Credit/Debt Recovery

Global economic collapse?

A friend sent me this story, which describes Bank of Canada's Governor David Dodge's warning to America: you're living beyond your means. Dodge specifically thinks the trade imbalances between us and other nations will lead to serious consequences for the US.

This story spells out the relationship between consumer debt and the international economy a bit better: we're still getting good mortgage rates (despite Fed rate increases) because China is lending us so much money.

There's no doubt, all of this could add up to a catastrophe. I don't think it will, but it's possible. People need to borrow less and save more, and our government needs to show some fiscal responsibility. Neither of those things is likely to happen, so the best thing to do is get yourself out of credit card debt and into a home at a good fixed rate. Start saving 10% of your income for emergencies. If a big recession does hit, you'll be in better shape than all the people who continue to live beyond their means.

Meanwhile, there's a bit of good news in the midst of this current DOOOOOOMMMM!!! news cycle. Friday I talked about how college students fear debt more than terrorism, and that's good, because maybe the next generation will be more fiscally responsible. Well, this story adds some support to my argument. Apparently credit card debt among college students is down. Looks like we're finally getting through to some people. Maybe we're not DOOOOOOMMMMed after all.

College grads fear debt more than terrorism

I can't believe I missed this story when it came out last week. The Partnership for Public Service found that 32.4% of college grads feared going deeply into debt, while only 13.4% feared a terrorist attack.

Here's USA Today's coverage.

This is actually good news, to my mind. A LOT more Americans are directly affected by debt than by terrorism. If more people focus on controlling their debt, we'll have a more stable economy all around, and we'll withstand terrorism better on an economic front. The notoriety of the bankruptcy bill should also motivate people to manage their debt better, since they're being told they won't have access to bankruptcy protection if they need it.

This could be the beginning of the end of America's culture of debt; it'll take an entire generation, but we may become a nation of savers yet.

Payday lenders and the military

Payday lending abuses of military personnel are the big story now; I think I blogged a while ago that congress would be getting in on the act (a friend of mine was recently invited to congressional hearings on the subject).

Payday lenders have been setting up shop across the street from military bases, advertising with patriotic symbols and 'Military welcome!' signs.

Here's a story that suggests that base closings will be affected by payday lending. See, not every state allows payday lenders such ready access to military personnel, so the ones that do may be first up for base closings. It's an interesting idea, and cause for states to really examine their laws governing payday lenders.

As usual Springboard was WAY out in front of this issue. Dianne Wilkman wrote an op-ed for the LA times three years ago, suggesting payday lenders should self-regulate, lest they face excessive governement regulation.

They didn't listen to her, and kept on charging an average of 400% in interest, and now we're going to see more government activity to limit what they can do. I'm against government regulation in general, which is why I get irritated by industries who demonstrate so clearly that they need to be regulated by the government.

And if it turns out that communities with military bases are thrown into turmoil because of the presence of payday lenders, that'll be a shame; it'll further erode what little sympathy payday lenders have from the public, clearing the way for regulators to smack them down.

Phone Bill Shenanigans

Five or six years ago, there was a lot of talk about "Cramming" on phone bills. These days, you hear more about "Slamming," which is a completely different thing.

Cramming is when unauthorized charges are applied to your phone bill without your authorization. Slamming is when your long distance provider is switched without your knowledge.

I just got crammed. My wife's sister lives in Chicago, so we switched to an all-distance plan. The phone company rep asked if I needed international calling, and I said no, at least twice. But this month, I was billed $15 for "JustCall Worldwide." I called and got it cancelled right away. But this highlights a few problems;

1. We don't hear much about cramming in the media any more. Which is unfortunate, because it's obviously still going on.

2. My case involved the phone company itself, not some sleazy third part (cramming often results from using phone psychics or sex lines).

Every time I talk to the phone company, the operator tries to sell me on some service or other. Since being salespeople is obviously now part of their job, I imagine quotas and pressure from managers are par for the course. So it seems that a few phone company employees will resort to signing people like me up for unwanted services in order to meet whatever sales goal they've been handed.

And all of this isn't even what's really irritating me. What's got me frustrated is that my $49.95 phone plan costs me 76.44 or so a month. And rising. And it's not necessarily the phone company's fault; the government regularly tacks on new fees and charges to our phone bills.

How am I supposed to budget to that? How do I help people prepare a budget when our phone bills are running wild? I just don't know what to do about it.

