/PRNewswire / -- The credit card legislation passed yesterday by the United States Senate won't protect consumers against outrageous interest rates or other egregious practices and represents an astounding victory for the banking and credit card industry, a consumer advocate said today.
Harvey Rosenfield, head of the California-based Consumer Education Foundation, noted that under the Senate bill:
-- There is no cap on credit card interest rates. In recent months,
companies have raised interest rates for some consumers -- even those
with good credit -- to over 30%.
-- Companies can raise interest rates on future purchases at any time.
The bill only prevents companies from increasing interest rates on
previous purchases.
-- Credit card companies can unilaterally changes the terms of the credit
card contract.
-- Companies can still use fine print "arbitration" clauses to prevent
consumers from suing them in court.
"This is not 'reform,' it's a charade," said Rosenfield. "After what American consumers have gone through, they deserve real relief. After all, the banking industry would not exist today were it not for a trillion dollar taxpayer bailout that allows banks to borrow our money from the US Treasury at a fraction of a percentage point and then turn around and loan it to us at twenty to fifty times that rate."
"The credit card industry's attempt to portray this as a defeat is just posturing designed to protect its political allies in Washington. As usual, no one in that city seems to be looking out for the interests of the people of our country."
The Consumer Education Foundation is a non-profit, non-partisan organization. In March, it co-published a two hundred page report on the causes of the financial debacle: "Sold Out: How Wall Street and Washington Betrayed America." The report can be downloaded at WallStreetWatch.org.
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Showing posts with label credit cards. Show all posts
Showing posts with label credit cards. Show all posts
Wednesday, May 20, 2009
Thursday, April 16, 2009
Housing Economic Recovery Act of 2008 and Tax Implications for eCommerce
TT Note: How about trying this little tidbit on for size? This little ole provision for 1099 reporting was unknown to me and I'm willing to guess it's unknown to a whole lot of people. Be careful. This little provision and the way the credit card processors do business is about to get real sticky. You know, the one person, one account scenario? Could be tough trying to prove to Big Brother that you and your business are two accounts.
/PRNewswire/ -- Many small businesses and payment processors were surprised to learn the Housing Economic Recovery Act of 2008 included a provision creating an IRS 1099 reporting requirement for all credit card payment providers (i.e. PayPal, Google Checkout, Amazon) to report individuals that receive deposits totaling more than $20,000 from over 200 debit/credit card transactions in one year. The proposed provision could deliver tax revenue in the amount of $9.529 billion over 10 years but at what cost?
For payment processors this is not just a simple matter of developing an accounting and reporting system. Payment processors will need to integrate tax reporting into their customer facing applications; they will have to change the way they collect and authenticate account holder data; they will have to setup customer service support for tax related inquiries and they will likely have to change the fundamental way they look at account holders.
It only makes sense that account holders will now want to setup 2 accounts, one for business and one for personal use. While this may seem obvious and trivial, this presents a problem for a number of payment processors who view the world as 1 person equals 1 account. Payment processors will have to adjust their velocity systems to pool accounts which can increase record keeping costs, customer service inquiries and maintenance costs.
Of course some sellers, not so honest ones, may also utilize multiple accounts (i.e. 1 personal, 1 business, 1 in my wife's name) to purposely spread out revenue. Some sellers from auction sites such as eBay or Craig's List will attempt to avoid the reporting requirements by diversifying their payment strategy. This would entail utilizing several different payment processors to try and go 'unnoticed' by staying under the reporting threshold with any single processor.
Payment processors will also have to deal with the potential for brand damage from "guilt by association". This association will come from account holders expressing displeasure of the new requirements in the blogosphere and from the increased damage caused to fraud victims. In terms of fraud, fraudsters that setup accounts using stolen identities will be causing 1099 income to be reported on the victims. In this case a 1099 would be generated and the consumer may not have any idea that it has occurred until they are contacted by the IRS for not reporting the income. The burden of proof will be with the taxpayer to prove their innocence to the IRS, and the burden of proof will be on the payment processor to prove to the victim they didn't do anything wrong. Needless to say, this scenario is likely to receive a lot of attention in the press and blogosphere that a payment processor wants to avoid.
For a more detailed discussion on the impact of the new payment processor reporting requirements from the Housing Economic Recovery Act of 2008 go to http://www.fraudpractice.com/housingrecoveryact2008.html .
