Here's some disturbing news from a new report called Generations of Struggle from the AARP.

Researchers Deborah Thorne of Ohio University, Elizabeth Warren of Harvard Law School, and Teresa A. Sullivan of the University of Michigan say that the "rate of bankruptcy filings among those ages 65 and older has more than doubled since 1991, and the average age for filing bankruptcy has increased."

Other findings in the report include:

Americans age 55 or older have experienced the sharpest increase in bankruptcy filings.

Americans age 34 or younger have experienced the greatest decrease in bankruptcy filings.

The influence of Baby Boomers on bankruptcy filings has moderated substantially.

Posted by Dan Thanh Dang at 2:30 PM | Permalink | Comments (0)
                    

On Sunday, I wrote about BlueHippo and the unending complaints that are still coming in about the Woodlawn-based retailer that sells computers and other electronics to people with poor credit.

Maria Allwine of Baltimore wrote in to say:

How about a story on who owns Blue Hippo and its history. I think publishing the names of the owner(s) and the history, finances, etc. of this company might be helpful.

The bad news is that I didn't include that information because I only have 25 inches of space to work with for my Sunday column. The good news is that The Sun and fellow blogger (a.k.a. Financial Guru) Eileen wrote a terrific story on this very question back in 2006.

But, being the generous, thoughtful soul that I am, I'm going to copy and paste the lengthy article after the jump instead of making you search and pay for it in our archives like my bosses would like for you to do. Why? Because it's all about you readers, that's why.

Continue reading "BlueHippo Blues" »

Posted by Dan Thanh Dang at 3:14 PM | Permalink | Comments (0)
                    

See those people there? It's a line for food rationing distributed by the United Nations World Food Programme in Nairobi.

The reason why I bring this up on a beautiful Friday morning is because reader PastorTim said something yesterday that depressed the heck out of me. On my post about rice rationing by Sam's Clubs because of concerns about shortages, he commented that:

This is only the start of food rations in the USA. We need to wake up to the times we are living in. We're in a Greater Depression.

As I keep telling you, I'm a worrier. So when I saw the Sam's Club story and read about retailers limiting consumer purchases of flour, rice and cooking oil, it made me worry. C'mon. I've been worried for awhile now... about the availability of wheat and now rice, rising food prices, rising gas prices, rising debt levels and of course, the mortgage crisis as documented by my terrific colleague Jamie and her Real Estate Wonk blog. 

Continue reading "A Great(er) Depression: The end of cheap food, energy and credit" »

Posted by Dan Thanh Dang at 7:00 AM | Permalink | Comments (7)
                    

Bank of America said yesterday it would stop peddling risky mortgages, including subprime and other non-traditional loans, after it completes the $4 billion purchase of Countrywide Financial Corp.

In our sister paper, the Chicago Tribune, BofA's global consumer credit executive Bruce Hammonds said, "We recognize this tightening restricts the availability of credit to some borrowers, but this will help ensure that those who get loans can afford to repay them."

Among other things, BofA announced in public testimony on its proposed purchase of Countrywide that the combined company will halt making option adjustable-rate mortgages, drastically cut back on low-documentation loans and limit prepayment penalties.

It won't solve the subprime mortgage mess we've got on our hands right now, but it's a step in the right direction. This goes back to my Sunday column where I said we're all for people getting credit limits they can afford on their credit cards... or at least curbing the ease of credit for people who can't afford it in the first place.

Posted by Dan Thanh Dang at 11:51 AM | Permalink | Comments (1)
                    

Did you catch my column yesterday on the credit card industry and how Congress is trying to rein in abusive practices? Here's some of the issues that the Credit Cardholders Bill of Rights would deal with:

•Universal Cross Default Clauses: If you are declared in default by any other creditor, be it your landord, utility company or a library fine, then that automatically represents a default on your credit card. You can be charged penalty interest rates even if you have been making payments on-time to the card issuer.

•Arbitrary Interest Rate Changes: Carry a balance too close to your credit limit and wham, your interest rate goes up. Open up another credit card and wham, your rate goes up. Pay late once and wham, your rate goes up. Sneeze and your rate goes up. Why? Because your contract includes a clause that says, “Any term can be changed at any time for any reason, including no reason.”

Continue reading "Credit Card Reform" »

Posted by Dan Thanh Dang at 7:38 AM | Permalink | Comments (0)
                    

We've been talking a lot about managing our money and the slowing economy. For anyone who thinks you may need some help getting your finances back in order, here's good advice on how to find a credit counselor from writer Gregory Karp at our sister paper, The Morning Call, in Allentown, Pa.:

Determine whether you're a good candidate. Sometimes a credit-counseling agency doesn't do anything you couldn't do for yourself.

Evaluate all of your options before entering credit counseling, including developing a better spending and savings plan and negotiating with creditors yourself.

