Put on Your Boxing Gloves: Advocates and Lenders Face Off Over Payday Loans

A firestorm of controversy has suddenly erupted this afternoon over payday loans. It all started when the Center for Responsible Lending (an anti-payday loan advocacy group) sent out a press release titled "Payday Lenders Take $4.2 Billion from Working Families." Those are fighting words if I ever heard them! The release goes on to say that:

• Payday lenders pocket $4.2 billion in "excessive fees" each year.
• The average borrower pays $793 for a $325 payday loan.
• Borrowers save $1.4 billion in states that enforce rate caps on these loans.
• The Center for Responsible Lending proposes a uniform 36% rate cap.
• "This $4.2 billion is much-needed monthly benefits being squeezed out of the pocketbooks of retired and disabled folks.  This $4.2 billion should be helping people stay firmly put in the middle class, rather than keeping them trapped in the quicksand of poverty."

Whew! Those are some strong statistics. This release makes it sound like payday lenders are only second to puppy killers in the court of public opinion.  Community Financial Services Association of America shot back a press release called "Payday Advance Industry Says New Report Misrepresents Customers' Use of the Popular Short-Term Credit Product" just two hours later. This release said:

• For that $4.2 billion in fees, consumer received $40 billion in credit.
• Consumers will pay $4.2 billion in ATM service fees to withdraw their own money.
• Consumers pay $22 billion in NSF fees to banks and credit unions.
• Banks collect an estimated $10.3 billion in overdraft protection fees.
• Consumers paid more than $87 billion in credit card interest in 2000.
• $57 billion in late payment fees were collected in 2003, more than 140% of the total estimated payday lending volume in the US.
• More than 90% of payday loans are repaid when due.
• Payday loans are far cheaper than alternatives such as late fees and bounced checks.

In this battle royale I have to say that the payday lenders are coming out very strong. Their statistics about the relative expenses of other financial services make a compelling case. I have always felt that, although there are valid concerns about the payday loan industry, the industry as a whole is unfairly villanized.

It is true that there are some serious issues with the way the payday loan industry has operated. The practice of unlimited rollovers can be extremely expensive for consumers. But recent trends show that these rollovers and some of the other worst practices are starting to disappear. Instead the payday loan industry (led by the CFSA) is trying to make good on what has become a rapidly growing market for short term loans and a demand for reasonable fees.

Whose side are you taking in this debate? Do you think the Center for Responsible Lending or the Community Financial Services of America Association has the stronger case? Share your feedback in the comments section below. 

Survey: What is Your Budget for Holiday Gifts?

Now that Black Friday and Cyber Monday have passed, most of us have probably at least started on our holiday shopping. I have about 40% of my gifts purchased and mostly from online stores. Although I don't have a detailed budget, I have a good idea of how much I am spending on gifts this year.

As much as car dealers and electronic stores want to make us think that big ticket gifts are standard, the statistics don't match those messages. According to the National Retail Federation's annual predictions, shoppers are planning to spend an average of $791.10 this holiday season, up from $738.11 in 2005. "As usual, most holiday budgets will be allocated to gifts, with the average person spending $451.34 on family, $85.60 on friends, $22.40 on coworkers, and $44.52 on other people like clergy, teachers, and babysitters." Does this match your holiday gift budget for 2006?

Make Free Online Polls

Great Holiday Gift Idea: Give Grandma and Grandpa the Give of Time

If your grandparents (or parents) are 65 or older, the best holiday gift you can give them is a few hours of your time. Help them figure out which of the 40 or more Medicare Prescription Drug Plans (aka Medicare Part D) makes the most sense for them. If they're already signed up, help them take another look - to see if they can get cheaper or better coverage elsewhere.

Unfortunately, it's not easy to choose between plans, but since you're Web savvy, you can be a big help! You'll need to gather some information, for example, a list of the drugs taken by your favorite senior(s) and their pharmacy. Then you'll need to be online for awhile, taking advantage of the very helpful tools Medicare offers. What you discover will make it much easier for your loved ones to decide on a plan. 

Fortunately for you, there's some history now with this program and some of the kinks have been ironed out. While past performance is not necessarily an indication of future results, the studies show that about 80% of seniors are satisfied with their drug plans, which they seem to have chosen based on name recognition (AARP) or low rates (Humana).

The Catches
Sounds like this approach to playing Santa is relatively straightforward, doesn't it? Unfortunately, it's not.

1. First off, you need to get on the stick. While decisions can officially be made until December 31, 2006, the folks at Medicare want to know what your seniors decide by December 8th, "to avoid any delay or inconvenience in accessing their coverage in January." So don't wait until everyone is gathered around the tree to share this gift of time!
2. There are a ton of details. The process is both confusing and complicated. Fortunately for you, some of us have been there before and offer advice to make it easier on you. Here's my contribution to the cause. Also check out the Kaiser Family Foundation's recently updated report, Talking About Medicare: Your Guide to Understanding the Program, especially the chapter on prescription drugs. And when in doubt, you can always call 800-MEDICARE.

