Change

       
        Yesterday on LinkedIn there was reference to a Scott Adams December 13, 2015 Dilbert comic about embracing change.  I noted that change for the better is a good thing, but change merely for the sake of change is not.  "Hasten slowly.”
        The hasten slowly I remember first seeing on a sundial at a monastery roughly 30 years ago. It was new to me then, but as it turns out the notion dates back as far as Augustus, the founder of the Roman Empire.  Along with the millennial support for Bernie Sanders’s socialism, it’s yet another reminder that that everything old can be new again.
        I found a short piece that I wrote 14 years ago titled, “Change Management Overview”, reproduced below.

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        The roots of change management as a field of specialty can be traced at least to Edgar Schein’s 1969 work on process consultation and possibly as far back as the late forties or early fifties depending upon one’s viewpoint.  Since the early days the field has been steadily developed by people who recognize the business and social needs to integrate human interaction and processes with business processes.

        Change management experienced a dramatic bent toward technology during the 1990s.  Even today, many people equate “change” with technological improvements.  While it is true that technology is involved in many change processes, the need for ongoing technological advancement is now accepted as one business necessity of many; it is no longer the driving force of change management.

        There are three basic classifications of change, each demanding a unique blend of competencies for effective management:

• Transformation is a process that occurs when an organization must radically alter its way of doing business.  The source of the need might be primarily internal, such as a switch in company leadership and strategy as when Lee Iacocca took on the responsibility at Chrysler.  An external source might be illustrated by the current economy’s impact on the transportation industry.  The semi-trailer manufacturer Wabash National Corporation is one local example.  Transformation has a clear onset, may have a loosely defined end, and requires tremendous insight, a high tolerance for risk, and a well-reasoned yet highly adaptable strategy.
• Transition occurs when there is a particular need identified that will improve performance, such as when a new technology, policy, or product is introduced.  A merger may be a transition rather than a transformation if company histories, cultures, operating procedures, and people are highly attuned.  A transition has a beginning and an end, and several transitions may be present during a transformation.  A transition requires clearly defined goals and a more rigid strategy.  Transitions typically require planning and management capability plus specific competencies in areas such as training or technology. 
• Development is an ongoing process in organizations with a culture of continuous improvement.  Development might include succession planning, specialized training, and individual and team problem solving.

        Development tends to be more proactive than reactive, and it ideally permeates the entire organization.  Development is typically an important component during both transition and transformation and requires strategic planning capability, trusted leadership, and the ability to effectively organize and troubleshoot virtually any process.

        The most effective development leadership has the ability to anticipate internal and external changes, to be on the leading edge of trends, and to establish trends when appropriate.  As developmental effectiveness increases, the instance and negative impacts of transition and transformation decrease.

        It is apparent that a particular change within an organization may fall into more than one classification.  It is also true that a single external event may call for a different level of change from one organization to another. 

       We should avoid change merely for the sake of change; case studies demonstrate that there is often costly confusion and unconscious and conscious resistance.  We must create and maintain a culture of continuous improvement and openness to change; those organizations with a learning culture suffer the least.

ID Theft and FTC Consumer Complaints

        On March 1st the Federal Trade Commission (FTC) released its 2015 Consumer Sentinel Network Data Book that reports complaints received by the FTC during the year.  For the first time in 16 years, identity theft DID NOT top the list.
        This year identity theft was edged out of first place by debt collection, which the FTC attributes to its ramped up enforcement against companies violating the Fair Debt Collection Practices Act.
        The complaint categories making up the 2015 top 10 are:

	Number	Percent
Debt Collection	897,655	29%
Identity Theft	490,220	16%
Imposter Scams	353,770	11%
Telephone and Mobile Services	275,754	9%
Prizes, Sweepstakes and Lotteries	140,136	5%
Banks and Lenders	131,875	4%
Shop-At-Home and Catalog Sales	96,363	3%
Auto-Related Complaints	93,917	3%
Television and Electronic Media	47,728	2%
Credit Bureaus, Information Furnishers and Report Users	43,939	1%

        The founder and president of Javelin Strategy & Research, a company mentioned in a 2012 identity theft video, has since warned that social media users are a growing target for identity theft.

