Sandwich Generation Stretched Thin Financially

/PRNewswire/ -- Today, Generation Mortgage Company and Zogby International released alarming new data detailing the financial tribulations of the Sandwich Generation -- a sector largely comprised of Baby Boomers who are caring for their aging parents while supporting their own children. The study found that a majority of the Sandwich Generation give their household's current financial situation a negative rating and are having to make tough financial decisions and cutbacks.

The eye-opening results shed light on many financial hardships facing the Sandwich Generation. With unemployment near 10 percent, it is no surprise that 23 percent of those polled have lost a job recently and an additional 24 percent have taken a cut in pay or benefits. This has resulted in 17 percent failing to make a mortgage or rent payment on time due to insufficient funds.

According to the Generation Mortgage/Zogby International survey, finances have forced the Sandwich Generation to make serious cuts in their spending habits to survive during the recession. Seventy-three percent have decreased spending on entertainment, recreation or eating out. Moreover, 43 percent have decreased overall spending on food or groceries and three out of five of those polled say it is difficult to be a caregiver for their parents and/or in laws while financially supporting their children.

"The Sandwich Generation is probably the most financially vulnerable demographic to result from the recession," said Jeff Lewis, Chairman, Generation Mortgage Company. "They are unemployed or under-employed, financially supporting two generations in their family and are saddled with debt from bills and a mortgage. As this group looks to retire, their financial situation, coupled with the state of the economy, is not leaving them with many options."

The study also uncovered that 78 percent of those polled said they are worried about having enough money to retire comfortably and 23 percent have restructured their retirement plan in the last year due to financial reasons. Even more distressing, 52 percent responded that they plan to work part time during retirement to make ends meet.

"As the Sandwich Generation looks towards retirement," commented Lewis, "they should become educated on their available financial options. One of the financial options that is often overlooked is a reverse mortgage."

Zogby International was commissioned by Generation Mortgage to conduct an online survey of 271 adults who have children and are caregivers of parent(s). The survey was conducted from August 9-11, 2010. A sampling of Zogby International's online panel, which is representative of the adult population of the U.S., was invited to participate. Slight weights were added to region, age, race, gender, and education to more accurately reflect the population. The Margin of Error (MOE) is +/- 6.1 percentage points. Margins of Error are higher in sub-groups. The MOE calculation is for sampling error only.

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Majority of Voters Expecting Double-Digit Tax Increases in Next 10 Years

/PRNewswire/ -- PJTV's Tea Party TV today unveiled the results of its weekly Tea Party tracking poll, which revealed that 71 percent of likely voters and 76 percent of Independents believe there will be a tax increase of 10 percent or more if current federal spending habits continue.

"Voters overwhelmingly believe the government's spending habits will force lawmakers to increase taxes by double-digit amounts," said Roger L. Simon, CEO of Pajamas Media. "In the last two years, Washington has lifted the debt ceiling twice, extending the limit by $2.2 trillion. Now, Americans - especially Republicans and Independents - are translating that national public debt into a personal financial burden."

When asked about the potential of a tax hike of 20 percent or more, only Democrats were skeptical. Majorities of Republicans (58 percent) and Independents (50 percent) thought this to be a real concern while only 18 percent of Democrats were anxious of this outcome.

The weekly PJTV/Pulse Opinion Research nationwide survey of 1,000 likely voters tracks Tea Party support as well as provides a snapshot of public opinion regarding the week's top issues. In addition to the weekly Tea Party tracking questions, this week's special question asked voters whether they believed taxes would decrease, stay the same, or increase by 10, 20, or 30 percent.

"The poll revealed that support for the Tea Party movement is holding strong at more than 50 percent," said Vik Rubenfeld, PJTV's Polling Director. "Moreover, we are seeing movement in the portion of likely voters who support the movement in the public arena. Today, 39 percent of likely voters report they publicly support the Tea Party, increasing from 33 percent three weeks ago."

Poll Highlights
-- 71 percent of likely voters and 76 percent of self-identified
Independents believe taxes will increase by 10 percent or more in the
next 10 years. Meanwhile, 42 percent of likely voters and 50 percent
of self-Independents believe they will increase by 20 percent or more.
-- 55 percent of likely voters support the Tea Party movement.
-- 39 percent of likely voters support the Tea Party movement publicly,
compared to 35 percent on August 22 and 33 percent on August 15.


Methodology

The Tea Party Tracking Study is a PJTV survey. The telephone survey of 1,000 Likely Voters was conducted by Pulse Opinion Research on August 29, 2010. Pulse Opinion Research, LLC is an independent public opinion research firm using automated polling methodology and procedures licensed from Rasmussen Reports, LLC. Margin of Sampling Error, +/- 3 percentage points with a 95% level of confidence.

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Inept Repairs Leave Economy Stalling

When the Fed's Open Market Committee meets today (Aug 9), its economists will doubtless produce reams of data and theory aiming to explain why GDP growth is fading fast. But there is a very simple - and disturbing - reason why the recovery is sputtering out: The damage we did to our economy during the housing bubble and subprime crisis was far too severe to be fixed by the weak steps our government has taken in response. We tried to cheap out on the repairs to our economy, and they haven't held up.

The leading example is the bank bailout. Only one-third of the TARP funds even went to banks. Instead of using the money to clean the toxic waste out of bank vaults, the Treasury bought just enough bank stock to prop up their share prices. And the money came with almost no stipulations about how the banks could use it.

As a result, the banks aren't back to normal, judging by their anemic lending. Their balance sheets are still stuffed with decaying loans, and they nurse along existing borrowers instead of looking for new ones. Sure, the big banks have all paid back the TARP funds with interest, but so what? Ask the millions of creditworthy people who can't find banks willing to finance their homes or businesses whether the chump change that taxpayers made from TARP was worth it.

