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  • Minnesota consumers hurt by inaccurate credit card debt claims

    Minnesota consumers have been hurt by inaccurate credit card debt claims. Consumers in Minnesota have recently been victimized because of incorrect information about their debt.

    Debt collectors across Minnesota have been sending out letters informing consumers that they owe thousands in credit card debt and other late payments. According to a report in the Minneapolis Star-Tribune, a number of these letters are based on inaccurate information. The firms sending the letters are in the business of debt collection, having purchased massive databases of unpaid debts for pennies on the dollar and flooding courts with legal actions in which they demand the full amount plus interest and fees.

    The report says the firms’ claims can be impossible to verify, and that advocacy groups estimate that one in 10 debt-buyer lawsuits across the country are the result of inaccurate information. The problem is especially bad in Minnesota, where proof of the claims’ accuracy is only needed if a debtor disputes a claim in writing. That happens in less than 10 percent of cases.

    A recent report from TV station KUSA in Denver said that the Federal Trade Commission received nearly 100,000 complaints about third-party debt collection agencies last year.

  • Signs a consumer is in over their head

    Signs a consumer is in over their head. Consumers will, at some point in their lives, pile up some amount of debt. Between mortgages, car loans, student loans and credit card debt, keeping track of payments can quickly spiral out of control without the proper know-how.

    According to a report in the Atlanta Journal-Constitution, consumers can succumb to the dangers of credit card debt very easily unless they take a few precautions. For example, only paying the minimum on credit card bills means it will take years to pay off even the smallest charges thanks to interest rates, especially if the rates are above 20 percent.

    The report also said some consumers who don’t know how much they owe and can spend each month versus what they earn. Credit card payments should not exceed more than 20 percent of monthly pay, and mortgages no more than 30 percent. One expert told the paper that he has seen many consumers whose interest payments exceed the principal, which is a major problem and can badly damage a consumer’s credit score.

    A recent report from CBS News said that improving a credit score that may have been damaged is as simple as paying bills on time and checking their credit report for any inaccuracies.

  • Financial reform bill could be torpedoed

    Financial reform bill could be torpedoed. Thanks to one change the financial reform bill picked up in committee, it may now end up dead.

    The financial reform bill has been seriously imperiled by the addition of $19 billion in bank levies while the bill was being hammered out in committee. According to a report from Business Insider, Massachusetts Senator Scott Brown will vote against the Dodd Frank Act because of the tax. That tax was added after both the House and Senate passed their versions of the bill, which were designed to help consumers reduce debt.

    Business Insider points out that the tax is relatively small, since the money it asks for is spread across the entire American financial system. The tax was built into the bill to help pay for its implementation and enforcement, which therefore means that without it, the bill will cost American taxpayers $19 billion. However, despite the fact that Brown voted for the bill a week ago, he now opposes it, based solely on this tax.

    "I’ve said repeatedly that I cannot support any bill that raises taxes," Brown said in a statement.

    Without Brown, the bill’s passage is unlikely. Because every law that comes up for vote in the Senate these days requires 60 yeas to get passed, the Dodd Frank Act required two Republican votes, which it had a week ago. However, the death of West Virginia Senator Robert Byrd means that Democrat now requires three Republican votes, and Brown, one of the few from his party to vote for the law initially, has unexpectedly changed his position.

    A report from Bloomberg said that lawmakers will reconvene to discuss the fee, which was added by Massachusetts Representative Barney Frank and signed off on by Senate Banking Committee Chairman Chris Dodd, and Democrats are backtracking on its importance.

    “My hope is that our colleagues will see this as a more attractive pay-for proposal than the one we adopted about four or five in the morning,” Dodd told Bloomberg.

    The proposed fix will pay for the bill by eliminating the Troubled Asset Relief Program, and raising the level of funds the FDIC must hold in reserves to insure bank deposits. The elimination of TARP alone is expected to pull together about $11 billion. The bill’s final approval is expected sometime this week, and while Democrats had hoped to get it on President Obama’s desk before July 4, that seems unlikely now.

  • Study: More people paying down credit card debt

    More people are paying down their credit card debt. As the economy has recovered in recent months, more Americans are getting more money to pay back some of the debt they’ve incurred over the last year or two.

    According to a new study conducted by the consumer website BillShrink, 67 percent of the 220,000 people surveyed said they are payingoff their credit card balance in full every month. A similar study conducted last year found only 24 percent of respondents did so. BillShrink said those numbers may be backed up by Federal Reserve figures that have found consumer debt declined by $113 billion in the same period.

    The survey also found that the rate of people paying off their debt increased dramatically in the last four months, which is directly attributed to the passage of the Credit Card Accountability, Responsibility and Disclosure Act around the same time.

    According to the Federal Reserve, the average consumer carries about $8,000 in debt of some kind – be it car loans, credit card balances or a mortgage – for a national total of $2.448 trillion.

  • Student credit cards aren’t always a bad idea

    Student credit cards aren't always a bad idea. Most college students have credit cards these days, and may be more likely to pile up lots of debt than most other consumers.

