Friday, April 29, 2005

The Loss of Good Stewardship in Washington

We are supposed to put godly men in leadership positions. As Americans we seem to have let ourselves be led astray. The debate in the passing of the recent Bankruptcy reform, it seems our leaders think it is the citizens of America that have had a decline in morality, when they have forgotten that leaders must hold themselves to a higher standard.

As a small business owner I learned that my employees would exaggerate my faults. That was because as the leader, I was setting the example. I also found that me and my peers would often complain about our employees and their lack of personal responsibility. All the while, they were simply a reflection of me. I see this happening on a national level. Our leaders in Washington and the leaders of our largest corporations are blaming individual consumers for being irresponsible, when all the while we are following their lead.

Where is the morality in playing a con game with the poor and middle class to take their wealth? What else can you call misleading advertisements to sell abusive credit card agreements? Lending, in biblical times, was originally an act of charity to help the poor. (Exodus 22:25) They gave interest free loans, instead of gifts, to allow the receiver to maintain their dignity by paying it back. The reason for this was to avoid poverty in Israel's society and keep their economy strong. To reinforce this debts were forgiven every seven years. (Deuteronomy 15:1-6) The United States is doing the opposite today. Scripture isn't soft on this issue. Habakkuk 2:1-7. Lenders are supposed to be ethical and responsible and lend only to those in need (2 Thess. 3:10).

Wednesday, April 27, 2005

Taking Your Promises Seriously

Last month I decided to take a closer look at one of the solicitations I got in the mail. I noticed that the disclosures required on credit card offerings form a contract when you sign the application. I had been reading about oaths in scripture and found one particular scripture that hit me. Ecclesiastes 10:1.

Waive Constitutional Rights for a Car Repair?
As I reflected on this scripture, and related it to how I went from a respected successful small business owner to one that is called a "deadbeat" that can't pay his bills. I made a few seemingly insignificant and common decisions to open a set of credit card accounts to facilitate the way we conducted business. Like the vast majority of people I hadn't read my credit card agreement in detail, and didn't realize what kind of risks I was taking with my personal finances. I remembered this yesterday when I dropped of my car at the dealer for service. I pay with cash now, but when I left it there was an entire contract on the back of the estimate that I realized I must read and agree.

It amazes me how signing these complex legal agreements have become so insignificant to us. We sign without a second thought. Many have an arbitration clause. My friend, strike it out before you sign it, or at least ask the attendant if there is an alternative to waiving your constitutional rights in order to get your car serviced, get medical treatment, open a checking account, or some other common activity.

Personal Responsibility
We need to take every agreement we sign seriously, as if we are going to be challenged by the terms we have agreed to. This is one reason credit cards can use the "personal responsibility" mantra, it takes attention off their unfair business practices. If we did take more "personal responsibility", we would preserve our reputations, and it would bring contractual abuses to light. It takes years to build a good reputation and one weak moment to destroy it. That is the point of Ecclesiastes 10:1.

Common Mistake
How do I know that few people read their credit card agreements before they agree to them? Over 78 million people have credit card accounts. The average household has $8,000 in credit card debt. On the credit card application is an agreement where you promise to be bound to the contract they will send with the card in the mail. Now tell me, how can you read a credit card agreement and agree to it if you don't have it yet? You are agreeing to something you have no idea about. You could be agreeing to sell yourself into slavery.

Common Deception
Why do the credit card companies do it this way? They don't want you to see the contract until you have the credit card in your hand, and they also get all your personal financial information in their database, including everything on your credit report. What did you get in return? A credit card with an agreement that is highly abusive in it's terms. If you read it, or took it to an attorney so you could understand it, you would cut up the card and close the account if you took it seriously.

I decided to file a complaint with the Office of the Comptroller of the Currency on this issue, and the initial response was that it was reasonable to expect to see the credit card agreement in advance of filling out an application. Credit card companies don't do this and refuse to let you see one in advance of filling out an application. Their investigation takes about 60 days. I'll keep you updated.

If you would like to file your own complaint on this issue, you can reach one of the Office of the Comptroller of the Currency's customer assistance specialists by: Telephoning 1-800-613-6743, toll-free (Monday-Thursday 9:00a.m. to 4:00p.m.CST) E-mailing - E-mail to; Fax - Faxing to - 1-713-336-4301 or; Sending mail to - Customer Assistance Group1301 McKinney StreetSuite 3710Houston, TX 77010

Monday, April 25, 2005

When You're In Trouble

I received an email today from a reader who was in trouble with their debt. Many of us are these days due to the major shifts in our economy over the last 5 years. I thought I'd share some information that I gave this person to help them. Maybe it will help you.

