I've Been Mugged

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.

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).

Infographic: How Credit Reporting Agencies Get Your Information For Their Credit Reports

The infographic below is from the folks at Credit Sesame:

You may also find the following articles of interest:

• A Primer On Credit Scores
• CFPB Begins Supervision Of Credit Reporting Industry
• What It Means To Have An Unrequested Security Freeze On Your Credit Report 
• Credit Reporting Agency Wants To Access Your Facebook, LinkedIn, and Twitter Information
• Directory Of Credit Reporting Agencies
• Have You Heard About Credit reports From Innovis?
• Is It Wise For Credit Bureaus To Outsource To Foreign Call Center Firms? (Part 3)
• Fraud Alert Or Credit Freeze; What's The Difference?
• Placing A Freeze (Or Lock) On Your Credit Files

Safe Shopping Tips For 'Black Friday' And The Holidays

You have probably read or heard about it in either the print, television, or radio advertisements. Many retailers will open early Thanksgiving day night to start the long weekend of shopping including what many refer to as "Black Friday." If you plan to shop, know your rights and shopping tips so you don't get "mugged" by excessive fees.

To help consumers, the Massachusetts Office of Consumer Affairs & Business Regulation (OCABR) has developed a holiday shopping guide that explains consumers' rights, the actions retailers are allowed, and shopping tips for the best experience. For example:

"Sale: For the term "sale" to be used in an ad when the actual savings are not stated, the law requires the savings to be at least 10% for items regularly priced $200 or less, and at least 5% for items over $200."

"Restocking Fee: This is a charge deducted from the purchase price when an item is returned, resulting in a partial refund. Sellers must disclose their return policies, including restocking fees, before the initial transaction is completed."

"Layaway: A plan that allows you to pay for a product in installments and receive the merchandise after you have paid in full. A store must fully disclose its policy on layaway plans, including cancellation and return (or non-return) of payments already made."

"Know the seller: Purchasing from a seller you know and trust is the best way to ensure an excellent shopping experience. For unknown web-sites, use an online store review service such as Epinions, BizRate, the Better Business Bureau..."

"Shop smart with a Smartphone: Smartphones allow consumers to keep track of deals, navigate between stores, and compare prices. Check out apps such as Consumer Reports Mobile Shopper and Google Shopper..."

To read the full list of right and tips for consumers, download the "Black Friday Shoppers Guide" (Adobe PDF) or this mobile-friendly version of the same report. Rules for retailers in other states may vary. Check with the consumer affairs agency in your state.

Related posts:

• California Attorney General Notifies Developers Of Mobile Apps In Violation Of State Privacy Laws
• How To Lock Down Your iOS Mobile Device
• Survey: How Mobile Device Users Protect Their Privacy With Mobile Apps
• 5 Things You SHould Know About Prepaid Cards
• Will A Credit Card Or A Debit Card Protect You Better From Fraud?

States' Attorney Generals Urge Congress To Reject Payday Lender Bill

On Friday, several states' Attorney Generals announced that they had sent a letter to Congressional leaders urging them to oppose HR 6139, known as the Consumer Credit, Access, Innovation, and Modernization Act. The letter read in part:

"Most states have enacted laws and rules to regulate short term lending, including payday loans. Many of these states have chosen to strike a regulatory balance that preserves access to alternative forms of credit while protecting consumers from repeated debt cycles and other pitfalls associated with such products. H.R. 6139 would turn back existing consumer protections... H.R. 6139 would give nonbank financial services providers – including payday lenders, installment lenders, car-title lenders, prepaid-card issuers, check cashers, and others – access to a federal charter issued by the Office of the Comptroller of the Currency. The bill would totally preempt state licensing laws for nonbank financial services providers... In place of state safeguards, the bill would establish only minimal consumer protections... the bill establishes no standards for determining a consumer’s ability to repay. Moreover, the bill would exempt loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act – the universal standard for measuring the true cost of credit – and substitute a cost metric that is confusing and misleading..."

The letter was sent on Friday October 5, 2012 to House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid, and Senate Minority Leader Mitch McConnell. 41 states' Attorney Generals signed the letter, including Guam and Puerto Rico.

