There are plenty of ways to read books for free, starting with visiting the library. Image from Wikimedia Commons.

Everyone knows at least one committed bookworm, a person who loves to read and devours books at a frantic pace. Purchasing books new at stores can be incredibly expensive, but there are plenty of ways readers can save cash on feeding their habit.

Free books

The first leg on a quest to satisfy an appetite for reading should always be the public library. The Institute of Museum and Library Services, the government agency overseeing the public library system in the United States, says there are 123,000 public libraries in the United States, comprised by more than 9,000 public library systems. There are plenty of ways to find a library online. Publiclibraries.com has a list of libraries by state people can browse to find the closest one to them. Many libraries have a “books by mail” program for people in rural areas. If borrowing books is not sufficient, many libraries have a “for sale” section of books, and there are plenty of used book stores one can purchase books from for a steep discount.

For the tech savvy

Since the rise of e-books and e-readers, people have been discarding the page in lieu of the screen. However, downloading books can be an expensive habit. A recent article on Today’s website has a list of free or very cheap sites to download e-books from. Amazon.com has a selection of free e-books for Kindle, and Barnes and Noble has a selection of free e-books for Nook users. Both sites have promotional sections where certain books can be purchased and downloaded at deep discounts. The service OverDrive has a list of e-books that public libraries have available for checkout. Users can download e-books for a couple weeks. Check overdrive.com for a list of participating libraries. There is also Ebook Fling, which lets people lend and borrow e-books for free.

The classics

Amazon and Barnes & Noble’s free book selection, as well as other sites for e-books like the Google eBookstore and Project Gutenberg, includes books considered “public domain.” A work by an author is copyrighted, or owned, by authors or their heirs for a certain period of time, which varies by country. When a book’s copyright expires, it enters public domain and can be obtained by anyone for free. There is no reason to pay for Plato or Plutarch. Project Gutenberg is one of the best known online depositories for classic works in the public domain, and it has a selection ranging from Jane Austen to Aristotle.

Sources

Institute of Museum and Library Services

Public Libraries

Today

OverDrive

Ebook Fling

Project Gutenberg

The USDA reports that the cost of raising kids is going up. Image from Wikimedia Commons.

The U.S. Department of Agriculture recently released its annual report on the cost of raising a child, and the agency found that kids are getting more expensive. It was found that the cost of raising one child to age 18 has risen by more than $40,000 after adjusting for inflation.

Pitter patter of little feet flattening the family pocketbook

The United States Department of Agriculture has just released its annual report on how much it costs to raise children, according to Today, and those bundles of joy are getting more expensive. The USDA estimates that for children born in 2010, the cost of raising them to age 17 will cost parents on average $226,920. However, the cost rises to $286,860 adjusted for projected future inflation. In 1960, the average cost of raising a child was $185,856 in 2010 dollars. Expenses for college are not included in that estimate, and “average cost” is a bit misleading. The average expenditure varied widely based on a number of factors, including income level of parents, location, single parent or two-parent household and number of children in the family.

Actual costs will vary

Annual spending on child-rearing varies, according to the USDA report, depending on multiple factors. Income level is a significant factor. Families with a gross income of $57,000 or less can expect to spend $8,460 to $9,630 per year. Families making between $57,000 and $99,000 will spend $11,800 to $13,830. Families making $99,000 or more are projected to spend $19,770 to $23,690 per year each child. These numbers are all based on 2010 spending patterns.

The USDA also observed that on average, parents with one child will spend 25 percent more per child than families with two children, and families with three or more children will spend 23 percent less per child than families with two children. Spending on children also varies by region; the urban Northeast is the most expensive. The cost of raising a child in the urban Northeast is estimated at $261,030 for the a two-parent, middle income family. For those in the urban West, the estimated cost of raising a child is $242, 760, compared with $222,630 in the Midwest, $212,610 in the urban South and $178,110 in rural areas. Single parents will spend an average of 7 percent less on their children.

Housing still the biggest expense

Housing still makes up the largest expense, as it was 31 percent of expenditures in 1960 and in 2010. However, childcare and education rose from 2 percent of expenditures in 1960 to 17 percent in 2010. Health care rose from 4 percent to 8 percent of spending, and miscellaneous spending rose from 8 percent to 12 percent. Food fell from 24 percent of spending in 1960 to 16 percent in 2010. The cost of clothing fell from 11 percent in 1960 to 6 percent in 2010. Americans may also be spending more than people in other countries. A recent article in the Herald Sun, an Australian newspaper, reports that the average Australian family will spend between $163,440 and $190,634 to raise a child.

Sources

Today

USDA Report (PDF – Requires Adobe Reader)

Herald Sun

Automatic enrollments don't guarantee people will put much into a 401(k) account. Photo Credit: MJ/TR/Flickr?CC-BY

A survey recently found that laws allowing employers to automatically enroll employees in 401(k) plans don’t work as well as was hoped. When workers automatically contribute to a retirement plan unless they opt out, they will often put in less than they would if they chose to start a plan.

Automatic contributions fall short of voluntary contributions

A recent study of 401(k) contributions found that a 2006 law giving employers the right to automatically enroll workers in a 401(k) plan has not been very effective in getting people to put more money toward retirement, according to the Wall Street Journal. The law was passed during the George W. Bush administration, which emphasized privatizing Social Security and other retirement plans. The onus was that if people had a 401(k) to contribute to, they would put more money aside into a retirement account. However, the Employee Benefits Research Institute found that most workers who are automatically enrolled into a 401(k) often put in far less than their counterparts who voluntarily begin contributing to a plan.

Most choose default setting

The study found that more than 50 percent of people who were automatically enrolled into a 401(k) plan would contribute 3 percent or less of their salary to their retirement accounts, or whatever the employer-set minimum contribution was. However, more people are contributing to retirement funds as total contributions to 401(k) plans has increased by 13 percent nationwide since the law was enacted in 2006. Aon Hewitt, a human resources company that administers a large amount of 401(k) plans, reported that 85 percent of employees participate — don’t opt out — in companies that use auto-enrollment on average and 67 percent opt-in at companies that don’t.

