New Movie Documentary about Credit Cards

There is a new movie that is probably being sold on video and/or DVD that would be good for anyone interested in this topic to see. the website is www.maxedoutmovie.com There are some interesting clips on the website. If you think credit cards are a necessary financial tool that you can't live without, you definitely need to see this.

Why Credit Card companies are Loan Sharks

I haven't mentioned this in awhile, but I think it is worth mentioning again. If you think you understand what is in your credit card agreement, you are mistaken. There are a wide array of tricky twists and turns in the agreement that many attorneys have difficulty decifering. One such twist is called "Universal Default" which means that when the credit card company periodically checks your credit score, if it drops from the last time, you have defaulted on your agreement and all bets are off. Your premiums are canceled, your interest rate goes sky high, and whatever else they can take away from you is taken because you didn't uphold your side of the agreement. See more about this in a story done by Frontline and PBS called "The Secret History of the Credit Card."

Teenagers Under Attack

Teenagers are targeted by credit card companies. They are being taught to become dependent on having a credit card, and that it is a sign of maturity to have and use a credit card. As a result they learn to live with debt. As I mentioned before Junior Achievement is telling 1st graders that credit cards are money. We are grooming future candidates for bankruptcy.

Credit Card Companies Target The Bankrupt

According to a report from Los Angeles NBC Channel 4, credit card companies are sending credit card offers to those who have filed bankruptcy. This just goes to tshow you that they want to find people who will default. As mentioned in previous posts, they make 75% of their profit from people who default. That is probably why they pull tricks like creep the due dates on accounts so that people who don't pay attention, assume it is due the same time every month and get caught with a late payment. That late payment defaults you on the agreement and your interest rate goes up, you get high late fees, your miles are cancelled, and you lose any premiums you might be getting. This is nothing short of predatory loan sharking. Why is it legal?

If You Are Getting Sued - Know What To Do

You likely will not find an attorney to help you get out of paying a debt - they don't do that. They'll defend you, but the first thing they'll do is negotiate a settlement, even if you don't owe the debt. That is fine, if you can afford to settle. If you can't you will have to defend yourself and force the creditor to prove you owe the debt. In the case of credit cards, they are hard pressed to do this according to strict court procedure, and if it is a collection agency that purchased the debt it is even harder for them to prove. You must use this as your defense, that they must prove their case. A great resource for this is a book titled "Beating Up On Debt Collectors" Click here for the book

There is also a book you might consider called Thou Teacheth My Hand To War

Mental Hurdles that Oppress Your Checkbook

Most of us are fairly ignorant when it comes to making financial decisions. No one is born with the skills. Fortunately educators are responding to this in various states. However, they are letting the fox in the hen house. Here is an example of how the subtle nature of these programs teaches kids to be consumers, not savers. Banks are teaching our kids how to manage money - do you think they are going to teach them that credit cards are to be avoided? Somebody needs to teach our kids not to borrow money.

Is Your Back Against the Wall?

Are you at the point where you have creditors hounding you? Not the original creditors, but its been long enough that your account has gone to collection agencies? And you can't seem to find the resources to pay up? In that case, it may be best to start enforcing your rights as a debtor, and hold them off as long as possible. Here is one of the best resources I've found to do that - better than hiring an attorney (who will be seeking a quick resolution). Cick here for the Book

How to Sell Stuff to Pay Off Debt

What I did to raise money to pay debts was to go through my house and find things I could sell to get the money I needed. Click here for eBay! It is free to sign up, and they have free tutorials on how to list items. If you need to raise money to pay off debts, you need to consider this easy way to turn stuff in your house into money to pay off debts.

Utah Moves Against Consumers

Here is a sign of the times.  Utah passes a new law that bars class action suits against credit card companies.  Are you mad yet?

You Just Gotta Get Mad!

Over the time I have had this blog, I have been ranting and raving about the banks and credit card companies and their abuses of consumers. Well, I think that goes to show that if you are going to see any change in your own finances, you have to recognize the problem, admit it is affecting you, and get mad about how you're being treated as a consumer and vote with your pocketbook.