In Congressional testimony during July 2012, the Office of the Comptroller of the Currency (OCC) stated its concerns:

"The effective result of H.R. 6139 would be to create a class of federally chartered companies (National Consumer Credit Corporations, hereinafter referred to as “NCCCs” or “companies”) focused on consumer credit products of the very nature and character that the OCC has found unacceptable based on consumer protection and safety and soundness concerns. In particular, it is our experience that the profitability of many of the types of small dollar, short-term loans that NCCCs would likely seek to offer is dependent on effectively trapping consumers into a cycle of repeat credit transactions, high fees, and unsustainable debt... The bill will result in a decrease in protections for categories of consumers that may be the most vulnerable. We have ample evidence from the recent financial crisis that the goal of enhanced access to financial products and services must be coupled with assurances that those consumers are subject to meaningful consumer protections and that the firms offering those products and services must do so on a prudent, safe, and sound basis. In this regard, the Consumer Financial Protection Bureau (CFPB) has been provided the authority to issue rigorous, uniform, and nationally-applicable consumer protection standards for financial products and services. It is important that the types of products envisioned for NCCCs not be carved out of coverage of CFPB-administered lending standards..."

There are plenty of examples of this cycle of repeat credit transactions, high fees, and unsustainable debt. In February 2009, CBS News reported about the payday lending industry:

"They've now grown into a $59 billion industry. But six states - Arkansas, Georgia, New Hampshire, North Carolina, Ohio and Oregon as well as the District of Columbia - have now effectively banned these loans... there are 24,000 payday lending stores in America - more than Starbucks and McDonald's combined. They provide 19 million American households a quick way to make ends meet... A typical customer takes out about eight payday loans a year..."

CBS News reported in April 2009:

"The payday loan industry, threatened by Congress with extinction, has deployed well-connected lobbyists and hefty sums of campaign cash to key lawmakers to save itself. The strategy has paid off."

This 2011 news report explained how many layday lenders charge unbelievably high interest rates. Last month, the City of San Francisco negotiated a settlement with payday lender Money Mart (a/k/a Loan Mart), which agreed to pay to $7.5 million to reimburse consumers for alleged illegal lending activities and interest rates as high as 400 percent. Consumers eligible to receive reimbursements may receive payments ranging from $20 to $1,800.

The letter caught my interest for three reasons. First, it seems to avoid unnecessarily the CFPB. Second, it mentioned prepaid-card issuers, which this blog has covered extensively. Banks and non-bank prepaid-card issuers have targeted the same market as payday lenders: consumers who have a checking or savings account and not both (e.g., underbanked), or who have neither (e.g., unbanked). About 8 percent of U.S. households are unbanked, and 20 percent are underbanked. Unbanked and underbanked households are typically non-Asian minorities, low-income, young, and unemployed.

Third, anytime a proposed Congressional bill mentions both "modernization" and financial services, a closer inspection is usually wise. (The Graham-Leach Bliley Act, which repealed Glass-Steagall comes to my mind.) Things often get modernized for some, not for others who really needed it, and there are always unintended consequences. One of the OCC's concerns is money-laundering, which is connected to a host of other global ills. Legislation that creates a new class of financial institutions needs to be well constructed, closely reviewed, an adequately discussed publicly.

The Attorney Generals' letter to Congress is available at the Illinois Attorney General website (Adobe PDF). Download H.R. 6139 (Adobe PDF) and see page 24, lines 3 through 8. That's a deal breaker. And, I suggest that you read the full testimony about H.R. 6139 by the OCC Deputy Comptroller of Compliance Policy (Adobe PDF).

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?

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.

Consumers Adapt Their Social Media Use Given Privacy Concerns

Pew Internet recently released the results of a second quarter 2011 survey about consumers' usage of social networking web sites and privacy. The survey found that consumers are adapting their usage of social networking web sites given privacy concerns:

• 63% of survey respondents have deleted people from their “friends” lists, up from 56% in 2009,
• 58% of users restrict access to their profiles on social networking websites. More women (67%) do this than men (48%),
• 48% of users have had some difficulty managing their profile privacy settings on social networking web sites,
• 44% have deleted comments made by others on their profile,
• 37% have removed their names from photos that were tagged to identify them, and
• 11% have posted content they regret.

It will be interesting to see how much further adaptation occurs in next year's survey results, since users will have had more time to use features, like the Timeline feature from Facebook. I have talked with consumers who use the Timeline feature to delete harmful archived status messages, since employers now use social networking web sites to screen job applicants, to determine credit worthiness, and to evaluate insurance worthiness.