Next generation of retirees face cash shortfalls

Average contributions were found to have dropped slightly over the past few years, and most people are thought to not be able to rely on 401(k) savings alone for their retirement. The Government Accountability Office, according to Reuters, recently released a report stating that more people can expect outlive their retirement savings in coming decades and need to contribute more heavily to retirement accounts and look into annuities as a possible retirement booster. The GAO also recommends people wait until after retirement age to file for Social Security benefits. More people are expecting to work longer as well, according to WalletPop, as financial services firm First Command found in a survey. The First Command survey found that up to 22 percent of survey respondents between ages 25 to 70 who made at least $50,000 per year expected to work until at least age 70.

Sources

Wall Street Journal

Reuters

WalletPop

Credit reporting agency Teletrack has been fined nearly $2 million by the FTC for illegally selling credit reports. Photo Credit: TrinityCreditServices/Flickr/CC-BY

Credit reporting agency Teletrack, which specializes in subprime credit reports, has been fined by the FTC for selling credit reports illegally. The agency was found to have sold credit reports to payday loan lenders and has to pay $1.8 million in fines to the Federal Trade Commission.

Company cited for selling credit reports for marketing purposes

The Federal Trade Commission has slapped credit rating agency Teletrack with $1.8 million in fines for illegally selling credit reports to payday loan companies for marketing purposes, according to WalletPop. Teletrack has agreed to pay the fines, but insists that it acted entirely within the law. The FTC says the company violated the Fair Credit Reporting Act, which prohibits the selling of financial information such as credit histories or borrowing habits of customers or similar information for any reason other than a “permissible purpose,” according to Statesboro Business and Lifestyle Magazine. Marketing is not a permissible purpose.

Huge presence in subprime credit market

Teletrack is one of the largest subprime credit reporting agencies. It reports the credit history and activities of hundreds of thousands of people who use subprime credit products. Also known as alternative financial services, Teletrack compiles data on people who borrow payday loans, purchase furniture through rent-to-own companies, use car title loans or get an auto loan through non-prime lenders. The FCRA doesn’t prevents companies like Teletrack from providing information when asked for a credit check and paid by a second party, but selling information to third parties for non-approved purposes is grounds for an FTC lawsuit, according to Forbes.

New rules for credit scores

Until the past few years, it was fairly difficult for consumers to obtain much information about their credit history or learn about how that information is being shared with their creditors or third parties. Part of the financial reform laws of the past few years include new rules and regulations concerning credit reporting and credit scores, according to NASDAQ. The Dodd-Frank Act created the new rules last year, and the Federal Trade Commission and the Federal Reserve are implementing them this year. Now, any creditor that uses a credit score as a factor in creating the terms of a loan must tell consumers what their credit scores are.

Sources

WalletPop

Statesboro Business and Lifestyle Magazine

Forbes

Nasdaq

If Congress cannot raise the debt ceiling, Social Security and Medicare payments could be put at risk. Image from Wikimedia Commons.

Currently, the United States Congress and the president are locked in a battle over raising the debt ceiling for the government. It seems to be yet another partisan squabble, but the consequences could include Social Security and other payments could be defaulted on if the debt ceiling isn’t raised.

Congress to forgo Fourth of July recess to work on debt issue

One of the biggest political and economic issues to arise in the past year or so has been the national debt ceiling, essentially the credit limit of the United States government. The government is not allowed by law to exceed more than $14.3 trillion in debt, according to Reuters, which was reached in the middle of May. Yet the government has been making payments on it through last-minute measures.

Some members of Congress, mostly comprised of Congressional Republicans, have been refusing to raise the debt limit without substantial changes to fiscal policies. Senate Majoirty Leader Harry Reid Leader has announced that the Senate is going to forgo the traditional week-long recess after the Fourth of July holiday  in order to work on the debt ceiling, reports CBS. It has to be raised before August 4.

Warnings issued against default

Though there is nearly a month to forge an agreement to raise the debt ceiling, there are already warnings being issued against allowing the federal government to default on its debt. Besides a potentially catastrophic effect on global financial markets, credit rating agency Standard & Poor’s has warned that default on debt would result in currently maturing U.S. Treasury bonds being issued a “D” rating if those bonds are not paid out on August 4. The U.S. has $30 billion in interest payments due on short term loans acquired through sale of Treasury bonds. Chairman of the Federal Deposit Insurance Corporation Sheila Bair has warned Congress that they are getting into “a dangerous game,” according to NASDAQ, should they fail to successfully raise the debt limit.

Potential fallout in case of default

The American government is currently borrowing 40 cents of every dollar it spends, and in August of 2011 alone, the government is slated to spend $134 billion more than it will take in, according to USA Today. Up to 44 percent of government payments could be missed. Granted, this may seem a faraway issue to some people, but the largest and most urgent payments could hit the most vulnerable citizens where it hurts. Social Security payments to retirees, disability benefits, Medicare and Medicaid benefits and other forms of social aid such as welfare and food stamps may go unfunded. Federal employees may also be furloughed and contractors, including defense contractors, may go unpaid or have their contracts cancelled.

It is projected that there won’t be sufficient funds for the $23 billion payment to Social Security and Social Security Disability Insurance, or SSDI, recipients on August 3. Social Security represents 50 percent or more of all income for 53 percent of all couples aged 65 or older and 73 percent of all people over the age of 65.

Sources

Reuters

CBS

NASDAQ

USA Today

Social Security Administration facts at-a-glance

The Federal Reserve has set the swipe fee cap mandated by legislation, and higher than expected. Image from Wikimedia Commons.

The Federal Reserve has announced it will cap interchange fees, or swipe fees, at 21 cents per transaction. The fees are now half what merchants have been charged on average, but the nation’s central bank has also announced that the cap will not take effect until October.

