rent the apartment, and even get a job.
Your credit score is a three-digit number that packs a lot of punch. For lenders and others interested in your “financial resume,” your credit score predicts the likelihood that you will pay your debts on time. The higher your score, the more likely you are to be approved for loans and to receive favorable loan rates.
Because your credit score can influence so many areas of your life, it’s essential that you protect to it. The best way to do this is to ensure that you pay all of your bills on time and in full. Just one late payment and your credit score can take a serious hit.
According to a recently released report by Experian Consumer Direct, a credit card payment that is more than 30 days late can lower your credit score by as much as 20 points. The stakes rise, however, if you’re late with an automobile payment. One late payment can lower your score by nearly 100 points. Experian Consumer Direct reports that the national average credit score for consumers with no late auto payments is 703, while the average score for consumers with at least one late payment is 605. If that auto payment goes 90 days delinquent, the average credit score drops another 25 points to 580.
What exactly would such a drop mean for you as a consumer the next time you went to get an automobile loan? On a 60-month auto loan of $25,000, a person with a credit score of 703 might expect to pay about 5.8% in interest, making his or her monthly payment $481. On the other hand, a person with a credit score of 605 could plan on paying interest of around 15.5%, which would bring his or her payment to $601 a month on the same loan. All told, the person with credit score of 703 would pay approximately $3,886 in interest, while the individual with the score of 605 would pay $11,078 in interest over the life of the loan. That’s a $7,192 difference on a future loan for just one late payment. (Rates and scores may vary by lender.)
For more information on Experian’s National Score Index study, visit http://www.nationalscoreindex.com.
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| [05-18-2007] |
| By Carey Denman, American Center for Credit Education |
| Take the soaring price of gasoline and add t |
| [04-27-2007] |
| By Carey Denman, American Center for Credit Education |
Not everyone feels comfortable crunching numbers; in fact, the notion can be downright intimidating for some, particularly when it comes to personal finances. If numbers tend to make your head swim, it can be easy to rely on someone else’s word, rather than on calculating the bottom line for yourself. This can leave you vulnerable to those who may wish to take advantage of your trusting nature or can cause you to spend more than is necessary on a financing deal.
One simple formula can leave you feeling more empowered and can help you to evaluate offers you receive. This formula can also be useful in making buying decisions; you can consider whether the item you desire is worth the additional money you will have to pay in interest.
You can use the following formula for calculating simple interest. Take the amount you wish borrow (the principal) and multiply it by the rate of interest the lender will charge you. Then multiply this figure by the total number of years of the loan (or time). The formula looks like this: I=Prt (Interest = Principal x Rate x Time).
To put this formula to work, let’s say that you see an advertisement on television for a new car. The car manufacturer is announcing a special financing deal—3.5% for 60 months (or 5 years)—for qualified buyers on a car priced at $26,000. The I=Prt formula can allow you to calculate the total interest you will pay if you take advantage of this offer and can also help you to estimate what your monthly payment will be. Let’s see how.
First, take the total amount of the car, $25,600 (the principal, or “P”) and multiply this amount by 3.5% or .035 (the rate, or “r” in the equation). Take this figure and multiply it by 5 (the time in years or “t” in the equation).
I = Prt
I = $26,000 x 3.5% x 5
I = $4550
This calculation reveals that you will pay a total of $4,550 in interest over the life of your loan (This figure does not take into account any other fees that may be associated with your loan, so the total amount of interest you pay could be higher.) If you add the $4550 to $25, 600, the total asking price for the car, you will pay approximately $30, 550 for your new car. You can estimate your monthly payment by dividing this new total by 60 months, which will bring your total payment to around $509 a month for the life of the loan.
The simple interest formula has its limitations because it does not take into account that the amount of interest you owe will be reduced when you make your monthly payment. Interest can also be calculated using different methods. Nevertheless, simple interest is a good way to get a general idea of what a loan will cost.
American Center for Credit Education—ACCE
Carey Denman
acce@acce-online.com
(605) 348-3104
The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.
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| [04-01-2007] |
| By Carey Denman, American Center for Credit Education |
You don’t have to be an environmentalist or a politician to get involved in the movement to “go green.” While going green does have the effect of helping to conserve the Earth’s resources, there are more immediate rewards for those who embrace it. In fact, going green can save you hundreds of dollars a year, but it does not necessarily have to involve a radical transformation of your home. One simple way to go green is to look for ways you can reduce your energy consumption.
The U.S. Department of Energy estimates that the average household spends approximately $1300 a year on utility bills. This means that if you were to cut your consumption by just 10%, you could save $130 every year. You can cut consumption by employing any or all of the following strategies:
Turn off the TV or radio when no one is watching or listening.
Don’t run the faucet if no one is actively using the water. In other words, don’t let the water run while brushing your teeth.
Invest in a programmable thermostat so that you are not spending unnecessary dollars heating and cooling to comfort when no one is home.
Ensure that doors and windows are caulked and sealed properly.
Unplug appliances that you use only on occasion.
Buy the most energy efficient appliances you can afford. Go to www.energystar.gov to find a list of the most energy efficient products available.
Maintain your heating and cooling systems for maximum efficiency.
Replace just one incandescent bulb with a compact fluorescent light bulb (CFL) and reduce electricity costs by $120 over the 10,000-hour lifetime of a CFL. CFLs also help reduce cooling costs: a room with three compact fluorescent bulbs—as opposed to three 100-watt incandescent bulbs—can reduce an air conditioner’s energy output by 12 percent.
Being conservation-conscious doesn’t mean hunkering down in the dark or having to wear two pairs of wool socks in the coldest months. It does, however, mean that you begin to pay attention to how you consume energy. Once you do this, you should be more prepared to cut your consumption costs.
American Center for Credit Education—ACCE
Carey Denman
acce@acce-online.com
(605) 348-3104
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| [01-20-2007] |
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| Would you like to increase your financial literacy from the comfort of your home? Our new FREE "Money in Motion" personal finance class will help you do just that. Just call our office or e-mail us to obtain your User ID and password. Then login at our website (www.financialhope.org) and you'll be on your way to a brighter financial future. 260-432-8200 or 800-432-0420 or dkennedy@financialhope.org. |
| [01-20-2007] |
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| To help you prepare for the most important purchase of your life, CCCS offers the self-study program "MAKE YOUR MOVE". The workbook and a one-on-one consultation provided to each participant meets both HUD and FANNIE MAE guidelines. Call for details about this FREE program. 260-432-8200 or 800-432-0420. |
| [01-20-2007] |
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| To help you prepare for the most important purchase of your life, CCCS offers the self-study program "MAKE YOUR MOVE". The workbook and a one-on-one consultation provided to each participant meets both HUD and FANNIE MAE guidelines. Call for details about this FREE program. 260-432-8200 or 800-432-0420. |
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