The Debit Card Scam: 1000% Interest

As the nation has moved toward more convenient, reduced cost and trouble banking via the use of those ubiquitous debit cards – you know, those not-really credit cards that allow you to make purchases without having to write a check – banks saw a perfect opportunity to fleece their ordinary (not-rich) customers yet again, to the tune of 1000% on small purchases. Who in their right mind would voluntarily sign for a loan at that sort of ridiculous rate? Well, if you use your debit card, chances are, you did.

It used to be that if there wasn’t enough money in your account to cover a purchase, your debit card wouldn’t go through. If you happen to be among the millions of Americans who barely make it from paycheck to paycheck, you’re much better off floating a check the day before payday so it won’t get debited until the paycheck gets recorded. But many people have found that they can still use their debit card, then have to pay the bounced check fee anyway.

As described by Chris Plummer in a commentary at Marketwatch, this can add up to usurious fleecing of the consumer. Particularly if you allow the bank to automatically deduct some of your monthly bills, which can leave you short even if you think you should have money enough to cover lunch the day AFTER payday! Plummer does the math and notes that if you end up having to pay the bank a $35 overdraft charge on a $3.50 lunch purchase, the effective interest is 1000%.

Moreover, if somebody else uses your debit card – steals it and manages to find your code in order to use it, or (in many cases) a child or other relative decides to withdraw on a card you lent for a one-time use – YOU are on the hook. If it were a credit card, the lender’s money is at-risk, so fraudulent use has built-in protections that you won’t be stuck with the bill. Since that debit card can only access YOUR money, you have to pay regardless of theft and fraud.

Plummer details the risks very well, so do check out the link and arrange your money management accordingly. Pay your bills on line only after the paycheck has been deposited and immediate purchases are covered, don’t let the bank do it for you. Always get your card back from anyone you’ve given it to for a one-time purchase, to protect yourself against them using it when it will overdraw your account. Keep strict track of your usage and fees, and if they’re costing you a lot you can go back to a regular checking situation. Which may be more trouble and generate more paperwork, but will protect you from the bank’s greed as well as protect your financial privacy. Check fraud IS protected just like credit card fraud in most states, where debit card fraud is not.

If your bank account is like mine, your money flows through and doesn’t sit in the vault earning a lot of interest for you or the bank. The bank is in business to make money, not to make your life convenient. Don’t trust them with the details of your financial struggles or you may find yourself paying them a big chunk of your income every month for nothing.

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The Next Mortgage Meltdown

The subprime mortgage crisis in just about over. Those whose loans came with usurious interest rates have, if they got behind or lost their jobs, already been foreclosed upon. Now the issue is negative equity, the fact that real estate is depreciating so fast that homes are no longer worth the price paid, even with prime interest rates. Being “upside down” and expecting a higher rate to kick in on the original price is causing more and more people to simply walk away from their mortgages.

And indeed, walking away from the debt may be the best option for people who purchased during the “bubble” of inflated valuation. Because the underlying problem the bubble was based upon – ever-increasing wages for the working classes – has dismally failed to materialize.

We’re all paying for the bubble and the ridiculous amount of side-bets that got made by financial pyramid schemers who artificially produced and inflated that bubble. When the “average” price of a below “average” home (say, 50 years old, in need of repair, in a bad neighborhood and too small for a family) rises above $120,000 in one of America’s “Officially Depressed Regions” where a majority of citizens are chronically out of work and wages hover right around minimum, you know something’s got to give. That’s how it is in my nearest county with an actual city in it – Buncombe County, NC, home to the city of Asheville (pop. less than 100,000).

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Confidence Games

One of my favorite series bloggers sarahnity has a weekly series at Daily Kos called “Frugal Fridays” that offers different tips and ideas every week, by her and a number of volunteer authors, on how to make your money go farther, how to earn money on the side, and how to hang on to what you’ve got. Last Friday the theme was frauds and scams geared toward those being most harmed by the current economy, entitled Don’t Get Fooled Again.

I’m just going to list the major confidence games going around in recent weeks/months, and the several resources and good advice offered to help people determine if something’s on the up-and-up or just more grifters targeting the weak to make themselves strong. The series is awesome, definitely worth bookmarking by all readers of this blog and checked every Friday afternoon for the latest in resources for the frugal.

The major scams making the rounds these days – particularly via the internet – are sometimes old and sometimes new. There’s the standard Work from Home sting where you have to pay to find out who’s hiring. If someone wants your money before showing you the want ads, it’s likely a scam. Real employers aren’t looking for you to pay them, they’re seeking people to pay for good work.

