Wednesday, February 27, 2008
[scams] FTC Takes Aim At BlueHippo's Finance Scheme
The Federal Trade Commission announced that it has won a settlement from a company called Blue Hippo that financed consumer electronics like computers and televisions for people with bad credit. This is similar to the rent-to-own world, but even worse.
According to the federal agency, Blue Hippo did not deliver goods to some consumers and violated multiple federal laws, including those covering Truth in Lending and the Mail Order Rule.
Court filings show unbelievable sales pitches such as "Do you want to own a computer, but have less than perfect credit? No problem. If you have a checking account, a home phone and can afford a weekly payment of just $35 for only 12 months, BlueHippo Funding says you're approved, guaranteed."
If you are reading this and considering such an offer, stop now. The axiom of "too good to be true" is accurate. If you can't afford it, don't put yourself in debt exceeding your means for instant gratification. You'll just make others wealthier.
Meanwhile, look for our upcoming article on the Mail Order Rule that discusses its growing importance in the age of Internet shopping.
Labels: Blue Hippo, financial, FTC, rent-to-own
Friday, January 18, 2008
Saving Money On Your Electric Bill [finance]
As the South gets hit this week with snow, prompting widespread panic and oil slowly retreats from its all time high, today's
Arizona Republic has a great story with tips on
how to save on your electric bill.
You likely know many, if not all, of these tips, but we thought the list was worth linking to although we still are not being into the notion that the economy is on the brink of recession. Still, electricity is expensive and folks with electric heat are really getting walloped.
We have a couple of quibbles with the Republic's list. For example, consumers are urged to "Enroll in a plan that averages consumption over the year, taking the seasonal swings out of electric bills." That idea often gets a lot of play and makes many financial planners recommendation lists. We don't like the idea for the same reason we don't like 15 year mortgages.
With proper financial discipline, consumers should not be paying more for electricity during because they do so at the peak. We're not thinking about some super-nifty pre-purchase of electricity at a locked-in price. We're thinking of the bill that runs $100 every month except for two months when it runs $200.
Under that scenario, a consumer pays eight $300 invoices ($2400) and four $600 invoices ($2400) -- a total of $4,800 for electricity in the year. Some financial planners and almost all utility plans urge consumers to
pay a monthly average and may even offer a one time incentive to do so.
That is an awful idea. In our scenario, the consumer pays $400 each month. The notion is that the sting of the $600 bills will be mitigated. That's the same silly notion that causes consumers to overpay their taxes, giving the government an interest free loan, so they "get" a refund in the spring. Such plans simply cost your money.
To optimize your financial situation, plan separately and create a budget for each month. Save the extra $100 in an interest bearing account or some other way until its time to pay your utility bill.
There is no reason to overpay a company for convenience.
The same holds true for a 15 year mortgage. Don't lock yourself into a higher monthly payment. Make sure you don't have a pre-payment penalty and then start paying down your mortgage every month. In that month where the kids needs braces, the washing machine breaks and you happen to have a $600 utility bill, that extra cash flow might help you.
The smartest thing to do right now to cut your heating bills? Make sure your home is properly winterized (no cracks, gaps, drafts, etc.) with storm windows where appropriate. Then have a good quality HVAC (heating and air conditioning) contractor check your system. Older systems are less efficient and can cost you more money. Don't fall for an automatic upgrade, but don't bury your head in the sand by thinking you can get away with
if it ain't broke, don't fix it.
Check with your local utility. Many offer programs that let you buy new energy efficient appliances at discounts or even provide loan programs for them. If you can't pay cash, and the utility savings justify the cost, go ahead and take a loan. Your utility or credit union may even offer a low cost loan.
But whatever you do, don't pre-pay your electric bill. Pay bills (not loans, bills) when they are due, not before.
Labels: financial, saving money, utility
Thursday, December 27, 2007
Senior Scam Halted In Time For Christmas
California's Attorney General and Insurance Commissioner wrapped up a long-running lawsuit in time for the Christmas holidays.
In announcing a $7.2 million settlement with multiple organizations, the California AG's office did what few do in such settlements. $5 million of the settlement will go to restitution with $1 million fines for two different companies.