Swipe fee takes effect in October

Last year, the Federal Reserve was mandated to institute a cap on interchange fees, also called swipe fees, by a portion of the Dodd-Frank Act referred to as the Durbin Amendment. The Durbin Amendment ordered the Fed to determine an appropriate limit to the fees banks charge to merchants to deliver payment on purchases made by customers using bank cards. The cap was legislatively set to take effect on July 21 of this year, but the Fed has announced that the swipe fee cap will not take effect until Oct. 1 unless a new start date is announced, according to USA Today. The fee cap has been set at 21 cents per transaction, nearly double the original estimate that the Fed gave of 12 cents.

Fraud protection preserved

The Fed has still slashed the current average in half, as banks normally charge about 44 cents per transaction and now will collect 21 cents per debit card transaction, beginning on Oct. 1. The fee cap was expected to be no higher than 20 cents, but an additional 1 cent per transaction fee is also allowed for fraud prevention. The cap also allows for five “basis points” per transaction for insurance against fraud, according to the New York Times, or an additional 0.05 percent of the amount of the transaction. Retailers were estimated to have paid more than $20 billion last year in interchange fees and processing fees, and banks were estimated to have collected almost $17 billion in interchange fees. The average fee, with the cap, could average about 23.9 cents per transaction, according to MarketWatch.

Coming fallout

Interchange fees have been a money maker for the banking industry since they were instituted in the early 2000s. Prior to that, banks had previously reimbursed merchants for installing debit card and credit card terminals. Though banks with $10 billion or less in assets are exempted from the cap, there will to be fewer benefits for many customers as a result of the fee cap. Banks have been steadily eliminating programs such as debit card reward programs and free checking accounts. Banks are anticipated to raise fees, according to USA Today, in response to the loss in revenue. Minimum balances in checking accounts may become required to avoid an account fee, and people may start getting billed for receiving paper bank statements. Banks may also start encouraging people to use credit cards instead of debit cards, as credit cards are not affected by the swipe fee cap.

Sources

USA Today on Fee Cap

New York Times

Reuters

MarketWatch

USA Today on bank fallout

The Federal Reserve is going to announce the debit card swipe fee cap soon. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

The Federal Reserve will soon make a definitive ruling on capping interchange fees, or debit card swipe fees charged to merchants by banks. The Fed was mandated to set a cap on the fees by the 2010 financial reform laws, but it may set the cap higher than anticipated.

Merchants cheering prospect of lower swipe fees

For the past year, there has been a tug-of-war in the press and in Congress over interchange fees, the fee that banks charge merchants to wire money from the accounts of customers who have made purchases with debit and credit cards. Merchants ranging from small mom and pop stores to corporate juggernauts such as Walmart and Target, according to Bloomberg, lobbied members of Congress to vote in favor of the interchange fee cap. Financial industry titans such as Bank of America and JPMorgan Chase, along with small credit unions and community banks, lobbied members of Congress to do the opposite and delay any “swipe fee” cap, if not vote to get rid of the legislation outright. The Federal Reserve, according to DailyFinance, is going to announce the cap on swipe fees soon.

Cap could be set higher

The Fed had tentatively said it would cap interchange fees at 12 cents per transaction, but insiders are saying that the fees could be set as high as 24 cents per transaction. Currently, merchants are charged an average of 44 cents per transaction, according to MarketWatch. If fees are set at 12 cents per transaction, it will be a reduction of almost 75 percent. It only costs banks about a penny to make the transaction. The banking industry is estimated to take in more than $1 billion per month from swipe fees. The cap on the debit and credit card transaction fees is a portion of the Dodd-Frank Act, the financial reform laws that were passed in 2010. The card fee cap was mandated by the Durbin amendment to the Dodd-Frank Act, which will take effect on July 21.

Expect user unfriendliness

Due to the massive loss of revenues, consumers can expect that many former perks of banking will either disappear or come with far more conditions. A debit card transaction cap has been bandied about in the press by megabanks such as JPMorgan Chase and Wells Fargo, and free checking accounts have largely gone extinct. Changes to rules regarding overdraft protection fees have cost banks dearly, as well. It is estimated that banks and credit unions have lost about $1.6 billion in revenue, according to MyBankTracker, when financial reform laws mandated that customers have to be asked if they want to “opt-in” to overdraft protection programs. Faced with a drop in revenue that the banking industry is used to, the consumer is the party who will end up feeling the pinch.

Sources

Daily Finance

Bloomberg

MarketWatch

MyBankTracker

Once seen as seedy, pawn lenders are now more high-class. Photo Credit: Infrogmation/Wikimedia Commons/CC-BY-SA

There has been an explosion in recent years of pawn brokers and pawn lenders becoming far more high-class. As a result, there has been a surge of sympathetic media portrayals of pawn lenders and high-end brokerages, both nationally and internationally.

High-class pawn brokers more commonplace

In decades past, getting a loan from a pawn broker was seen as an act of last resort. Many considered other alternative financial services like payday loans or car title loans first. But that perception now tends to clash with the image of more high-profile pawn operations. For instance, the online pawn brokerage Pawngo has been generating buzz in the financial press, as the company was featured several weeks ago on the Forbes website. Pawngo is currently backed by Lightbank, the same company that provided funding to another online company that recently exploded in popularity, Groupon. To get a loan from Pawngo, one simply ships the property via FedEx, and gets the money once the item is received.

Pawn broking on the rise in recession

Since credit is somewhat scarce — even for the opulent — many people still need short term loans. Many American cities are starting to see a surge in the number of pawn shops, and especially those that cater to discerning clients. A recent article in the St. Petersburg Times describes pawn shops that are making larger loans for wealthier clients. One store, the Gold and Diamond Center in St. Petersburg, Fla., is the same store where former governor Charlie Crist bought a 5-carat sapphire ring with which he proposed to his wife.

Another store, Cappello & Co., typically provides pawn loans to businesses, but also makes loan against jewelry, boats and other large assets. The store recently held property including a Bentley automobile, a Picasso painting, at least one airplane, several boats and a Ferrari.

To attract the growing pawn business, the city of Mankato, Minn., recently voted to allow more pawn brokers to open up shop in the city, according to the Mankato Free Press.

