Credit/Debt Recovery

McGraw-Hill & Jump$tart Coalition

I just got an email discussing the many ways McGraw-Hill (publisher of my book, Repair Your Credit And Knock Out Your Debt) is working with and supporting the Jump$tart Coalition (a Washington-based group that advocates improving the financial literacy skills of K-through-12 students).

I've been involved in Jump$tart, and I've been published by McGraw-Hill, and I have to say I'm not sure I agree with the basic idea of this partnership.

I mentioned Jump$tart in my book; I mostly gave them a pass because they're so new (Jump$tart efforts have to be begun in each state, and many states don't have a Jump$tart Coalition group at all, while some have more well-established Jump$tart efforts.

What Jump$tart seems to be really good at is putting together surveys; every few years they survey High School students to determine their level of financial literacy. This is the survey that tells us that only 12% of H.S. seniors in California have learned about financial literacy and money management while in school. Etc. Etc. Etc.

From these surveys, which show a shocking lack of financial literacy among students, the Jump$tart Coalition, (and apparently McGraw-Hill with them) has become determined to teach money management in schools, and particular to teach it to teachers. McGraw-Hill has even helped them with their teacher-training programs. (According to this email I received, "Research in the field has shown that many teachers of financial literacy have themselves never received instruction in personal finance. Responding to this important need, increasingly, The McGraw-Hill Companies' target audience is teachers..."

I was a teacher for a while. In fact, I've taught at every grade level from Kindergarten to college Freshmen. That's why I feel qualified to say that this approach is wrong-headed.

I know everyone here means well, but to me this is another symptom of the decay of American society. It is the job of parents to teach their kids about financial literacy. Parents should help kids establish their first bank accounts, learn to pay bills, budget and understand the basics of money management. What's happening now is the wholesale abdication of parental responsibility to the schools. Schools already have to teach your kids to recycle, be tolerant of others, not to do drugs, (in some schools) practice safe sex, and the list goes on and on. Schools can barely teach reading, writing and arithmetic any more, let alone music, drama and art. And we keep piling responsibilities on them. Now we want them to teach financial literacy as well? Speaking as an educator, I say "enough!" Either they want teachers to take valuable class time they don't have to teach things the students should be learning at home, or they think by providing financial literacy training to teachers there will be some "trickle down" of knowledge to the students.

I guess that was my biggest problem with Jump$tart; every meeting I attended, I felt like the only person in the room who'd ever actually been in a classroom full of kids. Jump$tart (in my experience) was populated by very wealthy, very intelligent, nice, and well-meaning individuals (mostly executives and CPA's) who knew a lot about money but very little about education. There were a few college professor-types there, but they're a subject for another rant.

The bottom line is, I think training teachers is great. We should do it. But we shouldn't expect that to translate into increased financial literacy among our students. And I'm not sure anything we do in schools will have a lasting or profound impact on students' level of financial literacy. (Honestly, is school any match for the constant barrage of media that kids see their entire lives? And school is the worst place to try to teach money management, when every kid has to have a more expensive pair of sneakers than the kid next to them.)

Where's the right place to teach all this stuff to kids? At home. McGraw-Hill, Jump$tart, listen to me: educate the parents. Give them what they need to teach financial literacy at home, where there's no peer pressure, and you might see financial literacy scores improve. Schools can't do everything, and they shouldn't have to.

What kids need to learn is this: You are not what you own. Americans' values today are tied to materialism and wealth, and that has to change. But this is not an objective area of inquiry; this has to do with your values, beliefs, and your self-image. Are these areas you want to hand over to schools? When it comes to things like values, wouldn't you rather teach them to your child yourself?

CRCS strikes again

More nonsense from this bunch of asshats. Consumers for Reponsible Credit Solutions has just sent out a press release warning that unless congress acts to change credit counseling laws, there will be an explosion of bankruptcies.

Let me state this right up front: this is crap.

Okay, now for the analysis. For one, have you noticed all my previous posts about consumer debt declining for 3 straight quarters, or credit card delinquency being at a four year low? This is not a recipe for "an explosion of bankruptcies."

