eCreditDaily.com

JC Penney’s ‘Fair and Square’ Prices Not Adding Up for Shoppers

2012-05-16T23:47:58Z

Shoppers have found JC Penney’s new everyday pricing strategy a bit too fair and square as they yearn for coupons and big bargains again.

The department-store chain reported a 20 percent drop in sales for the first quarter due in large part to public confusion and disappointment over the lack of big discounts to which they had grown accustomed.

The retailer’s “fair and square pricing” – touted in a new roll-out of commercials – launched Feb. 1 with the intent of weaning shoppers off the hundreds of daily sales and coupon programs Penney would offer yearly.

It seems shoppers have decided to look for those sales elsewhere.

Nonetheless, Ron Johnson, Penney’s CEO and a former retail store executive at Apple, said the retailer’s transformation is ahead of schedule, despite the “tougher than anticipated” first 13 weeks.

“While we have work to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America’s favorite store,” Johnson said.

Johnson, who was named CEO last year, told analysts at a meeting on Tuesday that Penney had done a poor job of communicating its new pricing strategy to customers.

First quarter sales for the department store chain dropped 20 percent to $3.15 billion, slightly better than the $3.43 billion average of 16 estimates compiled by Bloomberg. But Penney also announced that its quarterly dividend would be discontinued. Penney’s stock value plummeted more than 20 percent on Wednesday.

Internet sales through jcp.com were $271 million in the first quarter, decreasing 27.9 percent from last year.

Penney’s new ad campaign has featured comedienne Ellen DeGeneres and focuses more on brand and image, rather than merchandise.

Last month, Penney started launched “Do the Math” ads to convey to shoppers how everyday low prices will save them more than the periodic sale or coupons.

In a statement on the new strategy in January, Penney said: “Rather than inundating the customer with a relentless series of sales, coupons, rebates and retail gimmicks, J.C. Penney will host 12 promotional events each year, on a monthly calendar. Each month will include even better values on the things customers are looking to buy during the month and a host of exciting products and services that are unique to the month.”

Mortgage Delinquency Rates Fall to 2007-2008 Levels

2012-05-16T19:01:00Z

The combined percentage of loans in foreclosure or at least one payment past due was 11.33 percent in the first quarter, a 120-basis point decrease from last quarter and 98 basis points lower than a year ago.

This is the lowest measure – not seasonably adjusted – of mortgage delinquencies recorded by the Mortgage Bankers Association since 2008.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, a good indicators for the rest of the year, Fratantoni said.

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 7.40 percent of all loans outstanding as of the end of the first quarter of 2012.

That represents a decrease of 18 basis points from the fourth quarter of 2011, and a decrease of 92 basis points from one year ago, according to the MBA.

The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.96 percent, down three basis points from last quarter and down 12 basis points from one year ago.

The delinquency rate includes loans that are at least one payment past due, but does not include loans in the process of foreclosure.

Chase Freedom Index: Leisure Lifestyle Spending Surges

2012-05-16T17:27:56Z

During the first quarter, Chase Freedom card members spent 24 percent more at movie theaters, 21 percent more on theme parks and 7 percent more on recreational activities – compared to the same period in 2011.

Those are the findings of Chase’s just-launched “Chase Freedom Lifestyle Index,” a barometer of consumer trends having to do with life’s simple pleasures that come at a price.

The initial index found increases in spending on popular leisure activities, including at movie theaters and recreational facilities such as ski slopes and golf courses in the first quarter 2012.

Additionally, celebrations of Mother’s Day, Father’s Day and graduations are pushing up springtime spending on gifts and consumer wish-list items, such as flowers, jewelry and electronics:

Between April and May of 2011:

Total spending on flowers nearly doubled
Spending on jewelry increased by 28 percent
Total consumer electronics spending jumped 21 percent

“The Chase Freedom Lifestyle Index was developed to examine the ways that our card members, who represent a significant segment of the American credit card market, are enjoying simple pleasures and special occasions throughout the year,” said Matt Kane, general manager, Chase Freedom. “While surveys and opinion polls ask how consumers plan to or would like to spend their money, our Index tracks actual spending.”

