Bankruptcy Law A Disaster

The idea of the 2005 bankruptcy "reform" law was that it would stop abusive filings and as a result everyone would be better off, except the shameless few who were abusing the system. We were sold this bill of goods so effectively that many of us who are usually quite compassionate felt the reforms probably made sense. After all, shouldn't it be difficult to file for bankruptcy?

The resulting mess was legislation that bankruptcy judges are calling a colossal failure.

• "Unquestionably, this is the most poorly written piece of legislation that I or anyone else has ever seen," U.S. Bankruptcy Judge Keith M. Lundin of Tennessee (31 years of experience) is quoted as saying in an article on bankruptcy reform published by In These Times.

• "It's such a poorly thought out piece of legislation," says Henry E. Hildebrand, a U.S. bankruptcy trustee in Nashville, Tennessee in the same piece.

• U.S Bankrupcty Judge Frank R. Monroe published an opinion that essentially accused the credit industry and Congress of colluding "to make more money off the backs of consumers in this country."

Bankruptcy attorneys everywhere are expressing tremendous frustration in their ability to help consumers suffering from the perfect storm of bad mortgages, credit card card debt, stagnant wages or unemployment, and rising food and fuel prices.

For the credit industry, a word to the wise: Sometimes you don't get what you paid for. They wanted fewer bankruptcies  (more money) but filings are still rising, even with the new law. All predictions are they will reach the one million mark this year – a number not seen since the bankruptcy law was changed in 2005. As for making money as a result of these changes, apparently that's also a fantasy according to bankruptcy researchers. (I wonder if the credit industry has recouped the millions spent lobbying for it yet?)

Clearly the bankruptcy law is broken, and needs to be fixed. An overhaul is not likely at the moment, but there is an immediate issue that can and should be addressed: helping consumers save their homes by allowing loans to be modified in bankruptcy.

The Center For Responsible Lending says that by lifting the ban on court-supervised loan modifications for qualified homeowners in bankruptcy, Congress can help communities retain an estimated $89 million in tax revenues and save at least 600,000 homes from foreclosures.

HR 3609, the "Emergency Home Ownership and Mortgage Equity Protection Act"  would enable bankruptcy judges to allow these modifications in cases where it makes sense. Essentially, a bankruptcy judge would be able to order a lender to modify a loan if he or she determined the homeowner could afford keep his or her home. (Additional guidelines would have to be met.) This solution will cost taxpayers nothing, and in the end will likely save lenders a tremendous amount of money they would otherwise lose through foreclosures, short sales, and a continuing decline in home values. (What many people don't realize is that some loan servicers can't modify loans even if they want to help homeowners avoid foreclosure!)

Unfortunately that legislation has been "put on hold" but my sources say it's not a dead issue by any means. So let's do something about it.

While bankruptcy reform may not save every home, it's the single best commonsense way to help the greatest number of homeowners at one time, without costing taxpayers anything, Kathleen Day at the Center for Responsible Lending explained to me. I agree.

So speak up! Are you worried about keeping your home? Did you lose your home to foreclosure, or do you know someone who has or will? Is your neighborhood, county or state at risk of being hurt by foreclosures, and the corresponding loss in home values and tax revenues? Write to your Congressional Representative and Senators, the Presidential candidates, and even your local newspaper.

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author (with Mary Reed and attorney John Ventura) of the forthcoming Credit.com book, Stop Debt Collectors: How to Protect Your Rights and Resolve Your Debts.

Good News at the Gas Pump...In a Few Months

Come this fall, you'll be able to breathe a little easier when you use your Visa debit card at the gas pump. In October, excessive holds that freeze consumer's available funds for a day or two (or three) will become a thing of the past.

Currently, using your debit card to pump gas can be risky if you are living paycheck to paycheck as many people are. That's because when you use your debit card at the pump to pay for gas, a preauthorization request is made to your bank to make sure the card is valid and that there are sufficient funds in the account.  The problem is this preauthorization request also places a hold on an additional amount on your funds.  But that hold isn't lifted until the hold and the purchase amount are matched up by your bank, which can take about three days.

This means you may have bought $30 in gas, but also have a hold for $75 on funds. So the $45 difference is essentially "frozen" until your gas purchase clears the bank.

A new real-time authorization system that goes into effect this fall will cut that hold time to anywhere from about 15 minutes to 2 hours when a Visa debit card is used. MasterCard hasn't announced similar plans yet, but it's a good guess that they are working on something.

This is welcome news for consumers, but of course, we are presuming that gas stations will still welcome payment with plastic at the pump by then. In an effort to cut costs, some gas stations are banning credit cards, while others are offering discounts for those who pay with cash. And still others limit the amount you can spend at the pump if you use a credit card.

Got Cell Phone Gripes? They Can Hear You NOW!

