Saturday, August 18, 2007

What is So Bad About Good Old Money?

The world of electronic banking and other associated electronic fund transfers is growing. Credit cards are world wide and very popular, they will probably be slowly replaced by some kind of card which comes directly out of your account. We can see this already with Instant Cash cards, which deduct directly from your checking account.

Many people find cash to be more dangerous than credit cards. They are right to some extent. Cash is easily stolen with no hope of return and it can be hard to keep track of where it gets spent. Credit cards give you insurance and an itemized bill is sent to you every month, which makes credit cards very easy for book keeping and safe to use, right? Some people find comfort in not having an electronic trace of what they purchase every day. “As payment systems using
electronic checking become more pervasive, is it necessary to sacrifice the privacy and undocumentability associated with cash?” (Patiwat Panurch).

When you go the appliance store and wish to purchase a brand new 42’’ TV, all you have to do is whip out that piece of plastic that has a shiny symbol that says “Visa” on it, the cashier swipes it through a little electronic machine, you sign your name, and you now have new TV. WOW!

So, are you fully in control of your money? It’s a scary thought isn’t it? People in today’s world tend to just go with the flow with out even asking “what about…”. Personal bankruptcy is at an all time high. Maybe, having cards that deducted directly from your bank account, people would not spend money they don’t have.

Thursday, August 16, 2007

Bill gives industry too much credit

By ROBERT TRIGAUX, Times Business Columnist
Published April 15, 2005

Here's how the new bankruptcy legislation approved Thursday by Congress really should have been crafted.

In exchange for banks, credit card companies and retailers getting a tough law that will force more consumers to pay more of their debts in bankruptcy, lenders should have agreed to a cap on the insane volume of direct-mail credit card solicitations they dump on consumers.

Somehow, that idea was never considered. But it seems only fair. If President Bush signs another probusiness piece of legislation to plump credit card industry profits, then the card business should stop supersaturating American households swimming in debt.

Don't e-mail me arguing that "if people were more personally responsible they would not be overwhelmed with debt." I agree, to a point. But Congress ignored the facts that more people get into credit trouble because of lost jobs, huge medical bills and other hard-to-anticipate problems than do people who just can't stop spending at the mall.

A study conducted by doctors at Harvard Medical School and published in the February issue of Health Affairs found that half of bankruptcies, involving 700,000 American households and affecting more than 2-million people annually, are attributable to illness or medical debt.

It's really a two-way street. If consumers need to show more discipline, so do the providers of credit. That's why this biggest rewrite of the bankruptcy code in 25 years is so one-sided and flawed.

How fitting this matter should fall on April 15, our national deadline to pay taxes. A survey by the Cambridge Consumer Credit Index finds that 11 percent of Americans this year will borrow money on their credit cards to pay their tax bill. That's up from 3 percent who used credit cards in 2004.

The credit card industry's aggressive strategy over the past 20 years was to give everyone multiple credit cards. It's a big reason U.S. consumers became hooked on consumption and completely lost the ability to save.

Credit card solicitations have doubled to 5-billion a year. That's about 18 credit card solicitations for every man, woman and child in the United States. And the solicitations are getting bolder in pursuit of the vulnerable.

Seniors, including those who learned to shun debt in the Depression, are a rapidly expanding market for credit cards. The big lure? Paying for expensive prescription drugs on credit.

Minors younger than 18, with no incomes and no credit history, are targeted as an emerging market for the credit industry. College-age students, besieged with credit offers and high tuition bills, on average leave school (often without a job offer) with $18,900 in student loans and an average $3,262 in credit card debt.

The plastic barrage is impressive. At the end of 2004, Americans carried 657-million bank credit cards, 228-million debit cards and 550-million retail credit cards.

That means each household boasts 6.3 bank credit cards, 2.2 debit cards and 6.4 retail credit cards, according to CardData. In 1990, each household had 3.4 bank credit cards, 0.1 debit cards and 4.1 retail credit cards.

Look for 1.5-trillion payment cards in the United States by the end of this year.

When was the last time you applied for a credit card and were turned down? What the industry has created is a dependency on easy credit.

The parallel to drug addiction is not farfetched. Now hooked, more consumers can be squeezed for more money. Even in bankruptcy.

The new bankruptcy legislation is not all bad. It probably will catch some perennial deadbeats in its wide filters. But it will hurt many more consumers with legitimate need of bankruptcy protection along the way.

Professor Elizabeth Warren teaches bankruptcy law at Harvard Law School and has written extensively about the rising financial, social and political pressures undermining the U.S. middle class.

She points out that a million men and women each year turn to bankruptcy in the aftermath of a serious medical problem, even though 75 percent of them have health insurance.

She says a family with children is nearly three times more likely to file for bankruptcy than an individual or couple with no children.

