Consumer Fun Fact

January 22, 2010

Dow JonesWhich of the original Dow Jones companies is still in business today?  Read on to find out.

The Dow Jones Average is a widely watched stock index.  It is the weighted average stock price of 30 of the largest and strongest companies in America.  When the Dow was created in 1896, it only averaged the stock price of 12 of the largest and strongest corporations in America.

Of the original 12 companies in the Dow only, one is still in business today.  All the others have either been broken up by anti trust laws, been purchased by larger companies, or just gone out of business. The only remaining original member of the Dow Jones Average is General Electric.

The lesson to be learned— Things Change.

Foreclosure Crisis Continues to Worsen

January 21, 2010

foreclosureBy Angie Moreschi:

The number of people dealing with foreclosures reached a record number of nearly 3 million in 2009.  Americans saw that dramatic increase despite efforts, like President Obama’s Making Home Affordable  Program, to reduce foreclosure filings. So, what’s going wrong? Why can’t our country stem the tide of foreclosures? Some state officials are taking a stab at changing the trend.

A group of state Attorneys General and banking regulators have released a proposal urging loan servicing companies to step it up. The report, by the State Foreclosure Prevention Working Group, said current efforts are failing to keep up with the number of borrowers falling behind on their loans.

It found that more than 70% of loan modifications resulted in an increase in the principal amount owed as unpaid interest, fees and other charges were rolled into the loan amount.  Only four in 10 borrowers who are at least two months behind on their payments are involved in any sort of loss-mitigation effort. The report warned that without more aggressive steps, including a focus on principal write-downs, foreclosures will continue to weigh on the economy.

“Despite efforts of servicers, homeowners and the government, the foreclosure crisis continues to worsen. These signs point to more foreclosures in 2010 than in 2009,” the report said.

The states’ report is based on data from 13 mortgage servicing firms.  It offered a stark view of the housing market. Through the end of October, there were 1.7 million mortgages at least two months behind on payments, while the number of loans in the process of foreclosure increased by 52% between October 2008 and October 2009, the report said.

Key recommendations in the report include:

Reduce loan principal: State officials say that servicers should cut the loan balances of homeowners, in addition to reducing interest rates and extending the terms of the loan. This is especially true in places where property values have plummeted. Reducing principal will make it less likely that homeowners will default on their modified loans.

Pay attention to option ARMs: More than 40% of these complex mortgages are delinquent. Even worse, over the next two years, many will adjust, driving up borrowers’ monthly payments. Servicers need to address these loans before they fall into foreclosure.

Limit required paperwork: Many homeowners are not receiving permanent modifications under the president’s plan because they haven’t submitted all their documents. Treasury Department officials should reduce the amount of paperwork borrowers are required to file and speed up the debut of a central portal where homeowners can submit the forms. The portal is currently set to launch at the end of March.

Expand counseling and mediation efforts: State should expand their housing counseling and mediation programs, which require homeowners and servicers to meet before the completion of the foreclosure process.

Suspend foreclosure proceedings: Treasury officials should amend the president’s program so that the entire foreclosure process is halted when a borrower applies for the president’s program. Currently, only the sale is stopped.

Help the unemployed: Treasury officials and servicers should do more to assist the unemployed so they do not fall into foreclosure. A growing number of borrowers with good credit backgrounds are behind in their payments because of the weak economy.

How to Help in Haiti and Not Get Scammed

January 20, 2010

By Nicole Mayer:

The devastation in Haiti has many of us thinking: what can I do to help? Ambassadors leading the aid efforts say the best thing to do is donate money. But how do you know the money you donate is going to the right place? The best advice is to do your research. Click here for more information on how to avoid scams and to watch a CNN story on giving aid to Haiti.

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How Quickly We Forget

January 16, 2010

gas guzzlersBy John Newcomer:

Remember when gasoline cost $3.00 a gallon? It was not that long ago. Yes, in the summer of 2006 prices at the pump started to hit $3.00 a gallon, and the price stayed there for some time.

We screamed and whined when it cost us more than $100 to fill up our gas tank. We vowed to change and sell that gas hog. Next time I will buy a fuel efficient car more fitting with the new world economy.

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Calls to Tax Banks to Recoup Taxpayer Losses

January 13, 2010

The Obama Administration is moving forward with efforts to tax banks, because they’ve been so tone deaf in calls to help Main Street after receiving billions in aid from taxpayers.  Click here to watch an ABC News report on the call to tax the banks.

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New Way To Hide Outrageous Credit Card Interest Rates

January 13, 2010

By Terry Smiljanich:

Credit card companies are engaged in a binge of interest rate hikes on their credit cards, thanks to the lack of any usury protections or limitations on how high they can hike such rates. Interest rates of 24%, 36%, and even 79.9% are more and more common.  These abuses have been the focus of several Consumer Warning Network stories, as you can see here, here, and here,

In the face of the continued exposure of their practices and public shaming due to the taxpayer bail-outs they received, these institutions apparently are looking for new ways to hide their hideous, historically high charges.  Case in point: Macy’s, which seems to have found a nifty way of doing so.

