Do You Want A Cashless Society?

If you went to pay your bill at a restaurant or wanted to buy something at a grocery store would you be put out of sorts if the business didn't accept cash? I think I would be. I don't always want to put items on credit cards. For me it's far too easy to spend more money than I intended to spend if I use a credit card.

There is also the case that I may not always want the bank issuing the credit card to know where I was or what I was purchasing. However more businesses are starting to refuse cash. Not everyone is happy about this.

Sam Schreiber was mid-shampoo at a Drybar blow-dry salon in Los Angeles when someone from the front desk approached her stylist with an emergency: a woman was trying to pay for her blow-out with cash. “There was this beat of silence,” says Ms. Schreiber, 33 years old. “She literally brought $40.” 

More and more businesses like Drybar don’t want your money—the paper kind at least. It’s making things awkward for those who come ill prepared. After all, you can’t give back a hairdo, an already dressed salad or the two beers you already drank. Ms. Schreiber was tempted to wait and see how the Drybar employees would handle the situation with the customer, who had no credit or debit card with her; instead, she intervened from the shampoo bowl. “I said, ‘I can just pay for her and she can give me cash or Venmo me,’ ” she says.

A few moments later, one of the employees came back to hand her the $40 and expressed thanks on behalf of the stranger. 

Modern Day Loansharking and Obama Treasury Secretary Timothy Geithner

Mister Banker Mister please, how much does money mean
Won't you reconsider Mister Won't you do this thing for me
Mr. Banker 
-Lynyrd Skynyrd
I've written before that if you were a criminally minded sort in today's environment you'd be a fool to join the Mafia or other illicit organizations. These days, the benefit is no longer worth the cost. Working outside the law you have to worry about informants, violent paranoid co-workers, electronic surveillance up the wazoo, and long prison terms. That's no good. If you have wicked urges be smart and work inside the law. For example, if you want to assault or kill people, become a cop. You will be virtually untouchable.

If you want to help people gamble away their cash so that you can make a profit, open a liquor store and run the state sponsored lottery. People will give you money for nothing and thank you for the opportunity. And if you want to loan money at extortionate rates, changing or reinterpreting contract terms to your benefit while emptying your client's sucker's pockets, then do what former Obama Treasury Secretary Tim Geithner did and open up/run a finance company that markets predatory loans to impoverished and/or desperate people.

The check arrived out of the blue, issued in his name for $1,200, a mailing from a consumer finance company. Stephen Huggins eyed it carefully. A loan, it said. Smaller type said the interest rate would be 33 percent.

Way too high, Huggins thought. He put it aside.

A week later, though, his 2005 Chevy pickup was in the shop, and he didn’t have enough to pay for the repairs. He needed the truck to get to work, to get the kids to school. So Huggins, a 56-year-old heavy equipment operator in Nashville, fished the check out that day in April 2017 and cashed it.

RushCard Ripoff and The Vampire State

Driving home the other day and being atypically uninterested in whatever show the Sirius old time radio station was playing I turned over to a station which was playing Karen Hunter and caught the second half of her interview with Ryan C. Mack, a financial adviser, stock broker and author among other things. The topic of the moment was the financial problems currently going on with the RushCard, a prepaid debit care that has musical entrepreneur and well known celebrity Russell Simmons as an endorser/owner.  His celebrity doesn't matter. What is important is that the RushCard technical infrastructure was having some problems which temporarily (for ten days no less) prevented users of said card from having access to their money. But as Ryan Mack pointed out, considering the not so hidden costs of the RushCard, temporarily losing access to this debit card could be a blessing in disguise to millions if this made them reconsider using the card. Let's explain. As we've pointed out before there is a lot of money to be made from poor people. There's especially a lot of money to be made from poor black people. Although usury is technically outlawed in most states while consumer banks have been under greater legal and regulatory pressure since 2008 to reduce junk fees or at least make them more obvious to the user, there are many other such businesses who skirt or even outright flout usury laws by calling their prices "fees" or "charges" as opposed to interest. These include such institutions as rent-to-own stores, check cashing stores, payday loan stores, and pre-paid debit cards such as the RushCard. Very few people who have true wealth or for that matter even a decent salary which allows them to routinely put money aside are ever caught dead in such places. Very few people with an average to good understanding of personal finances patronize such firms. 

No. These businesses make money from people who are poor, often ignorant of the law or common business practices, are scared to stand up for themselves, or who for whatever reason can't or won't obtain a normal bank or credit union checking account. Unfortunately Russell Simmons has chosen to align himself with a business that makes money this way. Now as Puzo wrote in The Godfather, each man has to measure his own greed. Russell Simmons has a lot of money and wants more. I also want more money. There's nothing wrong with that in and of itself. But before someone does something as massively stupid as getting a RushCard, he or she should at least understand what they're getting for their money. Hint, Russell Simmons is not doing you any favors. Much like Bernie Madoff did with his ethnic group, Simmons is using his in-group and celebrity status to peddle products which are poisonous to personal prosperity. Spending money on nonsense like this is a major reason that black median wealth lags behind white median wealth. Now it's fair to counter that Simmons, like all of us, should be more concerned about his own wealth than someone else's. That is certainly correct. No one should live for other people that he doesn't even know. But just because I don't think someone should always be altruistic doesn't mean I think someone should be given a pass for ripping people off. There is a difference between me being indifferent about your finances and sticking my hands in your pocket to rob you. Here's some examples of some of the fees associated with the RushCard (this is an older example but gives you a great idea of the business model we're dealing with)

If we compare the fees affiliated with the Rushcard compared to the typical bank offered debit card, we can clearly see the advantage of the cards offered by the banking institutions.

