I've Been Mugged

7 Tips To Avoid A Rejected Credit Card During Vacation Travel

Today, banks are more vigilant than ever about spotting potential fraud. One way banks spot potential fraud includes charges outside of the cardholder's normal usage pattern -- the area where you live, work, and use your credit card. Often, when consumers go on vacation you intentionally travel outside of your area. Nobody wants a credit card purchase denied while traveling, especially when you don't have the cash with you.

So, what can consumers do to avoid having your credit card denied while shopping during vacation? Banks and credit card issuers advise consumers to:

1. Understand where your credit card is accepted outside of the United States. You can visit the customer service section of your bank's or credit card issuer's website. For example: the Help Center in the Discover site lists the regions where that credit card is accepted, including an international Country Acceptance Map. This is also helpful to understand any exchange rates used, and/or any fees or surcharges that might apply for purchases in different currencies. The Visa Travel Preparation Page provides similar information for cardholders traveling internationally.

2. Decide which credit cards you will bring. You may decided to leave at home the credit cards with high foreign transaction fees, don't offer purchase protection insurance, doesn't offer frequent-flyer mileage, and/or aren't accepted in the countries which you will visit. Experts advise consumers to bring at least two credit cards, and use one as a back-up in case your primary card doesn't work.

3. Notify your bank or credit card issuer of your upcoming travel, and the specific locatons where you will use your credit card. For example, Capital One directs its Visa cardholders to call its Customer Service department (1-800-955-7070) before their trip to provide the following information:

• Credit card number
• Travel destination(s): states and/or countries
• Travel start and stop dates
• Which cardholders will be traveling (if multiple people have accounts)

In Capital One's automated voice system, cardholders speak to enter and select voice prompt options. Say "More Options" and then "Report Upcoming Travel" to access the relevant option. Then, you can enter all of the necessary information, or you can speak with a human representative.

Obviously, if your vacation travel itinerary includes several cities and/or countries, you will want to have all of that information ready. When you contact your bank or credit card issuer, they will provide an international customer service phone number you can call while traveling outside the United States, should you have any problems. Last month before my vacation, I used Capital One's automated voice system. My travel itinerary included about six countries, and I found the system pretty easy to use to enter the necessary information.

4. Watch out for PINs. In some regions, automated kiosks require credit cards with smart chips. If your credit card doesn't have this new technology, it may not work.

5. If you want to use your debit card instead, first contact your bank, credit union, or card issuer to report your travel itinerary. Visit their website to find their office and ATM locations in the states or countries you will visit, any other banks they have partnerships with, any fees (e.g., conversion, foreign transaction) that apply, and any PIN number limitations (e.g., fewer digits). Generally, in-network ATM machines have lower fees than out-of-network ATM machines.

Experts advise consumers to keep sufficient cash with you for smaller purchases. The fewer times you use your debit card, the less you expose it to identity theft and fraud risks. If you read this blog regularly, then you already know that I use my debit card only at my bank's ATM machines. To me, it is too risky to use a debit card in a local retail store or gas station, especially in another country. There is no way to know if the card entry pads (or gas station pumps) has been compromised with skimming devices.

6. If you want to use a prepaid card instead, CardHub advises consumers:

"As long as your prepaid card bears the MasterCard or Visa logo and you notify your issuer of your travel plans, you should be able to use it abroad...”

Wise consumers will still check with their card issuer to get a copy of their prepaid card agreement, to find ATM locations in the states or countries you will visit, any other banks they have partnerships with, and any fees (e.g., conversion, foreign transaction) that apply. Again, in-network ATM machines generally have lower/fewer fees than out-of-network ATM machines. Compare the fees for your prepaid card against fees for your credit/debit cards. Understand your rights, protections, and the differences between credi, debit, and prepaid cards. If decided to use a prepaid card, make sure you load enough money onto it before you leave for your trip.

If you are unsure about whether prepaid cards are for you or not, there are plenty of online resources to help you decide. You can learn more by browsing the Prepaid Cards section of this blog. The posts in this blog section contain plenty of links to external sites and resources.

7. Check for foreign travel advisories. These may suggest additional precautions you should take in the countries you will visit.

Having done all of this, you can then travel with peace of mind.

Visa Survey Claims Consumers Lose $1 A Day In Cash

While surfing the web recently, I ran across a news item at Talking Payments, a website for people and companies (e.g., banks, retailers, card issuers, payment processors, etc.) interested in digital payments. The TP news item mentioned a study by Visa that consumers lose, on average, about $1.00 a day.

To learn more about the Visa study, I next visited the Visa Viewpoints website. The August 2012 survey included 5,641 people in Australia, India, Indonesia, Japan, Russia, Singapore, South Africa, South Korea, Taiwan, Thailand, the UAE, and the USA. View the infographic about the study (Adobe PDF). The survey tries to document the "cost" to consumers of using cash by adding cash lost plus idle cash. Some findings:

• In the US: $365 lost cash = $285 in lost foreign currencies after trips + $80 in idle cash lying around your home, office and/or car.
• In the US: men ($331) lose more than women ($245). And, younger people ($165) lose more than older people ($135).
• Lost cash varies across countries: Singapore ($656), Australia ($361), Japan ($349), and Russia ($137)

At first read, this seems very interesting. The implication of this study is that consumers who use payment cards (e.g., credit, debit, or prepaid) won't lose cash daily. Losing $1.00 a day in cash equals about $30 a month, or $365 a year.

Do you lose $1.00 a day in cash? I don't. I know this as I check the cash in my pocket at the end of the day -- everyday. When I receive change in the form of bills, I place that change in my wallet immediately. And, I don't consider idle cash as "lost." Maybe you do, but I don't. So, I am wondering exactly what consumers really lose $1.00 a day cash, and if people really lose that much cash daily.

One of the footnotes in the Visa inforgraphic reads:

"2. Foreign currencies given as tips given away in airports and/or misplaced."

What? So, a portion of the supposedly lost foreign currencies includes tips. I don't consider tips as lost money. When traveling, I tip bellhops, taxi drivers, and others who help me with my luggage. That's not lost money, That is paying for services received. Sometimes, I have foreign currencies left over from a trip, but that amount is nowhere near $285. It's under $5.

What's really going on here?

In my view, several things. First, banks really want to capture usage from consumers who don't have traditional bank accounts, or have only one account (e.g., checking or savings). Second, banks really want consumers to migrate to prepaid cards where there are fewer regulations for them; which means fewer or weaker consumer protections and consumer rights. That includes banks working with employers to provide payroll cards and banking services via prepaid cards, and/or health care spending accounts via prepaid cards. To learn more, read the list of prepaid card fees in this blog post, the payroll cards from Bank of America, and the Walmart MoneyCard.

To me, the study methodology compiled numbers in a way to inflate the amounts lost to justify these business goals.

Third, even if you lose as much as $1.00 a day in cash, a fair comparison is to consider the fees associated with prepaid cards, and if those those fees are greater than the cash you really lose. CNN Money found that basic prepaid card fees are about an average of $300 per year. That is almost as much as the supposed cash lost by consumers in the US, Australia, and Japan. Those average prepaid fees exceed the cash lost by consumers in several countries.

Both CNN Money and Consumer Reports found a wide variety of fees when it investigated prepaid cards: activation fees, monthly fees, reload fees, cash withdrawal fees, inactivity fees, online payment fees, paper statement fees, customer service phone call fees, and more.

What do you think of the Visa lost cash study?