The Payoffs

• Seniors who do sign up for Part D can save an average of $1,200 - not just in 2007, but every year for the rest of their lives. Those who make a bad choice could pay more for drugs than they do now – and those who don't sign up will face steep penalties, perhaps for the rest of their lives. But with a little help from you, your loved ones will get something priceless - peace of mind
  
• It's a gift that keeps on giving. Chances are, you'll never have to come up with another idea for a holiday present for Grandma or Grandpa. Why? Think of all the times they responded when you said, "Again!" as they pushed the swing, read a story, or played a game with you. (Now an annual ritual, we just did a Part D check-up for my mom and one of her friends, who both really appreciated this money-saving present.)

Give it a try and let us know how you make out!

It's Always Christmas Time...for Visa

Consumers Union has brought back their holiday video called "It's Always Christmas Time...for Visa." This hilarious animated short is quickly becoming the "Miracle on 34th Street" for the credit geek crowd! It is part of the Consumers Union campaign for Congress to pass credit card reforms. The chorus is my favorite part:

It's always Christmas time for Visa
Mastercard gets presents every day
They're happy as can be when we Discover 'neath our tree
The finance charge that never goes away
It's always Christmas time for Visa
The lenders feel the splendor and the cheer
The interest that they're making is the gift that keeps on taking
And leaves us buried deeper every year

Watch the video for free online or can download the song in mp3 format by clicking on this image:

Once you're done watching, you can send a letter about credit card reform to your representatives using the handy message generator provided by Consumers Union.

Just Say "No" to Holiday Gift Cards

Gift cards have become as much a part of the holiday season as mistletoe and snow over the past few years. Retailers such as Target, Best Buy, Old Navy and more have focused a significant amount of marketing energy on making gift cards a must on any shopping list.

More than 75% of shoppers plan on buying gift cards during the holiday season each year and last year $18.5 billion was spent on the cards. Gift cards are popular...but are they a good idea? While gift cards seem like a convenient way to give, they really come with a slew of potential issues.

• Many gift card programs come with expensive inactivity fees or even expiration dates for recipients who are slow to spend. These fees are usually hard to identify until it is too late.
• Gift cards from credit card issuers can be more costly to buy than cards directly from retailers.
• Many gift card programs do not offer protections if the card is lost or stolen. Once it's gone, it's gone.
• Your gift has a good chance of never being redeemed. According to UnclaimedAssets.com, 5-10% of gift cards are never used. That's as much as $7 billion of wasted giving.

Instead of risking it with gift cards this year, consider some alternatives. A gift of cash instead is often fun, especially for children. Or you can print your own "gift cards" using these free templates from HP with a few bills tucked in the envelope. You may also want to consider an old fashioned gift certificate from a local store; these programs are usually fee-free and easy to redeem even if the certificate is lost.

Are you planning on buying gift cards this year? Share your feedback in the comments section below.

Cyber Monday Gives Consumers a Second Chance to Spend

Did you brave the shopping crowds on Black Friday this year? If you did, you certainly weren't alone! According to CNN:

More than 140 million shoppers hit the stores on Black Friday weekend, spending an average of $360.15, up 18.9 percent from last year's $302.81, estimated the National Retail Federation.

A survey by ShopperTrak estimated a 6 percent sales increase overall for Friday alone, to $8.9 billion.

Don't worry if you missed out on the big Friday sales...you still have a shot at the early Christmas deals online today. The Monday after Thanksgiving has been dubbed "Cyber Monday" in recent years for the surge of online shoppers who login at work for great deals  on gifts. An expected $32 billion in online sales could take place today.

WalMart.com is rolling out special deals online all week and BestBuy.com is promoting a two-day Cyber Monday sale. Cyber Monday actually provides a good opportunity for savvy deal hunters who hate the holiday crowds. Here are some tips for shopping safely on Cyber Monday:

• Use a credit card - Online purchases get an added layer of security when made with a credit card. You'll be protected against fraudulent charges or problems with your order.
• Compare before you buy - One of the best parts of shopping online is the ability to quickly compare prices. Check to see if that special discount really is a good deal before deciding to buy.
• Look at shipping costs before you click - Shipping costs can add a huge amount on to your order. Try to find deals that include free shipping for heavy items such as large electronics or request to pick up your package in the store.
• Skip the financing - Many online retailers now offer financing programs in just a few clicks. But these deals can damage your credit score and add to the cost of your purchase. It's better to pay with cash or a credit card if you can.
• Avoid warranty offers - Extended warranty offers are rarely a good value. In fact, Consumer Reports just released a study recommending against warranty or service plan programs.
  
• Don't hit the back button - You could end up resubmitting your order and buying two plasma televisions instead of one.