Skechers to Pay $40M for ‘Deceptive’ Toning Shoe Ads

2012-05-16T16:29:56Z

Television personality Brooke Burke appeared in a Shape-ups commercial touting the shoes' beneficial effects on fitness and appearance.

Skechers USA has agreed to pay $40 million to settle charges of deceptive ads and making false claims that “Shape-ups” would help people lose weight, and strengthen and tone consumers’ buttocks, legs and abdominal muscles, said the Federal Trade Commission.

Besides Shape-ups, Skechers also made deceptive claims about its Resistance Runner, Toners and Tone-ups shoes, the FTC alleged.

Consumers who bought the “toning” shoes will be eligible for refunds either directly from the FTC, or through a court-approved class action lawsuit, and can submit a claim here.

The settlement with the FTC is part of a broader agreement also announced today resolving a multi-state investigation, which was led by the Tennessee and Ohio Attorneys General Offices, and included attorneys general from 42 other states and the District of Columbia.

“Skechers’ unfounded claims went beyond stronger and more toned muscles. The company even made claims about weight loss and cardiovascular health,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “The FTC’s message, for Skechers and other national advertisers, is to shape up your substantiation or tone down your claims.”

The settlement with the Manhattan Beach, California-based Skechers is part of the FTC’s ongoing effort to stop overhyped advertising claims, and follows a similar settlement with Reebok International Ltd. last year.

The Skechers advertisements challenged by the FTC include a “Shape-ups” ad telling consumers to “Shape Up While You Walk” and “Get in Shape without Setting Foot in a Gym,” and claiming that the shoes are designed to promote weight loss and tone muscles.

The FTC alleges that Skechers made unsupported claims that Shape-ups would provide more weight loss, and more muscle toning and strengthening than regular fitness shoes.

Another “Shape-ups” ad featured an endorsement from a chiropractor named Dr. Steven Gautreau, who recommended the product based on the results of an “independent” clinical study he conducted that tested the shoes’ benefits compared to those provided by regular fitness shoes.

The FTC alleges that this study did not produce the results claimed in the ad, that Skechers failed to disclose that Dr. Gautreau is married to a Skechers marketing executive, and that Skechers paid Dr. Gautreau to conduct the study.

Skechers was the market leader in the toning footwear category. Industry shoe sales peaked in 2010, with sales close to $1 billion. Shape-up fitness shoes, which Skechers introduced in April 2009, cost consumers about $100 a pair. Resistance Runner, Toners, and Tone-ups became available in mid-2010, and retailed for $60 to $100 a pair.

The settlement bars Skechers from misrepresenting any tests, studies, or research results regarding toning shoes.

The website http://www.ftc.gov/skechers gives consumers the basic facts about the Skechers settlement and directs them to file for a refund if they are eligible.

Refinancing Wave Spurs 9% Jump in Mortgage Applications

2012-05-16T15:33:12Z

Propelled by a wave of refinancing at record low interest rates, mortgage applications surged 9.2 percent last week from one week earlier, according to data from the Mortgage Bankers Association.

The refinance component of the group’s overall index measuring applications jumped 13.0 percent from the previous week, while applications for purchases decreased 2.4 percent.

The refinance share of mortgage activity increased to 74.9 percent of total applications from 72.1 percent the previous week.

The group’s Market Composite Index, a measure of overall mortgage application volume, increased 9.2 percent on a seasonally adjusted basis

“A flare up of the sovereign debt troubles in Europe once again led investors to flee to the safety of U.S. Treasury securities last week. As a result, mortgage rates have reached new lows in our survey, and refinancing application volumes picked up substantially as a result,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

Mortgage bankers surveyed said that the refinancing surge was not due primarily to HARP (Home Affordable Refinance Program) volume from the Obama Administration’s revamped effort to help underwater borrowers.

The HARP share fell to 28 percent of refinance applications, down relative to last week and last month, when the share was just above 30 percent in April.

The increase in refinance activity last week was concentrated in the conventional sector, which was up around 14 percent for the week, while government refinance applications were up only 4 percent.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.96 percent, the lowest rate in the history of the survey, from 4.01 percent, for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.20 percent, also the lowest recorded rate, down from 4.29 percent, for 80 percent LTV loans.

