Jeff Michael: Repair Your Credit and Knock Out Your Debt
I highly recommend this book because I wrote it.
Edie Milligan: Tips from the Top: Targeted Advice from America's Top Money Minds
I have about a dozen entries in this book.
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The American Bankruptcy Institute has a blog specifically about BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act). Since I"m unqualified to speak about the legalese (I'm not a lawyer) of the act, I try to stick to the credit counseling provisions of BAPCPA, about which I am qualified to speak. ABI's BAPCA blog has good information about case law and emerging precedents in bankruptcy courts.
Find ABI's BAPCPA blog here.
The NACBA press release I blogged about last week asks rhetorically, "Where are the deadbeats?" They're pushing the idea that since credit counselors aren't diverting clients from bankruptcy to DMPs (something BAPCPA opponents wrongly predicted), the entire bankruptcy reform law was unnecessary.
Where are the deadbeats? I have some answers:
1. They filed already.
Remember just a couple of months ago, when there was a stampede at every bankruptcy court in the country? That was after NACBA and groups like them convinced everyone that if they didn't file bankruptcy before Oct. 17th, 2005, they'd never get to. We know know that wasn't true, and in fact anyone who needs bankruptcy can get it--but how can we expect waves of deadbeats in the first four months of bankruptcy reform when so many people filed late last year?
2. They aren't even bothering.
Maybe the deadbeats aren't even bothering to start the bankruptcy process; if they know they don't qualify, what's the point? If this is correct (and I don't think it is) then the new law actually did work, and is preventing abuse of bankruptcy.
3. There never really were that many 'deadbeats'.
And so what? Even if there wasn't rampant abuse, maybe bankruptcy still needed to be reformed. Why is credit counseling and education a bad idea if all the people filing bankruptcy truly need it?
What NACBA is now spreading is meaningless. They're rushing to judgement about something that hasn't even been in place for five months. They're manipulating data to support conclusions they reached years ago, and they've established that they have zero credibility when it comes to bankruptcy reform.
NACBA, The National Assoc. of Consumer Bankruptcy Attorneys, was founded to oppose bankruptcy reform. This week, they're having a conference where they are (surprise) declaring bankruptcy reform a failure.
It's all hyperbole, and should be ignored. For one thing, BK reform has been law for less than 5 months. Advocates of bankruptcy reform had over 27 years of data to work with when they enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005; now NACBA thinks they can come to hard conclusions in less than six months.
And even that is irrelevant, because it's clear that their conclusions were reached before they saw any data. The meme originally was that credit counselors would "steal" bankruptcy attorney clients by signing them up for debt management plans. Now that the statistics are showing that 97% of clients are filing bankruptcy without being forced into DMP's by the credit counselors, the BK attorneys are arguing that the law is a failure because credit counselors aren't diverting enough clients from the bankruptcy they need! It's a classic case of "damned if you do..."
But what's most puzzling to me about all of this is why bankruptcy attorneys are going after credit counselors in the first place. They're not competing with them to steal clients, and in fact the data shows that credit counselors are bending over backwards to help bankruptcy attorneys. There may be provisions in the bankruptcy reform law that are questionable, but the credit counseling and education requirements are the least offensive (because they're not offensive at all).
Why take the trouble to attack the credit counseling provisions as opposed to say, means testing? I think it's possible that NACBA is fighting the battle they think they can win. Credit counseling agencies rushed to help NACBA by providing data for their study, only to see NACBA disingenuously shoe-horn the data into their preconceived view of the new law. Because credit counselors are so eager to help and work with BK attorneys, they're vulnerable to this kind of manipulation. This makes them an easy target for attacks like NACBA's current press release.
It's easy to mislead the public when it comes to credit counseling. There are big, high-profile agencies like Ameridebt who took advantage of their nonprofit status and a lack of regulation of the industry to profit at the expense of vulnerable debtors. Opponents of BAPCPA want to convince people that all credit counselors are as crooked as Ameridebt. It's clearly not true. If an agency is COA accredited and approved by the EOUST to provide bankruptcy counseling and education, then they've been very throroughly vetted. Add HUD-certification and BBB approval to that, and anyone who wants to defame that agency frankly looks like an idiot.
And speaking of, there is no shortage of enemies of credit counseling who sell themselves as "experts" on the subject, when in fact their true interest is eliminating credit counselors as competitors. When NACBA puts forward "credit counseling experts" who do nothing but attack the industry, why should we trust their "expertise?" It's like bringing in a scientologist as an expert on psychiatry.