Rushcard vs. Typical Bank Card

Activation Fee: Rushcard = $19.95 Typical Bank Card = Free 

Convenience Fee: Rushcard = $1.00 Typical Bank Card = Free 

ATM Cash Withdrawal: Rushcard = $1.95 Typical Bank Card = Free (At Branch) 

ATM Balance Inquiry: Rushcard = $.50 Typical Bank Card = Free 

Bill Payment: Rushcard = $1.00 Typical Bank Card = Free 

Inactivity: Rushcard = $2.95 Typical Bank Card = Free 

Refund of Rushcard/Bank Card via Check: Rushcard = $5.00 Typical Bank Card = Free 

As you see, there is no financial reason for one to choose the Rushcard over a typical banking institution which offers debit cards as a part of their services. With the continuous onslaught of technology, it is becoming increasingly easier to open bank accounts.

Ryan Mack's Open Letter

At every conceivable point of contact between the RushCard and the customer (excuse me that should read sucker) money is removed from the sucker's pocket and transferred into Rush's pocket.  Without fail. And it's not as if Mack was the only person who noticed the shoddy and shady business practices that Russell Simmons was using. Financial columnists have long pointed out the buyer beware nature of the prepaid debit card market. Hopefully as Mack has stated perhaps some people will decide to move on from pre-paid debit cards. Unfortunately some of the people who rightly do so will go to a different rip-off artist, the check cashing store. 

Denise Miller, who works in social services in Philadelphia, has not been able to pay her rent. In an especially embarrassing moment, her card was declined at McDonald’s when she tried to buy breakfast.“I am so angry,” she said. Erica Phillips, a 32-year-old autoworker who lives in the Detroit area, said she first experienced a problem with her RushCard on Oct. 10, when she noticed her money had been moved from her existing account to an expired RushCard account. Her weekly paycheck is loaded on her card by direct deposit, and she said she was unable to access that money all week. “I’ve been borrowing from everyone,” she said. “People at work have given me food.” Ms. Phillips canceled her direct deposit and plans to cash her paycheck this week at a local check-cashing store.

NYT LINK

What can be done? I'm not sure there is a legal or regulatory remedy in the short term. The long term solution is of course to build a society in which poor people have more solid financial understanding and are not disproportionately black. The businesses I've listed are basically vultures and hyenas who are attracted to financially sick people. The best thing we can do in the short term is share the information about how these companies work with our brothers and sisters who might be tempted to use these services. Just say no! Ryan Mack video

Speaking of bloodsuckers, whereas Russell Simmons is a figurative one, the State of Alabama in the person of one Circuit Court Judge named Marvin Wiggins (seen on the right in this picture) is a literal bloodsucker. Yes, it seems that old Judge Wiggins, rather than questioning why the state is running what can amount to extortion rackets over petty crimes committed by poor, often black people, has decided to put his own twist on the whole process by requiring indigents to give blood if they are temporarily unable to pay fees, fines or court costs. Now I suppose if you tend to be unsympathetic to lawbreakers you might reason well I guess they shouldn't have broken the law. Leaving aside the idea that having the court take part of your body against your will for a misdemeanor or civil infraction seems at the very least to be unusual and highly unethical, wouldn't you object to this order if the company taking your blood had been found responsible for giving someone HIV from a botched blood transfusion? I mean sure, maybe they've cleaned up their act now. Maybe. But do you want to be the next oops?  MARION, Ala. — Judge Marvin Wiggins’s courtroom was packed on a September morning. The docket listed hundreds of offenders who owed fines or fees for a wide variety of crimes — hunting after dark, assault, drug possession and passing bad checks among them. “Good morning, ladies and gentlemen,” began Judge Wiggins, a circuit judge here in rural Alabama since 1999. “For your consideration, there’s a blood drive outside,” he continued, according to a recording of the hearing. “If you don’t have any money, go out there and give blood and bring in a receipt indicating you gave blood.” 

For those who had no money or did not want to give blood, the judge concluded: “The sheriff has enough handcuffs.” Carl Crocker, who was among those who owed money to the court, recounted seeing one older man pass out after his blood was taken. Another defendant, Traci Green, said that one young man became so angry about the choice he was given that he was taken out of the courtroom. Mr. Crocker, 41, who made the recordings of Judge Wiggins, also recorded the employees of the mobile blood bank, who seemed fully aware of the sentence-reduction arrangement. Mr. Crocker said he grew even more uncomfortable later, after he recognized the blood bank, LifeSouth Community Blood Centers, which had recently lost a $4 million judgment for an H.I.V.-tainted blood transfusion. “It’s just wrong for them to utilize people who are in the court system and essentially extort blood out of you because you owe traffic tickets, misdemeanors, felonies, whatever you’re there for,” Mr. Crocker said.
LINK

I don't much care for the sense of entitlement that some judges seem to have in their courtrooms. Fortunately I haven't had reason to spend any time in courtrooms. I don't mind a judge who tries to bring some levity to the process or make individualized punishments fit the crime. And though it would irritate me greatly were I the defendant or convict I don't really mind judges who feel the need to provide a lecture to the person who's about to go away to prison. That's all inbounds I think. But coercing someone to give blood is in my opinion way out of line. That should not be allowed. No one should agree to that. Someone needs to tell Judge Wiggins just what he can do with his order to give blood. I would hazard a guess that most of the people who are appearing before Judge Wiggins are not the well off and politically connected. I thought these stories were examples of the current ways in which the wealthy and powerful continue to extort funds and literally blood from those who have less funds. Both are quiet obscenities in their own way.

