Debt

We told you about the debt collection hassles endured by people shouldering a large amount of credit-card debt. Then we invited debt collectors to tell their side of the story. Both sides had a lot to say about just what goes on in the debt collection industry, but one assertion -- by the head of a collections industry trade group -- that debt collectors were courteous and professional raised many eyebrows. Many of you vociferously disagreed with this in the comments section.

As it turns out, government watchdogs agree with you. A new report has led to the Federal Trade Commission stepping up its enforcement of debt-collection abuses.

"I'm pleased the FTC is cracking down on debt collectors, and has identified harassment and targeting the wrong debtors as examples of what's wrong in the industry," Linda Sherry, director of national priorities for Consumer Action, a consumer advocate group, told WalletPop via email.

More and more consumers are saying no to credit cards and shifting to debit cards, but are they permanently changing spending habits or finding a way to make do because lenders aren't lending? It's probably a little of both.

Whatever the reason, new credit card origination was down by 54.5% in November 2009 compared to figures from November 2007. In November 2007, 64 million new bankcards were issued year-to-date. In November 2009, that number was down to just 29.1 million new bankcards year-to-date, according to Equifax's January 2010 new account trends report.

You may never know when it happens, but lenders may begin guessing your income before they approve your credit application when the new Credit CARD Act takes effect on February 22.

The new law requires lenders to consider your ability to pay any new or additional debt before approving a credit card application. While they could do something as simple as ask you, they may want to verify what you tell them.

Since most people don't carry around a pay stub when they go shopping, if you decide to apply for a credit card during a shopping trip, the stores may look for a clue about your income when they ask for your credit score.

"Retail stores are quite upset about this change in the instant approval of their cards," Bill Hardekopf, CEO of LowCards.com, wrote to WalletPop by e-mail. "Consumers now need to show proof of income when they apply for a card, and not many of us carry this around when we are shopping in the mall."

The house sits behind an upholstery shop on the corner, and while I'm too young to know for sure, I'll bet the upholstery shop has thrived since the streetcar ran down Gladstone Street in the 1950s. The house, like mine, was built in the first few decades of the 20th century. An old grande dame, she is, brilliant with leaded glass windows and gingerbread detailing and a formal dining room and built-ins that must have had the real estate agents in a tizzy four years ago when the market was so hot she was flipped twice in a season, sold last for $417,000 -- nearly three times what we'd paid for our house, a block away, in 2002.

When she was first for sale my husband, who's worked for a few of the city's top residential real estate agents, called his old friends, dreaming of an investment -- he loves how enormous and elegant she is. I told him it was a foreclosure waiting to happen: even pre-crash I could see it couldn't work. The numbers just didn't make sense; the house had been a rental for many years and, despite its great "bones," there were problems that would prevent even the slummiest of landlords from breaking even.

The Wall Street Journal dropped a bombshell this week, noting with little fanfare (subscription required) that the college degrees we're told are a ticket to wealth and happiness aren't all they've been cracked up to be.

The College Board, a glorified trade group representing the interests of colleges and universities, has long touted an $800,000 lifetime earnings advantage for college grads. Now other researchers, armed with more rigorous data, are suggesting that the lifetime earnings advantage of college may be less -- a lot less. Mark Schneider of the American Institutes for Research calculated that the lifetime earnings advantage of a college degree is just $279,893.

An investigation by the nonprofit journalism operation, ProPublica, raises intriguing questions about reasons desperate homeowners are being turned away for the very government program aimed at helping them.

Some of the problems ProPublica uncovered echo complaints WalletPop heard when we wrote about troubles with the federal Home Affordable Modification Program last year: trial modifications being extended just as they are completed, and loans being denied because an income decline is considered temporary.

That temporary hardship, the focus of ProPublica's latest story, was not intended to be legitimate grounds for denial, as was clearly explained by the Treasury Department in a December memo. Now, JPMorgan Chase -- which was involved in all of the cases the investigation uncovered -- has acknowledged its error and encouraged anyone denied for that reason to reapply. A spokeswoman told ProPublica that the company "adapts as quickly as possible" to the Treasury guideline missives.

As of the end of 2009, the government reported, more than 900,000 trial modifications had been started, but only 66,465 had transitioned into permanent breaks for the borrowers. The report also showed JP Morgan Chase was second only to Bank of America as a participant in the federal HAMP program.