Then there’s the new-ish trick of Facebook identity theft where a clever grifter assumes an identity from among your networking ‘friends’ (often a relative) to beg for money. Be suspicious if someone on your Facebook page suddenly asks for money. Often the real person knows nothing about it – so check on regular email before sending anything.

There are also property tax scams going around where someone tells you you’re paying too much for property recently devalued. All you have to do is send money and the scammers won’t do anything for you. These can come in the regular mail too, so always do your homework and check with your real property tax officials about what’s what. If you really do pay too much, they’ll let you know for free. In line with this there are also housing and mortgage frauds, where someone offers you a “special rate” to refinance, take your money and disappear. Don’t fall for it.

There are more, of course. Please click on Sarah’s linked diary and check them out, there is good advice on how not to be victimized and who to report suspected scams to in your state and locality.

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Linkies: For Fun, Football and Profit

For those of us on the short end of the recent and ongoing mass looting of the economy by the kind of ant-populist robber barons who make Jesse and Frank James seem like do-gooders The Hardy Boys, there is now a historical record of the Fortune 500 CEO Hall of Shame in what could be printable trading cards outlining the shameful accomplishments of the Worst of the Worst.

Check out the card for Lehman Brothers’ Richard Fuld, whose stats list a total loss of $29 billion, while his personal take for the efforts comes in at a cool $71.9 million. Look at that punum… does he look suspiciously like a lizard? Then there’s Countrywide’s Angelo Mozilo, with a face only a mother (or a Sicilian Don) could love. Stats: in the loss column, a total of $22 billion. It’s the personal take that’s truly impressive – $225.7 million. This guy was good at being bad!

So if you’re overdue for an out-loud chuckle in the midst of economic meltdown designed to do the most amount of serious harm to the most number of honest, hard-working citizens, don’t miss this offering by BusinessPundit. It’s well worth the waste of card stock and color toner.

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Kids Heading for College? Good Luck With That.

Even way back last August, before the economy was officially in terminal free fall, the issues surrounding a college education were in the news. CNN Money asked, Is college still worth the price?

Most of us have come to understand how necessary a college degree – in anything – is to being able to ’successfully’ compete in today’s complicated modern world. Yet the costs of a degree – any degree – is soaring up to four times the rate of inflation even as both jobs and salaries for college graduates are shrinking. How much sense does it really make for families (or students, via loans) to pay $200,000 for a degree so s/he can get a job that pays $30,000 a year or less?

In a rational economy the rapid inflation of college tuition would slow, stop or even reverse as consumers – the pool of applying students – shrank in response to the spiraling costs. But for this particular commodity, there can be no shortage of applicants due to the recognized importance of said degree to the entire future of the prospective student. It is much easier to replace light bulbs and take public transportation to work in order to save on electric bills and gasoline than it is to forego a college education because it costs more than a graduating student can expect to earn.

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Got Credit?

For those of us out there who still have work and a regular paycheck, and who managed to put some store-bought presents under the tree on Christmas, some shock and awe may be hitting home right about now when the credit card bills are received. Seems the credit card companies have exercised the clauses in the light gray 6pt type nobody ever reads to raise their interest rates and fees through the roof and cutting off available credit altogether no matter how good your credit score may be or how promptly you pay your bill. Some card companies have been creative about shuffling due dates at will, confusing customers and hamstringing small business, and some are refusing to even try to explain to customers what’s going on or what their options may be.

As Kathleen Ryan O’Connor explained in a recent CNN article, Credit cards gone wild: Shocking rate hikes, “Faced with the same economic pressures as other companies affected by the ongoing recession and credit crunch, credit card companies are racing to protect themselves from the costs of more defaults by hiking interest rates and slashing credit limits, even for cardholders with excellent credit histories.” Banking analyst Meredith Whitney predicts that $2 trillion in credit lines will be wiped out over the next year and a half.

As if to add a note of irony to the pain and suffering of consumers and businesses being screwed by their credit card companies, those new card offers are still coming in at the undiminished rate of one a day. One wonders if the marketing department ever even communicates with the front office!

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We Predict Inflation Better than Experts

A very interesting piece of economic research appeared this week in ScienceDaily news service from the department of economics at Kansas State University, entitled Consumers Can Predict Inflation as Well as Professional Economists. This of course will come as no surprise to regular people, for whom economist’s double-talk is often seen as deliberately vague and couched in jargon that has no application to those in the lower echelons of economic stratification in this society.

Turns out that the actual price of milk and bread and gasoline can alert the average citizen of increasing inflation rates quickly and surely, and their predictions will then translate into how the family budgets their spending. Apparently one doesn’t need an Ivy League degree and a 5-figure Wall Street income to figure out that things cost more today than they did yesterday. Who would have thought such a thing?