    That’s why it’s important for parents to teach their kids about good credit habits that they have learned through years of trial and error. According to the consumer advice website Mint Life, there are a number of ways college students can get a credit card, such as having their parent co-sign for one, or by becoming an authorized user on a parent’s card.

    The site says that a better way to go about giving a student a credit card is to have them open a checking account with a debit card, which ensures that they only spend money they have on-hand. The same is true of prepaid cards, which can serve as training wheels until the student is ready for their own card.

    However, if a parent thinks their child is responsible enough, they should consider letting them have a regular credit card so they can start building a good credit history.

  • What to focus on when reducing debt

    What to focus on when reducing debt. Consumers often have a number of bills to worry about, and with debt mounting, they can become confused as to just what they should pay down first.

    According to a report on National Public Radio’s website, there are two schools of thought on which debt consumers should attempt to lower first. Mathematically, it probably makes more sense for them to pay off the loan with the highest rate first. Doing so would reduce the amount they’re paying overall interest, and that’s money that can be contributed to paying down that debt or others. On the other hand, consumers can get a psychological boost from tackling the smallest debt balance and eliminating it altogether.

    The report says that when a consumer wants to reduce debt, it’s usually wisest to take the first method, which makes more sense from a budgetary sense, especially if the debt that needs to be reduced is of a particularly large amount.

    According to a report in the Washington Post, consumer savings – the part of American paychecks that goes unspent – rose to 4 percent in May, indicating that consumers are successfully reducing debt and putting more money away.

  • Consumer spending increases in May

    Consumer spending increased in May. Consumers spent more in May than in April, thanks in part to a rise in average income and low prices.

    The latest report from the Commerce Department, which tracks consumer spending on a month-to-month basis, found that Americans spent 0.2 percent more than they did last month after holding steady between March and April. Incomes rose 0.4 percent in May, down slightly from the increase in 0.5 percent increase in April.

    The national savings rate improved to 4.0 percent last month as well, up from 3.8 percent, as Americans put away $454.3 billion, the report said. The report also said that the country’s gross domestic product increased an annualized 2.7 percent in the first quarter partly as a result of the increased spending.

    A report in the Wall Street Journal said that household spending and company investments need to pick up the slack from fading government stimulus money if the U.S. economy will continue to grow. Consumer purchases account for more than two-thirds of demand in the economy, but are being constrained by both a continued high unemployment rate and heavy debt.

  • How to reduce credit card debt and improve a score

    How to reduce credit card debt and improve a score. Many consumers across the country often wonder how they can improve their credit while reducing their credit card debt.

    This can be a confusing process, because many consumers are unsure whether paying off their credit card debt will actually help or hurt their credit score. A new report from the Washington Post says that consumers should always be confident that paying off their debt and not accumulating more of it is always going to boost their score.

    The best way to do this, the Post’s report says, is to pay bills on time. This is because payment history comprises 35 percent of an individual’s credit report, and the more on-time payments a consumer makes, the better their score will be. Paying when a bill is due is also a way to save money because it lowers the total amount due, and therefore how much interest the consumer pays, as well as eliminating any threat of late fees.

    A recent report in the New York Times said that reducing credit card debt is important because more lenders are taking greater steps to verify the finances of those that apply for loans.

  • Financial reform almost caused rewrite of bankruptcy law

    Financial reform almost caused rewrite of bankruptcy law. A proposal backed by advocates for homeowners as well as many leading Democrats nearly force the country’s bankruptcy laws to be completely rewritten.

    A potential change to bankruptcy law, known as a “mortgagecramdown,” would have allowed judges to change the terms of mortgages for distressed homeowners who wound up in bankruptcy court, according to a Reuters report. The change was being opposed by the banking industry and Republicans. Under current law, bankruptcy courts can alter or reduce many kinds of debt for struggling borrowers – including loans on cars and boats, a vacation home or family farm – but not primary residences.

    Reuters said that proponents of the bill, a measure that was passed by the House in March 2009 but was killed in the Senate, said it would help stop home foreclosures in the U.S. Opponents argued that it would raise costs for all homeowners.

    A report from the financial news and advice website The Motley Fool said that several banks supported the bill as well, saying that if homeowners are able to modify their mortgages after filing for bankruptcy, the number of strategic defaults will dramatically decrease.

  • Steps to fixing credit problems

    There are several steps to fixing credit problems. Many consumers have had their credit hurt badly by the financial crisis, but some are now trying to climb out of the hole.

    Fortunately, there are a number of steps to ease the process, especially for those who have faced foreclosure. According to the Epoch Times, there are several steps tofixing their financial situation. The first step is to simply find professionals with great credentials to help them through the process, which can be confusing to almost anyone. The second step is to begin consolidating debt by negotiating monthly payments or lowering balances, with the professional’s help.

    The third step, the Times says, is for the consumer to seek credit counseling to help improve their score. Credit counselors help teach consumers how to properly budget so payments are made on time. The fourth step is loan modification, which can help lower rates, but will lower the consumer’s credit score.

    According to the Tampa Tribune, courts in Florida are even offering foreclosure mediation to help reduce a backlog of foreclosure cases. Mediations such as these will help homeowners avoid going to court with their lenders.