She notes that more children live through their parents' bankruptcy than through their parents' divorce.

And Warren warns it is women who disproportionately will bear the brunt of higher costs, more restrictions and less protection from the legislation. Women are the largest demographic group in bankruptcy, outnumbering men by about 150,000 per year.

Rep. David Dreier, R-Calif., praised the legislation because it would allegedly save American families an average $400 a year in higher interest rates now charged to consumers to recoup losses from those who abuse bankruptcy proceedings.

That's laughable.

Sure, there might be some modest amount of money saved from fewer bankruptcies. But who really believes the kindhearted credit card industry will take those savings and, in place of higher profits, return it to consumers in the form of lower interest rates?

Fed considering revisions to credit card term disclosures

By Tony Pugh
Knight Ridder Newspapers

WASHINGTON - Growing consumer unease with credit card practices is fueling a call for action as lawmakers and regulators debate making changes.

For the first time since 1980, the Federal Reserve Board is considering major revisions to the clarity and content of credit card disclosures so consumers can better understand the terms of their cards and make more informed decisions about using them.

The Fed also is reviewing the effectiveness of consumer protections against unfair card practices and inaccurate billing in the wake of unprecedented growth in credit card usage and public outcry over rising interest rates and penalties along with costly, abrupt changes in card agreements.

The Fed recently sought public comment on a number of issues, including whether to make card disclosures more consistent so comparison shopping is easier, the costly trend of allowing borrowers to be over their credit limits for multiple billing cycles, whether minimum monthly payments should be raised so consumers would pay off their card debt more quickly and whether cards should provide more information about the cost of making only the minimum payments.

According to CardWeb, an online research firm, average household credit-card debt has more than tripled, from $2,966 in 1990 to $9,312 in 2004. If a family made the minimum 2 percent payment on that $9,312 at a 16 percent interest rate, it would take more than 43 years to pay off the balance - at a total cost of $27,265.44. Of that amount, nearly $18,000 is interest.

Possible recommendations by the Fed, which could include calls for congressional action, aren't expected until next year. It's unclear in what direction the agency might go.

"Trying to guess what they'll do is like trying to figure out who the College of Cardinals is going to pick as pope. It's virtually impossible," said Travis Plunkett, the legislative director for the Consumer Federation of America.

Nessa Feddis, senior counsel for the American Bankers Association, said the card industry was getting a bad rap from a small group of "vociferous" cardholders and consumer advocates: "Everybody likes to pick on credit cards because they're such a successful product."

Most cardholders, 55 percent, pay off their balances at the end of each month, Feddis said. More than 90 percent make their payments on time, she added, noting that those who complain about tough card terms have only themselves to blame for managing their money poorly.

Based on consumers' comments to the Fed, it's clear that many consumers think credit card companies are taking advantage of borrowers who don't fully understand the terms of their cards and feel powerless to contest changes when they're made.

"The people who are getting ripped off can't even understand what the hell is being written on the back of their statements. They should just have it in the clearest possible language and not in a complicated chain of words," said Brad Hoffman, a 25-year-old mortgage loan officer from Philadelphia who wrote to federal regulators urging them to address the problem.

Others, such as Derek Addams of Providence, R.I., told regulators of high fees on one of his cards and said the interest rate on another jumped from 17 percent to 28 percent in two months despite a "flawless payment history."

William Ridlon of Portland, Maine, complained about getting unsolicited credit card checks "sometimes two or three times a month."

"It's almost as bad as cocaine dealers trying to get you hooked, but on credit instead of drugs," Ridlon wrote. "We're not treated as valued customers, we're treated as money sponges that the credit card companies find new ways to squeeze every few months."

Those concerns found a sympathetic ear in Congress recently when several members of the Senate Committee on Banking, Housing and Urban Affairs said they also had trouble understanding their card disclosure forms.

"A magnifying glass and an attorney should not be necessary to understand a credit card agreement," Sen. Elizabeth Dole, R-N.C., testified at the hearing May 17.

Credit card industry officials, who have long complained of too many regulations, say the disclosures are fine as they are.

"We're not talking about a complicated product," said Feddis of the bankers' association. "There may be ways to improve it, but the basic model is very good. What we really need to do is some better consumer education," so that people know what to look for and where, she said.

Nevertheless, Sen. Christopher Dodd, D-Conn., the committee's ranking minority member, said high-interest credit cards were "nothing less than wallet-sized predatory loans" and warned that sentiment for congressional action was "building and building."

But Plunkett said the Republican-controlled Congress was unlikely this year to pass proposals by Dodd or Sen. Dianne Feinstein, D-Calif., that addressed complaints about credit cards.

He said committee Chairman Richard Shelby, R-Ala., kept his promise to conduct the hearing, which he made earlier this year during debate on bankruptcy legislation. It was the second oversight hearing on possible credit card abuses that he could recall in his six years of working on the issue.

