Consumer/Retail

Delinquent Consumer Debt Leading Cause for Security Clearance Denials

2010-09-03T07:06:12-07:00

People may have valid reasons for not being able to pay debt. Indifference or refusal to show a good faith effort to establish a payment plan or resolve the issue is not one of them and can cost you a job – at least with the U.S. Department of Defense and its contractors.

A recent analysis by insideARM.com of cases before the DoD’s office that determines which Americans get access to classified information found that delinquent consumer debt is the leading cause for security clearance denials. Of the 107 cases adjudicated by the Defense Office of Hearings and Appeals (DOHA) in July, 53 involved financial concerns. Of those 53 cases, 36 were denied security clearance for the job.

The applicants appearing before the DOHA administrative judges are seeking jobs that would put them in contact with classified information, specifically at private companies contracted to do work for the DoD. The agency also conducts similar hearings for 20 other federal agencies and departments and settles claims for military personal and DoD civilian employees, as well.

Cases are brought to DOHA when an immediate decision cannot be reached on the status of an application for access to classified information, thus necessitating a hearing. DOHA has adjudicated some 950 cases in 2010.

Some of the security clearance denials by the DOHA seem obvious. For example, people who have defaulted on federal student loans or are in debt to the Internal Revenue Service with no plan in place to pay back the loan or taxes were denied clearance. Taxpayer dollars fund student loans and federal, state, and local government agencies and governments tend not to employ or retain workers who owe taxpayers.

But failure to address private-sector consumer debt doesn’t sit well with the DOHA either. A 39-year-old employee of a federal contractor learned that fact when she was denied security clearance because evidence revealed a history of financial problems and about $32,000 in unpaid delinquent debts, despite being employed continuously since at least 1999.

The DOHA judge adjudicating the case noted, “She did not present any documentary evidence of a good-faith effort to repay or otherwise resolve her indebtedness. There is insufficient evidence to explain, extenuate, or mitigate the security concerns stemming from her history of financial problems.”

Consumer credit checks are becoming a routine part of the job screening process more often with private employers, too.

Robert Pickell, senior vice president of customer solutions for employment screening firm HireRight, Inc., said 32 percent of the respondents to its 2010 benchmarking survey indicated that they use check credits as part of their employment screening process. In a 2010 report on employment background checks by the Society for Human Resources Management, at least 50 percent of the respondents who conduct credit checks said they look at credit records as far back as seven years. And 64 percent of those SHRM respondents said if a credit check revealed a current outstanding judgment such as a lawsuit, it would affect their decision to withhold or withdraw the job offer. Forty-nine percent said accounts in debt collection would affect their decision to withhold or withdraw the job offer.

Human resource experts said employers do credit checks to reduce or prevent theft, embezzlement or other criminal activity. In the case of the U.S. government, officials want to be sure an employee with access to classified information won’t be likely to divulge that information for a quick pay day. But Pickell said credit checks are not relevant to all jobs.

“If you’re hiring someone in the accounting department, their credit background is job related. But if you’re hiring someone to work on a production line it isn’t relevant to the job and an employer probably should not be looking at it,” Pickell said.

Many state lawmakers agree. The use of credit history reports for employment is allowed in most states. But Hawaii, Washington, Oregon and Illinois, have passed legislation since 2007 restricting how credit history investigations are used for employment purchases. And 20 states, plus the District of Columbia, introduced similar legislations this year, said Heather Morton, a legislative analyst with the National Conference of State Legislatures.

Morton said state lawmakers are trying to balance employers’ needs to learn relevant information about a job applicant that may affect their business with consumers’ need to find employment and maintain financial privacy. But the issue is confusing and there are few resources for consumers that adequately address the negative impact of carrying large consumer debt burdens.

ACA International Spokesman Mark Schiffman told insideARM.com that the leading trade association for the accounts receivable management industry will step up its efforts this fall to make consumers more aware of its website, AskDoctorDebt.com. ACA is positioning the site as a tool to help consumers find answers to their questions about debt. While credit history may not factor into the application process for most job seekers, it may often play a role when seeking credit and buying or renting a home, Schiffman noted.

“We are going to be more activity publicizing (AskDoctorDebt.com) through (mainstream) media, trade media and through our members, encouraging them to use the website in their business and when talking with clients. Our goal is to encourage more folks to use it,” Schiffman said.

Even if consumers put forth a good faith effort to clear their debts, the repercussions can linger, with most debts staying on credit reports for seven years.

The DOHA also appears to have little sympathy for victims of circumstance who fail to act to clear their name or remove the debt. One applicant alleged that her boyfriend charged $93,000 in debt on her credit card without her knowledge. He later died, leaving her liable for the bill. Though her ongoing payments towards a student loan showed a good faith effort in meeting some obligations, she was denied clearance for the job. The judge said she had income after expenses and she provided no evidence that she had established a payment plan or taken any concrete plan to resolve her debts.

