New basic credit card scam: phony debt collectors and phony collection agencies

In this type of economy we live in we have to be vigilant about scams. Everyone wants to get your cash. When dealing with debt collectors or a collection agency, before making any payment or payment arrangement, make sure you get it in writing. Don't fall into the time pressure they put on you with claims that if you don't pay by the end of the phone call they will sue you. The legal process is a long process and doesn't happen overnight. One more day to get it in writing and to call them back to make sure the people you are dealing with are legitimate is worth the wait. Once you send them the cash, it will be almost impossible to get it back.



CLEVELAND - Ohio consumers are getting phone calls from someone claiming to be a debt collector. But, is the caller legit?

"Fast talking foreigner and he said I was delinquent and we're going to take legal action," Tim Swancer remembered.

Swancer is a college student working full time, and figured a payment from an online payday loan slipped through the cracks. He had no reason to doubt the debt collector, so he paid it off.

"He knew who it was from. He knew how much. He knew the last four digits of my social security number. He knew my birthday and place of employment," Swancer explained.

Under the law, Swancer has the right to request documentation of the debt before making any payment. Swancer didn't exercise that right.

After he paid, he looked through his paperwork for proof of debt. Swancer didn't find anything. The debt also didn't appear on his credit report.

"Two days later, I got a letter from CashNet USA saying we value you as a customer," Swancer said. The letter offered a promotional rate if he took out another loan.

The timing didn't add up for Swancer, so he called CashNet USA.

"They knew exactly what was going on. They knew there were fraudulent phone calls," Swancer said.

CashNet USA warns consumers about these phony calls on its website and says the calls are not being made by anyone affiliated with the company.

The parent company of CashNet USA did not return our repeated calls for comment. According to the company's website, customers of Payday Advance, Cashland, Cash America, and SuperPawn are also getting calls. Some people who never did business with these companies are getting calls.

The Illinois Attorney General also issued a warning for bogus debt collectors using a variety of names beside CashNet USA including: Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, America Legal Services, Quick Cash, and ACS.

Swancer just wonders why he never got a letter warning him about this problem.

"I'm afraid someone might have my information," Swancer said.

Swancer is lucky. His bank refunded the debit card payment.

CashNet USA refers consumers to the Federal Trade Commission, but that agency won't say if it's investigating.

Illegal credit card practices

Credit card companies are so big and powerful they get away with a lot of things both legally and illegally.  They make certain things possible with their army of lobbyists.  If they can't get it passed that way, they tend to do it anyways hoping not to get caught.

Every once in a while they do slip up and have to pay penalties.  This article below explains how visa, mastercard and American express have settled up or are being sued.


WASHINGTON (AP) -- The Justice Department on Monday sued credit card company American Express for alleged anticompetitive practices while proposing a settlement with the two biggest credit card companies, MasterCard and Visa.

In papers filed in federal court in Brooklyn, the department and various state attorneys general sued all three companies, saying they were attempting to insulate themselves from competition.

At the same time, the Justice Department filed a proposed settlement with Visa and MasterCard.

"We want to put more money in consumers' pockets, and by eliminating credit card companies' anticompetitive rule, we will accomplish that," Attorney General Eric Holder said in remarks prepared for an afternoon news conference.

The lawsuit says the card companies are impeding merchants from promoting the use of competing credit or charge cards with lower acceptance fees.

Each time consumers use a credit card to make a purchase, the merchant must pay a fee. Such fees brought in $35 billion last year to the three credit card companies and their affiliated banks.

Under the proposed settlement, Visa and MasterCard agree not to prohibit merchants from offering customers discounts or rebates for using a particular kind of card.

Credit card vs Prepaid Debit card

There are many differences and similarities between credit cards and prepaid debit cards.  Depending on your situation may determine which is the most beneficial to you based on your usage.  This article from Yahoo Finance does a great job explaining the differences.  Hopefully, you will be able to figure out what will work best in your situation.