That is why I stopped using credit cards. I got mad. Since then I have curbed my spending tremendously and my family relationships have improved. I am starting to rule over my money instead of my money ruling over me.

If you are in a bind right now, you need to get mad first, before you do anything. If you aren't motivated, you'll just keep making the same mistakes. One thing you can do to overcome your debt is to start selling things out of your house, stuff you already own. I did this and have raised thousands of dollars to pay down bills. You can do this too. Just consider getting your hands on something to teach you how. You can get a book on eBay for Dummies or something like it or you can get serious by taking some thorough training and do it full time. The link takes you to a guy who made $8 million selling on eBay and is sharing his secrets for doing that. I have been making some good money myself just selling stuff out of my house.

Go here for more on blogging.

Myths about Debt

Bankrate.com has listed 10 myths about bankruptcy.

Speaking of myths, what leads to bankruptcy is believing the myths about debt. So... here is my list of 10 myths about debt.

1. Debt consolidation saves interest, and you have one smaller payment. The truth is debt consolidation is dangerous because you only treat the symptom of a deeper problem - addiction to a lifestyle you can't afford. You also increase the amortization time to pay off the principle and you pay a LOT more interest when all is said and done. If you pay it off early, you paid a much higher interest rate if you paid "points" on the loan.

2. Debt is a tool and should be used to create prosperity. The truth is that debt adds considerable risk to you financial well being, and may not bring prosperity but bankruptcy. It isn't used by wealthy people as much as people think. Forbes magazine lists the "Forbes 400" richest people in America. In a survey of these people, 75% indicated that the best way to build wealth is to pay off all debts and stay out of debt.

3. If I loan money to friends or relatives or cosign on a loan for them, I am helping them. The truth is that loaning money strains the relationship, and can destroy it. The only way around this, if you want to help, is to do an interest free loan and be willing to forgive it if they are unable to pay. When you cosign on a loan, you'd better put it on your balance sheet as if it is your loan and keep room in the budget to make payments, because you may have to start making the payments. Also, it will show up on your credit report and affect your credit score.

4. Cash Advances, Payday loans, Rent-to-own, Title pawning, and Tote-the-note car lots are needed to make credit available to the lower-income people to help them get ahead. The truth is these loans are at interest rates that will send them to bankruptcy faster than anything else. These are predatory lenders designed to make fortunes robbing the poor of basic necessities.

5. Car payments are a way of life, you'll always have one. The truth is we borrow to buy a car because we can't afford the car in the first place. Staying away from car payments and driving a dependable used car is what the average millionaire does. That is probably how they became a millionaire.

6. Leasing a car is what sophisticated people do, because of the tax advantages and the declining value of a car. The truth is if you calculate the real numbers you will find that it is by far the most expensive way to operate a car, including the tax benefit. They also entice you to get more car, since the payments may be lower than on a car loan. You would spend even more.

7. You should get a credit card to build your credit. The truth is a credit card is more dangerous to your credit rating than its worth. Not to mention the agreements are impossible to avoid default in some small technical way that allows the credit card company to siphon off your hard earned money with higher interest and fees. You also can still get a mortgage to buy a home without having used a credit card. You paid rent on time, right? The idea is to minimize debt, not pave the way for more debt.

8. You need a credit card to rent a car, check into a hotel, or buy something on the Internet. Hogwash! The truth is you can do all that with a debit card. These days the merchant doesn't even have to know the difference. For merchants who do take debit cards, you may still find it cheaper to tell them it is a credit card, because the debit card fees are usually higher. However, don't use a credit card because it is debt, and is riskier to your financial well being. A debit card won't get you in debt.

9. A debit card is riskier than a credit card. The truth is VISA has a zero liability policy, you just have to report the fraudulent activity within two business days. If you miss the deadline, you are still only liable for up to $50. Plus, if you want to avoid the hassle of getting a potentially large sum of money back while they "investigate". Simply isolate the debit card to it's own checking account and limit the amount of funds that can be withdrawn. Make sure you write a letter to the bank and keep record of it. Tell them that you want the "overdraft" account they automatically open for you closed. That way any charges that overdraw the account will be rejected, and there is no check bounce fee.

