I've Been Mugged

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?

How To Get Help And File Complaints About Private Student Loans

To complete college and/or graduate-level study, many consumers took out student loans. According to the Consumer Financial Protection Bureau (CFPB):

"Student loans have now surpassed credit cards as the largest source of unsecured consumer debt... unlike federal student loans, private student loans do not generally have the same borrower protections such as military deferments, discharges upon death, or income-based repayment plans."

More help is available. The CFPB announced that it provides assistance for consumers who are experiencing problems with taking out a private student loan, repaying their private student loan, or managing a student loan that has gone into default and may have been referred to a debt collector:

• Before applying for loans, students should read the financial aid shopping sheet. Some consumers have already submitted feedback to the CFPB about what they want in this draft disclosure sheet. The CFPB will use this feedback in crafting future disclosure guidelines for lenders.
• Students who already have loans can use the Student Debt Repayment Assistant interactive, online tool to discover new repayment options.
• Borrowers who are experiencing difficulties paying loans, managing loans, or loans that have gone into default can now submit complaints at the CFPB website about private student loans. the types of complaints include: payment difficulties, confusing advertising or marketing terms, billing disputes, deferment issues, debt collection problems, and credit reporting issues.

Borrowers can also submit complaints to the CFPB via a toll-free phone number (1-855-411-2372), via fax (1-855-237-2392), and via postal mail (CFPB, P.O. Box 4503, Iowa City, Iowa 52244).

Private student loans are issued by banks, credit unions, schools, and similar lending institutions. If you aren’t sure what kind of loans you have, the CFPB advises students to visit the National Student Loan Database System for Students and select “Financial Aid Review” for a list of all federal loans made to you. Click each individual loan to see who the company is that collects payments from you.

Complaints about federal student loans (e.g., Direct, Stafford, Perkins, etc.) should be submitted to the U.S. Department of Education. The CFPB will automatically forward complaints it receives about federal student loans to the Department of Education.

Consumer Reports Reviews Several Prepaid Cards

This blog previously warned consumers about the differences between the three types of plastic in your wallets/pursues. Consumer Reports published the findings of its review of several prepaid cards, and concluded:

"... although fees are beginning to come down, they aren't always disclosed upfront. Moreover, prepaid cards offer weaker consumer protections than those provided by traditional debit cards..."

Some of the higher fees Consumer Reports found with prepaid cards:

• Activation or initiation fees ranging from from $3 to $14.95.
• Monthly fees as high as $10
• Fees to get cash as high as $2.50 per withdrawal
• Fees to contact customer service as high as $2.99 per call.

Obviously, consumers should ask for and read closely the terms and conditions or prepaid card agreement before purchasing a prepaid card. It is wise to understand the different types of prepaid cards.

Related posts:

• Your Rights And The Differences Between The Three Types Of Plastic In Your Wallet Or Purse
• How To Evaluate a Health Care Debit Card Plan From Your Employer
• Bank of America Merchant Services And Money Network Announce New Payroll Solution
• Move Your Money To... Walmart? A Good Deal?
• How To File A Complaint About A Bank

When Worlds Collide

Your Rights And The Differences Between The Three Types Of Plastic In Your Wallet Or Purse

While this blog has covered a variety of banking issues, one of the more important issues is that consumers need to know about the three types of "plastic" in your wallet or purse. Otherwise, you are likely to be "mugged" by your bank or card issuer.

As part of National Consumer Protection Week, the U.S. Federal Deposit Insurance Corporation (FDIC) listed the differences between credit, debit and prepaid cards. There are important differences about how interest rates, fees, and your liability apply. Your rights vary greatly with the type of "plastic" you choose to use.

What protections do consumers have with prepaid cards? How are prepaid cards different? The first thing you need to know is that there are several types of prepaid cards:

• "General purpose reloadable" (GPR) cards: these carry a brand of a card network (e.g., Visa, MasterCard) and can be used wherever that brand is accepted
• Payroll cards
• Gift cards

Prior blog posts have discussed payroll cards from Bank of America and the Walmart MoneyCard. How prepaid cards work:

"... allow consumers to spend only the money deposited onto them, can have a number of different features. For instance, some gift cards may be used only at a single merchant; most GPR cards may be used to pay for purchases and access cash at ATMs."

When using a prepaid card, your liability is different from a credit or debit card:

"Liability depends on the type of funds on the card. If the card is a payroll card, then the liability rules are the same as for debit cards. But if the card is a general purpose reloadable card or a gift card, then there are no protections to limit your liability under federal law."

What prepaid card issuers (e.g., retail store, employer, bank) must tell you in the prepaid card agreement varies:

"Disclosures depend on the type of card. For example, payroll cards must disclose any fees and the error resolution process, but a GPR card does not have any disclosure requirements. In addition, gift cards must disclose the terms of dormancy fees, whether there is an expiration date, and any other associated fees."