Plunkett agreed sentiment for congressional action is growing but said it might take several years to build bipartisan support for meaningful legislation.

In the meantime, the Fed's possible call for change appears to be the most immediate source for revisions. But the industry is resisting.

A frustrated Donald L. Nightengale, the senior vice president for retail banking at First National Bank, North Platte, Neb., gave the Fed a tongue-lashing for even considering more credit card regulations.

"Did it ever occur to you nincompoops that the part (consumers) don't understand is the thousands of words of regu-babble you so ridiculously refer to as disclosures?

"A Ph.D. would have a hard time understanding the overcomplicated idiotic procedures you have forced on the banking industry in your usual misguided and pathetic attempt to legislate illegality out of existence."

Clearly, Nightengale had second thoughts afterward.

In a later note to the Fed, he apologized for the "tone and style" of his earlier comments, noting that they were "personal" and didn't represent the perspective of his employer.

He wrote: "I deeply regret the embarrassment I have caused those organizations and the fine people they employ."

Wednesday, August 15, 2007

Credit debts: Q & A - Part 3

Q. I received an email saying that my computer was infected with many forms of spyware and I needed to download a "free" locating device. Once it was through scanning it popped up with an unbelievable number of infections. After trying to remove them all it said I needed to purchase something. The spyware that was found on my computer is said to give anyone access to what I look at online, my emails, who I chat with, and even credit card numbers and other personal information like that. Should I purchase this spyware remover or should I just pass it off as a scam
crystal, charlotte nc 10/03/03

A. Crystal -- I’d pass on this offer. A good rule of thumb is not to respond to unsolicited e-mails. If you think you might have spyware, look at getting AdAware or SpyBot. Both are free and can be downloaded at
Andrew Shain 10/03/03


Q. I've seen commercials suggesting that one of the ways to protect against identity theft is to do a periodic check on your personal credit rating. What's the best way to do that? I'm leary of those web sites offering a free report.
Anonymous, Old Fort, NC 10/02/03

A. You can go staright to the credit-reporting bureaus: Equifax -- or (800) 685-1111; Experian -- or (888) 397-3742; TransUnion -- or (800) 916-8800.
Andrew Shain 10/02/03


Q. I am trying to clean my credit report. I know that after 7 years bad debt is cleared off of the report. Does the 7 year contdown start when the creditor is paid in full or when the a/c was closed? Does charge-offs clear after 7 years?
Anonymous 9/30/03

A. Charge-offs clear seven years after the "last activity" listed on your credit report, according to Equifax. The last activity was most likely the date when the creditor charged-off the final amount you owed them. One wrinkle: If your debt was sent to a collector, they can keep a record on your credit report for seven years from the date of when they agency first took over your debt, Equifax said.
Andrew Shain 10/01/03


Q. Bob ... Several years ago, I was the victim of credit fraud. The person who victimized me was an employee of the mortgage firm who gave me the loan on my home. The FBI became involved in the investigation, but in the end stated they could do nothing because there was no "video evidence" of this crime. What did law enforcement do before video surveillance was available?
Deb Jordan, Charlotte, North Carolina 9/30/03

A. Deb -- ID theft is a difficult crime for authorities to make arrests and win prosecutions. They have to prove a suspect was the one who registered for a credit card in your name at the store or was at the computer keyboard when ordering those goods from a Web site using your passwords or was the person who accessed customer information from a company database. Video is a good proof. Otherwise, they try to follow a paper trail along to catch ID thieves.
Andrew Shain 10/01/03


Q. Hi, I'm in the process of trying to find a job, and i've noticed that a lot of places are doing credit checks. How is this legal? and what does it have to do with getting a job? also, i do have bad credit because of being unemployed, do i have any recourse with getting a job with this credit problem? Lastly, is there any place that doesn't do a credit check? Thanks
stephen, charlotte, NC 8/02/04

A. Stephen, Credit checks have become a staple for some employers when hiring. They are legal. Some businesses check credit histories because jobs involve handling money and employers want to see how you handle yours. Others check your credit because they believe people with poor histories might not be reliable employees. Employers should tell you if your credit history is the reason why they didn't hire you. If you have poor credit, consider mentioning that up front and explain why. Some businesses might be willing to look past your poor credit if you're honest about it. Good luck with the job hunt.
Andrew Shain 8/02/04