10. If no one used debt, our economy would collapse. In reality it would prosper more than it is. The pain of going cold turkey would be hard to swallow, but would pay off in the long run. This is taught in our schools by economics teachers, which brainwashes our children into believing it is good for them to spend and borrow to keep the economy healthy. That is like saying to a drug addict - "keep taking drugs, so you don't feel the pain of withdrawal". The fact is we are addicted to debt, and breaking an addiction is very painful.

There are so many other myths, I could go on. However, this is my list of 10 debt myths.

Credit Card Minimum Payments Raised

Now that the new bankruptcy law is in effect, if you are hanging on by a thread, and making minimum payments on your credit cards, you are in for another attack from the credit card companies. Minimum payments are being raised, by law. It is kind of a belated Christmas present from Credit Card companies.

Good luck. I hope you aren't stretched that thin.

A Ray of Light

The law firm Milavetz, Gallop & Milavetz P.A. is challenging the constitutionality of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) for allegedly violating the First and Fifth Amendment rights of attorneys and consumers. The declaratory judgment petition challenges BAPCPA’s ability to limit attorneys’ advice to clients and would stop classifying attorneys as “debt relief agencies.” The complaint alleges that the vagueness and overbreadth of the new law creates a chilling effect on the public’s right to receive information and advice from attorneys and limits the freedom of expression of attorneys, among other grounds, according to the firm.

Also, Honorable Lamar W. Davis, Jr., Chief United States Bankruptcy Judge, ruled in the U.S. Bankruptcy Court for the Southern District of Georgia that attorneys regularly admitted to the bar of that court are excused from compliance of the BAPCPA code regulating debt relief agencies.

Whether or not these efforts are successful and stand the test of time is yet to be seen. Our country's constitution is already being trampled on in many other ways, as seen in my other posts. However, the outcome of this could be telling about what the ultimate fate of our constitution may be.

New Law About to Take Effect

The new bankruptcy law is about to take effect on the 17th of this month. This new law is going to make it more difficult to declare bankruptcy with the new "means test" and new filing requirements that will increase the expense both in time and effort as well as attorney's fees. See a report here.

Attorneys are also taking on more potential liability for the accuracy of the information in the filing. More filers will be forced to file via Chapter 13, which requires payments on debts for a number of years before the debts can be discharged. What the filer can afford to pay will be determined by the IRS guidelines of living expenses. These requirements are so stringent that no matter what the filer's future income, he/she will live in poverty for those years with barely enough money for food and shelter in the cheapest conditions. They are so difficult to maintain that I predict that close to 100% of those who file Chapter 13 will default, based on the fact that 70% of filers under the old law defaulted on Chapter 13 filings. When they default they may lose their bankruptcy protection all together, leaving them at the mercy of their creditors who, if they are credit card companies, will enforce interest rates as high as 35%, along with late fees, overlimit fees, and any other fees they decide to come up with. Those who were unfortunate enough to have high credit card balances in the bankruptcy could stand to have that debt perpetually for life, unless they strike it rich somehow and are able to make lump sum payments.

This Includes All The Recent Disaster Victims
What is worse is that these new requirements are going to be enforced on the recent hurricane victims. Legislation has been introduced to give these people a break, but legislators are afraid that would be admitting the law is too harsh. It looks like these people are going to be left out in the cold by their own representatives in Congress. It is unfortunate that our government doesn't understand how much damage this law will do to our country in the long run.

Perpetuation Of Poverty
One of the main causes of poverty in our country is when bad things happen that are out of our control, such as debilitating sickness, bad economic cycles, and increasingly high levels of taxation. It tells us this in the scriptures. Eccl 9:12 People can never predict when hard times might come. Like fish in a net or birds in a snare, people are often caught by sudden tragedy. NLT Unfortunately, this kind of thing includes the corruption of our system of laws and how legislation is passed along with our current banking system. Prov 30:14 There are people who take cruel advantage of the poor and needy; that is the way they make their living. TEV