What do you think of these stories?

Student Loan Repayment Strike

I went to college in the Pleistocene epoch when colleges did not cost as much as they do today. I was fortunate enough to have an almost full academic scholarship, some money saved from summer jobs, access to Pell grants and finally a supportive and demanding father who would and did move heaven and earth to ensure that I graduated on time with no excuses and no debts. The idea of taking out massive loans just to obtain an undergraduate degree was completely foreign to me. The world has changed since the days of yore. It's much more difficult to obtain scholarships and grants. The cost of private and public colleges has skyrocketed. Free money has dried up. If you want to go to college and are not a child of either the 1% or parents who are obsessive savers, loans will likely be a large part of how you pay for your schooling. The obvious problem with loans, as opposed to scholarships, personal savings, grants and money from Mom and Dad, is that you have to pay the loans back. Nobody lends money with any other expectation. That's why they're called loans and not gifts. Although a college degree has increasingly become a requirement for a chance to enter the precarious middle class, it is also more important than ever to get the proper college degree from a respectable university. Just having the B.S. or B.A. behind your name isn't at all a guarantee of finding a good job, particularly if you are of visible/undeniable African descent , but that is a different post. Getting a BS degree from a BS university may only net you a BS job. Many people find this out the hard way when they graduate only to discover that their current skill sets and newly minted alleged education will get them a job that barely allows them to make rent and loan payments each month, if they're lucky. It is a financial pain in the tuchus to pay back student loans. Generally speaking, the loan can't be discharged in bankruptcy. Some former students or actual dropouts have decided that their best plan of action is to refuse to pay back their loans.

WASHINGTON (AP) -- Sarah Dieffenbacher is on a debt strike. She's refusing to make payments on the more than $100,000 in federal and private loans she says she owes for studies at a for-profit college that she now considers so worthless she doesn't include it on her resume. The "debt strike" sentiment is catching on. Calling themselves the "Corinthian 100" — named for the troubled Corinthian Colleges, Inc., which operated Everest College, Heald College and WyoTech before agreeing last summer to sell or close its 100-plus campuses — about 100 current and former students are refusing to pay back their loans, according to the Debt Collective group behind the strike.

They're meeting Tuesday with officials from the Consumer Financial Protection Bureau, an independent government agency that already has asked the courts to grant relief to Corinthian students who collectively have taken out more than $500 million in private student loans. The Education Department is the group's primary target, because they want the department to discharge their loans. A senior department official is scheduled to attend the meeting.

Dieffenbacher said she received an associate's degree in paralegal studies from Everest College in Ontario, California, and later went back for a bachelor's in criminal justice before later dropping out. She said she left school with about $80,000 in federal loans and $30,000 in private loans, but when she went to apply for jobs at law firms she was told her studies didn't count for anything.

Dieffenbacher, who works in collections for a property management company, said she was allowed at first to defer her loan payments, but now should be paying about $1,500 a month that she can't afford. Makenzie Vasquez, of Santa Cruz, California, said she left an eight-month program to become a medical assistant at Everest College in San Jose after six months because she couldn't afford the monthly fees. She said she owes about $31,000 and went into default in November because she hasn't started repayment.

LINK

I've been around for a while now. I have financial obligations that can be tiresome. Sometimes people advised me to take or avoid a certain course of action. Sometimes I listened. Sometimes I didn't. Although not every decision I made worked well I can say that ultimately all of the decisions were mine. Once you're over 18 and certainly once you're over 21, you're an adult. You get to make your own choices. If you decided to attend a sketchy college and overpay for coursework of dubious value that's your fault. If you are wise you will learn from that choice and not do anything that foolish again. I'm not sure you should get a do-over. Although there are a few cases where they are arguably warranted, bailouts almost by definition come with a huge moral hazard problem. The people who get bailed out don't pay the costs of their foolish behavior and thus are more likely to repeat such bad behavior in the future. Additionally other people who are playing by the rules of the game start to feel like suckers. Rationally it may also make sense for them to ignore the rules and default on their debt if the consequences for doing so are no longer punitive. If too many people start to do this the interest rates and fees for loans will increase. Institutions will be less likely to make loans. In extreme situations the market will grind to a halt. But maybe that is the wrong way to look at this. Maybe we should examine this situation not through the lens of loan repayment but rather through consumer protection. If someone sells me something I didn't ask for or is totally worthless then I should have the ability to complain to a consumer protection agency and get some sort of relief. That is the argument the Corinthian 100 are making. If the education was fraudulent should they pay?

I am not 100% unsympathetic to this argument, just 90% unsympathetic. There is no guarantee that a college education will provide any particular individual a path to a well paid career. It's an important factor but ultimately just one among many. Connections, career interest, personal drive, intelligence and the larger economy all play a role. A college or graduate school may boast about its alumni salaries and income but all they are really selling you is an education. What you do with that education is up to you. Still, if someone just doesn't have the money they don't have the money. I would be willing to allow student debt to be discharged in bankruptcy, which is currently not the case. That requires a change in the law. But I would not be willing to allow someone to default just because they entered the real world and learned that they weren't a special snowflake. We do need to rethink how we finance higher education in this country. The structure of loan based financial aid may have done little more than give colleges incentives to raise tuition and salary packages.  There is more than $1 trillion in student debt. We can't keep on in this way. We will see more stories like this.

How do you see this story?

Should the Corinthian 100 be able to walk away from their debt?

Should everyone else be able to walk away from their mortgages or auto loans?