Similarly, your rights and access to statements are different with prepaid cards:

"Payroll cards must provide either a periodic statement or account balance by telephone as well as electronic transaction history. GPR cards and gift cards do not have periodic statement requirements under federal law."

When terms change for a prepaid card, your rights about advance notice of changes are different, too. With prepaid cards, you generally don't get as much advance notice as with credit cards (45 days):

"Payroll cards must provide 21 days notice before making changes to fees charged or the liability limits for unauthorized transactions. GPR cards and gift cards are not required to do so under federal law."

Some people like prepaid cards because they can avoid interest rates. It is wise for consumers to fully understand the types of fees that apply to prepaid cards:

"GPR cards and gift cards have certain restrictions on dormancy fees charged. There are no specific requirements related to payroll cards under federal law."

So, you are probably wondering if prepaid cards are a good deal, or not. That answer depends upon your financial situation and the type of prepaid card you expect to use.

Since I already have checking and savings accounts at a bank, prepaid payroll cards are of no value to me. I find extremely troublesome the lack of restrictions on payroll cards, which means the banks can change terms, fees, and interest rates whenever they want; and as high as they want.

If you don't have a checking account, then a payroll card may benefit you. (Given the fee schedules and lack of restrictions, payroll cards will definitely benefit the banks but not necessarily consumers.) However, closely read the card agreement and fee schedule first. You may be better off (e.g., fewer fees, lower rates) opening a checking account instead at a community bank or credit union.

I still find retailers' prepaid gift cards (e.g., Dunkin' Donuts, Stop 'n Shop, Cheesecake Factory) useful for some holiday or birthday gifts, but the lack of agreements with many prepaid gift cards is troublesome. The lack of an agreement means the card issuer can change things whenever they want and not notify you. I will likely reduce my use of prepaid gift cards to only those that have card agreements.

What's your opinion? Do you use prepaid cards? If so, which types? If not, why not?

HSBC Agrees To Pay $5.25 Million Settlement To NCUA

Last week, the National Credit Union Administration (NCUA) announced a settlement agreement with HSBC. HSBC hs agreed to pay $5.25 million to the NCUA for a complaint about its sale of residential mortgage-backed securities to five failed credit unions. The settlement agreement does not require HSBC to admit fault.

Similar to FDIC and the banks it oversees, the NCUA charges the credit unions it oversees with fees to cover failed credit unions and to protect depositors' assets. The NCUA uses the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover failed corporate credit unions. In this instance, the true risk of the mortgage-backed securities sold to corporate credit unions allegedly wasn't disclosed and led to the failed credit unions. Any payments the NCUA collects is used to offset future fees the NCUA charges for the TCCUSF.

The NCUA had filed five lawsuits against various securities firms, and had negotiated settlements with Deutsche Bank Securities ($145 million) and Citigroup ($20.5 million).

Corporate credit unions provide various services (e.g., short-term loans, check clearing, electronic funds transfers, ATM networks) to the consumer credit unions they serve. Consumer credit unions are the credit unions which we consumers join. Corporate credit unions are chartered by the NCUA or states.

In its 2010 annual report, the NCUA listed the following corporate credit unions:

Corporate Credit Union Name	State	Assets (Mill)	Members
Corporate America CU	Alabama	$3,701.7	369
First Corporate	Arizona	$979.4	51
Western Bridge Corporate Federal	California	$16,756.3	1,010
System United Corporate Federal CU	Colorado	$2,091.3	363
Southeast Corporate	Florida	$2,561.5	390
Georgia Corporate Federal CU	Georgia	$1,737.1	171
Iowa Corporate Central CU	Iowa	$108.2	159
Members United Bridge Corporate Federal	Illinois	$10,012.9	2,166
Kansas Corporate	Kansas	$302.3	148
Kentucky Corporate	Kentucky	$363.3	105
Louisian Corporate	Louisiana	$146.7	172
Eastern Corporate	Massachusetts	$507.5	278
Tricorp	Maine	$617.1	184
Central Corporate	Michigan	$2,394.3	359
Missouri Corporate CU	Missouri	$501.0	223
Treasure State Corporate CU	Montana	$386.3	63
First Carolina Corporate	North Carolina	$1,917.7	172
Midwest Corporate	North Dakota	$181.7	60
Corporate One Federal CU	Ohio	$2,881.1	768
MidAtlantic Corporate	Pennsylvania	$3,025.7	888
Volunteer Corporate	Tennessee	$1,351.7	256
Southwest Bridge Corporate Federal	Texas	$7,745.3	1,377
VA Corp	Virginia	$1,056.5	229
Corporate Central CU	Wisconsin	$1,623.7	281
West Virginia Corporate Federal CU	West Virginia	$228.1	110
U.S. Central Bridge Federal	Kansas	$18,412.9	56
Total		$81,591.1	10,428

CFPB Accepts Complaints From Consumers About Checking And Savings Accounts

By now, you have probably heard about the new Consumer Financial Protection Bureau (CFPB), a federal agency designed to ensure that financial products and services for consumers are beneficial for consumers. Previously, the CFPB accepted complaints about credit cards and mortgages. Consumers can now submit complaints about checking and savings accounts to the CFPB. The website has a different form for consumers to share their stories about experiences with financial products.