Because TARP didn't really fix the banks, the Fed had to step in and take over many of the credit markets they pulled out of, such as commercial paper and mortgage securities. This forced the Fed to use all its financial strength simply to prevent these financial markets from collapsing. That effort used up virtually all the Fed's capacity to do its main job: stimulate the economy.

And then there's the $800 billion stimulus package. Only about one-third of that was actually new spending, which is what it takes to get the economy moving. And this money is spread out over several years, further weakening the power of its economic punch. Another third of the stimulus was in the form of tax cuts, which didn't stimulate the economy because most households used the tax cuts to pay back old loans rather than buy new things. The remaining third mostly tried to replace spending that would have otherwise declined due to unemployment and falling state tax revenues. That is beneficial, but it's no stimulus.

And finally, there is the mortgage relief program. What mortgage relief program, you ask? Exactly. The government bumbled through a series of small and ineffective programs that have created more frustration and dashed hopes than real relief. One of the first steps the government took was to request a voluntary moratorium on foreclosures, which only pushed the foreclosures off to this year. During the moratorium, it tried a voluntary program that refinanced exactly one mortgage during its first six months. The successor program didn't even start until May 2009 and actually tries to avoid reducing the amount the borrower owes. It's no wonder that struggling homeowners would rather negotiate directly with their lenders - or play the default game and stall for time before foreclosure and eviction.

After the buy-now-and-pay-later economy crashed, we chose a buy-now-and-pay-later recovery. Well, it's time to pay. Unfortunately, we can't simply put the programs in place now that we should have implemented back in 2008, such as removing the toxic assets from the banks and passing a true $1 trillion fiscal stimulus. Consumers and firms have moved on, and the economy has changed.

But more importantly, government lost the initiative to take strong action. The Fed committed its resources to supporting the mortgage market. And public sentiment, exemplified by the tea party movement, has turned against further fiscal stimulus. Now we have to pay for the damage by living with lackluster economic growth - maybe years of it.

Will there be a double-dip recession? Probably not - but that would be one of the best things that could happen. The government would once again have reason to take bold action - and get it right this time.

By Connel Fullenkamp 

Connel Fullenkamp is director of undergraduate studies and an economics professor at Duke.

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter: @GAFrontPage

FDIC Urges Stronger Debit Card and Overdraft Oversight; Other Bank Regulators Should Take Action

/PRNewswire/ -- Statement of CRL president Michael D. Calhoun: "American families, especially those most vulnerable financially, could save millions of dollars a year in costly overdraft fees if guidelines the FDIC proposed today are adopted. The guidelines would encourage the banks the FDIC oversees to offer customers lower-cost overdraft alternatives rather than charge unlimited high-cost overdraft fees--as many banks do, even on small debit card transactions.

Under the proposal, a bank would contact a customer who incurs six overdraft fees within 12 months and offer--and explain--less costly options. The bank would be encouraged to provide the customer with a reasonable opportunity to choose one of them. Banks the FDIC oversees also would be discouraged from re-ordering transactions to maximize overdraft fees.

Banks and credit unions frequently promote their most expensive form of overdraft coverage, which typically imposes a $34 fee per overdraft--twice the amount of the typical debit card purchase that triggers an overdraft--rather than reasonably priced options like a low-interest line of credit or an affordable small-dollar loan. Financial institutions earn $24 billion annually from these high-cost programs.

The proposal comes just days before new Federal Reserve's August 15th rules take effect requiring banks and credit unions to obtain a customer's signature before enrolling them in a costly overdraft program for debit cards. But many banks don't give consumers real choices among alternatives; instead, they steer customers into the highest cost overdraft coverage they offer. The FDIC's proposed guidance indicates the Fed's rule is not sufficient to stop unfair and abusive overdraft practices by lenders: The Fed addresses neither the size of the fees nor how many can be charged.

A decade ago, most banks declined debit card transactions, and at no charge, when a customer's account lacked sufficient funds. Citibank has never charged overdraft fees on debit cards, and Bank of America is stopping the practice. But another big bank, Wells Fargo, continues to charge over a billion dollars a year in debit card overdraft fees. Wells also continues to market a cash advance product that, like payday lending, carries triple-digit annual interest rates.

To comprehensively address abusive short-term loan products, including unfair overdraft practices, the Federal Reserve and the Office of the Comptroller of the Currency must join the FDIC's efforts and explicitly limit overdraft fees to no more than six per year. In addition, all regulators should require that the size of the overdraft fee reflect a lender's cost and risk, and they should ban the manipulation of transaction postings."

For CRL's research on banks' overdraft marketing efforts, see http://www.responsiblelending.org/overdraft-loans/research-analysis/banks-targ et-mislead-consumers-as-overdraft-deadline-nears.html.

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

AARP Survey: Americans of All Ages Plan to Rely on Social Security

/PRNewswire/ -- With the 75th anniversary of Social Security approaching, AARP released a new survey report that shows that three in four (75%) adults age 18+ rely on or plan to rely on Social Security for their retirement income, including a large majority (62%) of younger adults age 18-29. The survey also showed a strong majority of those polled oppose reducing Social Security benefits for deficit reduction (85%), and support the infusion of additional revenues into the system to provide the same level of benefits in the future (57%).

Changes to Program Should Strengthen for Long Term, Not Reduce Deficit

The AARP survey found that regardless of age, 85% of adults oppose cutting Social Security to reduce the federal deficit, with more than seven out of ten (72%) strongly opposing it.

However, many support other changes to keep the program strong for future retirees. Over three-quarters (77%) of non-retired adults are worried that they may not have enough money to live on in retirement. To that end, 50% of non-retired adults are willing to pay more now in payroll taxes to ensure Social Security will be there for them when they retire, a finding that has remained consistent over time. Over half (57%) of adults under age 50 would prefer to pay more into Social Security so they can get the same level of benefits provided today as opposed to keeping payroll tax rates at current levels in exchange for lower benefits.