Consumers Advised To Be Wary Of Prepaid Card Protections

If you haven't read it, there is an article by Sheila Blair in USA Today. Blair is a chairwoman at the FDIC and also a senior adviser to the Pew Charitable Trusts. If you use a prepaid card, then this article is a must-read. If you are considering a prepaid card instead of a traditional bank account (e.g., checking and savings), then this article is a must read.

In her article, Blair explores the relationship between banks, prepaid cards, and FDIC insurance protection for consumers:

"Banks sometimes fail... because of insurance provided by the Federal Deposit Insurance Corporation (FDIC). When a bank fails today, its insured depositors never lose a dime. By design, the failing bank is usually taken over by another bank... In fact, nearly 500 banks failed during the financial crisis and its aftermath, and every single depositor had access to their insured money within one business day... But this seamless protection for insured depositors can be avoided by companies that offer "reloadable" prepaid cards, a rapidly growing product that many Americans use instead of conventional checking accounts..."

So, don't get "mugged" by your bank's prepaid card. Ask your prepaid card provider for a copy of the complete terms and conditions agreement for your prepaid card. To learn more, read the Prepaid Cards section of this blog.

The CFPB Accepts Complaints From Consumers About Money Transfers

If you are like most people these days, your transfer or "wire" money to people or companies. It's a fast, easy way to send money to somebody in another state or country.

Sometimes, consumers encounter problems when transferring money. The company involved performing the transfer may have made a mistake, and/or does not respond to fix the problem. Or, the resolution may be unsatisfactory. There is a new resource for consumers to help you get problems like these resolved: submit a complaint to the Consumer Financial Protection Bureau (CFPB).

The types of money transfer problmes the CFPB can help with:

• Money was not available when promised
• Wrong amount was charged or received (e.g., transfer amounts, fees, exchange rates, taxes, etc.)
• Incorrect or missing disclosures or information
• Other transaction issues (Unauthorized transaction, cancellation, refund, etc.)
• Other service issues (Advertising or marketing, pricing, privacy, etc.)
• Fraud or scams

This includes both domestic and international money transfers. When you send money electronically to people in other countries, these are called remittance transfers. Consumers can transfer money using banks or certain financial companies the industry calls "non-depository companies" or money transmitters.

By law, companies in the USA are required to provide consumers with a disclosure document (in English) before you pay for your remittance transfer. The disclosure document should include the exchange rate, applicable fees and taxes, and the amount of money to be delivered.There are additional protections for consumers:

"1. Consumers get 30 minutes (and sometimes more) to cancel a transfer. Consumers can get their money back if they cancel.

2. Companies must investigate if a consumer reports a problem with a transfer. For certain errors, consumers can get a refund or have the transfer re-sent without charge if the money did not arrive as promised.

3. Companies that provide remittance transfers are responsible for mistakes made by certain people who work for them.

4. The rules also contains specific provisions applicable to transfers that consumers schedule in advance and for transfers that are scheduled to recur on a regular basis."

All of these protections for consumers apply to remittance transfers that are more than $15. Learn more or submit a complaint to the CFPB about an unresolved problem you had with a financial product and service.

The CFPB Consumer Complaints Database Does What It Was Designed To Do

In March 2012, the Consumer Financial Protection Bureau (CFPB) began accepting complaints from consumers about bank accounts, including checking, savings, CDs, and related financial products and services. Consumers were able to submit complaints about poor customer service experiences with banks and financial institutions.

Later during 2012, the CFPB began accepting complaints about student loans, credit cards, and credit reporting. In April 2013, the CFPB began accepting complaints about money transfers. In March 2013, the CFPB expanded the database to include mortgage complaints received since December 1, 2011. This expansion also included the addition of complaints about bank accounts private student loans, and other consumer loans received since March 1, 2012.

In March 2013, the CFPB went live with its Consumer Complaints Database. Some facts about it:

• Contains complaints submitted by more than 90,000 consumers
• Includes 450 companies
• Total complaints received - 131,500
• Complaints cover bank accounts, mortgages, student loans, credit cards, and related consumer loans
• Complaints about credit reporting (e.g., credit reports, credit reporting agencies) will be added later
• 48% of complaints were submited through the CFPB website
• 9% of complaints were submitted bia telephone
• 32% of complaints were received from other rgulators and agencies
• At February 28, 2013, the CFPB sent 109,200 complaints (83%) to companies for review and response. Companies have already responded to 104,100 (95%) of those complaints sent

A typical complaint includes:

"... he type of complaint, the date of submission, the consumer’s ZIP code, and the company that the complaint concerns. The database also includes information about the actions taken on a complaint by those companies – whether the company’s response was timely, how the company responded, and whether the consumer disputed the company’s response. A consumer’s identity and other personal information is not included in the data."

So, similar to reports provided the BBB, the CFPB also tracks the status of complaint resolutionl. The CFPB goes further and includes resolution amounts.

In its summary report, the CFPB listed complaints by financial product type:

The CFPB has received 30,600 credit card complaints. The analysis of credit card complaints received by type:

Credit Card Complaint Type	%
Billing Disputes	15%
Annual Percentage Rate (APR) or interest rate	10%
Identity Theft, Fraud, Embezzlement	8%
Credit Reporting	7%
Closing, Cancel Account	6%
Other	6%
Collection Practices	5%
Late Fee	4%
Credit Card Protection, Debt Protection	4%
Collection Debt Dispute	4%
Total: top 10 credit card complaint types	69%

Of the 30,600 credit card complaints received, the CFPB has forwarded 27,700 (84%) to financial institutions for review and response, and forwarded 10% to other regulatory agencies. 5% of credit card complaints are considered incomplete, and 1% are pending. Companies have already responded to 24,800 (96%) of the complaints forwarded. The CFPB also reported:

"Since December 2011, companies have also had the option of reporting the amount of monetary relief, if any. The median amount of relief reported was approximately $125 with $25 being the most common amount of relief for the approximately 5,300 credit card complaints where companies reported relief. Consumers have disputed approximately 4,200 company responses (18%) to credit card complaints."

The types of mortgage complaints received by the CFPB:

The types of bank account and service complaints received by the CFPB:

The types of student loan complaints received by the CFPB:

The types of consumer loan complaints received by the CFPB:

The types of credit reporting complaints received by the CFPB:

Also, BusinessWeek summed it up quite nicely the impacts of the CFPB Consumer Complaints Database upon responses by financial companies:

"Response times have sped up by 3& percent since the database came online... Steven Ramirez, CEO of data-mining consultancy Beyond the Arc, says his financial industry clients are asking him to find patterns in the CFPB data that show where they’re lagging."

Transparency and information are critical to a healthy, functioning marketplace. It helps everyone: both consumers and financial companies. It helpfs financial institutions improve their customer service, which can lower their costs by reducing account turnover and by retaining customers they'd otherwise lose.

With more information, consumers can make better informed decisions about the products and services they purchase. I like that there is now another option for consumers, besides filing a lawsuit or doing nothing. Consumers can now log complaints which the CFPB forwards to banks and financial institutions for review and resolution.

No business is ever too big to avoid responding to customer complaints. To use a sports analogy: while the playing field is still far from being level, the CFPB Consumer Complaints Database removes a lot of the tilt in the field.

Thanks to the CFPB and its staff for all of their excellent, hard work. Learn more about the CFPB Consumer Complaints Database.