Luckily, though, I was going through all of the nonsense taxes and fees when I caught the crammed-on international calling plan and canceled it. A small bit of comfort.

Here are some resources on this subject:
Consumer Action
TURN (The Utility Reform Network)
TeleTruth

Chili-Finger story was debt related

You all know the finger in the chili story by now. It seems the owner of the lost finger gave it to the perpetrator of the hoax to settle a personal debt.

Talk about secured credit... I wonder how many girl scout cookies my left pinky would pay off.

Girl Scouts hiring collectors

The girl scouts have signed up for the War on the Poor.

In this excellent story by Lisa Gutierrez entitled Tough Cookies:Girl Scouts go after deadbeat customers, we learn that the Girl Scouts are now hiring debt collectors to collect $24,000 in unpaid cookie revenues.

How greedy can the Girl Scouts get? This vast corporate entity sells millions of dollars worth of diabetes-causing cookies every year, and they’re hiring thugs to go after $24,000?

It just isn’t fair. This is a naked attack on the sick and the poor; why, in a scientific survey I totally made up in my head, 90% of the people who didn’t pay for their girl scout cookies bought aspirin the week before. That means they’ve got a medical condition! They can’t be expected to pay for their cookies!

Now, people ask how I can include people who buy aspirin in my imaginary survey. Well, even if I left out the aspirin part, it wouldn’t change my statistics (because they’re made up!); all of those consumers bought other products, like ibuprofin and band-aids. So it’s definitely safe to say that all of these so-called “deadbeats” are suffering from unexpected medical emergencies (in my imagination).

And it goes further than that. In an economy where girl scout cookie buyers are being squeezed by rising health care, automotive, and home costs, it’s just wrong for the Scouts to be disproportionately harming people who don’t pay for the cookies they ordered through no fault of their own. The fake news journal “The Paris Business Review” states that 90% of people who don’t pay for their cookies can’t due to illness. Another 50% can’t pay because of divorce, 40% because of death in the family, 70% because of job loss, 50% because of medical emergencies, and only one-twelfth of one-half of one percent because they don't want to.

This attack by the girl scouts on hard-working families should be remembered the next time they offer to sell you cookies on credit. They know the risks! They shouldn't let people who can't afford to pay write a check for their cookies.

And now that the Girl Scouts will be collecting all that unpaid cookie revenue, does that mean they'll lower the price of their cookies for those of us who aren't "deadbeats"? Heck no! Will the greed never stop?

Kids with Credit

Over the years as I've spoken to groups of college students and high schoolers about credit and debt, I've noticed younger and younger people obtaining credit cards.

Now a survey of Junior Achievers (...and proud we are of all of them) shows that 11 percent have credit cards. The story was picked up in several places: here's MSNBC's coverage.

MSNBC is also running a poll, and so far 75% have responded that teens obtaining credit is a bad idea. The other 25% think it will teach them valuable financial management skills.

I'm in the latter group. I don't think kids as young as 13 should get a full-fledged credit card, but why not a prepaid credit card? That's how a lot of people provide cell phones for their teenagers, so why not do it with money, too? The younger you can teach a kid to use credit wisely, the less likely they'll find themselves in trouble with debt later in life.

I use an Ecount prepaid card as a budgeting tool. They also have a special card just for teens; if you've got a teen who needs to learn better money management skills, check out that product.

Bankruptcy Filings Up, BK Attorneys Prepare for Fall

It's a busy time for bankruptcy attorneys. Bankruptcy filings are way up, after falling to 4-year record lows in January. Cardweb's got the numbers on that.

Meanwhile, BK attorneys have to prepare for the new bankruptcy law, which drastically increases their responsibilities. NACBA, the National Association of Consumer Bankruptcy Attorneys is holding a conference in July: Fighting Back: Helping Debtors Survive the New Bankruptcy Law.

This is one of the reasons I wasn't as worried about the new bankruptcy law as everyone else in the blogosphere. Bankruptcy lawyers are smart, and they're already at work finding ways to work within the new law to help deserving debtors access bankruptcy protection. More cynical folks than I might say they're already finding ways to game the system, but they're lawyers; it's their job to figure out the best course for their client within the law.