But the DOHA has shown a tendency to clear applicants who have wiped out or restructured their debt through bankruptcy, provided the agency was satisfied that the applicant had since demonstrated better financial judgment. However, a 35-year-old employee of a federal contractor who, along with his wife, played the real estate market and sought relief through Chapter 7 bankruptcy had not showed a improved pattern of credit usage. The judge noted that the bankruptcy relief was granted in November 2009, but said the evidence showed the applicant has a history of financial problems and did not provide “full, frank and candid answers to questions about his financial record during the security process.”

“Given the recency of the bankruptcy case and the surrounding circumstances, it is too soon to tell if applicant's financial problems were purely situational, and it is too soon to determine if applicant is now conducting his affairs in a financially responsible manner,” the judge said.

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Total U.S. Bankruptcies in First Half of 2010 Up 14 Percent Over 2009

2010-08-24T08:58:55-07:00

Alexandria, Va. — The total number of U.S. bankruptcies filed during the first six months of 2010 increased 14 percent over the same six-month period in 2009, according to data released today by the Administrative Office of the U.S. Courts. Total filings reached 810,209 during the first half of the calendar year of 2010 (January 1-June 30), compared to 711,550 cases filed over the same period in 2009. The totals represent the highest number of filings for the first six months of a calendar year since 2005, when the Bankruptcy Code was amended.

“Bankruptcy continues to be the last resort for many Americans seeking financial relief from household debt, unemployment and the economic downturn,” said ABI Executive Director Samuel J. Gerdano. “The first half 2010 filings show that bankruptcies are on pace to surpass 1.6 million by year end.”

Business filings decreased 4 percent for the six-month period ending June 30, 2010, to 29,059 from the first-half 2009 total of 30,333. Chapter 11 business reorganizations registered the sharpest decrease, as the 6,152 filings during the first half of 2010 represented a 17 percent drop from the 7,396 total chapter 11 business filings during the first half of 2009. Chapter 7 business liquidations remained nearly unchanged, as there were 20,385 in the first half of 2010, a half percent increase from the 20,375 business chapter 7 filings during the same period in 2009.

Filings by individuals or households with consumer debt increased 15 percent to 781,150 for the six-month period ending June 30, 2010, from the 2009 first-half total of 681,217. Consumers filing for chapter 7 protection increased 17 percent to 571,417 during the first half of 2010 from 489,128 during the first six months of 2009. Consumer chapter 13 filings increased as well, rising 9 percent as 208,778 consumers filed for chapter 13 in the first half of 2010 from 191,458 during the first half of 2009.

The 422,061 total filings for the second calendar quarter 2010 (April 1-June 30) represented a 11 percent increase from the second quarter 2009 filing total of 381,073. Consumer filings increased 12 percent from 365,059 recorded in the second quarter of 2009 to 407,609 filings in the second quarter 2010. Business filings decreased 10 percent from 16,014 in the second quarter 2009 to 14,452 filings in the second quarter of 2010.

The 1,572,597 total filings for the 12-month period ending June 30, 2010, represented a 20 percent increase from the same period in 2009, which totaled 1,306,315. The bankruptcy filing rate per thousand U.S. residents totaled 5.05 for all chapters during the 12-month period ending June 30, 2010, as 3.64 Americans per thousand filed for chapter 7 while 1.36 per thousand filed for chapter 13 bankruptcy.

Nevada maintained its position as the state with as the state with the highest per capita filing rate in the country, with 11.74 residents per thousand filing in all chapters, and also had the highest per capita filing rate for chapter 7 filings at 8.71. The state with the highest per capita filing rate for chapter 13 bankruptcy was Alabama at 4.16 per thousand for the 12-month period ended June 30, 2010.

Nonbusiness filings for the 12-month period ending June 30, 2010, were up to 1,521,989, a 21 percent increase from the 1,251,294 total nonbusiness filings over the same period in 2009. Business filings for the 12-month period ending June 30, 2010, totaled 59,608, up 8 percent from the 55,021 bankruptcy petitions filed in the 12-month period ending June 30, 2009.

The 1,133,320 total chapter 7 filings for the 12-month period ending June 30, 2010, represent a 25 percent increase from the 907,603 filings from the same period in 2009. Total chapter 11 filings increased 2 percent to 14,272 in the 12-month period ending June 30, 2010 from 13,951 during the same period in 2009. Total chapter 13 filings also increased 10 percent to 424,242 in the 12-month period ending June 30, 2010, from 384,187 during the same period last year. Chapter 12 filings increased 56 percent from 422 in the 12-month period ending June 30, 2009 to 660 for the same period in 2010.

Chapter breakdowns of BUSINESS filings for the 3-month period ending June 30, 2010: 10,311 chapter 7s; 2,859 chapter 11s; 194 chapter 12s; and 1,071 chapter 13s.

Chapter breakdown of NON-BUSINESS filings for the 3-month period ending June 30, 2010: 299,369 chapter 7s; 511 chapter 11s; and 107,727 chapter 13s.

ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,600 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.

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TASC Announces Support for FTC Debt Settlement Rules

2010-08-17T08:46:48-07:00

WASHINGTON: The Association of Settlement Companies (“TASC”) announced today that its Board of Directors has voted to support the recent debt relief services rulemaking by the Federal Trade Commission (“FTC”). In addition to mandating enhanced disclosure requirements modeled on current and proposed TASC standards, the FTC rulemaking prohibits debt settlement companies from accepting fees from a consumer for debt settlement services prior to the actual settlement of the consumer’s debt.