Survey: Consumer Usage And Perceptions About Mobile Banking

Late last month, the Federal Reserve Board (FRB) released the results of its latest survey of mobile usage by consumers for online banking. Key findings:

• 87% of the U.S. adult population has mobile phones
• 52% of mobile phones are smartphones (Internet-enabled)
• 87% of smartphone users accessed their devices to access the Internet during the past week
• 28% of all mobile phone owners used their devices for mobile banking during the past 12 months, up from 21% in December 2011
• 48% of smartphone owners used their devices for mobile banking during the past 12 months, up from 42% in December 2011
• 10% of mobile phone users who don't perform mobile banking expect to do so within the next 12 months

The specific mobile banking tasks consumers said they perform:

• 87% check account balances
• 53% transferr money between accounts
• 21% deposit checks
• 24% of smartphone users made mobile payments during the past 12 months,
• 42% made an online bill payment, down from 47% in 2011
• 6% of smartphone users made a retail point-of-sale payment during the past 12 months, up from 1% in December 2011. 22% want to use their mobile devices for retail purchases

Perceptions about the technology:

• 54% of mobile phone users said the primary reason they do not use their device for mobile banking is that their banking needs were already being met without the use of mobile banking. This is down from 58% in 2011
• 38% said concerns about the security were the primary reason for not us mobile banking. This is down from 42% in 2011
• 49% said security was the second most common reason given for not using mobile banking. This is up from 48% in 2011
• More than a third of mobile phone users who do not use mobile payments don’t see any benefit
  from doing so, and find it easier to pay with another methods (e.g., cash, credit, debit, prepaid)

Other tasks respondents said they use their smartphones for:

• 42% comparison shop while in retail stores
• 32% scan a product’s barcode to find the best price for the item
• 64% percent of those who comparison shop have changed where they purchased the product based on the information found
• 44% browse product reviews or get product information while shopping at a retail store
• 70% of those who browse product reviews have changed the item purchased based on the information found
• 64% of mobile banking users checked their account balance before making a large purchase
  in the past 12 months. About half of them did not purchase an item as a result of their account balance or credit limit

Who uses mobile phones:

• 10% are unbanked (neither they nor their spouse have a checking, savings, or money market account)
• 10% are underbanked (have a bank account, but also use a payroll card, payday lender, check cashier, or auto title loan)
• 59% of the unbanked have access to a mobile phone, half of which are smartphones
• 90% of the underbanked have access to a mobile phone, 56% of which are smartphones
• 49% of the underbanked said they used mobile banking during the past 12 months

The terms "unbanked" and "underbanked" are labels used within the banking industry. The FRB defines mobile banking as using a mobile phone to access a bank account, credit card account, or other financial bank account. So, mobile banking includes using the mobile phone's web browse, text messaging, or application features.

The reasons unbanked consumers gave for why they don't have a checking, savings, or money market account:

How consumers said they use the money from payday loans:

The reasons consumers said for why they don't use mobile banking services:

The reasons consumers said for why they don't use mobile payments:

Consumers' perceptions of the security of mobile phones and mobile banking:

Regarding mobile payments, the report found:

"Despite the increasing availability of phones equipped with near field communication (NFC) chips for use with NFC-based payment services, retailers and consumers appear to be trending toward adoption of non-NFC-based payment services. Indeed, consumers making mobile payments were nearly twice as likely to have used a mobile app or barcode to make their payment as to have made a payment by waving or tapping their phone."

How consumers with checking, savings, or money market accounts do their banking:

• 85% of banked consumers said they had visited a branch and spoke with a teller in the past 12 months
• 74% said they used an ATM machine
• 74% said they used online banking
• 34% said they used telephone banking
• 29% said they used mobile banking

The report's authors concluded:

"The two factors limiting consumer adoption of mobile banking and payments are concerns about the security of the technology and a sense that they don’t offer any real benefits to the user over existing methods for banking or making payments. With regards to security, consumers have actually become more likely in the past year to report that they simply don’t know how safe it is to use mobile banking, suggesting that consumers need to be provided with reliable and accurate information on the level of security associated with the various means of accessing mobile banking. In terms of the value proposition to consumers, the significant number of mobile users who reported an interest in using their phones to receive discounts, coupons, and promotions or to track rewards and loyalty points suggests that tying these services to a mobile payment service would increase the attractiveness of mobile phones as a means of payment."

The FRB's Consumer Research Section sponsored the survey and developed the report. GfK (formerly Knowledge Networks), an online consumer research firm. administered the survey from November 16 to 27, 2012. Nearly 2,600 respondents ages 18 or older completed the survey. The FRB conducted its first mobile survey in December, 2011.

Download the FBR "March 2013 - Survey of Consumers' Use of Mobile Financial Services" report (Adobe PDF, 941 kbytes).

The Companies Involved In Payment Transactions When Consumers Buy Items

When consumers pay for products and services, today they have a wide variety of options. To make these options work, a variety of companies are involved behind the scenes in the payment transactions: the companies money and information flow through after a consumer purchases something at the checkout register. Consumers may not realize the wide variety of different companies involved.

Companies involved in the payment transactions flow often have their onw privacy policy, and data collection of consumers' sensitive information -- driven by their agreement with the retailer or bank. And, each company involved may experience data breaches where consumers' sensitive information is exposed or stolen:

	Payment Method
Company Type	Cash	Credit Card	Debit Card	Retailer's Prepaid Card (1)	Bank Prepaid Card (2)	Prepaid Card: FSA (3)	Smart Phone
Brick-&-mortar retail store	No	Yes	Yes	Yes	Yes	Yes	Yes
Online retail website	n/a	Yes	Yes	Yes	Yes	Yes	n/a
Retailer's partners &/or affiliates (4)	n/a	Yes	Yes	Yes	Yes	Yes	Yes
Your bank	n/a	Yes	Yes	n/a	Yes	Yes	Yes
Retailer's bank	n/a	Yes	Yes	Yes	Yes	Yes	Yes
Payments Processor (5)	No	Yes	Yes	Yes	Yes (6)	Yes	Yes
Your Employer	n/a	n/a	n/a	n/a	Yes	Yes	Yes
Healthcare Vendor (7)	n/a	n/a	n/a	n/a	No	Yes	n/a
Wireless Provider	n/a	n/a	n/a	n/a	n/a	n/a	Yes
Mobile Device Manufacturer	n/a	n/a	n/a	n/a	n/a	n/a	Yes
Mobile Device Operating System Developer (8)	n/a	n/a	n/a	n/a	n/a	n/a	Yes
Mobile App Developer (8)	n/a	n/a	n/a	n/a	n/a	n/a	Yes
App Store	n/a	n/a	n/a	n/a	n/a	n/a	Yes

Footnotes:

1. Includes gift cards offered by retailers that are good only at that retailer's stores.
2. Includes general-purpose prepaid cards usually offered by banks
3. Includes prepaid cards used by employers to adminster healthcare Flexible Spending Accounts
4. Includes outsourced vendors that administer a retailer's email marketing programs, cloud-based storage services, customer relationship management databases, mobile marketing services, product fulfillment, and/or data mining services; plus companies that perform co-marketing campaigns
5. The bank and/or company that processes the debit/credit card transactions
6. Applies to employers that pay employees via a payroll debit cards
7. Some employers outsource the administration of their healthcare Flexible Spending Account (FSA) program to an external vendor, and issue participating employees a special prepaid card
8. The company that develops and maintains this software mobile devices

What do you think about the above chart?

