Credit/Debt Recovery

Utilities mimic creditor's evil ways

A few months ago, I blogged about a utility company in Texas attempting to change customers' fees and access to services based on credit scores. They were eventually forced to abandon this idea, but I predicted we hadn't heard the last of utilities using credit scores to decide your fate (everyone else uses them, so why not utilities?)

But I just came up against a new example of utilities adopting creditors' predatory practices.

I've warned you about Universal Default for a long time. Now, some in the mainstream media are finally picking up on this practice (in a nutshell, Universal Default means a creditor can raise your interest rate if you are late in paying ANOTHER creditor--if you default with one, you default with them all) and decrying it.

Well now my phone company is trying their own version of universal default.

I won't name my phone company, but it's Some Big Company you've heard of. They own a cell phone company (I won't name them either, but let's just say there's one cingular place in Kansas City where I can get a clear signal). I've been with that cell phone service for over a year. I just signed up with their residential phone service last month, mainly because I was migrating to DSL, and they wouldn't give me the internet service without also making me have a phone line put in.

A year with the cell phone, and no major problems. A month with the DSL and residential phone service, and already I've got problems with the line, DSL not working properly or up to speed, and phone bills that are way larger than they should be.

So I called the phone company to deal with some of these issues and they tried to get me sold on going through them to get my Satellite TV service.

It actually sounded like a good idea... they could get me a discount, and it would allow me to conveniently put both bills together. I wasn't in the market for satellite service, alas. But the phone company also mentioned that I could have my cell phone bill combined with my residential bill each month, since the phone company owns my cell phone service provider.

I was ready to go through with it. Getting my internet, phone, and cell phone all in one convenient bill each month, and even my satellite TV service, if I wanted to sign up for it.

But there was some glitch in the computer that prevented the phone company from combining the accounts. They said I'd have to call the cell phone service provider and have the accounts combined on that end.

Well. When I got through to them (cell phone company), the rep there very tactfully informed me (without saying anything that could get himself in trouble) that this was a bad idea.

It seems that if the accounts were combined in this way, and I had some billing problem with my residential phone service (which I did, which is why I started this entire line of inquiry), the phone company could suspend both my cell phone and my residential service until I dealt with the issue.

See what's going on? It used to be, if you had a problem with your phone bill and they cut you off, you were left with no options; you'd never be able to get phone service again until you paid the phone company off. But with cell phones, you could always forgo the residential line and just use the cellular exclusively. Well my phone company seems to have found a way around this.

And imagine having your phone(s) shut off because you haven't paid your satellite TV bill.

Not a very pretty picture is it? It's ingenious, I admit, but there's a Darth Vader quality to all of this; the ruthless efficiency of it is chilling.

So no, I didn't have the accounts combined, and if I'm ever in the market for satellite TV, I won't go through my phone company. I'm just glad the guy at the cell phone service provider was honest and up front about all this. The phone company certainly wasn't.

I've said it before, and here it is again; convenience is a luxury for the rich, not something for the rest of us. It may be convenient to have all of these services combined and handled by the same company, but that gives them a lot of power over you should you have a problem with one of your services. Resist any offers to "combine accounts" in this way. The small amount of extra convenience it nets you today could result in a huge headache for you down the road.

Secret History of the Credit Card

PBS' Frontline will air the "Secret History of the Credit Card" tomorrow night, November 23rd.

I'm sure it will be fascinating and one-sided. If you're interested, definitely tune in. But keep your bias meter turned up; Frontline has aired some of the stupidest conspiracy-theory crap I've ever seen, and I can no longer accept anything they air without heavy doses of skepticism.

I'm sure most of this particular program will be accurate and informative, but if your check out their press release (you'll have to find the Frontline website yourself; it's buried in tons of annoying deep links) you can see which side Frontline is on even before the show airs.

Of course, they're displaying their bias so openly, it's hard to fault them for having it--at least they're not pretending to be objective here.

Also, check out Myvesta.org (http://myvesta.org/history/history_index.htm) for a good overview of the "History of Credit & Debt."

FACTA coming Dec. 1st

The Fair & Accurate Credit Transactions Act will go into effect on Dec. 1st. It'll take a year, but the Act will allow consumers to get free credit reports and make it easier to correct errors.

Paul Richard at the ICFE (http://icfe.info) has created the Credit Report Reviewer Certification Program to prepare counselors for the task of helping clients take advantage of FACTA.

As usual, Paul has really nailed it. I think his Certification program is a must for any counselor who wants to stay current with the new laws regarding credit reports. If you're a consumer looking for help getting a free copy of your credit report under FACTA, ask if your counselor has Paul's Credit Report Reviewer Certification.