“We recognize that the Federal Trade Commission attempted to strike an appropriate balance between improving consumer protections and ensuring continued viability for the majority of ethical, well-managed debt settlement companies,” said Robby H. Birnbaum, President of TASC. “Debt settlement companies are the only truly independent voice for the consumer when dealing with overwhelming levels of consumer debt and we are pleased that the FTC recognized that debt settlement is not only an appropriate alternative but also a necessary service when delivered by a legitimate debt settlement services provider.”

Birnbaum noted that TASC has been working for more than a year with the FTC to craft appropriate program disclosures and observed that many of the FTC’s proposals were modeled on TASC disclosure standards.

“The only significant difference between TASC and the FTC,” Birnbaum said, “was the proposal that the collection of fees be delayed until debts are actually settled, a position that, we believe, ignores the fact that services are provided throughout the customer life cycle, not just at the time of settlement. TASC proposed, and continues to believe, that a less intrusive and equally consumer-protective solution would have been to mandate a full refund policy, backed up by a surety bond. However, after much discussion, both internally and with regulators, consumers and other interested parties, we have determined that the FTC’s position of tying fees to performance is an acceptable way of ensuring that consumers actually get what they pay for and expect.”

Andrew Housser, a TASC Board member who was very involved in the FTC comment process said, “While the rule provides a significant capital challenge to our industry, we are pleased that at least a few of our comments were heard and reflected in the final rule – these changes allow good companies that are getting results for consumers a fighting chance to continue as viable businesses.” He added, “While managing working capital will be tough for the industry, we think it is time to accept these rules and get back to the business of helping consumers get out of debt.”

Birnbaum went on to state, “TASC appreciates the efforts that the FTC expended to educate itself about the industry. We believe that the process that we went through with the FTC will foster more open communication among our organization, our members and the Commission. We hope that TASC’s cooperation and acceptance of the FTC’s new rule will reinforce the message that TASC believes strongly in its mission of helping the millions of Americans who find themselves struggling with unmanageable levels of credit card debt.”

About The Association of Settlement Companies
The Association of Settlement Companies (TASC) promotes fair business practices, consumer protection and industry standards for its debt settlement industry members. TASC, founded in 2005, serves to protect consumers through best practices and standards adhered to by reputable companies. The organization also serves its member companies through lobbying efforts at the state and national levels as well as awareness initiatives to educate consumers on debt settlement as a financial solution. All TASC member companies pledge compliance to strict association standards governing business practices and ethics. For more information, visit www.tascsite.org.

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US Debt Resolve Announces Compliance with Telemarketing Sales Rule

2010-08-17T08:46:48-07:00

DALLAS – On July 29, 2010 Federal Trade Commission Chairman Jon Leibowitz and Vice President Joe Biden announced a new rule to protect consumers of debt relief services at a Middle Class Task Force event at the White House. Following the Chairman’s announcement, Vice President Biden discussed the administration’s consumer protection agenda and the importance of consumer protection to middle-class families.

US Debt Resolve, provider of Debt Relief Services, announces compliance with TSR put in place by the FTC Months before DUE DATE.

USDR announced that the company has received recommendation for recertification of the ISO 9000. ISO 9001:2008 is a family of standards The ISO 9000 is maintained by the International Organization for Amendments

Telemarketing Sales Rule Prohibiting Debt Relief Companies from Collecting Advance Fees Will Take Effect in October 2010

The following are a few points of the TSR. For the entire Telemarketing Sales Rule click here http://www.ftc.gov/opa/2010/07/tsr.shtm

Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.

“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

On the subject of Open and Transparent: “Disclosures should be how well your company has performed with a particular creditor or their retention and completion rates...The consumer is saying, let me choose the company that gives me the best chance to get out of debt.” CEO of US Debt Resolve Scott Johnson said.

Additional comments http://www.ftc.gov/os/comments/tsrdebtrelief/543670-00319.pdf

Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:

require debt relief companies to make specific disclosures to consumers;
prohibit them from making misrepresentations;
extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.

About US Debt Resolve
US Debt Resolve (USDR) in Dallas, Texas provides debt settlement services for consumers coast to coast. To learn more about USDR, go to http://www.usdebtresolve.com/bsi-case-study.pdf. To speak with a member of the Consulting Staff about your financial situation call 1-866-991-3328. To discuss compliance with the TSR guidelines our audit department can be reached at 1-888-991-3328.

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Experian Provides Insight into Credit Card Trends of the Top 20 Major Metro Areas

2010-08-10T08:18:47-07:00

Costa Mesa, Calif. — Experian®, the global information services company, released its findings today on credit card trends, which provide insight into U.S. card usage. The study shows that nationally, consumers are opening 26 percent fewer credit cards* than they were three years ago. The study also reveals that out of the top metropolitan areas studied, the number of open bank cards were typically higher than retail credit cards, with the exception of four areas — Pittsburgh, Miami, Columbus and Atlanta — whose residents seem to favor their retail cards.