Most Trusted Companies For Privacy Study

Recently, the Ponemon Institute released the results of its annual study of the companies consumers trust the most to maintain their privacy. The study asked consumers to name and rate the companies they trust the most to protect their personal information. Key findings from the study:

"New entrants to this year’s top 20 most trusted list includes: Microsoft (ranked 17), United Healthcare (ranked 18) and Mozilla (ranked 20). Healthcare, consumer products, and banking are the industry segments considered by consumers to be the most trusted for privacy (among 25 industry categories). In contrast, Internet and social media, non-profits (charities) and toys are viewed as the least trusted for privacy."

The only government organization in the top 20 is the U.S. Postal Service (#5). Some noteworthy findings about consumers' habits:

"78% of respondents continue to perceive privacy and the protection of their personal information as very important or important to the overall trust equation... 63% of respondents admit to sharing their sensitive personal information with an organization they did not know or trust... 59% percent of respondents believe their privacy rights are diminished or undermined by disruptive technologies such as social media, smart mobile devices and geo-tracking tools. 55% say their privacy has been diminished by virtue of perceived government intrusions."

These findings should be a wake-up call to companies operating within the Internet industries, namely app developers and social networking website operators. About data breaches:

"49% of respondents recall receiving one or more data breach notifications in the past 24 months. 70% of these individuals said this notification caused a loss of trust in the privacy practices of the organization reporting the incident."

About consumers' expectations of data security (bold emphasis added):

"73% of respondents believe the substantial security protections over their personal information is the most important privacy feature to advancing a trusted relationship with business or government organizations. Other important privacy features include: no data sharing without consent (59%), the ability to be forgotten (56%) and the option to revoke consent (55%)."

Companies and their lobbyists would be wise to comply with these findings about important privacy features. Some troubling findings from the Ponemon study:

"Only 35% of respondents believe they have control over their personal information and this result has steadily trended downward over seven years. Less than one-third (32%) of respondents admit they do not rely on privacy policies or trust seal programs when judging the privacy practices of organizations they deal with. When asked why, 60 percent believe these policies are too long or contain too much legalese."

Study respondents said that the most significant threats to their privacy were:

• 61% - Identity theft
• 56% - government surveillance
• 42% - notice of data breaches
• 40% - violations of civil liberties
• 36% - annoying background chatter
• 32% - spam
• 30% - employer intrusions
• 28% - stalking
• 23% - annoying advertising
• 19% - children abuses

Ponemon has conducted this study for the past seven years, and noted that the importance of privacy by respondents has increased during this time. The study, conducted during October through December 2012, included responses from 6,704 adults in the United States. About 217 companies were named by respondents from 25 industries. 47% of respondents were male. The average age of all respondents was 34.6 years, with an average income of $55,900. The study defined "personal information" as:

"Information about yourself and your family. This information includes name, address, telephone numbers, e-mail address, Social Security number, other personal identification numbers, access codes, age, gender, income and tax information, purchases, website preferences, health information, account activity and many other pieces of data about you and your household."

Maybe the next study will include photographs, video, and other items posted on social networking websites.

The top 20 most trusted companies from the 2012 study:

1. American Express
2. Hewlett Packard
3. Amazon
4. IBM
5. US Postal Service
6. Procter & Gamble
7. USAA
8. Nationwide
9. eBay
10. Intuit
11. Verizon
12. (Tie) Johnson & Johnson and FedEx
13. 13. WebMD
14. Weight Watchers
15. U.S. Bank
16. Disney
17. Microsoft
18. (Tie) United Healthcare and VISA
19. AT&T
20. Mozilla

I was surprised that respondents ranked the banking industry so favorably. Companies I noticed that did not make the top 20 list: Apple and Google. I suspect that the perception of "children abuses" as a privacy threat will increase in the future.

Download the Ponemon report, "2012 Most Trusted Companies For Privacy" (Adobe PDF).

The AAA Prepaid Card. A Good Deal?

Just before the Christmas holiday, I received in the postal mail my new AAA card for 2013. While reading the materials enclosed, I learned that my new AAA membership card is also an American Express Prepaid Card. To learn more, I visited the AAA.com/americanexpress website and read the Cardmember Agreement.

The website clearly states that the AAA Prepaid card is not a debit card, credit card, nor a gift card. You can use it wherever retail stores accept American Express Cards. AAA crafted the deal correctly: AAA members have to opt in or activate their AAA Prepaid card in order to use its prepaid features from American Express. If a member does nothing, then their AAA Membership card functions as it always has.

The AAA/American Express website pitches four major benefits of the AAA Prepaid Card:

• World-class American Express benefits
• A safer way to spend
• Several ways to fund the AAA prepaid card
• Manage spending easily

The American Express benefits include purchase protection, savings on tickets to entertainment events, assistance when traveling, and other special offers. The card seems beneficial as a payment method while traveling abroad when retail merchants don't accept credit card payment methods (e.g., MasterCard, Visa). A consumer could use the AAA Prepaid Card instead of American Express Travelers Cheques when traveling abroad.

The "safer way to spend" benefits include protections if the card is lost or stolen, and no overspending and no overdraft fees. The lost/stolen protection is helpful, but the no overspending/overdraft-fee benefits are dubious. There are no overdraft fees with cash. If I don't have the cash, I don't spend it.

There are several ways to add money to the AAA Prepaid Card: cash, bank account transfer, check, direct deposit, or an American Express(TM) Card. You have to load at least $25.00 on the AAA Prepaid card and a maximum monthly of $2,500 (or a $10,000 max with direct deposit). Each month, the first ATM withdrawal is free, and all other ATM withdrawals are $2 each.

If the AAA website has a link to the American Express ATM locator, I couldn't find it. Having that link would be helpful for consumers who anticipate using their AAA Prepaid Card for ATM withdrawals.

The website emphasizes no activation fee, no monthly fees, no reload fees, and no foreign currency transaction fees. This is good because prepaid cards often have lots of fees. However, the ATM withdrawal fees mean you have to pay to access your own money, and can only make withdrawals at ATM machines that accept American Express Cards. Not good, especially if you have a bank account of sufficient size where your bank or credit union waives ATM fees.

The Cardmember Agreement clearly states:

"The Card is a prepaid, reloadable payment device which must have funds loaded to it prior to use. The Card is not a gift, credit, debit or charge card, and does not constitute a checking, savings or other demand deposit or consumer asset account. The Card is not a payroll card and cannot be used to make payroll to anyone... Subject to the amount of Available Funds on the Card, we may allow you to use the Card to obtain cash from Automatic Teller Machines worldwide that accept the American Express Card..."

This means it is a "general-purpose reloadable" prepaid card and has the responsibilities and liabilites associated with any GPR prepaid card. The bank can raise fees or change terms at any time without notice. There are no Federal disclosure requirements, so you are at the good graces of AAA and/or American Express to promptly alert you with advance notice about any changes in fees or terms.

The AAA Prepaid Card is "paperless" (Adobe PDF) -- all disclosures statements are only online. You don't receive monthly statements, so you have to check your balances online. The Cardmember Agreement also has specific disclosures for residents of Alaska, Arizona, California, Indiana, Kentucky, New Hampshire, Oklahoma, Oregon, South Dakota, Texas, and Vermont.

I've Been Mugged blog readers know that this blog has covered prepaid card before. Wise consumers should understand their rights and responsibilities before registering any prepaid card. If you are looking for a prepaid card to avoid overdraft fees with your debit card, it is wise to shop around and compare first, so you don't get "mugged" by other fees. Both CNN Money and Consumer Reports found a wide variety of fees when it investigated prepaid cards: activation fees, monthly fees, reload fees, cash withdrawal fees, inactivity fees, online payment fees, paper statement fees, customer service phone call fees, and more.