        A 2012 BankRate.com article  says that paying with a credit card or debit card makes you vulnerable, and mobile phone users are also a target.
        In March 2014, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray warns, "your information is always at risk, every day."
        My own interest in the topic likely dates back to 2002 when Walter Kevin Scott – a convicted felon - was working as benefits manager for the Indiana Public Employees’ Retirement Fund (PERF).  Mr. Scott had used a false Social Security number in the hiring process, and the State of Indiana had hired him unaware that he had served time in a federal penitentiary -  for identity theft!
        During his trial it was disclosed that from November 2001 to August 2002, Scott had unlimited access to the Social Security numbers of 1.2 million current and former public employees and their families  -  the equivalent of nearly one in every six Hoosiers.  Investigators found personal information and pension fund balances of 750 people during a search of Scott's home after he quit working at the fund.
        A few years later we began to hear more about breaches, most notably in universities.  In May of 2005, the Lafayette Journal and Courier listed ten universities that had already reported breaches in that year, including Purdue and IU.  Also in 2005 it was reported that identity thieves set up fake businesses and gained access to up to 160,000 consumer records from data broker ChoicePoint.
        Heartland Payment Systems Inc. - one of the largest processors of credit and debit card transactions in the U.S – was hacked in 2009.  With vague explanation, one local bank sent new debit cards to replace ones that were not even near expiration.  When the Target and Home Depot names appear in the news we all noticed, but how many of us would even recognize the name Heartland Payment Systems or ChoicePoint?
        The Identity Theft Resource Center (ITRC) tracked 781 U.S data breaches in 2015, the second highest number since it began tracking breaches in 2005.


Top breaches in 2015:

• Business sector 40%, up 8.1%
• Health/Medical sector 35.5%, down from 44.1%
• Banking/Credit/Financial 9.1%, nearly double the number reported in 2014
• Government/Military 8.1%
• Education sector 7.4%

        The ITRC defines a data breach as an incident in which an individual name plus a Social Security number, driver’s license number, medical record or financial record (credit/debit cards included) is potentially put at risk because of exposure.  As of March 16, 2016, the ITRC reports 155 breaches with 4,314,045 records exposed.
        In 2014 Krebs on Security reported that a nationwide beauty products chain discovered a breach in its payment systems and a fresh batch of 282,000 stolen credit and debit cards reportedly went on sale in a popular underground crime store.  That same month, Indiana University reported that information including names, addresses and Social Security numbers of those who attended any of the university’s campuses from 2011 to 2014 was unsecured for more than 11 months because security protections weren’t working correctly.
        Purdue associate professor of communication Josh Boyd states, “The recent security breaches . . .  are a good reminder that the online environment involves no guarantees.  If you put information online and somebody really wants it, it’s vulnerable.”
        The use of a credit monitoring service cannot prevent ID theft, but it may help you to discover fraud.  About the well-publicized Target security breach during the 2013 Christmas shopping season, Purdue professor of cyber forensics Marcus Rogers warns, "People have to be vigilant for the next six months, year, even up to two years.”
        The ProtectMyID credit montoring service offered by Target is a product of Experian, a credit reporting agency, and monitors changes only to a consumer's Experian credit report.  According to Consumer Reports, “The service can give consumers a false sense of security, and Consumer Reports can recommend this deal in its present form only as being better than nothing, and only for consumers who understand its significant shortcomings.”
        Credit Karma has been advertised much during recent years.  Credit Karma is a service that provides no-cost (so-called “free”) credit scores, credit reports, and credit monitoring from TransUnion.  In 2014, Credit Karma settled with the Federal Trade commission on charges that the company “failed to take reasonable steps to secure” its mobile apps, ‘leaving consumers’ sensitive personal information at risk.”
        To monitor your own reports from Experian, TransUnion, and Equifax, you may order copies through www.AnnualCreditReport.com.  For information about how to order by phone or mail, see the FTC's "Disputing Errors on Credit Reports".  If you’d like an estimated credit score, use a credit score estimator for which you do not disclose identity information.
        A high score can be useful at times, but do not make it your primary focus.  The Fair Isaac Corporation (the "FICO" people) tells us that 65% of a credit score is related to payment history and amounts owed.  So as it turns out, some of the actions that can increase your score also make financial sense!  Pay bills on time, every time, and don’t take on too much debt.  Then make sure that the information on your reports is accurate.
        It has become clear that no institution, public or private, is immune to data insecurity.  My guess is that by now just about every one of us has been a victim of ID theft whether we know it or not, and there’s nothing that we can do to change that.  Since there is so much that is outside of our control, it does make sense to at least control what we can.  Remain vigilant, and from today forward the less information that you provide - and the fewer places where you provide it -  the better.
        Especially if you have a rural mailbox, consider a post office box instead, and remember that outgoing mail is just as important as incoming.  For several reasons, seniors are a very vulnerable population, and if you have a loved one who is aging watch for signs of fraud.  Whether credit card statement, checking account statement, or utility bill, look through every line and understand what is behind every charge.
        Not all misinformation on a bill or in a consumer report is necessarily fraud – mistakes do happen.  But certainly make sure that all information is accurate.  If you know someone who has been denied a checking account, you might mention the ChexSystems consumer report and Bank On Tippecanoe; those outside of the Lafayette area may see Bank On Indiana.
        The CFPB explains how to check a minor child’s reports from the three major credit reporting companies.  The Indiana Attorney General informs consumers how to place a security freeze with Equifax, Experian, and TransUnion.  The Attorney General has also produced an ID Theft Victim Kit that outlines the steps to follow if a consumer becomes aware that personal information has been stolen or used by someone else.
        Considering the outrageous number of major breaches reported during the past three years I’ve just been unable to keep up with tracking.  Nevertheless, quite some time ago I reached the same conclusion as Lafayette editorial cartoonist Dave Sattler following Jimmy John’s September 2014 breach, “The recent security breach by Jimmy John’s as well as Target, eBay, and Home Depot has many wondering How do we protect our identity . . .  One way is to bring back an old friend . . ."
        Take care.

