Consumer Reports Index: Economy Continues to Waiver With Worsening Job Outlook

/PRNewswire/ -- Consumer difficulties are declining, but the economy continues to waiver, with a worsening job picture and declining retail activity, according to the Consumer Reports Index for September.

The U.S. job outlook remains bleak, the September results for the Consumer Reports Employment Index marks a two-month decline, down in September to 49.1 from 50.2 in August. The share of Americans claiming to have started a new job in the past 30 days is 5.0%, versus 5.9% in August, and down from July's recent high of 7.8%. Job losses in the past 30 days were up, 6.9%, from August, 5.6%. Results show that younger Americans between the ages of 18-34 years have been hit the hardest by job losses (13.7%).

Americans are continuing to pull their purse strings tight. The Consumer Reports Retail Index for August continues to decline. The Past 30-Day Retail Index for September is at 9.8, down significantly from last month's 11.4. September marks an overall decline from a year ago when the Past 30-Day Retail Index was at 11.0, and is at its lowest level since November 2009 (9.0). September's Next 30-Day Retail Index is at 7.6, down from August (8.1), as well as a year ago (8.8). Per capita spending in the past 30 days is down to $185, from $286 in August.

The economy remains unsteady and Americans are cautious, but the Consumer Reports Trouble Tracker continues to show positive developments. It has declined to 53.7 from 56.6 in August, and has posted three months of declines from its recent high in June (63.5). The Trouble Tracker has improved from this time last year when it was at 68.7, a 15-point drop. Positive developments this month were led by a decline in consumers losing or facing reduced healthcare coverage, to 6.7% from 9.7% in August.

As the Trouble Tracker improves, Americans' outlook has yet to brighten. The Consumer Sentiment Index has gradually slipped over the past two months and is currently at 44.1, continuing a slide from July (45.2). This index has changed little since October 2008 when it stood at 45.3.

"The recovery faces serious challenges and is at risk of stalling," said Ed Farrell, a director of the Consumer Reports National Research Center. "Job creation remains the greatest challenge. The growth in the ranks of the employed remains anemic and will dampen consumer outlook moving forward. Americans have not seen any real improvement in their financial situation since the recession hit and this is reflected in our Sentiment Index, which has been in negative territory for the last two years."

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index: 44.1
-- Consumer Reports Sentiment Index has gradually declined from 45.2 in
July to 44.1 in September. The most optimistic consumers are between
the ages of 18-34 (49.9), along with households with an income of
$100,000+ (50.7). The most pessimistic consumers are between the ages
of 35-64 (42.3) or age 65+ (41.1), and households with an income less
than $50,000 (40.4).


The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.

Consumer Reports Trouble Tracker Index: 53.7
-- The Consumer Reports Trouble Tracker Index has shown a decline this
month, pointing to fewer troubles for consumers, dropping to 53.7 in
September from 56.6 in August, and is down substantially from a year
ago (68.7).
-- Positive developments were led by a decline in consumers losing or
facing reduced healthcare coverage, to 6.7% from 9.7% in August; a
drop in the proportion of Americans unable to afford medical bills or
medications (13.6%), down from 15.4% in August, and a slight reduction
in the proportion of Americans that faced negative changes to their
credit cards, down to 7.2% from 8.9% in August.
-- The most common difficulties faced by Americans are:
-- Unable to afford medical bills or medications (13.6%), down from
15.4% in August
-- Missed payment on a major bill - not mortgage (9.3%), down from
10.2% in August
-- Credit card increased rates/fees, reduced credit line (7.2%), down
from 8.9% in August
-- Lower-income households, earning less than $50,000 a year, have been
disproportionately affected. In the past 30 days:
-- 22.4% Have been unable to afford medical bills or medications
-- 16.1% Missed payment on a major bill - not mortgage


The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced healthcare coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.

