Chapter 4 Notes
Page 80: Automatic
bill payments are "particularly helpful for busy individuals."
Golly, how many of us are NOT
busy?
Nevertheless, fast and easy isn’t necessarily
better, and can often lead to unfavorable results. But whether or not you choose automatic bill
paying, and whether or not you receive paper account statements, do look over
every line of every statement to make sure that all charges are legitimate
ones.
Page 82: Originally a temporary measure as a result of the October 2008
financial crisis, the Federal Deposit Insurance Corporation (FDIC) insurance
limit was raised to $250,000. The 2010 Dodd-Frank Wall Street Reform and
Consumer Protection Act made it “permanent”, and I do not expect that it will
change in the near future.
Remember that FDIC insurance
covers checking and savings accounts, money market deposit accounts and CDs,
but “. . . does not cover other financial products and services that banks may
offer, such as stocks, bonds, mutual fund shares, life insurance policies,
annuities or securities." Deposits in most (but not all)
credit unions are insured by the National Credit Union Administration (NCUA).
For more information, see the
FDIC Understanding Deposit
Insurance and NCUA Your
Insured Funds (PDF).
Chapter 5 Notes
Page 116: My edition of the textbook states
that your credit report includes your “future credit history.” Though lenders
do use your credit report for predictive purposes, your future credit history
cannot be included in your credit report since it doesn't yet exist.
Pages 114 and 117: These pages
indicate that your credit report includes your income history. It does
not. The lender asks for this
information directly from the borrower.
Page 117: The Federal Trade Commission offers
advice about Disputing Errors on Credit Reports. It provides information about how to order
reports by phone, mail, or through the Internet. Remember, the only authorized web site to order a free report is www.annualcreditreport.com.
Page 119: Often (but not always), store credit
card lenders are banks rather than the retailers themselves. In
either case, they tend to have less favorable terms than a major credit card
that you would get from your bank or credit union. Even if they offer you
some sort of perk or discount for signing up, my advice is to resist any store
credit card.
Page 125: “Today,
it’s practically impossible to get by without having a credit card.”
If this was ever true, it is not true today. Moreover, some people say
that you have to have a credit card for “good credit”, but this is also
false. If you’re interested in how to live without a credit card, we can
talk more.
Credit
Reporting: In
February 2013 CBS 60 Minutes ran an eye-opening segment in which, according to
Steve Kroft, "The problem is that
it's not really within the power of the average person using this system to fix
the mistakes. You feel like you're up
against this machine, and there's no way to break through." Ohio Attorney General Mike DeWine alleged
criminal conduct by the credit reporting agencies.
For
those of you who are interested, here are the 60 Minutes links:
- 40 Million Mistakes: Is your credit report accurate? February 10, 2013 (12:20)
- The ONE thing to know about your credit report August 25, 2013, (4:04)
- How to dispute errors on your report August 25, 2013 (1:43)
- How mistakes can harm your credit August 25, 2013 (2:11)
Fast
forward to March of 2015, when the three major credit rating agencies reached
an agreement with New York Attorney General Eric Schneiderman to change the way
they handle errors on credit reports. and the New York Times reported, TransUnion,
Equifax and Experian Agree to Overhaul Credit Reporting Practices.
Under the reforms, consumers can initiate a formal dispute to challenge inaccurate information and agencies must use trained employees to investigate the complaints. Hear the 3-minute NPR audio here.
In April, FICO reports, "Why the upcoming credit bureau changes are a big deal for consumers" and in August, Credit.com reported, "How Your Credit Score Could Rise Soon without You Lifting a Finger".
Let’s watch to see what comes of all of this.
Under the reforms, consumers can initiate a formal dispute to challenge inaccurate information and agencies must use trained employees to investigate the complaints. Hear the 3-minute NPR audio here.
In April, FICO reports, "Why the upcoming credit bureau changes are a big deal for consumers" and in August, Credit.com reported, "How Your Credit Score Could Rise Soon without You Lifting a Finger".
Let’s watch to see what comes of all of this.
Chapter 6 Notes
Page 143: “Consumer finance companies do not take deposits”. To clarify, depository intuitions, e.g., Wells Fargo, do have highly profitable consumer finance divisions.
Page 147: I know of no reputable credit counselor who would routinely “suggest” a debt consolidation loan to pay off credit card debt. Debt consolidation loans, even if one qualifies, are high cost and have high failure rates. They can work in very specific circumstances. But far more often it’s only a short term and very expensive stress reducer, and many people end up even worse off than before.
There are many wolves in sheep’s clothing. Make sure that you’re actually talking to a counselor, and not a collector or to someone simply trying to sell you financial products. If you have home equity, you’re an especially sweet target for predators.
Worth noting here is that people commonly confuse three terms: Debt consolidation, debt management program, and debt settlement (AKA debt negotiation). See the Federal Trade Commission’s Coping With Debt that briefly describes several debt reduction techniques.
The other suggestions on the page 147 are very good ones. Developing a zero-based budget can be started immediately (see my budgeting uploads), and whether you have debt or not, unless you already have a substantial emergency fund, include a regular contribution for emergencies (for unpredictable expenses).
Page 150: The NFCC is the National Foundation for Credit Counseling (NOT the National Foundation for Consumer Credit). These agencies offer:
- Budget and debt counseling;
- Debt management programs;
- Credit report reviews,
- Student loan counseling;
- Foreclosure prevention;
- Reverse mortgage counseling;
- Home-prepurchase counseling;
- Bankruptcy counseling;
- Bankruptcy education;
- Financial workshops
NFCC member quality standards include counselor certifications and agency accreditation by the Council on Accreditation (COA).
Consumer Credit Counseling Service of Lafayette operated from the mid-1990s and closed in 2010. I didn't know it at the time, but CCCS of Lafayette was only the first domino; more than 20 other Indiana NFCC offices closed since.
To my knowledge, today only two agencies maintain an Indiana location: Apprisen (Indianapolis) and GreenPath (Mishawaka).
Of course we do still have our eight United States bankruptcy courts (including one in Lafayette).
Page 173: “Many consumer finance companies specialize in debt consolidation loans and offer credit counseling services . . .”
I have not seen a consumer finance company with counselors, they are collectors. Nevertheless, good-hearted, competent and helpful counselors do exist in some credit unions, and banks appear to be improving. But even then we have to remember who signs their paychecks, and that their services are very limited compared to a stand-alone counseling agency.
The FTC offers guidance for Choosing a Credit Counselor.
Consumer Credit Counseling Service of Lafayette operated from the mid-1990s and closed in 2010. I didn't know it at the time, but CCCS of Lafayette was only the first domino; more than 20 other Indiana NFCC offices closed since.
To my knowledge, today only two agencies maintain an Indiana location: Apprisen (Indianapolis) and GreenPath (Mishawaka).
Of course we do still have our eight United States bankruptcy courts (including one in Lafayette).
Page 173: “Many consumer finance companies specialize in debt consolidation loans and offer credit counseling services . . .”
I have not seen a consumer finance company with counselors, they are collectors. Nevertheless, good-hearted, competent and helpful counselors do exist in some credit unions, and banks appear to be improving. But even then we have to remember who signs their paychecks, and that their services are very limited compared to a stand-alone counseling agency.
The FTC offers guidance for Choosing a Credit Counselor.
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