Kurt Burnett

 

America Saves Week

February 22 - 27, 2016 is America Saves Week, coordinated by America Saves and the American Savings Education Council.


Started in 2007, the Week is an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status. Typically thousands of organizations participate in the Week, reaching millions of people.


The 2015 Annual National Survey Assessing Household Savings revealed across the board improvement in the past year.


    •  71% are spending less than their income and saving the difference, up from 68% in 2014.

    •  52% are savings at least 5% of their income, up from 47% in 2014.

    •  40% are making good or excellent savings progress, up from 35% in 2014.

    •  78% had no or were reducing their consumer debts, up from 76% in 2014.

    •  66% have sufficient emergency savings, up from 65% in 2014.


With more societal encouragement and support, more Americans will be persuaded to Set a Goal. Make a Plan. Save Automatically.


How You can Participate in America Saves Week with Tweet chats, Facebook events, and Webinars.


    •  9th Annual America Saves Week Survey

Calculating Credit Card Interest and Payments

During the 1970s a minimum credit card payment of 5% was common.  Then Andrew Kahr, an industry consultant, became a sort of hero by convincing his clients – the credit card companies - to reduce it to 2%.  He also championed the zero percent introductory rate that we see heavily advertised even today.

The challenge for this week?

Chad and Kate have a credit card balance of $6,500, with an 18% APR and a minimum payment of 2% per month.  If they pay only the minimum payment each month, how long will it take to pay it off?

The CreditCards.com minimum payment calculator revels that, if paying the 2% minimum every month, it will take almost 44 years to pay it off, and they will have paid $17,896.66 in interest.  Of course this assumes no late or missed payment fee, no new purchase, and no interest rate increase for more than four decades.

I can probably think of something else that I would rather do with $18k.  How about you?

From a recent Purdue Federal Credit Union (PFCU) agreement:

“When you receive your billing statement you may pay the full amount due or a lesser amount, but the least you may pay is the minimum payment amount shown on your billing statement. Your minimum payment will be any amount past due or over-the-limit plus the larger of 3% of your new balance or $20.”

In other words, assuming there’s no past due balance and we’re not over the limit, the minimum payment on an initial $6,500 would be $6,500 x .03 = $195.00.

The advertised annual percentage rate (APR) would be 11.5% - 17.5%, “based on your credit worthiness."

