There is not a better television commercial out there today that describes the times in which we live. Yes, it’s the Cash4Gold.com spot.

Two major items of note:

1) The old lady by the lake saying, “I had no idea my gold jewelry was worth so much!” is priceless.
2) The dark haired lady saying, “I turned in my wedding band from my first ‘marrwidge’ and got money the very next day.” This lady is creepy, like a black widow.

Anyway, enjoy a laugh at the expense of our friends at cash4gold.com.

There must be better ways of getting money than this. What say you good readers of Clint Says? Are credit cards, cash advance loans, payday advances, pawning, or home equity lines of credit better choices than this?

-Tom Selleck

Here is the story from our friends as USA Today:

“Caught in the financial typhoon, American Express is seeking a safe harbor by becoming a bank holding company. The Federal Reserve approved AmEx’s request today, bypassing the normal 30-day waiting period to become a commercial bank.

Last week AmEx reported a 24% drop in quarterly profits, and last month it announced plans to cut 7,000 jobs, or nearly 10% of its workforce.”

Pay me, PLEASE!!!

American Express is in need of assistance because its users, primarily business and small businesses have increasingly defaulted or missed monthly payments. However, in a public statement, American Express, CEO Kenneth Chenault, stated the following:

“Given the continued volatility in the financial markets we want to be best-positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”

Given the rise in the number defaults in the housing market and its ripple effect on other credit markets, taxpayers and consumers should be somewhat leery of American Express when it states that it is moving to become a bank to simply “take advantage of various programs the federal government has introduced…”

As last week’s news about layoffs at American Express are combined with their move to garner taxpayer money, consumers and borrowers should be cautious of what American Express and other credit card lenders may do to remain solvent. Rate increases, fee assessments, and credit limit reductions are all in the works and more fees may be heading consumers’ way. Borrowers who utilize these cards may want to look to other forms of short-term credit to avoid the all but certain upcoming surprises from card issuers (i.e you pay more to utilize their plastic product).

-Tom Selleck

There has been much discussion as to the viability of short-term cash advance or payday loans in the news over the past few years. Some have even called for their outright prohibition. However, critics of the popular credit choice are quick to admit that there is a real need for these payday and personal loans. In spite of the apparent need for short-term credit (especially in this economy, which lacks abundant credit) some pundits speculate that these cash advance loans are on their way out thanks to the recent election of Mr. Obama and some liberal democrats. So what is in the wing to replace this necessary short-term product? Many familiar with the payday advance industry suggest it may be installment loans.

Installment loans are a different lending product that gives consumers even greater repayment flexibility. Demorats could hardly call these loans “predatory,” although federal officials once gave their express blessing to truly predatory loan products such as subprime mortgages, HELOC loans, and other high dollar loans tied to housing products.

With these short-term installment loans, consumers can repay in full at any time prior to their loan’s stated maturity date - which they choose at the outset of the loan - or they can make a set number of payments (typically around 20) over a period of weeks, normally bi-weekly. Costs are affordable and give the consumer much more of a safety net if they are unable to pay their loan in full on the two-week maturity date most payday loans have. Short-term lending and the fees and interest associated with it isn’t going away… it’s definitely changing, but you can be assured that consumers will pay as much or more with installment loans.

Following a study suggesting that the 18-34 age group are most at risk from the credit crunch, with many carrying significant debts, financial solutions company Think Money have advised people in this age group to take extra care with their finances as the prospect of a recession looms.

Furthermore, they added that debt problems are just as serious for people of any age, and should always be addressed as soon as they start.

The study, carried out by think tank Reform and the Chartered Insurance Institute, claimed that many 18 to 34-year-olds had so far experienced a “uniquely gilded life” which had given them a “false sense of security”.

As a result, they have “run up huge credit card bills, smashed their piggy banks and are now staring at a broken housing ladder”, the report claims.

The report dubs the age group the “IPOD (Insecure, Pressurised, Over-taxed and Debt-Ridden) generation”, and claims that one in five such people carry debts of $15,000 or more, while one in three have no savings.

The overall situation leaves the IPOD generation particularly vulnerable to the current state of the economy, with the report stating that they “have the raw skills to understand their position and the dawning sense of responsibility to do something about it (…) However they are hamstrung by a financial establishment determined to service the old and patronise the young.”

A spokesperson for Think Money said: “It may well be the case that many of the large numbers of younger people getting into debt do so because of a diminished sense of responsibility, brought on by comfortable living conditions and, until recently, relatively easy access to credit and short term loans.