Trend continues, thanks to TV

Over the past few years, there have been reality television shows such as “Pawn Stars” and “Hardcore Pawn” that have increased the notoriety of pawn lenders. “Pawn Stars” in particular featured some incredibly valuable items going through the store, and “Hardcore Pawn” recently featured a Las Vegas couple selling the show’s stars a Ford Mustang that once belonged to Lee Iaccoca, according to the MustangEvolution blog. The increase in status for pawn lenders isn’t even unique to the U.S. According to the Financial Times, a new store of the incredibly long-lived and respected pawn broker Suttons & Robertsons just opened on London’s Fleet Street, next door to Goldman Sachs.

Sources

Forbes

St. Petersburg Times

Mankato Free Press

Mustang Evolution

Financial Times

JPMorgan Chase has allegedly withdrawn credit card suits because suit documents were "robo-signed." Photo Credit: jebb/Flickr.com/CC-BY-SA

JPMorgan Chase withdrew more than 1,000 lawsuits nationwide against delinquent credit card holders over the past few months, for unknown reasons. However, it is rumored the suits are being dropped because many of the suits were “robo-signed,” or initiated without sufficient review of the paperwork.

Spontaneous withdrawal of credit card suits raises eyebrows

Credit card companies sue people for not paying their credit card debts every day. Any person can look at the court filings section of the local newspaper and see several suits being initiated against a delinquent borrower on any given day of any given week. However, when one of the nations’ largest banks withdraws a large number of suits without explanation, it looks odd.

Recently, according to the Wall Street Journal, JPMorgan Chase withdrew a large number of lawsuits from various courts in several states over the past few months. It is believed that more than 1,000 individual suits were withdrawn from courts in California, New York, New Jersey, Illinois and Florida since April without much explanation. However, it is rumored that the suits were “robo-signed” just like the rubber-stamped mortgage foreclosures that caused a scandal.

Too many potential robo-signings to ignore

JPMorgan is the second largest bank in the United States in terms of assets. JPMorgan is owed $45 billion in the five states where the suits were withdrawn, in delinquent and current accounts. It is said that paperwork in credit card lawsuits, though, is not up to snuff. A New York judge was quoted in the Wall Street Journal as saying that that number of potentially “robo-signed” credit card lawsuits was “significant.” The judge also had dismissed 150 credit card suits in the past year for having large amounts of paperwork signed by the same people.

A lawsuit was filed against JPMorgan in San Antonio last year, according to Fortune, due to large stacks of legal papers having been signed by the same attorney without having done the due diligence on the numbers. Forbes notes that at least one person has been fired for questioning practices of selling off portfolios of write-offs to debt collectors, which are delinquent credit card debts for collectors to try and collect on.

Not unheard of

Banks not following the best practices concerning legal action on bad debts is not unheard of. Earlier this year, no less than 38 state attorneys general petitioned for a class action suit settlement to be far higher in the case where Encore Capital Group was sued by 1.4 million people for “robo-signing” affidavits in debt collection suits, according to Reuters. Encore settled for less than $6 million, which was considered pitifully low by the panel of state lawyers, as it amounts to about $10 per person. The banking industry was infamously found to have signed foreclosure documents regularly nationwide without having done all the legwork to see if the foreclosures were valid, and a debt collection company is not likely to go through a bank’s files to see if they are suing to collect a valid debt.

Sources

Wall Street Journal

Fortune

Forbes

Reuters

Though the Better Business Bureau is a trusted institution, many businesses insist the rating system is akin to robbery. Image from Wikimedia Commons.

One of the supposed safeguards against unethical companies is the Better Business Bureau ratings system. Customers have long relied on the bureau’s grading system, but now the BBB is plagued by allegations that it runs a “pay-for-A” scheme.

Long-standing business rating service admits mistakes were made

The Better Business Bureau is thought to be among the few resources that consumers can trust in order to find out whether a business is trustworthy. The BBB has existed for decades and gives the public at large a way to vent frustrations at dealings that went sour, but there is a growing body of evidence that something could be rotten about the state of the BBB. Allegations have been made repeatedly over the years that businesses have to pay for a membership to get an “A” rating. According to a recent article at DailyFinance.com, the finance and business news site of AOL News, in response to questions on whether its rating system has a “pay to play” component, a BBB rep admitted “mistakes” had been made.

Rating system changed after news sting

The BBB announced last year that it was going to change its business rating system following a sting operation by a small group of Los Angeles area businessmen, an anonymous blogger and an accompanying “20/20″ news segment, according to ABC. It was also revealed that some very high profile companies have received disparaging grades for not being members. Some companies that have received F grades that aren’t BBB members include Wolfgang Puck restaurants, Disneyland and the Boston Ritz Carlton hotel. The Boston Celtics basketball team at one point held a D minus, and the New York Yankees currently have a C minus. The Boston Red Sox, as fate would have it, have an “A plus” rating– and the team is a BBB member. The sting operation by some Los Angeles area businessmen established a company called Hamas, after the Palestinian terrorist organization, and by simply paying $425 for a membership, Hamas received an A minus rating.

Holes exist in some nets

The group that created the Hamas company also created a BBB listing for a company they called Stormfront, the name of a neo-Nazi organization, which also received an A rating. It is not that the BBB is simply a “pay to play” organization, though it has been criticized as such by a fair number of people. The BBB does give consumers a legitimate forum to air grievances and use an impartial third party to register legitimate complaints about businesses.

Sources

Daily Finance

ABC

ABC on BBB Hamas

ABC on Ritz Carlton

BBB New York Yankees

BBB Boston Red Sox

People should watch for payday loan collection scams, which are usually conducted over the phone. Image from Wikimedia Commons.

Though any form of credit, from mortgages to payday loans, carries some risks and responsibilities, those risks do not include putting up with illegal activity. Unscrupulous people are trying all sorts of methods, including payday loan collection scams, to try to bilk people out of money.