What really needs to happen is increased cooperation between credit counselors and BK attorneys. Attorneys need to have credit counselors they can refer filers to for means testing whom they trust not to push debt management plans on people who won't benefit from them. There are plenty of credit counselors out there; enough to keep up with demand. The problem will come from the agencies who are trying to sign up DMPs rather than help filers get access to the bankruptcy protection they need. A smart credit counseling agency won't pull that; attorneys will be referring a lot of people to them for counseling, and if I were a BK attorney, I'd stop referring to agencies who hijack clients onto DMPs when it's bankruptcy they need. Similarly, lawyers need to recognize when a DMP is right for a client (and it is, 30% of the time) and pair them up with a good debt management agency.

My question is... why can't a BK attorney officially partner up with a credit counselor? Provide a one-stop solution for persons who seek counseling. Why couldn't a credit counseling agency have a bankruptcy attorney on staff to handle the folks who get through the means test to bankruptcy? And why couldn't law firms have counseling services for those few who don't qualify for bankruptcy under the new law? Or a debt settlement for people who can go that route?

I think this kind of "one-stop" operation may be forbidden in the new law, but I don't feel like slogging through it to find the actual verbiage. But why should it be?

The Health Blog

I've been so sick for the past few days I can barely look at my monitor. I came across this excellent "Health Blog" as I was surfing the net trying figure out what the heck is wrong with me.

I don't know the blogger, Ryan Healy, personally, and we've never corresponded, but I'm adding him to my list of blogs to read. I like how his blog is focused on its topic and rarely deviates (like I'm doing with this post). I'm learning a lot as I read through his archives, and I really agree with most of his ideas about health and nutrition (except one--I think it's stupid that Sesame Street has made the Cookie Monster a healthy eater. I'm a former Kindergarten teacher and I worked extensively in children's theatre in graduate school, and I can tell you authoritatively that kids are more sophisticated than most adults think. They know the difference between a fictional character and reality, and they understand that it's not always a good idea to do what the muppet does on TV.)

Anyway, no debt recovery advice today, but check out the Health Blog and maybe you'll avoid a few sick days in the future.

Richer, but not Happier?

I read an article in the Kansas City Star this weekend that said "increased affluence hardly affects happiness." (The Star has a dumb-ass registration required link, so you'll have to hit bugmenot.com to get a password if you want to read the article itself.)

The article also says that people in rich countries are not happier than those in poorer ones.

I don't know what to make of it. In recounting the least happy times of my life, I immediately think of the times I was most poor (okay, that's most of my life, but still...). Things got better as more money came in. Even now, the most stress I have is about my dwindling savings and my (financial) concern for the future.

So, am I saying I don't believe this article, and all of the psychologists and sociologists they quote?

Yeah. I guess I am. I don't buy it. At least, in my experience, more money equals more happiness. I'm not saying one can buy happiness, but lack of money is a huge obstacle that makes happiness harder to obtain. The article quotes a financial planner who talks of happiness in relation to family and friends. But how much inner peace can you enjoy with your family if you're not sure they're going to be financially taken care of? You may love them, and they may bring you joy, but genuine happiness will be fleeting if you're having trouble keeping a roof over their head.

The article does say that this money≠happiness nonsense doesn't kick in until a certain income level; $40,000 or so. Below that, more money does indeed equal more happiness. But after that, they say, the connection between the two ends.

I'd like to find a family of four in Southern California making $40,000 and see if another $10,000 per year makes them happier. Of course it would.

This isn't just a greed argument. I'm talking about having the means to provide for the ones you love and feel secure. And to have the extra means to donate to charities and causes that matter to you. I know hippies will always disagree with me on this stuff; they'll agree that Maasai tribesmen in Africa are as happy as billionaires in the US (and for some reason they'll agree that it's okay to compare those two groups). But I don't listen to hippies when it comes to personal finance, and neither should you.

What's really happening here is typical "screw the rich" thinking. I'd like to see all of these studies done without very rich people included. Say, anyone worth more than half a million dollars. I bet working-class people in this country have about as much use for this "richer doesn't mean happier" nonsense as I do.

Why do I even care? Because the "you can't take it with you" attitude is a big part of the problem I wrestle with for a living. People are drowning in debt in this country because far too few of us consider saving to be important. People very close to me have that "what good is money if you're not going to spend it?" attitude, and the result is they have no money in the bank despite a lifetime of hard work. They're one serious illness away from being destitute. I'm not saying everyone has to be Gordon Gekko, but realize that money is important in our culture, and it's worth the effort to learn to manage it responsibly.