Unfortunately we don’t know what our actual interest rate will be until we already receive the card, and when we feel that magical power surge through our hands.

But let’s assume a 15% APR, then the first month’s interest payment will be $81.25, and the payment applied to the principal is $113.75.

In this scenario, it would still take more than 14 years to pay off the original $6,500 of spending and they would pay more than $4,000 in interest. But they would save more than $13,000 in interest charges compared to the other scenario.

The couple has also saved $6,500, and is exploring savings options to build that to $10,000 for a home down payment within six years.

If you were their very best friend and they asked you for guidance, then what would you say?

One alternative for Chad and Kate would be to pay off the credit card debt with cash on hand, and then begin to save for the home down payment.  For example, $130 saved every month would build to $10,000 in about 6-1/2 years, even at zero percent interest!  If they could save $195.00 then they would reach their goal in just a bit over 4 years.  Note that I do recommend saving for at least a 20% down payment.

From the last that I heard, there are somewhere around 5,000 credit card issuers, but the top four combine to hold more than 50% of the market, in both the number of cards issued and in dollar volume.  If you have a credit card, check to see if it’s in the Consumer Financial Protection Bureau credit card agreement database.

I searched “Citibank NA” and it listed 40 agreements; some of them are clearly labeled, such as "My Best Buy Credit Card", “My Best Buy MasterCard“, and "SearsCharge PLUS Account", but others are labeled such as “Agreement 1” or “Agreement 61”.  Two were simply labeled "0".

If you have a card issued by Citigroup, JPMorgan, Bank of America, Capital One, or another top issuer, then happy hunting!

Best regards,

Kurt Burnett

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February 4, 2016

• 2016 personal debt might be a bigger problem than it was in 2015 (Debt.com)
• Bank Credit Cards (Nerdwallet) -  Not a particularly catchy title, but this article offers thorough explanations of how credit cards work.
• Is That Credit Card With the Annual Fee Really Worth It? (Associated Press)
• No Degree? Here Are 10 of the Best Paying Blue-Collar Jobs (MoneyTalksNews)
• These college majors will leave you drowning in debt (Money Management International)

January 28, 2016

• Ask the Experts: Which debt should I pay off first? (Money Management International)
• Bad credit? Subprime cards aren’t your only option (CreditCards.com)
• Most Unreadable and Wordiest Credit Card Agreements (Kurt Burnett)
• Survey: 5 in 6 Americans admit to impulse buys (CreditCards.com)
• Why we all lie about credit card debt (Money Management International)

Most Unreadable and Wordiest Credit Card Agreements

Students this week are to consider alternatives and make recommendations for a couple who wants to save $10,000 for a home down payment.  The couple now has some cash to invest, but they also have $6,500 in credit card debt with an 18% APR and a minimum payment of 2% per month.

If they pay only the minimum payment each month, how long will it take to pay it off?  Pick a number of years that sounds about right, and then check yourself with the Bankrate credit card calculator.  This is quite an eye-opener for many!

A few years ago there was an amusing Creditcard.com study.  While rereading the articles, I found the Jay MacDonald "3 language experts try to make sense of a card agreement" a particularly fun one.

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At my bank, I picked up a really cool brochure that highlighted the bank’s “Top 10 Reasons” to use a credit card.  Maybe another time we'll go through the bank’s “reasons” one by one.  But glancing though this brochure did remind me of a CreditCard.com report on its analysis of more than 1,200 U.S. credit card agreements.

The CreditCards.com folks found that credit card agreements are unreadable to 4 out of 5 American adults.  They ranked the agreements based on a “FOG” index  - that is, Frequency of Gobbledygook - and they listed the 10 most unreadable agreements and the 10 wordiest agreements.  I suppose that they wanted to reward some of the less obscene behavior and also included the 10 most readable credit card agreements.

In the below “Man on the Street” video, consumers try to understand some of the gobbledygook.

Comments from Roy Peter Clark, a national expert on writing and a senior scholar at the Poynter Institute in St. Petersburg, Florida:

"Credit card contracts and other such documents are written in dense prose for a reason: So that the customer will NOT be able to understand it.  I may be cynical, but I don't think their writing strategies are accidental . . . I think those writers know exactly what they are doing." ^[1]

At your leisure, go through the entire CreditCards.com series (links below) - maybe it will be as fun for you as it was for me.

