Danielle DiMartino Booth tell us what is really going on at the federal reserve board and why this might not end so well. We discuss her new book, Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America.
The IRS Debt Collection Scam
The IRS is going back to the private debt collector model. They are turning to debt collectors to speed up the collection process. There are a couple of things that you need to know. First, the private debt collectors industry is the most complained about industry in the country. More complaints are filed to the Federal Trade Commission year in and year out.
The difference between debt collectors using tactics with consumer debt versus tax debt is that most of the threats that are used for consumer debt are just that – threats. They can’t garnish wages. They can’t put a lien on your house. That can’t seize bank accounts. However, with IRS debt they can do all of those things. So, imagine getting threatened knowing the IRS can back it up. Taking you to jail for a tax debt. For the average debt and the processes afforded the taxpayer, jail is unlikely. Bottom line look to private debt collectors to use harassment and threats to collect IRS debt. As I said, the worst part about is the fact that the IRS is afforded those powers.
Second, the scammers will have a field day. Impostors posing as debt collectors will wreak havoc on consumers pretending to collect IRS debt. There is an easy way to know if the phone call is legit. You would have already received numerous letters from the IRS warning that this was going to happen. You should never be surprised. If you owe it, they will be in contact by mail. It is always by mail and never by phone. The problem with this scam is that when a person hears IRS debt and you owe and you’re in trouble, the thinking part of their brain turns off.
Just remember this is if you are in tax debt. The IRS has an unwarranted reputation for treating people badly. They want to work with you. I have heard stories of a kinder IRS in recent years. There are processes and laws passed to protect taxpayers in every situation. The problem is that taxpayers just don’t know about them. Dan Pilla is the authority on these processes. He has written many books on how to utilize the law to help with the IRS. For more information go to www.taxhelponline.com.
The Millennial generation has been stereotyped as having some pretty unflattering traits. Words such as entitled, disloyal, lazy, etc. come to mind. I get all types of studies and surveys sent to me for stories for the radio show and the ones on the millennial generation show that this generation is anything but like they are being stereotyped.
Here is a news flash for you – my research shows that the millennial generation is probably the most financially responsible generation around.
39 % of millennials have decided to save or invest this year’s tax refund — the most of any age group. Gen Xers came in at 23% and baby boomers came in at 33%. Only 6% of millennials plan to splurge and spend that tax refund.
I belong to generation X. Yes, we would rank as the most irresponsible generation when it comes to money. So, the 23% is no big surprise. I just know when I was in my 20’s that tax refund would be spent before I even received it. After we are the credit card generation. Why wait when you have plastic.
Moneyunder30.com released these stats from their research:
62% of Americans on average are saving anything for retirement. 86% of Millennial ‘s are saving.
Amount of money saved on average for retirement in America is $35,000. The average amount of money saved by Millennials is $7,453.
The average family savings account in America has a balance of $3,800. The average savings account balance for the Millennials is almost twice that at $6,713.
So why the shift?
There could be many reasons one could point to. My theory is that the Millennials had a front row seat during the financial crisis and watched what their parents went through and came to one conclusion. I don’t want to be like my parents. I think that this is also why the Millennial generation is so risk averse when it comes to investing. They are force fed advice to take as much risk as possible because of their age. They aren’t taking that advice.
This is encouraging news. We must stop the cycle of financial irresponsibility. The even better news is that Generation Z which is the next generation up appears to be even more financially responsible.
Amazon.com Is Pushing More and More Businesses into Bankruptcy
If you don’t change, you will become a dinosaur. That should be the lesson that retailers are learning from Amazon.com. Amazon.com is the big boy on the block and is stealing more and more market share as consumers gravitate to the ease of shopping on-line.
They are about to unseat Macy’s as the largest seller of clothing. They also have plans to greatly expand their online grocery store delivery. If they figure that one out, many grocery stores will be out of business. Further, they are already the #1 retailer of electronics.
So far this year, the number of retailers filing for Chapter 11 bankruptcy protection is headed toward its highest annual tally since the Great Recession. The number of retailers on Moody’s distressed list is also the highest since the Great Recession. Bear in mind, this is happening as the economy is growing. You are seeing a seismic shift in how people shop. This doesn’t even take into account the death spiral at Sears and JC Penny or the other retailers who are closing stores. Consider the following:
Payless is said to be filing bankruptcy very soon with plans to shut down up to 600 stores.
Macys is planning to shut down 168 stores this year
Foot locker plans to close 100 stores in 2017 after closing 41 stores at the end of 2016.
Kohls closed 16 stores in 2016 and is going to reduce square feet in 500 of the 1250 stores and lease that extra square feet to other tenants to reduce expenses
CVS is closing 70 stores not due to Amazon.com but do to the uncertainty of the affordable care act
Abercrombie and Fitch closed 54 stores last year and plans on closing 64 more this year
BCBG will close 118 stores in 2017. They are already under Chapter 11 bankruptcy
HHGreg is closing 3 distributions centers and 88 stores. They are also under chapter 11 bankruptcy.
Pier 1 plans to close 17 this year after closing 16 last year with plans to close a total of 100 stores by 2019
Staples closed 48 last year and plan on 77 stores this year.
Tiffany & Co. will close 6 stores this year.