Additionally, the results show that New Yorkers lead the way with the highest number of open cards, and Phoenix residents have the fewest. A closer look at New York reveals that while its residents have more open cards, the data shows they aren’t using those cards as much as some of the other cities, such as Atlanta, where the highest average monthly balance is $6,753 on revolving accounts. San Francisco and Houston have the lowest average monthly balance, with $5,323 and $5,328, respectively.

Results ranked by highest to lowest number of open cards and average aggregated balances are detailed below:

Metropolitan Area	Average # of Open Credit Cardds	Average Balance
1. New York	3.77	$5,713
2. Pittsburgh	3.60	$5,989
3. Boston	3.49	$6,152
4. Philadelphia	3.45	$6,078
5. Minneapolis	3.39	$6,610
6. Chicago	3.31	$6,182
7. San Francisco	3.24	$5,323
8. Baltimore	3.23	$6,440
9. Washington, DC	3.22	$6,190
10.(t) Miami	3.19	$5,814
10.(t) St. Louis	3.19	$6,111
11. Columbus	3.17	$6,734
12. Los Angeles	3.16	$5,681
13. Seattle	3.15	$6,577
14. Detroit	3.14	$6,445
15.(t) Atlanta	3.06	$6,753
15.(t) Denver	3.06	$6,211
15.(t) Houston	3.06	$5,328
16. San Diego	3.04	$6,086
17. Dallas	2.99	$5,839
18. Tampa	2.94	$6,066
19. Portland	2.83	$6,045
20. Phoenix	2.78	$6,058

“As expected with the current financial environment, we can see that the average person has fewer cards in their wallet and is using credit differently than in the past,” said Michele Raneri, senior director of analytics, Experian. “This implies that many American consumers are relying less on cards and potentially trying to pay down debt.”

For more information on average debt levels per consumer in the top 20 metropolitan areas, please see Experian’s previous study, Experian ranks top 20 major US metropolitan areas by average debt per consumer.

Below are some tips for using credit wisely:

When you are extended a line of credit, use it, but use it carefully. Most important, make your payments on time.
Set up a budget and stick to it. You need to be aware of how much debt you already have and how much you are adding to that debt by buying with credit.
Shop around for credit. Lower interest rates, lower or no annual fees, cheaper service charges and additional benefits such as frequent flier miles or special insurance rates are available. Find the credit that is right for you.
Once you have signed a credit agreement, you are responsible for it unless the creditor agrees to release you from the agreement.

For more information on managing credit, visit http://www.experian.com/crediteducation.

Methodology

The data was pulled and analyzed by Experian Decision Sciences using a statistically relevant sampling of Experian’s File OneSM consumer credit database. Credit files analyzed had all personal identification information removed. They then were filtered through Premier AttributesSM, the credit industry’s most robust, accurate and comprehensive set of credit attributes that provides consumer data at the most granular level, facilitating enhanced modeling opportunities. Experian’s credit study data score averages are based on VantageScore®.

About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 90 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2010, was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil.

For more information, visit http://www.experianplc.com.

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FTC Issues Final Rule to Protect Consumers in Credit Card Debt

2010-07-30T07:19:29-07:00

“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:

require debt relief companies to make specific disclosures to consumers;
prohibit them from making misrepresentations; and
extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

Advance Fee Ban

The Final Rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected until:

the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt. First, the provider’s fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts.

Dedicated Account for Fees and Savings

Another new provision of the Final Rule will allow debt relief companies to require that consumers set aside their fees and savings for payment to creditors in a “dedicated account.” However, providers may only require a dedicated account as long as five conditions are met:

the dedicated account is maintained at an insured financial institution;
the consumer owns the funds (including any interest accrued);
the consumer can withdraw the funds at any time without penalty;
the provider does not own or control or have any affiliation with the company administering the account; and
the provider does not exchange any referral fees with the company administering the account.

Disclosures and Prohibited Misrepresentations

Under the Final Rule, providers will have to make several disclosures when telemarketing their services to consumers. Before the consumer signs up for any debt relief service, providers must disclose fundamental aspects of their services, including how long it will take for consumers to see results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts if they choose to require them.

The Final Rule also prohibits misrepresentations about any debt relief service, including success rates and whether the provider is a nonprofit entity. The FTC’s Statement of Basis and Purpose, which accompanies the Final Rule, provides extensive guidance about the evidence providers must have to make advertising claims commonly used in selling debt relief services.

The Rulemaking Process

In August 2009, the FTC published in the Federal Register a notice of proposed rulemaking proposing amendments to the Telemarketing Sales Rule and requesting public comments. Over 300 commenters, representing a wide variety of stakeholders, submitted comments in response. The Commission also held a public forum on the proposed amendments on November 4, 2009. The FTC developed the Final Rule based on the public comments, the record of the public forum and the FTC’s September 2008 Workshop on the debt settlement industry, recent testimony before Congress, and law enforcement actions brought by the Commission and the states.

Information for Businesses

Today, the FTC staff issued a compliance guide to help businesses comply with the new debt relief rules. The compliance guide describes the key changes to the Telemarketing Sales Rule affecting debt relief services, helps businesses determine if they are covered by the new rules, details information that covered entities must disclose to customers, and discusses how fees may now be collected. It can be found at http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdf on the agency’s website and is linked to this press release.