So how do you avoid getting caught in the drain? Prepare for the worst. As unrealistic as it may seem, the only way to be sure that some calamity won't catch you off guard is to save LOTS of money, put it in a safe place, and hold it in a form of value that won't be destroyed if the dollar becomes worthless. Also, pay off ALL debt, including your mortgage, especially your mortgage. Live on far less than you make - I suggest 50% of your after tax income - based on Elizabeth Warren's recommendations in her book "All Your Worth." And last, but most important, put your trust in God. If you are a good steward of what you have, and you live a life that is generous to the poor, you will have many good friends who will become your true wealth in hard times. Prov 19:17 If you help the poor, you are lending to the LORD — and he will repay you! NLT

Alternative to the Credit Card

I posted this before, but it has become difficult to find in the archives. Since I have recommended this to many people, here it is again.

People tell me that credit cards are necessary in today's economy, for the convenience of payment. That is why many people never carry balances. These people are considered "deadbeats" by the credit card industry. Why? Because they don't provide profits to the credit card company. Banks and credit card companies make over 75% of their profits on fees. See commentary on the Business Week (Registration required) article from the May 2, 2005 issue. The article is titled "Protection Racket?". When you understand this, you understand why they specifically target people who are likely to trigger these fees.

My suggestion these days is to cut up your credit card and start using a debit card. Now, before you go out and do this, there are some things you need to be aware of. First, banks are often setting up "overdraft" protection accounts without your knowledge. If you accidently overdraw your account, they will pay the demand, and then tap into your overdraft account. You get charged exorbitant fees for it, plus interest in some cases. You must request that the bank close this overdraft account, and bounce any demands beyond your balance. You still get overdraft fees, but you protect yourself being held liable for unathorized demands on your account. If your bank won't do this, go somewhere else. My credit union did it, no problem. Second, set up a checking account specifically for the debit card, and keep only the money you intend to use with the debit card. Treat your card like cash in your wallet. That way you can block significant unathorized charges. Just remember. NEVER use a debit card on your primary checking account, because a problem from losing your card could wipe your account out, and bounce all your payments on household bills if a thief got their hands on your debit card.

Banking regulations recently changed to allow your ATM/Debit card to be used like a credit card. These are the VISA CHECK CARD and the MASTERMONEY CARD. In other words, the merchant can't tell the difference. So if you are worried that a debit card won't be accepted by the hotel you are traveling to, don't worry anymore. This is a good thing because it means you don't need the credit card to get the payment convenience. You also get fraud protection, though you have to be more careful about monitoring your account. See a PIRG article for more information on protecting yourself. Credit card companies don't want you to know this because you won't need their card anymore.

I am still looking for other "gotcha" clauses in the account agreements, I'm sure they are there, but it is still better than a credit card from what I can tell. I say that because I have learned about sneaky credit card policies the hard way. At least with this kind of debit card arrangement, you can put a lid on potential charges against your account.

OCC Responds

I finally got a response from the OCC on my complaint about MBNA. If you remember, it was about reviewing the contract before applying for an account. Apparently banks and credit cards don't have to tell you what you are promising them until you are obligated.

Here is the text of the letter:
“The Office of the Comptroller of the Currency (OCC) is responding to your letter regarding the above-mentioned bank. The focus of the OCC’s review of consumer complaints against national banks is to determine whether the bank’s actions are consistent with banking statutes, regulations or any policies that are applicable to nationally chartered banking institutions.

In your correspondence with this agency, you expressed your concern regarding the delivery of the card agreement for a credit card account. You feel the card agreement should be provided before the application is completed, instead of after the application has been completed.

The OCC contacted the bank, which responded to us regarding your concerns. The bank contacted you by phone to discuss your concerns. The bank advised you that the card agreement is specific to the approved application and is mailed to the consumer with the credit card. The bank confirmed that all rates, fees, and other costs and provisions are disclosed in the card agreement.

Regulation Z, the Truth In Lending Act, does not require the bank to provide the disclosures prior to the application process. However, the act does require that the bank disclose the terms, fees, and charges associated with the account once established.

The Customer Assistance Group’s consumer complaint process is a service that is provided to customers of national banks. Information provided within this letter is specifically related to an individual consumer complaint and should not be construed as either a legal opinion of the OCC or a supervisory action. If you are not satisfied with the resolution of your complaint, you may wish to consult legal counsel so as to preserve your rights.”