Tuesday, August 14, 2007

Credit debts: Q & A - Part 2

Q. I purchased a car from an auction (VA) and arranged financing for the vehicle with a finance company (CO) associated with the auction. The term was 2 years and I paid the vehicle off early even though it was no longer running (vehicle was donated). Years past and I went to finance something else and the car transaction showed up on my credit as “unpaid.” I contacted the finance company and they asked me for proof that I had insurance on the car. I no longer had the insurance papers as proof since years had passed. The finance company was/is charging me for “forced place insurance” on a vehicle that had already been paid for (and they list the car as paid for). We're unable to get anywhere. First question, Is this legal? Secondly, this occurred 7 years ago. What is the statute of limits for negative items on a credit report? Last, but not least, how might I deal with a charge like this and an uncooperative creditor? Thank you, 1st Jaguar
Anonymous, Charlotte, NC 7/12/04

A. 1st Jaguar -- Seven years from the last active transaction is the limitation for negative information on a credit report. I would write letters the credit bureaus explaining the discrepancy about the car payment, including proof that you paid off the loans. In the meantime, you should be able to get insurance records from the company you used for insurance in the past, if that's all the finance company needs. If the finance company won't back down, file a complaint with the Better Business Bureau and state consumer protection office in Colorado.
Andrew Shain 7/12/04


Q. I have been getting phone calls from Waterloo, Iowa, a collection agency for Direct Television Inc. I am also being sued by DTV (as are 100 thousand or more people in the US) claiming I bought a Technology Avancement Device off the Internet. Now this collection agency says I bought a DTV Receiver and I did not have it activated, so now I need to pay them $150. I refuse since I did not buy this Product, and they say it will ruin my credit if I don't pay. I have asked for Proof that I bought it, and if I did, I will gladly pay them - but I know I haven't. And they just keep calling and saying they will ruin my credit history. What can I do to stop them. I am at a point to just pay them and get it over with - but if that happens, I'll be sending them 15000 penny's in a wooden box. Thanks in advance for any advice.
Nautilas2004, Louisiana 5/15/04

A. Collection agencies must show you proof of your debt. They also are not allowed to threaten you and must stop contacting you at your request. You can file a complaint with the Federal Trade Commission and the Louisiana Attorney General's office.
Andrew Shain 5/17/04


Q. When I went to the Mecklenburg County Tax Office to pay my vehicle fee, I discovered that I was out of checks; I was handed a sheet with a graduated schedule of "convenience fees" if I chose to pay with a credit card. To my astonishment, I saw that I would have had to pay $16 just for the privilege of using my credit card which already charges me interest! At the highest listed payment, one could be charged this additional fee of nearly $2,200. I am flabbergasted that one of our public officials was given the authority to choose a company (Official Payments Corp.) that processes these fees. This appears, to me, to be a flagrantly irresponsible decision made on behalf of Mecklenburg County's taxpayers.
Ted, Charlotte 5/11/04

A. Ted, County officials said in April they are considering a new credit-card payment system that does not require high convenience fees. Official Payments does not get any money from the county for handling credit payments. The company makes money from the fees changed taxpayers.
Andrew Shain 5/12/04


Q. Received an e-mail from " Dark Profits.Com. with an e-mail address. It is headed as "Important Notice". To Quote,"We have just charged your credit card for money laundry service in amount of $234.65 (because you are either child pornogrophy webmaster or deal with dirty money which require us to layndry (sic)then send to your checking account) If you feel this transaction was made by our mistake, please press "No". If you confirm this transaction, please press "Yes" and fill in the form below. It has 2 boxes for filling in credit info. Can something be done about this obvious fraud attemp? This is the second time I've gotten one of these. I have SpyBot, which caught it. I can forward this to you, if you would like. A response would be appreciated.
John Lambert, Harrisburg, NC 10/10/03

A. John -- You received a piece of spam (unsolicited commercial e-mail) that's going around the country. There's not much you can do except click "delete." Never provide personal financial information in response to an unsolicited call, e-mail, mailing, etc. A popular scam lately has been e-mails that appear to come from legitimate businesses (Bank of America, Best Buy, eBay) asking consumers to confirm account information. If you get an e-mail like this, call the company to confirm the message. Or you can just click delete.
Andrew Shain 10/13/03


Q. My roommate keeps getting calls from creditors regarding a "private label account." He swears he's taken care of it. These calls have really began to disrupt the lives of myself and my other roommate. Is there anything I can do to get them to stop calling? The only response I've gotten from them is "you should tell your roommate to be more responsible with his finances." Thanks for the help!
Anonymous 10/06/03

A. If the debt has been repaid, get a letter from the creditors saying so. If the calls continue, I'd use the letter as evidence when filing complaints with the Federal Trade Commission and N.C. Attorney General's office. (For contact information, see my "Consumer Resource Guide" on my Web page)


Q. I am receiving threatening, harassing phone calls from a collection agency concerning a debt with Direct TV. A Direct TV representative applied charges to the incorrect account. This was verified by a Direct TV supervisor in a telephone conversation with me. My account with them was closed in May 2002. This charge was applied in May 2003 and is related to an address in another state no less. A telephone call with a Direct TV supervisor was supposed to have corrected this problem but we are still receiving harrassing calls from the collection agency. How can I correct this problem? How do I check to see if this went against my credit rating? What follow-up recourse do I have? Thank you
Robert, Kannapolis, N.C. 10/05/03

A. Robert -- I suggest getting a letter from DirectTV, saying the debt no longer exists and send a copy to the collection agency. If their calls don't cease after that, file complaints with the N.C. Attorney General's office and the Federal Trade Commission. (You can find numbers for both in my "Consumer Resource Guide" on my Web page.

