Consumers beware, Bank of America is upping its fees starting on May 24th. The bank will charge a monthly fee of $12 for its MyAccess checking account, up from the $8.95 it currently charges. To avoid paying the fee, you would have to keep a minimum balance of $1,500 or set up a direct deposit of at least $250.00. There used to be no direct deposit requirement.

Also new, Bank of America will begin charging a fee of $35 everytime a consumer overdrafts their account, even if it’s only by a penny. Previously, B of A only began charging overdraft fees unless the account was overdrawn for $10 or more.

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Consumers beware, Bank of America is upping its fees starting on May 24th. The bank will charge a monthly fee of $12 for its MyAccess checking account, up from the $8.95 it currently charges. To avoid paying the fee, you would have to keep a minimum balance of $1,500 or set up a direct deposit of at least $250.00. There used to be no direct deposit requirement.

Also new, Bank of America will begin charging a fee of $35 everytime a consumer overdrafts their account, even if it’s only by a penny. Previously, B of A only began charging overdraft fees unless the account was overdrawn for $10 or more.

Consumers beware, Bank of America is upping its fees starting on May 24th. The bank will charge a monthly fee of $12 for its MyAccess checking account, up from the $8.95 it currently charges. To avoid paying the fee, you would have to keep a minimum balance of $1,500 or set up a direct deposit of at least $250.00. There used to be no direct deposit requirement.

Also new, Bank of America will begin charging a fee of $35 everytime a consumer overdrafts their account, even if it’s only by a penny. Previously, B of A only began charging overdraft fees unless the account was overdrawn for $10 or more.

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) that went into effect last year included some very important protection for consumers. Notably, the Act

–restricts all interest rate increases during the first year
–restricts interest rate increases on existing balances
–preserves the ability to pay off on the old terms
–requires fair application of payments
–provides sensible due dates and time to pay
–protects young consumers
–restricts issuance fees on fee harvester cards
–requires enhanced disclosures
–places limits on fees anbd penalty interest
–requires banks to review rate increase every six months

These new rules have inevitably cost credit card companies big bucks! Rather than turn the other cheek, card issuers are consistently looking for new and creative ways to skirt the law, finding loopholes wherever possible so that the new legislation is not applicable.

Results from a Pew study released this week indicate that American households receive more than 10 million offers each month for business credit cards. The majority of these cards contain terms that are prohibited on credit cards meant for consumer use. None of the restrictions imposed by the CARD Act apply to business credit cards. That means that these companies can increase rates and fees at will, according to the Pew report.

The most disturbing part of this practice is that these companies are sending out these “business” or “professional” cards to people who don’t even have a business nor need to prove any type of business or “professional” status to qualify. The term “business” or “professional” is clearly used as a way to circumvent the CARD Act and deny consumers the protections afforded by the Act.

For example, The Wall Street Journal reported that in the first quarter of 2010, 47 million professional card offers were sent out, a 256% increase over the same time in 2009. A review of credit card mailings in 2010 also demonstrated practices that support the notion that credit card issuers are not really in fact targeting businesses. In the same Wall Street Journal report, Chase credit card mailers in January 2010 asked prospective cardholders to provide the name of their business, a Federal Tax ID, nature of the business and address. In July, the mailers had been revised to merely include a check box that said “Yes, I am a business owner” or “yes, I am a business professional with business expenses”.

Clearly, Chase was passing off the burden of performing due diligence on prospective cardholders by creating a situation wherein they could always respond with “well, you stated and signed to being a business, so you lied”. Meanwhile, with the original questions in the January mailer, one could argue that they, at the very least, have a duty to verify that a business is really a business based on the information provided.

Efforts are underway in Congress to stifle these practices. A bill recently introduced to the House by Nita Lowey of Westchester County, New York intends to create similar protections for cards issued to businesses. In particular, the law would define a small business as one with 50 employees or fewer. Proper notification of due dates, retroactive rate increases and late fee traps like weekend deadlines would be eliminated for companies. Lowey argues that protecting these businesses from unfair and deceptive billing is the lease we can do to help small businesses grow, expand and hire.

Moral of the story: if you receive a “business” or “professional” card offer, no matter how enticing it is, consider the rights that you are relinquishing and the protections you are giving up. Also keep in mind that cards termed “business” cards aren’t really true business cards. A true business card is one that is issued based on your business credit and does not include or involve you as an individual. That said, however, these types of business cards are typically hard to get and do require an established business credit history which few small businesses have. But, I think it’s important to clear up the misconception that your Chase Business card is a “business” card within the context that most people define a business card. It was applied for and qualified with your social security number, not your business tax ID number. It reports to your personal credit report, not your business credit report. So, what makes it a business card? It’s a misleading term as far as I am concerned. It’s personal credit card with a business facade, and now one that allows card issuers to hide under and refuse to give you the protections you should be afforded.

