By Chris Buchheit on March 30, 2010

If It’s On the Internet, It’s Automatically True

When your finances got you down, and the world of numbers seems to be against you, at least you can turn to government debt grants to solve your problems, right?

Oh so wrong.

Several consumers have been sucked into this scheme – the offer of government bailouts, essentially, for individual households’ finances. If you Google this kind of deal, the first several sites will be scams, usually making consumers pay in order to receive these benefits that do not exist.

These kinds of schemes are not new. They are in the same vein as the not-so-free-credit reports, buying insurance on low-end electronics, and spas for dogs. Generally speaking, if you ever have to pay someone on a website to receive some service like this, chances are you are getting scammed.

Whoever came up with the idea of government grants to aid households out of debt is crazier than the guy who invented bacon flavored mayonnaise. One thing American consumers need to realize is that their finances have no restart button, TIVO rewind function, and no secret quick-fix solution to them. Finances are something that need to be maintained, like a healthy eating habit.

To make a long story short, there is no such thing as government backed debt relief grants. However, on the flip side, the government does have several programs in place to help households with their finances. Be that as it may, nothing, especially money from the government is free. Consumers are much better off preventing issues with their finances instead of trying to pull themselves out of holes.

What does this mean? This means that consumers must increase their individual responsible and reign in their finances. Considering the state of the economy, peoples’ savings are decreasing in value, and thus the only responsible action to take is to be fiscally responsible.

So, unfortunately, there is no quick solution to consumers’ debt from the government. Do not buy into the tempting hype – there is not much free money floating around Congress these days. Be sure to use your common sense and think about these kinds of deals before buying into them.

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For more information on fiscal responsibility, follow Chris Buchheit at Alan Greenspent.

By Stewart Pelto on March 27, 2010

Although each American should take active steps to prevent identity theft, buying insurance isn’t one of them. Nevertheless, many Americans don’t mind paying for the service because it only amounts to an extra $25 to $100 per year on their homeowner’s insurance. This is admittedly a small price to pay to feel protected from the very real threat of identity theft. However, identity theft insurance just isn’t worth it, even despite its low cost.

To win your support, many plans offer attractive reimbursement policies to help you cover the costs of identity theft. But take a closer look at what they actually offer and the whole idea quickly becomes unattractive. The National Association of Insurance Commissioners reminds consumers that identity theft insurance doesn’t reimburse them for actual money lost. This means that if somebody stole your credit card and bought $10,000 worth of electronics seven states away, that money is gone. Before you panic and wonder why you got insurance in the first place, understand that federal law limits your liability to $50 per credit card anyways.

So what is paid for by identity theft insurance? Mainly the expenses associated with getting your financial identity back, such as sending certified mail or making phone calls to creditors. Well… after you’ve paid for the first $100-$500 out of your own pocket. Do some mathematics and you’ll see that this is not worth paying for; certified mail will cost you a few dollars and phone calls with most modern long-distance providers are either cheap or free, so in essence you’d be paying somebody else a small monthly fee for the pleasure of cleaning up your own financial mess. Still interested in getting that coverage?

Instead of paying into an insurance plan, however affordable it may be, take some simple steps to reduce your already-low chances of having your identity stolen. For starters, take that same $25 to $100 you would spend on an insurance plan and buy a quality paper shredder. When you get junk mail credit card offers telling you you’ve been pre-approved, tell that offer it’s been pre-approved to get snipped into bits in your new high-powered machine. Any old bills and receipts you don’t want to hang on to should be run through the shredder as well.

Finally, stay on top of your credit history and watch out for lines of credit you don’t remember opening by taking advantage of FACTA, or the Fair and Accurate Credit Transactions Act of 2003. This act provides for three free credit reports per year, so be smart and request one every four months. Congratulations! You just found a free way to monitor your history year-round so that if anything unusual pops up, you can check it out – and fast!

I have seen good companies make mistakes, but I really have to question the integrity of banks who are involved in an insurance scheme. After being targeted by my own mortgage lender, I am making it my responsibility to follow up on this outrage personally.

Specifically, what I received were two letters from my lender, Bank of America Home Loans. The first, dated February 18, 2010 requested proof of insurance coverage. The second letter, dated March 4, 2010 stated "We previously sent you a letter requesting that you provide us proof of your insurance. As of the date of this letter, we have not yet received the much-needed information."