Credit debts: Q & A

Q. Hello - I have had a family emergency (a death) and have fallen behing on my debts as a result. At this point, I'm so far behind that bankruptcy is the only solution for me. My credit is already score is bad as a result of the late payment history, which in the past was always very good. Will I always have bad credit as a result of filing for bankruptcy? Will I ever be able to get a house of my own?
Lee, Charlotte, NC 3/16/04

A. A bankruptcy will remain on your credit history for 10 years. Depending on the lender and your recent payment/employment history, you should have a chance to get a house several years after the filing, though expect to pay a high interest rate.
Andrew Shain 3/29/04


Q. Fifteen years ago, I had some trouble paying off some credit card debt. I had some charge offs and late pays but cleared everything up...or so I thought. My parents recently received a letter addressed to me from a collection agency on behalf of a company with whom I used to have a credit card. They want payment for a $400 outstanding balance. I check my credit regularly with all three agencies and it hasn't appeared for at least 8 years. The SSN is correct on the letter but I don't have any records to verify the amount. What should I do?? If I pay it, it will have a new Date of Last Activity and start showing up on my credit report. Why couldn't they find me years ago?? I've never hid from any creditors. If fact, I'm married and a home owner (very easy to locate).
Anonymous, Charlotte, NC 2/18/04

A. If the debt was charged-off by the credit-card company, a collection agency can ask you to voluntarily pay the money at any time. Even though nothing appears on your credit record, the debt still exists. (The charge off remained on your credit record for seven years.) If the debt is that old, send a notice to the collector to stop contacting you and ignore further requests. If you promise to make payments, they collection agency could start legal proceedings against you if you fail to follow through.
Andrew Shain 3/23/04



A. Debt collectors are allowed to call you at the office, but must stop if they have a way to reach you during non-work hours or they know your employer disapproves of the calls, the N.C. Attornet General's office said. If you have a complaint about a debt collector, call the N.C. Attorney General's office at (877) 5NO-SCAM or (919) 716-6000.
Andrew Shain 3/09/04


Q. The guy that I was previously dating asked me to rent a car for him (he did not have a credit card) and that he would pay me the cash. I rented the car in my name. Over the course of 4 weeks, he paid me $300 of a $750 bill. We have since broken up. Is there any possibility of my recovering the unpaid money?
Anonymous, Chicago, Illinois 2/18/04

A. Not sure there's much you can do except keep asking him for the money. You could take him to small claims court for the remaining $450. You can represent yourself, but there are fees that might eat into the cash you're seeking. For more information, visit
Andrew Shain 2/19/04


Q. Hi - I have a lot of credit card debt and it's starting to get overwhelming. How much of an adverse effect will using the services of a credit counseling service have on my credit report, which is otherwise good. I have never been late nor missed a payment.
Douglas, Charlotte 10/30/03

A. As long as you're current on your accounts, using a counseling service will not hurt your credit score with most groups, say credit-rating bureau Experian. Still, some creditors might consider you more of a risk when you apply for loans or credit cards. You can always add a statement to your credit record to explain the circumstances for using a counselor.
Andrew Shain 11/04/03

Students are over their heads with debt

Fed-loan limits force higher rates on some

Nelly Perry went to massage school convinced she could avoid the tens of thousands in loans her friends amassed at traditional universities.

She followed the advice of counselors at two schools, borrowing more than $12,000. The process was so easy that she applied for one loan over the phone. But, unlike her friends' loans from the federal government, Perry's came from private lenders charging interest rates of between 8.5 percent and 13.5 percent. Plus, the loan terms required repayment while she was still in school.

"I got overwhelmed," said Perry, 27. When loan collectors began harassing her about missed payments, she moved back home to Milwaukie, Ore., and sought help from a credit counselor. "You feel like there's a ton of bricks on you. You feel like you can't breathe."

With the cost of higher education skyrocketing and federal student loans capped at 1992 levels, more students are turning to private loans to pay for trade schools and even traditional colleges. The loans are the fastest-growing type of student aid, and lenders are scurrying to cash in on the highly profitable products, offering easy online access or jockeying to get on a school's list of preferred lenders.

