Credit/Debt Recovery

Prosper.com after 3 months

Back in March, I blogged about Prosper.com, a new social-networking style service that matches up borrowers and lenders and provides a host of services to both.

After 3 months, I've heard some disappointing news from a Prosper investor: 3 loans are dilenquent, and one of those never made a single payment. I was optimistic about Prosper's potential default rate, but what I'm hearing isn't encouraging.

I still think the service has a lot of potential, but it seems that making smaller loans and spreading the money out as much as possible is the best way to maximize one's return. I'll keep my eye on it: I'm curious about the forthcoming collection efforts on those delinquent loans.

BAPCPA Blog

Anyone who's really curious about the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 should check out American Bankruptcy Institute's BAPCPA blog.

ABI is even-handed in their coverage, and nobody's more of an authority on bankruptcy than them.

The Sunday post about disability waivers for credit counseling leaves me conflicted. I think the standards should be loosened to allow people with disabilities to more easily get out of the credit counseling requirement of BAPCPA; after all, the first six months of BK reform have taught us that crounseling isn't about diverting clients from bankruptcy, it's really about education and financial literacy.

On the other hand, it's easy to comply with the counseling requirement. There are plenty of counselors to meet the demand, and sessions can be completed by phone or over the internet. If you're interested, check out the BAPCPA blog to see how a consumer with disabilities can meet the requirement to waive counseling, and see if you think it's too strict. I'd say it could stand to be loosened a little, but like I said, the counseling requirement is easy to meet.

Medical debts NOT responsible for most bankruptcies

I know I've repeatedly bashed on the myth that most bankruptcies result from medical debt, but let me throw some more evidence on the growing pile:

Here's a .pdf link to a study by the American Enterprise Institute that shows only 27 percet of bankruptcies are the consequence of primarily medical debt. That's around 50% off from the Harvard study that was much ballyhooed by the WORM (Tom Blumer's label for the "Worn-Out Reactionary Media). I wonder if the AEI study will get similar press coverage?

Credit cards in Monopoly

I have to say I'm baffled by this.

I wonder if they'll put in a new "Community Chest" card that reads "You need credit counseling. Pay $50." Or a "Chance" card that says "MBNA rate increase on your Visa card. Pay $150."

Late fees average $31.37

As though you needed further proof that making late credit card payments is a bad idea, credit card late fees average $31.37 according to CardWeb. (HT BizzyBlog.)

Depending on your balances, your minimum credit card payment may be lower than this (mine always is). That means one late fee could double that month's payment. Add in over-limit fees and the like, and this sort of thing can spiral out of control rather quickly.

There's a political angle to all of this, too. Federalism has put us in a situation where we have to pay the higher fees and interest rates permitted by South Dakota and Delaware, even if our state of residence imposes limits on those fees. I don't blame South Dakota for creating an environment friendly to credit card issuers; it's been a huge boon to their state. But the Supreme Court made it possible for creditors to pick all of our pockets. Just something to think about; ultimately, your high credit card rates are Alexander Hamilton's fault.

Not so foolish

In the past, Motley Fool has published some incredibly dumb lies about credit counseling, and I've called them on it. But this article is anything but foolish. Check it out to see how to "Make 29% Risk-Free!"

Good advice from South Africa

MoneyWeb has a nice article here called "Ten ways to stretch your cash." They're based in South Africa, so debt laws are a bit different I'm sure. The one piece of advice here I'm not sure I agree with is #7, "Don't fix you home loan rate."

Adjustable Rate Mortgages aren't for amateurs. In my lifetime people were paying 18% interest; don't think it can't happen again. If you can lock in a low rate on a home loan, I'd recommend it.

Everything else MoneyWeb has to say in their article is great advice.

Anatomy of a Credit Score

Since I had a post bashing Business Week up all weekend, I'll link to something by a BW writer that's not a bad article: Anatomy of a Credit Score.

Good basic info here, but interestingly, not one word about the bureaus' new "Vantage Scores." I guess that idea isn't taking off yet.

The linked article talks about how your credit score can be as much as 50 points off from bureau to bureau; sometimes that can actually be a good thing, and that's why I prefer the FICO credit scoring system to the new, more consistent Vantage scores.

Identity Theft Statistics Exaggerated

Cato@Liberty has a great post commenting on Slate's article about the misuse of statistics by reporters.

For years I've been telling people that ID Theft doesn't really happen over the Internet like we're told, but right out of your home or your mailbox, or more recently, from stolen data at your workplace. That's no reason to let your guard down against phishing scammers, but I repeat for the umpteenth time: buy a shredder and use it.

Business Week attacks Target... again

Business Week attacks Target... again

Dated July 17th, Business Week has an artcle, Where Target May Miss The Mark, that attacks Target's credit card business.

That "Biz Weak" is attacking Target is no surprise, especially when the article is written by Robert Berner. A very quick search turns up a slew of anti-Target articles by Berner:
Target: The Cool Factor Fizzles
Target Takes a Gamble the Markets Don't Like
Has Target's Food Foray Missed the Mark?
Too Many Retailers, Not Enough Shoppers

I started to think Berner was anti-retail in general, but here he is cheerleading for the KMart-Sears merger: Kmart and Sears: An 11 Billion Dollar Goliath

The attacks on Target go back years, and he's been pretty consistently wrong. He predicted years ago that their grocery business would flop (it didn't) and was against their credit card operation from the beginning. That's just plain silly; if Target having its own VISA was such a bad idea, Wal-Mart and Home Depot wouldn't be desperately scrambling to get into the banking business.

Why do I even care? Like Berner, I'm not qualified to evaluate businesses in terms of stock performance or project future success or failure.

My concern is credit. Here are two top 10 lists that are unfortunately registration only: Consumer Reports' Top 10 Consumer-Friendly Credit Cards and Advertising Age's article on the Top 10 Credit Card Issuers. For the sake of this post, the important thing about these lists is that Target is the only credit card issuer on both lists. They're one of the top 10 in the country, and they're rated one of the top 10 consumer-friendliest. No one else can say that.

Incidentally, reasonable interest rates was a criteria in the "consumer-friendly" survey, yet Berner in Business Week consistently refers to Target's Visa card as "high-interest".

What's my point with all of this? Ignore Business Week when it comes to Target: as consumer credit card issuers go, you can do a lot worse. Not only does their Visa have good terms (low rates, fees, reasonable grace period, no two-cycle billing, no universal default), you're never more than 40 miles from a Target store (on average), where you can pay your credit card bill, have the funds posted to your account immediately, and get a reciept. What other credit card issuers can offer all of that?