If you're tired of having to pay when you leave your cell phone company for a better deal, this is THE time to vent your frustration! The FCC is meeting tomorrow, Thursday, June 12th, to discuss those hefty early termination fees, which range from $175 to a high of $250, according to Consumers Union (CU), the publisher of Consumer Reports. CU is spearheading an email campaign through its site, hearusnow.org, to let the FCC hear from customers, not just the cell phone companies, because: "You shouldn't have to pay up just to get better service elsewhere."

While the FCC could put limits on these fees, the companies want something in exchange. "They want to take away consumers' right to sue them for potentially illegal behavior in exchange for lowering these fees," says CU, "a possibly worse situation in the long run." In fact, a class-action lawsuit was just certified to proceed in California, challenging the companies' unfair business practices, including early termination fees.

"Cell phone companies shouldn't get special legal treatment just for giving consumers a fair shake!" says Consumers Union. I agree! So I sent an email to the FCC, and hope you will, too. CU makes it really easy to tell the FCC what you think. I doubt that it took more than a minute to add my name and address -- as well as a personal note -- to the excellent message CU drafted. And I feel better for having spoken up. Try it, you'll like it!

After you've sent your message to the FCC, please come back and let us know what your other pet peeves are about your wireless service. With over 200 million of us having cell phones, imho, we ought to get better protection and treatment! Do you agree with me?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Fraud Alert: CentralGroupInc.com and CentralGroupAlliance.com

The underworld of nefarious financial criminals keeps on growing.  We've identified a new loan scam online this week.

A site called CentralGroupAlliance.com or CentralGroupInc.com has stolen some of Credit.com's source code without authorization and has established an advanced fee loan operation. The company's lawyers are getting it shut down. In the meantime, we wanted to put out a warning to any potential victims out there.

CentralGroupAlliance.com is one of thousands of advanced fee loan scams operating across the country. With this scam, the so-called "lender" collects an application and goes through the motions of granting you a loan. During the process they ask you to send a downpayment or insurance payment via Western Union, usually to Canada. After you send the payment, you either never hear from them again or they continue asking you for more money.

There's no way to get your money back after it has been sent. And, unfortunately, very few places you can turn for help after you're a victim. The only thing you can do is to report your case to the anti-fraud agencies FTC and PhoneBusters in Canada.

If you think you might be dealing with a scam lender, here are some signs to watch out for:

• Any lender that asks you to wire transfer a payment is not legitimate. Don't send it.
• A site without any street address listed or contact information aside from an email form.
• An unsecured (not https) application online.
• A lender that emails you a contract as a word document or PDF.
• A website that has only been registered for a few weeks or months. You can get this information with a Whois.net look up.
• A site with no animated VeriSign seal at the bottom of the page.

Hopefully, this information can help prevent new victims of advanced fee loan scams from losing money. Stay safe out there, internet!

Update 6/4/08: CentralGroupAlliance.com has been shut down. CentralGroupInc.com is online and we received a report from a victim who lost $1,500 to the scam.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

What the Millennials Are Thinking May Soon Change America

A majority of Millennials, people who are between the ages of 18 and 29, "believe that the government can be a force for good in the economy, and that increased investments in healthcare, education, and other areas are necessary to ensure strong and sustainable economic growth." That's a key finding from a just-published study by the Center for American Progress on the economic attitudes of this age group: "The Progressive Generation: How Young Adults Think About the Economy," by  David Madland and Amanda Logan.

The authors mainly relied on two long-running academic surveys that have been asking many of the same questions for decades, which makes it possible to compare the opinions of different age groups (and is music to the ears of this sociologist!). For example, Madland and Logan discovered that:

• Millennials are more likely to support universal health coverage than any age group in the 30 previous years the question has been asked. In fact, 87% of them think Uncle Sam should spend more on health care -- even if taxes have to be increased to pay for it

• A whopping 95% think education spending should be increased, even if taxes have to be raised. They're the most sup­portive age group ever to respond to this question.

• The Millennials overwhelming support increased government services, think the economy is the biggest issue in this year's election, and they're pro-labor union, too.

It's going to be quite an adjustment for me and the other baby boomers out there, but not only are the Millennials more progressive than we are (or were), but there are more of them than there are folks from our generation – and their percent of the population will only increase as we head off to the great bye and bye. Almost seven out of ten of them already think their generation is unique, while only half of the baby boomers feel that way.

What Makes the Millennials So Progressive?
You might think that their viewpoints are due to the hard time they're having with declining incomes, growing debts, and increasingly high costs for health care, housing, education, and especially child care. (For more about the current economic state of young Americans, see my last post, where I concluded "it's not so hot," based on findings from new Demos research.)