This letter was dated August 9, 2005. I had previously written Dianne Feinstein about my complaint and that I hadn't received a response. Her letter to me was dated July 18, 2005.

“Thank you for contacting me to express your concerns about MBNA and the Truth In Lending Act (TILA). I appreciate the time you took to write and welcome the opportunity to respond.

Like you, I am very concerned that some credit card companies are using deceptive tactics that push consumers into debt. This is especially relevant with regard to solicitations and I cannot stress enough how critical it is for credit card companies to abide by existing regulations like the TILA and the Federal Reserve Board’s Regulation Z. As you know, these safeguards are in place to ensure the “clear and conspicuous” disclosure of certain terms of credit card agreements – including annual percentage rates (APR) – in solicitations to open a credit card account. Furthermore, I find misleading tactics particularly troubling because credit card solicitations are growing fastest among consumers with the lowest incomes.

Research done by my staff shows that many credit card issuers fail to screen their clients, thus credit cards are being offered to people who are unable to afford them. In addition, inadequate information is provided to new users of credit cards on how to manage their credit. In part for these reasons, I have introduced the Credit Card Minimum Payment Notification Act (S.1040). My bill would require creditors to disclose the amount of time and amount of money that it would take to pay off a credit card balance if only the minimum payment is made. I believe the consumer has the right to know the long term impacts and details of their credit card debt.

Again, thank you for your letter. Please know that my staff will follow this issue closely and I will be sure to keep your concerns in mind should legislation related to credit card payments come to the Senate floor.”

While I applaud her efforts. I still think it is too little. All I am asking for is to see a contract before I sign it. It seems banks and credit card companies aren't required to treat people fairly. The Truth In Lending Act (TILA) and Regulation Z are simply regulations that protect banks more than they protect consumers. TILA is a substitute for a contract, and credit card companies bait and switch by sending you a new agreement in the mail, after you have given them your private information and added an account to your credit report. You have also waived constitutional rights and given the credit card company the ability to put you into financial slavery with the flick of a pen - but you don't know that because you don't understand your agreement, nor have you even read it.

The Fed is Considering Credit Controls

In a recent blog post, I saw that the Federal Reserve Board is considering a response to credit card holder complaints. It is the first time since 1980.

It is about time that the Federal Reserve Board does something. When we apply for a credit card, we are required to disclose a lot of personal and private information. That information is kept in the bank's database and used for marketing and other purposes. We are not compensated for that disclosure because it is simply provided on an account application. Banks and credit card companies have little regard for privacy, especially after the recent Financial Services Modernization Act was passed. This law essentially dismantled the protections put in place by the Glass-Steagal Act of 1933 that prevented banks from doing both wholesale and retail banking. Now that the likes of Citibank have become financial conglomerates, in every area of financial services, privacy no longer exists as this information is shared across all areas of bank operations. Instead of this leading to lower costs that are passed on to consumers, prices for financial services have gone up in financial and legal terms.

Signing Unseen Contracts
Consumers are signing contracts that don't disclose their content until after the contract is made. The industry is using the disclosure laws as a substitute for the actual contract. There is simply one line in the disclosure that defers to a yet unseen agreement, that you are agreeing to with your application. You are not allowed to see the contract until it comes in the mail with your credit card. This would be considered dishonest in every other industry. It is simply wrong to sign a contract you haven't seen, yet we are expected to "take personal responsibility" for what we agreed to. What is worse, those contracts are so carefully crafted that it is difficult for even an attorney to completely assess the implications of the agreement. I hope the Fed puts a stop to this practice.