Enlisting a credit counselor will be noted on your credit report. It can do significant damage to your ability to borrow money at good interest rates, because creditors will see that notation.

But credit counseling doesn't directly affect your three-digit credit score. Many distressed people seeking counseling have badly dinged up their creditworthiness, so an additional bad mark is perhaps only incremental.

 

Continue reading "How to find a credit counselor" »

Posted by Dan Thanh Dang at 11:23 AM | Permalink | Comments (0)
                    

Anyone out there wondering how we got into this mess? By mess, I mean the slowing economy, which might or might not be in recession. Officially, we're not in a recession, as the msnbc story says. But, and this is a big BUT, things are definitely not rosy.

I read a great story in the WPost yesterday about why we've got this mortgage mess on our hands. We're leverage addicts. Writer Michael S. Rosenwald sums it up quite well:

The simple answer, according to personal finance experts, is that we want more -- more money, more house, more car, just more, more, more. We often think we deserve more. Leverage gets us more. With historically low interest rates, leverage is the easiest and quickest tool to get more stuff.

The problem is that too much leverage has a downside that is easy to overlook. When everyone else is using leverage so successfully to get more, do we wonder what will happen if interest rates go up? Not so much.

Continue reading "Borrowing 'til it hurts" »

Posted by Dan Thanh Dang at 11:22 AM | Permalink | Comments (3)
                    

Anyone catch "The Secret History of Credit Cards" on Maryland Public Television last night?

It's all about how credit card use took off in the U.S.

If you haven't seen it, you should check it out. Really fascinating stuff about fees, interest rates and why credit card companies moved to certain states. If you missed it, here are some really interesting points from the piece, written by Robin Stein, that you should know:

Even if you make your credit card payments on time, the credit card bank can raise your interest rate automatically if you're late on payments elsewhere -- such as on another credit card or on a phone, car, or house payment -- or simply because the bank feels you have taken on too much debt.

This practice is called the "universal default" clause and increasingly is becoming a standard clause in credit card agreements. According to credit card executives, the logic behind universal default is that the bank is not being unreasonable in raising rates when it has reason to believe that the risk of being repaid by the customer has increased. [Note: Credit card banks can now easily track your everyday financial activities and monitor your credit score.]

Your credit score -- known as a FICO score -- has become a vital statistic for many Americans and can be widely shared. It is used to determine how much you can borrow, how much you pay for life insurance, if you can rent a home, and, as already noted, it can be a factor in determining the interest rate you pay on a credit card.

Most Americans don't know what their credit score is, nor how it's computed and with whom it's shared. Your credit score is usually determined by five factors, with the most important being the amount you currently owe and your payment history on large debts.

Continue reading "The secret life of credit cards" »

Posted by Dan Thanh Dang at 8:18 AM | Permalink | Comments (0)
                    

Computer retailer Blue Hippo is not the only company that offers credit to people with poor or no credit histories.   

BH, which settled with the Federal Trade Commission after accusations of taking consumers' money for computers and plasma TVs and not delivering the goods, was featured in a BusinessWeek story last year about businesses that target the poor.

It discusses several companies, including BlueHippo, that extend credit and thus a wider range of consumer goods to poor people. But as the story puts it:

"... this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge."

Contrast this with the story of Adam Shepard, a college graduate who takes $25 and a gym bag with him on a poverty experiment, a la Barbara Ehrenreich's "Nickeled and Dimed" ...

Continue reading "Perpetually poor" »

Posted by Liz Kay at 8:02 AM | Permalink | Comments (1)
                    

Have you ever wanted to hire a financial advisor to give you tips on saving and investing money? How much would you pay someone for valuable tips on buying and keeping a home? Would you pay money to listen to someone give you advice on how to start your own business?

Saturday's your lucky day, my friends. The Baltimore CASH Campaign -- which is working with Congressman Elijah Cummings and other community and financial institution partners -- is holding its 3rd Annual Money Power Day on Feb. 16 at the Baltimore Polytechnic Institute, 1400 W. Coldspring Lane, Baltimore, MD. from 10 a.m. to 3 p.m.

This year's theme is "Road Map to Financial Success." The event will feature an exhibit area with over 40 organizations providing information to working families who need help obtaining and understanding a credit report, legal advice on taxes and information about grants to help people purchase homes in the city. There will also be workshops and services on a range of financial topics from credit counseling to tax preparation assistance.

Continue reading "Get Money Smart" »

Posted by Dan Thanh Dang at 8:06 AM | Permalink | Comments (0)
                    

People who earn little money often pay more for financial services because they lack access to low-interest, short-term sources of credit and to banks themselves, according to a report by the Maryland Consumer Rights Coalition. They're also not informed of the high fees they often pay to consolidate debt and for tax refund anticipation loans or payday loans.

The Maryland Consumer Rights Coalition is urging elected officials and government regulators to take more steps to protect the rights of poor consumers and to enforce the laws already on the books.