Perhaps you're thinking, maybe once they get a little older, their attitudes will moderate. That's not likely, according to David Madland and Amanda Logan, who have reviewed the academic literature and conclude that:

"political ideas and attachments that are developed in early adulthood tend to last. Research suggests that a social­ization process occurs that leads young adults to hold onto the party identifica­tion and opinions that they developed in their formative years. While people’s opinions certainly change throughout their life, they are more likely to hold onto existing views than to reverse them."

The authors also point to independent studies that show the same thing, and "contradict commonly held assumptions that aging leads to conserva­tism" and "cast significant doubts on the idea that the Millennials' economic pro­gressivism will moderate over time." If that's true, and the Millennials will maintain their viewpoints, it seems as though a lot is going to change in this country. This is a politically active generation that not only cares deeply about economic issues, but it's also voting in increasing numbers.

Are you a Millennial, or do you love any? Do these research findings jibe with your viewpoints? How do you think the Millennial's will impact your finances?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Hey Comcast -- Give Me Back My Rights!

If you received a little black book titled "Comcast Agreement for Residential Services" as I did recently, don't just toss it in the round file. It's a mind-numbing 29 pages of legalese, but it describes your "agreement" with Comcast for their services. And buried almost in the middle is a gem: How to opt-out of mandatory binding arbitration in case of a dispute.

Mandatory arbitration takes disagreements out of the courtroom and into an alternative forum that some consumer advocates and attorneys (myself included) believe is skewed in favor of the industry. You can learn why by going to GiveMeBackMyRights.org.

The Comcast agreement gives you the opportunity to say no to mandatory arbitration. You can go to www.comcast.com/arbitrationoptout or mail a statement to Comcast at 1500 Market Street, Philadelphia PA 19102 Attn: Legal Department/Arbitration. Opting out won't affect your service, but can help preserve your legal rights.

Act quickly. You have only thirty days from the date you receive the notice to tell Comcast you don't agree to binding arbitration.

Hopefully you'll never have a dispute against Comcast that warrants a lawsuit, but if you do, you'll want to make sure you have the right to have your day in court. Throw away this notice, and you're throwing away your rights.

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

Our Veterans (Still) Deserve Better

In honor of the fifth anniversary of the invasion of Iraq, let's take a few minutes to think about our veterans. Wouldn't you expect, after all the stories about how our veterans were being mistreated last year, that their situation would be much improved? Unfortunately, that doesn't seem to be the case. Veterans still don't get the attention they deserve. For example, consider the fact that our elected officials in Washington left VA loans out of that big bipartisan stimulus package.

You Can't Remember Everything
"On Capitol Hill, it's known as the biggest goof-up relating to housing in years," reports real estate columnist Kenneth R. Harney on RealtyTimes. "The stimulus increased loan maximums for Fannie Mae, Freddie Mac and the FHA to $729,750 from the previous $417,000, but totally forgot about a program that helps finance more than 11,000 homes a month: VA loans for veterans."

While $417,000 may seem like a lot for a home, it's not enough in many parts of the country, for example, near Washington, DC or in many parts of CA or NY. Vets in these areas who might have benefited from VA loans are out of luck … until Congress gets its act together and decides to give vets the same break that the rest of us can get.

VA loans are a good deal for vets, according to the Veterans Administration, which says the most important advantage is that no down payment is required in most cases. That's right. Vets can still get 100% financing – plus there's no monthly mortgage insurance premium to pay and limits on closing costs.

I agree that VA loans are a good deal, but how come the VA didn't go to bat for the 27 million veterans that it says are eligible for VA financing – and make sure this program was included in the stimulus bill? What possible excuse could the VA have?

My dad was a veteran of the Army of Occupation after World War II, and my family was able to benefit from a VA loan way back when. Today, the loan limit would be too low to buy the very modest home where I grew up. "Someone's head should roll for that," would be my dad's response to how the VA was asleep at the wheel.

Speaking of head and other injuries, there's a very moving story in Money Magazine about first lieutenant Ivan Castro, who was hit by mortar fire in Iraq and sustained many serious wounds. He spent a month in intensive care, had to endure many surgeries, ended up blind, and was faced with a complicated financial picture. As author George Mannes details in "A soldier's story: Financial rehab," Money's financial adviser was able to help Ivan and his family come up with a sound path forward. Every veteran deserves that, no?

One Great Loan Program for Vets
If you already have a VA loan, but the rates are lower now than when you closed, the VA can help you get a refi. Known as an Interest Rate Reduction Refinancing Loan (IRRRL), there's generally no credit check or appraisal. The closing costs, if any, are minimal, and most can be folded into the new mortgage. Call the lender that currently has your mortgage and also shop around to find your best IRRRL deal.