And remember: don't go overboard! Does it really make sense to buy your grandmother a $300 digital camera instead of a $30 sweater for Christmas this year?

Have you found a great Cyber Monday deal? Or do you have a tip for online shoppers today? Share your feedback in the comments section!

Ignorant or Stupid?

I love collecting quotes that seem to get right to the heart of an issue.  Here's one I found last week.

The difference between ignorance and stupidity is that ignorance can be cured.

I feel that the most important part of my job is not "doing loans." It's filling in the gaps in my clients' knowledge base.  The overwhelming majority or people are clueless about mortgages just as I am clueless of their field of endeavor.

One recent client is an engineer whose job it is to design parts of laptop computers so the heat generated doesn't destroy components or shut down the computer. If I needed help in that area, I'd sure hire him to help me because I don't know anything about that. I want people to hire me for the same reason.

I've had 4,500 clients and I have never met one who knew as much about mortgages as I do. In a word, they were "ignorant" about my business. That's OK because I am eager to help educate them so that, with my help, they can make the best decisions for their families. I love it!

To that end, I wrote a couple of books (for a sample click here) I also have written hundreds of articles like this with one specific purpose: to cure ignorance. I strongly believe that it is possible to cure mortgage and real estate ignorance through education, and I have thousands of success stories to support my belief. 

But people have to be willing to learn. Strangely, some people are very resistant to education. Sometimes they think they know it all. Sometimes they stubbornly hold onto incorrect belief structures. For whatever reason, they resist the attempts to cure their ignorance.

That's STUPID.

Avoid the crowds, shop online

Kudos to one of my personal finance heroes, Humberto Cruz, and his wife Georgina who completed their holiday shopping in October. I should be totally annoyed but Humberto is such a nice guy... I will only confess that I am jealous. 

I haven't even started my holiday shopping yet.

But you won't catch me in a mall on Black Friday. Shopping ranks somewhere around visiting the dentist in terms of ways I want to spend my time. So I will start my shopping this Friday, but I'll do am much of it as possible online. I am happy to share my online shopping tips with you since writing about them gives me more time to procrastinate.

Give great gifts: To figure out what to buy, start is with Consumer Reports Best Gifts issue which you can order online (a summary of the top picks is free) or you can pick up the printed magazine at your local newsstand. If little ones are on your gift giving list, check out US PIRG's annual toy safety survey. Some 73,000 children were treated for toy related injuries last year (!), and most of those could be prevented.

Once you figure out what you want to buy (and what not to buy):

Get the best price: Use shopping bots to find the best price online. A few popular ones are PriceGrabber.com, MySimon.com and BizRate.com. If you'd prefer to buy from a local merchant, try ShopLocal.com.

Use your credit cards: Federal law protects you against loss or theft if you use a credit card. $50 is your maximum liability and most issuers will take that number down to zero for you. Debit cards carrying the Visa and MasterCard logos also offer zero liability for most transactions but you need to spot the loss quickly or you could be bouncing checks all over town.

Under federal law you also have billing error protection that allows you dispute a credit card charge (but not a debit card transaction) for an item that isn't delivered as agreed. This can include delivery later than a promised date, or delivery of an item when the merchant ships you an item that is different in size, color etc from what you ordered. It does not cover buyer's remorse.

Print and keep a copy of your receipts for online purchases: It also doesn't hurt to print out a copy of the website description of the item as well. Make a note of exchange and return policies for your recipients.

Watch your statements: This is a busy time of year for thieves too. If you don't carefully review your statements, you won't know when your account has been compromised. So review your statements, preferably online which just takes a few minutes. If you can set up alerts on your accounts to notify you of unusual activity, do so.

If something does go wrong,gather your documentation and try to resolve the problem with the merchant. If you can't resolve it quickly, then file a dispute with your credit card company.

If you find you need to dispute a charge, make sure you follow the rules. You must write to the card issuer within 60 days at the address for billing errors or inquiries listed on your statement. A phone call is fine to discuss the problem with your issuer, but make sure you follow up with a letter to protect your rights. You can then withhold payment on that particular purchase until it is resolved. (But you must continue making your minimum payment or pay all the other charges if you normally pay your bill in full.)

Oh, and before you start shopping, give yourself a gift: make sure you have up-to-date antivirus and spyware detection software on your computer. If you don't have both, don't bother shopping online. You might as well just open your wallet and ask a stranger to take what they want. Consumers lost over $8 billion to online scams last year. That's the last thing you want to deal with during the holidays.

Happy bargain hunting!

Credit Freeze – An (Intentionally) Inconvenient Process?

So, you live in one of the 20 states that allow all consumers – not just victims of identity – the right to freeze their credit. And, you're thinking of taking advantage of the opportunity to protect yourself from identity theft. It should be easy, right?