Consult with an accountant, but with the proper record keeping and accounting, you might be able to legally use a personal card for business expenses and perhaps reap the protections the CARD Act offers.

Recently, consumers nationwide had to decide whether to “opt-in” to whether thier banks can continue charging them overdraft fees in exchange for their transactions going through when there are insufficient funds in the account. Those who chose to “opt-out” will simply have transactions denied at the point of sale.

Recent poll numbers indicate that the majority of consumers (78%) have opted out. This has dealt banks nationwide a huge blow and many are scrambling to compensate the loss with new debit card fees. Buyers beware…many banks are now charging a per transaction fee, ranging from 10 to 25 cents per transaction, in an effort to recoup some of the loss generated by consumers opting out of overdraft protection.

Inquire with your banks what, if any, fees are currently being assessed to your debit card transactions and, more importantly, if the new fees are only charged when you use your card as a debit (when you have to enter your pin number) versus when you use it as credit.

A recent survey conducted by the New York Public Interest Research Group indicated that 89% of banks in the New York area are assessing these fees for PIN-based transactions only. While this study concentrated on NY based banks, consumers nationwide are seeing a similar trend.

Even if your bank is not charging these fees now, banks all too commonly play “monkey see, monkey do”, making it only a matter of time before your bank hops on the new debit card fee kick. Get in the habit now of choosing “credit” not “debit” when using your debit card. However, don’t be surprised if your bank charges you a fee, regardless of your debit v. credit selection.

Credit scores to be revised amid soaring mortgage defaults
Changes in consumer behavior mean that borrowers who were once considered outstanding credit risks may no longer be so today.
November 07, 2010|By Kenneth R. Harney
Reporting from Washington — With foreclosures soaring — and homeowners with unblemished payment histories abruptly walking away from their houses with no warning to lenders — the two major producers of credit scores have begun changing how they evaluate consumers’ risks of default. The revisions could affect you the next time you apply for a loan.

In late October, both Fair Isaac Corp., developer of the FICO score, which dominates the mortgage field, and VantageScore Solutions, a joint venture by the three national credit bureaus and marketer of the competing VantageScore, outlined modifications they were making to handle the vast credit disruptions caused by the housing bust, the recession, high unemployment and behavioral changes by consumers.

Overall, credit industry experts agree, consumer creditworthiness has deteriorated in the U.S. since 2006 — especially among what used to be considered the credit elite, people with the highest scores. For example, a study this year by VantageScore found that the probability of serious delinquency — defined as nonpayment for 90 days or more — had increased 417% among “super-prime” borrowers between June 2007 and June 2009. Default risk during the same period rose 406% for the second-highest-rated category of “prime” consumers, and nearly doubled for those at the “near prime” scoring level.

The driving force behind the score revisions, according to Sarah Davies, VantageScore’s senior vice president for analytics and research, is the “significant change in consumer credit repayment behavior” that began during the housing bust and recession.

Not only are borrowers who previously were rated outstanding credit risks far more likely to default today, she said, but many homeowners are defying long-standing credit industry assumptions by going delinquent on their first mortgage payments while continuing to pay their credit card balances and second mortgages on time. Strategic defaults, or walkaways, by high-score borrowers also have been an unexpected development, she said.

To adjust its statistical models to these new realities, VantageScore says it conducted intensive research on 45 million active credit files obtained from the databases of its joint venture partners, Equifax, Experian and TransUnion. The research examined the same files — with personal identifiers removed — during set time periods between 2006 and 2009 to capture emerging behavioral patterns associated with defaults on various types of credit accounts. The resulting VantageScore 2.0, which is expected to be rolled out nationwide to lenders in January, focuses on the subtle warning signs of credit stress that might have been missed earlier and penalizes or rewards consumers with higher or lower risk scores than they would have received before.

Joanne Gaskin, director of mortgage scoring solutions for Fair Isaac, said her company’s new FICO 8 Mortgage Score was based on similarly exhaustive research into consumer credit behavior changes over the last four years. When used by a lender to rate the risk of new applicants or existing mortgage customers, Gaskin says, the Mortgage Score is likely to be 15% to 25% more accurate in detecting signs of future default compared with the standard FICO model.

Though she would not discuss proprietary details about the early warning signs the new score monitors, Gaskin gave an example of how the new score might work: Say a borrower with a 720 FICO score has average balances on a first mortgage, home equity lines and other accounts that are higher than norms pinpointed by the revised scoring software. A 720 FICO is considered a good score by most mortgage lenders, often qualifying for favorable rates and terms. However, the same applicant might rate just a 680 FICO or lower if the lender used the new Mortgage Score. The lender would then have a choice: Reject the applicant, quote a higher interest rate on the mortgage or require a larger down payment.