Finally, for now, there's an audacious meme being put forward by NACBA that the credit counseling requirement is responsible for bankruptcy being "trickier and more confusing"as well as "cumbersome, time consuming, and expensive." READ CAREFULLY: Credit counseling adds a few hours of quality education to the bankruptcy process and around $100 to the total cost. (And yes, credit counselors waive the fees for the truly needy.) Meanwhile, bankruptcy lawyers are charging $1500-2000 for a bankruptcy filing, and they have the nerve to accuse credit counseling of making bankruptcy more expensive? It's all moot anyway, since if you're wiping out thousands of dollars in debt in a bankruptcy filing, it really isn't that expensive, even when your lawyer charges you 2 grand.
And I reject the idea that bankruptcy is always "trickier and more confusing" now. Consumers have credit counselors advising them on their personal finances, which didn't happen before. The attorney is there to guide them through the BK process. Maybe bankruptcy is "trickier" for an attorney, but it shouldn't be so for the client. Not if the attorney is doing his/her job.
With NACBA's current agenda, it seems that there are a lot of consumer bankruptcy attorneys who will simply never give in. They will never come to the table to work cooperatively with credit counselors, and will continue to spam the EOUST with complaints and hire shrill "experts" to support their inflexible notions about bankrukptcy. If they win this first war and successfully undermine the credit counseling requirements of the new law, they'll move on to other provisions of BAPCPA and take them down. The only question left in my mind is why they chose to begin their offensive against the most benign and consumer-friendly provisions in the law, and whether their misinformation campaign will ultimately succeed.
I realize that this article by Davidy Berky is a designed to promote his "Simple Joe's Expense Tracker" software, but it's a pretty good article on the basics of credit card use.
There is a point he makes that I think is worth debating. He writes:
Credit cards may actually save you money. Some people avoid making purchases if they do not have cash. Cash seems to "burn a hole" in our pockets, it just disappears. It is so easy to spend and it is right there. But a credit card takes more effort and you know that you have to pay the bill later that month.I don't believe that's universally true. I think it's harder for people to part with cash than to make a credit card purchase. I also think people spending with credit cards will spend more on a given shopping trip. I seem to remember a study that showed people were more likely to upgrade a meal ("Super-size") if they were paying with a debit/credit card as opposed to paying with cash. Similarly, if you go to the grocery store with nothing but a $50 bill, your spending is capped. Bring a debit or credit card, and you're much more likely to overspend.
I've been hearing buzz for years now that 40 year mortgages were going to be on the rise. This story offers some support for that notion.
In the long term, I'm not so bothered by the concept. Just as most first-time homeowners will upgrade to a second home within five years, most people with 40-year mortgages will refinance as their financial situation improves.
That is, provided housing values stay strong and a unicorn doesn't pop the housing bubble with its golden horn (unicorns being about as real as the housing bubble...).
The bottom line is, anything that helps people get into homeownership is a good thing: a 50-year mortgage is certainly less than optimal, but I'd rather have that than rent. Of course, not everyone agrees with me, which I find baffling. Specifically, I'm thinking of this Sacramento Bee article that seems to almost gleefully expose the rise in mortgage defaults in California:
It took less than eight months for Dustin Suposs' "American Dream" to become a nightmare.I'm sorry the Bee doesn't understand what the "American Dream" really is. When people enter a mortgage that's way out of their ability to pay, they made a mistake. It doesn't indicate that homeownership is a bad idea or that there's some kind of nefarious "mentality" at work. If there's a "better-buy-now" mentality, that means more consumers have gotten the message and are making the best investment they can make.
He and his girlfriend, both in their early 20s, got caught up in the better-buy-now mentality that fueled the Sacramento area's housing market last spring.
By the way, if you're a first-time homebuyer, great! But understand the concept of a "starter home." Your first house doesn't have to be a 3,000 sqare-foot mini-mansion. Like I said, most first-time homeowners upgrade within 5 years.
Last week, in honor of Valentine's Day, myfico.com added a "for couples" section. There's some interesting information here, particularly the results of their survey, which show that financial matters rank near the top when it comes to stress in relationships.
I'd have to say I side with the majority in these surveys; financial responsibility is crucial in a relationship--far more crucial than a lot of physical characteristics that are just going to fade with age anyway.
I also agree that couples should share information and work together when it comes to conquering debt. When you marry someone, you marry his/her credit, too.