Also, the CFPB is investigating how checking account overdraft programs affect consumers. Part of this investigation the CFPB seeks feedback from the public about a proposed “penalty fee box” disclosure on a consumers’ checking account statements to clarify the amount overdrawn and total overdraft fees charged.

Reportedly, the average overdraft fee ranged from $30 to $35 in 2011. A 2008 study (Adobe PDF) by the Federal Deposit Insurance Corporation (FDIC) found several alarming trends and statistics about overdraft programs.The CFPB has four concerns about overdraft fees:

1. Transaction Re-ordering that Increases Consumer Costs: the way that overdraft fees are applied by some banks increase costs to consumers. One practice is the co-mingling of all checks, bill payments, debit card transactions, and ATM withdrawals each day and processing the largest transactions first -- rather than in the order received. This maximizes the number of transactions that will trigger overdraft fees.
2. Missing or Confusing Information: the CFPB is analyzing how consumers anticipate and avoid overdraft fees given current banking disclosures -- and if there is a better way.
3. Misleading Marketing Materials: the CFPB is investigating reports that consumers have received misleading marketing materials about overdraft fees, since opt-in rates to overdraft programs vary widely by bank.
4. Disproportionate Impact on Low-Income and Young Consumers: The CFPB is concerned that overdraft programs disproportionately affect certain groups. The same 2008 FDIC study found several alarming statistics, including that 9 percent of checking account customers pay about 84 percent of overdraft fees.

You can view a prototype of this "penalty fee box" at the CFPB website (Adobe PDF). To submit feedback about overdraft fees, include the Docket No. CFPB-2012-0007 with your submission by:

• Online instructions: www.regulations.gov,
• Email: cfpb_overdraft_comments@cfpb.gov
• Postal Mail: send letters to Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection Bureau, 1500 Pennsylvania Ave, NW, (Attn: 1801 L Street, NW), Washington, DC 20220.

The CFPB began operation on July 21, 2011. In its annual report (Adobe PDF) to the U.S. Congress, the CFPB reported that by December 31, 2011, it had received 13,210 complaints from consumers, including 9,307 credit card complaints and 2,326 mortgage complaints. 44% of all complaints were submitted through the CFPB website, and about 15% via telephone calls.

The FTC advises consumers who experience identity theft or fraud with financial products to both submit a complaint to the CFPB and submit a complaint to the FTC.

CFPB Reports List Of Consumer Complaints About Financial Products

In its annual report, the new Consumer Financial Protection Bureau (CFPB), a federal agency designed to ensure that financial products and services for consumers are beneficial for consumers, listed the leading complaints submitted by consumers. The CFPB accepts complaints about credit cards and mortgages.

The CFPB began operation on July 21, 2011. In its annual report (Adobe PDF) to the U.S. Congress, the CFPB reported that by December 31, 2011, it had received 13,210 complaints from consumers, including 9,307 credit card complaints and 2,326 mortgage complaints. 44% of all complaints were submitted through the CFPB website, and about 15% via telephone calls. The leading types of credit-card complaints received:

Leading Credit Card Complaints Reported By Consumers to CFPB. July 21 - Dec. 31, 2011	Number	Percent
1. Billing Disputes	1,278	13.7%
2. Identity Theft / Fraud / Embezzlement	1,014	10.9%
3. APR or Interest rate	950	10.2%
4. Other	854	9.2%
5. Closing / Cancelling Account	478	5.1%
6. Credit reporting	437	4.7%
7. Credit Card Payment / Debt Protection	383	4.1%
8. Collection Practices	378	4.1%
9. Late Fee	364	3.9%
10. Other Fee	334	3.6%
Total for Top 10 complaint types	6,470	65.9%

The types of mortgage complaints received:

Mortgage Complaints Reported By Consumers to CFPB. July 21 - Dec. 31, 2011	Number	Percent
1. Problems when you are unable to pay (Loan modification, collection, foreclosure)	889	38.2%
2. Other	540	23.2%
3. Making payments (Loan servicing, payments, escrow accounts)	501	21.5%
4. Applying for the loan (Application, originator, mortgage broker)	235	10.1%
5. Signing the agreement (Settlement process and costs)	96	4.1%
6. Receiving a credit offer (Credit decision/Underwriting)	65	2.8%
Total Mortgage Complaints	2,326	100.0%

The FTC advises consumers who experience identity theft or fraud with financial products to both submit a complaint to the CFPB and submit a complaint to the FTC.

I like the CFPB's mission and its website. The agency's consumer response mechanisms are still new and in their infancy. They will become more beneficial as the agency identifies and resolves problems. What is your opinion of the CFPB?