Consumer Reports Retail Index: Past 30-Day - 9.8, Next 30-Day - 7.6
-- Consumer Reports Past 30-Day Retail Index for September, reflective of
August activity, is at 9.8, down from the prior month (11.4). Per
capita spending for the past 30 days was down significantly for
September, reflecting August activity, to $185, from $286 the prior
month.
-- The proportion of Americans buying across categories in the past 30
days showed the greatest declines in small appliances (16.6%, down
3.7% points), personal electronics (21.4%, down 3.5% points), and
major home electronics (10.7%, down 2% points).
-- Among the non-index categories, past 30 day purchases, reflecting
August activity, were down slightly for new cars (1.7%) versus the
prior month (2.2%), but up for used cars (5.1%) from the prior month
(3.7%). Home purchases were up slightly in September (2.5%) relative
to August (1.6%).
-- Consumer Reports Next 30-Day Retail Index, reflective of planned
purchases for September, is at 7.6, down from the prior month (8.1) as
well as one year ago (8.8).
-- Among the non-index categories, next 30 day planned purchasing points
to new cars declining slightly, 2.5% versus 3.1% the prior month, and
used cars also moving downward to 3.5% from 4.3% for August. Planned
purchasing for homes in the next 30 days, reflecting September
activity, is on par with the prior month (1.5%).


The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30-days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.

Consumer Reports Stress Index: 60.1
-- According to the Consumer Reports Stress Index, the level of stress
consumers feel they are under (60.1) is unchanged from the prior month
(59.4), but down from one year ago (65.4).


The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).

Consumer Reports Employment Index: 49.1
-- The Consumer Reports Employment Index is down in September (49.1) from
50.2 in August, dipping into negative territory.
-- Overall labor force activity has slowed considerably in the past
month, with significantly fewer Americans claiming to have started a
new job in the past 30-days, 5.0% versus 5.9% the prior month.
-- Job losses in the past 30-days (6.9%) were up from the prior period
(5.6%). Job loses have hit younger Americans age 18-34 the hardest
(13.7%).


The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30-days.

For more information regarding the Consumer Reports Index visit www.ConsumerReports.org.

The Consumer Reports Index, conducted by the Consumer Reports National Research Center is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,257 interviews were completed (1,007 telephone & 250 cell phones) among adults aged 18+. Interviewing took place between August 26-August 29, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields, 914.378.2454, cfields@consumer.org.

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Study Shows Massive Increase in Consumer Bankruptcy Costs

/PRNewswire/ -- People currently filing for Chapter 7 and Chapter 13 consumer bankruptcy protection are facing as much as a 55 percent cost increase as one result of the 2005 comprehensive bankruptcy reforms, according to a new study published in the American Bankruptcy Institute Law Review. In addition, as a direct result of these increased costs, unsecured creditors are being paid a smaller percentage on the dollar today than prior to the 2005 reform.

The study, authored by New York bankruptcy attorney Lois R. Lupica of Thompson & Knight LLP and funded by the American Bankruptcy Institute (ABI) and the National Conference of Bankruptcy Judges (NCBJ), reveals that consumer bankruptcy is a "far more complicated process than it was before the 2005 amendments" based on an increased number of conditions and calculations for filers in addition to a corresponding rise in expenses.

"The government's stated goal in passing bankruptcy reform was to eliminate abuse of the system and create a set of higher eligibility standards for consumers, but this is the first time that the financial impact of those standards has been quantified," says Ms. Lupica, who also serves as a Maine Law Foundation Professor of Law at the University of Maine School of Law in Portland.

The study examined data collected from consumer bankruptcy cases in judicial districts located in Florida, Illinois, Georgia, Maine, Utah, and West Virginia. The costs to consumers was defined as debtor's attorney fees and expenses, trustee fees and expenses, filing fees, credit counseling and debtor education fees, and any other professional fees.

For the sample of Chapter 13 cases, the study found that the median cost for consumers was $2,930 in 2003 and 2004, with an increase to $4,077 in 2007 and 2008. For Chapter 7 cases in the same periods, the costs increased from $900 to $1,399.

"Attorney fees are just part of the required administrative expenses that may have contributed to the overall decline of consumer bankruptcies, even in the face of the public's increased debt load, foreclosures, and loan defaults," Lupica says.

While the overall number of consumer bankruptcy filings has declined since passage of the 2005 reforms, the most recently available data reported by the ABI shows that the 149,268 consumer bankruptcies filed in March 2010 represented the highest monthly total of consumer filings since the reforms were enacted. The March filing total represented a 34 percent increase from the February filing total of 111,693 and a 23 percent increase from the March 2009 total of 121,413.

