Your credit report and the US PATRIOT Act

Earlier today, Congress voted to extend the Patriot Act for five more weeks. Sixteen provisions of this act were set to expire on December 31, including one section allowing roving wiretaps, and the review and sharing of library and medical records without a court order. Although these sections have received the most media attention, another provision, Section 505 will not expire. Section 505 of the Patriot Act allows government agencies to obtain a variety of consumer records without a court order by simply writing a "national security letter."

As anyone who has read their credit report knows, the information in a credit report is detailed and often inaccurate. Old addresses, crossed records and incorrect employment histories are very common on credit reports and could lead to major complications under Section 505. The Fair Credit Reporting Act requires that anyone who uses your credit report must inform you of that your report has been reviewed, explain your rights, and detail any adverse action that will result from the credit check. However, under Section 505, government agencies do not have to comply with these regulations. The Patriot Act amends the Fair Credit Reporting Act in two important ways: (1) It requires a consumer reporting agency to furnish all information in a consumer's file to a government agency upon certification that the records are relevant to intelligence or counterintelligence activities related to international terrorism.; and (2) it precludes a consumer reporting agency from telling a consumer that his or her report was accessed for this purpose.

What is terrorism? Sec. 802 of the Patriot Act amends the federal criminal code to: (1) revise the definition of "international terrorism" to include activities that appear to be intended to affect the conduct of government by mass destruction; and (2) define "domestic terrorism" as activities that occur primarily within U.S. jurisdiction, that involve criminal acts dangerous to human life, and that appear to be intended to intimidate or coerce a civilian population, to influence government policy by intimidation or coercion, or to affect government conduct by mass destruction, assassination, or kidnapping.

This means that government agencies can order the phone logs, email records, bank account information and full credit reports of US citizens, based on ‘appearances’ even if there isn’t enough evidence to obtain a search warrant. There is no judicial oversight of these requests and there is no requirement that the federal agencies, accessing and sharing consumer records, must ever inform the consumer that their records were accessed. It is no surprise that the ACLU has challenged the practices of Section 505 as a violation of the First (freedom of speech) and Fourth Amendments (no unreasonable searches).

To learn more about this issue visit the ACLU, ChecksandBalances.org, Electronic Frontier Foundation, Congresswoman Nancy Pelosi, Slate.com included Section 505 in their review of the most frightening parts of the Patriot Act or Senator Lisa Murkowski online.

Posted by Valary Miller on December 23, 2005 at 02:07 PM | Permalink | Comments (0)

As anyone who has read their credit report knows, the information in a credit report is detailed and often inaccurate. Old addresses, crossed records and incorrect employment histories are very common on credit reports and could lead to major complications under Section 505. The Fair Credit Reporting Act requires that anyone who uses your credit report must inform you of that your report has been reviewed, explain your rights, and detail any adverse action that will result from the credit check. However, under Section 505, government agencies do not have to comply with these regulations. The Patriot Act amends the Fair Credit Reporting Act in two important ways: (1) It requires a consumer reporting agency to furnish all information in a consumer's file to a government agency upon certification that the records are relevant to intelligence or counterintelligence activities related to international terrorism.; and (2) it precludes a consumer reporting agency from telling a consumer that his or her report was accessed for this purpose.

What is terrorism? Sec. 802 of the Patriot Act amends the federal criminal code to: (1) revise the definition of "international terrorism" to include activities that appear to be intended to affect the conduct of government by mass destruction; and (2) define "domestic terrorism" as activities that occur primarily within U.S. jurisdiction, that involve criminal acts dangerous to human life, and that appear to be intended to intimidate or coerce a civilian population, to influence government policy by intimidation or coercion, or to affect government conduct by mass destruction, assassination, or kidnapping.

This means that government agencies can order the phone logs, email records, bank account information and full credit reports of US citizens, based on ‘appearances’ even if there isn’t enough evidence to obtain a search warrant. There is no judicial oversight of these requests and there is no requirement that the federal agencies, accessing and sharing consumer records, must ever inform the consumer that their records were accessed. It is no surprise that the ACLU has challenged the practices of Section 505 as a violation of the First (freedom of speech) and Fourth Amendments (no unreasonable searches).