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The Loan Shark Bailout Bill

…er, Housing & Economic Recovery Act

The US Congress, both House and Senate, finally cleared the Housing and Economic Recovery Act of 2008 today, after nearly a year’s worth of hemming and hawing and slipping goodies into the legalese in the middle of the night. A regular miracle of modern political tug of war and a bill that’s changed its name and focus so many times nobody’s quite sure what’s in it other than a trillion or two to bail out Fannie Mae and Freddie Mac. Having weathered a total of seven [7] Senate cloture votes, President Bush is likely to sign it into law.

No one expects a handout from this bill unless they’re 1. a robber baron, or 2. a loan shark, or 3. a speculator and/or house-flipper (buys real estate only to flip it immediately at inflated price), or 4. an fossil fuels dealer. Thus not surprisingly, the stock market opened low this morning [7-28-08], down more than 134 points at noon. Though Fannie and Freddie were on the upswing on that promise of taxpayer trillions.

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Attack of the Zombie Debt Collectors

Some years ago while visiting my husband’s then newly widowed and elderly mother, we were moved to intervene on her behalf after some jerks claiming to be collectors for delinquent student loans went on a rampage of gross harassment against her because someone much younger had her same first and last name. They were calling her so often and being so verbally abusive that she changed her phone number, which she’d had for more than 20 years and which all her distant friends and relatives knew by heart. They were sending threatening letters – sometimes 3 a week – telling her they were going to ruin her credit and attach her wages.

After hubby calmly informed them they had the wrong person – do your homework, don’t call, stop writing and there were no wages to attach (she retired long ago) – Mother-in-Law got a call from her banker telling her they were now trying to attach her bank account! Hubby put a stop to that right quick by showing the many threatening extortion letters to that banker right there in his office, explaining the situation, and getting some good advice. Call the state Attorney General immediately, follow up with a formal letter detailing the illegal tactics, and if worst comes to worst, get a lawyer.

Now, I know it sounds weird that a woman who graduated from college in 1947 could be so thoroughly confused with the ~30-something single mother who was actually in arrears on her student loan payments, or that a sweet old lady could be so horribly abused by professional con artists/thugs. But the truth (as best we could figure) was that they figured they could brow-beat Mom into paying someone else’s debts just because she was old and living alone and had some money in the bank.

Luckily we had gone to high school with the AG and he was more than willing to go after these crooks wearing size 1000 pointy cowboy boots. The harassment ended in short order, and Mom now knows to simply let her contact with his debt/fraud task force know whenever she gets targeted in some scam. The shame is that there are so darned many scams out there targeting people like her, and once you get on one scammer’s list (even if they end up in jail), you’ll be sold to every other scammer in the con-club fleecing little old ladies out of their meager life’s savings.

So when I saw CNNMoney’s article entitled Debt collectors on the rampage, I figured it might be a good idea to document a bit about your rights if you happen to end up on the scam list. This article has a list of rights and procedures as well as a run-down on ways that third party collectors violate the rules. Those rules are detailed in the FDIC’s Fair Debt Collection Practices Act, and explained in some detail through the links at fair-debt-collection.com.

Even if you really do owe the debt, the collectors are required to abide by rules. For instance, they cannot call you before or after certain times of day, must stop calling if you tell them not to call, and may not demand any payments on debts for which your state’s statute of limitations has expired [a.k.a. "Zombie Debt"]. If you find yourself in a situation of unethical or illegal harassment the best thing you can do is educate yourself about this law and its provisions, and know what steps you can take to defend yourself.

If there’s anything unethical shysters are legitimately frightened of, it’s a mark (target) who knows his/her rights and isn’t reluctant to assert them.

Links:

Fair Debt Collection Practices Act
CNN: Debt collectors on the rampage
Debt collectors calling? Know your rights
Fair Debt Helpers [attorneys]

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Is Bankruptcy ‘The End Of All Things’?*

* [h/t Frodo Baggins]

The cost of everything is still rising fast, despite the influx of ready cash to taxpayers in the way of rebates going to pay arrears on the mortgage or electric bill. The number of people losing their homes and losing their jobs continues to rise as well. And in a little-publicized indicator no one likes to talk much about these days, the number of Americans declaring bankruptcy is shooting through the roof – up nearly 30% [27.0] in the first quarter of 2008 over the same period in 2007. As Samuel J. Gerdano, Executive Director of the American Bankruptcy Institute says…

“Bankruptcies are rising due to the heavy burden of household debt and growing mortgage problems. We expect this trend to continue through 2008.

So there doesn’t look to be any break in the recession cloud this year, with indicators that it may well descend all the way into depression by election day in November.

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