Some consumers use the new Facebook Profile Preview feature to screen and reject their friends' attempts to tag them in status messages and photographs. That seems very wise since too many users (42% total) don't restrict access to their profiles.

Should companies use social networking websites for financial, insurance, and employment screening uses? That's debatable, but the reality is that companies use the data anyway for screening, and the social networking sites are happy to make more money. My advice: prune your profile of harmful archived posts, and don't post anything at a social networking web sites that you don't want read/shown in court.

A Primer: Finding A Credit Union To Move Your Money To

Many consumers feel "mugged" by the big banks and their many banking fees, and are moving their money to a community bank or credit union. If you are looking for a credit union, there are a few things you should know. I am looking for a new bank or credit union, given the new debit card fees and poor treatment.

To learn about credit unions, first I visited the National Credit Union Administration (NCUA) website. The NCUA is the independent federal agency that regulates and supervises federal credit unions. The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF), which insures deposits at federal credit unions and most state-chartered credit unions. Deposits are insured up to $250,000 per account.

The NCUA website explains what a credit union is and how they operate. Some consumers like credit unions because they believe all banks will ultimately add fees for checking accounts. Besides offering low and no fees compared to the big banks, the attraction of a credit union is:

"... cooperative financial institution that’s owned and controlled by the members. Since they’re not-for-profit, they exist to serve you, the member. Not for profit, not for charity, but for service is a credit union motto. As a member, you have a say in how the credit union is run..."

I like the idea of having a say, since that is not happening at the big bank where my accounts currently are. At the NCUA website, I used the find a credit union to develop a short list of three or four credit unions located near where I live. The tool delivers summary information about each credit union: name, address, phone, CEO name, credit union type, number of members, charter number, status, and other pertinent data. I found this information useful with creating my custom list of prospective credit unions to apply to.

To join a credit union, you have to apply. Some have specific membership criteria; others do not. You will probably want to find credit unions located near you, since their network of ATM machines is not a broad as the big banks. To me, that is a small consequence to avoid the numerous fees charged by the big banks.

To learn more, you can also follow the NCUA on Facebook. Or you can also visit the National Association of Federal Credit Unions (NAFCU) website. While the NCUA website focuses on the needs of consumers, the NAFCU website provides information for both its members and for consumers. You can also follow the NAFCU on Facebook.

The NAFCU also provides a credit union locator tool to find a credit union, and a compare rates tool, to compare the interest rates by type (e.g., savings, mortgages, consumer loans, and credit cards) at credit unions. I found the compare rates tool not very useful, since it only lets you compare all interest rates in a state by type, or rates by type nationally. The compare rates tool doesn't let you compare rates by type within a state.

To be fair, while I like a lot of the information about banks in articles at Bankrate.com, its compare rates tool includes interest rates for a variety of financial products (e.g., checking, savings, CDs, credit cards, mortgages, auto, student loans) at banks, but lacks relevant checking and savings fees. In 2009, this blog first covered the Move Your Money Project (MYMP) website. At that time, the search tool only included community banks. The search tool was upgraded last year and includes both community banks and credit unions.

The Find a Better Bank (FBB) website lets consumers search across both banks and credit unions. I found many of the questions in the FBB search tool intrusive on privacy, and just wanted the site to simply display a list of nearby banks with their key check/savings interest rates and relevant fees.

What search tool have you used to find a credit union or a community bank to move your money to? If you have used any of the above search tools, please share your experiences: good or bad.

[November 1, 2011 Update: In a Facebook message, the NCUA announced today, "We have launched the completely restructured and redesigned www.ncua.gov and rolled out phase II of our consumer-focused website www.MyCreditUnion.gov. The site www.ncua.gov is now exclusively tailored toward the business aspect of the agency, whereas consumer content moved to www.MyCreditUnion.gov with an identity aimed at attracting web-surfing consumers who either want to learn about credit unions or need help with their credit union. The new site incorporates the latest functionality in web technologies and features."]

The Frenzied World Of Companies Collecting Consumers' Financial Histories

Many consumers believe that if you pay your bills on time, keep your (Experian, Equifax, and TransUnion) credit reports accurate, and keep your credit scores high, then all is well. Not necessarily. There are many more companies that track and collect data about consumers financial history.

