Credit/Debt Recovery

Payday lending becomes an issue

A lot of people have been talking about payday lending for years. Now John Ewdards has made regulating payday lenders a campaign issue for 2008 (ABC news link).

One one hand, I think more choices are good for consumers, and payday loans are part of the arsenal of services available to them. There are some people who can only get loans that way, and regulating the industry the way Edwards is calling for will shut a lot of poor people out of any sort of borrowing. (And I thought Edwards cared about the poor!)

On the other hand, payday loans are almost ridiculously usurious. Wise people called for the payday lending industry to self-regulate years ago, and they were ignored. Now the industry will pay the price. It's already happening on a state-by-state basis, and if Edwards sticks to this issue, it may end up happening federally.

I predict we'll hear a lot more about how evil payday lenders are in the next couple of years; maybe it's not too late for that industry to heed some good advice and police itself.

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.

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.

A situation in which credit counseling can't help...

This could only happen in Great Britain, I think. (link)

If this were to happen in America, the couple would have filed bankruptcy a long time ago. I'm not up on British bankruptcy laws, so I don't know what remedies are available to them. I do have to confess that my book would be of little use to these folks.

Baby's Identity Stolen

I'm back online after a few weeks of transition; I was minus an internet connection during my recent move. Now I've finally gotten my DSL connection up and running...

I'll return by pointing to this article about the youngest-ever victim of identity theft.

Now, if you're not convinced that you need to check your credit report and make sure you're identity hasn't been stolen, I don't know what else to tell you.

Update on Universal Default

My buddy Paul Richard from the Institute of Consumer Financial Education (ICFE) has an article up about Universal Default.

The Office of the Comptroller of the Currency (OCC) has gotten into the act; they have declared that universal default is an "unacceptable" practice for national banks. This is a good development, IMO.

Read all of Paul's article here.

You're not an adult until you're 21

NY Senator Chuck Schumer is proposing new laws that will make it more difficult to grant credit to college students.

In a speech at NYU, Schumer blamed credit card companies for college students' credit card debt, and is proposing a bill that would require creditors to get parental consent before granting credit to dependent students under 21.

This may sound reasonable to most readers, though I suggest we raise the voting age and the cumpulsory draft age to 21, since 20 year olds are still children, apparently.

Schumer's the one responsible for killing bankruptcy reform the last time it was proposed. That BK reform bill would have done nothing but help consumers and creditors alike, but Schumer put in the poison pill anyway.

This goes back to what I've been saying about being more anti-creditor than pro-consumer. Schumer attacks the credit card companies before introducing this new bill. He doesn't do anything to create a win-win situation that will benefit all parties. He wants the debtor to win, and the creditor to lose.

Well, it ain't gonna happen. Creditors may be evil, greedy, selfish, and all the rest, but you're not going to beat them at this game. We've got to work together to foster a culture of cooperation between creditor, consumer, and legislator. Credit counselors have been doing that for decades, but they've been set back recently by profiteers within their ranks and legislators who believe the lies tying credit counselors more closely with creditors than is actually the case.

And I know it's possible for creditors to genuinely care about their customers, and not just act out of greed and pure evil. I've worked with mortgage lenders who care, and every credit union I've dealt with put their members' first. Gradually, more of the lending industry can become more like that--but not if U.S. Senators keep attacking them and blaming them for everyone's debt problems.

Oliphant Column on Credit Card Issuers and the GOP

If you've ever read any Thomas Oliphant columns in the Boston Globe, you know he's a committed lefty. If you've read any of his columns lately, you know he's a lefty who should be committed. (Honestly, I have no strong anti-Oliphant feelings; I just went for a cheap joke. Though his suggestion that Kitty Kelley's new book about the Bushes should be taken seriously is enough to prove he has no objectivity whatsoever.)

His August 29th column points out that the banking, insurance, and real estate sectors have contributed $25 million to Bush's campaign this year.

He targets MBNA as a "Monster," and you know I've had some issues with MBNA myself lately. He also makes this valid point:

The latest goodie was a ruling from Bush's Treasury Department preempting all state laws, notably in California, that have sought to put a brake on some of the most abusive credit card practices -- a remarkable flip-flop for a conservative government supposedly respectful of states' rights.

Oliphant is right about this. No argument here.

He then disparages bankruptcy reform:

The campaign cash is also gushing because the personal finance people know Bush will back another attempt in Congress to make it harder for Americans to escape, via bankruptcy, the debtor prisons constructed for them.

Okay. Regular readers know I'm way in favor of the proposed bankruptcy reform. Let me say this one more time:

THE PROPOSED BANKRUPTCY REFORM WILL NOT MAKE IT HARDER FOR CONSUMERS WHO NEED BANKRUPTCY PROTECTION TO GET IT.

The argument that BK reform will limit access to bankruptcy is a huge red herring. It will make the process of filing bankruptcy more involved, and in a good way. But people who need bankruptcy will get it. Period.

And no, I'm not going to back that up with facts, logic, or reasoning. I'm just going to blythely assert it, just like Oliphant blythely asserts that BK reform will "make it harder for Americans to escape, via bankruptcy, the debtor prisons constructed for them."

And please... "debtor prisons costructed for them?" Credit used be a luxury in this country. If you can't make the payments, don't borrow the money. Of course the creditors need to be more careful to whom they lend, but they can't bear the full responsibility for their customers' debt woes.

Personal responsibility:

Every right implies a responsibility; every opportunity, and obligation; every possession, a duty.

John Dr. Rockefeller, Jr.

Ahem.

Okay, then Oliphant gets back on track with universal default. John Kerry promises to end that hideous practice, and more power to him if he wins. Again, no argument with Oliphant there. And he wraps up by taking a deserved dig at sub-prime lending, which is a subject for another 2,500-word rant.

On balance, it seems I agree with Oliphant here as often as I disagree with him. He's wrong if he thinks he can blame lenders for every debt problem in the U.S., but personal responsibility is a two-way street: creditors do need to do a lot more to help indebted Americans, there's no question.

And hey Americans, stop taking on so much debt! Toughen up. Read my book.

(Oh, I suppose, on the political side, I should say that I'm still on the fence in this election year. I don't love Bush, but I certainly don't think anybody should take Kitty Kelley seriously. As for Bush being in the pocket of the personal finance industry, well, so what? Every politician has been bought by some scary group of special interests. I'm way more worried about Bush's potential Supreme Court appointees than who's contributing to his campaign.)

TXU shelves credit-related fee plan

Last week, TXU, a utility company in Dallas, made waves when it announced a plan to base utility rates on the customer's credit score.

It's actually a bit more complicated than that, but the essence of the story is, if your credit history is poor, you'll pay higher rates. Read the USA Today article for more details.

Now, a week later, TXU is delaying that plan. They are going to "duscuss the issue with state regulators."

This idea isn't dead yet, though. Eventually, this notion will catch on and spread, and your credit score will affect your utility rates and other regular service fees. So now more than ever it's imperative that you check your credit reports regularly, get a credit correction done if necessary, and be very careful in your credit use.

And buy my book! ^_^