How Many Homeless Vets Is OK?
The VA issued a press release the other day: "Number of Homeless Vets Drops 21 Percent." Now there are "only" 154,000 veterans without a home on a typical night, as opposed to 195,000 a year ago. In explaining this reduction, the VA says it's "thanks to the services offered by the Department of Veterans Affairs (VA) and its partners in community- and faith-based organizations, plus changing demographics and improvements in survey techniques." I don't care how they count the numbers, I don't think any number of homeless vets is acceptable. How about you?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Must Read: Who is to Blame for the Credit Crisis?

The Wall Street Journal has an excellent and detailed article today about the factors that led to the current credit crisis. It covers the influence of government pressure on increasing homeownership rates, reduced lending industry regulation and the rise of seemingly lucrative subprime loans. Click here to read the full article.

All this brought to mind an incident that happened last year. I was on a talk radio call in program along with a mortgage broker. We were talking about finding a mortgage and credit tips. At one point, the lender was talking about how she was so excited to be helping consumers become homeowners.  And how it was her job to do everything she possibly could to give someone the loan they wanted.

I asked "What if they can't afford it? What if homeownership isn't right for them?" And there was this pause. She replied "Oh...I've never thought of it that way."

Homeownership is a noble goal. But how did we get to a time where borrowing $300,000+ was the right answer for nearly every person in country?

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

And the 2008 Bad Bank Award goes to...

National Consumer Protection Week is a great time to give out our "Bad Bank" awards (or "BaBas" if you're in the know). There were a lot of great entries into this year's competition. It seems like almost ever financial institution managed to do something bad for consumers lately.

First, our runners up:

• Ameriquest Mortgage. One of the largest subprime mortgage lenders. Made big contributions in taking down the housing market along with 233 other, now defunct, lenders.
• Macy's/Citi Cards. In October, these card issuers took the unprecedented and bold move to close 3.5 million dormant Macy's accounts (one credit score ding) and open up new Citi accounts on an opt-out basis (another credit score ding).

And now our winner:

• Bank of America
• They should have seen this one coming miles away. This has been a banner year for the nation's largest commercial bank and credit card issuer. There are two main reasons they're our 2008 winner:
• First, their move this January to raise the interest rates between 10-20% across the board for long term credit card holders with no real rationale right smack in the middle of the credit crisis. This alone would have earned them the BaBa.
• Second, Bank of America earned the dubious distinction this year of having by far the highest frequency of identity theft complaints to the Federal Trade Commission. They're expensive and potential fraught with fraud danger...excellent!
• Bonus! As if this all wasn't enough, Bank of America also led the charge in raising non-customer ATM fees to $3 in September.

I know that there are at least 60 angry CreditBloggers.com readers who support the granting of this year's award. What do you think? Who would you give the BaBa to this year?

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

The Worst Financial Scam of the Year

National Consumer Protection Week is a time to take a close look at some of the worst scams. The following fraud was my personal nemesis last year:

In the summer of 2007, a terrible con appeared on the radar. Advanced-fee loan fraud grew rapidly into a silent epidemic. Thousands of people have lost from $200 to $10,000 to this scam. Here's how it works:

1. Scammers contact a consumer posing as a lender and offer a large loan amount. Sometimes, they advertise online or in newspapers. Other times, they contact consumers directly. We're not sure if or how the crooks identify specific consumers in need of a loan, probably through some sort of online spyware.
2. The scam lender assures the consumer of their validity by posting an authentic looking website, sending official looking contracts by email and sometimes even having a BBB file.
3. When the customer agrees to the loan, the scammer tells them that they need to send a "downpayment" or "insurance" payment to get their money.
4. The consumer wires these funds using Western Union, usually to an account in Canada.
5. The consumer never receives any money from the loan scammer. Calls either go unanswered or result in profanity laced diatribes. Sometimes, the lender will ask the consumer to send more money and the cycle repeats.

Over the past year, this type of loan fraud has gone by many names. Here are a few that we've tracked:

• FairView Financial Services of Maine
• Royal Oak Financial
• Variety Financial Services
• Southfield Financial Group
• TransCredit Financial
• Interline Financial
• Prudent Financial Services
• Peach State Financial Services
• Liberty Mutual Financial Services
• Brookfield Lending
• Heritage Lending (here is their fake website)

It appears that the only way to stop this fraud is to educate consumers. Multiple reports to the FTC and various Attorney Generals have not resulted in any legal action against the scammers. Western Union is starting to do more to discourage their customers from wiring money to fraud lenders.

Remember: an authentic lender will NEVER ask you to wire money. No authentic personal loan lenders  require any sort of downpayment, insurance or guarantee payment to fund a loan.

If you are unsure if the lender you are working with is legitimate, there are a few simple tests you can perform. Ask them to mail you the contract instead of sending it by email (they avoid this because it constitutes mail fraud). Question their practices (they often turn rude and aggressive at this point). Take a closer look at the website (usually incomplete, with no posted address and only a short contact form). Google them (odds are that there will a posted warning about the company).