Chances are, you haven't heard of their names. The Washington Post reported:

"But little attention has been paid to the firms that target consumers outside the mainstream financial system. Often they are students, immigrants or low-income consumers who do not qualify for traditional loans or choose not to use them... they carry particular weight for the estimated 30 million people who live on the margins of the banking system."

Who are some of the smaller firms? Some of them this blog has covered: ChoicePoint, Innovis, RapLeaf, Quantcast, First Data, Acxiom, Intelius, US Search, and Spokeo. Some are data brokers. Some collect website visitation statistics. Others focus on finance or insurance. Some are technology vendors working with ISPs. A prior blog post discussed the variety of brands of credit scores. Some other firms' names you may not have heard about:

"LexisNexis, whose parent company bought ChoicePoint three years ago, handles background checks, tax assessments and criminal histories. Bounced checks can be tracked through Chex Systems, TeleCheck or SCAN. Payday lenders report to a company called Teletrack. Alliant Data compiles information on so-called “installment payments,” industry jargon for recurring monthly fees such as gym memberships. The National Communications, Telecom and Utilities Exchange collects account information for 63 of that industry’s largest firms..."

The accuracy of the information collected by these firms is suspect:

"Arkansas resident Catherine Taylor didn’t learn about the fourth bureau until she was denied a job at her local Red Cross several years ago. Her rejection letter came with a copy of her file at a firm called ChoicePoint that detailed criminal charges for the intent to sell and manufacture methamphetamines. The information was incorrect... Taylor said she has identified at least 10 companies selling reports with the inaccurate personal and financial information, wrecking her credit history so badly that she says she cannot qualify to purchase a dishwasher at Lowe’s. Taylor must apply for loans under her husband’s name and has retained an attorney to force the firms to correct the record..."

And all of these firms do not include social networking websites, advertising networks, and mobile device marketers -- all collect information and profiles about consumers.

Given the long list of companies across several industries collecting consumers' personal information, you could call this a feeding frenzy.

Why Does First Data Know So Much About Consumers?

[Editor's Note: This blog post was first published on September 10, 2008. I am posting it again since several banks have decided to sell consumers' debit card shopping habits, and since consumer tracking has increased greatly during the years. Banks have a sacred trust to their customers -- to serve and protect consumers' sensitive personal information, not sell it all. Guest author William Seebeck has written several posts for this blog. "Bill" and I worked together at Lexis-Nexis headquarters in Dayton, Ohio during the 1980's. Bill sent to me his comment below which he also submitted as a reply to the ZDNet blog post by Tom Formeski about First Data Corporation. Bill's message deserves the widest audience possible, and it includes advice First Data, the big banks, and consumers would be wise to listen to.]

I'm sure that it is true, as Mr. Capellas states, that he knows more about what we (the American public) are likely to do next than we do ourselves.

However, I hope that Mr. Capellas also knows that he and First Data Corporation hold a special trust as the guardians of that information as it represents the most private of American consumer information.

Why does First Data know so much?

In part it is because First Data Corporation, now a private corporation, represents both sides of most electronic transactions. It represents more than 50% of the banks and other financial institutions that issue credit/debit cards and other electronic instruments. It also represents more than 50% of all merchants that accept credit cards at their stores, restaurants on the streets of America's towns and cities and also on the electronic highway that transits our Internet community. First Data also represents more than 50% of all the ATM's that Americans use every day.

This means that First Data Corporation has knowledge of your bank accounts, credit activity, purchasing data, and much, much more.

I think most Americans would agree Mr. Capellas that as a result of the role your company plays in all aspects of financial transactions that you and your company are in a very unique and most singular position. You hold a sacred trust it seems to guard the privacy of such transactions rather than thinking up new ways to monetarily benefit from the use or sale of this most private information.

Those of us who are pioneers in the use of electronic information and e-payment services believe that companies like First Data should be much more transparent. It is bad enough that America's consumers feel held hostage by the credit reporting agencies, it doesn't need another company to exploit them.

Mr. Capellas, most Americans don't know that you have access to their bank accounts, their store accounts, their phone records and their Internet activity. I strongly suggest that you keep what you and your company know about what is in those accounts to yourself. Show the people of America what keeping a sacred trust is all about.

William B. Seebeck
August 8, 2008. © William Seebeck.

Foreclosed And Abused By Their Mortgage Company

This story is a classic example of a "mugging" by a mortgage company. The Huffington Post reported an awful story about a couple facing foreclosure on their home even though they didn't miss a payment.