Well, not exactly…

The St. Paul (MN) Pioneer Press reported on October 23 that one of its readers, anxious to take advantage of the new credit freeze law, tried to put a freeze on his credit. His experience was far from easy, and the newspaper's anonymous consumer watchdog, attempting to replicate his difficulties, similarly found herself trapped in the credit reporting agencies' labyrinthine – and somewhat deceptive – websites.

Since you need to file a separate request with each of the three credit reporting agencies – Experian, TransUnion, and Equifax – to freeze your account, it makes sense to check with them first. But the websites hardly make the relevant information available. Instead, readers are treated to a barrage of the various credit monitoring services the companies offer – for a fee, of course. Dig deeper, and you still might not find what you're looking for. Even contact numbers are obscured if you're looking to talk to a company representative.

Why are the companies making this process so difficult? According to a recent Pioneer Press article:

With the freeze available to more and more consumers (25 states now have similar laws), the companies fear they will get less business, said Beth Givens, director of the Privacy Rights Clearinghouse.

"They want free flow of credit information because that's how they make money," she said

Well, partly right. The credit reporting agencies stand to lose some of the "stock" they sell to retail and credit card companies as lists of people for pre-approved credit card offers. Still, they can potentially earn revenue from the fees charged for freezing (in some states) and thawing (in almost all states) a consumer's credit report. In the end, they're probably just fearful of news of the credit freeze going public: the agencies have traditionally fared poorly with customer service, and any change to this status quo could require the establishment of protocols in that area. The agencies are likely unwilling to shift operational costs into such an endeavor.      

Ultimately, your best bet for finding information on freezing your credit report would be to go straight to the main source that takes the consumer's best interest to heart: namely, your state attorney general's office. If your state is one of the 25 that allows credit freezes, your state attorney general should have pretty clear instructions on how to put your credit on ice.

Good luck with your freeze!

Giving Thanks for Good in the Financial World

Our credit experts here at CreditBloggers.com are going to be gone until Monday celebrating the Thanksgiving holiday. Although we often like to complain about identity theft, rising interest rates, consumer scams, etc. there are still quite a few things we appreciate in the financial world.

We are thankful that:

• Credit card interest rates in the US are still far lower than in a lot of other countries, especially Brazil.
• HR 3997 hasn't passed yet, leaving residents of California and other states with their excellent security freeze laws still in tact.
• Consumers are entitled to one free credit report from each of the credit bureaus every year.
• Mortgage rates are well below 7%.
• The the US no longer has the highest rates of consumer debt in the world.
• Consumer awareness of credit reporting and scoring has dramatically increased over the last 10 years.
• FDIC deposit insurance coverage was raised for the first time in 25 years to $250,000 for certain retirement accounts.
• Consumers have the power to remove themselves from pre-approved marketing lists just by calling 1-888-5-OPT-OUT.
• The credit reporting system allows for fresh starts by having negative records expire from  credit reports after 7-10 years.
• There are free credit score estimator tools available online.
• John Ulzheimer really likes to talk about credit scores and Randy Johnson really likes to talk about real estate.
  

What are you thankful for this year? Share your feedback in the comments section below and have a great Thanksgiving!

How to Kill a Market

The most recent figures on home sales indicate that the median price of a home in the U.S. fell by 1.2% from year-ago numbers.  More important, however, was the fact that declines only occurred in one-third of the 148 market areas.  The good news is that in the other two-thirds, prices were stable or increasing.  I think that the news media can be particularly eager to tout something sensational, like the nationwide decline, and ignore the fact that a majority of the markets have not been affect negatively.

In California, values actually rose. In the greater Los Angeles area, the rise was 5.2% although in Orange County prices were off by .8 % from 2005. Other areas in California, the Bay Area and inland Southern California were up year to year although Sacramento and San Diego markets, where there is a lot of homebuilding activity, were both down. Some markets show surprising strength, like the Seattle area where prices were up 14.6%.

A friend is selling his home. He finally came up with a realistic price that he thought would attract a buyer and result in a quick sale. By that I mean he was not trying to "defend" a high price, just trying to be reasonable.

What worried me was his report of his real estate agent engaging in scare tactics to encourage him to list now. She firmly predicted that prices were going to drop 10% and said if he sold now, he could save himself from losing all that money.

I am not one to predict the future and I am skeptical of anyone who tries it. The agent does not know what is going to happen any more than you or I do. Nor, when you look at the statistics, I see any evidence to support this "guess."

I shudder to think of what would happen if all the real estate agents started telling this to all their sellers and buyers.  This world is, to a great extent, one of expectations. The Consumer Confidence Index tries to measure that.  (By the way, that index has been up the last two months!) When you start trying to manipulate people to a particular expectation, like a market collapse, you just might get it.

If you are likely to participate in the real estate market either as a seller or buyer, study the facts and make up your mind. Don't pay attention to people who think they can predict the future.

