Thursday, April 24, 2008

Fight Arbitration Clauses

If you have ever signed a contract where you do not have the power to negotiate (the legal term is "Adhesion Contract"), you may have seen an increasing occurance of arbitration clauses. You are waiving your constitutional right to a fair and impartial hearing when you agree to arbitration. It is supposed to be cheaper than litigation in the court system, but that is not necessarily true. Also, the meetings are private. There is no public record of what occured in those meetings. In our court system, pleadings are recorded, which document the cases made by each side. Without this public record, it is easy for creditcard companies to get away with mistreating cardholders in these hearings. There is indications that this is exactly what is happening.

The Christian Science Monitor looked into this issue and found, "...the 10 most frequently used arbitrators - who decided almost 60 percent of the cases heard - decided in favor of the consumer only 1.6 percent of the time, while arbitrators who decided three or fewer cases decided for the consumer 38 percent of the time."

Do yourself a favor and take a look at the website and learn how to fight back, so that you don't find yourself being taken to the cleaners. If you are already in trouble with one of these contracts, find a consumer attorney.

Wednesday, April 16, 2008

Is The Federal Reserve Bank On Its Way Out?

In an interview, Jim Rogers, CEO of Rogers Holdings, an investment guru, tells an investment newsletter that the Federal Reserve is intentionally debasing the dollar. This means they are printing money with abandon, increasing the money supply and inviting inflation. Historically, when other central banks have done this, the currency becomes worthless. If the currency fails, the Federal Reserve will be a failed institution. This is an inevitable result of a fiat currency and an economy driven by debt.

Watch this interview on CNBC where he elaborates on the problem.

Friday, April 11, 2008

The Credit Score Scam

Most people think having a good credit score is necessary. This is the most successful marketing lie that exists in the financial industry. It only matters if you borrow money. Unfortunatey landlords, insurance companies, and various other companies have started using it as a guide. It is the lazy mans evaluation of a person's creditworthiness. Unfortunately, since there are so many errors on credit reports it has become an unreliable source of evaluating creditworthiness. Getting these errors corrected is a formidable task. While you are correcting them, more errors appear. It is a losing battle.

Despite what most people think, the credit bureaus don't work for consumers, they work for creditors. They will not accept any information from a consumer without undisputable proof, while the creditor just simply needs to make a claim and it is slapped onto your report unverified.

What's more, the scores themselves have now become a way to rip off consumers. There is the FICO Score (considered the standard), and then each credit bureau has their own proprietary score. They have started giving away "free" credit reports, which are little more than bait for subscriptions. The consumer thinks they are purchasing accurate information, when each bureau is likely to have vastly different information, and the score they give looks higher than the actual FICO score. There is a lawsuit in progress attempting to address this.

You even have to be careful about who you get your financial advice from. Suzy Orman is in bed with Fair Isaac and touts the value of a good credit score because she makes money when she does. However, Fair Isaac has recently settled a class action lawsuit against them involving Suzy Orman and her "FICO kit" for claims that they violated the federal Credit Repair Organizations Act and various state laws. They got away with providing "free" 3 to 6 month subscriptions. Ironic, since the FICO score marketing is all about improving your score, yet the scores continue to be fraught with countless errors, helping them continue to sell credit repair for their own mistakes.

The truth is that if you don't borrow money, the FICO score formula gives you a poor rating. In actuality, you are the lowest risk. Lenders who pay attention to what they are underwriting will see this. The score means little in the end with lenders who pay attention who they are lending to. As for the others, the landlords, the insurance companies, and employers. You can simply point out the errors and usually get past this screening. If you don't borrow money and tell them this is your policy, they should think highly of you regardless of the zero FICO score.