The trend alarms financial aid advisers who fear students are unwittingly taking on too much debt. Some, like Perry, eventually fail to repay the loans on time. That trend could worsen if interest rates continue to rise.

In addition, regulators are investigating allegations that some trade schools and their lenders have not adequately informed students about the high interest rates and extra finance charges. Authorities in Oregon, California and Pennsylvania this year probed the recruiting and financial aid practices of trade schools owned by Illinois-based Career Education Corp. The investigations follow complaints from students who said they did not know they were taking out loans with 15 percent interest rates.

Career Education Corp. has said it is cooperating with Pennsylvania investigators but calls allegations by California regulators "grossly exaggerated." Lenders say they follow federal disclosure laws and maintain students simply aren't carefully reading loan disclosures. Nonetheless, the loans worry educators and regulators.

"I've seen interest rates as high as 26.5 percent," said Deborah Godfrey, head of the closed schools and student-tuition-recovery-fund unit at the California Bureau for Private Postsecondary and Vocational Education. "Unfortunately, students are very, very, very poor consumers."

Students are resorting to private loans partly out of necessity. Since the early 1980s, college tuition has risen twice as fast as inflation, yet Congress has not changed the maximum a first- or second-year student can borrow since 1992.

As a result, private loan activity grew nearly eightfold between the 1995-96 and 2003-04 school years, according to a College Board survey, from $1.3 billion to $10.6 billion. Private loans now represent about 9 percent of all student financial aid, the College Board says.

Lenders say a growing number of students don't fit traditional molds that the federal loan program envisions. Forty percent of students attend school part time, up from 28 percent in 1970, said Melissa Bassett, executive vice president of Student Capital Corp., a company launched in June to market private student loans. Other students borrow to attend trade schools that either don't qualify to receive federal aid or charge more than $30,000 per program, far in excess of the annual federal loan limits.

But alternative loans differ significantly from federally backed Stafford and Perkins loans and can carry significantly higher risks.

Federal student loans currently carry interest rates of between 4.7 percent and 6.1 percent. The government can raise them in the future, but never higher than 9 percent.

Federal loans are typically more flexible, offering students a chance to postpone repayment if they return to school, lose their job or fall into financial trouble. They also can be consolidated, after borrowers graduate, into one payment. And federal rules require that applicants be verbally counseled about the loans' interest rates and terms of repayment.

Private student loans, on the other hand, carry adjustable interest rates with no caps. Their finance rates usually start at prime rate, now 6.5 percent, and add zero to 6 percentage points or more, depending on the student's credit rating and whether a relative will co-sign for the loan.

Monday, August 13, 2007

Color of Money Live With Michelle Singletary

Julyette Jacobs
Investor education director at the Financial Literacy Center

Tuesday, January 4, 2000 at 2 p.m.

Let's start the New Year off with a financial free-for-all. Let's talk. Do you have debt problems? Can't figure out where to start investing. Are you undecided about co-signing for a friend or relative? And, just what should you do to save more. The investor education director of the Financial Literacy Center will be on hand to help answer these and other basic financial questions. She'll also share some financial wit and wisdom from the center's "Loose Change" 2000 calendar, which is filled with 12 months of money-saving tips that can help you prepare for a financially fit century!

Michelle Singletary: Welcome again to a discussion about money. Already I've heard from a number of readers who like the idea of having a year-long guide to get started on becoming financially fit. So, bring on your questions but please remember we are not allowed to give specific investment advice ---just general stuff to start you on your way.

Arlington, Va.: Michelle, I think your column is so great! With your help, last year I set two financial goals: pay off credit cards and start a mutual fund IRA for retirement. Goals accomplished. This year: my goals are to pay off my car -by April- and pay off my student loan -by Dec-. As the car loan is not set to be paid until 2 more years, and the student loan is set to be paid off in like 15 years, I think these will be major accomplishments. I just cannot STAND living with debt so that's why I want to massively pick up the payments. I also feel my life will be so much more free after paying off these things. Thank you for such a superb column. Keep up the GREAT WORK!

Julyette Jacobs: Congratulations! You are providing a great example of how people need to list their debts, and set goals for paying them off! Once you get your debts behind you, you'll be able to determine what savings goals are important to you.

Bethesda, Md.: I understand that 401-k-'s are good way to dollar cost average. I contribute the maximum percentage allowed of each paycheck, and as a result, my 401-k- reaches the total dollar limit around September. My theory for doing this is that I get my money in the market earlier, but I was wondering if this defeats the advantages of dollar cost averaging -since I'm putting nothing in for the last three months of the year?

Julyette Jacobs: In the world of finance there are always various strategies that can be used. We think getting your $ in the market as soon as possible is to your advantage,even though this means you might not be using dollar cost averaging throughout the entire 12 months of the year.