Arkansas Attorney General sues Kansas firm for illegal collections

A Kansas-based debt collection firm is being sued by Arkansas Attorney General Dustin McDaniel for attempting to illegally collect debts the company claims are owed to payday loan lenders by citizens in the state of Arkansas, according to ArkansasNews. McDaniel has sent National Credit Adjusters two requests for information concerning its attempts to collect payday loan debts in Arkansas, but the Hutchinson, Kan., firm has not responded to either. According to a post on the Attorney General of Arkansas website, payday loan lending is illegal in Arkansas, and the debts are therefore not collectable, according to the Attorney General’s office.

Beware collectors posing as cops

A popular trick among some unscrupulous debt collectors and scam artists is to call people and pose as either state officials or police officers. People in North Carolina, according to WFMY, a CBS affiliate in the Raleigh, N.C. area, have been receiving phone calls from telemarketers posing as agents of the Federal State Bureau of North Carolina saying that people owe a debt and have to pay up right away or be arrested. An Ohio man, according to Credit.com, was contacted by lawyers for the Brooklyn County Court and told he owed a payday loan company almost $800 for a loan and collection fees, though he had only applied for an online loan but did not take it. Similar phone calls, involving a “thick accent” and posing as an official through the non-existent Brooklyn County Court, have been observed across the country, and many people who received such calls had recently applied for a payday loan online.

Forewarned and forearmed

Debt collections fall under the Fair Debt Collection Practices Act, and people who feel a debt collector is not abiding by these laws should complain to their state attorney general’s office and the Federal Trade Commission. Ask for a statement in writing, as a debt collector is required to provide one. Do not stand for tactics of intimidation; it is illegal for debt collectors to be abusive when trying to collect a debt. Also, if a debt collector claims to be an attorney, ask for the person’s name and proof of membership in the state bar association. Impersonating an attorney is a crime, and consumers should never hesitate to ask for credentials.

Sources

Arkansas News

Arkansas Attorney General’s Office

Credit.com

WFMY

Fair Debt Collection Practices Act

Summer vacation is getting more costly as prices for amusement parks and airfare go up. Image from Wikimedia Commons.

Every year, thousands of American families plan a fun getaway that often involves extensive travel and locations like theme parks. However, the cost of vacations is rising as things such as amusement parks and flights are becoming more expensive.

Cost of Disneyland getting less enchanting

Disneyland, the “Enchanted Kingdom,” is practically a Mecca for American children and for parents wanting to fulfill childhood ambitions for their little ones and see the joy on their face as they get a photo op with Donald Duck. However, the current price of admission may cause many parents to wince. Disney has raised prices, according to WalletPop, for single day admission by 5.3 percent to $80 per person for admission to one of its two Anaheim-based parks. The cost of a three-day pass to both parks now costs $224, though the cost is about $6 less for kids 3 to 9. Costs across all amusement parks went up by 2 percent per year since 2008, when attendance was down. Attendance has been rising again, but so have prices.

Getting there is half the battle

As oil and gas prices have gone up, so has the cost of airfare. Average airfare in the United States has gone up by 10 percent since last year, according to the Los Angeles Times, reaching $247 in the first quarter of 2011. That is an increase from the 2008 peak of $233, observed just before prices went lower in the midst of the recession. Fuel surcharges and baggage fees have been hitting travelers where it hurts, and international travelers will feel the pinch more than others, according to the Wall Street Journal. The average international flight costs 8 percent more this year, at an average of $1,888. Budget airlines are raising prices, too. RyanAir, among the cheapest airlines in Europe, recently raised prices by 12 percent, according to MSNBC. Travelers can also expect to pay more at the destination because hotel prices are also up. The price of a typical domestic hotel room rose 3 percent to $150, and international rooms rose 4 percent to $238 since this time last year.

Aggravation at cost of big vacation

Vacation costs are creeping up, but the biggest effects seem to be confined to people who want to fly to the most popular destinations. A recent American Express survey, according to CNN, found that only 20 percent of respondents were planning on flying somewhere in the U.S. this summer. However, more people were apparently planning on traveling somewhere by car, as 59 percent of survey respondents were planning on taking some form of summer vacation, compared with 51 percent in 2010. However, Americans might actually be a bit more willing to spend on a holiday than people in some other core countries. It is estimated that up to 17 million people in Britain are foregoing a summer holiday entirely, according to the Telegraph.

Sources

WalletPop

Los Angeles Times

Wall Street Journal

MSNBC

CNN

The Telegraph

The AARP, a key lobby for the elderly, is starting to be receptive to reduced Social Security Benefits. Image from Wikimedia Commons.

The AARP has begrudgingly given its blessing to reducing Social Security benefits should Congress move to reduce payments to retirees. The AARP, or the American Association of Retired Persons, normally advocates against reducing benefits but is conceding that Social Security is in need of reforms to remain solvent.

Entitlement programs in Congressional crosshairs

There has been a flurry of Congressional activity in the past few years concerning financial reform, especially concerning government spending. Since entitlement spending, such as programs like Social Security, Medicare and Medicaid, make up almost half the federal budget, there are a lot of elected officials who say they have to be cut. However, some groups such as the AARP oppose any cuts to Social Security and to Medicare, as these programs make up the “safety net” that provides income to retirees. In fact, according to the Social Security Administration, 90 percent of elderly people in the United States receive Social Security income, and Social Security payments make up 41 percent of income for elderly people. However, the AARP recently conceded that they would be open to “some” cuts to benefits, according to the New York Times.

Powerful lobby group concedes to certain cuts

The AARP, formerly called the American Association of Retired Persons, recently said that it would accept some cuts to Social Security payments. The group has maintained that it doesn’t want benefits to be drastically cut, but would not be opposed to minor reductions that would help keep the system solvent. The board of Social Security Trustees, according to Bloomberg, recently announced that the Social Security Trust Fund, where all money the Social Security Administration doesn’t pay out is placed, will be depleted by the year 2036 based on current projections. The AARP also maintains that payroll taxes should be raised to cover any gaps. Legislators are already putting forward proposals such as decreasing benefits or raising the retirement age.