Bank of America Merger Causes Consumer Headaches

Ugggh...I spent a half hour on the phone with Bank of America last night trying to restore online access to one of my credit cards. This is an account I rarely use and I had no clue that it was a part of the huge MBNA/Bank of America merger. All I knew was that suddenly I couldn't login to pay my bill. It took forever to get everything straightened out and there are still some lingering issues.

Wasn't I supposed to receive a letter about this? Somehow, my auto insurance company finds a way to have an actual live human being call me every six months just to see if everything is alright. Why couldn't Bank of America have done something like that to alert customers to the shift?

And yesterday morning a customer emailed me at Credit.com about losing 75,000 airline miles when his rewards card switched from MBNA to Bank of America ownership. He's still working on a solution to try to get his rewards back but the future is looking bleak.

Apparently the two of us aren't the only ones having a bit of trouble with the switch. According to a ConsumerAffairs.com article customers have reported that their cards stopped working, issues with online accounts and broken ATM machines.

Have you had a positive or negative experience with this switch? Share your MBNA/Bank of America merger stories in the comments section below!

It's Not Rocket Science: An Increase in Late Payments Leads to a Decrease in New Accounts

Experian Consumer Direct released the results of a consumer credit and borrowing study this morning. The report found that:

• There has been a 19.6% decline between 2001 and 2006 in the rate of consumers opening new credit card accounts. New auto loan openings dropped 17.5% and new installment loan openings dropped 15.6%
• During the same period, there has been a 12.6% increase in the rate of 90 or more days late payments.

You don't have to be a credit genius to figure out what might be happening here.  Occurrences of 90- day late payments have a major impact on consumer credit scores. Our credit scoring expert, John Ulzheimer, detailed exactly how this works in his article "Late Payment Secrets Revealed."

Most credit scoring models are designed to predict the likelihood of a consumer becoming 90 or more days late on an account. So when the consumer actually does become 90-days late on account, it can cause a dramatic drop in credit scores for up to 7 years. And we all know that dramatic drops in credit scores lead to more rejected applications for new credit. 

I wish that the Experian report would have somehow tracked applications for new credit, not just actual new account openings. I would bet that the rate of application for new credit has not dropped, and probably even increased as consumers have had a harder time being accepted for new accounts.

Funny Money Friday: Surviving Black Friday

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Black Friday is only a week away. This annual "holiday" marks the explosive start of the Christmas shopping season. While it is isn't technically the biggest shopping day of the year, it is one of the busiest and most planned for of the season. Here are some of our tips for gearing up on Black Friday:

Bullriding protective vest  - Each year the headlines are the same: "Black Friday Frenzy at Local Wal-Mart, Four Trampled and Left with Serious Injuries." Protect your ribcage from stampede-related injury with a professional bullriding vest. This particular vest is on clearance for $199 and comes with a kidney protecting "long tail."

Black Magnum Sharpie -  Carry this with you so that you can mark out your credit card number on receipts. Although this practice is now illegal in many states, it is still pretty common to come across stores that will print your entire credit card number on a receipt. Imagine what a lucky identity thief could do with one of those?

The number for compulsive shopping treatment on speed dial - Call Recovery Connection toll-free at 1-800-993-3869 for help locating a treatment center that can help you with your compulsive shopping or spending addiction.

Black Friday t-shirt - Celebrate your love for the sport of competitive, full contact shopping with a custom t-shirt for $16.99. This site also sells sweatshirts, beanies and scarves to help you "dress like a pro."

MRE's - Serious shoppers don't have time to visit the food court. Come prepared with genuine fresh military meals-ready-to-eat. Each days supply includes a main dish, side dish, snack, dessert, instant coffee and water pouch. Imagine the envious looks you'll get from other shoppers!

Accordion File - Keep print-outs of all the best Black Friday deals and store blueprints along with copies of your latest credit card statements and savings account balances organized in this handy file.

Good luck out there shoppers! I'll be wishing you well from the safety and comfort of my living room! Do you have a favorite tip for surviving Black Friday? Share it in the comments section today!

How Will You Celebrate Black Friday?

November 24th, the day after Thanksgiving, will be this year's Black Friday – the day when retailers traditionally open their doors early and offer incredible bargains in the hope that we'll jam into the stores and start off the holiday spending season with a bang.

Every year, the commercials and the hype for Black Friday and the holidays start earlier and earlier. I saw Santa on a TV commercial before Halloween this year. Ugh!

According to research by the National Retail Federation, the hoopla is paying off. Last year, some 145 million of us spent $27.8 billion in stores and online during the weekend after Thanksgiving. That's up over 20% from 2004, when we "only" spent $22.8 billion.

If you're eager to plan your shopping spree, there are plenty of sites that will get your mouth watering with the upcoming sales possibilities. For example, here are three sites that claim to be "official" Black Friday sites:

1. The Official Black Friday Deals Site
2. The Official Site for the Hottest Day of the Year
3. The Official Site for 2006 Black Friday Ads

Watch Out!
Before you head out the door, be sure to follow this sage advice from CreditBlogger's Editor, Emily Davidson, who says, "Don't go overboard. Just because it is on sale, doesn't make it a good gift or something you need to buy."