The Janet Malone case: why I despise the IRS

Now my advice for those who die
Declare the pennies on your eyes
Cos I'm the taxman, yeah, I'm the taxman
Taxman-The Beatles
My problem with many federal regulatory agencies in general and the IRS in particular is that they tend to operate under Lavrentiy Beria's proscription of "Show me the man and I'll find you the crime". When both by regulation and by law the list of crimes ever expands then everyone, innocent or not, can be found guilty of something. I have read (and experienced?) that if a police officer really wants to stop you he can find a esoteric traffic violation of some sort before you've driven three blocks. The IRS operates under the same principle. When all you have is a hammer, everything looks like a nail. This society is supposed to endorse the principle of innocent until proven guilty. The IRS doesn't really operate under those rules. For too long Congress has given the IRS a free hand to seize people's assets and property before any sort of proceeding has really established guilt. I believe in paying the taxes that I owe and following the law. But I don't believe that Congress (which is to say we the people) should be giving the IRS and other regulatory or law enforcement agencies wide swaths of poorly defined authority, particularly when it comes to putting people in jail and taking their money. Too often such authority is wielded with a vengeance against relatively powerless individuals who don't have the connections or funds to fight back. It's rare that we hear about a banker or other financial big shot going to prison for money laundering in drug or arms dealing crimes. Such banks and individuals are often thought to be too big to fail. No one has gone to prison for the mortgage meltdown that almost destroyed the US economy.
To combat tax evasion, drug trafficking, money laundering, terrorism, and other crimes, the IRS requires your bank or other financial institution to report to the IRS any deposits you make that are over $10,000. 

Once that rule became public knowledge, anyone with a working brain who was engaged in nefarious activities who still nonetheless needed access to the banking system would make deposits that did not exceed the $10,000 threshold and keep it moving. Maybe Monday they would deposit $2000 at ten different branches. Maybe Tuesday five different newly incorporated Bahamian based companies would make thirty deposits at twenty different banks. And so on. Apparently feeling a bit stupid at being so easily foiled Congress/The IRS also made it a crime to break up transactions below the $10,000 threshold. Theoretically this would allow them to go after those supposed super smart bad guys who had learned to count. The problem is this rule also made technical criminals out of virtually everyone else who used the banking system. So if you deposited $5000 today and $5000 next week because you're a small widget company owner who gets paid irregularly, or deposited $3500 in the morning and $6500 in the afternoon because you're a realtor who attended two closings, or deposited $5800 today and $9000 tomorrow because you're a widow who is closing the estate of your late husband the IRS could take your money and threaten to put you in prison.

IOWA CITY, Iowa (AP) — An Iowa widow is charged with a crime and had nearly $19,000 seized from her bank after depositing her late husband's legally earned money in a way that evaded federal reporting requirements. Janet Malone, 68, of Dubuque, is facing civil and criminal proceedings under a law intended to help investigators track large sums of cash tied to criminal activity such as drug trafficking and terrorism. 

At issue is a law requiring banks to report deposits of more than $10,000 cash to the federal government. Anyone who breaks deposits into increments below that level to avoid the requirement is committing a crime known as "structuring" — whether their money is legal or not. 

Larry Salzman, an attorney with the Institute for Justice, criticized the government's case against Malone given its declared shift in practice. "This is shocking because it demonstrates that prosecutors are not taking seriously the IRS' alleged policy change not to prosecute legal source structuring," he said. After the policy change, federal prosecutors in Iowa agreed to return money the IRS seized from two people accused of structuring, including a restaurant owner who had $33,000 taken and a doctor who fought to get back $344,000 in earnings from his medical practice. But prosecutors declined to drop the civil forfeiture case over $18,775 the IRS seized from Malone.

Instead, they added a misdemeanor criminal charge last week alleging she willfully violated the law, after her husband had been warned about the practice four years ago. Malone is expected to plead guilty next week and let the government keep the money, under a plea agreement filed Monday. The charge carries up to one year in jail and a $250,000 fine.

Shortly before his death in October 2011, Ronald Malone told his wife about a briefcase containing $180,000 cash from his job as a publishing executive, gambling winnings and investment income. She deposited some of it in increments between $5,800 and $9,000. The IRS obtained a warrant to seize it based on suspicion that the transactions were meant to avoid reporting requirements.

LINK

I see this as nothing more than pure bullying. I have more respect for the Mafia thug who forces you to join his local "business association" or the hoodlum who carjacks you. Such criminals are honest at least. Here the government has taken money from an elderly widow and threatened to jail her simply because she deposited her money in her bank. There is no proof of criminal behavior. The same government that can't figure out how to make corporations pay taxes can bring down the hammer on an old woman. Such brave people they are. This kind of Kafkaesque exercise of authority needs to be halted. 

Thoughts?

Pay your auto loan or don't drive!!!

I generally think that if you take out a loan you should adhere to the legally enforceable terms of the contact. So if you agree to pay X dollars back per month then you really should pay X dollars back per month. It irritates me when people borrow money from me and find all sorts of creative reasons why they should not pay it back. I think this is true regardless of financial status. Pay what you owe. A deal is a deal. That said, depending on what the loan or service was, the creditor can encounter difficulty getting repayment. The Federal government and to a lesser extent state governments have fewer problems getting money owed from you as they have the power to just TAKE money from your account, seize your assets, tell your employer or bank to stop giving you money and put you in prison. That will get your attention. Utility providers can shutoff service for non payment. Customers notice that. Loan officers operating outside the law can send unpleasant people to your home or workplace to threaten physical harm if they don't immediately receive payment. Getting your shins cracked with a baseball bat or having your hands broken can provide financial clarity. Some other creditors, say lenders on auto loans, don't have the ability to immediately and seamlessly compel payment. They loaned money on a quickly depreciating asset. Many people don't give car loans priority over housing or food costs. The debtor can easily move his car to another state. To repossess the asset, depending on state law, the creditor usually has to go to court to obtain a judgment before hiring some semi-reputable people to retrieve the vehicle. This could all be messy and costly. In some zip codes if someone hears or sees someone breaking into their car, they will shoot first and ask questions later. So what's a creditor to do?