The FTC vote approving publication of the Federal Register notice was 4-1, with Commissioner J. Thomas Rosch voting no. The notice will be published in the Federal Register shortly, and is available now on the FTC’s website at http://www.ftc.gov/os/2010/07/R411001finalrule.pdf. The provisions of the Final Rule will take effect on September 27, with the exception of the advance fee ban provision, which will take effect on October 27.

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75 Percent of Top Metro Areas Post Increasing Foreclosure Activity in First Half of 2010

2010-07-29T07:17:58-07:00

IRVINE, Calif. – RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its Midyear 2010 Metropolitan Foreclosure Market Report, which shows 154 of the 206 U.S. metropolitan areas with a population of 200,000 or more posted year-over-year increases in foreclosure activity even while foreclosure activity decreased in nine of the 10 metros with the highest foreclosure rates.

Four states — Florida, California, Nevada and Arizona — accounted for all top 20 metro foreclosure rates. Florida led the way, with nine of the top 20 metro foreclosure rates, followed by California with eight, Nevada with two and Arizona with one.

“While we’re seeing early signs that foreclosure activity may have peaked in some of the hardest-hit markets, foreclosures continued to rise in three-quarters of the nation’s metropolitan areas in the first half of the year,” said James J. Saccacio, chief executive officer of RealtyTrac. “The fragile stability achieved in many local housing markets hinges on improvements in the underlying economy, specifically job growth. If unemployment remains persistently high and foreclosure prevention efforts only delay the inevitable, then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metro areas.”

Top 10 metro foreclosure rates

Las Vegas continued to post the nation’s highest metro foreclosure rate in the first half of the year, with 6.60 percent of its housing units (one in 15) receiving a foreclosure filing — more than five times the national average. A total of 53,525 Las Vegas properties received a foreclosure filing during the six-month period, a decrease of nearly 15 percent from the previous six months and a decrease of nearly 9 percent from the first half of 2009.

Foreclosure activity in the Cape Coral-Fort Myers, Fla., metro area decreased nearly 22 percent from the previous six months and was down nearly 30 percent from the first half of 2009, but the metro area still documented the nation’s second highest metro foreclosure rate — 4.98 percent of its housing units (one in 20) received a foreclosure filing during the six-month period. Other Florida cities in the top 10 were Orlando-Kissimmee at No. 8 (4.15 percent of housing units) and Miami-Fort Lauderdale-Pompano Beach at No. 10 (3.89 percent).

With 4.59 percent of its housing units (one in 22) receiving a foreclosure filing, Modesto, Calif., posted the nation’s third highest metro foreclosure rate. Other California cities in the top 10 were Merced at No. 4 (4.47 percent of housing units); Riverside-San Bernardino-Ontario at No. 5 (4.37 percent); Stockton at No. 6 (4.37 percent); and Vallejo-Fairfield at No. 9 (3.91 percent).

The Phoenix-Mesa-Scottsdale metro area in Arizona posted the nation’s seventh highest metro foreclosure rate, with 4.28 percent of its housing units (one in 23) receiving a foreclosure filing in the first half of 2010.

Metros with highest foreclosure totals

More properties received a foreclosure filing in the Miami-Fort Lauderdale-Pompano Beach metro area during the first half of 2010 than any other metro area with a population of 200,000 or more. A total of 94,466 properties in the Miami area received a foreclosure filing during the six-month period, a decrease of 8 percent from the previous six months, but up nearly 11 percent from the first six months of 2009.

A total of 93,263 properties in the Los Angeles-Long Beach-Santa Ana metro area received a foreclosure filing in the first half of 2010, the second highest total of any metro area nationwide and 2.11 percent of all housing units (one in 47) — ranking No. 35 in terms of foreclosure rate.

A total of 78,022 properties in the Chicago-Naperville-Joliet metro area received a foreclosure filing in the first half of 2010, the third highest total and 2.07 percent of all housing units (one in 48) — ranking No. 37 in terms of foreclosure rate.

Other metro areas with the 10 highest foreclosure totals were Phoenix-Mesa-Scottsdale (73,352), Riverside-San Bernardino-Ontario (63,717), Las Vegas-Paradise (53,525), Atlanta-Sandy Springs-Marietta (52,381), Detroit-Warren-Livonia (47,563), New York-Northern New Jersey-Long Island (44,522), and Orlando-Kissimmee (37,352).

Report methodology

The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the RealtyTrac database during the first six months of the year for metropolitan statistical areas with a population of 200,000 or more based on Census bureau estimates. Some foreclosure filings entered into the database during a six-month period may have been recorded in previous time periods. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is received for a property during the six-month period, only the most recent filing is counted in the report. If the same type of foreclosure document was filed against a property previous to the six-month period but within the estimated foreclosure timeframe for the state where the property is located, the report does not count the property in the six-month period.