The scam worked like this:
California officials said that the companies tricked senior citizens into buying annuities—long-term financial vehicles with high penalties for early withdrawal. The annuities offered the possibility of future payments, but only after a lengthy surrender penalty period. Because of their long window to mature, California officials said the investments were not typically suitable for senior citizens.
One of the companies, Family First Insurance, reportedly sent sales representatives, who were not authorized to practice law, to senior citizens’ homes to provide legal advice on estate planning. Those representatives naturally did not disclose that their ultimate goal was to sell annuities. After preparing the living trust documents the agents returned to the seniors’ homes—under the guise of acting as their financial or estate advisors—and induced the seniors to move their liquid assets into annuities.
Family First will be forced to cease operating according to California officials, who offered some solid advice for consumers in the wake of the problems.
* Consumers should be wary if someone claims to a trust expert, senior estate planner or paralegal, or to work with an attorney who is an expert in estate planning. These agents are not attorneys and not experts in living trusts. If seniors need assistance with preparing a trust or other estate plan, they should seek out their own attorney whose expertise is in estate planning.
* Be wary of free seminars or sales presentation on living trust services.
* Use caution if the representative asks for access to your personal financial information while setting up or updating an existing living trust. Agents use this ploy to ultimately pitch annuity investments.
* Some may also criticize existing investments, saying that these investments carry more risk than the annuity.
* And finally, a big warning bell should go off if someone does not discuss the drawbacks of a particular investment option.
Labels: California, consumer, financial, insurance, investment, scam
Friday, December 07, 2007
Forget Mortgages Now. One Agency Tells You (Free) 51 Ways To Save
As the government interference in the free market mortgage economy sorts itself out over the coming hours and days, we'll share our thoughts on this big piece of consumer news. There are still several battles looming and today's Wall Street reaction before a true temperature can be taken of the unilateral government actions being taken.
Meanwhile, the FCIC, one of our favorite federal or local agencies, does an excellent job with a new publication on saving on loans and credit cards. As always, the agency and its content partners do a great job describing an issue and its solutions (or prevention) in plain ole' English.
(from their release)For many, nothing says the holidays more than shopping: hitting the sales, taking in the sights, searching for the perfect gift for everyone on your list.
But it's very easy to shop yourself into more debt than you can handle. This year, resolve to keep your expenses in check and your credit intact -- it's a gift you'll appreciate the whole year through.
Check out
51 Ways to Save Hundreds on Loans and Credit Cards from the Federal Deposit Insurance Corporation (FDIC) and the Federal Citizen Information Center to get advice you can use now and to start the new year off right.
BUDGET: Set a budget whenever you shop. Decide how much you can spend, and don't go over that limit. Paying with plastic? Look at how much you already owe on your cards. One of the quickest ways to run up debt is to only pay the minimum amount owed on your credit cards. Late fees add up, too, and so does going over your credit limit.
51 Ways to Save has other helpful tips for paying less in credit card fees and interest.
BEWARE QUICK CASH LOANS: Proceed with caution if you're looking for quick cash for a shopping trip. Car title or "payday loans" can get you money fast, but they come at a steep price --
the interest rate on a payday loan can be as high as 391 percent! Instead, start a savings account where you can put just a little bit from each paycheck throughout the year. You'll have saved plenty for gifts in time for the next holiday season. If you're considering other loan options for extra cash (like a home equity loan), make sure to check out
51 Ways to Save to learn how to shop for the best deal, compare Annual Percentage Rates (APR) and read the fine print to save even more.
You can get
51 Ways To Save three ways (four, if you count sending us a $25 money order...we're just joking, don't do that)
* Send your name and address to 51 Ways to Save, Pueblo, Colorado 81009.
* Visit
www.pueblo.gsa.gov/rc/n7051waystosave.htm to order online or to read or print these and hundreds of other Federal publications for free.
* Call toll-free 1 (888) 8 PUEBLO weekdays 8 a.m. to 8 p.m.
Labels: credit, FCIC, financial
Monday, October 29, 2007
Countrywide Goes Proactive
We're still not backing down from pushing a healthy dose of the blame for the mortgage crisis on consumers who overextended themselves. When a recent piece on Capital One aired, an middle-aged couple explained how the credit card giant kept offering them cards even though they were overextended and couldn't pay their existing cards.
Let's be clear, and let's be smart consumers.