Gaskin said the reverse could also occur: The FICO 8 Mortgage Score could come in higher than the standard FICO — indicating lower risk for the future — in situations where formerly troubled borrowers manage to put themselves back on a healthier credit track.

Experts in the credit industry say the new scoring efforts by Fair Isaac and VantageScore should prove to be a net positive for the housing and mortgage industries if they can do what they claim: spot subtle risk patterns and nascent hints of improvement.

But as a mortgage applicant you should know that your next score might not look anything like the score you thought you had. You might end up getting a better deal — or worse than you wanted — when lenders quote you rates and terms.

By SARA MURRAY
Checking the credit histories of job applicants—a common practice among employers—is coming under fire.

Four states have passed laws in the past three years that limit the practice, and similar bills have been introduced in 20 other states and Congress. The issue has surfaced in the wake of the recession, which has left many unemployed workers with tattered credit.

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Associated Press

The EEOC, run by Jacqueline Berrien, weighed credit checks Wednesday.
The underlying concern is that poor credit could become a barrier to landing a job. Employers contend credit checks help them evaluate candidates and protect against fraud.

Another concern is the potential discriminatory impact on hiring. That prompted the Equal Employment Opportunity Commission to hold a hearing Wednesday to listen to testimony from advocates on both sides of the issue.

Opponents of the practice cite studies showing that African-Americans and Latinos tend to have lower credit scores. They also dispute whether credit reports are an accurate way to measure an employee’s qualifications. An early 2000s study by Jerry Palmer, an Eastern Kentucky University psychology professor, showed that bad credit was a poor predictor of job performance.

Audio
Listen: Some states are moving to limit the practice of employers running credit checks in the wake of the recession, Sara Murray reports.
“It is a practice that we believe is both harmful and unfair to American workers,” Chi Chi Wu, counsel for the National Consumer Law Center, said at the EEOC hearing. The center advocates for low-income clients.

State laws aimed at limiting the use of credit checks tend to carve out exceptions for certain industries. Oregon’s law, for example, exempts federally insured banks and credit unions, as well as some jobs in other industries. In Illinois, debt collectors, insurance agents and some state and local government agencies are among those exempt.

Proponents of credit checks, which include fraud examiners and credit-reporting groups as well as employers, contend the histories are an important screening tool for employers and tend to be used sparingly.

A recent Society for Human Resource Management study showed 60% of employers used credit checks to vet job candidates. Of those, 13% used them for all candidates.

Michael Eastman, an executive director at the U.S. Chamber of Commerce, told the EEOC that employers take individuals’ circumstances into account. Many at the hearing stressed that employers look for a pattern of careless financial behavior, not one-time events.

“It’s very easy for the best, well-intentioned people to have very difficult times,” he said. “Employers recognize that.”

Credit checks can also be used as a tool to protect businesses against fraud, supporters argue. A recent study by the Association of Certified Fraud Examiners of some 1,800 fraud examiners globally showed that fraud costs businesses about 5% of their revenue. In the U.S., the median loss was $105,000 in each incident.

In many of those instances, there were “red flags,” examiners reported. In 44.7% of cases, fraudsters were experiencing financial difficulties, according to the survey, and in 44.6% of cases, they were living beyond their means.

One problem in evaluating credit checks is confusion over what information is included in credit reports, how employers use them and what research has been conducted on the effects of using the checks in employment.

Experian Information Solutions Inc., a company that provides credit reports, offers an employment report that includes details such as a credit history, evidence of bankruptcy or liens, and information on previous employers. It doesn’t include a credit score—which takes into account various details of a person’s credit history and synthesizes them into one number. Much of the research on disparities in credit histories between racial groups is based on credit scores, though most employers never see that number.

“I have yet to see a study that shows the relationship between the use of credit reports and the disparate impact,” said Pamela Q. Devata, an employment lawyer at Seyfarth Shaw LLP who supports the credit checks.

“If there were, the federal government would likely be using this,” she said.

In Cincinnati, Fannie Jeffries, 49 years old, contends her bad credit is holding her back. Laid off in October 2008 from her data-entry position at a bank, Ms. Jeffries was unable to pay her bills.

Between student loans and credit cards, Ms. Jeffries said she was more than $140,000 in debt. She has applied for government work, clerical jobs and for a position stocking shelves at Dollar Tree, among others.

Ms. Jeffries understands why employers might be worried someone with bad credit would steal, but thinks criminal background checks are a better gauge of that propensity.

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