The scam seemed to die down around the end of 2007, but it has made a resurgence these past few weeks.  The current credit crunch is likely making it even easier for scammers to target consumers.  The harder it is to get authentic loans, the more open people will be to the scams.  Just a few days ago, I talked to one consumer who was extremely hesitant to believe me that the loan offer was a scam because he needed the money so badly.

Have you encountered an advanced-fee loan scam? Share your story in the comments section below.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

National Consumer Protection Week

This is our favorite week of the year here at CreditBloggers.com! National Consumer Protection Week is a time to focus on the financial issues that impact us all. From identity theft to loan fraud to credit card rip-offs, we're going to cover it all this week.

For NCPW this year, Credit.com has announced the official launch of our Credit Report Card. This detailed report of your credit standing is 100% free; absolutely no strings attached and no trial offers to cancel. It was designed by John Ulzheimer and myself using our combined 20 years in the credit industry to be easy-to-read and actually useful. 

We're really proud of how the Credit Report Card came out. Our users seem to love it too:

"Wow! What can I say? This Report Card was informative and easy to follow. Now I just hope I can fix some credit issues shown in the report. Thanks for the info and yes, keep this program because I am sure others will benefit from its ease of use and information."
   — David D.

"Thank you for offering this service and for free! I have been struggling to pay my bills on time and have been afraid to pull my credit report. The credit report card didn't make me feel bad about my credit situation. It gave me sensible advice on how a lender would view my credit and what I could do to improve my credit score. I really liked the fact that I was graded which I can relate to and I didn't flunk in every subject which makes me feel like there is SOMETHING positive about my credit score. :) Thanks!"
— Lisa

And industry blog, NetBanker.com, said that the Credit Report Card is "extremely well done."

Anyone can order their own Credit Report Card online through our secure form at www.credit.com. So far, over 40,000 consumers have used this free service.

Do you have an issue or topic you want covered for National Consumer Protection Week? Share it in the comments section below.

Emily Davidson – A former TransUnion insider and a member of Credit.com's expert team. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

A Proposal For Real Economic Stimulus

I am no economist, but seeing the proposed economic stimulus package coming out of Washington, I feel just as well qualified the "experts" to suggest a couple of alternatives:

A national freeze on credit card interest rates at no more than 14%. It's time to put an end to this 27% and 30% loan sharking nonsense by major credit card companies like Bank of America and Chase. The Fed cuts interest rates, yet credit card rates skyrocket, even for consumers who have never missed a payment.

When a credit card rate jumps from say 14% to 27.99%, not only does the debt become more expensive, but the minimum payment also increases significantly. For those who are getting hit with these high rates, any tax rebate they get will quickly be gobbled up by higher interest charges and larger minimum payments.

Because credit card companies have used their leverage to wipe out consumer protection at the state level, a nationwide cap is the only way to return some sanity to the credit card industry. Make it temporary if we must, but a credit card interest rate cap would give millions of Americans much needed breathing room so they can spend money -- on things like gasoline and groceries.

Allow home loans to be modified in bankruptcy. "Bankruptcy law is wildly off-kilter in how it treats homeownership," warned former HUD Secretary Jack Kemp in an LA Times editorial. He echoes the opinions of many consumer advocates who have been supporting this legislative change. Virtually any type of loan – except the loan for the home you live in  -- can be modified when necessary in a Chapter 13 bankruptcy plan. This gives consumers time to work things out and get back on track, and helps ensure their Chapter 13 plans succeed. Flexibility for bankruptcy judges to modify mortgages (including ones with abusive terms) means fewer foreclosures, and helps in the effort to stabilize home prices. We can't let the "success" of purely voluntary industry initiatives derail this sane proposal.

It appears, though, that our government is going to let us go further into hock to give us back some of our own money, in the hopes that we all go on a shopping spree and forget our money worries for a few moments. If it takes us the next thirty years to pay back our debts at 25%, so what? This is America, after all.

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

Hold on to Your Hats: Fed Cuts Rate by .75%

Well...this is one way to jump start a short week! Investment news from around the world was bad while we were on vacation Monday. And things got harrier when we returned to work today.

The Federal Reserve board announced an emergency rate drop this morning, the largest single cut in rates since 1982. The new overnight lending rate is now 3.50%, back to 2005 lows. The stock market today opened with a  huge 460-point drop but appears to be recovering a bit with news of the Fed's announcement. In a survey we ran last week, 64% of CreditBloggers.com readers supported a rate cut.