Stop digging when you're in a hole. The slanted piece somehow blamed
CapOne instead of irresponsible consumers who kept applying for credit cards they couldn't afford to pay. The same issue is rampant in the
subprime mortgage crisis that is damaging the American economy. Banks and financial institutions sell mortgage and other financial products. If you can't afford them, you shouldn't be applying, much less accepting, them.
That said, Countrywide Financial (NYSE: CFC), the nation's largest mortgage lender, has announced that it will proactively rewrite more than 80,000 mortgages. The amount is an unfathomable number with a lot of zeroes. This is after Countrywide was forced to grasp at an $11 billion line of credit offered by Bank of America and after thousands of people lost their jobs.
Consumer advocates have been excessively critical of the mortgage lending industry for making loans to consumers who may not have been unable to pay them back. We think that forces too much responsibility at the business world. If a consumer has diabetes, one shouldn't sue the baker for making lovely cakes and pies available. Likewise, if a consumer has a driver's license that restricts night driving, don't go after the auto manufacturer for putting headlights on the car.
Consumers knew or should have known the risks involved with a variable mortgage. Many seemed positively snobbish about the low, low, low rates they were receiving. The smart consumers we knew all either planned to sell before the first adjustment period and needed a place to park the proceeds of their previous sale or locked into a fixed rate.
We're reminded of one of the smartest people we know who once asked us, "Should I apply for a 30 year or 15 year fixed mortgage?" Our answer remains the same: why lock in a higher rate when, with discipline, you can create even less than a 15 year mortgage provided you don't have a
pre-payment penalty for some reason.
This is all opinion from consumer advocates, not financial advice from any sort of planners or consultants. You should talk with a professional before becoming involved in a mortgage. And if you can't afford one, look in the government listings of your telephone book for a local or state agency who can help you.
But don't sign for a mortgage you may not be able to afford in the future and then chastise the company for offering you the opportunity. Perhaps the biggest part of being a smart consumer is knowing when to say "no". And if you don't have the knowledge, find a professional who does.
Meanwhile, hats off to Countrywide for being a smart consumer-friendly company. Yes, they are taking a licking from those who want to blame the fast food restaurant for serving hot coffee. We prefer consumers take more responsibility and let us help them fight the battles against the companies who do them wrong.
If you think you were hurt in this recent financial crisis, think of the consumers who no longer have a job because Countrywide laid them off. And think of the small investors who owned CFC as part of their retirement funds, and saw the healthy stock's value get halved.
And put down the doughnut unless you're planning to work out later.
Labels: Countrywide, credit, financial, mortgage
Tuesday, September 04, 2007
New Month, Same Housing Woes
After July's foreclosure rate surged 9% from June to July and almost doubled between July 2006 and July 2007, many expected August's market gyrations would follow. The Federal Reserve Bank eased the situation somewhat by attempting to control liquidity.
Now Congress is getting involved.
Senator Chuck Schumer (D-NY) has told lending giant, Countrywide Financial, to stop compensating brokers more for adjustable mortgages. Schumer said at a press conference that 40% of borrowers in an adjustable rate mortgage could have qualified for conventional financing.
As usual when politics and consumers mix, the results are framed by the different perspectives.
Consumers took adjustable rate mortgages to lower their payments or qualify for homes they couldn't afford. The mortgage industry did not take advantage of the consumer. The consumer has taken advantage of a loophole that provided a year or three of monthly cash flow. Now with higher rates, those consumers who cannot afford their homes are going to have to take action. They will need to move or take second jobs or higher paying positions that involve other sacrifices.
Foreclosure should be the last possible resort. Banks and lenders did not cause the subprime crisis. Consumers did. While late night comedians joke about anyone qualifying for a mortgage, the same consumer truths were applicable in that market.
1) Understand the terms.
2) Don't overextend yourself if the worst case scenario you agreed to occurs.
Perhaps the second car has to be sold. Perhaps one of the children can't go to college this year or can only go part-time. By behaving as though a low rate mortgage is a right rather than a privilege earned by strong credit ratings, consumers who wanted it all are driving a financial crisis impacting those who had it all.
Consumer Help Web always reminds consumers to know their rights. Knowing their responsibilities is just as important.
Labels: Countrywide, financial, mortgage, sub-prime
