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.
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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?

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. 
LINK

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?

Tom Perkins: Return to Aristocracy

There has been a lot written of late about inequality. Unsurprisingly people on the Right tend to defend inequality in general and the massively increased inequality of the past 40-50 years as a good thing. People on the Left tend to consider increased inequality a bad thing while some go so far as to consider virtually any inequality as problematic. The Right, or at least corporations and the monied class have been winning this argument for a very long time. To the extent there is increased energy on the Left about this it's a last ditch stand or cynical media posturing by politicians who'd like to change the subject from their own complicity in the workings of the machine while keeping those campaign contributions rolling in. But there are some people of the Right who are not content with being wealthy, not content with paying relatively low taxes by historical American standards or by the standards of other First World industrialized nations, and not content with having money treated as speech and having political bribery virtually legalized. Some people, aristocrats in all but name, are starting to wonder why those damned peasants have the right to vote at all.

I mean if you're so awesome and so intelligent that you've built or expanded multinational corporations, discovered new medicines, increased the limits of knowledge about the universe, or at the very least made yourself and your family more money than could be spent in one lifetime, is it really fair that some sap who hasn't even made a million dollars gets the same vote as you do? Some rich people think that they should have more say in society while more of us peasants should have no say. Venture capitalist Tom Perkins, last heard from comparing the wealthiest 1% Americans to Jews hunted and exterminated during the Holocaust, is such a man.

"The Tom Perkins system is: You don't get to vote unless you pay a dollar of taxes," Perkins said. "But what I really think is, it should be like a corporation. You pay a million dollars in taxes, you get a million votes. How's that?" 

The audience at the Commonwealth Club reacted with laughter. But Perkins offered no immediate indication that he was joking. Asked offstage if the proposal was serious, Perkins said: "I intended to be outrageous, and it was."

It is hard to overestimate how profoundly undemocratic and unAmerican this proposal is. There is always a tension between the private sector in which the boss can more or less operate as he sees fit (especially without unions) and the public sphere of democracy and a republican form of government in which everyone has a say and both private power and public power are limited by constitution and law. Evidently Perkins doesn't like our system any more. Perhaps he should consider leaving the country and resettling in a place like Afghanistan or Somalia where whatever the local Big Man says, goes. He might be much happier. The entire swath of American political history has tended towards expanding the franchise, not limiting it.

Perkins offers no reason as to why it would be a better thing if only rich people voted or had even more of an outsize impact on elections than they already do. I guess to him it's self-evident. But I think he's going to have to come up with a better argument than "I'm rich and dislike the current President."

An aristocratic system tends not to last if you have other elements like an educated middle class, social safety nets, unions and other non-government support groups, etc. Because sooner or later people without the vote or with limited political say realize that they greatly outnumber the rich and have no need to bow and scrape before them. But to be an American is not to bow and scrape before anyone NOR to want anyone to do that before you. Perkins should learn how to be an American. I think he was apparently born in the wrong country and wrong century. If nothing else, Perkins should realize that a society that moves too far towards plutocracy and autocracy eventually gets balanced out by a Robespierre...

Phil Mickelson, Taxes and Fairness

You can pay Uncle Sam with the overtime
Is that all you get for your money
-Billy Joel "Moving Out"

During my time on this planet I've known several people who are doing much better financially than I am. I'm sure you have known people more successful than you are. Some of these people were born to it or inherited it. Others worked for it. Some were smarter and harder working than I was. Some have skill sets which I lack. Other people are just older and more experienced. Other folks simply happened to marry well. In any event very few of them liked giving money away, and certainly not to the state or federal government. I remember listening to a rant by a former friend, who having built an income in the high six figures, was outraged that to her mind, so much of it, too much of it was going to the federal government. It seems like it was a weekly event of listening to her whine about taxes and how it wasn't fair and blah, blah, blah.

I've also known a few wealthy people who made it a point never to complain publicly about their taxes because they considered it gauche and something not likely to engender sympathy. I certainly didn't feel much sympathy or empathy for the friend I mentioned. This lack of sympathy often occurs because when you're living paycheck to paycheck you don't see how someone making high multiples of what you make can have too many financial problems. I look at some people making more than I make and think they have it made. But I also know some people who earn much less than I do and think I have it made. And I assure you that is so not the case. It's all relative.

This feeling of "Buddy we've all got it tough" could be what golfer and California resident Phil Mickelson ran into when he complained about the high taxes he was paying, and specifically the increased taxes he would owe under the fiscal cliff deal and California's just passed 13% income tax rate.