CRCS starts their press release by correctly saying that without credit counseling, a lot more people would file bankruptcy. But they say "access to those services may not be available in the majority of states in the future unless laws are changed." That's a flat-out lie. Access to CRCS's brand of for profit credit counseling may not be available, and that's to the consumer's benefit. Laws are being changed; see my post earlier this week about Illinois acting to prevent CRCS-type counseling agencies from resuming their profiteering ways (realize that CRCS is formed from the ashes of Ameridebt).

CRCS goes on to reiterate that NFCC agencies are "creditor-controlled" because they get "most" of their funding from the creditors in the form of Fair-Share contributions.
First, "most" in this case means 60%. Yes, a majority of the funding still comes from Fair Share, but that's dwindling every day. Second, that doesn't mean the creditors "controll" anything. COA-accredited agencies aren't allowed to act for the benefit of the creditor only; they'd lose their accreditation if they did.

Another thing I guess I'll have to say until I'm blue in the face: NFCC credit counselors create win-win situations. They're not trying to take sides. It's not Client Vs. Creditor, or vice versa. Credit counselors (honest ones) try to bring everyone to the table to help consumers avoid bankruptcy. That's it.

CRCS also claims that most non-profit credit counselors are "exempt from basic state and federal oversight." Let me tell you; when I was working for Springboard in California, we didn't feel "exempt" from anything. We had legislative fee caps that sharply limited what we could charge for our services. And a lot of other states made us jump through flaming hoops to get licensed. The claim that there's no oversight of credit counseling is another bald-faced lie.

How about this dirty tactic? CRCS says that "creditor-controlled agencies typically serve the interests of creditors and their profits more than consumers." For one, it's a lie. Creditors' and consumers' interests are not mutually exclusive, despite what phony irresponsible press releases tell you. And it's the CRCS-type profiteer credit counselors who serve the interests of their own profits. So much so that they've been sued and legislated out of business, hence the reason for founding CRCS in the first place! This kind of dirty lie is so devious it's actually brilliant. Accuse your enemy of committing your own transgressions; that way we end up in an endless point-and-shout match, each of us saying, "No, you did it," "Not, it was you!," ad infinitum.

The bottom line? Non-profit counseling agencies don't have profit. So how can they serve the interests of their profits? Non-profits are struggling to stay alive; they don't have shareholders to pay dividends to. If you want to see credit counselors serving the interests of their own profits, by all means pass the laws the CRCS recommends. Then Ameridebt will rise up from the ashes and resume ripping people off.

They go on to misrepresent the IRS investigation of credit counseling (it's agencies like those that make up the CRCS that the IRS is gunning for, not the NFCC), but now I'm just tired and angry.

The CRCS made a couple of good points in their 80-page hatchet job on the NFCC, but at the end of the day I think they must be regarded as self-serving liars and everything they say should be regarded with skepticism, no matter how reasonable it may sound.

BugMeNot.com = Hooray!

I'm diverging from credit and debt today to introduce you to an invaluable online service: bugmenot.com.

Compulsory registrations at online media outlets are a huge problem for bloggers such as myself. I want to offer readers a link to news stories that are of interest to this blog, and often add my take on the article.

If you've been with this blog from the beginning, you know I HATE compulsory registrations:

They violate your privacy.
They generate SPAM.
They're an annoying waste of time.
They're stupid–I never give my real email address to them.
The keep eyeballs from seeing the content your advertisers are paying for.

All of this is echoed on the bugmenot.com FAQ page.

Bugmenot stores registrations and passwords for over 20,000 web sites. The next time you're trying to get to an article that's hosted by the NY Times or Kansas City Star and find that you're impeded by some asinine registration/login page, pull up bugmenot.com, type in the url, and you'll be given account names and passwords to bypass the marketing survey and surrender of your email address.

Eventually, online editions of newspapers will give up this silliness. I don't feel the slightest bit bad about using bugmenot. I'm trying to direct traffic to them with this weblog, after all. The least they could do is not muck up the works with a stupid, waste-of-time, pointless registration process.

credit card delinquencies at a 4-year low

I know the economy is supposed to be terrible and all, but according to this article from Reuters, Americans are paying their credit card bills on time in record numbers.