States Divert Mortgage Settlement Funds to Cover Shortfalls

2012-05-16T14:25:47Z

Only 27 states out of 49 that received a total of $2.5 billion from the mortgage settlement with the top U.S. lenders have actually used the money to assist homeowners or hard hit communities affected by the foreclosure crisis.

The remaining 15 states have confirmed that they will use all or part of the settlement funds for the intended – but not required – purpose of helping desperate homeowners or preventing foreclosure fraud.

Some of the cash-strapped states are using the settlement allocations to cover festering budget shortfalls.

Even California, one of the hardest hit states of the housing crisis, is proposing to use its $400 million from the banks to pay down the state’s growing debt burden, according to a proposal from Gov. Jerry Brown.

The state-by-state analysis of the $2.5 billion allocation is provided by Enterprise Community Partners, a national organization that promotes affordable and fair housing.

The $2.5 billion is part of the landmark $25 billion settlement reached in February after more than a year of talks between the top lenders – Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial – and federal and state officials.

The deal was reached as a result of accusations by homeowners and authorities of widespread mishandling of foreclosure paperwork or affidavits that were “robo-signed” by the thousands without regard for fact-checking or proper diligence.

Most of the settlement – about $17 billion – is to be paid out to nearly 1 million homeowners in the form of loan modifications, refinancing for underwater borrowers at current historically low loan rates or mortgage principal reductions.

Nearly another 1 million homeowners who lost their homes will receive, on average, a check for $2,000.

The $2.5 billion portion was divided up as direct payments to 49 states and the District of Columbia. The settlement’s guidelines says: “To the extent practical, such funds shall be used for purposed intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud…”

But the money “is also tempting to state governors and legislators who have been struggling with state budget shortfalls for years,” said the report by Enterprise Community Partners.

The organization said that some states have still not made a decision on how to use the funds.

“Therefore, housing advocates who would like to see the funds used for housing or foreclosure prevention activities must understand the decision-making process and timing in their particular state in order to be impactful,” said the organization’s report.

American Express Pilots Personalized Daily Deals on iPhone App

2012-05-16T01:03:00Z

American Express has launched a pilot program for its “My Offers” iPhone app that ranks merchant offers based on a card customer’s spending history and location.

AmEx calls it the industry’s first “mobile offer” engine that recommends and ranks personally relevant deals in real time. The charge card company reflects a customer’s history and location on a “spend graph.”

“My Offers” is the mobile application where millions of American Express card members manage their accounts.

During the pilot, recommended local offers be will be concentrated in Los Angeles and New York City, with an overlay of offers available nationwide at merchants such as Baskin-Robbins and Dunkin’ Donuts.

“In an increasingly crowded marketplace, where consumers are bombarded with daily deals, we saw an opportunity to help our card members save time as well as money by curating meaningful offers for them,” said Josh Silverman, president of the U.S. Consumer Services Group at American Express.

Meanwhile, AmEx can help merchant partners build their business by connecting them with the right customers at the right time.

After card members download or update the American Express iPhone app, they can click to see “Offers Available for You.”

The list of offers will be ranked based on relevance, taking into account a member’s spending history and current location.

Card members can also sort and discover offers based on location or expiration date.

To redeem an offer, members simply add it to an eligible American Express card and then use their card to make the qualifying purchase. Savings are automatically delivered via a statement credit generally within three to five days.

Justice Initiates Probe of JPMorgan Chase Trade Losses

2012-05-15T20:17:29Z

The pressure keeps mounting on JPMorgan Chase as the Justice Department has joined a list of federal entities investigating the banking giant’s trading losses of $2 billion tied to credit derivative hedging.

The U.S. Securities and Exchange Commission and the Federal Reserve have said they are also looking into the trades.

Justice officials have launched a criminal probe, but it is unclear what laws may have been violated.

Meanwhile, JPMorgan Chase CEO Jamie Dimon today survived an attempt by some shareholders to strip him of his chairman’s title, citing fears the he may have too much consolidated authority.