Yahoo Finance:

Sporting the Visa and MasterCard logos, reloadable prepaid debit cards are marketed as an affordable alternative to fee-laden bank accounts.

In the last decade, they have proliferated everywhere -- online, in grocery stores, drug stores and big box chains such as Wal-Mart. But consumer advocates argue that prepaid debit cards are brimming with an array of pricey fees and lack the regulatory protection of traditional debit cards.

Prepaid debit cards are not connected to a specific bank account. Cardholders deposit money with the card's issuer to "load" the card. Usage has grown sharply: Last year $28.63 billion was loaded onto prepaid debit cards, up 47 percent from 2008, according to Ben Jackson, senior analyst with Mercator Advisory Group.

The cards were initially designed for the millions of consumers who have bad credit or no access to traditional bank accounts. Up to 10 percent of American families are "unbanked," according to a 2008 study by the Federal Deposit Insurance Corporation. Prepaid debit cards allow these consumers to shop online, pay bills online and do other activities they can't do with cash. Some card issuers report bill-paying activity to smaller credit bureaus, helping consumers rebuild tarnished credit scores.

But the cards are also gaining popularity among consumers who are fed up with bankoverdraft and penalty fees. The industry is marketing the cards to people who routinely overdraw their accounts, arguing that a prepaid debit offers a less costly option.

Anna Daugherty, 23, an editor at a public relations firm in Michigan, starting using a prepaid debit card 18 months ago after racking up $250 in overdraft charges. "My bank always cleared the most expensive thing first, it wasn't chronological," she says, so several smaller purchases made on her debit card would push the account into overdraft, even if the transactions took place the day before a large bill, such as a rent check, was presented for payment.

"I was so angry with that bank it kind of woke me up, and I decided I had to start taking control of my finances," says Daugherty. "I use the card for my gas, so I know I'm not spending my gas money for other things; and if I know I have a group of friends coming over and have to make a big dinner, I take the money out of my normal grocery budget and set it aside on the card."

The biggest player in the pre-paid industry is Green Dot, which raised $164 million in an initial public offering in July and has 3 million active users. It offers cards and reload services at some 50,000 retail stores nationwide, and it offers co-branded cards through Wal-Mart, Kmart and Meijer. Competitors include NetSpend, AccountNow and RushCard.

"Banked customers come into a prepaid card very much around the issue of control," says Mark Troughton, president, cards and network, for Green Dot. "Using their debit cards on their bank accounts, they get into overdraft and penalty fees. On the prepaid debit cards, you spend what you load, which helps you stay on budget. There are no penalty or overdraft fees."

But consumer advocates say the cards contain a variety of fees that can make them equally expensive -- including overdraft fees. A study updated last week by Consumers Union found 12 different charges associated with pre-paid debit cards. They may include fees to acquire the card, a monthly maintenance fee, an ATM fee, a fee to use the card to pay a bill online or at point of sale (especially for PIN-transactions), a fee to check the balance on the card, inactivity fees and a fee to load money onto the card (the exception is typically people who have their paychecks direct-deposited onto the card, or load $1,000 a month).

The report reviewed 19 prepaid cards, comparing their costs using a hypothetical consumer's activity. It found costs in the first month ranged from $16.59 to use a Wal-Mart Money Card, to $17.60 for an AccountNow card, to $43.75 for a RushCard.

Moreover, some cards do indeed charge overdraft or "shortage" fees, says Michelle Jun, staff attorney with Consumers Union and author of the report. Many customers do signature transactions rather than enter a PIN because the latter sometimes triggers a fee.

"Those signature transactions are not in real time most of the time, so they don't get processed until the end of the day," Jun explains. "So you may have that amount on the card at one time, but at end of day you might not have sufficient funds because a transaction hasn't cleared yet. The terms and conditions say you need to make up that negative balance -- and some charge a shortage fee." Jun suggests consumers who have a checking account use a bank debit card and simply opt out of overdraft protection, so the transaction is denied if the funds are insufficient.