10 Most Unreadable Credit Card Agreements

What surprised me was that credit unions dominated the top ten most unreadable list.  But to their credit they comprised the top ten most readable.

If you have a credit card, go to the Consumer Financial Protection Bureau's credit card agreement database and read the agreements of your current lender.  If you’re unsure of who the lender really is, look at your original agreement or on the back of your credit card. For example, with some exceptions the lenders for big box store cards tend to be big banks, not the stores themselves. The lender for my own bank’s cards is not even my bank.

Initial agreements may list possible interest rates for purchases to be a particular range, say ten percentage points or more, with the note that “the rate you receive is based on your credit worthiness.” In other words, you won’t even know the interest rate until you already feel the magical powers surging in your hands.

10 Wordiest Credit Card Agreements

Banks do seem to consider “creditworthiness” as more of a potential profitability measure than as any sort of worthiness.  Several years ago it was reported that World Financial Network National Bank (WFNNB) planned to deny new Gander Mountain credit card applications to customers with FICO scores of 800 or higher!  Gander Mountain sued, WFNNB (now Comenity Bank) countersued, and about a year later they resolved their differences and dropped the suits.

By the way, who has studied credit card merchant agreements?

Related CreditCards.com story links (open in new windows):

• MAIN STORY: Credit card agreements unreadable to 4 of 5 Americans
• 10 most unreadable credit card agreements
• 10 most readable credit card agreements
• 10 wordiest credit card agreements
• Readability of credit card agreements from biggest 20 banks
• How credit card agreements' readability compares to familiar documents
• Quotable: What lawmakers, consumer activists, bankers say
• 3 language experts try to make sense of a card agreement
• Federal database of credit card agreements not user friendly

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[1] CreditCards.com <http://www.creditcards.com/credit-card-news/credit-card-agreement-readability-1282.php> accessed 12/21/2011

One in five Americans with debt believe they will never pay it off

In a CreditCards.com survey reported today, 21% of those with debt predict they will never be rid of it, up from 18% 2014 and 9% in 2013.
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A CreditCards.com representative offers four tips and, as you will immediately recognize, the first two suggestions are very effective ones.  But before I would recommend the other two I’d want to ask a few questions.  With every financial decision, we need to be confident that we’ll actually be in a better position and that the move is something more than just a short-term stress reducer.
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On a more positive note, only eleven percent of Millennials believe that they'll never be debt-free.  Even though this is 11% more than I would like, it is certainly a thought in the right direction!  Hopefully the 89% will somehow exhibit the financial behaviors that will make it happen.
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Surprising to me is that people ages 30-64 were more likely than average to be carrying holiday debt.  In my opinion, folks in this age group really should know to plan ahead for Christmas spending; it does come up every year.
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Of those with holiday debt, about three-quarters said that they expect to pay it off within three months, and 15% said it would take more than six months.
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Every year, credit counseling organizations anticipate a surge in appointments during the first quarter, when things don’t work out as people had hoped.   After all, if an individual doesn’t have the capacity to save up for Christmas, then paying it all off – with added interest – can be very difficult.
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Hope can be an inspiration and can motivate us to action, but without a plan it can leave us worse off than we were before.
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Every one of you enrolled in this course knows more about personal finance that does the average American.
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I wish you the very best!

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- Kurt Burnett

Indiana Attorney General Urges Credit Freeze

 

FOR IMMEDIATE RELEASE: Friday, October 2, 2015

Zoeller urges credit freeze in wake of Experian/T-Mobile data breach

Experian, housing T-Mobile customer data, hacked; 15 million affected

INDIANAPOLIS, Ind. – An estimated 15 million T-Mobile customers who applied for credit through Experian are at risk of having their data compromised, and Hoosiers who are affected should register for a credit freeze as a precautionary measure, Indiana Attorney General Greg Zoeller said.

The information was obtained when an unauthorized party accessed T-Mobile data housed in an Experian server. Affected customers are those who applied for T-Mobile USA postpaid services between September 1, 2013 and September 16, 2015.  Information that was breached includes customers’ names, addresses, social security numbers, dates of birth, identification numbers (typically a driver’s license number, military ID, or passport number) and additional information used in T-Mobile’s own credit assessment. According to Experian, its consumer credit database was not accessed in this incident.