“But with the credit crunch ongoing and a recession becoming a very real possibility, a lot of younger people may be about to experience the kind of struggles that instilled an “instinctive fear”, as the report puts it, into people from previous generations.

“Whatever the reason, in the current economic climate, it’s more important than ever for people to tackle their debts now. Especially with high-APR debts such as credit cards, it’s essential that those debts aren’t allowed to grow.

“There are a number of debt solutions designed to help people in different financial situations.

“For people with a number of smaller debts, a debt consolidation or cash advance loan could help. A debt consolidation loan involves taking out a new loan to pay off all your existing debts, meaning you only have to repay one creditor instead of many. The interest rate is often smaller than your original debts, especially if you are paying off high-APR debts such as credit cards – although if you choose to lower your monthly payments by spreading them out over a longer period, this will incur more interest which could cancel out the benefit of a lower overall rate of interest.

“If you have a number of debts that you are struggling to repay, a debt management plan might be a better option. This involves speaking to a debt adviser, who will discuss your financial situation in confidence, and will then negotiate with your creditors to agree repayments based on how much you can afford each month. In many cases, interest and other charges can be frozen, reducing the total amount you have to pay.

“If you have more serious debts of over $23,000, an IVA (Individual Voluntary Arrangement) could get you debt-free in five years. An IVA involves making regular monthly payments to your creditors based on the amount you can afford to repay, and after the five-year period your remaining debt will be considered settled.

“However, be aware that an IVA requires approval from creditors holding a total of at least 75% of your debts before it can go ahead, and you may be required to withdraw some of the equity in your home in the fourth year of your IVA.

“Debt affects people of all ages, so we urge anybody struggling with debt to seek expert debt advice as soon as possible.”

Article Courtesy of Think Money

Here is a great response to a recently released study by the Center for Responsible Lending.

-TS
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The Center for Irresponsible Payday Loan Studies
by Lawrence Meyers

They’re at it again. The Center for Responsible Lending, the corrupt “charity” that consistently and fraudulently attempts to ban payday loans to fill their own coffers with competing products, has released the results of another “Study”. This time, in an attempt to remove consumer choice from Ohio and Arizona, they trot out a study from the University of Michigan. Out of one side of their mouth, they proclaim, “The survey by University of Michigan law professor Michael S. Barr found that respondents using payday loans were more likely to file for bankruptcy, be evicted, or face utility shut-offs than respondents who had not taken a payday loan.” Ah, but just a few lines down, they bury the lead: “While the Michigan survey does not establish a causal relationship…”! Well, this is typical of the CRL’s thuggish tactics.

They parade around ridiculous studies that have flawed data collection techniques, draw false conclusions from this flawed data, then try to snooker unsuspecting readers that this smoke-and-mirrors job supports their assertion. Just to reiterate, the CRL has its own loan product. They want to drive payday lenders out of business so they can have a monopoly. They are entirely funded by government grants and George Soros – the man who wants to raise taxes on everyone but himself, while he secrets his wealth off-shore.

The facts are, and always have been, on the side of payday lenders. They are sources of short-term credit that 93% of consumers use responsibly. If they could get a free loan from a friend or relative, they would. They are smart enough not to bounce checks, which cost more than a payday loan. Don’t buy the rotten fruit that the CRL is trying to pass off as freshly harvested. It’s rotten to the core, just like they are.

This is a great article. I remember the layaway counter from my childhood
-TS
________________________________________________________

Before there was VISA, Mastercard, or any credit card there was layaway. Consumers who didn’t have quite enough cash on hand to make a large purchase could put the item “on layaway.”

That meant the merchant would set the item aside for the consumer until they came in and paid for it. Often the consumer would come in weekly and put down small amounts until the item was paid for.

In this new era of tight credit, retailers like Kmart and TJ Maxx have experienced a sharp increase in customer demand for their layaway programs, according to a report in the Wall Street Journal. Holiday consumers see layaway as a payment alternative at a time when credit card companies are reducing purchase limits and access to loans is tightening amid the country’s ongoing financial crisis.

“People are shying away from credit cards, because maybe their limits have been reduced or they simply don’t want to carry any debt
ahead of an economic recession,” said Bob Robicheaux, Ph.D., chairman of the UAB Department of Marketing and Industrial Distribution. “And if a purchase can’t be put on credit because it’s restricted, then the best option is to use layaway and put $10 dollars down then make equal payments toward the purchase in the weeks before the holidays.”