Mercator's Jackson says part of the problem is that fees are based on customer usage. "The cost varies from card to card and cardholder to cardholder, so it's caveat emptor," he explains. "If the buyer knows what he needs the card for, and compares the fees, then he can come out ahead. But if it's willy-nilly 'I want this because it has the Visa logo and I can buy stuff online' -- but someone is not paying attention to what it costs to reload or do transactions -- it's going to become difficult."

The other issue is what costs are being compared. "Consumers Union typically compares prepaid cards to free checking accounts, and prepaid cards lose," says Jackson. "Prepaid card advocates compare their products to the cost of going to a check cashing store and paying for a bunch of money orders to pay your bills -- and prepaid cards win."

Aside from the issue of fees, consumer advocates are concerned that the cards don't offer the same protections as debit cards tied to a bank account, which are regulated by the Electronic Funds Transfer Act (EFTA) and Regulation E. If consumers contact a debit card issuer about a lost or stolen card within two business days, liability is limited to no more than $50. If a lost or stolen debit card is not reported to the issuer within two business days, a consumer's liability is capped at $500.

The industry says it offers similar protections in its terms and conditions. But consumer advocates say these can be changed or rescinded because companies reserve the right to change the terms of the contract at any time for any reason. Reloadable prepaid debit cards are also not covered by the new restrictions of the CARD Act, such as the rule prohibiting gift cards from expiring before five years, and banning inactivity fees in the first 12 months.

"We take it for granted that it is safe to use a debit card under the EFTA. Those same rules should apply to prepaid debit cards," says Jean Ann Fox, director of consumer protection with the Consumer Federation of America. In addition, "it's hard to tell from card to card which ones are structured so there is FDIC insurance" and if the consumer's funds would be protected if the institution issuing the cards failed.

"I think it's a valid concern," says Troughton of Green Dot, which sells FDIC-insured cards. "As far as I know, the vast majority is FDIC-insured, but consumers need to look program by program."

Perhaps the most contentious issue is that some companies link the prepaid debit card to an expensive line of credit -- a cash advance that essentially works like a payday loan. "A cash advance on a prepaid debit card has triple-digit interest rates, and is repaid by deducting the next deposit to the card all at one time, so consumers don't get an installment repayment schedule," says Fox. "This is a debt trap for consumers who might use these cards."

Troughton says Green Dot has no plans to expand into this service. "We don't believe there is a way to offer short-term credit today in a fair and value-oriented way," he says. "I don't think it's a good value to customers."

NFL Reward cards to be cancelled, use the points or lose them

I think this is no surprise since many banks are losing money, they are doing what they can to save any money. They have done it by cancelling members cards even if they are in good standing. 


Fortunately, some of them are giving memebers a chance to cash in those points before they do away with the plan.