Safety net in danger

Social Security is already slated to spend almost $190 billion more than it takes in this year alone, according to USA Today, and is projected to do so next year. It was also revealed recently that the Social Security administration is estimated to have overpaid by more than $6 billion in 2009, according to Time magazine, by making payments to people who shouldn’t have received them or by paying too much. The federal government is estimated to have distributed $125 billion more than it should have that year. The system, as it stands, appears to be unsustainable. In order for Social Security to continue as the social safety net for the nation, payroll taxes may have to go up and many Americans could realistically expect to retire later, and possibly on less than they would like.

Sources

New York Times: http://www.nytimes.com/2011/06/18/us/18aarp.html

Bloomberg: http://www.bloomberg.com/news/2011-06-17/aarp-says-it-will-back-social-security-cuts-to-ensure-solvency.html

USA Today: http://www.usatoday.com/news/opinion/editorials/2011-06-16-Payroll-taxes-raid-Social-Security_n.htm

Time: http://www.time.com/time/nation/article/0,8599,2077690,00.html

Social Security Administration: http://www.ssa.gov/pressoffice/basicfact.htm

As states try to get rid of payday loans, other types of loans pop up in their place. Photo Credit: AR McLin/Flickr.com/CC-BY

Virginians frequenting pawn shops and title lenders more

Many states have passed laws intended to closely regulate, if not outright eliminate, payday loan lending. However, such laws don’t eliminate the need or demand for a short term credit product. The state of Virginia passed laws several years ago capping the interest rate on payday loans, which has reduced use of that particular product but not demand for financial help. Up to 10 percent of all Virginia households were estimated to have used some sort of alternative financial service, according to BusinessWeek, in a recent study done by the University of Virginia. Four percent of Virginians reported using payday loans at some point and 3 percent frequent pawn shops. Between 2004 and 2008, 70,000 Virginian households used refund anticipation loans and between 2005 and 2009, almost 150,000 Virginians used car title loans.

New class of lenders

Some of the most frequent laws passed against payday lending mandate loan repayment be done over a period of more than two weeks. The state of Colorado passed a law a year ago making the repayment period six months instead of a couple of weeks, according to the Greeley Gazette. As a result, former payday loan lenders are offering six month installment loans. When Arizona let the law allowing payday lenders to lapse in 2010, many thought that payday lending would disappear. Instead, according to the Arizona Republic, many stores simply started offering car title loans instead. In February of this year, a bill was introduced to the Arizona legislature that would authorize installment loans at higher-than-normal interest, as many consumers still need a source of short term credit. North Carolina, according to BusinessWeek, just approved a bill authorizing installment loan lenders to charge more than 36 percent interest on loans up to $1,500.

Supply and demand still rule

Though there are many products that a lot of people find less than palatable, such as payday loans, there is obviously still a demand for these products. A lot of people who don’t have access to bank credit find themselves short in between paydays or have an emergency come up that they didn’t plan for. Then they have to seek out alternative financial service providers in order to get the credit they need. Because many of these lenders don’t benefit from the kind of protections banks enjoy, they have to charge higher interest rates in order to stay open. It is undeniable that there is a demand for these types of short term credit.

Sources

BusinessWeek on VA

Greeley Gazette

Arizona Republic on payday loans leaving

Arizona Republic on new loan bill

BusinessWeek on North Carolina

Merchants are starting to move away from debit and credit cards, as the interchange fees they have to pay banks to get paid are cumbersome and expensive. Photo: MoneyBlogNewz/Flickr.com/CC-BY

There is a huge showdown going on between banks, merchants, regulators and legislators over interchange fees on credit cards and debit cards. Interchange fees are charged to merchants every time a customer uses a card, and the controversy over the fees is leading businesses to rebel against the way things have been done for years.

Card fees becoming less palatable to businesses

Some people may have noticed that coffee shops, gas stations and other businesses have begun imposing a minimum purchase amount a person has to make in order to use a debit card or credit card, and there’s a reason for it. It’s called an interchange fee, and the bank that a person has their credit or debit card through charges a fee to pay the customer’s charge, and it costs, on average, 44 cents according to CNN. Banks are fighting furiously to keep the fees as they are because they make billions for the banking industry. Merchants are championing the legislation because they are fed up with having to pay banks to get money they are owed. Anthem Blue Cross, according to the Los Angeles Times, is going to start charging customers to make automatic payments from their credit or debit card account.

Credit card companies moving into prepaid cards

Some credit card companies are moving into the prepaid card market. For instance, American Express recently announced that it is launching a new prepaid debit card, according to Time. Visa and MasterCard already offer them, along with companies like GreenDot and others. It turns out there’s a good reason. Prepaid debit cards, which have to be reloaded with cash but don’t have overdraft fees and don’t require a bank account to get, aren’t subject to the same regulations. GreenDot, according to Reuters, derived 30 percent of its income in 2010 from interchange fees and, unlike debit card counterparts from Bank of America or JPMorgan Chase, prepaid debit cards are exempted from the interchange fee cap.

It’s chip to be Square

Not everyone has to accept traditional payments systems or opt to only accept cash. Mobile payment system technology is starting to increase its presence in the marketplace. For instance, the Square mobile payment system has a card reader that plugs into a smartphone, and users can download the Square application to begin accepting payments through mobile devices. It’s compatible with Android phones, iPhones and iPads. Square is also working on a payment network in which merchants using the service can deduct payments from a person’s debit or credit account by simply verifying the customer’s identity and don’t have to swipe a card, according to the Washington Post. There are also Near-Field Communication systems being implemented nationwide. NFC technology uses a chip mounted in a card or a cellular phone that a reader registers and charges the appropriate linked account. South Korea, according to Reuters, plans to have 300,000 NFC equipped merchants by the end of the year.

Sources

CNN

Los Angeles Times

Time

Reuters on Green Dot

Washington Post

Reuters on mobile payment systems

Federal Reserve Chairman Ben Bernanke is being urged to create stronger regulation of business credit cards. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

Members of Congress are urging the Federal Reserve to do more about regulating business credit card marketing, especially regarding small businesses. Currently, small business credit cards are not subject to the same regulations in the CARD Act that apply to their private counterparts.