To learn more about this issue visit the ACLU, ChecksandBalances.org, Electronic Frontier Foundation, Congresswoman Nancy Pelosi, Slate.com included Section 505 in their review of the most frightening parts of the Patriot Act or Senator Lisa Murkowski online.

Credit card rates on the rise

When most of us hear "rates are on the rise" in the news we think about mortgage rates. However, recent rate increases have had a more significant impact on credit cards than large loans so far. When the Federal Reserve Board raised interest rates again for the 13th time this December, the prime rate increased to 7.25%. This in turn means that credit card APRs went up about .5% across the board:

The average credit card rate for standard, non-reward credit cards is currently 12.58%. The average rate for consumer credit cards with rewards is 13.64%. For consumers with excellent credit, these averages are 10.07% and 11.38%, respectively. In the last two months, average rates have risen over a quarter-point (.37%) on standard credit cards and over a half-point (.54%) on reward cards.

What does this mean to you? These interest rate changes impact both existing and new credit card accounts If you carry a balance on your credit cards, even a small rate increase can have a major impact on your debts. Combined with credit card minimum payments doubling (from 2% to 4%) this January, it looks like carrying credit card debts is going to be a lot more difficult in 2006.

The Fed has raised interest rates 3.75% since June 2004 in an effort to curb inflation. Analysts expect that these increases will continue over the next few months.

Boston Legal v. credit card industry

ABC's primetime law drama, Boston Legal, took on the credit card industry during a dramatic December 13th episode. CreditBloggers.com posted about this passionate criticism the next day and we have been patiently waiting for the transcript to appear online ever since. It has finally arrived! Here's one particularly juicy excerpt:

While a swell guy like you doesn't want the public to know that of the thousands of industries tracked by the Better Business Bureau the credit card racket is number one in customer complaints. You don't want them to know that you deliberately target those who won't be able to pay off their debts. People you call, 'Revolvers'. People who see 'zero percent interest' in big blue print and don't know that with just one late payment you skyrocket their interest to thirty percent. That if they so much as inquire about leasing a car you raise their rates.

You don't want the public to know that while over seven million families have filed for bankruptcy in the last five years you got Congress to change the bankruptcy code to make it next to impossible for people to discharge credit card debt. You don't want people to know that the credit card industry is essentially a pack of hyenas crunching on the bones of the poor. Do you? 

Read the complete transcript of this Boston Legal episode in PDF format online here. If you are interested in what is being done to try to reform the credit industry, you can visit ConsumerUnion.org for more information.

Capital One and disappearing credit limits

Is there something mysteriously missing from your credit reports? If you have a credit card account with Capital One or a few other creditors there may be some holes in your credit records. Your credit limits are probably not being reported to Equifax, Experian and TransUnion. Why? Because these credit card companies don't want other creditors to see how valuable you are as a customer and try steal you away.

The trouble is that this omission by the creditor can harm your credit scores pretty significantly. Is it legal? Yes. Can you change it? No. But you can decide not to keep accounts open with companies that support these policies.

Credit.com just posted a must-read article online all about these disappearing credit limit records.  Click here to read more about your missing credit limits.

Holiday preparation checklist

Christmas and Hanukkah are almost here! Along with your last minute holiday shopping and gift wrapping, you may also be preparing for traveling. If you are going to be visit relatives or taking a vacation during this weekend and next week, here are something you should do before you leave:

• Request a mail hold - The US Postal Service lets you file a 3 to 30 day mail hold request online as late as the same day. When you return, you can either request to have all your old mail delivered at once or to pick up your mail from the post office. This free request just takes a few seconds and will stop opportunistic identity thieves from stealing your mail while you are away. If you subscribe to a daily newspaper, you should also request a vacation hold of this delivery.
• Pay your bills online - With all the holiday shopping frenzy, it can be easy to lose track of your accounts. Check your credit cards, bank accounts and loan accounts online before you leave town. You may need to pay a bill online or transfer funds to cover your travel expenses.
• Update your creditors - If you are traveling internationally over the holidays, take a few minutes to call each of your credit card companies to let them know you'll be using your cards overseas. This alert stops them from locking your accounts when they see suspicious foreign purchases. You can also use this call to see what exchange fees your creditors charge for foreign purchases.