And if you're any kind of financial professional (mortgage lender, college financial aid worker, CFP) you should definitely check out Paul's program right away. FACTA is almost upon us.

Clarifying my Position

As I read over some previous posts, it seems I come down pretty hard on the notion of for-profit credit counseling.

The truth is, I have no problem with it. There's nothing wrong with offering a good service, charging a fair price, and making a profit.

I don't like profiteering, which to my mind is not the same thing as being for profit. Taking advantage of people on the verge of bankruptcy is evil. Charging them a fair price to give them the help they need (even if you're doing it for profit) is good.

There are for-profit hospitals, and there are non-profit hospitals. They both save lives. There's nothing wrong with making money.

If for profits are allowed to enter the credit counseling world, many of them will be on the level. But there will be a few who are bad, just as there are a few bad non-profits now. My number one problem with the for-profit crowd right now is that they seem to want to destroy the non-profits rather than co-exist. They'd rather bring the roof down on all of our heads. Do they really think the non-profits would have such an unfair advantage if they were allowed to compete in the same market?

Non-profits are losing money month after month. For-profit agencies may have some of the answers. They may come up with a better business model for credit counseling. But it seems they're intent on destroying the NFCC first, then getting congress to allow them to do their thing.

Congress should let them; for-profits should be allowed to enter the credit counseling field. But cheering on the IRS as they strip away credit counselors' non-profit status is unseemly.

I'll continue to support more choice for consumers, including opening up the field for credit counseling to qualified for-profits. But I'm not drinking the kool-aid yet. There's still more debate that needs to be done on this topic before we destroy a 50-year old industry.

Target bans Salvation Army bell ringers

On fark.com, I found the link to this story about Target banning Salvation Army bell ringers from its stores.

Typical of modern journalism, the story is crap. I love the objectivity on display here:

"And the less noise means fewer families can be helped."

A better writeup of this situation is available at snopes.com.

But there's something even Snopes missed. I won't name anyone or anything specific here, but a friend of mine got a job in California working for a firm that collected money on behalf of charities. They hired aggressive young salesmen and sent them door-to-door to sell coupons and solicit donations for various causes (mostly for anti-drug charities, since they preyed on poor neighborhoods in SoCal that were deeply concerned about the drug problem).

The firm kept half the money collected as their fee. They gave the salesman a third as their commission. And the charity got just over 15% of the take. And that same firm also handled bell ringers all across Southern California. (Let me be clear: I don't know for whom those bells tolled. It could have been they were collecting for charities other than the Salvation Army by setting up kettles and ringing bells... but the whole thing gives me great pause.)

Sure, charities like the Salvation Army get 70% of their donations this way, but the salesmen who skim 83% off the top drive luxury cars and live in $500,000 houses.

Since I learned the truth about this, I haven't put a dime in a kettle. I prefer to donate directly to the Salvation Army online. They get ALL of the donation, and it's tax deductable.

So don't be too hard on Target this Christmas. They're good guys when it comes to charitable contributions. And be careful whom you donate to; there are crooks everywhere..

UPDATE: I got an email from a good friend of mine who is a member of a masonic lodge. He's one of their volunteers to ring the bell for the Salvation Army, and he assures me he doesn't drive a lexus. Let me clarify strongly; the scenario I described above isn't universal. Lots of places have good old fashioned volunteers ringing the bell. I just want to raise awareness and urge consideration when donating.

A good rule of thumb: if the guy's wearing a fez with gold fringe on it, go ahead and donate. :) And remember, don't buy anything from a charity, just donate. Buying a coupon book or something like that eliminates any tax deductability the contribution might have. I still recommend going right to the source to donate, but if you can trust that your local SA bell ringer is an unpaid volunteer, by all means, donate. But don't join in any boycotts of Target; go to snopes.com and learn the facts.

Frustrating

I was talking with a good friend of mine today. She's the perfect credit counseling client... she pays her DMP payment on time, in full, every single month. She shopped around until she found a credit counselor who wouldn't keep her first payment as a voluntary fee. She ended up with CCCS of Kansas City.

CCCS KC merged with a few other midwest NFCC agencies, but it hasn't affected her DMP at all. She's basically happy with the service she's getting, and after over two years on the plan, things are going well.

Today, someone all but convinced her she'd been scammed. They said she'd have been better off filing bankruptcy, and her credit would now be ruined.

It's frustrating that these lies are still spreading around. Nothing is worse for your credit rating than bankruptcy.

"But I heard it's easier to get a loan with a bankruptcy on your credit than with credit counseling."

Yeah. Subprime lenders and most auto lenders would rather see you post-BK. Because they get to charge higher interest, they know you can't legally file BK again any time soon, and they figure since you just had your debt wiped out, you can afford their ridiculous interest and high payments.