Small businesses at mercy of banks and card companies

A group of Congressmen are lobbying the Federal Reserve to implement regulations regarding credit cards extended to businesses, especially those marketed to small businesses, according to the Wall Street Journal. A group of Senate Democrats, including Senator Charles Schumer of New York and Senator Bill Nelson of Florida, are urging Federal Reserve Chairman Ben Bernanke to do something about enhancing disclosure requirements on credit card accounts offered to small businesses. Areas of concern include interest rate hikes, fees for going over spending limits and other types of fees that are prohibited for regular consumer credit cards. Credit card companies are not mandated by law to follow the Credit Card Accountability Responsibility and Disclosure Act when it comes to business credit cards.

Clever dodge of CARD Act

Part of the concern over the non-regulated status of business credit cards is that credit card companies are offering the cards to people who aren’t business owners; all a customer has to do is apply for the account just like a normal credit card and start using it once approved. Card issuers don’t have to ask for a business license number or proof that the card is for business purposes, which Chairman Bernanke is being urged to make mandatory. The senators also are concerned that business cards make up a fair portion of direct mailed credit card offers, according to BusinessWeek, as they cite a Pew study that found 9 percent of all credit card offer mail between 2006 and 2010 was small business card offers. The same study estimated that Americans received more than 2.6 billion pieces of such mail in that period. More than 6.7 million went to senior citizens.

Small businesses grapple with credit card companies

Processing credit and debit card transactions can be a hassle f0r small businesses. Many stores have mandatory purchase amounts that customers have to meet in order to use their debit or credit card because of interchange or swipe fees. Merchants are charged to receive funds from the bank or credit card company, and they have to pay to use credit and debit card processing machines. Many simply pay, but some are finding ways around it. For instance, the Square payment processing system that allows someone to use their iPhone, iPad or Android phone as a card reader is getting 100,000 more users per month, according to Entrepreneur. Square charges 3.5 percent of the transaction, far less than traditional methods of accepting credit or debit payments.

Sources

Wall Street Journal

BusinessWeek

Entrepreneur

Debt collectors, many of whom are perfectly normal people working hard in call centers and offices nationwide, are trying to get a fairer shake in the media. Image from Wikimedia Commons.

One group of people that are almost universally despised is debt collectors. They could easily be misunderstood, as they do provide a somewhat necessary service and the only media coverage is when people are abused by collectors, not when debts are properly and calmly collected in a reasonable fashion.

Media picking up story humanizing the face of debt collection

An article that recently appeared in the New York Times has been getting a lot of mention around the web, on sites like Time and MSNBC. The focus of the piece is an effort by debt collectors to be seen as more “human” by the general populace. One of the collectors cited in the piece, who works for a debt collection firm in Minnesota, said that some customers are every bit as awful as collectors are supposed to be, as people trying to do their jobs and collect a debt will be threatened with everything from lawsuits to death on a daily basis.

Mark Neeb, the head of the trade group for debt collectors, ACA International, insists debt collectors are hard-working folk just like everyone else, and that the rotten ones are really the exception to the rule.

An uphill battle

Rehabilitating image will be hard, since most of what the public hears is that debt collectors are unethical. Searching for “debt collection” on any search engine provides many examples. For instance, according to Reuters, Encore Capital Group LLC, the largest debt collection agency in the country, is being sued by the Minnesota Attorney General for improperly “robo-signing” collection letters just like some fairly well known banks were doing, and unjustly attempting to collect the debts. A Florida debt collector, Brooks, Newman and Stone, Inc., was recently fined $7,500 by the state of Minnesota for collecting a debt on behalf of a South St. Paul business and pocketing the money, according to the Minneapolis Star Tribune. In Eugene, Ore., an attorney named Derrick McGavic was disbarred and fined $70,000 for garnishing wages without notifying people he was trying to collect a debt, according to KCBY 11, a CBS affiliate in central Oregon.

Convenient timing

Looming over the debt industry is the Consumer Financial Protection Bureau, the agency that will police everything from credit cards to payday loans. The CFPB is soon to begin operation, and will share jurisdiction with the Federal Trade Commission over debt collectors. Debt collectors have been getting in trouble with regulators more these days, as there were 140,036 complaints filed last year against debt collection agencies, up 14 percent from 2009. Debt collection is fairly simple. A debt, held by a business, is bought by a debt collector, who tries to collect it from the customer.

While most debt collection practices are legal, there are some that are prohibited by the Fair Debt Collection Practices Act. If a person is being contacted by a collector, they should familiarize themselves with the FDCPA. Also, negotiations for paying less than the total is possible, since collectors typically buy debt for pennies on the dollar.

Sources

MSNBC

Time

Reuters

Minnesota Star Tribune

KCBY 11

Federal Trade Commission and Fair Debt Collection Practices Act

The state of Virginia still allows payday loans and car title loans, but there is a good deal of legislation concerning both products in the state. Photo Credit: AR McLin/Flickr.com/CC-BY

The state of Virginia has been on the front lines of regulating short term loan lenders like payday loan and car title loan companies in attempt to reduce their use. Both consumer finance products have been subject to stricter legislation that has dramatically reduced the use of such products.

Car title loan lenders operating without license in Virginia

The state of Virginia has recently released its first report about use of car title loans in the state, according to WHSV, an ABC affiliate in Harrisburg, Va. The state of Virginia passed a law that capped the interest rate and fees that could be charged by car title lenders in the state. That law took effect in October of 2010. The law also required that any businesses lending such loans get a license to operate in the state. In the last three months of that year, 25,000 loans have been lent for a total of $21 million in loan capital. There were almost 200 people whose cars were taken away because of default. According to The News Leader, a Gannet newspaper in Staunton, Va., there are 23 title lenders operating in the state but only seven are licensed.