Hyattsville, Md.: We have a ninth grader in high school and we've been saving primarily through savings bonds. We hope that there will be sufficient funds -including scholarships and partial or full scholarships- available to help pay for our child's college education but there are no guarantees we'll have it in four years. We want to try other ways to save other than savings bonds.

What's the best way to save the maximum possible for our child's college education? Another factor in the mix here is that we will be searching for another house -our last house before retiring in the next 5-10 years- this year. Should we hold off on buying another house -with a larger mortgage payment- and use that money to save more for college?

Thank you for your assistance.

Julyette Jacobs: Part one-because there is only 4 yrs. left until the child heads off to college, Year 1 college money needs to stay in something safe like a savings bond. $ for years 3 and 4 could go into a stock mutual fund. We suggest you talk to a qualified personal financial professional about your specific situation, and what mutual funds to use.

Part 2-Set your own personal priorities on when is the best time to buy a house. You need to talk to that qualified financial professional.

Silver Spring, Md.: Recently, I opened a 24 month Retirement account CD for $2500.00 Should I have opened a ROTH IRA instead?

Julyette Jacobs: The Roth IRA is a great way to save for retirement, depending upon your age,tax bracket,income level, and what other retirement savings you have. It is not possible for us to tell you that your choice was better or worse than a Roth, w/o knowing a lot more about your personal financial situation. The Roth allows you the ability to accumulate earnings tax-free, if left in the account for at least 5 years.

Washington: Good afternoon Ladies,

I am sick of debt, so I have devised a plan to pay off one bill at a time and put more funds into my 401K account since our company is matching it this year. In addition, I plan to invest in muni funds and the stock market in a small way, but it beats nothing.

I bring my breakfast, lunch and snacks to work and I will definately be cutting back on unecessary expenses -dinners, etc.- Are all the above a good idea? Thanks for this opportunity

Julyette Jacobs: I bring my lunch too- and my coworker keeps feeding me snacks! First, to pay off the debt most efficiently list each credit card, the interest rate, and the amount owed. Start paying any extra $ you have, on the credit card with the highest interest rate, while you continue paying the minimum on the other cards. Continue this procedure until all debt is paid off.

At the same time,contributing to your 401(k) so you get your employer's entire match is the key to accumulating $ for your future.

For additional information on paying off debt go to

Michelle Singletary: Many people want to know how to get started in the New Year with getting their financial house in order. What are the first steps people should take in developing good, keepable financial goals?

Julyette Jacobs:
1. Write down your financial goals.
2. List any credit card debt, interest rate of each card,and how much you owe. Then devise a plan to start paying it off.
3. Review last year's budget. Determine where you can make adjustments, so you can move toward your goals.
4. Review your will or estate plan.
5. Gather documents for tax season.
6. Establish a clean budget from all this information for 2000.

Determine how you want to increase your financial knowledge, like reading Michelle's column, using financial websites,and going to the library.

Bethesda, Md.: Hello,
I'm a first-time investor looking to invest in the stock market. I do not want to put money into companies that exploit workers-others or the environment but I do want to earn money on my investment. Can you point me to some successful and socially-responsible groups that specialize in this area? -If you can't give names, perhaps you could tell me where I could find them myself.- Also, how do these types of investments-mutual funds stack up against typical blue chip-'coporate' investments? Thanks.

Julyette Jacobs: There are specific mutual fund companies that specialize in socially responsible funds. Also, some mutual fund companies have one or more funds that meet socially responsible criteria. Michelle can provide more specific information on such funds.

Michelle Singletary: For more information on socially responsible investing you might want to check out a column I wrote on this very topic. You can find the column on this web site by going to the business section, then list of finanical columns. Go to the archive for The Color of Money. I wrote the column Jan. 10,1999. You should also check with the nonprofit group, Social Investment Forum. The group is based in Washington and tracks the performance of socially responsible mutual funds. Fortunately, these funds are doing much better and are producing some great returns. You might also want to check out funds by the Calvert Group and Citizens.

Upper Marlboro, Md.: I currently make allot of money but find myself in 25,000 worth of credit card debt. Most of my debt has come from personal travel. I currently have a 401k, a roth IRA and several mutual funds. I also have a conslidation loan. After I received my consolidation loan I closed all credit cards later to reopen them and max them out in less than a year after receiving the loan. I can say I have truly learned my lesson. My question is should I borrow from the 401K to get my debt managable or should I pay the monthly amount plus a little more to re-establish a payment history. Right now, all my payments are late and all credit cards are over the limit because of interest. I am as far as 90 days behind of 2 credit cards. HELP!!

Julyette Jacobs: Withdrawing $ from your 401(k) is generally not a good solution because you will have to pay federal and state income taxes, plus a 10% penalty (there are some exceptions, depending on your age). This could amount to an almost 40% loss of the $ you withdraw.