About RealtyTrac Inc.
RealtyTrac (www.realtytrac.com) is the leading online marketplace of foreclosure properties, with more than 1.5 million default, auction and bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan and home sales data. Hosting more than 3 million unique monthly visitors, RealtyTrac provides innovative technology solutions and practical education resources to facilitate buying, selling and investing in real estate. RealtyTrac’s foreclosure data has also been used by the Federal Reserve, FBI, U.S. Senate Joint Economic Committee and Banking Committee, U.S. Treasury Department, and numerous state housing and banking departments to help evaluate foreclosure trends and address policy issues related to foreclosures.

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State AG Reaches Settlement with Payday Lenders; Agreement Nets $305,000 in Refunds

2010-07-23T07:18:58-07:00

CHARLESTON, W.Va. – In a continuing effort to protect West Virginia consumers from unlawful Internet payday loans, West Virginia Attorney General Darrell McGraw today announced a settlement with FFD Companies, operators of at least five Internet payday loan web sites, to refund illegal fees and interest to West Virginians and halt marketing within the state.

Under the settlement, the defendants will pay refunds totaling $305,446.53 to 576 affected West Virginia consumers who obtained payday loans by computer through interactive web sites operated by the FFD Companies. Additionally, the FFD Companies, which denied wrongdoing, agree to a permanent ban on making or collecting payday loans in West Virginia.

"Payday loans are not solutions but treacherous traps that can lead to financial ruin for the many West Virginians facing difficult financial circumstances," Attorney General McGraw stated. "We will not rest until all payday lenders agree, as the FFD Companies have now done, to stop marketing these predatory payday loans over the Internet to West Virginia consumers."

Illegal in West Virginia, payday loans are high-interest loans or cash advances with interest rates that reach as high as 600 to 800% APR. The loans, typically made for 14 days, are secured by a post-dated check or an agreement authorizing electronic debits from the consumer’s checking account.

Today’s action settles a complaint filed by McGraw against the FFD Companies in a November, 2009 lawsuit that charged the defendants had engaged in the making and collection of Internet payday loans in violation of West Virginia law. Since McGraw began investigating the industry in 2005, his office has reached settlements with 107 Internet payday lenders and their collection agencies, resulting in $2,452,978.87 in refunds and cancelled debts for 8044 West Virginians.

As negotiated by the Attorney General’s Consumer Division, the settlement involves eight corporations under the FFD umbrella and their principals, with offices in Delaware, Georgia, New Mexico, Nevada, Texas, and Utah. The FFD Companies and websites that entered into the agreement include: FFD Ventures, LP of Carson City, NV, and Atlanta, GA; DFD Ventures, LP of Carson City; First Fidelity, Inc. of Carson City, Wilmington, DE, and Atlanta; FFD Resources I d/b/a Cash Supply of Espanola, NM, and Atlanta; FFD Resources II, LLC d/b/a Web Payday of Atlanta; FFD Resources III, LLC d/b/a Payday Services of Salt Lake City, UT, and Atlanta; FFD Resources IV, LLC d/b/a Payday Yes of Wilmington; FFD Resources IV, LLC d/b/a Paper Check Payday of Wilmington; and Great American Credit Management of Atlanta and Houston, TX.

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New Citi Survey Finds 62% of Americans Believe the Economy Has Yet to Hit Bottom

2010-07-22T07:30:23-07:00

NEW YORK--A new nationwide survey issued today by Citi, and conducted by Hart Research Associates, shows that nearly two-thirds of Americans (62 percent) believe the economy has yet to hit bottom. This represents a 3 point decline from March, when 59 percent said we have a long way to go, and a return to the level measured in September (63 percent). According to the survey, just one-third (33 percent) believe the economy has hit bottom, even though Commerce Department data indicates the U.S. economy resumed growing in 2009’s third quarter.

In addition, the data reveals that, as we pass the halfway point of 2010, Americans’ expectations for when the economy will stabilize for their households have slipped quite far into the future, with 62 percent believing it will be at least two or three years, if not longer, and more than one quarter (28 percent) believing it will be four or more years until the economy stabilizes for their household.

At the same time, however, Americans’ views on current economic conditions, as well as their outlook on their own personal financial situations, are improving or holding steady.

According to the data:

Twenty-four percent say the local economy where they live is good or excellent, up from 19 percent in March.
The percentage of Americans who say their personal financial situation is better now than a year ago has improved slightly since March (17 percent versus 15 percent). Fifty-two percent said their personal financial situations are about the same as they were a year ago.
Although down slightly from March, 64 percent of Americans remain very or somewhat optimistic that their financial situation will improve in the next twelve months, compared to 32 percent who are somewhat or very pessimistic.

Americans’ views on local employment opportunities, however, remained weak, with 85 percent reporting opportunities as only fair (36 percent) or poor (49 percent). In a measure of potential consumer demand, 62 percent of Americans believe that, in the current environment, it is only a fair (30 percent) or poor (32 percent) time to make a major household purchase, up from 61 percent (27 percent and 34 percent, respectively) in March.

“Clearly, the mood of Americans has been heavily influenced by the unemployment numbers here at home and the news of economic woes in Europe,” said Jonathan Clements, Director of Financial Education at Citi Personal Wealth Management. “And yet, if you dig deeper, consumers are actually feeling a bit better about their own finances and the local economic outlook. The big question is, could the gloomy news become a self-fulfilling prophesy, prompting consumers to restrain their spending, thus hurting the economic recovery?”