Just over a month ago, President Bush signed into law a ban on anonymously posting messages or sending e-mails designed to "annoy, abuse, threaten or harass."
La Shawn Barber blogged about it at the time, and CNET's Declan McCullagh offered this perspective, which to my mind was dead on. This is a bad law.
However, whether I consider it unconstitutional or not, it is currently the law of the land. And how exactly does one prosecute such a crime? Right here on my blog, comments have been posted that are pretty annoying. And anonymously, too. Late last year's comments on this post spring to mind. I suppose that would be illegal today, wouldn't it?
But here's what's on my mind now. What if an anonymous contributor to Wikipedia vandalizes, an entry to cast the subject in a bad light? I find that annoying. What about all the Wikipedia editors who make good contributions who are bowled over by trolls and edit warriors with an axe to grind? Could this awful new law offer them some relief?
I'm too busy for regular posting this week, but I don't want an angry rant against BofA to sit atop the blog any longer, so here's a quick thing that hit my inbox last week:
The discredited "most bankruptcies result from medical bills" meme is being resurrected. A report is being cited, saying that 65 percent of people in bankruptcy had medical debts.
Problem? The report examined 348 people in one state (and not even the whole state). Most of those people owed less than $5,000 in medical bills (and only 27% owed over 10,000), while the average credit card debit in the US is around $9,000. So is it the medical bills that resulted in the bankruptcy, or the fact that the 200 or so people in the study were stretched to their limit on credit card debt?
I'd encourage anyone who wants to seriously examine and comment on these issues to do a bit of homework first, starting with How To Lie With Statistics.
I'll readily agree that bankruptcy protection is necessary and for many consumers, it's the best option for debt relief. But continuing to re-fight BAPCPA with this kind of useless "study" and constant exaggeration of factors like medical debts does more harm than good, because people who employ these tactics sacrifice their ability to be credible advocates for consumers.
For a few years now, I've been using Bank of America's online bill pay to pay most of my monthly bills. Before last month, when I paid a bill, the money was taken out of my account right then, and a payment was sent to the payee. That payment, whether it was an electronic transfer or a check issued by the bank, was guaranteed funds. No worries.
Now, instead of taking the money out of the account right then, BofA leaves it in the account until the payee cashes the check. Essentially, they now write the payee a personal check from my account, and the funds stay there for 4-7 days (it takes 4 days for BofA to deliver the payment, and usually a few more days for the payee to process the payment--it took a week for my last utility bill payment to leave my account from the day I made the payment online).
Why on earth would I want that money to stay in my account for an extra week? I'm not earning interest from my checking balance, and the money is already committed to the bill I've paid. All this change does is drastically increase the chances that my account will be overdrawn.
BofA has destroyed any incentive to use their online bill pay system, and with it, online banking. I might as well pay my bills with personal checks, since that's all BofA is doing now. At least if I write the checks myself, I'll have my hand-written register to tell me what funds are available to me. I can't count on my online balance any more, since Bill Pay doesn't remind me what bill payments are still pending. (Even after I commit to making an online bill payment, the debit isn't listed on my main account page along with other "pending transactions." Think about that--if you were banking normally and writing personal checks, would you wait until the checks cleared to record that transaction in your checkbook register? That's what BofA is doing now.)
What galls me the most about all of this is BofA is touting these ruinous changes as big improvements--"Bill Pay just got better" they say, over and over again. "Even better, funds can stay in your account longer-since your money remains in your account until the payee receives the payment."
How is this "better?" I suppose if you pay bills from your interest-bearing savings account, the extra week those funds sit there can earn you .0013¢. But really, this is better for Bank of America, since they're far more likely to reap more overdraft charges, now that your online balance is meaningless if you use online Bill Pay.
I'm switching to BB&T as soon as I can. Good riddance to Bank of America.
From Britain comes this BBC story about Barclaycard's new billing policy for credit card users. Barclaycard users who pay their bills in full every month (the kind of customer US credit card companies call "deadbeats") will have a shorter time to pay before incurring a £20 late fee. That's to offset the fact that the credit card company isn't making any money from interest charges off of those customers, so setting a late-fee trap for them is the only way to make a profit.
I'm sure there are a few US creditors who'd love to do something like this, but I doubt they'd be as honest about it as the British lender is being. It may never happen here, but we are talking about the industry that invented universal default, so we'd better be on the lookout for this kind of nonsense.
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