These quick and easy steps can help you have a safe and happy holiday vacation. CreditBloggers will be posting on a reduced frequency next week as our team of credit experts takes some time off for the holidays. You can email emilyblog@credit.com with any questions or blog ideas while we are away.

Think You Can Avoid Finance Companies...Think Again

One of the lesser-known credit facts is that using finance company accounts can hurt your credit scores. It’s not a huge “point killer” but it can still hurt, especially if you are trying to improve your credit scores and you need every point you can get.

Avoiding finance company credit should be very easy. All you have to do is not apply, right? I mean, if I see a building on the corner with a “Joe’s Finance Company” sign then I’m going to keep driving. Seems simple.

Ah, but it’s not. In fact, thousands of people are opening up new finance company accounts each day and they don’t even know they’re doing it. They’re doing it by taking advantage of “in-store credit” offers. The technical term for this is Indirect Lending. You are applying for credit at a store but a completely different company is extending the credit.

Indirect lending is most common in the automotive industry. When you ask a car dealer to help you find financing for a new or used car they shop your credit out to several of their lending partners. You may be at a Ford dealership but you’re actually applying for credit with several lenders, not necessarily just with Ford Credit.

In the case of in-store credit the biggest culprits are the big box electronics retailers and furniture showrooms. When you apply for their credit to take advantage of “same as cash” offers then you are actually applying for credit with a completely different company. And, in many cases that company is a finance company.

If your application is approved you’ll drive away with a new TV, a dining room table and a brand new finance company account. In about 30 days that account will show up on your credit reports and your credit scores could suffer because of it.

This is all completely legal and, in fact, you agreed to it when you signed the credit application. Most people don’t read the fine print but it most likely identifies the indirect lender by name.

So what can you do about it if you’ve been a victim? Well, there’s not much you can do about it. Even if you have an old finance company account that has been paid in full for years the mere fact that you have one (or more than one) can still hurt your scores.

The better question is, now that you know this, how can I avoid it? There’s good news. It’s actually very easy to avoid this from happening to you. Before you fill out any application read who the lender will be. If the lender has the words “Finance” or “Financial” in the name then don’t go any further.

And, just to be safe, even if it’s with a lender that doesn’t have the dreaded “F” word in the name, it’s still a good idea to ask the credit manager “WHAT TYPE OF ACCOUNT WILL SHOW UP ON MY CREDIT REPORTS?” If he or she doesn’t know then don’t go any further. If they assure you that it will show up as a “bank” account then you’re probably going to be fine. But, just to be sure, get it in writing.

If it will show up as a “finance company” account then don’t go any further. It’s simply not worth it.

Next week…why “same as cash” financing can hurt you in the long run.

FRONTLINE Special: Secret history of the credit card

FRONTLINE, the PBS news program, broadcast their investigative report on the credit card industry again last night. This hard hitting program originally aired in 2004 along with a joint New York Times report on the plastic trap.

Ed Yingling, incoming president of the American Bankers Association, tells FRONTLINE that revolvers are "the sweet spot" of the banking industry. This "sweet spot" continues to grow as the average credit card debt among American households has more than doubled over the past decade. Today, the average family owes roughly $8,000 on their credit cards. This debt has helped generate record profits for the credit card industry -- last year, more than $30 billion before taxes.

Missed the broadcast? You can download and watch the entire credit card special online through the FRONTLINE website anytime. The FRONTLINE website also offers information, interviews and other must read information about the inner workings of the credit card industry.