If you need to build your credit history, then a prepaid card may not be right for you. If you already have checking and savings accounts, then you may find a prepaid card of little benefit. Wise consumers do the research to determine whether a prepaid card fits your lifestyle and spending habits. Read this FDIC comparison between debit cards, credit cards, and prepaid cards.

Is the AAA Prepaid card a good deal? Only you can decide for yourself. You know your lifestyle and spending habits best.

For me, I chose tol continue using my AAA membership card the traditional way, and not activate its prepaid card features. I'll continue to use my debit- and credit cards instead. My bank account balances are sufficiently high that my bank waives all ATM fees. My credit cards already provide rewards and special offers. Plus, I have not had any problems using my credit cards when traveling abroad. I simply don't buy that much when traveling abroad.

The new AAA Prepaid Card highlights the trend of many retail organizations to turn membership cards into prepaid cards. In my opinion, we consumers now see so many prepaid card offers because prepaid cards are a way for banks to avoid the newer rules governing debit- and credit cards that mandate certain disclosures and protections for consumers.

What do you think of the AAA Prepaid Card? If you use it as a prepaid card, what has been your experience?

FDIC Publishes Money Guide For Young Adults And Teens

The fall issue of the quarterly Consumer News newsletter published by the Federal Deposit Insurance Corporation (FDIC) includes a money guide for young adults and teenage children. Topics include:

• Choosing and using an account for everyday banking;
• Mobile banking by smart phone;
• Avoiding mistakes with credit cards;
• Building a good credit record;
• Obtaining and repaying student loans;
• Getting a good deal on an auto loan;
• Recovering from debt or bill-payment problems;
• Saving money to meet specific goals, made easier with the help of automated services; and
• Guarding against fraud, including identity theft.

Congress created the FDIC in 1933. The agency insures deposits at the nation's 7,181 banks and savings associations. It ensures the soundness of these institutions by identifying, monitoring and addressing risks. The FDIC is funded by fees it charges to the banks its oversees.

The section of the guide about how to avoid costly mistakes with credit cards includes sound advice:

"1. Read the fine print. Before you apply for a credit card, read all the terms and conditions... 2. You can avoid fees by being aware of your card’s credit limit. If you want your credit card issuer to permit transactions over your credit limit to go through, you must notify your lender that you want that service in advance and will pay the resulting fees... 3. Try to pay the entire balance in full and on time every month. That way, you will avoid interest charges and save money... 4. Think twice before applying for more credit cards. Special promotions, such as low introductory rates or discounts on purchases, make it tempting to apply for additional credit cards. But every time you apply for a card, it appears on your credit report. Multiple applications (called “inquiries” on a credit report) or new cards opened within a short time period can lower your credit score... 5. Take advantage of automated alerts from your card issuer. Many lenders and other companies can send customers messages by cell phone or e-mail, such as payment reminders, balance notifications to let you know if you’re close to your credit limit..."

The section about online banking with your smart phone includes several valuable tips:

"1. Ask your bank about the mobile banking services it offers and how much they may cost... 2. Understand your potential liability for unauthorized transactions... 3. Also be aware that the funds you place on a prepaid card may or may not be protected by FDIC insurance if the bank that holds the money (for you and other customers) were to fail... 4. As with any activity conducted online, keep security in mind. Protect your mobile device with a password that is hard for others to guess. Don’t lend your smartphone to others... Quickly report any unauthorized transactions or other suspicious activity."

You can read the money guide online or download a printable copy (Adobe PDF; 892K Bytes).

Class Action Settlement Proceeds With Bank Of America Credit Protection Service Customers

Back in August 2012, Bank of America agreed to pay $20 million to settle a class-action lawsuit about alleged deceptive marketing with its credit protection services. Also in August, the bank announced that it had decided to independently stop accepting new customers for its credit protection services and to terminate its credit protection services in 2013.

Recently, a relative received the postcard below from Gilardi & Company LLC, the administrator for the class-action settlement. Because the reply mechanism with the postcard asked for sensitive personal information, that relative asked me to investigate:

Gilardi has set up www.creditprotectionsettlement.com for consumers who subscribed to a credit protection service from Bank of America between January 1, 2006 and July 17, 2012. You may be eligible for a payment, which could be $50 or $100 depending upon your situation. You must submit a claim to receive payment. Key upcoming deadline dates:

• December 13, 2012 to opt out of the settlement agreement
• December 13, 2012 to submit objections about why you do not like the settlement agreement
• January 14, 2013: Fairness Hearing
• February 26, 2013 to submit a claim

Massive Data Breach At TD Bank Affects 260,000 Consumers

Several news outlets have reported about a massive data breach at TD Bank, affecting about 260,000 persons from Maine to Florida. The affected consumers include 35,000 in Maine, 3,000 in Florida, 73,000 in Massachusetts, and 43,000 in New Hampshire. According to the CBS affiliate in Philadelphia, most breach victims -- about 150,000 -- are in states in the New England region of the USA.

The bank is notifying affected customers via letters. In a breach notice sent to the New Hampshire Attorney General (Adobe PDF), the bank said:

"We have determined that personal information of New Hampshire residents was included on two data backup tapes that we shipped to one of our locations in late March 2012. The tapes have been missing since then, and we have been unable to locate them..."

The sensitive personal information exposed/stolen includes full names, addresses, Social Security numbers, bank account numbers, birth dates, and driver's license numbers. The bank is offering breach victims with one year of free credit monitoring services via ITAC Sentinel Plus.

In a statement, Martha Coakley, the Massachusetts Attorney General, said:

"The loss of these tapes potentially puts the personal information of thousands of Massachusetts consumers at risk, and we remind consumers to take appropriate steps to protect themselves... We will be reviewing the circumstances of this breach and the steps that TD Bank is taking to address the loss.”

A close review of the bank seems appropriate, since banks are not supposed to lose things, since they are entrusted with valuable items. And, this is not the bank's first data breach:*

• March 2011: "insider identity theft" involving an employee that sold the account information of about about 10 customers causing about $39,000 in fraudulent charges 
• March 2010: a fraud ring, using a former employee, stole and sold the account information of customers to accomplices who then stole about $200,000 from bank accounts

This breach sounds similar to what I experienced in 2007 with IBM, where computer data tapes were lost or stolen during shipment from its headquarters fo an off-site storage facility. That breach sounded like theft, as does the recent TD Bank breach. Vendors don't just accidentally lose computer tapes. Misplace them, perhaps. Lose, no.

Things I noticed in the TD Bank breach notice to its affected customers lacked:

• If a vendor or contractor was involved with transporting the missing/stolen computer data tapes, the corrective actions the bank is taking with this vendor to avoid a repeat of this breach
• If an employee was involved with transporting the missing/stolen computer data tapes, the internal employee training and data security methods is taking to avoid a repeat of this breach. Sadly, there are numerous breaches where company employees left data tapes unsecured in parked autos.
• Notice about how results of its breach investigaton will be communicated to breach victims
• Whether or not the data on the tapes was encrypted; and if it wasn't encrypted why not
• An explanation of why only 12 months of free credit monitoring, when the usability of stolen personal information is far longer

*Note: breach history from Privacy Rights Clearinghouse.

American Express Centurion Bank To Pay $112 Million To Settle Deceptive Credit Card Marketing And Debt Collection Practices

American Express Centurion Bank has agreed to pay $112 million to settle allegations of deceptive credit card marketing and debt collection practices. The Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC) announced the settlement this week.