Eight in ten Americans 18+ (81%) believe the government made a commitment to Americans about Social Security being there for them when they retire, and that the government cannot break its promise. In addition, over eight in ten Americans (83%) agree that regardless of income, everyone who pays into Social Security should receive it, a finding that has not changed over time.

"The message from people of all ages to Washington is clear - don't erode the one bedrock of retirement security that unites all Americans," said AARP Executive Vice President Nancy LeaMond. "Americans see Social Security as a benefit they've earned over a lifetime of hard work, and they oppose it being used to reduce the deficit."

Lack of Confidence Does not Diminish Support, Including Among Younger Adults

Although confidence in the future of Social Security has consistently been low over the last 25 years, Americans of all ages strongly support the program. Consistent with previous surveys, a strong majority (63%) believe Social Security is one of the very most important programs in this country, with nine out of ten (90%) younger adults age 18-29 saying that Social Security is an important government program. Among non-retirees who are not confident about the future of Social Security, 84% agree with the statement that "Maybe I won't need Social Security when I retire, but I definitely want to know it's there just in case I do."

In addition, the public's lower level of confidence in the future of Social Security can be partially explained by the lack of awareness about solvency. Only one in five (21%) Americans knew that if the Social Security trust fund is exhausted in 2037, Social Security could still pay reduced benefits.

"Americans overwhelmingly understand that Social Security has literally been a lifeline to millions of friends, family members and neighbors for 75 years," added LeaMond. "More importantly, they want to make sure it will still be there for future generations. Younger Americans, although worried about whether Social Security will be there for them, value the program with unquestionable support, and want to know that they can rely on the benefits when they retire."

Social Security Provides Financial Security for Families

The AARP survey found widespread understanding and support for Social Security as an important resource for families and their loved ones.

Americans overwhelmingly support Social Security's protections for people who are disabled and for children and widowed spouses of deceased workers (91%). Almost two-thirds of Americans 18+ (65%) say that their family would be hard hit if Social Security were cut, including 72% of adults whose household annual income is less than $50,000. Eighty percent of Americans appreciate that Social Security alleviates the financial burden of taking care of parents and 88% of non-retired adults believe Social Security helps older Americans remain independent.

With increased attention on Social Security's future, the survey assessed Americans' attitudes toward key features of the program. Across all ages, nearly eight in ten (79%) Americans surveyed agree that Social Security should continue to provide guaranteed benefits while few (19%) think that it should be more like an investment account, subject to risk of possible losses. Half of Americans believe that Social Security payments for retirees are too low.

"We are celebrating Social Security's 75 years of success in reliably helping millions of people age with dignity, confidence and independence," said LeaMond. "We encourage leaders in Washington to reassure all Americans - in words and in actions - that Social Security will be strengthened, not treated as a piggy bank for deficit reduction, so that we can celebrate again 75 years from now."

During the August Congressional recess, AARP is engaging Americans of all ages in activities around the country to demonstrate to lawmakers the importance of Social Security. The organization is going to state fairs, holding community conversations, and collecting petitions that ask the President and Members of Congress on both sides of the aisle not to cut Social Security benefits for deficit reduction and to keep Social Security strong. AARP has already collected 1.5 million petitions over the past few months.

AARP commissioned GfK Roper, a national survey research firm, to conduct a national random digit dial (RDD) telephone survey of 1,200 adults aged 18 or older. A total of 781 respondents were not retired and 419 were retired. Interviews were conducted from July 15th to 27th, 2010. The results from the study were weighted by age, sex, race, region, and education. The margin of sampling error is approximately +/- 3%.

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Saving for College: UTMAs and 529 Plans

/24-7/ -- With the costs of attending college increasing every year, many parents wonder what is the best way for them to save for a child's education. While there are several different options for saving for college, two of the most popular choices are UTMA accounts and 529 plans.

UTMA Basics

UTMA (Uniform Transfers to Minors Act) accounts are custodial accounts that can be set up at any financial institution. One parent generally serves as the custodian over the account. UTMA accounts allow parents to put securities, bonds and other investments in a child's name. Once their child reaches the age of majority, the assets in the account become the child's property. In Illinois, the age of majority under the Act is 18 for most types of investments and 21 for gifts.

The investments placed in the UTMA account can be used to pay for college or for anything else, so long as it benefits the child. Any assets placed into the account are forever the child's - the parents may not transfer them back. This is known as an "irrevocable gift." Once the child reaches the age of majority, however, the custodian loses control over the account and the child can use the assets for whatever he or she wants, which may or may not include education expenses.

529 Plans

Parents looking for a way to save for college also have the option of opening up one of the many state-sponsored 529 plans. These plans are offered by each individual state, so there is variation in the types of 529s available and the benefits offered. However, there are some common denominators for all of the plans, including federal tax benefits. The money placed in 529 plans grows tax-free and may be deducted without federal tax consequences so long as it is used for educational expenses.

Unlike UTMA accounts, a child does not gain control over the funds in a 529 account once he or she reaches 18. Instead, the parents always retain control over the assets in the account. Additionally, the parents can use the funds in 529s for other purposes besides the child's education, although they will have to pay taxes on the money and a penalty for doing so. The account also is transferable and can be transferred to another child if the intended child beneficiary decides not to go to school.

Pros and Cons of the UTMAs and 529s

There are benefits and drawbacks to UTMAs and 529 plans. Some of the factors parents should consider before opening either type of account include:

Tax benefits

UTMAs used to provide a significant tax shelter, but the rules have since been changed. Now, any assets in the account valued at more than $1900 are taxed at the same rate as the parent's income.