If you get notice that your are being sued, you should definitely plan on showing up to any pre-trial conference or hearing. In fact, if the case number in the letter is filed at the court, you should be able to see it by asking the court clerk. If it in fact a case with the court, you should call the attorneys and attempt to settle with whatever you can. You want to make sure it is actually a case filed with the court since sometimes collectors like to make you think they have filed a case when in fact they haven't.

I am not an attorney, and I am only providing this as information. It isn't legal advice. You need an attorney for that. However, I really feel strongly about what credit card companies and banks are doing to people, this includes major department stores because they are using the same practices to increase their sales, though some of the issues are a little different. In either case, collectors are going to do what they are paid to do, and attempt to get you to pay your debt. What's wrong with what they do is charge high interest charges and late fees that they tack on to your balance. When they sue, they will at least attempt to tack on their legal fees and court costs.

Court rules vary, but there is usually a pre-trial hearing or conference to attempt to settle the matter before it gets put on the court docket. In that case, it would be a good idea to go prepared with something to offer that you can afford, like small payments for a period of time or a lump sum of cash. The point is to offer whatever you can, even if it is miniscule. It shows good faith.

If it is a pre-trial hearing, that is more serious because it will most likely be in front of a judge. However, the goal is the same. If you can convince the judge you are doing everything possible, he or she will be more considerate, and may force the creditor to take a lower settlement than they would have done without the judge's intervention. Make it very clear to the judge everything you have done to pay the account, and that the interest and fees are making it impossible to pay off the account. If you stopped making payments, it is because they were unwilling to compromise to settle the account by making it possible to pay off. It is their lack of cooperation brought you to the courtroom, not yours. If the judge sees this, he may even dismiss the case if you are lucky.

If the creditor is a Credit Union you need to be careful. They have credit cards with a cross-collateralization clause. This is where any other assets you have with the credit union can be tapped into to pay a debt you owe them. If you have a car loan with them, they can reposess the car to pay the credit card balance.

If the creditor gets a judgment against you as a result of a lawsuit, then they can file claims against any assets you have. Most likely the first step would be to attach any bank accounts and sweep funds out of them to satisfy the debt. The second step is to garnish any wages. If you are self employed and aren't incorporated there are no wages to garnish through an employer. The final step, if the debt is still not satisfied, is to file liens against any assets you have. If you have equity in your car, then when you sell the car any excess proceeds would go toward the judgment. This is the same with a home. In the case of owning your home, there are various homestead exemptions that protect the equity in your home. In some cases they can force the sale of your asset. It is unlikely they would do that if it wouldn't produce much money to pay the judgment.

Sometimes these guys sue you and violate your rights without you realizing it and get a judgment against you before you know what is happening. That is why you need to act on any notification you get NOW. They know you can't afford an attorney and are unlikely to sue them for violations of the law. Creditors are becoming more aggressive lately, so you have to be prepared. If they get a judgment they have to renew it every 10 years. If they feel they can be patient until you do start making money, they will get the judgment and doing everything they can to capture what you earn, though it may not be much. That is why it is important to make it clear you have nothing for them to take, nor will you in the future, if that is the case.

In the meantime, you have to figure out how to live below your means. Specifically, an excellent guideline is don't let total of your rent, utilities, phone service, renters insurance, health insurance and other medical expenses, car payment, car maintenance and gas, life and/or disability insurance, and food be more than 50% of your net income (after business expenses and taxes). See more about that here. If you can reduce your living expenses to that level, you should be fine. The other 50% goes to gives you financial security, and room to get things you want. That is a goal to work toward.

They don't have debtor's prisons these days. However, creditors have a lot of power on their side and can make you miserable until they extract their pound of flesh. If it gets too difficult, a last resort is to file bankruptcy. You might check into your options. The court system has legal aid for those who can't afford attorneys. Use them to help you file for bankruptcy or direct you to an attorney who can help pro bono (depending on your situation). That could give you a fresh start, and if you address the reason you got into debt and can be sure you won't end up here again, this option can relieve a lot of stress. If you haven't addressed the problem, you'll end up right back in court, with no bankruptcy option.

Congress just recently passed a new Bankruptcy Bill that is tougher on consumers. It will go into effect in October this year. Experts are advising that you file before then, if you are thinking about it.

In the meantime, if creditors are calling you constantly, you need to know your rights. Go to here, print it out and take it to an attorney to explain it to you. The majority of collectors violate this law in various ways. Each violation is worth $1000 to you in small claims court. I don't normally suggest that people sue, but when you are being harrassed, you need to stand up for yourself, and collectors don't listen or come to agreements very well. Their job is to get as much from you as possible, and talking with them can inadvertently get you in a contract with them. So you have to be extremely careful what you say.