Bank Of America To Test New Fees

After consumer backlash last fall forced it to abandon plans to add fees for consumer debit card accouns, the Bank of America is now testing new fees for checking accounts in three states: Arizona, Georgia, and Massachusetts. Reportedly, the new monthly fees apply only to new accounts and range from $9 to $25 depending upon the consumer's account balance.

Meanwhile, the Massachusetts Secretary of State Galvin seeks legislation for national banks operating within the state to offer free checking accounts for young adults under 19 years of age and elders ages 65 and older. Galvin wants to prohibit these banks from holding state and local government deposits unless they offer free checking for these two groups. State-chartered banks in Massachusetts are already required by law to offer free checking to these two groups.

To learn more, visit the banking authority for your state.

Bill Maher: End Abusive Relationships With Your Bank

An important message about the Move Your Money Project from Bill Maher, with his usual wit and humor:

How To Evaluate A Health Care Debit Card Plan From Your Employer

A blog post on Tuesday described Caren's experience with her United Healthcare Consumer Accounts Card, a specialized debit card her employer provided for Flexible Spending Account (FSA) expenses. That blog post highlighted what can go wrong with a health care debit card.

I wanted to take a closer look at the card agreement, and see what broader issues might apply in general. Today's blog post includes my findings about several items employees should be aware of when considering a health care debit card plan. I am not an attorney, so this is not legal advice -- just my observations and opinions as a consumer -- like you tyring to navigate a complex world. If you need legal advice, hire an attorney.

First, healthcare debit cards are similar to traditional debit cards, but with several important differences. Employees must understand how they work and when fees apply, just as you would with a traditional debit card with your bank checking account. So, it is important to closely read all appliable agreements, terms, or policies y to know your rights and responsibilities -- especially when bad things happen.

The introduction to the United Healthcare Consumer Accounts Card agreement (Adobe PDF; which is also available here) lists some important warnings:

"At the register or cashier: This is not a credit card, but you will need to choose “credit” when making purchases... At the pharmacy, supermarket or other retail store: Pay for eligible over-the-counter (OTC) supplies and materials. Please note: The card will be rejected if purchasing OTC medicines, even when prescribed..."

Select "credit" at the point-of-sale even though the card says "Debit" on its face? Prescribed OTC medicine will still be rejected? These exceptions sound like a recipe for employee confusion and rejected purchases. While the agreement states that it is a MasterCard Debit, I wonder if the bank tweaked a traditional credit-card payment solution for health care purchases and rushed it to market without removing all the bugs first.

What comes to mind is that old saying: never buy the first year of a new car production (and wait until the manufacturer gets all of the bugs out). Seems to apply to payment solutions, too.

Section #2 of the same agreement states:

"When you use the Card, you represent and warrant that you will not submit, and have not previously submitted, a claim for reimbursement for the same expenses under any other plan or program. You agree to save all invoices or receipts that are provided to you by merchants and service providers when you use the Card. You agree to provide a copy of any such receipt to us or United Healthcare, promptly on request. If you fail to submit a receipt when it is requested, under IRS rules, the amount in question may not be excluded from your gross income for federal tax purposes or may otherwise result in financial penalties to you. Your use of the Card is subject to the terms and conditions of the Plan, as well as the terms and conditions of this Agreement..."

So, employees must still save all purchase receipts. The health care debit card doesn't eliminate all paperwork. The last sentence in the above clause is important because it highlights the fact that several policies apply. It would be helpful if this agreement listed all applicable policies. My estimate is that at least five different policies apply:

1. Consumer Accounts Card Agreement,
2. United Healthcare HIPAA Privacy Policy,
3. Any additional policies at myUHC.com,
4. Employee handbook or manual,
5. Optum Bank policy

Employees should not have to guess which policies apply. It would be best for employees if a single, consolidated policy applied, but unfortunately American business does not operate that way today.

Let's return to the Consumer Accounts Card agreement, which also states:

"You agree that you will only use the Card to pay for eligible expenses under the Plan... if you use the Card for anything other than an eligible expense, you will be liable for any taxes, penalties and other expenses payable under applicable law and any expenses we, United Healthcare or your employer may incur as a result of such impermissible use. Upon demand, you agree to reimburse us, United Healthcare or your employer, as the case may be, for any such use for non-eligible expenses..."

While employees may think that ineligible FSA expenses are automatically blocked at the point-of-sale, the agreement governs what really happens. The Consumer Accounts Card payment process may indeed block some ineligible purchases, but United Healthcare and the bank seem to have left themselves a convenient loophole where employees are still liable. It would be helpful if the agreement stated what those amounts of taxes, penalties, and other expenses could be. It seems risky to use a debit card when you don't know the exact amount of fees that might apply.

Second, employees should be aware of their responsibilities to avoid liability. The "Consumer Liability" portion of the agreement states:

"Tell us AT ONCE if you believe your Card has been lost or stolen. Telephoning is the best way of keeping your possible losses down. If you tell us within 4 business days, you can lose no more than $0 if someone used your Card without your permission. (If you believe your Card has been lost or stolen, and you tell us within 4 business days after you learn of the loss or theft, you can lose no more than $0 if someone used your Card without your permission.)"