The money placed into a 529 plan is tax-free and can be taken out of the account tax-free, so long as it is used for qualified educational expenses. The money can be taken out for non-educational expenses, but it is then subject to federal taxes as well as a 10% penalty. States also may offer state income tax benefits to their residents who invest in their 529 plans.

Financial aid eligibility

Assets in a UTMA account are attributed to the child for purposes of determining financial aid. Depending on the value of the account, this can have a profound effect on the child's ability to get need-based financial aid.

Assets in 529 plans, on the other hand, are considered the parents' assets. While they still will be considered when determining financial aid eligibility, it will have less of a potential impact on the child's ability to obtain federal financial aid.

Limits on contributions

There is no limit on the amount of contributions that may be made each year to a UTMA account. However, parents who give more than $13,000 individually or $26,000 jointly may be required to pay gift taxes on the transfer.

Most 529 plans will have either an annual cap or a plan cap on the amount of money that may be placed in the account. As with UTMA accounts, parents who contribute more than the federal limits for gifts may be subject to gift taxes.

Degree of involvement in investing

In UTMA accounts, the custodian has complete control over the types of investments that are made. 529 plans do not offer this type of control. Instead, an administrator is selected by the institution sponsoring the plan, who then determines how to invest the money. 529s also limit the amount of times that parents can change the plan's portfolio, which is generally only once per year.

With the current uncertainty in the market and the losses many suffered to their retirement accounts and 529 plans, parents may be uncomfortable relinquishing control over the account's investments. For those who want complete control over how the funds are invested, UTMA accounts are a better choice.

Control

The custodian only has control over UTMA accounts until the child reaches the age of majority. At that time, title to the assets goes to the child, who then is free to do as he or she pleases with the assets.

In 529s, the parent retains control over the account and how the assets are used at all times.

Flexibility

While the custodian still has control over a UTMA account, the assets can be used for anything so long as it is for the child's benefit. This may include paying tuition, but also could include purchasing a car. Once the child reaches the age of majority, the assets can be used by the child for any purpose, educational or otherwise.

The assets in a 529 plan should be used for education expenses to maximize the tax benefits of the account. However, the account can be used for other expenses, but will be subject to income tax and a penalty.

Legal Issues With UTMA Plans

It is important for parents considering setting up a UTMA plan to remember that any contributions they make to this plan are irrevocable gifts that belong to their child. This means that while the parent has custodial authority over the account, the investments and funds in the account must be made for the child's - not the parent's - benefit.

Thus, a parent falling on hard times cannot sell, transfer or otherwise use the assets in the UTMA account for his or her own purposes. Likewise, the parent cannot transfer the assets back to him or herself. Moreover, a custodian who does not act in the best financial interests of the child beneficiary may have legal liability for his or her acts.

Conclusion

Deciding how best to save for your child's future is an important decision. For more information on UTMA and 529 accounts, contact an experienced attorney today.

Article provided by Van Schwab, Attorney at Law

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Direct Deposit Push Exposes Social Security Recipients to Bank Payday Loans

/PRNewswire/ -- The federal government's push to require all recipients of Social Security and other benefits to receive payments by direct deposit will expose many seniors to predatory payday loans made by banks.

That's the conclusion of "Runaway Bandwagon: How the Federal Government's Push for Direct Deposit of Social Security Benefits Has Exposed Seniors to Predatory Bank Loans," a new report issued by the National Consumer Law Center.

"Treasury must stop banks from making these high-cost, short-term loans to Social Security recipients," said Margot Saunders, an attorney with NCLC and an author of the report. "These loans are only made because they are fully secured by a borrower's next direct deposit of federal funds."

"While federal law protects Social Security and other benefits from seizure by creditors, banks regularly take those benefits as repayment for what are essentially payday loans that they have made without even assessing borrowers' ability to afford those loans," Saunders added.

"Runaway Bandwagon" spotlights account advance loan products - some with Annual Percentage Rates as high as 1,800% - that some banks offer to customers with checking accounts or prepaid debit cards. Banks help themselves to funds from customers' accounts to repay loan principal and fees, so that these loans closely resemble both fee-based overdraft programs and payday loans.

"With these loans, banks profit from vulnerable and hard-pressed recipients of federal benefits, trapping them in a cycle of mounting debt and high borrowing costs," said Leah Plunkett, an attorney with NCLC and an author of the report. "In effect, these high-cost loans are used to hijack benefits federal law intends to provide for the basic needs of elderly and disabled citizens."

More seniors and vulnerable benefits recipients will become the targets for such loans as the Treasury Department moves forward with its plan to require electronic payments to all federal benefit recipients by 2013. New protections are needed to prevent the victimization of seniors and other vulnerable consumers and preserve income from Social Security and other social insurance programs that many seniors depend upon for survival.

Treasury must ensure that when accounts used for benefit deposits are used to secure loans, those loans are made only after an evaluation of the borrower's ability to afford repayment, carry APRs including fees of no more than 36%, have a term of at least 90 days or one month per $100 borrowed and allow repayment in multiple installments. Treasury must also prohibit banks and other lenders from requiring borrowers to provide as security electronic access to a bank account. Borrowers who do allow lenders such access must be permitted to end that access at any time and at no cost.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Funding Status of U.S. Pensions Falls to 82.0 Percent in May, According to BNY Mellon Asset Management

PRNewswire-- Falling stock markets in May sent pension plan assets lower, resulting in the worst funded status for the typical U.S. corporate pension plan since October 2009, according to monthly statistics published by BNY Mellon Asset Management. The funded status in May declined 4.3 percentage points to 82.0 percent.

Through the end of May, the funded status of the typical U.S. corporate plan is down 3.5 percentage points for the year.