The FDIC, the Utah Department of Financial Institutions (UDFI), the CFPB, and the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System had all took separate actions against the bank. The settlement agreement requires the bank to pay $85 million to reimburse more than 250,000 affected consumers, and to pay $27 million in civil penalties.

The investigations found violations between 2003 and the spring of 2012. The affected consumers included people who had signed up for the American Express "Blue Sky"credit card program. The bank promised them $300 in bonus points that were never provided. According to the CFPB:

"... American Express Centurion Bank and American Express Bank, FSB billed late fees on certain cards based on a percentage of the debt in violation of the Credit CARD Act... American Express Centurion Bank used a credit scoring system that treated charge card applicants differently on the basis of age. For a period of time, the bank did not fully implement the system for applicants over the age of 35. This violated the Equal Credit Opportunity Act because it requires credit scoring systems that take age into account to be properly designed and implemented... American Express Centurion Bank and American Express Bank, FSB failed to report the existence of certain customer disputes to credit bureaus, which is a violation of the Fair Credit Reporting Act... All three of the American Express subsidiaries deceived consumers into believing there were certain benefits to paying off old debt. Consumers were wrongly told that if they paid off the old debt, the payment would be reported to credit bureaus and could improve their credit scores. In fact, American Express was not reporting the payments and the debts were so old that even if they had tried to report them, many of the payments would not have appeared on these consumers’ credit reports or affected their credit scores..."

American Express Centurion Bank, a subsidiary of American Express Travel Related Services Inc., is based in Salt Lake City, Utah. In a press release, the CFPB emphasized that affected consumers do not need to do anything to receive payments:

"...If the consumer no longer holds the American Express card, American Express will mail a check or credit any outstanding balance.Customers who were promised $300 for signing up for a Blue Sky Credit Card will get the $300. Consumers who paid an illegal late fee will be reimbursed, with interest. Consumers who paid old debt in response to deceptive promises to report payment to credit bureaus will be reimbursed the money they paid plus interest. Consumers who were promised their debt would be forgiven but were denied new American Express cards because the debt was not really forgiven, will receive $100 and a pre-approved offer for a new card with terms we and the FDIC find acceptable. If the consumer already paid the waived or forgiven amount in order to get a new card, they will be refunded that amount plus interest."

[Correction: an earlier version mentioned $102 million. The correct amount of reimbursements and penalties equals $112 million.]

Survey: FDIC Releases Results From Latest Survey Of UnBanked And UnderBanked Consumers

Yesterday, the Federal Deposit Insurance Corporation (FDIC) released the results of its "2011 National Survey of Unbanked and Underbanked Households." The FDIC conducts this survey every two years, in a partnership with the U.S. Bureau of the Census. Key findings from the survey:

• "8.2 percent of U.S. households are unbanked. This represents one in 12 households in the nation, or nearly 10 million in total. The proportion of unbanked households increased slightly since the 2009 survey. The estimated 0.6 percentage point increase represents an additional 821,000 unbanked households."
• "20.1 percent of U.S. households are underbanked. This represents one in five households, or 24 million households with 51 million adults. The 2011 underbanked rate in 2011 is higher than the 2009 rate of 18.2 percent..."
• "29.3 percent of households do not have a savings account, while about 10 percent do not have a checking account. About two-thirds of households have both checking and savings accounts."
• "One-quarter of households have used at least one AFS product in the last year, and almost one in ten households have used two or more AFS. In all, 12 percent of households used an AFS product in the last 30 days, including four in ten unbanked and underbanked households."

The survey included responses from about 45,000 households. The term "unbanked" refers to consumers who do not have a checking account nor a savings account. the term "underbanked" refers to consumers who have either a checking account or savings account, but not both. This is important because banks have targeted both unbanked and underbanked consumers with financial products and services-- typically prepaid cards and variations such as flexible spending health-care cards and payroll cards.

These prepaid cards, which often have numerous fees, and offer fewer rights for consumers than both credit cards and debit cards. Industry research has documented the perception by consumers, many of whom have bank accounts, that prepaid cards are a desirable method to avoid the expensive overdraft fees with debit cards. Some additional findings from the survey:

"The highest unbanked and underbanked rates are found among non-Asian minorities, lower-income households, younger households, and unemployed households. Close to half of all households in these groups are unbanked or underbanked compared to slightly more than one-quarter of all households... Among unbanked households, slightly more than half have never had a bank account. Relatively high proportions of Hispanic (14.7 percent) and foreign-born noncitizen households (18.9 percent) have never had an account. The most common reasons why households report they do not have bank accounts are that they feel they do not have enough money for an account, or they do not need or want one."

The specific banking rates by demographic groups:

Demographic Group	UnBanked %	Underbanked %	Fully Banked %
All Households	8.1	20.1	68.8
Black households	21.4	33.9	41.6
Foreign-born, non-citizens	22.2	28.9	45.8
Households experiencing unemployment	22.5	28.0	47.5
Lower income households (less than $15,000)	28.2	21.6	47.6
Unmarried female head of households	19.1	29.5	48.4
Hispanic households	20.1	28.6	48.7
Households with people under age 24	17.4	31.0	49.7

By targeting unbanked and underbanked households, banks are trying to replace pay-day lenders and check cashing services, often referred to as "Alternative Financial Services" (AFS). The survey reported:

"AFS transaction products (i.e., non-bank money orders, non-bank check cashing, and non-bank remittances) are considerably more widely used than AFS credit products (i.e., payday loans, pawn shops, rent-to-own stores, and refund anticipation loans). In the last year, 23.3 percent of households used transaction AFS and 6.0 percent used AFS credit products. The relationship between household banking status and AFS use is complex. A non-trivial share of unbanked households (29.5 percent) do not use any of the AFS providers asked about in the survey, suggesting they rely primarily on cash. However, overall, unbanked households are more active AFS users than underbanked households."

Also, I found these survey results interesting:

"Having a bank account does not guarantee long-term participation in the banking system. Households can and do cycle in and out the banking system over time. For example, nearly half of unbanked households had an account in the past, and nearly half (48.2 percent) of these report that they are likely to join the banking system again in the future... Households with banking experience appear to have more positive perceptions of having an account and rely less on AFS. Unbanked households that previously had a relationship with a financial institution are more likely to see value in having a bank account than unbanked households without this relationship. Previously banked households are more likely to want to open an account in the future..."

Download the FDIC survey (Adobe PDF, 7.9 MBytes).

CFPB Announces Capital One Bank To Pay $165 Million For Deceptive Marketing Tactics

The Consumer Financial Protection Bureau (CFPB) announced Wednesday the terms of a Consent Order where Capital One Bank (USA), N.A. will pay both $140 million to about 2 million customers, and a $25 million fine for deceptive marketing tactics. After an investigation, the CFPB:

"... identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards."

The CFPB found that Capital One vendors misled customers about the benefits of these add-on products (e.g., increase their credit scores), deceived about how the products operated (e.g., not always told that the products were optional), misled about their eligibility (e.g., some call center representatives sold products to ineligible consumers), misinformed consumers about the cost of products (e.g., told it was free when it wasn't), and enrolled without their consent.