This four-day time period seems unreasonably short. My bank allows 60 days from my statement to dispute a charge on that statement. Does United Healthcare expect employees to check their online FSA account every four days? The next portion of the agreement states what happens when employees provide notice after the four-day window:

"If you do NOT tell us within 4 business days after you learn of the loss or theft of your Card, and we can prove we could have stopped someone from using your Card without your permission if you had told us, you could lose as much as $50."

Now, the liability sounds more like the liability with a traditional credit card: $50. What I find troubling about this clause is that it assumes traditional theft or loss. This blog has documented numerous examples of identity thieves plant skimming devices inside point-of-sale terminals at gas stations, supermarkets, and other retail stores to steal consumers' data to clone debit cards. Since employees are forced to use health care debit cards at retail stores, a more relevant agreement would provide tips about what to do if they believe their card has been cloned. Perhaps the myUHC.com site explains this, but I don't have a myUHC.com account.

The agreement also states (emphasis added by me):

"... if the statement you receive from the Plan administrator shows transfers that you did not make, tell us at once. If you do not tell us within 90 days after the statement was mailed to you, you could lose as much as $50 if we can prove that we could have stopped someone from taking the money if you had told us in time."

Again, that sounds like traditional credit card liability (e.g., $50), but at least the window for notice is longer at 90 days. Why lead with the four day clause? It seems unnecessary. In Caren's case, it seems that United Healthcare is enforcing the 90-day clause. What I find troublesome about the above clause is that it assumes paper statements sent via postal mail. In reality, employees' statements are available online. Nothing is sent via postal mail. So, why write the agreement assuming this? It sounds like the card agreement was rushed to market without all the bugs removed.

Another portion of the agreement states:

"ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR CARD MUST BE DIRECTED TO THE BANK, AND NOT TO YOUR EMPLOYER OR PLAN ADMINISTRATOR. The Bank is responsible for issuing the Card and for resolving any errors in transactions made with your Card. The transactions will appear only on the statements provided to you by the Plan administrator."

It would be helpful if the agreement listed the bank's phone and postal address information. I couldn't find it in the agreement. The agreement lists United Healthcare's phone and postal address information. In my experience, well-written agreements provide both phone and postal address information with any instructions where consumers should give notice. Perhaps, the other policies provide this information, but I don't have a myUHC.com account.

SO, let's see if I got this correct. The agreement directs employees to contact United Healthcare for transfers the employee didn't make, but contact the bank about statement "errors."What's the difference? How are employees to tell? This sounds confusing.

It troubles me that the above clause mentions "errors" and doesn't mention "fraud." I would expect any bank to aggressively investigate suspected fraud. The fact that Optum Bank's flow of funds page still presents a 2008 copyright does not give me much confidence in the bank:

If something this simple still says 2008, what else has this bank missed? Or, should consumers conclude that the Optum web site hasn't been updated in four years? Or is this flow-of-funds information that is four-years old and/or obsolete? I would expect more timely and current information from any bank -- especially one processing my extremely sensitive health care information.

The "Fees" section of the agreement states:

"OptumHealth Bank does not charge usage fees for this card."

No fees are good, because banks can apply a wide variety of fees to debit-card accounts.However, it means that employees should monitor any changes in the card agreement. Things might change with new fees introduced. So, employees should read any updates to the card agreements or policies with their health care debit cards.

Now, let's return to Caren's story. The fact that Caren never used the Medco online pharmacy should be a huge "red flag" to Optum Bank, Large HR Firm, and United Healthcare. It suggests that Caren's payment information was stolen. The payment data on Caren's Consumer Accounts Card could have been stolen via a skimming device, which identity thieves plant inside point-of-sale terminals at retail stores and gas stations -- not just at bank ATM machines.

If Caren's Consumer Accounts Card was not cloned via skimming device theft, then a couple other options are possible. The pharmacy may have re-submitted the purchases it originally rejected -- and if so, it should have notified Caren, and reimbursed her for the purchases she paid out-of-pocket. Caren could test this by using a different pharmacy. If the duplicate charges don't happen at the second pharmacy, then it is reasonable to assume a problem at the first pharmacy. If the duplicate charges continue, then it seems safe to assume that her debit payment data was stolen.

Insider identity theft is always a possibility. It's harder for employees to spot, but it does happen.