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/PRNewswire/ -- Many small businesses and payment processors were surprised to learn the Housing Economic Recovery Act of 2008 included a provision creating an IRS 1099 reporting requirement for all credit card payment providers (i.e. PayPal, Google Checkout, Amazon) to report individuals that receive deposits totaling more than $20,000 from over 200 debit/credit card transactions in one year. The proposed provision could deliver tax revenue in the amount of $9.529 billion over 10 years but at what cost?
For payment processors this is not just a simple matter of developing an accounting and reporting system. Payment processors will need to integrate tax reporting into their customer facing applications; they will have to change the way they collect and authenticate account holder data; they will have to setup customer service support for tax related inquiries and they will likely have to change the fundamental way they look at account holders.
It only makes sense that account holders will now want to setup 2 accounts, one for business and one for personal use. While this may seem obvious and trivial, this presents a problem for a number of payment processors who view the world as 1 person equals 1 account. Payment processors will have to adjust their velocity systems to pool accounts which can increase record keeping costs, customer service inquiries and maintenance costs.
Of course some sellers, not so honest ones, may also utilize multiple accounts (i.e. 1 personal, 1 business, 1 in my wife's name) to purposely spread out revenue. Some sellers from auction sites such as eBay or Craig's List will attempt to avoid the reporting requirements by diversifying their payment strategy. This would entail utilizing several different payment processors to try and go 'unnoticed' by staying under the reporting threshold with any single processor.
Payment processors will also have to deal with the potential for brand damage from "guilt by association". This association will come from account holders expressing displeasure of the new requirements in the blogosphere and from the increased damage caused to fraud victims. In terms of fraud, fraudsters that setup accounts using stolen identities will be causing 1099 income to be reported on the victims. In this case a 1099 would be generated and the consumer may not have any idea that it has occurred until they are contacted by the IRS for not reporting the income. The burden of proof will be with the taxpayer to prove their innocence to the IRS, and the burden of proof will be on the payment processor to prove to the victim they didn't do anything wrong. Needless to say, this scenario is likely to receive a lot of attention in the press and blogosphere that a payment processor wants to avoid.
For a more detailed discussion on the impact of the new payment processor reporting requirements from the Housing Economic Recovery Act of 2008 go to http://www.fraudpractice.com/housingrecoveryact2008.html .
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Wednesday, January 07, 2009
Credit Analyst Warns of Trap for Credit Card Customers
/PRNewswire/ -- "Many people will have their credit scores lowered this year if they're not watchful, know what to do and take action," said Eddie Johansson, president of Credit Security Group, a leading nationwide credit score analysis and rescoring firm.
Credit scores are used by lenders to determine credit risk. Lower scores result in loss of credit and higher interest rates. Financial analysts predict cuts up to $2 trillion in credit card account lines over the next 18 months.
"This will have very bad consequences for consumers who are not prepared," said Johansson, speaking recently about credit scores at the Texas Bankers Association's Financial Literacy Summit.
Analysts predict many card companies will be canceling unused cards and lowering limits this year. According to Johansson, "This is how the trap will be set: you have a $4,000 balance on a card that the company lowers your limit from $10,000 to $5000. You don't know it, but your credit score has just taken a hit -- and it's only beginning." Johansson says credit companies constantly monitor your credit score, which causes the trap to spring.
"Another company lowers your limit and increases your interest rate, 'due to decreased credit score.' This lowers your credit score further. Another company cancels an unused card. The cycle snowballs with other cards, and then the same ones over again. If you are planning a major credit move -- say, refinancing your house for lower rates, your lower credit score hurts your chances of refinancing and greatly increases the interest rate offered."
Johansson points out that the consumer here has done nothing different, hasn't gone into more debt, hasn't missed any payments. Yet, his rates have gone up and his ability to use credit has been damaged -- while he was unaware. And once ensnared it's difficult to get out. "This is why it's a trap," Johansson said.
"You can prevent this from happening to you," he said, "if you know how."
"The critical piece of this trap is your credit score," said Johansson. "It's what keeps the snowball rolling. Your credit score is also the sole measure used to determine your credit risk and interest rates in the future. You should carefully guard it as it comes under attack this year," he said.
With the amount of credit reduction projected, almost everyone will lose some credit availability, Johansson said. "You can't control credit card companies reducing the amount of credit in the system, but you can make sure it does not hurt your credit score - and this is critical to maintaining your ability to manage your finances in addition to saving you thousands of dollars in fees and interest payments."