Catch them violating the law and file a complaint in small claims court. A legal aid attorney could help you do the paperwork. Don't let collectors harass you. Record phone calls on tape, and when they have made a violation tell them you are recording the call - they'll probably hang up. Write down the details of the calls, for documentation that can be used to sue. Keep all letters. Send a "Cease Communication" letter to each one. Go here and here. You have the right to dispute your debts under this law, and violations in this area are also worth $1000 per violation in small claims court. Knowledge is a valuable thing, and can be used to fight back, if you play your cards right, you can make some money to settle the debts. You can use your $1000 judgment to settle the account (depending on what your balance is). Always make sure you get any settlement agreement in writing.

Also, don't get swindled by debt counseling or debt elimination companies. See this website and this one.

Let me leave you with this to think about in relation to taking contracts or agreements seriously:

Citibank's slogan is now, "Live Richly", as if getting their credit card is going to make you wealthy. It is actually quite the opposite. Citibank, the largest issuer of credit cards to college, high school, and junior high school students, promises them that credit cards will reduce the stress of college life, help them be independent of their parents, make them more desirable to the opposite sex, etc. In 1998, a MasterCard commercial on television says, “Dinner $40. Movie $15. Second date with the right girl: Priceless.”[1] (Go here for the source of this quote, from his book "Credit Card Nation".) Sending the message that using your credit card will get you a second date, and that is worth all the money in interest and fees you’ll pay for using it on your date. Is this really true? It is doubtful. By the way, it is illegal to bind a minor in a contract but Citibank still does it because parents pay anyway, and if they don't Citibank will sue the parents on the minor's signature. If this happens to you, find an attorney to reply to the lawsuit and argue the contract is invalid. Don't let them get away with this! Then make your teenager pay them back for the charges, minus the interest and fees. Then don't forget to make sure their credit report is cleared in the settlement.

How many of us make promises too freely, to get people to do what we want them to. It is like advertising. Your main objective is to influence someone’s behavior. Once you’ve done that, you have to fulfill their expectations, and that is where it gets challenging. Sometimes you have to make a pretty big promise to convince someone to do what you want. When you promise something, the scriptures are clear that you must deliver. That is why when we borrow money we must pay.

The sticky part of this in today’s world is when you get yourself into a contract that was so complicated that you didn’t understand what yourpromise really was. Does that mean you are still obligated to fulfill it? Unfortunately, yes it does. But that doesn’t mean that the deception used to get your promise was right. You must be aware of what you are promising before you make an “oath” to pay on a credit card account, or any other loan for that matter.

An oath, on the other hand, is more serious statement to validate a promise. In biblical times it was sealed with a curse (1 Samuel 14:24), which might be the equivalent of a written contract today where there are damages often defined for default. The curse was used to insure that the oath was not broken. (Genesis 26:28).

Today contracts (oaths) are taken lightly, which is evident in the fact that in the year 2000 there were about 78 million[1] households that had at least one credit card, and the contracts for these accounts were, and are, practically incomprehensible in their abusive terms. Go here for more information on the credit card industry abuses taking place today. The credit card company expects them to be broken, yet consumers expect to break them without consequences. This is demonstrated in the statement made on a Virgin Airlines website for their credit card deal, “the stuff our lawyers require” to describe their disclosures, as if they have no intention of taking it seriously and neither should you. This was also true in biblical times as seen in Hosea 10:4, where this was one of the reasons for judgment prophesied against the Baal cult. Letting this continue has consequences, as mentioned in Habakkuk 1:4. When the justice system becomes corrupted, as is beginning to happen today, you can see what happens by reading on to verses 5 through 11. Is it possible a modern version of this could happen to us?

Oaths were meant to be taken seriously as we see in Leviticus 19:12 where it was part of the Mosaic Law, and breaking it could result in death (Ezekiel 17:16-18). As Christians today, we should think seriously about making sure we understand all contracts we sign, especially for loans. This Old Testament principle still applies in today’s world, and ignoring it could result in a financial death. This means taking these contracts to an attorney for interpretation, because U.S. law has become so complex. In my personal assessment, it has become so complicated and full of legal traps that it is extremely difficult to say with 100% certainty that you will not default on your contract. This is why I believe we should take contracts more seriously, even though we may be ridiculed for doing so, and make certain we can fulfill every clause, or negotiate the clause out. Not doing so puts your good character and reputation at risk.

