Credit/Debt Recovery

Advice to ignore from Lifehacker

I've linked to Lifehacker from here a few times... when they cover debt and money issues, they tend to do an excellent job. It's not their main focus, and they do make some mistakes when it comes to credit and credit scoring, but generally their input is good.

Having said that, I can stress enough how much I disagree with this post advising readers to "Avoid over-saving for retirement." Terrible, terrible advice. 

Listen, we can't even begin to imagine what is in store for us in the coming years. They'll be taxing social security benefits before that whole ponzi scheme collapses, a VAT is impending, and health care costs may bankrupt our economy long before I reach retirement age. It is quite plainly crazy to tell people they can over-save for retirement. I don't accept that notion on any level.

Lifehacker is a good site, and I recommend adding them to your daily rounds. But if anyone suggests you can save too much for retirement, ignore them.

Tough times ahead for the Debt Settlement industry

Debt settlements are under scrutiny by the federal government, with senate hearings including testimony from aggrieved customers.

See Good Morning America's coverage of the story here, which includes the senate commerce committee's report of the "6 Most Problematic Debt Settlement Companies"

A New Beginning Financial & Ministries

Credit Solutions of America

Freedomdebt.com

Freedom Fidelity Management

Procorp Debt Solutions

Web Credit Advisors

I thought I'd seen a national commerical for Credit Solutions of America recently, but I can't find it now.

Coming soon; a ban on advance fees for debt settlement services, and probably more regulation designed to make offering debt settlement services less profitable.

I've been on the record that settlements can be a good option for some consumers, provided they understand completely what they're getting into. A responsible settlement agency makes sure its customers understand all of the pros and cons of a settlement so they can make an informed decision. All it takes is a handful of agencies making false or misleading claims, and now an entire industry is under fire with crushing government regulations looming. We saw that with credit counseling a few years ago, and now it's settlements' turn. 

The other issue is indiscriminately enrolling every client who calls; whether you're a bankruptcy attorney, settlement negotiator, or a credit counselor, you need to figure out which clients truly need your service and target them. It does you no good to sign up a client who isn't right for your service and is destined to fail. In this case, a client who didn't complete their settlement and lost thousands of dollars got to tell her story to a senate committee, and now hundreds of settlement agencies will pay the price. Who enrolled her in a settlement plan? If I were in the settlement industry, I'd be furious at the agencies who invited this legal scrutiny.

I'd only wish congressional hearings and federal legislation on my worst enemy. Having said that, junk debt buyers should be next up for investigation.

No more Visa card from Target

Target announced today that they are not going to offer their Visa card as of April 29th. Instead, all new accounts will be their store cards only. (Here's the story where I found it at the BBB.)

They're saying they have made this decision because it's good for their retail business; the store card is only valid at Target, while the Target Visa could be used anywhere. According to Target's press release, surveys have told them that customers spend more in the store using their Target card than their Target Visa. 

A couple of reactions to this:

• Target's Visa was the one "consumer-friendly" credit card that was widely obtainable. The other 9 on the list were from regional banks with very strict application requirements. By my reckoning, their Visa card stopped being consumer-friendly a couple of years ago when a pump-and-dump scam artist  an "activist investor" bought a bunch of their stock and forced them to sell about half of their credit card business to Chase. The Target store card may go back on the "consumer-friendly" list if it's administered solely by Target.

• Target was the largest retailer to have its own bank, "Target National Bank," allowing it to issue its own credit. Until they were goaded into selling half their portfolio, they reaped all of the profit from their credit card interest, fees, and etc. A few years ago, Wal-Mart tried to start its own bank and was greeted with conniptions from politicians who were already in the pocket of existing banks and unions. No one ever explained to my satisfaction why what was good for Target wasn't good for Wal-Mart. (And according to today's story at Insurance Day, Wal-Mart is still very interested in entering the banking business, even as Target seems to be stepping away from it.)

• Yes, I could use my Target Visa card anywhere, including Target's competitors. But if I did, that competitor was forced to pay service fees to Target National Bank. So Target Financial Services made money off of the Visa card no matter where it was used. That revenue stream will start going away when this switch happens.

• The fact that Target is making this move soon after the Credit CARD Act went into effect is probably not a coincidence. While the new law was intended to help consumers, it has probably hurt them here, by driving Target away from the business and decreasing consumer choices when it comes to credit cards.

• Defaults on credit cards are another likely reason for this move, which suggests we're still deep in the woods with the financial crisis. 

Redesigning credit card agreements

Alan Siegel gave a talk at TED calling for simplified legal documents, with less jargon and easier-to-follow design and layouts. This is long overdue, especially when it comes to credit card agreements. Here's a TEDBlog post featuring Siegel's proposed new credit card agreement, one that is concise and clear, with a good design that makes the whole document less confusing and more useful for the consumer.

It'd be great if the creditors adopted new standards like this in their documentation, but I'm not expecting anything from them. Documents like this come from legal departments, not designers, and a cynic might argue that dense, confusing credit card agreements make it easier for creditors to take advantage of their customers. 

I'd also like to see more clarity in the design of monthly credit card statements, especially since the Credit CARD Act requires creditors to cram more disclosures into their monthly statements. 

Reason's Hit & Run blog on Elizabeth Warren

I've written about Elizabeth Warren a few times over the years, like here.

Tim Cavanaugh at Reason's Hit & Run Blog mentioned her yesterday, appropriately enough, on April Fool's Day. Some of the commenters seem to have her figured out pretty well.

The gist of things is that once again, Warren is making huge claims with unverifiable data. It's pretty well known at this point that none of her statistics are reliable... well, they're reliable in that they're always wrong and they always seem to demonstrate a greater need for government intervention in our lives.