What should employees do if your employer offers a specialized debit card for healthcare expenses? I suggest the following steps:

• Read all applicable policies to know your rights and responsibilities -- especially before registering for a FSA with your employer. Your employer may have negotiated a really good deal for its employees, or not. Don't blindly assume so; read the fine print in the agreement first. Part of evaluating if it's a good deal is looking for certain clauses in the agreement -- like the ones listed above. If you have difficulty reading contracts, get help from a trusted friend, family member, or attorney if you can afford one.
• Use the Internet to find reviews written by employees about their health care debit card plan. Places I like to look include Consumer Reports, The Consumerist, and Epinions.
• File a police report with local law enforcement. (In Caren's case, somebody spent money from her FSA account without her authorization. That is theft.) Insist on law enforcement accepting the report. Make several copies. Attached the police report to any complaints filed with your employer, the FSA healthcare administrator, and the bank,
• Use a different pharmacy. If the duplicate charge problem stops, it is reasonable to assume a problem at the first pharmacy, and file a police report accordingly,
• If you feel that you aren't getting the services promised by the bank which processes your health care debit card transactions, learn about how to file a complaint against your bank.
• File a fraud complaint with the U.S. Federal Trade Commission (FTC) including any relevant documents (and non-action by employer, HR Firm, health care firm, and bank). This will help the FTC track any emerging theft trends with health care debit cards.
• If there is no action by the employer, HR Firm, healthcare firm, and/or bank), write a letter to your federal or state elected officials asking for help. It's part of their jobs -- to help their constituents.

Is the United Healthcare Consumer Accounts Card a good deal? Only you can decide for yourself, as everyone's needs are different. Hopefully, I have highlighted the things consumers should look for in any health care card agreement, so you can make an informed decision.

If you use a specialized debit card for health care expenses, what has been your experience?

A Debit Card Cautionary Tale

[Editor's Note: today's post is by guest author R. Michelle Green, the Principal for her company, Client Solutions. She is a combination geek girl, personal organizer, and career coach. Michelle helps others improve their use of technology in their personal or professional life. Today, she tackles what I believe will become a huge identity-theft problem. As employers lower their administrative costs by outsourcing payment systems that include debit-card transactions, the result is a more complicated, patchwork mix of companies where it is not easily clear who is responsible when bad things happen.]

By R. Michelle Green

At a business conference I attended, the topic turned to health care insurance administration. Some of the attendees now have new debit cards they didn’t ask for. Their employers gave them debit cards for their health care expenses (to access their Flexible Spending Accounts). Instead of having to submit receipts, employees offer the card at the point of sale. If s/he tries to charge more than allowed, or tries to charge things that are not acceptable, the card is rejected. Easily fits into the distributor’s payment systems (cash credit debit), no paperwork for the employee, less evaluative work for the FSA provider. Everyone wins, right?

Not everyone.

Meet Caren (not her real name, of course). She offered her new debit card -- her's is called a United Healthcare Consumer Accounts Card -- for prescription meds in January last year. However, the purchase was rejected by the pharmacy. She assumed it was a glitch, and paid for it herself. While this eventually happened every time, she doesn’t have medical charges every day, so it took a while to recognize that the card never worked. For reasons not relevant here, she did not pursue this with the provider until the fall, only to discover that all her money had been used up on health care charges she didn’t make.

She spoke with United Healthcare using the phone number on her Consumer Accounts Card. She submitted all her information in writing as they requested. They produced a sheet showing that her charges mostly matched (about 70%) identical charges paid 1-2 business days after hers. Though they did not accuse her of fraud, they did say the case was closed and did not merit an appeal. When she approached her human resources provider, he said, well at least she got the tax break. (!) She didn’t get a tax break, she got a salary reduction! She was deprived of access to her own money, set aside from her salary. The debit card agreement online says that she should call the bank operating the card, but that hasn’t proven productive either.

Had a second card been issued to someone else, we wondered? Not to her (or to the bank’s) knowledge. Did the drugstore have signatures on the other charges ostensibly hers? The other charges were mail order charges through Medco, so no receipts or signatures. She has no account with Medco. The pharmacy is not interested in pursuing this, they’ve been paid (perhaps twice!). Medco won’t address it, as she is not a client. The debit card provider only knows the money is spent. The FSA account holder is satisfied that it was spent for the right things. Only Caren is out of pocket and disadvantaged. Doubly so – this was so traumatic that she did not enroll in FSA this year. That makes her ineligible for the associated tax benefit in 2012.

Turns out our blog host is interested in the way financial systems are evolving, and found this issue particularly interesting. There are a lot more parties in the mix than you might at first think. Caren has an employer small enough that it purchases human resources expertise from a national firm. So there’s Caren, Small Firm, and Big HR Firm. Big HR Firm takes the money from her account and sends it somewhere based on their agreement with United Healthcare. Her debit card is managed by United Healthcare, and Optum Health Bank administers that card for them. Optum Health Bank has a subsidiary, Optum Financial, that handles the flow of money from the holding account to the point of sale. And what about the pharmacy: could their processes have been compromised as well?

I read a lot about fraud and scams, and wondered if this could be the tip of a software theft operation, selecting certain customers, and duplicating certain customers’ receipts, at just low enough rates that they are not perceived. (Good movie, eh? But Occam’s Razor says: not likely.) But who is the person with enough clout to investigate this, particularly if no one person or entity loses big bucks?

Today she tweeted that she had heard from Big HR Firm – there’s nothing they can do. So who’s responsible? Several corporations are in play; doesn’t each have a responsibility to Caren? Who can help her?