For more tips on surviving the Black Friday chaos, attend Emily's Black Friday Boot Camp.

Not Born to Shop?
If the mere thought of the mobs at the mall make you shudder, you are not alone. Join me and many others by spending Black Friday in a very different way: Celebrate Buy Nothing Day!

Folks around the world who are fed up with excess consumption and materialism don't buy anything for 24 hours. Some try to convince others to do likewise by holding eco-fairs in schools, demonstrating at malls, putting up flyers, and/or distributing press releases – anything and everything they can dream up to get us thinking about our over-spending.

My activist days are long behind me, so my Buy Nothing Day will be low-key. I will go out of my way to talk to some of my loved ones about gift-giving alternatives, like my all-time favorite, the gift of time. And I'll winnow down my "re-gift" pile – all that stuff people bought me that I'll never use - by giving some away via my local online recycling group. (Click here to "re-gift" in a group near you.)

How to Take Advantage of the Black Friday Sales and Celebrate Buy Nothing Day, Too
Buy Nothing Day is celebrated in the US and Canada on Black Friday. But for the rest of the world, Saturday, November 25th , is the day to stay out of the stores. So even if you can't resist getting malled on Black Friday, you can jump on the Buy Nothing Day bandwagon on Saturday -- we're one world after all, right?

Reader Question: Are these medical bills going to damage my credit?

We received a great question from Paul in Dallas this week about medical bills and credit reports:

My wife submitted health claims to an insurance company that no longer covered our medical bills.  Those bills are now in the collection status and I have great concern about their impact on my credit report.  This happened at a time that I was in-between jobs and no longer had the proper coverage.  The collection notices we received are addressed to her with a C/O to me.  She did give them my name and Social Security number since I was (when the policy was effective) the main policy holder.  We have negotiated with some of the doctors to pay in installments. Others want the full amount. Can they report the status of the collection accounts against my credit report?

The easiest solution is for Paul to check his credit reports online and see if the medical collections are actually appearing on his report. He can order all three of his credit reports in just a few minutes online without causing any damage to his credit scores.

The tricky part is figuring out if the collection account should be on his credit reports. Since Paul was the primary insurance policy holder, the ultimate responsibility for the debt would have fallen to him. But since he wasn't actually insured at the time, I don't think this applies.

However, Texas is a community property state and that means that Paul and his wife share financial responsibility for medical bills. This would suggest that the collectors could come after him for the medical debt. You can read more about consumer debt collection rights in this article.

If the collection account is appearing on his credit report, there is not much he can do. Collection records remain on credit files for 7 years from the date of the last 180-day late payment on the original account. Paying the account does not cause the collection to be removed from credit reports.

If Paul's health care providers have not yet sold the accounts to collections, I highly recommend that he find a way to pay the bill before they do sell it off and it destroys his credit. When it comes to medical bills, it is often a good idea to pay first and ask questions later.

Do you have some advice for Paul? Or a question about credit? Share your feedback in the comments section below!

Credit Freeze – An (Inconvenient) Ounce of Prevention?

If you asked identity theft victims whether they would have preferred to protect themselves before or after their information was stolen, there's a good chance they would opt for "before." Take, for instance, the story of Dawn Higgins, of Arlington, VA.

This week, The Daily Times of Salisbury, MD reported the devastating effects of identify theft on Higgins's finances. She had purchased rental property in another state and entrusted the property management to friends. Unbeknownst to her, these "friends" bought 5 houses for themselves – worth $700,000 – on her credit and then defaulted on the loans. Higgins was entirely unaware of this until she was turned down for a loan on a house for herself. So far, straightening out this ordeal has cost her $150,000 (including $20,000 in lawyer fees).

Unfortunately, Virginia – where Higgins lives – is not one of the 25 states that allow consumers to "freeze" their credit. If Higgins had had that option and had chosen to freeze her credit as a preventive measure, her credit file would have been locked, making it impossible for the wayward property managers to take out loans or open credit accounts in her name without her permission.

Of course, Higgins would have had to be particularly credit-conscious in making the preemptive decision to freeze her credit after her initial purchase. But shouldn't it be up to consumers whether they want to take that extra measure of security?

New credit-freeze legislation sounds like – and is – a great step toward helping consumers protect themselves better from identity theft and account takeover. Still, some consumers opting to freeze their credit may find the path tricky, if not impossible.

Some states that do allow credit freezes don't allow just any consumer to freeze his or her credit (to date: Hawaii, Kansas, South Dakota, Texas and Washington state). In those states, only consumers who can provide evidence of identity theft are permitted to freeze their credit. The first evidence of identity theft sometimes surfaces as a mortgage loan fraudulently taken out in your name, Higgins's case being a perfect example. However, by the time such credit fraud is discovered, the genie is out of the bottle.