Let's talk about what this dramatic rate cut could mean to you:

• Credit Card Rates - Your credit card APR's could be dropping back down to those lows you enjoyed a couple years ago. Although, the recent trend of lower credit limits, higher fees and stricter underwriting rules will likely still remain.
• Home Equity Loan & Auto Loan Rates - Both of these loan types are keyed off the Fed Rate and should drop pretty quickly. If you got an auto loan with a very high rate this year, you might want to consider refinancing.
• Home Loan Rates - Mortgage rates aren't necessarily tied to the Fed Rate but do tend to follow big changes. Desperate mortgage brokers abound offering good refinance deals. Many have also offered programs where they'll refinance you again with no closing costs if rates drop even lower. If you haven't locked in a low rate FRM, now may be the time.
• Savings Rates - Your high-yield savings account should be taking another APY hit. Look for your savings rates to drop below the 4-5% range.
• Housing Market - It's too early to tell how the Fed's rate cut will help with the mortgage crisis. Many are saying it is too little, too late. Foreclosure rates will likely continue to increase. But lower Fed Rates could mean that banks will start lending and it will easier for new buyers with good credit to snatch up some of those properties on the market. Subprime borrowers are still going to have trouble finding loans.
• Stock Market - The Fed Rate cut is a move designed to increase market stability. Although, some see the move as a warning sign that the economy is getting into deep trouble. More up and down days are likely ahead as we weather the storm.

What do you think about today's news? Share your feedback in the comments section below.

Emily Davidson – Credit.com credit expert and former TransUnion insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Funny Money Friday: Investing in the Finer Things

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.

Economists often recommend that investors move their savings to bonds and metals during a recession. The theory being that things like gold and silver are able to better weather the storm. If you're looking for a safe harbor that's a bit more creative, we have some great suggestions for you:

Platinum Hello Kitty - Why settle for boring gold bars when you can get cute instead. A 2-inch, diamond studded figurine of the famous Japanese cat retails for about $100,000.

Diamond Studded Phone - Neiman Marcus is promoting this luxurious phone in their holiday catalog this year. For $73,000, it comes studded with 7.3 carats of diamonds, coverage in 150 countries and a concierge service.

Jeweled Rims - Of course, you'll want your car to match that glittering cell phone. For $250,000 you can buy a set of cubic zirconium tire rims. Or you can up the anti for a set with real gemstones for about $1 million. That set comes with a free Bentley!

Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

CreditBloggers Experts in the News

Here at CreditBloggers.com, we hope that you view us as your resource for credit insight and straight answers. We love answering reader email questions! We love it even more when we get a chance to help reporters with their credit articles. Over the weekend, our team was quoted in two great publications:

NEW - USA Today - "To Freeze or Not to Freeze Your Credit Report"

John Ulzheimer was quoted in Sandra Block's article about new credit report freezing methods and consequences.

Boston Globe - "Unexpected Cards Irk Customers"

Columnist Bruce Mohl covered the story about Macy's card customers being sent Citibank Mastercards without their approval. We weighed in about the potential impact this could have on your credit.

Kiplinger.com - "Don't Close Credit-Card Accounts"

Kimberly Lankford answers the common credit question "Would closing old credit-card accounts ever help my credit score?" in her Ask Kim column.

If you have any credit questions, feel free to send them to us at tidbits@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Signs of the Credit Crunch's Impact on Consumers

The financial news from the past few months has been quite scary. Stock market taking big dives, mortgage foreclosures on the rise, housing prices on the decline. The direct consumer impact of these shift is now starting to surface in two key measures: eating out and holiday shopping.

First, a recent survey revealed that 54% of Americans are planning to eat out at restaurants less over the next three months. 63% of those with incomes under $25,000 said they would eat out less compared to 35% of those with incomes over $50,000. And 40% acknowledged that they are already dining out less now than 6 months ago.

"Volatile stock markets, declining home values, higher energy costs and overall concern about the economy are reducing Americans' appetite for dining out," said RBC Capital Markets equity analyst Larry Miller.

Retailers are also predicting a slower holiday shopping season this year. The National Association of Retailers cited "economic concerns" in announcing slower that usual growth in holiday spending. They expect a 4% increase over last year, down from an average 4.8% annual growth.

"Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles," said NRF Chief Economist Rosalind Wells. "With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending."

Our team of personal finance experts have already spoken with several reporters about the "economic grinch" looming over this year's holiday season. This "belt-tightening" topic really seems to have legs for the next few months.

What about you? Are you cutting back on restaurants and shopping sprees? Share your feedback in the comments section below.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

What the Fed Rate Cut Means for You

After facing stock market turmoil, rumors of recession, and a hollering Jim Cramer, the Federal Reserve Board has issued rate cuts this afternoon.

Overnight interest rates were lowered a half a point to 4.75%. Discount rates were cut by half a point to 5.25%. These changes were made to "promote the restoration of orderly conditions in financial markets."

The  move is one of the larger rate changes we've seen in the past few years. Usually Fed rates are adjusted by quarter points at a time. Today's drop brings Fed rates back to early 2006 levels.

What does this rate change mean to you?   