Lots of people need bankruptcy. It's a fact of life. But the anti-credit counseling attack machine needs to lay off. In credit counseling, we don't like bankruptcy, but we recommend it when it's the best option for the client. I daresay we don't get the same courtesy from the bankruptcy industry.

Again, your FICO score will not change because of credit counseling. Lenders will loan you money when you're done with your debt management plan, and at better rates than post-bankruptcy.

Part of the problem is, the credit counseling industry is like the national Democratic party. When we line up our firing squad, we stand in a circle. We're arguing with each other over for-profit vs. non-profit, AICCCA vs NFCC, etc. Meanwhile, the pro-bankruptcy "consumer advocacy" groups are picking our industry apart. When the dust settles here, will there even be a credit counseling industry to serve debtors? Fair share will certainly be a thing of the past (you think our new congress is going to require creditors to make fair share contributions? heh). And will there be any consumers left who will credit counseling a chance (and pay the higher fees that a non-fair share world will necessitate)? We're getting a worse reputation every day, and now "concerned whatevers for responsible credit something" are in an eye-gouging contest with the NFCC agencies; I predict bad things for the industry if this trend continues.

Consider: Dick Gephardt would be president-elect right now if he'd won the nomination. Think about it. I'm right about this. But he sacrificed his candidacy when he went way negative on Howard Dean in Iowa (which succeeded in derailing the Dean candidacy). And he didn't even get the VP nomination for his trouble. (Which would have made the election even closer. Think about it. I'm right about this, too.) They called it a "murder-suicide." That's what I think is happening in the credit counseling industry right now.

And the bankruptcy people and the "consumer advocates" are watching the show, and loving it.

Think about it. I'm right about this.

Important comments last week

I just discovered some very good comments on my October 24th post-I'm sorry it took me so long to notice them (election madness). I highly recommend reading them, because this is a crucial issue that's coming up.

Check out Darrien Nayz's comments here.

Of course, when I whine about profiteers and counselors who want to be for-profits, I'm usually talking about groups who are currently non-profits. That's the majority of the industry. And you bet some of them are unscrupulous. And yeah, I'll say it; some of those unscrupulous nonprofits are probably NFCC and AICCCA members.

The future of the industry will be decided by the IRS. Strip away the nonprofit status of traditional NFCC agencies, and it's game over. I really believe that. And you know what, some of those agencies may well end up being collection wings for the big creditors if that comes to pass. I'd consider that a sad outcome.

Election's over

The blogosphere has been an unpleasant place for the last few months, and it's been particularly bad over the last couple of days.

Can we get back to our lives now?

One thing I will say regarding the election results and the subject of this blog. It seems the numbers favor bankruptcy reform, but there are still plenty of reasons to not get our hopes up (or worry, if you're against BK reform). Chuck Schumer is still in the senate, and I don't doubt he'd drop a poison pill in any BK reform bill that might be forwarded by the new senate. And given the way the wind is blowing politcally, Schumer's particular poison pill will very quickly destroy any BK reform effort that might come up.

(If you don't know what I'm talking about, Schumer attached a provision to the last BK bill that would take away one's ability to declare bankruptcy on damages awarded in lawsuits stemming from blocking access to abortion clinics. That got Republicans thinking that little old ladies who tried to pray with people in front of clinics would be sued for everything they have and wouldn't be able to declare bankruptcy on the resulting judgments. I think they way overreacted, personally, but it succeeding in killing BK reform for the time being.)

If the Democrats are smart, and they are, they'll pick legislation like this and take a stand and destroy it. BK reform would be the perfect place for them to prove their point.

Now, I disagree with them on this particular issue; I'm for BK reform. But I don't doubt their sincerity. They truly believe they're helping those less fortunate, and that they shouldn't limit access to Bankruptcy protection in a shaky economy. They're not just cynically blocking legislation on this particular issue, they're taking a principled stand that I respect.

But I just think they're mistaken. Regular folks who need bankruptcy will still be able to get it. All this talk about people being prevented from getting the help they need is a huge red herring. Even the Harvard study confirmed that BK filings wouldn't be significantly affected in that way. It would just make BK filings more meaningful and allow them to benefit the filers more. There won't be masses of people turned away from the bankruptcy courts--just those few who are trying to get away with fraud.

Other than BK reform, maybe this election signals good news for the for-profit credit counseling crowd. I suspect a Republican majority congress will be more amenable to lifting fee caps and restrictions on credit counseling and other bankruptcy alternatives.

There's good and bad here. Certainly having more viable BK alternatives is a good thing, but too much deregulation on an industry that's already seen its share of scam artists and phonies could lead to disaster.