Yes, you read that correctly. The mortgage company wants to foreclose even though the homeowners didn't msiss a payment. And the homeowners can prove they didn't miss a payment.

How did this situation happen? According to the Huffington Post story:

"...the neighborhood bank that originally issued their mortgage sold the loan, and it eventually landed in the hands of one of the nation's largest mortgage companies... The complex reality of the modern mortgage system was supposed to have very little effect on the Parkers -- they would simply mail their monthly payment to a mortgage servicer... But, along the way, that machinery broke down. No one, the Parkers say, told them their loan had been sold. With no word from the new servicer, New Jersey-based PHH Mortgage, the Parkers sent their first payment to the original bank, which mailed the check to PHH, according according to documents the Parkers provided to The Huffington Post. But that check went missing..."

How does a mortgage company mishandle a payment? After all, collecting mortgage payments seems like a primary corporate task.

The Parkers did everything correct. They kept documentation. They kept submitting mortgage payments. They called PHH to find out what happened. They also sent payments directly to PHH. They sent registered letters to PHH customer service representatives. They spent hours on the phone with the bank and the mortgage servicer. They even contacted both the CEO of PHH and their state attorney general's office for help.

You'd think that PHH would want to quickly correct the problem, since they want to continue receiving payments from a willing and financially-able homeowner. The Parkers worked with the local bank to correct the problem at PHH. They hired an attorney to help them communicate messages and payments properly given the foreclosure threat:

"It appears Metropolitan National Bank forwarded proof that that original payment had been sent to PHH Mortgage, and asked the Parkers for proof they'd made all the subsequent payments, which they forwarded to PHH Mortgage... In November, 90 days after that first payment had gone missing, the PHH Mortgage refused the fourth payment, returning the check with a letter that explained the account was in arrears..."

I guess that bureaucracy and incompetence got in the way at PHH. PHH sent the house into foreclosure on December 29.

Consumers lose their home after one mishandled payment by a mortgage company? That is not right, on so many levels. Where is the honesty? The corporate responsibility?

I checked the Better Business Bureau website to see it's rating of PHH. While the BBB listed PHH as B+, there are 362 complaints about the mortgage company. 33 percent (120) of those complaints were for billing and collections issues, and 35 percent (128) were for contract issues. While 93 percent (336) of complaints were resolved, consumers still had to experience the hassle of getting their complaint resolved. It seems thtat the Parkers' experience with PHH is one of the unresolved.

I wonder how frequently this crap happens. A company mishandles checks and paperwork; and the consumer suffers the consequences. Where is the executive and corporate accountability? This kind of crap will stop only when bank and mortgage executives go to prison for this type of consumer abuse.

A Primer On Credit Scores

Lately, it seems like many websites are offering free credit scores. Some of those websites, like FreeScore.com, I have reviewed in this blog. But there are others. Consumers should know that there there are different brands of credit scores. Here is what you need to know about credit scores:

1) A credit score is a three-digit number banks and lenders use to decide whether or not to give you credit. Examples of credit are mortgages, bank loans, auto loans, and credit cards. A variety of companies use credit scores, including banks, credit card issuers, telephone companies (e.g., landline, cellular), landlords and utilities (e.g., gas, electric companies).

2) You should check your credit score before you apply for a loan. Why? It will give you a good idea of your chances of being approved for a loan or credit. According to About.com:

"People with credit scores lower than 620 find it harder to get applications approved and are left with higher interest rates."

3) Not all credit scores are the same. If your credit score is 802, that means one thing if the high end of that credit score brand is 850; and it can mean something different if the high end of that credit score brand is 990. Knowing both the brand and range the of credit score is important. You may encounter the term "FAKO score." That terms refers to any credit score that is not the myFICO brand credit score.

4) Several events will negatively affect your credit score. When credit score producers cacluate your credit score, they look at your credit history. Examples of events that will lower your credit score include: paying late, defaulting on a loan, high balances on your credit cards, and a personal bankruptcy. See this page at About.com for the list of 15 events that negatively affect credit scores.

5) You need to know which credit reports and credit score brand your bank or lender uses to evaluate your credit worthiness and risk. You don't want to buy a credit score brand you don't need. You don't want to buy credit score brand X while your bank or lender uses brand Y.