Illusory Contract
Black's Law Dictionary defines an illusory contract as "An agreement in which one party gives as consideration a promise that is so insubstantial as to impose no obligation. The insubstantial promise renders that contract unenforceable." I would make the argument that credit card agreements qualify under that definition. The agreements are virtually unenforceable by the consumer and the credit card company can change the terms at any time to their benefit. It is especially illusory now that "mandatory arbitration" clauses have been added. It is a well known fact that these arbitration arrangements are giving lopsided justice, and keeping credit card abuses private, as arbitration proceedings are kept out of the public record. This type of clause included in an Adhesion contract, which credit card agreements also qualify, should make the clause unenforceable, but consumers have little power to fight the force of highly paid credit card company attorneys. It is a waiving of a constitutional right, and should not be taken so lightly as it is slipped in under the radar of credit card holders and considered applicable to retroactive purchases. I hope the Fed puts a stop to this.

Consumer Abuses
The media has documented abuses quite well. These abuses are made legal by the careful crafting of deceptive and unfair credit card agreements that are slipped into envelopes with the credit card as it is issued, taking advantage of human nature. There is clearly intent to decieve. Credit card companies treat their customers as if they are simply objects in which they extract money. If they don't comply, and submit to abuse, they are punished using the credit reporting bureaus. Even when they try to comply, the credit bureaus are used as a means of extracting more money. We have been programmed to believe credit cards are a necessary form of payment, and that we have little choice but to sign their agreements. If these abuses do not stop, things will only get worse. It is killing the financial health of our country, and will eventually cause us to lose our position of strength in the world. I hope the Fed does something to stop this.

Irresponsible Lending

If you would like to see a report that shows poor stewardship go here. It seems like there should be a law against binding minors into contracts, especially without their parent's knowledge. Can somebody get mad about this and organize to stop it? It seems a bill in congress that addressed this failed to pass. I guess this just goes to show how corrupt our leadership has become.

Using What You Have

One day we will all stand before God and give an account for what we did with what He gave us. Romans 14:12 and 2 Corinthians 5:10 make it clear. In Matthew 25:14-30, Jesus tells a parable that illustrates what He expects us to do with what He gives us. This parable is referred to as the Parable of the Talents. Talents in biblical times were actually money. Today the word is used to describe our abilities. Both meanings are revelant, because both represent wealth.

The first thing to notice is that what we had during our life was really loaned to us for a short time while we were on earth. In verse 14 he is telling us that God entrusts certain "property" to us to use for Him. We are stewards for what He has given us. We often think we own what we have, but we really only have it on loan. He has given us gifts (Ephesians 4:8).

In verse 15, we see that He is giving us these "talents" according to what we can handle. We all have different gifts according to the grace He has given us (Romans 12:6). If He didn't do it this way He would cause us trouble. This also means that if we are envious of what others have, we are not appreciative of what He has given us, and we are ignorant of the trouble we would have if we were given those things.

In verses 16-19 and the Master's response to the 3rd man in the parable in verse 26,27, it is evident what He expects from us. If we did not have enough trust in God to do something besides keep His gifts safe, we are lazy and wicked. God expects us to try even if we are going to fail. If we are doing His will, He will bless our efforts. So we need to deal with our fears and move forward. In verse 25 we see that the 3rd man was afraid to lose the talent he was given, and buried it. Don't bury what God has given you, and don't squander it. Use it for what the real owner would want done with it. Remember, you are just the steward.

In verse 28, the Master gave the one talent from the 3rd man and gave it to the one who had the most, because he had made the most with what God gave him. We are expected to do God's will with what we have. If we do well, we will get more. This is evident by the statement in verse 23 of the parable.

So God does expect us to be productive with what we have. If we pass the money test, He will give us more. As long as we are good stewards of it. If we use it to oppress others, or otherwise misuse it, it will eventually be taken away. If we do foolish things like spend it on selfish things, and borrow more money to get bigger and better things, we will lose it quickly. God's will for our use of money is found in 1 Timothy 6:17-19. We are to be willing to help others with it. In Matthew 6:21, we see the principle where looking at how you use your money, reveals what you love. If you are storing it up, and have much wealth, that you'll never use, you are materialistic and put your trust in money. If you use your excess wealth to help others, you are probably being a better steward for God's wealth. The same goes with your talents, they are wealth as well. A good book on stewardship, for further study is God & Your Stuff

Who's Fault is it?

I encountered an interesting blog post on placing blame for the bankruptcy problem in our society today. There are some good comments. See it here.