Foreclosure Abuse Widespread

Last week, the San Francisco Assessor-Recorder office released the results of an audit (Adobe PDF) of about 400 home that were foreclosed on during 2009, 2010, and 2011. The audit found that about 84% of the homes had at least one violation of California foreclosure laws.

The office began the audit last Fall with Aequitas, a mortgage investigation firm, after problems surfaced in mortgage records requested by homeowners facing foreclosure. Assessor-Recorder Phil Ting said,

“When it became clear that property records were severely undermined, a red flag was raised... Those records are supposed to be filed with this office and many were simply missing or had serious inconsistencies..."

It's difficult to impossible for a homeowner to fight foreclosure when mortgage records are inaccurate or incomplete. Ting emphasized the need for state legislation to guarantee compliance with California foreclosure laws by the mortgage industry.

The register of deeds in Guildford County, North Carolina, examined 6,100 mortgage documents last year, and found signature irregularities in 4,500 (xx%). Experts see this as a clear indicator of the illegal practice of "robosigning" documents.

Seems to me it is time to both fine companies and send bankers to prison nationwide. Only then will this madness stop. Demand action from your elected officials.

Big Banks vs. Credit Unions

If you are unsure about whether or not to move your money from a big banks to a small, community bank and credit union, consider the statistics below from Consumer Reports:

Item / Fee	Big Banks	Credit Unions
Non-interest Checking (per month)	$10.27	$6.00
Minimum Balance to Waive Fees	$1,115.97	$500.00
Online Bill Payment (per month)	$6.95	$0.00
Use Another Bank's ATM (per transaction)	$2.21	$1.07
ATM Surcharge (per transaction)	$2.96	$2.79
Overdraft (per transaction)	$34.48	$27.82
Insufficient Funds (per transaction)	$34.48	$27.82
Stop Payment (per transaction)	$31.09	$19.43

To learn more:

• Javelin Research Reports Results About Bank Transfer Day
• Learn About Credit Unions. Free Workshops At A Nearby City
• Keeping Its Commitment To Its Customers: A Bank Does The Right Thing
• Bank of America Merchant Services And Money Network Announce New Payroll Solution
• How To File A Complaint About A Bank
• Move Your Money To... Walmart? A Good Deal?
• Some Banks Reverse Decisions To Add New Debit Card Fees

Javelin Research Reports Results About Bank Transfer Day

Finally, some firm statistics are being released about the results of Bank Transfer Day, when consumers moved their money from big banks to credit unions and local community banks. Based on extensive research, Javelin Strategy & Research estimated that 5.6 million U.S. adults moved their money during a 90 day period. Some details:

• 11% (610,000 of the 5.6 million) mentioned Bank Transfer Day as the reason they moved their money
• 26% said that high banking fees were the reason they moved their money

Javelin concluded that both Bank Transfer Day and the Occupy Movement had a measurable impact when compared to research results from prior years. So, a true grassroots movement can have an impact.

Previously, CUNA revised downward its estimates of Bank Transfer Day results due to a flawed methodology. CUNA did not change its estimate of more than 40,000 new credit union accounts opened by consumers on November 5, Bank Transfer Day.

Javelin designed the online research questionnaire and surveyed 5,878 consumers during December 2011. The survey process included:

"... targeted respondents based on representative proportions of gender, age, income, and ethnicity, and data was weighted to U.S. census proportions. The survey is based on a set of questions that were first fielded in 2003, and are now deployed on a twice-annual basis."

Javelin has research identity theft and fraud, with reports covering 2008 and 2010, plus trends in corporate data breaches. I have found Javelin's work reliable, but still await more results about Bank Transfer Day. It would be great to know the average bank account balance transferred, since the big banks seem to have focused on getting consumers to consolidate their accounts (e.g., checking, savings, and investments). The big banks are probably willing to lose consumers with smaller balances.

In a recent conversation with banking industry analysts, the Bank of America CEO reported a 20 percent increase in account closures during the fourth quarter of 2011.

Insider Identity Theft Example: Banc of America Broker

If you wonder what the phrase "insider identity theft" means, this case below is an excellent example. The basic definition of insider identity theft is when an employee (or contractor) at a company accesses personal information they aren't authorized to access. In the case below, it included the contact information of the company's clients. If you are one of those clients, this case illustrates how your contact information can be abused.

The Forbes article described how Dante J. DiFrancesco worked at Banc of America Investment Services (BAIS). When he left BAIS, DiFrancesco attempted to take his clients' contact information with him, only to clumsily discover that he'd take the contact information for 36,000 clients instead of his 180 clients.

The good news in this story is that BAIS discovered DiFrancesco's data access attempts. Companies with good data security have processes in place to detect when employees attempt to access information they aren't authorized to access, as BAIS did.