For a freeze to be a truly effective preventive measure, it would have to be employed on-and-off between the start of every new credit line you open.

Those who oppose credit freezing (often lenders, credit bureaus and businesses) say that it's too inconvenient for the consumer. They argue that the up-to three-day waiting period for a temporarily "thaw" limits consumer "freedom." Instant credit at retail stores or the purchase of a cell phone on your lunch break would be out of the question. Supporters of credit freezing, such as Connecticut Attorney General Richard Blumenthal argue that it certainly presents an element of inconvenience, but "so does a fire alarm or an air bag or a safety belt." Isn't protection worth some inconvenience?

Yes, a credit freeze can be inconvenient. However, identity theft can be devastating. Consumers like Dawn Higgins, burned by the current lack of options for credit protection, would surely have been willing to trade some convenience for an extra measure of security.

When it comes to debt, we're No. 2!

Here's some good news for the US: We're no longer number one! At least when it comes to the amount of consumer debt we carry.

Over the weekend a PricewaterhouseCooper report found that UK consumers have surpassed the US in personal debt. In England, personal debts (unsecured and secured) represents 104% of gross domestic product. In the US, our personal debts add up to 92% of our GDP. "The average UK shopper now has more consumer credit that their counterparts in France, Germany and Italy combined."

The good news for the Brits is that something is actually being done to help. A new set of consumer protection rules has capped credit card fees at £12 ($22), down from as high as £38 ($72). These regulations are estimated to have cost UK credit card issuers $2 billion in lost fees. Experts worry that the new restrictions will cause interest rates to rise or will lead to more annual fees, but the end result will probably be good for British consumers.

In fact, the growth of borrowing has already slowed in the UK over concerns about the cost of debt. During July and August, credit card balances in the UK fell by 400 million pounds. That sounds like a good thing to me. Unfortunately, it probably won't be long before America is number one in debt once again.

Can an Angel Help You Find the Right Home?

In my town we have a little bit of almost anything you can conceive of the might pamper the human body or mind. Orange County, California is supposed to be the center of the universe when it comes to bosom enhancement operations. We seem to have a nail salon on every block, and so forth.

I'm not easily surprised but a new business really got to me. It's a Spiritual Healing Center and advertises the following:

• Angel messages - not massages, messages
• Devine Soul portrait
• Soul mate
• Twin flame
• Diamond essences
• Spiritual Healing

A prominent sign on the front door promises:

Your angels want to help you heal your life.

I didn't go in to check out whether I could cash in on some of these benefits because, I must confess, I have my doubts about it.  It's not that I am not a spiritual person.  I am. It's just that I go to a different sanctuary for my spiritual guidance.

What does this have to do with homebuying and finance? A LOT!  It is critically important to have the proper mental perspective when you are engaged in a search for a home or are trying to finance that home. If you want to be a successful homebuyer, you should start out WANTING TO BUY. And you should realize that a lot of information will be thrown at you and you need a fact-based evaluation system. 

More to the point, I see people who have the WRONG assumptions about how the world works, and I can assure you, they can get far off-track. Maybe they think all homes are over-priced, or they end up looking at 50 different houses, assuming the agent hasn't blown them off by then.  They don't evaluate homes or their values properly. Whatever!  These people are ones that still don't have a home a year later. That's failure, not success.

I would not rule out the possibility that an angel can help you, but I that angel is going to be disguised as an intelligent, experienced, trustworthy counselor who will give fact-based advice, have your best interests at heart, and be such a pleasure in working toward your success that you will think he or she IS an angel.

Good luck.

Funny Money Friday: Thanksgiving Financial Facts

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Thanksgiving is only 13 days away! It is a time for turkey, football and shopping. But what about the pilgrims and the indians? Here are some interesting and funny financial facts about Thanksgiving that we dug up:

The Holiday: President Abraham Lincoln was the first to declare Thanksgiving a national holiday in 1863. But it was Franklin Roosevelt who set the date as the fourth Tuesday of November. His motivation: to encourage earlier holiday shopping! Now we're lucky if we can make it past Halloween without Christmas carols in stores.

The Turkeys: $5.7 million dollars worth of live turkeys are imported to the US each year. 95% of those turkeys come from Canada. Most of our sweet potatoes come from the Dominican Republic.

The Pilgrims: America has historical roots as a nation of debt. The original colonists arrived in America in debt from the cost of their travel. They agreed to send goods back to England to repay their burdens. In 1641, the pilgrims consolidate their debts into four annual payments to a London creditor. The interest rates on these obligations were often between 30-70%.

The First American Money: Pilgrims used quahog shells called "wampum" for currency. In fact, Harvard College would accepte wampum for tuition payments in the 1640's. Wampum shells were recognized as official currency in America for over 80 years. A variety of crops and furs and coins from other countries were also used.   