Additional enforcement actions by the CFPB against Capital One Bank:

• Stop marketing these add-on products until after the bank submits a compliance plan to the CFPB that is approved by the CFPB
• The $140 million reimbursement of consumers includes interest, and applies to customers who either enrolled in or tried to to cancel an add-on product on or after August 1, 2010
• Pay claims that were previously denied to truly eligible customers
• Payments will a credit to current Capital One Bank customers, or a check to former customers
• An independent auditor will review the bank's actions for compliance with the Consent Order

The CFPB also disclosed that this Consent Order was:

"... in coordination with the Office of the Comptroller of the Currency (OCC), which is separately ordering restitution of approximately $150 million from Capital One. This amount includes the same $140 million refund... The OCC’s order also includes separate restitution for additional consumers harmed by unfair billing practices taking place between May 2002 and June 2011 in violation of Section 5 of the Federal Trade Commission (FTC) Act. For the combined activity, the OCC is assessing a $35 million civil money penalty against Capital One."

It an separate press release, the OCC:

"... based its $35 million penalty on the bank’s failure to develop and implement a comprehensive and effective enterprise risk-management program to detect and prevent unfair and deceptive practices, and the duration of and failure to correct those practices."

In a press release from the bank, Ryan Schneider the President of Capital One's Card business said:

"We are accountable for the actions that vendors take on our behalf... These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted and we are committed to making it right."

The bank's press release did not state whether it fired its vendors involved in these deceptive marketing tactics, or took other monetary, legal, or disciplinary actions. Nor did it state what disciplinary actions, if any, it took against the bank's executives in charge of hiring or managing the vendors' activities. Ideally, those actions will be outlined in the compliance plan so these types of deceptive marketing tactics don't happen again with the same or different vendors.

It is wonderful to see the CFPB protecting the interests of consumers, and coordinating its enforcement actions with other agencies. As a Capital One credit card customer, I am doubly pleased. What's in Capital One Bank's customers' wallets? A little more money soon from Capital One.

Survey: 11% Of Banking Customers Ready To Switch To Another Bank

According to a recent surevy of about 5,000 banking customers, about 11% are ready to switch to another bank. That represents about $675 billion in assets, according to a March 2012 survey by Javelin Strategy & Research. Key findings:

"Citibank and Bank of America are the most vulnerable giant banks by far, with as many as one in four customers at risk of switching... although Americans were riled about banking fees, the didn't switch their primary [bank] in greater numbers. The reason: Convenience trumps fees... built on a foundation of big branch systems, broad ATM networks, convenient online banking, and... mobile banking..."

The leading reasons why consumers switch banks:

• 33% - Too many fees
• 21% - unsatisfactory customer service
• 15% - more convenient location
• 12% - moved their residence

Download the summary (Adobe PDF) of the "Bank Switching in 2012" Javelin report. Related articles:

• Bank Of America To Settle Class-Action Lawsuit With Overdraft Fee Rebate Program
• Bank of America Merchant Services And Money Network Announce New Payroll Solution
• Is It Wise To Move Your Money To A Prepaid Card?
• Citigroup Increases Number of Breach Victims To 360 Thousand

Beware of Latest Trick By Banks To Trap Consumers: Zombie Bank Accounts

Perhaps you moved to a new town, which your old bank doesn't serve. Or maybe you simply wanted better customer service and/or lower prices. So, you completed the time-consuming research to find a new bank, opened an account at a new bank, moved your money over, and paid any fees while closing your account at the old bank. Unfortunately, your old bank may not be finished with you.

Some consumers have reported instances where their old bank re-opened previously closed accounts, typically referred to as "zombie bank accounts." These accounts are difficult to kill and they incur lots of expensive fees, without any notice or consent to consumers.

How could this happen? Consumer Reports investigated and found that:

"... two of the nation's 10 largest retail banks, bank of America and Chase, reserved the right to reopen a closed account if there was a subsequent deposit; and Bank of America might also reopen an account after an attempted withdrawal."

Apparently, Wells Fargo bank also reserves the right to reopen previously closed bank accounts.

"Zombie bank accounts" is the latest in a long line of ill-conceived, customer unfriendly attempts by companies to ignore consumers' explicit requests: zombie cookies, zombie databases, and zombie e-tags. Now, it's the banks' turn again after the huge interest-rate hikes. and transaction manipulations to increase fee revenues during 2009.

Of course, a closed account should remain closed -- and the bank should reject both attempted deposits and attempted withdrawals at the old account. Otherwise, chaos results.

In October 2011, Congressional representative Brad Miller (North Carolina) proposed legislation to both make it easier for consumers to switch to another bank, and to prevent the zombie banking practice. 32 Congressional representatives, including Michael Capuano (MA), Judy Chu (CA), John Conyers (MI), Louise Slaughter (NY), and John Tierney (MA) have co-sponsored the bill, H.R. 3077, which is currently in subcommittee. Write to your elected officials and tell them to support this bill -- that "closed means closed" for bank accounts.

The fact that banks practice zombie bank accounts, and that corrective legislation is required, both say a lot about the banking industry's ethics (or lack thereof). Meanwhile, experts advise consumers:

• Review your bank's customer agreement,
• Discuss the bank's reopen account policy with a bank representative, and get it in writing before closing a bank account, and
• Submit complaints to the Consumer Financial Protection Bureau (CFPB)

In March 2012, the CFPB began accepting complaints from consumers about checking and savings accounts. And, the agency has helped some consumers close zombie bank accounts.

Has your old bank open a zombie bank account? If so, share your experience below. Please name the bank, and whether you filed a complaint with the CFPB.

Survey: Banking And Financial Executives Say Unethical Or Illegal Behavior Is Necessary To Succeed

A recent ethics survey of banking and financial executives in the USA and UK found that:

"Misconduct is still widespread... 26% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace. Nearly one-fourth of respondents believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful... 16% of respondents, would commit a crime–insider trading–if they could get away with it. Nearly one-third of all financial services professionals reported feeling pressured by bonus or compensation plans to violate the law or engage in unethical conduct. Nearly one-quarter of the respondents felt similar pressure from other sources... Only 41% of respondents reported that staff within their own organization had “definitely not” engaged in unethical or illegal conduct to be successful. 39% of UK respondents believed that others in their company have definitely not engaged in such misconduct to get ahead. 43% of US respondents had a similar view..."

Yes, you read that correctly. About a quarter of survey responds said it was okay and maybe necessary to perform unethical or illegal behaviors to succeed in business. And given the survey findings, some of the same respondents don't simply believe this, but also saw unethical/illegal behavior in the workplace.

Survey respondents have a dim view of government regulators:

"Only 30% of all respondents felt that the SEC/SFO effectively deters, investigates and prosecutes securities violations... In the UK, 34% of financial services professionals felt that the SFO is effective... In the US, only 26% of financial services professionals felt the SEC is effective... With respect to FINRA and the FSA, only 29% of all respondents felt these agencies effectively deter, investigate and prosecute securities violations... In the UK, 32% of financial services professionals felt that the FSA is effective...In the US, 27% of financial services professionals felt FINRA is effective."

About the risks to whistle-blowers of exposing wrongdoing within their banks, the survey found:

"...14% of all respondents believed that their employers were likely to retaliate if faced with a report of wrongdoing in the workplace..."

Banking and finance seems to be an ethics-challenged industry. The researchers concluded:

"The best way to avoid corporate scandals is to establish and nurture a culture of integrity in the workplace. Too often, scandals result from a long chain of mistakes, where one breakdown in judgment cascades to another breakdown, and then another. In time, isolated and seemingly random unethical or illegal choices snowball..."