Johansson gives specific advice on what to do. The key is in your credit scores -- knowing how the scoring system works and how to avoid hits to your score. In brief, the steps are:
1) Keep your balances low on existing cards.
2) Remember it's the balance/limit ratio that counts -- not the balance amount. If a credit card company lowers your limit, immediately lower your balance if necessary to stay under eight percent. Try to keep all cards under the eight percent guideline.
3) Charge small amounts on your old, unused credit cards. This makes them active which increases the limit portion of your balance/limit ratio.
4) Avoid opening new lines of credit if at all possible. Use new credit sparingly and for your best advantage.
5) Don't price-shop where the seller pulls your credit score. This includes homes and cars among other products and services. If you're not sure, make sure -- tell them not to pull your credit report.
6) Whatever it takes, avoid any negative events on your credit report.
7) Monitor your credit reports; be alert for any changes. Correct inaccurate information in your report, or hire a professional to do so. Besides keeping your score from decreasing, many people increase their scores by correcting their data at the credit bureaus.
More detailed information on these steps and what to do can be found at the Credit Security Group web site, http://www.creditsecuritygroup.com/ .
Johansson said that consumers' lack of knowledge about the credit systems is especially costly to them in these times and there is a great deal of misinformation. "Common sense and credit sense are not the same thing."
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Credit scores are used by lenders to determine credit risk. Lower scores result in loss of credit and higher interest rates. Financial analysts predict cuts up to $2 trillion in credit card account lines over the next 18 months.
"This will have very bad consequences for consumers who are not prepared," said Johansson, speaking recently about credit scores at the Texas Bankers Association's Financial Literacy Summit.
Analysts predict many card companies will be canceling unused cards and lowering limits this year. According to Johansson, "This is how the trap will be set: you have a $4,000 balance on a card that the company lowers your limit from $10,000 to $5000. You don't know it, but your credit score has just taken a hit -- and it's only beginning." Johansson says credit companies constantly monitor your credit score, which causes the trap to spring.
"Another company lowers your limit and increases your interest rate, 'due to decreased credit score.' This lowers your credit score further. Another company cancels an unused card. The cycle snowballs with other cards, and then the same ones over again. If you are planning a major credit move -- say, refinancing your house for lower rates, your lower credit score hurts your chances of refinancing and greatly increases the interest rate offered."
Johansson points out that the consumer here has done nothing different, hasn't gone into more debt, hasn't missed any payments. Yet, his rates have gone up and his ability to use credit has been damaged -- while he was unaware. And once ensnared it's difficult to get out. "This is why it's a trap," Johansson said.
"You can prevent this from happening to you," he said, "if you know how."
"The critical piece of this trap is your credit score," said Johansson. "It's what keeps the snowball rolling. Your credit score is also the sole measure used to determine your credit risk and interest rates in the future. You should carefully guard it as it comes under attack this year," he said.
With the amount of credit reduction projected, almost everyone will lose some credit availability, Johansson said. "You can't control credit card companies reducing the amount of credit in the system, but you can make sure it does not hurt your credit score - and this is critical to maintaining your ability to manage your finances in addition to saving you thousands of dollars in fees and interest payments."
Johansson gives specific advice on what to do. The key is in your credit scores -- knowing how the scoring system works and how to avoid hits to your score. In brief, the steps are:
1) Keep your balances low on existing cards.
2) Remember it's the balance/limit ratio that counts -- not the balance amount. If a credit card company lowers your limit, immediately lower your balance if necessary to stay under eight percent. Try to keep all cards under the eight percent guideline.
3) Charge small amounts on your old, unused credit cards. This makes them active which increases the limit portion of your balance/limit ratio.
4) Avoid opening new lines of credit if at all possible. Use new credit sparingly and for your best advantage.
5) Don't price-shop where the seller pulls your credit score. This includes homes and cars among other products and services. If you're not sure, make sure -- tell them not to pull your credit report.
6) Whatever it takes, avoid any negative events on your credit report.
7) Monitor your credit reports; be alert for any changes. Correct inaccurate information in your report, or hire a professional to do so. Besides keeping your score from decreasing, many people increase their scores by correcting their data at the credit bureaus.
More detailed information on these steps and what to do can be found at the Credit Security Group web site, http://www.creditsecuritygroup.com/ .
Johansson said that consumers' lack of knowledge about the credit systems is especially costly to them in these times and there is a great deal of misinformation. "Common sense and credit sense are not the same thing."
-----
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Fayetteville, Peachtree City, Tyrone
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