Blogs we like: SoundMoneyTips.com

SoundMoneyTips.com is a great blog that offers a once-daily money management tip. Covering a wide variety of budgeting and investing topics, this blog is a fun spot to check in for a quick update each morning. Check out the tips on shopping for health food online, getting free 411 phone service, and keeping your credit score healthy over the holidays from financial writer Michael Weinstein.

Managing higher credit card minimum payments this January

Credit card minimum payments are doubling this January (those rumors you heard are true). The largest creditors, including Citibank and MBNA, have already announced that their minimum payments are increasing from 2% to 4% of the borrower's credit balance each month. Other credit card issuers may have different increases but most are expected to double their existing minimums in the next few weeks.

If you carry large balances on your credit cards (the average balance is a whopping $8,400), you may be surprised to see how much you have to pay each month. As we discussed earlier on CreditBloggers, this higher minimum payment is a good thing in the long run. However, that doesn't mean that higher payments won't hurt a bit in the short term.

If you are worried about being able to afford your credit card payments when they double, here are somethings you can do to prepare:

• Calculate your new minimums - It is easy and dangerous to ignore these upcoming changes during the holiday season. The single best thing you can do to prepare is to review your accounts and calculate your increases in advance. Look at what you are paying now and double it to see what may happen with your next credit card statement. Knowing the problem is half the battle.
• Start saving now - If you know that making your payments is going to be a stretch, do your best to save up a little money now. Save your Christmas bonus instead of spending it, don't go overboard with your after-Christmas sale shopping and put any cash gifts into the bank.
• Stop using your cards - Since your minimum payments are usually calculated as a percentage of your balance, it makes sense to stop adding new charges to your credit cards now. The holidays are the high season for credit card spending so it may be difficult to resist.
• Move your payment date - Request that your credit card payment due dates are moved to immediately after your payday. This will help you make paying your credit card bills a priority over other spending.
• Rework your budget - Consider shutting off your cable subscription or packing a lunch to work everyday as ways to reduce your monthly spending and free up more money for your credit card minimums. These little spending cuts can result in huge savings.
• Contact your creditors - If you are positive that you will not be able to afford your increased minimum payments, contact your credit card companies right away. Most major creditors have special programs set up to help people who are having a hard time paying back their debts. They may be able to reduce your monthly payments.

You may also want to consider consolidating your debts, but this process takes time and you will still need to make all your minimum payments for at least a few months. The best plan is to pay off all your credit card debts as quickly as possible so that you can be debt-free before the end of 2006.

Credit Can Be Your Best Friend

Your credit profile is your financial fingerprint.  It is the cornerstone of your reputation in the marketplace. It documents how you deal with others and speaks volumes about who and what you are. 

It follows you. In certain cases, it precedes you.  It will never go away. 

For decades, credit has been unfairly portrayed as a mysterious, scary, black cloud hovering above us all. A hostile and complicated system managed by three powerful and distant national credit reporting agencies determined to implement new and painful ways to degrade and frustrate us from attaining our financial goals. A process we could neither understand, nor control.

Most credit extenders, on the other hand, have portrayed themselves as understanding, caring vehicles for the realization of our dreams - heroically standing between us and the dark forces of “credit.”

I believe that we must re-orient our thinking to view credit as a friend -- not something to be feared; rather, embraced and, ultimately, celebrated.

But never forget, to have a friend, you must be a friend.  A solid friendship requires a good deal of care and a great deal of work.

As with any true friend, when you get to know credit (and in turn it gets to know you), you will come to understand the enormous benefits that such a friendship can bring. If you encourage it to grow, and nurture, respect and protect it, it will enrich your life and be there for you if and when your financial well-being is threatened.

It can help you get a job, buy a car, purchase a home, begin a business, build economic security for your family, guarantee an education for your children and even provide a financial safety net in an emergency.

The theme of this blog is friendship.

Hopefully, together we can get you acquainted with, and for some, reacquainted with your most long standing, and perhaps unappreciated friend – credit.