The falling stock markets resulted in a decline of 4.8 percent in assets at the typical U.S. corporate plan, while liabilities were little changed in May, rising 0.3 percent, as reported by the BNY Mellon Pension Summary Report for May 2010. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

"U.S. stocks in May had their worst month since February 2009, declining nearly eight percent, while a weakening euro helped to send international stocks down more than 11 percent, said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "May's results wiped out equity gains on a year-to-date basis. Unfortunately, there was no relief on the liability side as the Aa corporate discount rate remained essentially flat despite a 30-basis-point widening of spreads to Treasuries."

Austin added, "The May 6 U.S. market flash crash reminds us that the equity markets remain very sensitive. Continuing fears over the European sovereign debt crisis and the fragility of the global economic recovery are likely to result in increased market volatility for the near term. In response to this expected volatility, we are hearing from a growing number of corporations that are seeking new solutions to manage financial risks posed by their pension plans. There appears to be growing interest for funding strategies that seek to establish deadlines to achieve and maintain specific funding levels, with the goal of providing a buffer against wide swings in either the equity markets or in interest rates."

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Consumers Union Urges Fed to Require Banks to Roll Back Recent Unfair Credit Card Interest Rate Hikes

/PRNewswire/ -- After Congress passed legislation last year reining in some of the worst credit card lending practices, many banks responded by hiking interest rates before the new rules went into effect, including on customers with perfect bill paying records. Now Consumers Union, the nonprofit publisher of Consumer Reports, is calling on the Federal Reserve Board to require banks to roll back those unfair interest rate hikes and to put stronger limits on the size of penalty fees and interest charges.

The Fed has already proposed new regulations that would limit penalty fees and require banks to reconsider interest rate hikes imposed during the year leading up to the enactment of key CARD Act protections on February 22, 2010. But the proposed regulations don't go far enough according to Consumers Union and should be strengthened to ensure consumers are more likely to see their old interest rates reinstated and don't face unfair penalty fees and charges in the future.

"Last year's shameful frenzy of credit card interest rate spikes has saddled millions of Americans with high cost debt, including many consumers who always paid their bills on time," said Lauren Bowne, staff attorney for Consumers Union. "The Fed should undo that damage by requiring banks to lower interest rates for customers who were treated unfairly before the new credit card protections went into effect."

The Fed's proposed regulations would require banks to review interest rate hikes made on customers between January 2009 and February 22, 2010 and to reduce those rates "as appropriate." But under the proposal, banks are allowed to keep secret their review process with no oversight by the Fed.

Banks could keep the higher interest rate if the reason for the old rate hike still exists, or if the bank decides to come up with a new reason for the higher rate. Banks would not be required to start this "look back" process until six months after the regulations go into effect - in other words, starting in late February 2011.

Consumers Union urged the Fed today to strengthen the rate review proposal by:

-- Requiring banks to reinstate the old interest rate if the reason for
the rate hike would not have been allowed under the new protections
afforded by the CARD Act.
-- Requiring banks to disclose the methodology they use to review rates
and to report to the Fed twice each year the number of rate increases
reviewed and the number of rate reductions that result.
-- Requiring banks to begin reviewing rate increases on August 22, 2010,
when the rate review provision goes into effect.


Thousands of consumers have contacted Consumers Union over the past year to complain that their credit card interest rates were raised unfairly. Many consumers reported that their banks acknowledged that interest rates were raised because of the economy or a change in market conditions and not because of anything wrong done by the consumer. Other consumers reported that their interest rates doubled or tripled after they were a day or two late making their payment or for other minor mistakes. Before the new credit card protections started on February 22, banks were allowed to raise interest rates on existing balances at any time for any reason.

Starting on February 22, banks were prohibited from raising interest rates on a credit card customer's existing balance unless the customer has a variable rate card, a promotional rate has expired, or if the customer is more than 60 days late making the minimum payment.

The Fed also has proposed regulations required by Congress under the CARD Act that are meant to ensure penalty fees and charges are "reasonable and proportional" to the customer's violation of the credit card contract. However, the Fed's proposed rule only applies to penalty fees such as those imposed for going over the limit or being late with a payment and not penalty interest rates.

Under the Fed's proposal, penalty fees would be allowed only if a bank can show the fee is a reasonable proportion of the total cost to the bank caused by the customer's violation of the credit card agreement or if the bank proves that the fee amount is necessary to deter the same kind of violations in the future. The rule also proposes a complicated "safe harbor" provision which allows a bank to pick a permissible fee amount without doing the cost or deterrence analysis.

Consumers Union urged the Fed to broaden its proposed regulation so it extends to the size of penalty interest rate hikes in addition to fees and to limit those rate increases to no more than seven percentage points above the non-penalty interest rate. Consumers Union called on the Fed to simplify and strengthen the "safe harbor" provision for penalty fees by setting it at five percent of the violation or no more than $10.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

LPS' Mortgage Monitor Report Shows Total Delinquent Loans 21.3 Percent Higher Than Last Year; Foreclosure Rates At Record High

/PRNewswire/l/ -- The latest Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE:LPS) , a leading provider of mortgage performance data and analytics, shows that the total number of delinquent loans was 21.3 percent higher than the same period last year. Although the data showed a small 1.45 percent seasonal decline in delinquencies from January 2010 to February 2010 month-end, the national delinquency rate still stood at 10.2 percent. The report is based on data as of February 2010 month-end.

The nation's foreclosure inventories reached record highs. February's foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase. The percentage of new problem loans also remains at a five-year high. The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. Furthermore, the percentage of new problem loans is also at its highest level in five years. More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end.

As a result of the federal government's Home Affordable Modification Program (HAMP), delinquent loans that were modified and that remained current through HAMP's three-month trial period - called "cures-to-current" - have increased. Advanced delinquency rolls, however, remain elevated from a historical perspective.