The Shopping: Black Friday is one of the busiest shopping days of the year, but it isn't actually the biggest. The top shopping day of the year for retailers is usually the last Saturday before Christmas.

Happy Friday!

Election's Over, Phone Stops Ringing

I am thankful the election is over, mainly because I am tired of hearing my phone ring constantly with recorded messages from political groups trying to sway my vote. All of the messages were annoying, and some I considered downright offensive. Since I voted by absentee ballot nearly two weeks before the election, all the groups were wasting their pennies and my time trying to sell me on their candidate.

But even though my phone number is listed with the national Do Not Call registry, as well as Florida's Do Not Call list, there was no way to stop the barrage. Political candidates and their supporters are exempt from the requirements of those laws, supposedly because they aren't "selling anything," (though I would beg to differ).

At any rate, the blessed quiet today reminds me of how lucky we are to have the Do Not Call registry, and it's a good time to remind everyone to sign up if you haven't done so already. It's easy, free, and you'll stop most telemarketing calls in their tracks.

But you won't stop all of them. In addition to an exemption for political calls, there is an exemption for surveys, as well as for charities. If a third party is calling on behalf of a charity, though, you can request they not call you again. Companies you have a business relationship with are also free to call, which explains why my credit card companies call me every month trying to get me to enroll in their "income protection" or "credit monitoring" plans.

Then there are the companies that just seem to ignore the rules. On Halloween, the Federal Trade Commission filed a judgment and permanent injunction against USA Home Loans Inc., a mortgage services company, and telemarketer USA First Investment Group Inc. because they violated the FTC's Telemarketing Sales Rule (TSR) by calling telephone numbers listed on the National Do Not Call Registry and failing to pay the required fee for access to numbers listed on the Registry.

It's no small matter. The settlement includes a $426,782 civil penalty against USA Home Loans Inc. and its owner, David Vach, which is suspended except for $35,000, contingent upon the accuracy and completeness of their financial statements, and an $85,356 civil penalty against USA First Investment Group Inc. and its principals, Richard Burnham and Vincent Piccione, which is suspended, contingent upon the accuracy and completeness of their financial statements. The defendants, all from Maryland, also are permanently prohibited from further TSR violations.

If you haven't already registered your phone number with the Do Not Call registry, I highly recommend it. If you have a new phone number, or a new cell phone number, it's a good idea to make sure they are included as well. You can do so online at Donotcall.gov or call toll-free 1-888-382-1222 (TTY 1-866-290-4236) from the number you wish to register.

Now if we could just force the politicians to hold themselves to the same rules they wrote for everyone else…

Oregon votes down insurance credit score bill

Oregon voters rejected a bill last night to prohibit the use of credit scores in determining insurance rates for new customers. Measure 42 was defeated in a nearly 2-1 margin by voters. Heavily funded campaigns against the measure stressed the fact that ending the use of credit scores would result in higher premiums on homeowners, auto and commercial insurance rates. From InsuranceJournal.com:

"We are very pleased that Oregon voters understood the harm Measure 42 would have caused – higher insurance rates for 60 to 70 percent of Oregonians. This vote represents the public's continuing support for insurance pricing that reflects risk. Voters understood that Oregon already has one of the strongest consumer protection laws in the country and this initiative would have unnecessarily increased rates," said Kenton Brine, northwest regional manager, Property Casualty Insurers Association of America (PCI).

The insurance industry is justifiably excited about this measure failing to pass. Insurance groups spent almost $4 million combating this bill and fighting to keep credit scores as part of their reviews. Oregon was the first state to vote on a bill prohibiting credit score use for new customer underwriting and would have set a dangerous precedent for the industry had it passed. In 2003, the state voted to approve a bill that prohibited the use of credit scores for evaluating existing insurance customers.

The use of credit data in insurance calculations has been extremely controversial since its inception. Proponents cite the fact that insurance credit scores can accurately predict customer risk behavior and have led to reduced insurance costs for consumers with healthy credit. Opponents argue that credit scores and financial data has nothing to do with the way that a consumer drives and is harmful to low income and minority consumers.

What do you think about the use of credit scores to underwrite insurance? Did Oregon do the right thing in voting down Measure 42?

Survey: Vote for Your Favorite Financial Law

Did you vote yet today? Here in California, voters faced an extremely long ballot full of propositions and local measures. I voted this morning on cigarette taxes, school bonds, parking tax ordinances, teleconferencing policies and rules requiring the mayor to attend board of supervisors meetings. My finished ballot was ten pages long!

Since it seems we are voting on anything and everything this year, why not add some credit and financial measures on the ballot too?! CreditBloggers.com has a few dream laws that we wish were in the election this November. Which would you vote for?

Create Free Polls

Happy election day! Don't forget to vote!

Reader Question: What Happens if I Dispute This Bill?

Over the weekend, Fred wrote in with a question about disputing an unfair bill:

My current credit score is about 780.  However, I just r