Well imagine if instead of having to go through the hassle of sending out multiple dunning letters, taking people to court and spending money on repo men, a creditor could ensure that the debtor was interested in, even eager to pay the creditor on time and in full each and every month for the life of the loan? How would someone do that you ask? Well the creditor would just install a handy dandy gadget which prevents the auto from running if the creditor has not been paid.  

The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start. The cause was not a mechanical problem — it was her lender. Ms. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March. 

“I felt absolutely helpless,” said Ms. Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June. This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn. Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year. 

Last year, Nevada’s Legislature heard testimony from T. Candice Smith, 31, who said she thought she was going to die when her car suddenly shut down, sending her careening across a three-lane Las Vegas highway. “It was horrifying,” she recalled.
Ms. Smith said that her lender, C.A.G. Acceptance, had remotely activated her ignition interruption device.
“It’s a safety hazard for the driver and for all others on the road,” said her lawyer, Sophia A. Medina, with the Legal Aid Center of Southern Nevada.

LINK

This is a good example of how poverty is quite profitable for certain segments of our population. Although these devices are currently only being used on those customers unfortunate enough to be entangled in sketchy subprime loans I would predict it's only a matter of time before usage is expanded to the entire consumer auto loan market. In short you might have a 800 FICO score and be willing to put down 80% of the car's value as a down payment. But a bank might still decide that it can reduce risk by insisting that all of its loans must include shutoff devices. I wouldn't like that. But it's not just enlightened self-interest that would make me oppose these devices. It might be funny from afar if, as described in the article, Joe Sixpack is embarrassed as a deadbeat in front of his lady. It's not so funny when a car shuts off while it's being driven. It's not funny when a car won't start when a police or fire vehicle needs to get in front of it. There's no humor in a a non-working car when someone needs to get to the hospital or there is some other emergency. When I am on the road I try to be as vigilant as possible to protect myself and the lives of others. Part of that protection is a societal interest in ensuring that other drivers are licensed and that their cars work. I don't want to be on the road with other cars that could suddenly shut off. That's an unnecessary risk for us all. The lenders are making unnecessary and dangerous intrusions into our privacy and our safety. I understand their interest in receiving timely payments. But there are other concerns against which those must be balanced. Electronic shutoff devices are a bad idea.

Should electronic shutoff devices be outlawed?

Would you buy a car if your loan included this device as a requirement?

Are these people just examples of poor financial acumen?

Should the Federal government get involved in regulating these devices?

Kohl's Lawsuit: Deadbeat Client or Harassment; Brad Ausmus: Unfunny Joke

A long time ago before I was the sober responsible grownup that I am today I used to use credit irresponsibly and run up bills that were more than I could pay in one month. Doing this a few times and getting dinged with late fees, interest, and other penalties and having the highly irritating experience of having a few paychecks effectively spent on debt service before I even received them was more than enough for me to revert back to my parents' training of not buying something if you couldn't pay cash for it. After all we all must be able to distinguish between a want and a need. Grown ups do that. Children don't. Generally speaking, if you can't or won't pay cash for something, chances are you don't need it. I believe that if you owe money you should pay what you owe. That's what's fair. However just because someone owes money doesn't give the creditor the right to take extra-legal steps that include tactics of harassment or worse in order to get their money back. As a creditor there are a number of laws you must abide by when seeking to get your money back, whether you are doing it yourself or have outsourced it to a legbreaker collection services agency. In Michigan, a woman who owed Kohl's department store felt that the store was being far too aggressive in seeking to recover a particularly small debt. It's unclear as to whether the debt was more than 30 days late. Fed up with the tactics she filed a federal lawsuit. Yes that's correct. A federal lawsuit.

Enough with the calls.That’s what one consumer is telling Kohl’s in a federal lawsuit that claims the department store is stalking her and harassing her by phone over an overdue credit card bill, calling her at all hours of the night over what she calls a measly $20.“They started harassing me over $20 and I was like, ‘Screw it, oh well,’ ” said Lisa Ratliff, the 29-year-old plaintiff from Ypsilanti who got so fed up with the phone calls she sued over them. “It’s really annoying if you’re trying to get things done or you’re trying to sleep or you’re working or spending time with your family …I just want them to stop harassing me.” 

Ratliff said she was going to pay the bill but got so irritated by the repeated calls that she decided against it. Instead, she’s suing over Kohl’s collection practices — tactics that she claims are prohibited under federal law. In a lawsuit filed Monday in U.S. District Court, Ratliff’s lawyers claim that Kohl’s violated the Telephone Consumer Protection Act, a 1991 law that makes it illegal to call a cell phone using an auto dialer or prerecorded voice without the recipient’s consent. The lawsuit, filed by the Krohn & Moss Consumer Law Center in Chicago, is seeking damages under the act, which allows victims to sue for $500 per violating call — or up to $1,500 per call if they can prove the party knowingly violated the law. Kohl’s officials did not return calls or e-mails seeking comment. No attorney of record is yet listed in court documents for Kohl’s. According to Ratliff’s lawsuit, the Kohl’s phone calls — which included both automated and live operator calls — started in November 2013. Until then, she said, she paid her bill in full every month and that her total credit line was $400. When the calls started, she owed $20. Now it’s up to $100 because of late fees and interest, she said.