The Indiana Attorney General’s Office is investigating the breach and monitoring the situation to ensure that consumers are properly notified, and can assist any consumers who fall victim to identity theft or fraud. It is unknown who committed the data breach, but the AG’s Office will work with its federal counterparts in the investigation.

“This latest data breach is yet another example of why it is so important for everyone to proactively register for a credit freeze to protect themselves from identity theft,” Zoeller said.  “At this point it's safe to assume that everyone in our state has been affected by one of the many data breaches, no one is immune to this and if you don’t take the initiative to protect your credit, the consequences could be very costly and have a long-term financial impact.”

Protect against ID theft

Zoeller urges consumers who may have been impacted in this data breach or any other breach to take the following immediate steps to guard against identity theft:

• Sign up for a free credit freeze with the three credit bureaus – TransUnion, Equifax and Experian. Registering for a credit freeze will prevent a fraudster from taking out a line of credit in your name without your permission; and you can easily lift the credit freeze at any time if you do wish to apply for new credit or a loan.  The free credit freeze sign-up page can be found at www.IndianaConsumer.com/idtheft.
• Closely monitor financial statements for any unusual activity.
• Review and monitor your credit report to check for inaccuracies. A free credit report can be requested from each of the credit bureaus once a year through www.AnnualCreditReport.com.

Additionally, Experian and T-Mobile will offer affected consumers two years of credit monitoring and identity protection services for compromised customers at no cost. Credit monitoring alerts consumers to fraud after the fact, so it’s always best to also have the credit freeze already in place to deter fraud, in addition to credit monitoring. Visit www.ProtectMyID.com/SecurityIncident or call Experian at (866)-369-0422 for more information about its credit monitoring.

If consumers already have credit monitoring in place from a previous breach, they might consider adding the Experian/T-Mobile monitoring if it would provide a longer coverage period. Consumers should be aware when the free time period ends on their credit monitoring, especially if they would like to cancel, because they will likely be encouraged to purchase the service long-term.

Zoeller said the free credit freeze is the best protection against fraud and identity theft, though monitoring can be helpful in identifying fraud.

Everyone, regardless of if you believe your data has been compromised, can take the above steps to protect against ID theft.

Red flags of ID theft

Certain red flags can indicate that identity theft may have occurred, including:

• Incorrect personal information on your credit report such as a social security number, address, name, initials or employers.
• New accounts being opened in your name that you did not authorize or receiving credit cards that you did not apply for.
• Missing bills. Often identity thieves will change your billing address to make their illicit activities look more legitimate.
• Any unexplained debits to your accounts.
• Being denied credit or only offered high interest rates on credit lines for reasons unknown to you.
• Calls from debt collectors about purchases you did not make.

Report ID theft

If unusual activity is detected and you believe you are a victim of identity theft, follow the below steps:

• Report fraud to the police and file a complaint with the AG’s Office at www.IndianaConsumer.com or by calling 800-382-5516.
• Place fraud alerts on your credits reports by contacting one of the three credit agencies: TransUnion, Experian or Equifax.
• File a petition in court asking the judge to issue a court order declaring you a victim of identity theft. That order can help clear up fraudulent activity.

Under Indiana’s Disclosure of Security Breach law, businesses with Indiana customers are required to inform customers and the AG’s Office about security breaches that have placed personal information in jeopardy. The AG’s Office investigates data breaches to determine if customers were properly notified of the breach and if the entity had appropriate safeguards in place to protect customers’ data.

More information about the T-Mobile/Experian breach is posted on Experian’s website here: http://www.experian.com/data-breach/t-mobilefacts.html. Experian has said they are notifying all individuals who may have been affected.

In 2014, nearly 400 data breaches were reported to the Indiana Attorney General’s Office. In 2015 thus far, 375 data breaches have been reported. In 2015, about 924 complaints about identity theft have been reported to the AG’s Office, and 1,300 complaints were reported in 2014.

More identity theft protection tips and information on the AG’s Identity Theft Unit can be found at www.IndianaConsumer.com/idtheft.