Other key results from LPS' latest Mortgage Monitor report include:

Total U.S. loan delinquency rate: 10.2 percent
Total U.S. foreclosure inventory
rate: 3.3 percent
Total U.S. non-current* loan rate: 13.5 percent
Florida, Nevada, Arizona,
Mississippi, California, New
Jersey, Georgia, Illinois, Ohio and
States with most non-current* loans: Indiana
North Dakota, South Dakota, Alaska,
Wyoming, Nebraska, Montana,
States with fewest non-current* Vermont, Colorado, Washington and
loans: Minnesota

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

Note: Totals based on LPS Applied Analytics' loan-level database of mortgage assets.

LPS manages the nation's leading repository of loan-level residential mortgage data and performance information from approximately 40 million loans across the spectrum of credit products. The company's research experts carefully analyze this data to produce dozens of charts and graphs that reflect trend and point-in-time observations for LPS' monthly Mortgage Monitor Report.

To review the full report, listen to a presentation of the report or access an executive summary, visit http://www.lpsvcs.com/NEWSROOM/INDUSTRYDATA/Pages/default.aspx.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

To Buy or Not to Buy: Taking Advantage of the Homebuyer's Tax Credit

/PRNewswire/ -- Despite the extension of the 2009 homebuyer's tax credit to April 30, 2010, and low home prices, potential buyers need to carefully examine their finances before taking the plunge.

"Many people are able to benefit from this tax credit, but that does not always mean buying is a good option for them," said Lindsay Alston, a credit counsellor with CESI Debt Solutions. "You have to look closely at your income to see if the numbers work."

A key rule for homebuyers to remember is that your mortgage, including the principal, interest, taxes, association fees and insurance should never exceed 30 percent of your gross income. A debt-to-income ratio higher than 30 percent indicates that at the end of the year, the amount you are spending on homeownership might exceed what you can afford - and ending up in the red will offset the benefit of owning a home.

"It is the buyer's responsibility to understand the full cost of owning a home - which includes maintenance," said Alston. "It means being responsible for replacing the hot water tank when it dies, or fixing the roof in the event of a fallen tree."

A tax advisor can help house hunters understand the benefits of the tax credit. The credit, which offers 10 percent back on a home's purchase price up to $8,000, will be added to a current tax refund or subtracted from money owed back in taxes. For example, if you already owe $500 in 2009 federal taxes and qualify for a $2,000 homebuyer's credit, you will only see an additional $1,500.

"The tax credit is a great incentive for people who are financially in good shape and planning to buy a new home anyway," said Alston. "But if you don't think you can make the numbers work without it, you should probably wait and continue to save, even if it means missing out on the tax credit."

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter: @GAFrontPage

Credit Card Statements Will Have A New Look in February

/PRNewswire/ -- The Credit Card Accountability Responsibility and Disclosure Act of 2009, commonly known as the CARD Act, has been signed into law and the Board of Governors of the Federal Reserve System has issued a final rule elaborating on some of the CARD Act's requirements.

Even though the implementation deadline for certain CARD Act requirements is not until February 22, 2010, many credit card issuers already have several elements of their CARD Act compliance plan in place. For instance, consumers can expect their February credit card statements to have a new look.

One prominent change to statements is the requirement that consumers be provided with an illustration of how long it will take them to pay off their balance, illustrating paying only the minimum amount due each month versus paying off the debt in three years. This will be a real eye-opener for millions of Americans who will now see each month just how serious their debt obligations are.

Further, the statements will now include contact information for nonprofit counseling agencies that may serve as a resource for sorting though their financial challenges. The Act requires issuers to prominently display a toll-free number where consumers may receive information about accessing credit counseling. Not only will this information help make consumers aware that help is available, but it will add a layer of protection by directing them to government-approved nonprofit counseling agencies for assistance.

As the largest and longest-serving network of community-based nonprofit credit counseling agencies in the nation, it is no surprise that the National Foundation for Credit Counseling (NFCC) has stepped-up to the plate and enhanced its National Locator Line (NLL) to support the government's new requirements. Through the NFCC NLL consumers will have access to certified counselors in 50 states and Puerto Rico and have the ability to receive assistance in 31 languages.

"The NFCC has always encouraged consumers to deal with their credit problems sooner rather than later. Now, with the help of the government, they will receive contact information on their monthly statements, so they can do just that," said Susan C. Keating, president and CEO of the NFCC. "This is a critically important step particularly since so many American consumers are in serious financial trouble and need help, and is consistent with the NFCC's mission to promote the national agenda for financially responsibly behavior."

Already more than 200 lenders have elected to utilize the NFCC's network to comply with the CARD Act and to assist their customers in need of financial counseling and education. The NFCC's enhanced NLL is operational now, well in advance of the February 22 deadline, allowing those who receive their February statements early in the month the ability to immediately reach out for help.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter: @GAFrontPage

Consumer Groups Call On Fed to Adopt Stricter Gift Card Rules

/PRNewswire/ -- In comments filed with the Federal Reserve Board today, consumer groups urged regulators to rein in gift card fees and related terms and conditions that can quickly diminish their value. The Fed is considering a set of proposed gift card regulations that are required under the Credit CARD Act of 2009 and will go into effect on February 22, 2010.

"Banks earn billions every year from gift card fees just because consumers don't always get around to using their cards right away," said Michelle Jun, staff attorney with Consumers Union. "Congress passed limits on gift card fees earlier this year and now it's up to the Fed to make sure consumers are fully protected. The Fed should impose reasonable limits on fees so consumers stand a better chance of enjoying the full value of the gifts they receive."

Many consumers end up losing money on their gift cards because they don't redeem them right away. A recent Consumer Reports poll found that one quarter of those given gift cards last holiday season still have at least one card they haven't used and 11 percent of recipients have four or more. The TowerGroup estimated that about $8 billion remained unredeemed on gift cards in 2006.