6) Some sources, like the credit reporting agencies, will sell to you both their credit score brand and other credit score brands. You may or may not find this helpful. Compare prices and see #5.

7) If you are a victim of identity fraud, then criminals have both stolen your identity information and obtained credit (e.g., loans, mortgages, services) fraudulently in your name. Obviously, the criminals don't plan to pay off the loans they have obtained in your name. When they fail to make payments, it will negatively affect your credit scores. Plus, the lenders will come to you looking for payments. So, it is important to protect your identity information, check your credit reports for fraudulent entries, and correct any fraudulent entries.

8) Your credit score isn't the only factor that matters. You still need to review your credit reports for accuracy. Fraudulent entries can lower your credit score. Your credit utilization ratio (the balance on your credit card as a percentage of the card limit) matters more to some lenders than your credit score. If you max out your credit card limits every month, that will reduce your credit score. Experts suggest you keep your credit utilization ratio below 50% -- ideally at 30%.

Since there are several credit score brands, to stay organized I compiled a list:

• CreditKarma.com (offers the TransRisk credit score based on your TransUnion credit report)
• CreditXpert
• Equifax Credit Score
• Experian Plus Score
• FreeScore
• My FICO (produced by the Fair Isaac Corporation)
• Quizzle (offers a credit score based on your Experian credit report)
• TransUnion Credit Score
• Vantage Score® (developed jointly by the three major credit-reporting agencies: Equifax, Experian, and TransUnion)

I am sure that there are more. What credit score brands have you used? Share your experiences below in the comments section. I've Been Mugged readers want to know.

National Protect Your Identity Week

If you hadn't heard, October 17 - 23, 2010 is National Protect Your Identity Week (NPYIW). About 10 million consumers were victims of identity theft and fraud last year. And the problem isn't going away anytime soon.

The ProtectYourIDNow site contains events for consumers by state. I visited the website to see the types of events available. Most of the events are sponsored by local organizations and governments, and many events are access to portable shredding resources for consumers who don't have at-home shredding machines. Other events include workshops about how to avoid scams, or tips about credit scores and credit reports. Many of the events are free. I encourage readers to find a NPYIW event near you.

The NPYIW website includes informative videos, and an online quiz to test your knowledge about identity theft and fraud. Sponsors of NPYIW include the Better Business Bureau, the National Foundation for Credit Coounseling, the Consumer Federation of America, the U.S. Federal Trade Commission (FTC), myFICO, the Identity Theft Resource Center, the National Crime Prevention Council, the National Council of La Raza, the Credit Union National Association, and many others.

Cities Whose Consumers Have The Highest Credit Scores

I found this report very interesting. The Experian State of Credit report ranked cities in the United States by consumers' average credit score. Residents in these cities had the highest average credit scores:

1. Minneapolis (MN): 787
2. Madison (WI): 785
3. Cedar Rapids (IA): 781
4. Green Bay (WI): 780
5. San Francisco (CA): 780
6. Boston (MA): 779
7. Peoria (IL): 778
8. La Crosse (WI): 778
9. Seattle (WA): 777
10. Sioux Falls (SD): 777

The average credit score was based on January to June 2010 inputs by Designated Marketing Area (DMA) from VantageScore and other leading credit reporting agencies. VantageScore is a newer credit-score score brand which competes with the FICO score, produced by the Fair Isaac Corporation. Consumers' VantageScores range from 500 to 990. 16% of the population has a VantageScore between 900 to 990.

The cities with the lowest average VantageScores:

1. Harlingen (TX): 684
2. Jackson (MS): 698
3. Corpus Christi (TX): 700
4. Shreveport (LA): 701
5. El Paso (TX): 706
6. Monroe (LA): 706
7. Las Vegas (NV): 707
8. Bakersfield (CA): :708
9. Myrtle Beach (SC): 709
10. Tyler (TX): 709

Residents in Harlingen had an average of 1.4 credit cards, $23,500 outstanding credit card debt, and an 11.7% unemployment rate. Residents in Minneapolis had an average of 2.1 credit cards, $25,100 outstandind credit card debt, and a 6.8% unemployment rate. Coincidentally, the Minnesota Attorney General's website provides its residents with good information about both personal finance and credit scores. The website lists these factors that affect consumers' credit scores:

• Have you paid your bills on time?
• How much outstanding debt do you have?
• How long have you had credit?
• How often do you apply for credit?
• What types of credit are you using?