A Quarter of Americans Struggle with Debt, Highest-Earning Americans Impacted As Well

Americans of all ages and income levels are struggling with debt. The survey found that, while no one category of debt presents a major problem to more than about a tenth of U.S. families, as many as 25 percent responded that there is at least one category of debt that is a major challenge or is becoming unmanageable.

Of those surveyed, health expenses are a major or unmanageable problem for 11 percent followed by credit card debt (9 percent). Including other categories of debt such as mortgage debt (6 percent), student loans (5 percent), consumer loans (2 percent), and child support (1 percent), a full quarter of the public reports a major or unmanageable problem with at least one category of debt.
People in their 30s (32 percent) report having at least one area of debt that is a major or unmanageable issue, higher than any other age group. This compares with Americans under age 30 (28 percent), in their 40s (30 percent), and in their 50s (27 percent) who responded similarly.
Interestingly, among the top-income bracket (Americans earning more than $150,000 annually), 21 percent report having at least one area of debt that is a major or unmanageable issue. This compares to 15 percent of Americans earning $75,000-$150,000; 22 percent earning $50,000-$75,000 and 33 percent earning less than $50,000 annually.

“It is startling to see more than a fifth of high-income earners express concerns about their debt,” noted Clements. “This may speak to their overconfidence during the boom years, as they took on first and second mortgages to buy real estate and pay other expenses.”

Summer of the ‘Stay-cation’

Reflecting current economic worries, three in five Americans responded they will either not vacation at all or will stay home during their time off this summer.

A full 51 percent of Americans say they will not take any vacation at all this summer.
Sixty percent of Americans will either not vacation at all or else will stay at home as their vacation.

Clements added, “Given the sluggish economic recovery, it is no surprise that Americans remain conservative with their spending, saving and summer vacation plans. Americans’ fiscal discipline is admirable. Still, lower consumer spending may slow the economic recovery.”

Majority of Americans Believe They Are Living the American Dream, Especially Older Americans

Despite the current economic challenges, Americans remain remarkably optimistic. The survey found that 53 percent of Americans believe they are living the American dream and nearly three in four (73 percent) say they are either living the dream now or expect to live the dream in the future. Older Americans lead the way in responding they are currently living the dream, while young Americans remain hopeful.

Sixty-five percent of Americans over age 70 believe they are currently living the American dream.
Comparatively, more than half of Americans in their 60s (56 percent), 50s (55 percent), and 40s (51 percent) also say they are currently living the American dream.
Forty-seven percent of Americans under age 30 say they are currently living the American dream, while just 43 percent of Americans in their 30s say they are.
A full 83 percent of 18-to 29-year-olds believe they are or will live the American dream in the future, while people in their thirties remain hopeful, but less so (75 percent).

By 56 percent to 24 percent, a majority of Americans believe that the American dream is more defined by family, faith and freedom than it is defined by material goods or financial elements such as housing, income or lifestyle.

Citi conducted this nationwide survey as part of its ongoing effort to better understand changes in the needs of the consumers and communities the company serves.

Survey Methodology

Hart Research Associates conducted the telephone survey of 2,005 adults nationally from June 22-29, 2010. The Random Digit Dialed (RDD) survey has an overall statistical margin of sampling error of plus or minus 2.2 percentage points. The survey also included a panel of respondents who use only a mobile telephone.

About Citi
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.

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CNN Spins Words of Ex-Debt Collectors into "Confessions"

2010-07-21T08:55:40-07:00

Last week CNN Money published a slideshow of ten ex-debt collection workers’ experiences in the industry centered on “in their own words” accounts of why they left the profession.

The absence of any overt editorial framing by CNN appears on the surface of things to present these former debt collectors in a disinterested manner. But calculated editorial decisions were in fact made to draw readers into the content through understated sensationalism and, once hooked, color their perceptions of the accounts receivable management industry in the same worn-out coat of paint as so many previous accounts of third party debt collectors.

First consider the title of the piece, "Confessions of Former Debt Collectors." To confess is to acknowledge, avow, or admit. The object of those admissions is typically one of two things: guilt or sin. Might CNN’s “unfiltered” exhibition of one-time collection agency representatives have been received differently had the words “stories” or “narratives” or “anecdotes” been substituted for “confessions?”

Second, not until the fifth slide do readers encounter a positive (or even neutral) account of a debt collector’s experience. On the contrary, the first four profiles describe anti-social (Mel: “I had a black heart.”), cruel (Alexis: “Collectors I knew regularly held contests to see who could make the most people cry in one day.”), sickening (“…he [the debtor] winded up going home and shooting himself.”), and illegal behavior (Anonymous: “One of the guys in a nearby cubicle called up debtors and posed as a legal counsel”). And even when a past collector demonstrates ethical business practices (Mike: “I didn't try to scare people or take advantage of peoples' ignorance by threatening things like eviction even though we weren't allowed to evict someone.”), his section concludes with a knotty sentiment: “And there's no point in telling a deadbeat they're a deadbeat. They already know it.”