But at their annual meeting in Tampa, shareholders voted to keep Dimon in his dual role of CEO and chairman.

Dimon also won a shareholder endorsement of his pay package for 2011, which totaled $23 million, according to an Associated Press analysis of regulatory filings. But most shareholder ballots on the pay package were cast before Dimon revealed the trading loss last week.

However, pressure mounted on Dimon to reclaim some of the millions paid to the executives who approved the trades. Dimon said JPMorgan would pursue disciplinary actions against those who were responsible.

“We will do the right thing. That may well include clawbacks,” he told reporters after the annual meeting.

Clawbacks refer to compensation that is taken back because of special circumstances. In the aftermath of the financial crisis, clawback policies have been extended to executives and supervisors who engage in excessive risk.

JPMorgan has already reshuffled its management team overseeing its hedge trading after the $2 billion loss. Ina Drew, who headed the Chief Investment Office, was forced out.

AAA: Cheaper Gas to Spur More Road Trips

2012-05-15T19:13:58Z

AAA projects 34.8 million Americans will travel 50 miles or more from home during the long Memorial Day holiday weekend, an increase of 1.2 percent – or 500,000 travelers – from the 34.3 million people who did so last year.

A survey of Americans who plan to travel found that 53 percent said gasoline prices would not affect their Memorial Day holiday travel plans.

Of the remaining 47 percent of travelers who said gas prices would impact their travel plans, nine percent are planning to take a shorter trip, four percent will travel by an alternate mode of transportation and 34 percent will economize in other areas.

Gas prices have declined in recent weeks: the current national average for regular gasoline is $3.73 per gallon, down from $3.91 a month ago.

A year go, the price for regular was higher, at $3.96 a gallon

“American consumers faced a new challenge this year as steadily increasing gas prices throughout the spring significantly squeezed many household budgets,” said AAA President and CEO Robert L. Darbelnet. “Americans will still travel during the Memorial Day holiday weekend but, many will compensate for reduced travel budgets by staying closer to home and cutting entertainment dollars.”

Those surveyed who said they intend to economize in other areas plan to reduce spending on entertainment (65 percent), stay at a lower priced hotel (34 percent), stay with friends and relatives instead of reserving a hotel room (31 percent) or stay in a hotel that includes value-added amenities like free breakfast and internet (27 percent).

AAA defines the Memorial Day holiday travel period starts Thursday, May 24, through Monday, May 28.

Debt Collection Scheme Eyed Magazine Subscriptions: FTC

2012-05-15T18:47:21Z

Operators of a debt collection scheme that allegedly sought payment for bogus magazine subscriptions have settled with the Federal Trade Commission.

The proposed settlement, filed by the Justice Department on behalf of the FTC, bars Luebke Baker and Associates, Inc., Kevin Luebke, and other defendants from representing that a consumer owes a debt “without having a reasonable basis to do so.”

They are also prohibited from making any other misrepresentations when collecting debts or selling goods and services.

The scheme operators, who handled collection of hundreds of thousands of accounts each year, violated the FTC Act, the Fair Debt Collection Practices Act, and the Telemarketing Sales Rule, according to the complaint.

Under the settlement, the debt collectors must provide consumers with disclosures about their rights under the Fair Debt Collection Practices Act. The proposed order also requires them to inform their collection employees of their personal obligations under the Act.

The Luebke defendants allegedly collected on debts for magazine subscriptions even after the FTC had successfully sued the company that originally sold the magazine subscriptions for deceptive marketing.

The defendants were notified of a 2003 federal court order against Cross Media Marketing Corp. that placed special requirements on anyone attempting to collect payment for these magazine subscriptions.

The FTC alleged that the Luebke defendants ignored these requirements and repeatedly told consumers the debts were due and payable.

The defendants also marketed a credit repair CD titled “Credit Solutions,” allegedly collecting an up-front fee before providing any goods or services, in violation of the Telemarketing Sales Rule, which bans advance fees imposed by companies selling credit repair goods and services, according to the complaint.

The proposed settlement imposes monetary judgments totaling $3.1 million.

For consumer information about dealing with debt collectors, see Debt Collection FAQs: A Guide for Consumers .