The woman may well have a case, at least according to the local attorney giving some analysis in the clip from FOX 2 News.
Fox 2 News Headlines
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Also in local news the Detroit Tigers, who had a great start with people talking about the pennant and the World Series have sunk into the toilet since and now have people wondering if rookie manager Brad Ausmus really knows what he's doing. Faced with questions of how he deals with the stress and unpleasantness of losing, Ausmus responded with a wisecrack that wasn't funny. The current political-sociological environment made it even less so. Detroit Tigers rookie manager Brad Ausmus is known to be quick with a quip. But he strayed over the line Wednesday and he knew it. It started when he was asked after the 2-1 loss to the Kansas City Royals how he has been able to keep his cool during his team’s horrendous streak.“Yeah, it’s not fun,” he said. “Like I said, once I get to the field, I’m always in a good mood, especially if I’m driving and it’s sunny out. Once I’m here, I’m ready to go. I feel like I’m the exact same person that you would have seen on day one of spring training.”And when he goes home? “I beat my wife,” Ausmus said. “I’m just kidding. No, luckily, my wife and kids are fantastic. I do get a little mopey at home, but my wife and kids are good. They’ve seen me be in a bad mood after a loss, so they’ve been great.” His joke drew some hearty laughs and some nervous laughs from the media and, after answering another question, he came back to it. “I didn’t want to make light of battered women,” Ausmus said. “I apologize for that if it offended anyone.”  I think it's pretty obvious that Ausmus did not mean to endorse beating one's wife nor was he making fun of abused women. He apologized almost immediately because he knew the joke wasn't funny or appropriate. I think it should end there. Sometimes we all say things that aren't funny or just don't fit in the environment we happen to be in at the time. Ausmus is a guy who hasn't had this level of scrutiny previously. He still needs to learn that not everything that pops into his mind needs to be shared with the rest of the world. I don't think that MLB or the Tigers need to say or do anything else to Ausmus. Leave it there.

What do you think?

1) Does Ms. Ratliff have a federal case?

2) Does Mr. Ausmus need to attend sensitivity training or pay fines?

3) Did you ever get so irritated with a creditor that you told them off?

What's your retirement plan?

After a long hectic day of fighting crime while maintaining my secret identity as a mild mannered accounting IT analyst I was minding my own business when out of the blue the batcave emergency phone rang. As most people don't have that number and those that do know not to bother me during the time when the phone rang, against my usual instincts I decided to answer it. It was indeed an emergency. An older maternal relative, one of my few remaining ones, needed help. She had been hesitant to call as on both sides of my family I have over the years quite deliberately cultivated a reputation as someone who can be a little cold when it comes to money. I'll help if I must but there's a 100% chance I'm going to want to know how you got yourself in a spot where you need my help, if I can ever expect this money back, and what is your plan so that I don't have to give/loan you my money again. I like my money more than I like my little cousins, nieces and nephews. And I love them very much indeed. Ok, that's hyperbole. But not by all that much. I'm not going to put all my relative's business in the street as that would be wrong and is not really the point of this post anyway. I did decide to assist her and have no expectation of seeing that money again. I decided to help because she is a) far past retirement age, b) is a woman, and c) had no one else but my brother and I to turn to. Younger and especially male relatives probably would have not gotten assistance. That may be "sexist" or "ageist" but it is what it is. Enough said on that.

What inspired me to write this post was that in helping my relative and finding out some of her story I was inspired to take a honest look at my own wealth (or relative lack thereof) and future retirement plans. I'm doing much better than I was five years ago but am definitely not where I'd thought I be twenty years ago. Like the saying goes, life is what happens while you're making other plans.

Traditionally your retirement package was supposed to be akin to a three legged stool. You were supposed to be able to rely on a) Social Security b) company pension and c) personal savings and investments. To stretch the analogy somewhat that stool could be covered in the security blanket of a paid off house, affordable health care insurance for seniors and maybe an annuity or two. So during your golden years, you should ideally be able to enjoy a lifestyle close to if not better than what you had when you were scuffling and struggling in your youthful days. Things didn't work out that way for my relative. Things probably won't work out that way for a lot of people if the data means anything. There are a lot of reasons that saving is not as "easy" as it would have been for the generations that preceded mine. The two biggest reasons in my opinion are a stagnant real income and acceptance of easy credit to buy almost everything. Real income is stagnant because of globalization, destruction of unions, automation and importation of cheap labor at both the high end and low end of the job market. There are fixes to this of course but they are outside of what I want to write about today. In order to deal with that loss of income people have adapted to using credit cards for everything and worse, carrying balances. When you do this not only do you buy stuff you probably wouldn't buy if you had to pay for it with cash, but you also waste your money on penalties, fees and interest charges. 
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Roughly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings, according to a survey released by Bankrate.com Monday.

Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event, according to the survey of 1,000 adults. Meanwhile, 50% of those surveyed have less than a three-month cushion and 27% had no savings at all.

Last week, online lender CashNetUSA said 22% of the 1,000 people it recently surveyed had less than $100 in savings to cover an emergency, while 46% had less than $800. After paying debts and taking care of housing, car and child care-related expenses, the respondents said there just isn't enough money left over for saving more.

Fewer companies provide pensions these days, having largely replaced them with 401K plans. The issue with 401K's is that not only are many people really not all that savvy investors but more importantly the risk and liability of market swings have been switched from companies to employees. Risk is fine and perhaps even a requirement when you're young. But when I retire I would prefer the certainty of knowing I will have a yearly pension payment of $XX,000 until I die rather than be exposed to market risk. Unsurprisingly the big shots at companies, the CEO's and other company officers tend to still have pensions and quite lucrative separation agreements.