The only way that most survive is to develop an online presence. Unfortunately, Amazon.com dominates that space and almost monopolizes the internet. Technology and change is a real thing. Businesses of all types need to pay attention.
Sign of a Bear Market
Do you think that stocks are a great investment today? If the answer is yes, you are not alone. A hallmark of the ending of bull markets is extreme optimism. Now I know that sounds counter-intuitive. Wouldn’t everyone being positive be a good thing? Unfortunately, that is not the case. There is an old saying from economist and writer Humphrey O’Neil. He says when everyone thinks the same way everyone is wrong.
Historically speaking, everyone is over the top enthusiastic right before a bear market starts. It was that way in 2000 and 2007. What about today? Investor sentiment (being positive) is at levels not seen since 1987. We all know what happened in 1987. The second biggest crash in the history of the stock market.
Now I can add to that number. Margin debt is at 513 billion dollars which is an all time high. Margin debt is particularly important to follow because it is typically at it’s highest right before bear markets start. When investors are the most optimistic they borrow money against their brokerage accounts and then invest it which creates margin debt.
February data shows that margin debt is at an all-time high. It is one of the more riskier strategies to invest because margin debt can’t exceed a certain percentage of an account. Thus, if stocks are declining and the value of a margin account declines then investors are forced to sell stock to keep the percentage of margin debt in line with regulations. If you have a high percentage of people selling stock to satisfy the percentage of margin debt, then you just have more selling which creates more decline. It is a dangerous loop and one of the main ingredients to the 1929 stock market crash.
Does record margin debt predict a bear market? No, it is just important to know that record levels of margin debt are typically present before a bear market starts.
What Credit Card Companies Don’t Want You to Know
The devil is in the details. For credit cards that is the fine print. Unfortunately, you don’t get the real fine print until after you received the card. You think that you did. After all, you read the one page agreement that gives the details. That is only a 10th of what you need to know. The real document is the 18 page card member agreement which is mailed to you after the fact. That describes exactly what they can do. What is worse, you agreed to it when you signed the dotted line.
Here is what you need to know:
How do they apply your payment? A lot of credit card accounts have debt at two different interest rates. For example, let’s say that you have 5,000 at 15% and 5,000 at 10%. They will take the minimum payment and first pay the interest charges. Then they apply the rest of the minimum payment to the LOWEST interest rate debt to insure you will stay in debt as long as possible. Only if you pay more than the minimum payment will it be applied to the higher interest debt.
They can declare your account is in default if you don’t make your payment or if you are late. Generally speaking, once in default you risk going to collections and have damaging effects to your credit report.
I’ll just quote Citibanks agreement – “We may close or suspend any reason or for no reason. (yes I didn’t make that up) If we close or suspend your account, you must pay us all amounts you owe on the account”.
Some more straight forward details. “We don’t guarantee approval of Transactions. We are not liable for those that aren’t approved, even if you have enough available credit on your Account.”
Disputes are resolved by arbitration. In arbitration, you waive the right to go to court or participate in a class action suit. The consumer typically doesn’t fair well in arbitration. Further, you have to pay full legal costs of an attorney. They use arbitration agreements for a reason.
Remember that reward program you signed up for? “Any benefit, reward, service or feature offered may change or be discontinued at any time for any reason. Separate terms and conditions will describe any exceptions.” Where do I find those exceptions?
As if the above wasn’t clear enough, they add this language towards the end of the document. “We may change this Agreement for any reason and at any time, subject to applicable law. This means that we can change rates and fees that apply to your Account. It also means we can add, replace or remove provisions of this Agreement.”
Even the best of the best card companies subject you to these terms. Make one mistake and you’ risk dealing with a debt collector and destroying your credit.
The credit card landscape has a lot more risk than most people know. This is why credit card companies are not up-front. Chances are you will throw that agreement in the trash once you do receive it.
Simple Way to Reduce Interest Rates and Fees on your Credit Card Debt
A survey conducted by Bankrate shows how easy it is to reduce interest rates and fees. What is the secret? All you have to do is ask. Sound too easy? Look at these survey results:
- 87% of those who called in and asked for a late charge to be waived had them forgiven.
- 67% that wanted lower interest rates received them as well
- 89% of those who asked for a credit limit increase received it
- 82% hand their annual fee waived or reduced
Why would banks actually agree to reduced revenue? After all, banks and credit card companies are notorious for ripping off their cardholders through their deceptive practices? (Ironically that we agree to when we sign on the dotted line). There are really two answers.
First, very few people make these requests. If a higher percentage of people requested these discounts, it probably wouldn’t happen.
Second, credit card companies and banks do appreciate a loyal customer who has paid on time and honored their commitment to making the credit card relationship work. After all, in order to get those discounts, a stellar payment history is mandatory.
So what do you have to lose? Just ask…
Now there is one question that you should never ask. I have only seen one example of this happening and one example is enough for me to advise never to ask this question.
A listener sent me a story stating that she asked the credit card company to make a settlement on her credit card balance. They viewed her as a risk, closed her account, and sent her to collections. Can they really do that? Yes, it is in the fine print. I can’t tell you if that is going on today. Since it is such a low probability that they would negotiate a settlement (near zero) it is not worth taking that risk.