Well, Mike, how about not calling them “deadbeats” in the first place? They’re debtors, just like millions of other Americans.

It’s not my job (or inclination) as an editor and writer to play apologist for the ARM industry. Even as I remain skeptical of the kinds of journalistic sleight of hand I believe are being deployed in the CNN Money example, there is undoubtedly some legitimacy to at least some of what these people have to say. And it would be wise for owners and executives in the collection industry to use these less than ideal accounts—as well as the slew of reader comments, Diggs, Tweets, and Facebook shares—as a teaching moment that starts with holding a mirror up to their own companies' training, monitoring, and collection practices.

Notwithstanding my advice to the ARM industry, I’m not quite ready to grant CNN a full pardon or total absolution for its "Confessions." "News" like this surely gives the lie to the idea that third party collection agencies operate in a vacuum. Debt collectors do what they do through contractual agreements with creditors—banks, card issuers, hospitals, automotive lenders, etc. And while those financial sectors have certainly taken their public relations body blows since the fall of Lehman Brothers in September 2008, credit grantors are rarely taken to task for initiating collection action against consumers.

While the analogy isn’t entirely copasetic, some consumers’ responses to the horrific BP oil spill—to boycott the 11,000 service stations across the U.S. that sell BP gasoline but are almost entirely owned and operated by local businesspeople—seem eerily akin to how many consumers react to a collection notice (sent on behalf of their credit card company).

And I’d wager that some percentage of boycott participants drove their shiny SUVs to protest rallies outside gas stations in their own communities, just as some consumers file online complaints to the FTC about debt collectors with one hand while the other feverishly types credit card information into the billing address field of BuyMoreStuffRightNow.com.

Michael Klozotsky is managing editor of insideARM.com. He can be reached by email.

Banks Forced to Repossess Homes Despite Collection Efforts

2010-07-16T07:42:44-07:00

While some mortgage servicers are trying to work with more borrowers in the collection process, some mortgage holders are being forced down the foreclosure path.

Thanks to the decline in the real estate market over the last few years forcing more homes underwater -- meaning borrowers have no equity or negative equity -- combined with job losses and an unemployment rate near 10 percent, banks are increasingly taking possession of homes under default.

According to a report released Thursday by RealtyTrac, banks repossessed a record number of U.S. homes in the second quarter.

Banks took control of 269,962 properties in the second quarter, up 5 percent from the prior quarter and representing a 38 percent spike from the second quarter of last year, RealtyTrac said in its midyear 2010 foreclosure report. If that trend continues, repossessions could top 1 million this year.

But banks are still actively trying to avoid foreclosures and work with borrowers through the rehabilitation and accounts receivable management process.

“We’re trying to keep as many people in homes as we can by using a combination of federal home mortgage modification programs and some of our own programs,” Tom Goyda, spokesman for Wells Fargo, told insideARM.com. Goyda noted that Wells services one in six of the nation’s mortgages.

Since the beginning of 2009 through May of 2010, the bank’s mortgage division:

Helped more than 2.2 million homeowners with new low-rate loans, either to purchase a home or refinance their existing mortgage.
Assisted about 500,000 loan customers facing financial hardships through a trial or completed loan modification; 17 percent of which were under the federal government’s Home Affordable Modification Program (HAMP).
Helped more than 100,000 unemployed customers with short-term modifications – well before the new government modification unemployment program was introduced.
Provided more than $3 billion in principal forgiveness for customers facing financial hardship, permanently erasing on average 14 percent of the principal owed, amounting to more than $50,000 per loan for more than 55,000 customers. In addition, through loan modifications for investor-owned and Wells-owned loans, the mortgage division has deferred more than $600 million of principal for more than 8,700 customers.

Together, these programs have helped about two-thirds of borrowers more than 60 days delinquent avoid foreclosure, Michael J. Heid, co-president of Wells Fargo Home Mortgage, testified in late June before the House Committee on Committee on Oversight and Government Reform.

Goyda added that 92 percent of the loans originated under the Wells name are current. “Most are doing what is necessary to make the payments,” Goyda said. “There are a lot of options out there. But there are times after we’ve exhausted everything else that we have to move to foreclosure.”

Heid, in his testimony, added: “We also have improved our foreclosure prevention practices for customers who cannot afford to remain in their homes. We now are able to give Wells Fargo Home Mortgage loan customers – who have identified a home buyer and have provided the necessary paperwork – a short-sale decision, on average, in less than 5 days. For the loans we service where we do not have full delegated authority to make decisions, we have been able to work with the third parties who must be involved to provide a decision, on average, in less than 15 days.”

In Florida, Wells is testing a new voluntary deed in lieu practice for first-lien mortgage holders, whereby the lender gives borrowers who cannot afford their homes $10,000 to vacate their property in good condition within 30 days. This program is designed to help families avoid foreclosure and eases their transition to a new, more affordable residence. In three months, when the pilot is complete, Wells expects to be in a better position to share when and if this program will be expanded.

Other lenders have also participated in some of the federal foreclosure prevention programs. Even so, RealtyTrac predicts another 3 million home foreclosure filings this year.