NEW YORK (AP) -- The National Football League's decision to move its branded credit card business from Bank of America to British banker Barclays is forcing customers of the Charlotte, N.C., bank to scramble to spend reward points before they expire next month.
On message boards, in between talk about upcoming training camps, fans are discussing how they'll spend their points in Bank of America's "NFL Extra Points" program. They have until the end of August, just before Barclays' new program begins in September.
Fans can get a one-hour appearance from the Denver Broncos mascot Miles for 40,000 points, Pittsburgh Steelers head rest covers for 3,250 points, or replica team jerseys for 10,400 points. Fans also can buy "experiences" such as visiting the playing field before the game. A point typically equals $1 spent on the card.
There's a giant countdown clock ticking away the time on the program's site, http://www.nflextrapoints.com -- 57 days as of Monday.
Ann Weinzimmer has racked up about 5,000 points on her Cleveland Browns card. The 33-year-old Cleveland lawyer is frustrated that her accounts seem to keep changing ownership. She's planning to look for better point deals rather than get a new NFL card.
Weinzimmer -- who notes she's really more of a Cincinnati Bengals fan -- will probably spend her points on baseball caps. "I might as well, otherwise you're just throwing it away," she said.
The market for credit cards affiliated with sports teams, universities or other special-interest ventures has been growing and consolidating amid the financial shakeout. The NFL likes having credit card partners because it gets a cut of the business beyond the initial payment for the rights to the franchise. Credit card companies like the programs because rabid fans don't need much convincing to sign up.
Bank of America Corp. won't say why it and the NFL failed to reach agreement on an extension of a contract it has held since 1995. It is still the official bank of Major League Baseball and for four NFL teams, the Washington Redskins, New England Patriots, Carolina Panthers and Dallas Cowboys, which let it issue debit cards with their logos but not credit cards. The NFL, which announced the deal with Barclays last month, declined further comment.
Bank of America's credit card business is large. It reached a peak of $184 billion in balances outstanding in 2008, but it was stung in the recession by growing defaults. The default rate went from 3.9 percent in 2006 after it acquired MBNA to 11.2 percent by the end of 2009, though the rate has started to improve.
The sticking point in the NFL talks may have been the issue of debit cards, said Odysseas Papadimitriou, a former executive with Capital One and now CEO of CardHub.com, a credit card comparison site. Banks prefer debit cards because customers usually keep their accounts longer -- which means less work to land new accounts. And customers are also less likely to run up debt because debit card charges are automatically deducted from customers' checking accounts.

New Basic Credit Card Changes

It seems like there are many more changes happening in Congress that will affect your basic credit and debit card transactions.  From fee to rewards and discounts from paying cash.


Associated Press:

Hate those merchants that won’t let you use your credit card unless you spend more than a certain amount? Well, now they have Congress’s blessing, as long as the minimum is not higher than $10. The Federal Reserve can increase the minimum if it chooses. As for maximums, only the federal government and colleges and universities can limit what people spend. So if you are paying tuition on a credit card and earning a couple of free plane tickets each year, that fun may soon end.
Merchants are also free to offer discounts to people who pay cash instead of using cards, or use debit instead of credit cards. They will not, however, be able to charge one price for people using American Express cards and a lower price for people using Visa and MasterCard credit cards.
Merchants will also not be allowed to give discounts based on which bank issued the debit or credit card you are using. Why would a merchant want to do that? Because the bill gives the Federal Reserve the ability to set a limit on the fees that stores must pay to accept debit cards. The catch here, though, is that only banks with more than $10 billion in assets would be subject to the cap. As a result, merchants may have to pay more to accept debit cards from smaller banks and credit unions than big banks like Bank of America and Chase. And if that were to happen, stores might be tempted to offer discounts to people with big bank debit cards.
Oddly, community bankers and credit unions don’t want to end up earning more money from merchant fees than big banks do, even though it would give them a competitive advantage. Why not? They worry that the big banks will immediately put pressure on Visa and MasterCard to lower merchant fees for all debit cards, not just the big banks’ cards. Thus, the smaller institutions had hoped that the status quo would remain, with everyone continuing to earn fat fees from the merchants forever.
It is not clear what the Fed will do or how the big banks and Visa and MasterCard will react. This could take a few years to play out, or many years if lawsuits start flying. Some merchants may try to play fast and loose with the rules too. Bill Hampel, chief economist of the Credit Union National Association, figures that small retailers might happily accept debit cards with the names of big banks that they recognize and then ask shoppers with cards from no-name institutions to use cash or some other card.

4 Basic Credit Card Errors

This was a cool article I wanted to share with you. These are mistakes anyone can make.

Christian Science Monitor:

1. Not Paying Attention to Due Dates

This recently happened to me. I got my email notification of the statement, logged it in the back of my mind that I needed to pay that bill and unfortunately got busy and never bothered to pull that statement out of the back of my mind until two days after the bill was due.

I know what you’re thinking – just automate your bill pay! Yes, I should do that, but I do like to take a look at what’s on the statement and make sure everything is correct. This forces me to do that.