LINK

“If you add up all the federal and you look at the disability and the unemployment and the Social Security and state, my tax rate is 62, 63 percent,” Mickelson said. “So I’ve got to make some decisions on what to do.”Mickelson, who lives with his wife, Amy, and their three children outside San Diego, his hometown, said he planned to elaborate on his comments in more detail this week when the tour stopped in his backyard, at Torrey Pines in La Jolla, Calif.

“It’s been an interesting off-season,” said Mickelson, who cracked open a window into his thought process last week during a teleconference. Asked if he has considered following his United States Ryder Cup teammate Steve Stricker, another 40-something golfer, into semi retirement, Mickelson replied: “You know, I think that we’re all going to have our own way of handling things, handling time in our career, our family, handling what’s going on the last couple of months politically. I think we’re all going to have to find things that work for us.”

In December, Mickelson, who was part of a group that had bought the San Diego Padres four months earlier, abruptly announced that he was no longer involved in the business deal. His reversal came shortly after California voters approved Proposition 30, which imposed a 13.3 percent tax rate on incomes of more than $1 million.

Asked Sunday if the election results played a role in his decision to sever his ties with the Padres’ ownership group, Mickelson replied, “Yeah, absolutely.” "I'm not going to jump the gun, but there are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and...it doesn't work for me right now."

Mickelson faced a backlash over his comments with some people claiming he should only be paying 52% of his income, not 63% and therefore should stop whining and take it like a man.

Mickelson frenemy Tiger Woods came to Mickelson's defense by pointing out that high taxes were one reason that he had previously left California. But perhaps not wanting to seem insensitive or place himself within political controversies any more than he already had, Mickelson issued an apology for his statements.

"I'm like many Americans who are trying to understand the new tax laws. I certainly don't have a definitive plan at this time, but like everyone else I want to make decisions that are best for my future and my family. Finances and taxes are a personal matter and I should not have made my opinions on them public. I apologize to those I have upset or insulted and assure you I intend to not let it happen again".

Mickelson was, according to Sports Illustrated, the second highest paid athlete in 2012. Floyd Mayweather was #1. So even by the elevated standards of New York or Hollywood, Mickelson would remain rich even if the federal, state and local governments really were shaking him down for 63% of his total (not marginal) income. Perhaps he really should just keep his mouth shut and pay up. Never complain and never explain is often really good advice for an adult to heed. If you're paying a lot of taxes, you're probably earning a lot of money so what do you really have to complain about when all is said and done? Mickelson's net worth is estimated at or around $180 million. So it's not like I'm ever going to see Mickelson on my homeward bound expressway exit forlornly holding up a sign that reads "Will putt for cash. Please help".

So this raises an interesting question. There are as stated, very few people who like paying taxes. People at all levels of income complain about the bites various governments take whether they're getting clothing at goodwill or going shopping for suits in Paris and Rome over the weekend. Presumably Mickelson and his wife know better than anyone not in the IRS, how much he pays in taxes. Whatever his tax burden is, by Mickelson's reckoning it's too damn much. He has a right to say so. California's 13% income tax is by my standards, too high and could well be a reason why some people who have the ability may consider departing California for more pleasant (lower tax) locales. You need not be a right-wing free market fundamentalist to recognize that there is a point where higher tax rates do not result in higher revenue. Because all else equal people can and do decide to leave the political unit where high taxes are imposed or failing that work less. For a high tax area to succeed, it needs to offer some other super high quality services to go along with the higher taxes-high quality schools, high income potential, clean air and water, great roads, open space, responsive police and fire service. Does that sound like California these days? I couldn't say...

But Mickelson should count himself lucky. Progressive talk show host and author Thom Hartmann thinks we should outlaw billionaires.  Mickelson doesn't make that cut yet but if he keeps whining I'm sure some people might decide that a 100% wealth tax on anything over 1 million might be a good idea. On the other hand I am shortly due for significant pay raises and bonus, though the increases are sadly somewhat short of $60 million. I imagine that I will be rather po'd when I see how much of the increase in income goes to the federal government. Last year I remember going to my boss wondering if the check was correct. NO ONE likes taxes!!

Questions:

Was Mickelson right to speak out? Do you have any sympathy?

Was an apology necessary?

Is 63% of income going to government too high?

How much of his own money should Mickelson get to keep?