The survey (Adobe PDF), conducted during June 2012 by Populus and the law firm Labaton Sucharow, included 500 senior-level executives. Labaton Sucharow provides legal services to protect and advocate for whistle-blowers who report violations to the SEC. The firm also represents companies, institutional investors, and consumers in complex securities litigation.

Executives' attitudes extend far beyond finance. Recently, a Federal U.S. appeals court found that a bank's poor data security was responsible, after thieves used wire transfers to steal about $689,000 from a construction business. Among its failures, the bank also failed to notify the company about the wire transfers it was processing.

With attitudes like this among banking executives, now is not the time for politicians to argue for less regulation. Survey results like this are a call for agencies like the FTC, DOL, and SEC to step up their monitoring programs.

Is It Wise To Move Your Money To A Prepaid Card?

Earlier this year, Pew Health Group released the results of focus group research about how consumers view and use prepaid cards. Key findings:

1. Consumers view prepaid cards as a way to avoid hidden bank fees
2. Consumers use prepaid cards to budget and control spending
3. Some prepaid card users like the privacy of prepaid cards, since they don't have to register with their personal information
4. Consumers dislike fees on prepaid cards
5. Prepaid card users don't want either overdraft protection, nor credit lines on prepaid cards
6. Prepaid card users want direct deposit, a savings option, and credit building tools
7. Consumers incorrectly assume federal government oversight of prepaid cards

Finding #1 and #2 together suggest that some consumers view prepaid cards as an easy way to avoid spending money you don't have and avoid the overdraft fees banks charge. For these consumers, moving their money from a checking account to prepaid cards seems attractive. But what are the "costs" or consequences of using prepaid cards instead?

Life has taught me that there are always consequences; some unintentional. Read on.

The overdraft fees banks charge have been so large and frequent, that some consumers seem conditioned to view prepaid cards as a cheaper alternative. We've all heard stories about the $35.00 cup of coffee. Nobody wants to pay that.

CNN Money reported that the average prepaid card charges $300 a year in fees. That $300 in annual prepaid fees may seem cheap if you incur overdraft fees (at $35 each) more than 9 or 10 times a year. This seems to be the case with some of the Pew focus group participants. Pew shared one participant's comments:

"I don’t like the fees on prepaid debit cards... It costs to load (them). It costs $3.95. I don’t like that I pay the $3.95... I’m good with my checking account. Nobody wants to pay extra fees. If we had to, I’d take the $3.95 any day over the $35 overdrafting or for some other fees."

If only the load fee was the only fee on prepaid cards. Both CNN Money and Consumer Reports found a wide variety of fees when it investigated prepaid cards: activation fees, monthly fees, reload fees, cash withdrawal fees, inactivity fees, online payment fees, paper statement fees, customer service phone call fees, and more.

That same $300 in annual prepaid fees seems expensive when compared to a $5 - $10 monthly checking fee many banks charge (assuming good budgeting with no overdraft fees inc urred). That $300 seems ridiculous and avoidable when compared to far lower fees or free checking available at some banks and credit unions.

Are consumers confused? Probably. Banks charge both overdraft fees and fees for overdraft protection. Wise consumers know the difference. And, to avoid overdraft fees It may be better or simpler for you to decline auto-enrollment of overdraft protection.

I found it disheartening that the focus group participants didn't seem to understand the banking practice to reorder debit purchases to maximize overdraft fees. In early 2009, this blog reported about this  banking practice, which increases the frequency of overdraft fees. The CFPB is tackling the overdraft fees issue, and seeks comments from consumers by June 29.

I find particularly troublesome finding #7 above. When deciding to use a checking account or a prepaid card, consumers need to consider:

• The fees on prepaid cards (see the above list and related articles), and which will apply given your usage
• The limits, if any, on fees and interest rates
• Prepaid cards don't build your credit history
• Your rights to receive periodic statements, disclosures of fees, error resolution process, and changes in terms
• Your liabilities when your card is lost, stolen, cloned, includes unauthorized transactions, or includes transactions in error

There are huge differences between credit cards, debit cards, and prepaid cards. There are different types of prepaid cards: gift cards, general purpose, health care spending, and payroll. This blog discussed payroll cards from Bank of America and the Walmart MoneyCard.

Wise consumers know that not all prepaid cards are the same:

• Consumer's liability (e.g., loss, theft, unauthorized transactions) is different for payroll prepaid cards versus gift/general purpose prepaid cards
• Statements and disclosure requirements are different for payroll prepaid cards versus gift/general purpose prepaid cards
• Employer-provided health care flexible spending prepaid cards often have an entirely different set of rules

To learn more and be a smart shopper:

1. Ask the retailer/bank/employer for a copy of their terms and conditions policy for the prepaid card you are considering,
2. Read that policy,
3. Read this FDIC comparison of debit cards, credit cards, and prepaid cards, and
4. Browse related articles in the "Prepaid Cards" section of this blog.

What's your opinion? Do you think it is wise to move your money from a checking account to a prepaid card?

5 Things You Should Know About Prepaid Cards

Right now, there probably are three different types of plastic in your wallet or purse. Each type has different rules, disclosures, government regulations, and fees. So, wise consumers use the best type of plastic instead of cash.

Most consumers are familiar with credit cards and debit cards -- the first two types of plastic. Credit cards include an interest rate applied to all purchases, plus a variety of fees (e.g., overdraft, annual usage). Debit cards are offered by banks to their account-holders to access money in their checking and savings accounts.

Prepaid cards often look like debit cards but have several important differences. Prepaid cards must have value stored or "loaded" onto them before they can be used. Usually, consumers use cash to add value to a prepaid card. Then, the consumer uses the prepaid card for purchases, which are deducted from the balance on the card until there is no value left on the prepaid card. Then, more value must be added to the card before it can be used again.

Retail stores, restaurants and malls offer prepaid cards, usually called gift cards. Chances are you may have already received a prepaid card as a gift. I've received and given several prepaid cards as gifts. Customers use the Dunkin' Donuts prepaid card are the chain's retail stores. Prepaid cards from The Old Spaghetti Factory, Starbucks, and Target all operate similarly. Some retailers use their prepaid cards to track customers' purchases for rewards for loyalty programs.

Besides retail stores, many other companies and entities offer prepaid cards. Some employers pay their employees via prepaid cards, often called payroll cards. These payroll cards are designed for employees who don't have checking and savings accounts. Behind every payroll card is a bank that handles the transactions.

Some employers offer their employees prepaid cards only for qualified healthcare spending purchases. Some golf clubs offer prepaid cards for their members to use at the club's golf store and restaurant.

Some banks offer prepaid cards, too, for consumers who lack checking and savings accounts. With all of these prepaid cards in use, it is important for consumers to to know the advantages and disadvantages. There is a pretty good CNN Money article that discusses what consumers should know about prepaid cards:

"Watch out for the fees: The average prepaid card charges nearly $300 in basic fees a year, such as monthly charges, ATM fees and reloading fees, a recent NerdWallet study found... many prepaid cards also charge activation fees, transaction fees, bill payment fees, declined transaction fees, inactivity fees, customer service fees and paper statement fees."

"They don't build credit: Using a prepaid card doesn't help you build credit with the three major credit bureaus... don't be fooled into thinking they are doing anything to boost your credit score."

To browse the entire list of five tips, read the CNN Money article. To learn more about the differences between the three types of plastic in your wallet/purse, read the FDIC alert about consumers' rights. You can also select Prepaid Cards in the tag cloud in the near right column.

What has been your experience? What prepaid cards have you used?