We've discussed Social Security before. Although AFAIK the program is still actuarially sound for at least the next few decades, it likely will need some adjustments. It will continue to be attacked both by conservatives who never liked it in the first place and strangely enough liberals or "centrists" looking to make grand bargains. Do I think the program will pay out the same benefits when I get to the front of the line as it does currently? I've never been a lucky man so I would tend to doubt it. We shall see. I just went over to the SSA website to calculate my expected retirement benefit. It was nice, but was hardly enough to keep me even close to my current standard of living.

Finally there is personal savings. Compared to the other two legs of retirement this is the easiest for the individual to control. You get to make decisions on how you spend your money. You also get to make decisions on what career you pursue and/or what second job or other business opportunity you perform. And if you're young, as I no longer am, you have years and years and years to work and transform that income into wealth. Sadly many people ignore personal savings and spend money as if they're millionaires. They carry balances on credit cards. They buy things that they've lost interest in a year later. By the time they reach the point where retirement is no longer a theoretical concern they find that years of living paycheck to paycheck have taken their toll. So my relative's emergency just reminded me that I must do a better job of saving the money I earn at my corporate job, continue to earn and build a financial life outside of my twice a month paycheck, and look for ways to cut unnecessary spending. I don't think two or three decades down the line there will be any cavalry riding over the hill to save me from financial mistakes or unforeseen setbacks. That's a sobering feeling but also strangely enough an exhilarating one. I have to make the moves now to guarantee that I don't wind up broke and homeless. It's all on me.

Questions:

Are you content with your level of wealth/savings?

Do you think you are or will be ready for retirement?

If you were flat on your back financially do you have people who would help?

Do you often help relatives out financially?

Does Your Parachute Work?

Things are finally looking up for me financially. Nevertheless I still operate on a thinner margin than I would like. It's taken hard work to get where I am and will take more hard work to get where I want to be. Bad decisions made years ago have ripples down through the decades. There's nothing I can do about that except live and learn. I was reminded of all this recently while I was stopped at two different expressway exit ramps, watching two different young men hold up signs asking for help. They avoided eye contact and I'm sorry to say so did everyone else. They had what appeared to be their worldly belongings in either a milk carton or a backpack. Of course you see people like this all of the time and unfortunately you get used to it. Some people make bad decisions in life. There's plenty of work if you aren't lazy. It's not my problem. There's a decent safety net. Maybe those people all have substance abuse problems. And so on. Those are the things we privately tell ourselves in order remain convinced that WE would never fall so low as to be begging on the street.

But recent unfortunate events in my personal circle of family/friends and the news that the income gap between the richest 1% and everyone else has grown to the widest ever and that even the top 10% are also taking more than half of total income, also a record, have made me wonder (and will hopefully make you wonder), does your parachute really work? How easy is it to find another job that pays the same or more as the one you currently have? How far are you really, from begging strangers for money? 

Let's say you work for someone else. If that person died, transferred or retired, just how safe is your job? I've had the experience of a new boss arriving and wanting to hire and promote his or her own people. Depending on company culture, holdovers from the old regime might just be fired on the spot or not so subtly harassed until they transfer or quit. If your company decides that your services could be better and more cheaply performed by someone else, whether in this country or even overseas, there might not be any hint of change, just a terse email and a humiliating walk-out by company security. I've seen that happen too. It's also true that by the time you reach your forties and fifties and are at or near your maximum earning potential you are also a tempting target for a firm looking to save on salary and benefits or bring in younger and more malleable workers. If you work for yourself and make a mistake in business plan or your leverage you could also lose everything and watch your company go belly up. In any case no matter what happens to you the world will keep on turning. There are very very very few people on this planet who care quite as much about your well being as you do yourself. Because ultimately it's your life. You are the person who will reap the benefits or bear the costs of choices that you make.

If whatever you do today for money was no longer viable starting tomorrow, just how long would it be before you were on the street asking for money. My macho pride says that would never ever ever happen to me. I'm a (insert family name) and WE don't do that. But sometimes I'm not so sure. No one can see the future. Whether it's medical bills, lawsuits, divorce, bad personal habits, deaths, job loss there's always something that hits you when you least expect it. There are numerous calamities that could wipe out whatever financial stability you've attained. Winter is coming for us all. We don't know exactly when but it is coming. Count on it.

Now there are also tons of ways to deal with this risk and we've discussed some of them before. Spending less than you earn and saving the difference is the number one solution. Playing your cards right and regularly saving your money immediately after entering the workforce can give you a nice little nest egg by the time you hit your late thirties, forties and fifties and presumably start to slow down a little. Starting a side business is a great way to bring some extra income into your pockets. Keeping your skills up to date, staying in touch with close friends and family, avoiding or limiting consumer debt and getting married are also helpful. Divorce is obviously a big risk but having a second income and/or a second pair of hands to perform tasks you otherwise would have to spend time and money on is a huge advantage of marriage.

Still although it is ultimately on the individual to find his way through life I can't help but wonder if the changes we've made in our political economy over the past forty to fifty years have really helped more people than they've hurt. The economy is a man made entity. We can make changes in how we do things. There's not any good reason that we have to accept that the work participation rate in the US is at a 35 year low. Whatever bad decisions a particular homeless person might have made they did so against the backdrop of a US economy that is not producing enough jobs for everyone who wants one. But on my own I can't change that. I would need your help and that of millions more. But I can change my financial situation. To do that I need the help of much fewer people. So that's what I try to do.