When comparing credit scores, consumers need to know which brand of credit score they have. Want to learn more? Visit the attorney general or consumer protection website for your state. Also, you may find these related blog posts helpful:

• A Review of FreeScore.com
• After a Data Breach, Will a Replacement Credit Card Affect Your Credit Score?
• 'Hard' Inquirieis Will Negatively Affect Your Credit Scores
• 5 Sneaky Ways To Ruin Your Credit Score

6 Tips To Help Consumers Spot Credit Repair Scams

Perhaps you were the victim of identity theft and fraud which wrecked your credit scores and credit. Perhaps, you made made some poor financial decisions. Or maybe you home was foreclosed upon after you lost a job during the recent economic recession. What should a consumer be aware of when trying to improve your credit?

Some consumers seek help from credit repair services. After all, there are ads everwhere online and on television by credit repair services offering to help. Some credit repair services have even posted comments on this blog. What should consumers be aware of? How can you spot legitimate credit repair offers from the scams?

Everyone wants to be a smart, informed shopper. The U.S. Federal Trade Commission (FTC) offers six tips to help consumers spot credit repair scams. Credit repair scams will often:

1. Demand payment before they provide any services. The Credit Repair Organizations Act specifies that they cannot force you to pay until after they have provided the services promised
2. Won't explain your rights nor what you can do for free by yourself
3. Instruct you not to contact the three major national credit reporting agencies: Equifax, Experian, and TransUnion
4. Promise they can delete most or all the negative information in your credit reports, even when that information is accurate
5. Ask you to create a “new” credit identity to get a new credit report by applying for an Employer Identification Number instead of your Social Security number
6. Instruct you to dispute all the information in your credit reports, even when it accurate

Obviously, before doing business with a credit repair service you should review your credit reports from the three major credit reporting agencies. Know you rights and use the official website to order your free credit reports as provided by law: AnnualCreditReport.com. Like any other serious financial situation, document everything in writing when doing business with any credit repair service.

If you need more help, check the website for the Attorney General's Office in the state where you love. Many provides assistance and advice about credit repair scams. For example, see the Connecticut or Missouri or Florida attorney general websites.

Identity Thieves Target Job Seekers

The CBS News Early Show features a really good video warning job seekers about employment scams. I strongly recommend watching the video, since it is short, informative, and very helpful.

Experts advise job seekers to:

• Do an online search using the website address for any company name you are unfamiliar with before visiting the site; especially work-at-home offers. This could turn up links to company reviews or complaints at places like the Better Business Bureau or your state's consumer protection agency.
• If a potential employer or recruiter asks you early in the job application process about a credit check, to enter your Social Security number in an online application form, or to pay a fee -- look elsewhere. Chances are, it could be a phishing scam to uncover your bank account information. You shouldn't disclose your SSN unless a job offer is eminent.
• Learn how to spot phishing scams. They now circulate on Facebook and Twitter

Teenagers And Identity Theft Prevention

A recent Associated Press news story on ABC News highlighted a new trend by identity criminals to steal the sensitive personal information of children and teenagers. Why? Because youth have unused Social Security numbers which thieves can resell to people who want to obtain credit fraudulently. Plus, parents (and their children) don't check their chldren's credit reports for fraud.

What should you do? Parents should ensure that their teenager children learn how to spot phishing attacks -- attempts by identity criminals to trick teens into revealing their sensitive personal information.

The Federal Deposit Insurance Corporation (FDIC) advises teens:

"Even if you're too young to have a checking account or credit card, a criminal who learns your name, address and Social Security number may be able to obtain a new credit card using your name to make purchases. One of the most important things you can do to protect against identity theft is to be very suspicious of requests for your name, Social Security number, passwords or bank or credit card information that come to you in an e-mail or an Internet advertisement, no matter how legitimate they may seem."Teens are very comfortable using e-mail and the Internet, but they need to be aware that criminals can be hiding at the other end of the computer screen," said Michael Benardo, manager of the FDIC's financial crimes section. These types of fraudulent requests can also come by phone, text message or in the mail."

To that I would add: don't give out your health care coverage information or account number. Some identity theft includes medical identity theft.

To summarize, teens must learn how to recognize phishing websites, phishing email messages, and phishing posts at social networking sites. You have probably seen the $1,000 gift card scam circulating within Facebook. If it sounds too good to be true, it usually is.