Take a look at one of its “Platinum Star Rewards” account statements. There at the top of the front page the annual percentage rate for the account is shown as 24.5%. That’s pretty steep, but there’s more.

Also included on the first page is a $2.00 “Interest Charge,” with the following explanation: “If you pay your New Purchase Balance of “x” dollars by “y” date, your Initial Interest Charge of $2.00 on your Revolving Account will be refunded on your next statement.”

So, in addition to the 24.5% interest charge, Macy’s is also taking out $2.00 up front and keeping your money for a month. It will refund it next month, if you pay off your new purchases.

You might wonder what effect this fancy footwork has on the actual interest rate you are being charged. Well, if you go to the bottom of the second page you will find this statement:

Macy's 47% Interest Rate

Yes, you saw it right.  47.04% interest!! “As a result of the Minimum INTEREST CHARGE of $2.00 being applied to your Revolving Account, the actual ANNUAL PERCENTAGE RATE charged on that account is 47.04%.”

So, as it turns out, the “Annual Percentage Rate” of 24.5%, shown on the front page of the statement, is not the “actual” percentage rate, which is really 47%. What does that make the percentage rate shown on the front, the “pretend” percentage rate?

Not only does Macy’s misrepresent the “actual” percentage rate, but it also gets to hold onto your $2.00 for a month, even if you eventually pay off your balance. Granted, $2 bucks is not a lot of money, but adding up the total number of revolving accounts Macy’s has, it could add up to a nice little source of extra income.

Credit card companies should be ashamed of the interest rates being charged in today’s market. They, at the very least, be honest about their usurious rates.

Chase Freedom Credit Cards – A New Way To Trick You

January 13, 2010

Chase Freedom CardBy Terry Smiljanich:

You’ve got to hand it to the credit card companies. When it comes to trickery and misrepresentation, they can outdo P.T. Barnum.

JP Morgan Chase is a prime example. Take its new “Chase Freedom” credit card “bonus offer.” A pretty straightforward internet come-on states:

“There’s never a better time to use your Chase Freedom credit card. Earn 3% Cash Back for every eligible dollar you spend up to $1,500 on purchases between January 1 and March 31st . . .” To emphasize the point, a large banner proclaims: “3% CASH BACK.”

The ad lists certain categories of purchases for which the offer is limited, but it’s pretty clear that you will get 3% cash back on most purchases up to $1,500. Do the simple math and that comes to a potential maximum cash back of $45 at the end of the three month period. What could be more clear?

But wait. What’s that footnote? Oh, just the usual gobbledygook about limitations on the kind of merchants, non-transferability, etc., etc.  But right in the middle of the fine print footnote is this incredible statement:

“Maximum bonus reward accumulation during the promotional period is $20”

Say what? Again, do the simple math. A $20 dollar maximum cash back on the maximum limit of $1,500 in purchases comes to 1.3%, not 3% as advertised!

In simple English that even Chase can understand, “3% cash back” is a bald-faced lie. Either the wizards at Chase, one of the largest financial institutions in the country, are mathematically challenged (not pretty to contemplate), or they simply chose to misrepresent the offer and hope that their potential customers either flunked 8th grade math or, more likely, didn’t read the fine print that would have told them that the big, bold words at the top of the page were a complete lie.

When asked to comment on this clear misrepresentation, Chase chose not to respond to our inquiries. I guess they couldn’t come up with a legitimate excuse for such a clear falsehood.

Banks: The New Loan Sharks

January 7, 2010

In the ongoing efforts of Consumer Warning Network to expose why banks are allowed to charge outrageously high interest rates, we caught the attention of national business columnist Al Lewis.  Click here to check out Al’s segment on Fox Business Channel about how credit card rates are blurring the line between banks and loan sharks.

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Banks May Warm Up to Idea of Principal Reductions

January 7, 2010

Under water mortgageThe foreclosure crisis is likely to deepen this year with many adjustable rate mortgages set to balloon.  As a result, reports banks are taking a closer look at whether principal reductions on under-water mortgages make financial sense for both parties.

In the past, efforts by U.S. banks to help distressed homeowners have focused mainly on temporary fixes such as interest-rate reductions that may only put off the day of reckoning, despite policy makers wanting them to do more.

Now, while principal reductions remain rare, banks are doing them more often. In the third quarter of 2009, some 21,000 home loans — 3 percent of the total modified mortgages — included a principal reduction or deferral, according to Mortgage Metrics, a government publication. That’s up from 6,245 in the first quarter of 2009, the first time the U.S. reported the data.

Click here to read more in this report from BusinessWeek on

Foreclosed Homeowners Get Revenge

January 7, 2010

Losing a home to foreclosure is a painful process, that can leave you angry and resentful. Many homeowners say lenders won’t work with them to save their homes, no matter how hard they try and that leads to something that’s being dubbed “debtor’s rage.” WFAA in Dallas recently did an interesting report on how some foreclosure victims are getting revenge by trashing their homes.  Click here to check out the report.

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