Robicheaux said smaller retailers are more likely to offer layaway programs because those businesses know their customer personally, leading to a degree of trust between buyer and seller. Companies offering layaway this holiday season could see a competitive advantage over larger retailers that have done away with the service.

“Companies with layaway programs are essentially offering their customers free credit, and many consumers are likely to take advantage of that in these economic times,” Robicheaux said. “So I see a distinct advantage for some retailers to capitalize on.”

Layaway, as a practice, was mostly abandoned by many retailers as the popularity of credit cards surged in the 1990s.

Here is another interesting example of the continuing credit crunch caused by looming “progressive” federal legislation. In light of American Express laying of 7,000 employees I thought the posting of this article is timely.

-TS

*********************************

The US House and Senate aren’t expected to vote on credit card regulations until early next year. The Fed’s rules, currently being reviewed by the industry, could take effect around that same time. But lenders seem to be preparing for the worst-case scenario: an outright ban on some practices.

To get ahead of rules that would hamper their ability to reprice accounts, for example, many firms are jacking up interest rates. A survey of major issuers by consumer advocacy group Consumer Action found that 37% of firms have raised rates across the board, even for borrowers with relatively pristine credit records.

“In anticipation of a federal crackdown, credit card companies are scouring their portfolios and tightening credit,” says Tower Group’s Moroney.

Even consumers like Michael Polemeni, who miss only a single payment, can find themselves in the crosshairs of credit-card companies. The independent computer specialist relied heavily on his credit cards for child support payments and business expenses. He has recently sought out cash advance loans as well.

Polemeni generally made more than the minimum payment each month, carrying a $2,000-or-so balance. But in July he missed a payment, and Providian, owned by Washington Mutual, jacked up his rate from 9% to 30%. “I was shocked because I am a very good customer,” say Polemeni, who paid off the full balance immediately. WaMu didn’t return calls for comment.

Not everyone will be able to pay down their debts like Polemeni. And that leads to a vicious cycle: As credit-card companies raise rates, more consumers fall behind on their payments, which then hurts the issuers. Says Innovest’s Larkin: “We are going to see the banks massively hit.

Clint Says read with some interest a statement from the North Side Community Federal Credit Union, located in the fair city of Chicago. North Side has caught the vision of how to better offer payday loans, cash advance loans, and other short-term credit products as its introduced its “PAL” program. Here are the details of their payday loan alternative:

-Average loan is $500 ($75.00 of which the credit union doesn’t allow the borrower to use, so the true principal loan amount given to the consumer is $425.00.

-An “reasonable” APR of 16.5% (why are the payday guys out of business yet? Let alone subprime credit card providers?)

-A $30.00 “application fee” (Why doesn’t this get rolled into the APR?)

-Hopeful borrowers must attend 4 financial education seminars (Can you see someone who needs an emergency loan waiting around to complete the four part series? Me neither).

Of course, the program superficially looks good to consumers, and why not? 16.5% APR verses a 391% APR product? You would have to be a fool to choose the more expensive loan. The question that interested policy makers and informed consumers should ask is, “why does the program have fewer than 1,000 participants in a city of nearly 3,000,000 individuals?” I can assure you its not because the credit union lacks a decent marketing budget.

In a press release from NSCFCU about the PAL program a couple of years ago, the organization, which relies heavily on bounced check and courtesy overdraft charges (60% of fees according to a recent article by Forbes Magazine) bemoaned the fact that at the time it was only charging those in need of short-term loans a $10- application fee, to quote the release:

“We currently charge only a $10 application fee for the loan. Increasing this fee to $20 would at least help cover our costs of the program.”

Since then, the program has increased is self proclaimed innocuous “application fee” from $10.00 to $20.00 and then to $30.00. Does the $30.00 fee cover the program costs? A look at the NSCFCU loan product using a comparative APR will shed more light on the application fee.

Remember the terms of the loan? $425.00 in principal, 16.5% APR, and a $30.00 application fee. To calculate the APR we need the duration of the loan. The vast majority of cash advance loans are repaid in 13 days (NSCFCU gives a borrower up to six months, but verifiable consumer behavior shows the majority of these loans are paid in full after two weeks). When calculated on a a two week basis the credit union payday alternative loan’s APR is 231.02% compared to a payday loan of 391%. Payday lenders have claimed that at the interest rates they charge they receive a paltry 6.6% net profit or the same as an average Fortune 500 company in 2007. Patrons should not be surprised when the CU asks for an increase in the “application fee” from $30.00 to $40.00 in the near term to help them break even.