To learn more, try these blog posts:

• High School Seniors Need Help WIth Money Management
• 7 Things You Should Stop Doing On Facebook
• Warning College Students About Identity Theft
• College Offers Cyber Training For New and Current Students
• Identity Theft Prevent Tips For College Graduates
• How To Find A Job While Safeguarding Your Sensitive Personal Data

Banks and Banking Customers Affected By The BP Oil Gusher

As you have read in the news, the oil gusher has spewed oil into the Gulf for almost three months. Hundreds of regional medium and small businesses, like tourism and fishing, have been affected. Banks and their customers have been affected, too.

I think it is important to observe during this crisis how the national and regional banks (and regional credit unions) help their customers-- regional business -- affected by the oil gusher. Earlier today, several government agencies released a statement advising ways that banks can assist regional businesses affected by the oil gusher. The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Conference of State Banking Supervisors issued this joint statement encouraging:

"...financial institutions to work with their customers and consider measures to assist borrowers affected by this situation and its subsequent impact on local communities. Substantial business disruption and damage to businesses along the Gulf Coast Region have occurred. In response to this disaster, financial institutions can take measures to meet the critical financial needs of their customers and their communities... if conducted in a reasonable and prudent manner, are consistent with safe and sound banking practice. In this regard, the regulators encourage institutions to consider alternatives for customers who can demonstrate they are affected by the disaster; such alternatives may include:

• Temporarily waiving late payment charges, ATM fees, and penalties for early withdrawal of savings;
• Expediting lending decisions when possible, consistent with safety and soundness;
• Extending or restructuring borrower debt obligations in anticipation of the receipt of funds based on claims the borrower may have filed with BP; and
• Easing credit terms or fees for loans to certain borrowers, consistent with prudent banking practice."

Now, there is an opportunity for the FTC and related agencies to issue similar guidelines and reminders for regional businesses to protect the sensitive personal information of their employees and customers. The crisis should not be an opportunity for small businesses to abandon data security.

To its credit, the FTC has issued Consumer Alerts about both oil gusher insurance/charities scams and oil gusher job scams. If you seek a job in the Gulf region, the FTC oil gusher job scam alert helps consumers learn how to recognize these signs of a job scam:

• Guaranteed jobs or guaranteed placements
• An employer or employment-service firm that wants you to pay for training, certification, or its expenses
• Vague offers: the more general the email “job” description, the less likely there is a valid job
• You’re asked for your financial information: credible employers don't need your bank account information or credit/debit account numbers to interview or hire you
• Companies that charge you for lists of available jobs

Sadly, as ocean current distribute the oil to wider areas, more businesses and consumers will need the above advice.

High School Seniors Need Help With Money Management

I recently wrote about identity theft tips for college graduates. It seems that things are worse with high school seniors.

According to a recent survey by Capital One Financial Corporation, high school seniors benefit greatly from financial education both in the home and at school. Either one alone is not quite enough. The survey found that those seniors with financial education both at home and at school felt significantly more confident about their personal finance skills and knowledge.

The survey also found that nearly half (45 percent) of all high school seniors surveyed said they are unsure or unprepared to manage their own banking and personal finances. Compare that to this: of the students who had a personal finance class 75 percent said they felt prepared to manage their finances. Another 66 percent rated themselves "highly" or "very" knowledgeable about personal finance, compared to only 30 percent for high school students who didn't have a financial education course.

If this is how high school students without a financial education course rated their confidence, the percentage must be similar for those who haven't learned about identity theft and fraud.

Parents Involvement Matters

The survey also found:

• 20 percent of high school students said that they "frequently" discuss money management and personal finance issues with their parents
• 45 percent said they "sometimes" discuss money management and personal finance with their parents
• 34 percent said they never discuss money with their parents, or only when necessary
• Of students that reported frequent discussions, 71 percent rated themselves as "highly" or "very" knowledgeable about personal finance, and 81 percent feel prepared to manage their own finances

Having a Job Helps

The survey also found that having a job during high school helps prepare high school students to manage their money and finances. Of the high school student who already had a job, 72 percent said that their job experience prepared them in some way.

To help parents and young adults, Capital One partnered with Search Institute to create a free multimedia financial literacy program at www.bankit.com. The program helps parents and teens learn practical skills together and avoid common mistakes.