Consumers overwhelmingly want limits and additional disclosures on bank overdraft fees, according to a survey released by the Consumer Federal of America (CFA). Yet Congress has done nothing to fix the problem since it held hearings late last year and banks continue to make billions on overdraft fees. The Center for Responsible Lending (CRL) estimates that consumers paid $23.7 billion for overdraft fees in 2008, which is an increase of 35% over just two years.

CRL reported that 50 million Americans overdrew their checking accounts at least once over a 12-month period with 27 million account holders paying five or more overdraft or insufficient funds fees per year.

The Federal Reserve is implementing new rules requiring banks to get customers' consent on overdrafts when they get a debit card, but the new rules do nothing to rein in the high fees or provide real-time disclosures. The rule does mandate an opt in at the time one opens an account, but does not require banks to discuss the opt out provision after a customer experiences an overdraft.

If you're fed up with overdraft fees, you're not alone. During a telephone press conference held earlier this afternoon, which I sat in on, Consumer Federation of America released the results of a national poll today showing that (surprise) just about everyone wants limits and additional disclosures on bank overdraft fees.

I'll get to that in a moment, but there was really a second message that the CFA and the Center for Responsible Lending, which had a representative at this conference, wants to get out: If you're truly fed up, call your Congressman or woman and ask them to get behind two bills circulating in Congress that intend to put much more severe restrictions on overdraft fees.

It's no big secret that a lot of Americans are having trouble making their credit card payments these days. High interest rates and punitive penalty fees just heap it on, and make getting out from under those bills a daunting task.

This article from MSN Money, though, explores a possible solution many people aren't even aware of: Asking their issuer to cut them some slack.

The technical industry term for this is "forbearance." It's not loan forgiveness; you still have to pay. But, according to the article, an issuer can do anything from postpone payments to lowering minimum payments to reducing your interest rate or the amount you pay in fees.

If you need to use credit but don't want to impact your credit score, you may want to apply for a charge card rather than a credit card.

If you've found yourself paying frequent overdraft fees when using debit cards, or finding your checking account tied up waiting for the bank to correct an error from your debit card usage, charge cards may also be the answer.

Let's flash back to the beginning of December. The Consumer Reports National Research Center polled more than 1,000 randomly-selected consumers to find out how much they planned to spend on gifts this holiday season. The answer: $699 on average, about $65 less than they planned to spend in the prior two years.

Now, however we have actual totals and they are -- you guessed it -- substantially higher. The average shopper spent $811 – or 16% more than they'd planned – on gifts alone. The half of the population surveyed that paid with credit cards reported spending another $85 more, on average, raising their total to $896. And nearly one-fifth couldn't resist bringing home a little (or not so little) something for themselves.

Not long ago, we shared the experiences of several Americans who had climbed their way out of deep debts. Their tales touched a nerve with readers who shared their own harrowing stories of their experiences with debt collectors. Some of these agents treated their debtors professionally; others, less so. Readers described dodging collection calls and hanging up on agents.

A few brave professionals also responded, complaining of the unfair mis-characterization of their jobs, and of them. What's it like to be on the other end of that phone, or on the other side of that doorway? Here's the consensus: Being a debt collector is a tough way to make a living.

"It was the worst, nastiest job I ever had. Every day, I would go to work stressed out," says Lisa Crowley, who handled receivables for a heavy-equipment company in Michigan in the late 1980s. Half of her job involved calling clients who hadn't settled their bills, from mom-and-pop businesses to the city of Detroit. Crowley stuck it out for a year before transferring to another department.

It is an unfortunate truth that those who can least afford to lose money are often targeted by businesses (and scams) intent on taking advantage of their weak position.

The folks at Mint.com put together an excellent graphic presentation of how lower income people get caught up in difficult situations and pay dearly called "The Shaft: How Companies Prey on the Poor." The raw deals users get with payday loans, "repair" credit cards and renting to own are detailed by the artist behind WallStats.com.

See it here. Be patient, the image is large and, depending on your browser, you might have to click on it to expand it for viewing.

It's a good primer on the perils of doing business with those who cater to those with lower incomes and the credit-challenged.

Rebuilding lousy credit is a hot topic with consumers these days, and one I've thought about a lot, having recently written a book about bad credit and having survived many, many years of financial turmoil. I currently have no credit cards, save one that my wife and I were able to get when my wife needed dental work last year. When I mentioned this to my bank manager once -- during a discussion about my almost-every-other-month overdraft fees -- he suggested I get a secured credit card.

Secured, as in, I put my own money into the credit card, say $300, and then I use it for a year, and eventually I'm be granted credit again. (Bankrate.com does a nice job of explaining the ins and outs of secured credit cards, in case you're interested in learning more.)