• A more solid stock market. The stock markets have already surged up about 2% based on this news. The rate decrease is largely designed to counteract instability that has surfaced the last few months due to the mortgage and credit crisis news. the move is largely aimed at stopping the growing economic "panic."
• Lower credit card rates. Mortgage rates aren't directly tied to the fed rates, but credit cards are. Banks set credit card rates based off the prime rate, which is based off the fed rate. You may see your APR decrease along with your rates on home equity loans.
• A few other lower loan rates. Home equity rates and auto loan rates are also keyed off the fed rate and may see some decreases. Car buyers may be especially happy to see auto rates drop back from their recent increase.

What does this rate change mean for the credit crisis? Probably not much. We're just at the start of the ARM mortgage reset cycle and there's likely still plenty of foreclosures and housing issues lurking in the future. The rate cut could also potentially have a negative impact on growing inflation concerns.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Giving Credit Where Credit’s Due: Three Cheers for Linda Sherry

My hat's off to Linda Sherry, the director of national priorities at Consumer Action (CA), for her 13 years of work in protecting our rights, whether the issue is unfair credit card practices, Internet privacy, insurance fraud, or bankruptcy reform. Linda is in charge of researching and writing the many free publications CA offers on these and other subjects – in addition to its important annual surveys of banks, credit cards, prepaid phone cards, and long distance telephone carriers.  Much of the information Linda and her team assemble are available right on CA's easy-to-use Web site, in Chinese, Korean, Spanish, and Vietnamese, as well as in English.

During a recent phone conversation, the topic quickly turned from what Linda has accomplished over the years to what we can do now to get more consumer-friendly credit card legislation in place. The first step, Linda says, is to pay a visit to the Take@ction Center on CA's site, where you'll find lots of info on unfair credit card practices, and a form letter that makes it easy to tell legislators you want them stopped.

From where Linda sits, Congress is at a real "tipping point." As she explains it,

"Congress is poised on the edge, and it could go either way. Many would like to say that the credit card industry will clean itself up. The reality is that many in Congress understand that consumers are really being hurt. If consumers push hard enough, we can convince legislators to focus on consumer rights."

Now Is the Time

Linda believes "we all need to be incredibly active' now if we are to get this legislation through. She urges everyone to contact their senators and representatives – ideally via snail mail. Linda wants us to spring for the stamp because she believes a printed letter doubles the impact of an email. But either way you want to connect with your legislators is a big help from her perspective.

Consumer Action's form letter is a snap to modify with your personal comments, if you're so inclined. Want some additional points to make? I recommend  "A Brief Summary of the Proposed Credit Card Reforms," by our chief CreditBlogger, Emily Davidson.

Whether you add something extra to your letter or not, you can then either email it, or print and send it off to your elected officials. If you're willing to take it one more step, Linda recommends that you call your legislators' local offices. Tell them about your letter, and say that you want their votes for consumer credit card protections.

Let's make it clear that while they are off on a summer vacation, we're focused on what Congress needs to do for us bill payers when they return. Please  let us know what your elected official have to say in response!

Curtis Arnold, is the Founder of CardRatings.com, a website that provides ratings and reviews of over 20,000 credit card offers.

Reader Question: How will the FICO Change Impact my Refinance?

We are continuing to get great email questions from our readers about the recent FICO announcement. Fair Isaac's decision to change their FICO score formula is causing a lot of people to worry about the impact on their own scores. Here's one question from our reader, Amy: 

My husband and I were able to get our first mortgage loan last year, we have high percentage rate and we only took it so we could get into our house. We were told that we would be able to refinance this year, it has been a year since we closed.  Will the news of the big "FICO" change to remove me as an authorized user from our shared accounts? Is this going to affect us if we try to refinance?

First things first, the FICO change will not do anything to change your existing accounts. Credit scores work as filters that interpret your credit data, they don't have an impact on the information on your credit reports. FICO's decision not to include authorized user accounts in their credit scores means that the "filter" will simply ignore those records.

If you want to be removed as an authorized user from a shared credit card account, you should contact the credit card issuer directly with your request. And if you want to have the old authorized user records removed from your credit report, you can dispute them with the credit bureaus.

Unless the shared credit card had late payments or was maxed out, removing it from your credit score calculation will probably not help to improve your credit scores. It's more likely that your credit scores will drop from the loss of the extra credit limit and established account. This credit score change is true for both removing the account by disputing or after the FICO change takes effect in a few months.

What does this mean for Amy's refinance? She should take a close look at where her FICO credit scores stand. If her scores are higher than 700, it would probably be smart to refinance before the FICO change comes this fall. If she's in the 650-700 range, there's a danger that her credit score could easily drop to "subprime" levels with the change and she might have trouble finding a refinance loan. If her score needs some help, she can read this article about "sprucing up credit scores."