Like many things in business, the case went to court. The Financial Industry Regulatory Authority (FINRA) investigated, filed charges, and ultimately ruled in favor of BAIS. DiFrancesco appealed the ruling twice; first at FINRA (which affirmed the first ruling) and then at the U.S. Securities & Exchange Commission (SEC). The SEC ruled against DiFrancesco, too.

Investigate The Banks

Professor, political economist, author and former Secretary of Labor chief Robert Reich called on President Obama to hold big banks fully accountable for their part in the alleged mortgage abuses and housing market crash -- which the President finally addressed, in part, during his SOTU speech last night:

"We'll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people's investments. Some financial firms violate major anti-fraud laws because there's no real penalty for being a repeat offender. That's bad for consumers, and it's bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count."

To learn more, visit YesHeCan.org.

Debit Cards: A New I've Been Mugged Topic

Since many consumers have shifted their purchases from cash and credit cards to debit cards, I have added a new topic in the tag cloud in the near right column. With recent events in the banking industry, new offerings allows employers to perform direct deposits to employees payroll cards, a customized version of debit cards. The "Debit Cards" topic includes this content of interest to consumers and residential banking customers. I hope that you like the new category.

Plenty Of Collateral Damage From a Credit Card Theft

There is a good article in PC Magazine that describes the scope of damages from identity theft when credit cards, smart phones, and spammers intersect. Jacqueline, a sales manager, had her credit card stolen and cloned, which resulted in over $2,000 in fraudulent charges. (Damages #1.) Her bank cancelled the exisitng credit card account and issued her a new credit card account. You would assume that was the end of the story, but sadly it wasn't.

Then, the credit card theft and card cloning happened with the replacement credit card -- which suggests an insider identity-theft problem at the bank Jacqueline uses.  Her bank cancelled the replacement credit card account, and issued her a second replacement credit card. End of the story, right?

Wrong. Next, Jacqueline and her contacts began to receive a flood of text message and phone call spam from unknown phone numbers. Apparently, the identity criminals had also stolen Jacqueline's mobile phone number (Damages #2.) along with her credit card information. Jacqueline's company-issued Blackberry-brand smart phone had been spamming people and phishing for consumers' Sovereign Bank sign-in credentials.

Jacqueline doesn't work at Sovereign Bank. After more investigations by the IT department at Jacqueline's employer, her mobile carrier, Verizon, informed them that the text message spam wasn't coming from its network, but from a computer pretending to be Jacqueline. Apparently, the credit card thieves re-sold Jacqueline's personal data and mobile phone number to other identity criminals, which included a spammer (Damages #3.):

"Someone had gotten a hold of her mobile number and was spoofing other phones using her digits. It turns out there's software designed specifically for businesses to send bulk SMS to lists of phone numbers from a computer."

Wow! What a mess. This saga highlights several issues, including the:

• Creativity and persistence of identity thieves,
• Efficiency of online forums where consumers' stolen personal data is resold and traded,
• Value of consumers' (digital) personal information, and
• Duration of damages from identity theft and fraud.

The average consumer doesn't think about how valuable the various bits of their personal information are. But, identity criminals think about it deeply.

The good news in this story was that the IT department at Jacqueline's employer was able to rule out any leaky smart phone apps that could have compromised her data security.

Today, there's not much more Jacqueline or her employer's IT department can do. Her personal identity information is out there in the thieves' domain. As I see it, all she can do is file police reports to document the trail of theft, and lock down her credit reports to keep the damage from spreading to her financial accounts. If the thieves also have her Social Security number, then they can obain fraudulent identification cards and drivers licenses. And, there's nothing to restrict the thieves' action with the USA borders.

Traveling Outside The Country? Before You Leave, Notify Your Credit Card Issuer So Your Purchases Aren't Denied

With the increase in identity theft and fraud during the past few years, many banks have increased their security efforts to fight identify fraud. This includes proactively flagging or automatically denying credit card purchases in another country. This increased security has both good and bad news.

The good news: consumers are better protected against fraud. The bad news: valid purchases by cardholders traveling outside the the country may be denied. The last thing anyone wants to experience is a denied credit card purchase when you are in a different country and low on cash in the local currency.

To avoid this, I notified my credit card issuers before my recent vacation travel. Credit card issuers will want to know your card number, travel destinations, travel start/stop dates, and cardholders traveling.

The letter I used, which you are welcome to adapt for your upcoming trip:

"This regards the [insert Visa/Discover/MasterCard/Amex/etc.] account ending XXXX. I am the cardholder for the above account. This letter is to inform you that I will be traveling on vacation from November 22, 2011 to December 9, 2011, and visiting the following locations: Mexico, Guatemala, Panama, and Colombia (Cartagena). Hence, you will see purchases on my [insert Visa/Discover/MasterCard/Amex/etc.] card at these locations, and from the XXXXXXXXX cruise line."

With some credit card issuers, you can report upcoming travel via a toll-free phone number. I prefer a written letter which documents the communication. The address to use is on your monthly statement. Check the website for your bank or credit card issuer about how to report upcoming travel.