It's been a crazy time during this "recession." Sure, the stock market hasn't performed at late-1990's levels, but people are buying and building homes at record rates, they're in less debt, and they're paying their credit card bills on time.

I'm wondering; if we weren't in an election year, would we be hearing all of this doom and gloom about the economy?

New Illinois law to regulate credit counselors

According to this article in the Belleville News-Democrat, Illinois has passed a revised law designed to prevent credit counseling agencies like Ameridebt from overcharging clients.

Finally, a media outlet has properly noted the difference between profiteers like Ameridebt and true non-profit agencies. NFCC agencies aren't the least bit worried about laws like this one, because we've never been in violation of them. (True, many of us feel we're over-regulated, particularly with regard to fee caps, but the Ameridebt/NCC practice of taking the client's first payment as a 'contribution' never crossed our minds. It's about time they made that illegal.)

I still think it will take some time to completely weed out the bad guys in this industry, but you can see that the process is under way. My prediction is that by the end of 2005 the credit counseling industry will be smaller and more honest. (Smaller in terms of fewer overall number of agencies, no in number of clients or $ disbursed.) I think we only need to require COA accreditation across the board, and the battle will be won.

HUD = ugh

My adventure in homebuying continues to be, well, an adventure. I will get my financing; not exactly how I wanted it, but I'll get the loan. The plan is to refinance in sixth months after I've established a new credit rating.

The new problems this week involve HUD, from whom I'm buying the house. (Yeah, it's a HUD repo; it's been vacant for a while, but it's in great shape and I'm getting a great deal on the purchase price.) All the utilities are off, and I found out yesterday I have to have the home inspected after all (HUD inspected it less than two months ago, but I'm being required to have another inspection anyway) and that can't happen with all the utilities off. So I have to have them all turned on, in my name. Then I have to get the inspection, and then I have to turn the utilities off again. All this has to happen within two days. Then in a week or so, when we close on the property, I'll have everything turned on again.

I understand this is all because the house is currently insured by FHA, but what a hassle. The utility companies are going to hate me before this is over.

What's the point of all this? If you're looking at HUD properties, think twice. Unless you're getting a great deal or you really love the property, you should think carefully before going forward. It's borderline nightmare dealing with all the rules and regulations and complications that come with purchasing a HUD home. If you do go through with that kind of purchase, find someone with experience to help you out. I'm supposed to be some kind of smart-ass author, and I'm hopelessly befuddled by all this.

Hopefully I'll have this minefield navigated by September 1st or thereabouts. (I'd better; too much longer than that and I'll have to start paying penalties for not closing on the property within 45 days of signing the contract.) Dealing with government bureaucracy is keen.

freecredit report my *$$

A few years ago, I was giving a credit seminar at UC San Bernardino, and a faculty member talked about how she was able to get a free credit report from freecreditreport.com, and how happy she was with it.

In my entire career, that makes a grand total of 1 person who was happy with their experience at freecreditreport.com. Everyone else I've ever spoken to who used the site got burned.

The amazing thing is that freecreditport.com is owned by one of the major credit bureaus, Experian (though you won't find any evidence of that on the freecreditreport site).

As you can imagine, I strongly urge you not to make use of the freecreditreport.com service (the new FACTA law will mandate that you get a free credit report anyway, it just might take some time). At the site, you'll be enrolled in Experian's CreditCheck Monitoring Service, which is a subscription thing that'll start sucking money out of your bank account after the first 30 days. Sure, you can quit your membership and not be charged, but good luck; like I said, I've only ever met one person who ever pulled off getting a completely FREE credit report from these guys. Everyone else I know ended up paying for a subscription service they didn't want.

Caveat online emptor!

Dave Ramsey

Given my line of work, it's amazing I hadn't discovered Dave Ramsey before now. So far, I'm incredibly impressed.

He's a talk radio guy who focuses on money matters, in particular eliminating debt. Check him out at www.daveramsey.com, and see if there's a radio station near you that broadcasts his show.