Illegal online lending considered a problem

Consumer advocate groups like the Virginia Poverty Law Center are advising Virginians not to enter into any contracts with any unauthorized parties such as unlicensed title loan lenders and online payday loan lenders. Lending online payday loans is a felony in Virginia. Payday loan lenders themselves are authorized if the businesses are licensed and contained to a brick-and-mortar store. Laws were passed in 2008 that regulated payday loan lenders. There were more than 800 payday lenders in Virginia in 2007, according to the Washington Post. By 2010, there were fewer than 300. Legislation that would institute an interest rate cap of 36 percent has been brought before the Virginia General Assembly but never passed.

Credit carries risk

Payday loan lending and car title lending are seen by some as predatory, while others see them as simply alternative forms of credit. Any and all forms of credit carry risks. Credit cards can keep a person indebted in perpetuity, and the thousands of people who have lost their homes to foreclosure can attest to the risks of mortgage foreclosure. People who have hundreds of thousands of dollars in debt with student loans can’t discharge the debts they accrued for their education, even in bankruptcy. Laws vary by state, and borrowers should always do their homework concerning any financial product they are interested in obtaining.

Sources

WHSV

News Leader

Washington Post

The number of people using their retirement accounts as a source of spare cash is increasing. Photo Credit: godfreja/Flickr.com/CC-BY

The number of people taking loans from their 401(k) accounts is reaching record highs. More people are resorting to taking money from their retirement accounts, which many advisers would say is not a sound financial move. Some members of Congress are trying to limit the number of times a person can borrow from their retirement funds.

Retirement accounts being raided

AON Hewitt, the human resources company of the AON Corporation, noted in 2010 that one in seven, or about 14 percent, of people who had a 401(k) managed by AON Hewitt had borrowed from their retirement account, according to SmartMoney. That was a 14 percent increase from 2009. During 2010, investment houses T. Rowe Price and Vanguard both noticed an 11 and 14 percent increase in 401(k) loans, respectively. It is thought that up to 28 percent of all people holding a 401(k) account have taken a personal loan from their own retirement account at some point. It is estimated that up to 30 million people may borrow from their retirement accounts by 2014, according to CBS.

Congress seeking to cap borrowing

In May of this year, Congress announced that it would be introducing a bill that would limit the number of times that a person could borrow from their 401(k). Senator Herbert Kohl, a Democrat from Wisconsin and namesake of the Kohl’s department store chain and the chairman of the Senate Special Committee on Aging, sponsored a bill called the Savings Enhancement by Alleviating Leakage in 401(k) Savings Act. It was co-sponsored, according to Business Week, by Mike Enzi, a Wyoming Republican. The bill would limit the number of loans a person could borrow to three per person over their lifetime. Currently, there is no limit, and a person can take a loan against a 401(k) as many times as they want to, or are permitted to by their employer or plan administrator. The bill, according to Govtrack, was referred to the Senate Finance Committee in mid-May and hasn’t gone anywhere since.

Advantages to borrowing

Taking an installment loan from one’s 401(k) has some advantages and disadvantages. First, any interest or appreciation that the funds would have made while the loan is being repaid is lost. However, the interest rate on the loan itself may make up for any lost interest. If an account is only gaining 3 percent but the interest rate on a 401(k) loan is 6 percent, the borrower technically has doubled their gains for the amount of money that was borrowed. If the loan, according to SmartMoney, is used to pay off high interest debt, that is also a net benefit; essentially, a high interest debt has been replaced with a low one. Also, the thing about borrowing from a retirement account is that one pays ones’ self back, not a bank. That said, if one loses their ability to repay, or defaults on the loan, then retirement funds have been lost. Furthermore, the Internal Revenue Service imposes a 10 percent tax on early 401(k) withdrawals.

Sources

SmartMoney

CBS

Business Week

GovTrack

Internal Revenue Service

The Senate did not pass an extension on the debit card fee cap. Photo: MoneyBlogNewz/Flickr.com/CC-BY

The deadline for the Federal Reserve to decide on whether to institute a debit card fee cap is in July. The Senate failed to extend the deadline in a close vote, and it appears the Fed will have to make a decision. The cap could have serious implications for consumers.

Federal Reserve has weeks to decide

Among the provisions of the Dodd-Frank Act aimed at reforming the financial industry is the provision concerning interchange fees, the fee that banks charge merchants when people use debit cards to pay for things. Some contend that merchants are paying too high a price, but others say banks will be forced to recoup revenue by passing the loss onto customers. Under Dodd-Frank, the Federal Reserve was given until July 21, 2011, to decide how to cap debit card fees, according to CNN. The Senate tried to pass an amendment that would push the deadline back, but the six-month delay was defeated 54 to 45. Banks currently average a charge of 44 cents per transaction, according to the Wall Street Journal, and the Federal Reserve proposed to cap the swipe fees at 12 cents.

Consumer bureau still lacks director

The Dodd-Frank Act created a Consumer Financial Protection Bureau, an independent agency to regulate consumer finance products like mortgages, credit cards and payday loans. Special adviser to the president Elizabeth Warren has seemingly spent more time in Congress dealing with partisan squabbles than helping to establish the agency, which is what she was appointed to do. It is rumored, according to Bloomberg, that President Obama will nominate former banker Raj Date to head the CFPB. Date has been one of Warren’s top assistants and formerly worked for Capital One and Deutsche Bank AG. Date has to get a Senate confirmation to be head of the bureau.

Possible coming fallout

Earlier this year, several large banks threatened to put cap on debit card usage if debit card fees are capped. If the Federal Reserve caps fees at 12 cents per swipe, consumers will likely pay for it in some fashion. The cap on bank fees last year led to the near-demise of free checking. There is an exception to the swipe fee rules, according to the New York Times. Any financial institution with $10 billion or less in assets is exempt. However, that may be small minority; it’s estimated that fewer than 100 individual banks and three credit unions nationwide fit that criteria. The banking industry earns more than $12 billion of its annual revenue from swipe fees.

Sources

CNN

Bloomberg

Wall Street Journal

New York Times