In a letter to the Fed today, Consumers Union, Consumer Action, Consumer Federation of America, and the National Consumer Law Center urged regulators to:

-- Cap the amount that gift card issuers can charge for inactivity fees.
The Credit Card Act of 2009 prohibits card issuers from charging
inactivity fees on cards if they have been used within the past 12
months. After twelve months of inactivity, card issuers will be
allowed to charge a monthly inactivity fee. Consumers Union urged the
Fed to protect consumers more fully by limiting the amount that that
can be charged for inactivity to no more than the actual cost incurred
by card issuers for maintaining the card.

-- Limit fees on low value cards. Consumers Union urged the Fed to
follow the lead of states like California, Oklahoma and Washington
which have limited fees that can be charged for inactivity when the
balance on the card is $5 or less. These states limit card issuers to
charging a $1 per month fee.

-- Limit when inactivity fees can be charged. Many consumers report that
they face difficulties using their gift cards because merchants often
will not accept their cards when they don't cover the full cost of the
purchase or when they cannot determine the remaining amount on the
card. Consumers Union urged the Fed to count such transactions as
"activity" on the card so that consumers don't start incurring
inactivity fees when they've attempted to use them.

-- Make sure consumers are protected from early expiration of gift cards.
Under the Credit Card Act of 2009, gift cards cannot expire less than
five years from the date the card was purchased or money was last
added to the card, whichever is later. However, many gift cards are
stamped with a "valid thru" date," which is the estimated lifespan of
the card's magnetic stripe and could be less than five years from the
time the card was purchased. Consumers Union urged the Fed to require
card issuers to select expiration periods long enough that the card
will have at least five years of remaining life when it is purchased.
Card issuers should be required to disclose on the card that the card
may be valid beyond the date imprinted on it and to provide an 800
phone number on the card that consumers can use to easily find out
when their cards actually expire.

-- Protect consumers from losing funds on lost or stolen prepaid cards.
Prepaid cards are reloadable cards that can be used to make payments
similar to debit cards and are becoming increasingly popular. But
consumers using prepaid cards don't enjoy the same safeguards as debit
cards if their cards are lost or stolen and could end up losing all of
their funds. Consumers Union urged the Fed to ensure that prepaid
cards come with the same protections as debit cards so the consumer's
liability is limited to $50 and he or she can recover missing money.


The new gift card regulations will cover both retailer gift cards and prepaid general use gift cards (the ones that often are branded as Visa, American Express, MasterCard, or Discover). The law does not cover rewards, loyalty, telephone or promotional cards and does not cover paper gift cards or paper gift certificates.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

World Unlikely to Scrap Current Reserve System Despite Weak Dollar, Says CornerCap Investment Counsel

/PRNewswire/ -- Despite the recent credit crisis and headlines about the possible demise of the dollar as the world's dominant currency, it is unlikely that the world will scrap the current reserve system anytime soon, CornerCap Investment Counsel concluded in a recent report (go to http://www.cornercap.com/library/Newsletters/n2009fall.pdf for the complete report).

While the dollar will inevitably surrender some of its dominance, too many major players like China and OPEC have a vested interest in a financially strong U.S. to undermine the dollar's position too strongly, according to Cannon Carr, chief investment officer.

Instead, Carr anticipates an orderly transition to a post-dollar world, one that will take a decade or more, and probably with U.S. leadership.

"The dollar's position as the world's dominant currency has been key to our standard of living since World War II, and its standing plays a vital role in the U.S. recovery," Carr said. "Moving radically away from the U.S. dollar as the dominant currency would limit our return to economic growth, at a time when other countries need a healthy US to boost their own economies," he added.

However, high U.S. debt levels and deficits, when combined with a weak growth outlook, do increase the risk to a currency system tied to the dollar. With a sustained weak dollar, non-U.S. countries can find their exports expensive and their own economies influenced by poor policy choices by the US. So while other nations can tolerate a weak dollar, an irresponsibly sustained weak dollar jeopardizes their financial stability and could force them to seek more radical change to the reserve system.

What's more, without convincing economic growth (say 4% annually); the U.S. will have to balance national debt levels, deficits and government spending to manage the dollar's position. Special attention must be given to government spending (for growth, social programs, entitlements, or war), which is typically financed through taxation, borrowing, or inflation. Pushing too far in those areas would have serious ramifications for the dollar.

Carr believes the dollar's recent descent may reflect investors' increased risk tolerance rather than collapsing faith in the U.S. system. When fear reached its peak in October 2008, investors sought safety in U.S. Treasury instruments and the U.S. dollar. If fear returns, those two investment vehicles could be once again viewed as safe havens.

What does the dollar's outlook mean for investors? Pursuing radical strategies today are likely to yield sub-par investment results over time.

"We continue to believe deflationary forces may prevail for the immediate future but inflation has a higher probability in perhaps four to five years," Carr said. Predicting when that inevitable transition will occur is impossible, and CornerCap recommends diversified investment portfolios that balance the risk/reward across many uncertainties, including deflation, inflation, or a normal recovery.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Solid Index Findings: Americans Define Themselves Based on Finances, But Don't Invest in Their Fiscal Futures

/PRNewswire/ -- The economic contraction has highlighted the internal duel between Americans' beliefs and actions according to the latest Solid Index, a survey by SunTrust Banks (NYSE:STI) that studies Americans' emotions and perceptions toward their finances. The Solid Index revealed that while more than half (58 percent) of the respondents feel that their financial situation contributes to their perceptions of self-worth, 40 percent of American adults will not be enrolling in a retirement plan this year.