I'm certainly not recommending that you buy his book instead of mine... :-), but I like the way he thinks. For one thing, he doesn't immediately recommend bankruptcy, no matter how rough a caller's situation seems (I'm sure Consumer's Union, the Consumer Federation of America, et. al. don't like him for that reason, since they think bankruptcy should be a consumer's first resort). He's a big believer in taking personal responsibility, budgeting, and taking realistic, proactive steps to better manage your money.

Having said that, he's a very commercial guy; it'd be easy to spend hundreds of dollars at his site. I can't recommend doing that at this point. I'm just recommending him for a listen (you can listen to his broadcasts by streaming audio on his site). Also, he trains others to become financial counselors, and I can't say I'm entirely comfortable with that. I've not seen a counselor training program more rigorous than the NFCC's, and until I do, I won't recommend anyone else.

But by all means, give Dave Ramsey a listen; you may be as impressed as I am. (I think he runs circles around Suze Orman.)

ripoffreport.com

A reader directed me to this site, www.ripoffreport.com. It's billed as sort of an alternative to the Better Business Bureau:

Unlike the Better Business Bureau, bad businessbureau.com/Rip-off Report does not hide Reports of "satisfied" complaints. ALL complaints remain public in order to create a working history on the Company or Individual in questions: unedited.

It's an interesting idea, sure, but I have to step in and defend the BBB. I've worked with them and I know them to be fully on the level. For one thing, the BBB doesn't just "hide" a satisfied complaint. The consumer who filed the complaint in the first place retracts his/her complaint after they have been satisfied (or paid off) by the company against which they filed the complaint in the first place.

The BBB isn't at fault; they're simply reporting the complaints they get, and when a complaint is retracted, they stop reporting it. That's how Ameridebt got by so long; it was cheaper for them to pay off the few people who complained to the BBB because so many of the people the ripped off didn't do anything.

Even so, CoB readers know that the NCC had a negative BBB rating, and they could do nothing to improve it; even after they paid off all of the people they had scammed, the BBB still wouldn't correct their rating. The NCC even filed a stupid lawsuit over it, which is likely to be dismissed now that they've been shut down by the FTC.

Having said all that on behalf of the BBB, I do state in Repair Your Credit and Knock Out Your Debt that a satisfactory BBB rating should only be taken as a minimum, and is not enough, by itself, to recommend a company.

Now ripoffreport.com lets anyone post a complaint about anyone, and never takes them down. There's interesting stuff there, and you may find the site useful. It's certainly different enough from the BBB to be a worthwhile enterprise. My biggest problem with it is that so many of the complaint forums degenerate into idiots calling each other liars and similar flamewars. That stuff's not all that helpful. But if you've been ripped off, posting negative information about the ripoff artist is an absolute must, and you should report it everywhere you can. (So go to BOTH the BBB and ripoffreport.)

Bottom line: ripoffreport.com is ok, but I don't think their attacks on the Better Business Bureau are accurate or fair.

Foolish

The Motley Fool has previously revealed itself as an enemy of credit counseling; sometimes they make the half-hearted assertion that not all credit counseling is as bad as the Ameridebts and other profiteers of the world, but in truth, the folks at Motley Fool have little use for credit counseling at all.

See this article for a prime example.

The reader asks:

My father, age 83, has managed to ring up credit card debt on ten to twelve cards totaling close to $100,000. His annual interest is almost $20,000. I am desperate to find a way to keep him from filing for bankruptcy. Should he seek credit counseling or get a consolidation loan?

In answering the question, Dayana Yochim of Fool.com barely mentions credit counseling, and when she does it's a warning to be careful. The rest of her answer is excellent, except when it turns into a commercial for the Fool's fee-based discussion board.

Let me give you my expert opinion: The situation described above is an IDEAL time to visit a credit counselor. Especially if you are "desperate to find a way to keep from filing for bankruptcy." A reputable credit counselor, even if s/he can't help you with your situation, will definitely be able to steer you in the right direction.

Ah, there's the rub. How do you know if your credit counselor is reputable? You can find a million lists and articles on the web purporting to answer that very question. My answer is the quickest and the best. Find a COA-accredited counseling agency. That's all. Look for the COA logo, and you know your counselor is on the level.