Do you have a question about the FICO score announcement or credit in general? Send us an email!

Credit Troubles of All Kinds

When you are a credit geek like me and my fellow CreditBloggers, everyone tells you their credit stories. I don't mind, really. If nothing else it gives me great fodder for this blog. Here are just a few I've heard this year:

1. At New Years Eve, a friend told me that he had twice received a $100 Home Depot gift card from his son. Both times he got to the store and was told the cards were never activated and were worthless. Because his son did not save the receipts, he was unable to get anything for the $200 he spent.

Lesson: If you purchase a gift card, keep the receipt and tell the recipient you have the receipt if there is a problem. Or call the toll-free number listed on the card when you buy it to verify the balance.

2. Recently I was talking to a friend who works with several websites. She told me that one of her clients is finding suspicious purchases in her shopping cart, some to the tune of $5,000. That might not be weird if the client were selling jewelry or electronics, but she's a business coach and the large purchases are for telephone coaching which, presumably, the thief will never take advantage of (as needed as those services may be).

Lesson: If you see a suspicious charge on your credit card, immediately contact the company providing the service to try to ascertain if it is legitimate and if not, please remember to follow the billing dispute rules by putting your dispute in writing to your card issuer, right away. Remember calling does not protect your rights. 

3.  One of the supposed benefits of a Costco credit card is that you can use to to rent a car through Alamo and avoid the fee for an additional driver. My father is a cardholder and used it to rent a car on his trip to Florida to visit me. But at the car rental counter, he was told he had to pay the additional driver fee to add my sister as a driver (at $10 a day!) because he didn't use the proper code when booking the reservation online. This, despite the fact that he called Alamo before making the reservation through Priceline, confirmed the benefit and was was not told anything about this secret special code. At the airport, with a huge line forming behind her, my sister tried going up the chain of supervisors, only to finally give up in frustration. Anyone else have this problem?

Lesson: Don't count on Alamo to give you the promised Costco card benefit! (I hope Alamo will see the light and fix this one.)

4. Last but not least is my recent credit card pitch in the sky. Returning home from a business trip last month, my US Airways flight was canceled. I spent hours on the phone trying to rebook a halfway decent flight the next day. I finally boarded my flight, settled in, and wearily begin to doze off as the plane rumbled down the jetway. As the flight attendant wrapped up his safety monologue, I was jarred awake when he launched into a full scale commercial for the US Airways Visa Signature Credit Card.

This was no mere mention of the credit card, but a well-crafted, smoothly delivered, very long commercial enticing us to sign up today for the credit card and get enough miles for a free ticket with our first purchase(!) and two yearlong companion passes for $99(!) and 500 bonus miles if we filled out the application right away and gave it to the flight attendant during that same flight (!). I'll give the flight attendant credit, he made it sound like the perfect credit card. And we certainly were a targeted, captive audience. But should I be subjected to that pitch on a flight I paid for?

Lesson: Credit card marketing follows us everywhere. Which keeps giving us credit geeks something to write about. 

Congress Must Change Bankruptcy Laws to Help Homeowners

Over two million families with subprime mortgages have already lost their homes to foreclosure or they're likely to lose them in the next few years unless Congress changes the bankruptcy laws. That's the message in a joint  "Call for Action" issued the other day by the National Association of Consumer Bankruptcy Attorneys (NACBA), the Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) – on behalf of the hundreds of thousands of families struggling with abusive subprime mortgages and hoping to escape foreclosure.

These three nonprofits warn that the bankruptcy laws are currently written in a way that means low-income subprime mortgage borrowers will have a very hard time keeping their homes … while those with second (and even third) homes will have a much easier time saving those properties.

Catch 22: The Rulz Is Nuts!
The problem is that the Bankruptcy Code includes very restrictive provisions that apply only to mortgages on primary residences. Home loans are essentially excluded from bankruptcy protection, which puts mortgage lenders in a far better position than virtually every other creditor.

In the best case scenario, the "Ponzi Scheme" subprime lenders came up with was based on low rates plus quick property appreciation. That’s the only way  folks could hope to keep afloat. But rates went up and property values have gone down, leaving borrowers who can least afford them with mortgages that are bigger than their homes are worth. So even if they were able to sell, they'd get a lower price, would still owe their mortgage lenders a pile, and would be homeless.

Then there are all the worst case scenarios brought to us by even more irresponsible lenders – for example, those who gave subprime loans based on appraisal fraud. Even in these circumstances, judges cannot restructure the mortgages. So how in the world are these people supposed to get back on their feet?!

The answer: Congress should modify the bankruptcy code so judges can write down these loans and let people stay in their homes.

You Can Help!
Let your legislators know that you support revising the Bankruptcy Code. And if you are facing this situation, please share some of the details with us. Your "horror story" may be what convinces a legislator that the current code must go!