To be fair, a lender must make sure that it's security interest in their colateral is insured. Otherwise, there are major risks involved when a borrower fails to properly insure their home. 

The problem with the two letters I received is that they were both postmarked on March 9, 2010. Obviously, one cannot respond to a letter that one has yet to receive.

The price of the new policy that Bank of America Home Loans wanted to sell me was $1,800 annually, when my actual policy costs less than half that amount. According to Kyleen Stowe Insurance Agency, they have received similar letters from clients who have loans with either Bank of America or Wachovia.

The major issue with this situation is the manner in which my lender backdated the first letter and mailed it simultaneously with the second letter. There is a real problem with a lender backdating letters that it mails out much later, since many of the notices that lenders send are heavily regulated. You just cannot backdate letters in order to give the appearance that you have supplied ample notice.

For the record, my home does carry the proper insurance coverage. My insurance agent did supply Bank of America Home Loans with proof of coverage, and I expect that the matter has already been resolved.

If you believe that your lender has misrepresented the sent date on any communication, you have the right to file a complaint with your state's Attorney General. I did.

John and Monica Clune accepted $13,000 in payments from a Mississippi couple as part of a debt settlement plan. According to the Mississippi Attorney General, the Clune's had no intention of helping the couple settle their debt.

Media reports suggest the the John and Monica Clune purported to work for a debt settlement company while pocketing the cash. They have been charged with five counts each of wire fraud.

John, at age 50 could potentially be in jail until age 75 as a result of the scheme. Each count of wire fraud could result in 5 years behind bars.

Local police in Farmers Branch, TX assisted the Mississippi Attorney General with the investigation.

It is unclear why the victims ever agreed to give their money to a company that wasn't legitimate. As a consumer protection advocate, I see these types of situations all too often.

Even so-called "legitimate" debt settlement companies have paltry success rates that are normally in the single digits. For every one debt settlement company client that settles at least one of their debts, there are nine other clients that never settle a single debt.

Most consumers never take the first (and easiest) step toward checking to see that they are working with a reputable company. Before ever contracting with a company for any purpose, check their rating with the Better Business Bureau. They don't necessarily have to be a BBB member, but you want to make sure that there are no patterns of complaints that hint at problems.

As far as debt settlement companies go, I think you will find that the entire industry suffers from poor reputations, false advertising and extreme cost. I would certainly think twice before giving what money I have to what New York's Attorney General calls a "rogue industry." Getting help from a reputable credit counseling organization would be a better option.

Extended warranties are popular among car buyers who maintain low reserves in their bank accounts. Many can afford an extra $35 a month, but a $2,000 repair bill would really set them back.

It might sound good to have an extended vehicle warranty. A little peace of mind might actually be worthwhile sometimes.

However, these products are increasingly under the scrutiny of regulators who claim the companies often do not honor their promises. In the end, it is you the consumer who gets stuck with both the repair bill and the extended warranty premiums.

US Fidelis is one of the most widely recognized extended warranty companies. They marketed their products heavily during 2009 featuring NASCAR's Rusty Wallace as a spokesperson. His image lent substantial trust to a brand that might otherwise go unnoticed.

Now, US Fidelis has suspended all sales and has filed for bankruptcy protection in Missouri. Its former and current policyholders have little hope of receiving their full claims [UPDATE: US Fidelis owners indicted for extended warranty fraud].

The office of the Attorney General in Missouri is particularly concerned about the proliferation of extended warranty companies that collect fees but fail to pay on valid claims. Attorney General Chris Koster reported that his office is fielding dozens of fraud complaints. US Fidelis is also reportedly facing numerous lawsuits.

If you buy a newer vehicle, you are likely covered under an existing factory warranty. Find out before closing the deal. Also, avoid purchasing pricey extended warranties on any vehicle. These are frequently pushed by car dealers as a way to increase their commissions. You may also receive solicitations by phone or mail from companies that are completely unrelated to the manufacturer or dealer.

You end up paying interest on the total price of the warranty, which increases its cost. Also, there is substantial risk that your premiums will be wasted on a policy that will become worthless by the time you get to use it.

A better option is to divert $50 a month into your own savings account. That way, you can save enough to cover many of your own unexpected repairs. Even if repairs exceed what you have in savings, you can still lean on a credit card to cover the difference.

If you have an extended warranty that is not paying on your valid claims, be sure to file a complaint with the Federal Trade Commission.

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