Questions

If after you read this your current income was abruptly eliminated what would you do?

How long could you survive at current spending habits without income?

Do you have people who'd be willing to support you? How long? Indefinitely?

Do you have sympathy for the homeless? Do you give money? Volunteer at shelters?

Banks and Loan Sharks: Payday Loans and Online Lending

When you think of a "loan shark" you might stereotypically think of a hard nosed man who will advance you some cash when you're in a bind but is rumored to hurt or even murder people who don't pay him back on time. He might be affiliated with the regional office of a national organization of similar businessmen. He probably employs people the size of small refrigerators who collect for him. He may tool around town in a late model Cadillac or older Town Car with an expansive albeit suspiciously stained trunk. If you are late on your payments or if he suspects you might be thinking about being late on your payments, he might suddenly appear at your home and politely ask for his money. Or he may follow you to your anniversary celebration and throw you a beating in front of your spouse and kids. It all depends on his mood and how late you are. 

Hey, all he wants is his money. Since he can't rely on the courts to enforce a technically valid but completely illegal contract, you can understand why he would need to have some, well, unorthodox methods of securing his capital. Since many of his clients are themselves violent lowlifes, criminals and other trash, stern dunning letters and threats to report late payers to credit bureaus won't have the desired effect. Generally speaking baseball bats and tire irons are more effective than plaintive phone calls at getting people's undivided attention.

But if you're a loan shark all this can be hectic and dangerous. Your clientele is often armed themselves. If you kill a debtor you lose that payment stream. Harassing or beating up debtors, while occasionally satisfying, can bring in the police or worse, scare the deadbeat so much that he scurries down to the local FBI office. And then you'd probably be convicted of several racketeering, conspiracy, usury and assault charges and spend the next 40 years in a federal penitentiary. No good. So what's an ambitious hoodlum to do?

Well if he was smart he'd realize that the risks of dealing with criminals and degenerate gamblers, ordering or carrying out beatings and murders, sharing profits with bosses who are even more paranoid and brutal than he is, and spending time worrying that a customer or associate might be an undercover FBI agent or informant don't really justify his shylock profits. I mean you can't spend your money if you're dead or in jail right? And really, who needs all the stress? What if you could make similar profits in a related venture that not only was completely legal (more or less) but also put banks and lawyers on your side for a change? I mean how cool would that be? Wouldn't a loan shark like to have a regular nine to five gig with above board profits, vacation and sick days, 401K opportunities and incentive bonuses without all the messy illegality and violence that used to go along with his business? Classic loan sharks aren't as common as they used to be. They got smart.

A loan shark should enter the payday loan/online lending business. Now, in payday loan lending you might not attain the 1040% annualized nominal interest rate on a typical 6-for-5 mob loan but then again you don't have to pay hoodlums who will beat up, intimidate or kill delinquent clients either. You can start your car without wondering if a co-worker put a bomb under the seat. You can attend last minute meetings with the franchise president without being frightened because the conference room is empty. Your overhead shrinks. You can pay taxes and bank your profits. And banks will help you with your business instead of informing the IRS. And if you like, you can even keep your two-tone pinstripe suits for old time's sake. What a country, eh??

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent. With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JP Morgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals. “Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law. Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

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Now stupid people will often do stupid things. Now why does this even matter you might ask? Well it matters because instead of helping people start businesses and get out of poverty payday/online lenders are largely in the business of helping poor people to stay poor. And wouldn't you know it, black people, who already have lower incomes and wealth than most Americans, are disproportionate customers of payday/online lenders. Black people are about 12% of the US population but make up 23% of payday borrowers. Renters and people of lower income are also more likely to use payday loans than homeowners and higher income Americans. Most people are using payday loans for daily expenses. This means it is more difficult for people who are already behind the 8 ball economically to get over the hump. They are diverting a sizable portion of their already meager resources to interest payments for things that if they really thought about it, they may not have needed. 

Or viewed another way if they really did need them then this is another good reason we need to raise the minimum wage here and work to increase income in this country for our citizens as opposed to helping people in China, India or elsewhere. If people are taking loans just to make ends meet then something has gone drastically wrong with our job generating machine.  I view payday/online lending not just as a symptom of poor personal financial management or temporary desperation but as a wholly predictable outcome of a deunionized workforce with stagnant income growth. JP Morgan Chase, not content with aiding legal loan sharks to rip off low income citizens, also allegedly ripped off other banks by selling them crap mortgages. HSBC escaped criminal charges after willingly assisting drug cartels in laundering their profits. Apparently something has gone drastically wrong with the financial superstructure in this country and world. We need to fix this ASAP because otherwise not only will we continue to have record levels of income inequality as well as financial corruption but growth will also stay anemic. You can't grow when you're spending so much of your income servicing debt.

What we ought to be worried about is not the mob shark but all of the other debttrappers that have proliferated since our credit markets were deregulated. There are more of them now than ever before and most of them have been issued licenses. That is the loan-shark problem regulators should confront.

It looks like financial market deregulation hasn't so much gotten rid of the classic loan shark as it's made him clean up and operate above board, with almost the same business model. It looks like Lucky Luciano was right on the money with his insight.

‘I’d do it legal. I learned too late that you need just as good a brain to make a crooked million, as an honest million. These days, you apply for a license to steal from the public. If I had my time again, I’d make sure I got that license first!’
Charles "Lucky" Luciano

QUESTIONS

1) Should Payday loan/online lending be outlawed completely?

2) Does the government have a role to protect people from themselves? 

3) Is there any difference between a bank and an unregulated lender?

4) Do you know anyone who has used payday loans? Have you used them?