The most recent survey is the fourth in a series of six throughout 2009 and it investigated Americans' thoughts around benefits enrollment, the contributors of their self-worth and their reactions to the recession. In addition to their financial situation, the findings revealed that 55 percent of Americans feel that their job contributes to their sense of self-worth, with 43 percent citing their salary and more than a third (37 percent) noting their possessions.

"It is surprising and unsettling that many Americans are neglecting to properly invest in their future even while using their financial situation as a litmus test for their self worth," said Rilla Delorier, chief marketing officer for SunTrust Banks. "In this current economic situation it may seem difficult to invest in one's retirement, but proper planning and budgeting can lead to solid behaviors and help individuals feel good about themselves now and in the future."

Other key findings of Americans' reactions to the recession include:

-- Almost two thirds (64 percent) feel that they are obligated to feel
grateful for having a job in today's economy.
-- Penny pinching is getting old, with 54 percent stating they are tired
of cutting back on the little things.
-- To combat the restrictions of penny pinching, 93 percent said that
they have purchased an item in the last three months to give
themselves a "pick me up".
-- Women are significantly more likely than men to indulge themselves by
spending on clothes (59% vs. 43% men), while men tend to be more
interested in splurging on electronics (30% vs. 18% women).

Not all reactions to the economic turbulence have been negative. One in two respondents stated that the economy has caused them to spend more quality time with their family, bringing them closer, despite the fact that 55 percent believe a night out with the family has become unaffordable. Additionally, many reported becoming more generous due to the economy by helping their friends, family and neighbors save money by giving away hand-me-down clothes (66 percent), preparing meals for others (55 percent), babysitting (38 percent) and doing renovations (37 percent).

"While Americans are challenged by this economy, they are finding new ways to enjoy their families and friends, whether it's spending more time together or swapping a solid - that is, supporting and helping each other with favors instead of paying others to do it for them," added Delorier. "These types of solid behaviors underscore the generosity and resiliency of Americans."

The Solid Index was conducted by StrategyOne as a five-question, single wave telephone omnibus survey among a census representative sample of 1,000 American adults aged 18 and older. The next wave of SunTrust's Solid Index will be released this December.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

PrimeRevenue Spotlights Supply Chain Finance in GM, Chrysler Restructuring Plans

(BUSINESS WIRE)--PrimeRevenue’s Supply Chain Finance (SCF) proposal to provide financial assistance to US automotive suppliers won key nods last week as General Motors and Chrysler (the OEMs) each independently proposed a supply chain financing or ‘quick pay’ solution among their recommendations to address the imminent cash flow requirements of the US automotive supply base. Supply Chain Finance was the only supplier assistance option proposed by both GM and Chrysler.

In its restructuring plan, General Motors proposed that “the Government would agree to guarantee OEM receivables up to a certain limit, the OEMs would select participating credit insurance providers, or supply chain financing providers, based on a competitive process, and suppliers would enroll in the program as they deem necessary”. Similarly, among its recommendations Chrysler called for a “quick pay” program to provide financial assistance to suppliers.

A Supply Chain Finance program for the US auto industry would operate in much the same way as traditional SCF programs. The OEMs would upload their payables to PrimeRevenue’s SCF platform where suppliers would view them and, at their option, sell them to participating banks in order to receive early payment. Due to current market conditions, banks are unwilling to purchase OEM payables, therefore, under PrimeRevenue’s proposal the Government would guarantee them. This enables banks to fund supplier early payment requests at extremely attractive rates based on Government credit risk without adding debt to supplier balance sheets. Suppliers could further improve their cash flow by participating in SCF programs operated by their other clients who carry investment grade credit ratings.

“Supply chain finance is a quick and powerful way to inject low cost liquidity into the US automotive supply chain,” said Joe Juliano, CEO, PrimeRevenue. “We join GM, Chrysler and their suppliers in calling for rapid adoption of a supplier assistance package to meet the severe cash crunch suppliers will face as early as March 1st. Since we currently deliver SCF solutions elsewhere in the auto industry, PrimeRevenue is uniquely positioned to deliver quickly, and we look forward to doing so.”

A summary of PrimeRevenue’s proposal to GM, Chrysler, the US Treasury and suppliers may be accessed at http://www.primerevenue.com/auto.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

New Online Treasury Management Course Available

/PRNewswire-USNewswire/ -- The Government Finance Treasury Management course is now available online through a collaborative effort between the University of Georgia's Carl Vinson Institute of Government and the University of Georgia Center for Continuing Education. Treasury Management is a self-study, 30-day, CEU-awarding course offering the basics of treasury management in a governmental environment.

Treasury Management is one of several online Government Financial Management programs offered by UGA. The course will familiarize you with the legal and political considerations and parameters within which a treasury management system functions.

"The Treasury Management class becomes the fifth online class we've launched in governmental finance to keep meeting our client demands for distance learning. We feel participants will gain a great overall understanding of treasury in a government setting by participating in the online Treasury Management Course," said Sabrina Wiley Cape at the Carl Vinson Institute of Government.

You will also learn how governments utilize investment economics and various investment alternatives, banking systems and how they affect local government treasury management and the concepts of contracting for banking services.

Online lessons include:
-- Cash Management
-- Banking Services
-- Forecasting
-- Collections
-- Disbursements
-- Investments
-- Internal Controls
-- Staffing and Supervision
-- Accounting and Reporting


For more information or to register, please contact Bob Wells at the University of Georgia Center for Continuing Education at (706) 542-6692, (800) 325-2090 or e-mail Bob.Wells@georgiacenter.uga.edu. The Online Treasury Management course can be viewed at www.georgiacenter.uga.edu/is/treasury.

For more information on other online Governmental Finance courses offered, please visit www.georgiacenter.uga.edu/is/govtacct and www.georgiacenter.uga.edu/is/debt. Additionally, new Governmental Finance courses are being developed and will be available in 2009.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page