Interesting to note --- part of the remedy in the 2003 Maryland Debt Management Services Act involves making sure that the print is not-so-fine:

"The consumer must enter into a debt management services agreement
and must receive a copy of the agreement that is in at least 12
point type and sets out the schedule of payments, maintenance
fees and a list of which creditors will receive payments, and a
notice of the right to rescind the agreement by giving written
notice."

Continue reading "Poor? Pay more." »

Posted by Liz Kay at 2:03 PM | Permalink | Comments (1)
                    

If you haven't already read Eileen's very helpful story on how the Fed's three-quarters of a percentage point cut affects you, check it out here.

If you're too lazy to read it, I'll sum up for you.

Credit Cards: Don't count on seeing a lower interest rate.

Home Equity Lines: Expect to see a decrease as early as next month.

Mortgages: No change for fixed-rate mortgages, but maybe for adjustable rate mortgages.

Continue reading "How the Fed interest rate cut affects you" »

Posted by Dan Thanh Dang at 1:30 PM | Permalink | Comments (0)
                    

Here's another piece of news I meant to put out earlier. A cluster of consumer advocacy groups in the state are warning Marylanders that even as thousands of homeowners are suffering through the loss of their home through foreclosure, that could just be the beginning your financial troubles.

Here's why: If you, the homeowner, has part of your debt forgiven during the foreclosure process, you're required to include the forgiven amount as income on your tax return. This amount is called a "windfall" and often taxes will be owed on that amount, according to the Maryland Consumer Rights Coalition, Maryland CASH Campaign and Baltimore CASH Campaign.

Forgiven debt in a foreclosure can range from a few thousand dollars to hundreds of thousands, which means the taxes owed can be significant. The groups warned that federal and state tax debt usually cannot be discharged through bankruptcy so consumers should contact their tax preparer immediately if you have canceled debt, known as the "1099 shortfall."

Continue reading "Tax bills on forgiven debt in your future?" »

Posted by Dan Thanh Dang at 11:00 AM | Permalink | Comments (0)
                    

By now, you must know I'm a pessimist. I figure if I'm always expecting the worst, then maybe, just maybe, if something good comes out of it then I'll consider myself superlucky.  

That's my way of asking you to forgive me for inundating everyone with bad news on a frequent basis. Just remember, I do it only because I'm hoping that by scaring the crud out of you, it will help everyone be extra vigilant about avoiding such pitfalls.

This latest bit of misery comes from an AP story that says Americans are falling behind on credit card payments at an alarming rate.

Experts say this could partly be "a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy."

As the story says, many economist expect deliquencies and defaults to rise more after the holiday shopping season.

Mark Zandi, chief economist and co-founder of Moody's Economy.com Inc., blamed mounting mortgage problems that started after the subprime financial shock, and a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit, the AP says.  

"Credit card quality will continue to erode throughout next year," Zandi said.

Continue reading "Unpaid credit card bills rising!" »

Posted by Dan Thanh Dang at 4:26 PM | Permalink | Comments (0)
                    

If you've been following the columns I write, you know I just recently shared the story of Gordon Crooks being harassed for an old debt his son may or may not owe. I'm not sure if the debt is owed because the son didn't talk to me for the column.

Now, some readers left some pithy comments to suggest that I'm OK with the son owing this debt and that I'm OK with consumers not paying their bills. If you know me at all and if you've been a reader of the columns and this blog, you know that's far from the case. I am totally, vehemently, body & soul opposed to consumers racking up debt and not paying for it.

We're all for taking personal responsibility here when it comes to spending money.

The point of that column is that debt collectors can not hound you for a debt you don't owe. They can't even hound you if you do owe a debt. The laws are very, very clear about what they can and can't do to collect on a debt. Why is that important?

Continue reading "Don't get bullied by debt collectors" »

Posted by Dan Thanh Dang at 11:53 AM | Permalink | Comments (0)
                    

At this time of year, if you're anything like me, you're trying to remember all the stuff you have to do before you gather with family and friends for the holidays. I have so many siblings and we're all older now so, thank goodness, we skip gifting all the adults. But, there's still a bunch of nieces and nephews who would be sorely disappointed without some presents under the tree or in the mail.

I'll probably avoid the crowds on Black Friday by staying home, but I will be making my lists and checking around for deals on-line. Holiday party season is starting, too, so that means I'll have to plan on stocking up on some wine or gifts-for-the-host so as not to come empty-handed. At the same time, I'm also hoping to take a little holiday vacation.

What does this all mean? I'll be spending more money than usual. In the old days, I just put everything on my credit card and paid it off over time. Debt. No big deal, right?

Wrong.

(Chiaki Kawajiri, Sun photographer)

Continue reading "Smart holiday shopping and the coming consumer crunch" »

Posted by Dan Thanh Dang at 8:43 AM | Permalink | Comments (0)