In Ecclesiastes 10:1 it tells us that a simple small act of foolishness can ruin the good character of a man with a sound reputation in one small and unguarded moment. It takes years to build a good reputation, and it can be destroyed in one small foolish act. You have to ask yourself, is it worth it? Your reputation is worth more than any amount of money you might borrow or any business deal you might make.

[1] Robert D. Manning, Credit Card Nation, (Basic Books, 2000), Pg. 13

Tuesday, April 12, 2005

The Truth About Debt

I am a former small business owner that learned a lot about more about banking when I shut my business down that what I learned in business school. My concentration was in Finance!

When I learned about the bankruptcy bill in Congress, I decided to learn more about it because I realized that I may need to consider this route in the future if things didn't go well for me. What I found surprised me. When I began to do more research on the history of banking, and on the realities of borrowing, I found that the truth is really being hidden.

I am in the process of writing a book about this, and welcome comments that might help me with it. I will share bits and pieces of my research here and will hopefully peak your interest as well as give you some solutions you can use. My book will cover topics such as:

  • what the Bible says about money and debt,
  • how our economy is built on debt,
  • how our education system grooms us to be debtors,
  • how our legal system has gone awry,
  • ethics relating to money and debt,
  • how you can preserve your wealth in this system,
  • and what you can do to make a difference in our future as a country.

As an opening salvo on this topic, let me share with you some of what I've found in the Bible about money. Though this subject is not a popular one to be taught from pulpits, there are more Bible references to money than any other subject except “love.”

Basic Stewardship
This truth will shed a lot of light on why our country struggles with money and debt. Before we talk about debt, we need to understand money. The scriptures don’t define money, necessarily; they are more concerned with our attitudes toward money. Money is what we make it to be, so it makes sense to first examine attitudes.

The word “mammon” is used to refer to wealth in the bible. It is referred to as unrighteous in Luke 16:9,11 but if used properly can prove your trustworthiness. You are not to let it enslave you, because you cannot serve two masters. God is your master. If you let mammon be your master, you will be led to making decisions to serve that master, and it is opposed to God. (Matthew 6:24 and Luke 16:13). Borrowing makes mammon your master through a lender. In Luke 16:9 we are instructed to make friends by the use of mammon. When we are generous with it, it endears people to us. They become bound to us by gratitude. This use must further God’s purposes, not ours.

Our attitude toward mammon is first to learn to be a good steward of it. It tells us this in 1 Corinthians 4:1-2. This scripture speaks of ministers of the Word, but uses a term applied to those who were entrusted with wealthy estates. As we are entrusted with God’s gifts to us, whether they are skills, knowledge, or money, we are expected to be good stewards (1 Peter 4:10)

It isn’t our money, its God’s money. He has entrusted it to us (Matthew 25:14-30). Other scriptures that illustrate this attitude is Proverbs 11:24 and 19:17. Matthew 6:19-21,24,33 tells us to seek His Kingdom first and to work for heavenly treasures for eternity. Wealth in this life is fleeting and can disappear quickly. You can easily allow the pursuit of wealth in this life to enslave you, especially when you have an appetite for material things and use credit to get them before you can afford them. (1 Timothy 6:18,19) Many of us have done this by purchasing expensive cars or homes, and find ourselves having to put both parents to work to pay the bills. There is nothing wrong with both parents working necessarily, but we still find ourselves stretched thin. I've done this, and I can see how I have let myself become enslaved by the debt I've taken on. However, if we are good stewards God rewards us as you can see in Luke 19:11-27 in the Parable of the Pounds and Matthew 25:14-30 the Parable of the Talents. Also see Matthew 21:33-46 for the Parable of the Wicked Husbandmen and Luke 12:42-48.

It is our attitude toward money that makes a difference. If we have the right attitudes, we make better decisions as to what to do with the money we get, and ultimately end up with more financial security. I see this more clearly now that I have shut a business down, and look back at what went wrong. Proverbs 22:7 tells us that the borrower is a slave to the lender, and that is a principle that holds true in all cases to whatever degree you have in debt. The concept is that we shouldn't have to borrow to reach our objectives. It only seems necessary, as a result of peer pressure in today's society, and we try to rush results. We are sending a message to God that He hasn't provided enough for us, and we need to borrow. That isn't true, He has provided everything we need. We foolishly disagree with God when we borrow. Borrowing was originally a charitable act, for the poor, not a money making enterprise. In the process, we are taking higher risks with what God has given us and it is the banks that make most of the profit in the end. We put ourselves at the mercy of ungodly men who would destroy our lives, while enriching themselves.