"Greater up-front costs may have hindered some consumers from filing bankruptcy, but there may be other factors at play," Lupica says. "There was a large volume of negative publicity in the aftermath of the 2005 amendments, as well as heightened efforts by aggressive debt collection and consolidation firms."

The publication of the study marks completion of the first phase of a two-part national survey to analyze how the consumer bankruptcy system has changed in the past five years. The full study is scheduled to be published in late 2011.

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New Federal Credit Card Law - 5 Things Consumers Need to Know

/PRNewswire/ -- On February 22, most provisions of a new Federal Credit Card Law will go into effect. While many of the changes are designed to help protect card holders, it is still important that consumers practice sound credit management.

"Despite changing requirements for credit card companies, consumers should not use credit cards as emergency savings accounts or to purchase items they cannot afford," said Mechel Glass, director of education for Consumer Credit Counseling Service (CCCS) of Greater Atlanta. "Using credit wisely is the most sensible way to build, and maintain, a solid credit history."

CCCS shares 5 things consumers need to know about the new Federal Credit Card Law.

1. Rate Increases and Credit Limits. Under the new law, credit card
companies must extend promotional rates for at least 6 months and, in
general, rates cannot be raised on existing balances unless you are
more than 60 days late with your payment. Creditors may lower credit
limits or close accounts without prior notice to cardholders."Consumers
who are more than 60 days late and experience a rate increase are
eligible to have the original rate restored after six consecutive
months of on-time payments," said Glass. Creditors may still raise
rates on new balances with a 45 day notice to cardholders, compared to
the 15 days required under prior legislation, and there is no cap on
interest rates.Purchases may be declined if a credit limit has been
reduced and a pending purchase would result in going over the limit.
Institutions may offer consumers the option of exceeding their limit in
exchange for fees, but only one "over the limit" fee may be charged in
a billing cycle. "Make sure you clearly understand the fees involved,"
said Glass.


2. Payment Protection and an end to Double Billing. Payments received on
the due date, or the following day if the creditor was closed and did
not accept payment, are considered on time, as are payments made at a
local branch. This can help consumers avoid late fees, as payments must
be processed the same day they are received."Under the new law,
consumers cannot be charged interest twice on the same balance," added
Glass. The practice of basing finance charges on current and previous
balances is no longer permitted.


1. How to Keep Your Credit Card "Active"One by-product of the new law is
that some credit card companies may close a consumer's account if they
see a card is unused. To keep your credit cards "active," Glass
recommends that consumers may want to purchase gasoline once a month
with a credit card and pay it off quickly. She says this recommendation
will help consumers who have low balances on credit cards that
otherwise may be closed by their card company due to inactivity.



1. More Favorable Payment Allocation and TimingIn most cases, current
credit card agreements outline plans to apply payments to the lowest
rate balances first. Under the new law, any payment above the minimum
amount due must be applied to the highest rate balances first. In a
provision that went into effect last August, credit card companies must
send statements 21 days in advance of the payment due date, compared to
14 under the old requirements.

2. Gift card protectionOf the $87 billion dollars in gift cards estimated
to be purchased in 2009, approximately 6 percent, or $5 billion dollars
will go unused. Many will be eroded by fees and eventually expire
without ever providing a benefit to the recipient. Under the new law,
gift cards will not be able to expire for at least 5 years, and
inactivity fees will not be able to begin before 1 year after the card
is issued.


Changes in the credit card law are designed to help consumers be better fiscal managers. To help consumers navigate the new requirements, Glass recommends that consumers continue to use credit wisely. "Use credit cards only to make purchases that you are prepared to pay off when the bill comes in. Pay bills in advance of the due date and work toward creating an emergency savings account that will reduce dependence on credit in the event of unplanned events."

Need help getting your credit under control or understanding how the new laws might impact you? CCCS can help. Our certified counselors can help you review your current financial situation and work with you to create a budget and financial plan to get you back on track. Contact CCCS at 800-251-2227 or online at www.cccsinc.org or www.cccsenespanol.org.

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