Regardless, the alternative loan product remains somewhat cheaper, but why the continued lack of interest?

The requirement to go through weeks of financial seminars although noble and good, is unrealistic for many people who rely on short-term loans to help meet unexpected financial issues. All people who use cash advance loans are employed. Many work two jobs to get by. The last thing these working and middle class people have time for when they are in a bind is a four-week series taught by someone who looks down on the way they have handled their finances. What the credit union doesn’t realize or simply don’t care about, is these classes create a burden more costly that what they would pay at any online cash advance or payday loans provider. Time in many instances is more precious than saving a few dollars (the cost difference between most payday alternatives and cash advance products).

Payday advance and pre-paid VISA card providers have and will continue to succeed in their mission to provide short-term credit at reasonable prices because they have put themselves in the shoes of their borrowers.

There have been some recent stories listed on Bankrate regarding Credit Card issuers (and the banks that fund them) reducing credit limits and increasing APRs on consumers due to the lack of liquidity and the increased risk involved in today’s consumer credit market. Some borrowers are even finding their accounts canceled by the credit card providers as well. Below are a couple of testimonials as found on several websites:

-TS

90 % REDUCTION
I received a Macy’s Visa back in 2005 that I didn’t even recall applying for. The credit limit was $5,000. Nevertheless, I didn’t use it until this year. I had planned a trip to Disney in Florida and wanted to use it then. I called to activate it and found out that my limit was reduced to $500. How drastic was that?!
– Patricia S.

THIS IS THE THANKS I GET?
My wife and I have faithfully paid our credit card payment every month for the last five years. Last week we received a notice from our bank that they were reducing our limit by half and that we would need to reduce our balance in 90 days or face over the limit charges. We’ve never been late on a payment and am ticked off that we may face losing our credit cards because others have been stupid with the way the utilized their credit cards. Because it will be difficult to make ends meet through the end of the year, we may need to utilize another credit card’s cash advance line or even use a title loan. This is the great service we should expect from our bank after five years of banking with them.

-Jason W.

BRUISED CREDIT SCORE
I am 49 years old and have been employed since 1993, when I graduated from law school. My wife and I have lived in the same home since 2000. Neither my wife nor I have any late payments on any obligation we have had over the last 10 years or more. We do, however, have a good deal of credit card debt, very nearly all of it at 4.99 percent interest or less. Our annual household income is over $90,000 and our total monthly debt payments, including my student loans, our credit cards and our mortgage, is about $2,400. My wife’s credit score was about 720 and mine about 690.

A few months ago, Bank of America advised rather abruptly that it was cutting our cards’ credit lines by a total of about $30,000. This increased our credit utilization ratio rather dramatically, and it has begun affecting our credit scores. My wife’s score has dropped by more than 50 points and mine by an even greater amount. In turn, I believe other credit issuers will begin cutting our credit limits. We just received notice from American Express, for example, that my wife’s card limit through them will be cut by over $5,000. No doubt actions such as this will further depress our credit scores.

As a consequence of their actions, my wife and I are seriously considering severing our relationships with Bank of America and American Express. Although this sounds like the proverbial cutting off of one’s nose to spite one’s face, I don’t know what else to do to express my displeasure with these companies other than discontinuing their opportunities to profit from my patronage.
– Doug H.

I was driving into work this morning hearing about another example of the leftist radical organization, ACORN, conducting more illegal voter registration in battleground states. The show host had a person on defending ACORN workers actions. He tried to defend the organization by stating that the field workers signing up fictitious or multiple people are only doing so in order to get paid. It seems that ACORN pays or bonuses their field workers on the number of registrations they collect. The question is, why is this practice legal at all? This election cycle has provided ample proof that paying individuals to get people to register to vote is a poor idea. Especially when such registrations can lead to voter fraud and jeopardizes the legitimacy of the American democratic voting system of “one person, one vote.”

The repeated examples of voter registration fraud suggests that it is time for government to step in and protect the integrity of the system. State legislatures should seriously look at establishing statutes that prohibit individuals from receiving any compensation for registering people to vote and organizations from paying individuals to register to vote. It may be worthwhile to only allow the government to sponsor and organize voter registration drives. We have seen too many examples of what can go wrong when such efforts are incentivized. Our democracy is to valuable to be cheapened by paid voter registration efforts.

-TS