Making a late payment even if it is only by a few days can rack up ridiculous charges that only compound your debt. Those annoying charges can also have an impact on your credit report. Being vigilant about paying your debt and paying it on time is key.

What I’ll do is give American Express a call and see what they can do for me. Since I don’t carry a balance, normally pay on time and have been a long-time, loyal customer I’m hoping they’ll waive those charges for me.

2. Not Paying Your Bill in Full Each Month

This is where it all begins doesn’t it? You’re a willing victim to the crazy cycle. You buy something you can’t afford and think, “I get paid in two weeks, I’ll just put it on the credit card and as soon as I get the bill I will pay it off” and then something else comes up.

Emergencies happen or you find some other trinket you want to buy and you put that on your credit card too. At the end of the of the month you receive a hefty bill. What do you do? If you only pay what you can and wind up leaving a balance on the card that accrues interest at insane amounts, you’re asking for trouble and perpetuating the cycle!

Just think, with a little discipline and some self control you could’ve avoided unnecessary spending and used that money to open a Roth IRA or fund some other type of investment account.

3. Not Realizing You Have Credit Card Problems

Okay, this sounds silly, how can you not recognize that you have credit card problems? Well, it’s actually fairly easy. I spent the majority of my college years and shortly after living the high life without any regard to the thousands of dollars I was racking up!

I didn’t even realize that I had a credit card problem. I just figured this was a normal part of existence and that once I made more money, then I would pay off that debt! No big deal right?

Little did I realize that I needed to make some drastic changes! Get real with yourself and ask if you’ve got some spending issues.

4. Not Negotiating With Credit Card Companies

It puzzles me that more people don’t call their credit card companies to negotiate with them. You can negotiate things like interest rates, late payment fees or even payment plans. If nothing else, it doesn’t hurt to give them a call and find out what they can do for you.

The person who never asks, never receives. Now of course there is no guarantee that the credit card company will do anything, but wouldn’t it be nice to know if they were willing to do something?

Getting out of debt is not easy, but don’t make it harder on yourself by making simple mistakes that can easily be avoided.

What do these new laws mean for basic credit cards?

The new credit card laws that go into effect this week are suppose to protect and help consumers. What do the experts think about it?

Huffington Post:

The credit card reforms enacted by Congress and signed by the president last year are set to take effect on Monday. Unsurprisingly, credit card issuers have already found several ways to get around the reforms.

Harvard professor Elizabeth Warren, chairwoman of the bailout oversight panel, said on Thursday that the shortcomings of the credit card reforms show the need for an independent agency that protects consumers from the financial industry.

"[The Credit Card Accountability, Responsibility, and Disclosure Act] is a good first step but it isn't enough alone," said Warren on a conference call with reporters hosted by the U.S. Public Interest Research Group. "The credit card industry and the entire consumer credit industry is broken. We need an agency, a cop on the beat that is flexible and responsive."

The House of Representatives approved a financial regulatory reform bill that includes a Consumer Financial Protection Agency. It's fate in the Senate is uncertain.

Warren described a new credit card trick to get around new restrictions on arbitrary interest rate increase and "hair trigger" rate increases for barely-late payments.

"Last week, somebody showed me a letter from their bank that raised their interest rate from 9.9 percent to 29.9 percent -- not because the person had done anything wrong or failed to pay, just a rate increase -- but then gave a so-called 'rebate' back to 11.9 percent," Warren said. "So now the company can impose its 29.9 percent rate increase anytime it wants because that is the actual rate on the card. In other words, this issuer has just figured out a way to slide slightly over from the rule of the CARD Act and avoid the intent of the rule in order to go back to the practices that Congress has deemed abusive."

That's a new one. In September, the Center for Responsible Lending issued a report titled "Dodging Reform" identifying eight new tricks credit card issuers had come up with. The Federal Reserve, when it promulgated rules for the industry to follow the reforms, squashed two of the evasions identified by the Center.