If your plan offers a loan, you should explore the terms with a debt counselor or personal financial professional.

Truly, we think your first step is to get some debt counseling from a qualified professional who can understand all aspects of your current situation.

Michelle Singletary: If someone is in a lot of debt should they still try to invest and save? We are told so often the importance of investing soon and consistently but if you are loaded down with debt how can you do that and pay off the debt? And, if you choose to pay off the debt aren't you wasting time your money could be in the market?

Julyette Jacobs: When you have debt, the first thing you need to do is to list all the debt, and pay off the highest interest rate credit cards first.

The main place you need to look at saving, prior to paying off your debt is in a qualified retirement plan, like a 401(k), 403(b), especially if the plan has an employer match.

So work at paying off that debt then take the money you were using to pay debt and start putting that into your mutual funds.

Alexandria, Va.: I'm afraid I'm paying too much to my financial planner, about $2,500 a year above stock-fund loads and fees on a $300,000 portfolio. Is this too much and how do I go about finding another planner.

Julyette Jacobs: First, I would talk to your current planner about your concern with the fees to see if he/she is willing to reduce the $2,500 annual amount. You should also find out how much of a load you are paying on the funds in which you are invested.

After that, if you stil feel that you are not getting service = to this expenditure you should talk to family and friends and find recommendations of other financial professionals to interview.

Washington: It's been said that those who forget history are condemned to repeat it. Now that it is the conventional wisdom, dispensed by Washington Post Guru's like Michelle and James Glassman -now departed- that stocks held for the long run are "safe" investents, aren't people getting a bit too complacent, as they did in 1929. Like bubbles of the past, I can see this all ending very badly for a lot of people, maybe the majority. Shouldn't the advice of you and your colleuagues carry a mandatory "may be hazardous to your wealth" warning.

Julyette Jacobs: Each person needs to look at their own goals and comfort with investment risk to determine how they will invest their money. There is definately risk in investing in the stock market. There is also inflation risk if you invest too conservatively and do not have enough money to reach your goals. Again, we suggest that each individual meet with a personal financial professional who can best give you assistance on your own situation.

Washington: I was wondering where I should go to get financial counseling. I know that some stock brokers and mutual fund groups have advisors, but how much are they biased by their employers? My bank has financial advisors, I think. Would that be a good choice? Thanks for your help.

Julyette Jacobs: People should search for a good financial professional like they would for a good doctor. Ask family and friends for recommendations. Check professional associations to obtain ideas and leads. Interview carefully 2-3 of your choices until you find someone that you are comfortable with and can trust. A key trait is someone who is most concered with you and your personal needs.

Michelle Singletary: How do you make the decision between trying to pay your debts or filing for bankruptcy? Is there a benchmark? And, for some people isn't bankruptcy the best option if they are overwhelmed with debt and no end in sight to pay it off?

Julyette Jacobs: You really need to talk to a debt councelor so you can truly understand the long term ramifications of declaring bankruptcy. They can assist you in looking at your overall circumstances and set a plan of action.

Arlington, Va.: How can you become debt free when one spouse is cautious and the other is not?

How long does bankrutcy affect your credit?

Julyette Jacobs: You and your spouse need to honestly sit down with each other and perhaps engage a third party to define your combined financial goals. You will need to put these down on paper and then start toward paying off any debt. One successful couple we know meets once a week to discuss their budget and review their goals. If you do not get your joint financial life under control it will continue to affect your overall relationship.

Washington: I am 37 years and single and would like to buy a house this year. My credit card debt is about $10,000 and am trying to pay those off, in addition I know I have to restore my credit worthiness. I do not have the cash for a down payment but can get it from my 401-k- savings plan. I understand this is not the best decision for me to make, do you have any suggestions?

Julyette Jacobs: Before you purchase a house get your debt under control-paid off. Houses have a lot more cost than just the original purchase and the mortgage payment. There is property taxes, utilities, repairs, etc... You need to understand all of these before embarking on home owership. Personally, I believe strongly in owing your own home, but withdrawing money from a 401(k) is not recommended as you will generally end up paying 40% of what you withdraw to taxes and penalties. So, set Step 1: Debt reduction. Step 2: Start saving for that downpayment. Step 3: start looking for that house. GOOD LUCK!

Michelle Singletary: Where can people go to find a reliable debt counselor? Should people stay away from firms that promise to "repair" consumers credit?

Julyette Jacobs: Look at the website of Debt Counselors of America ( and National Foundation for Consumer Credit ( There is also Debtors Anonymous ( DCA has warnings on their site about these credit related scams.

McLean, Va.: To the person maxing their 401k contributions around September--if your employer is matching your contributions, you're missing out on some free money.

Typically an employer will match the first five percent or so. It's better to stretch you payments over the whole twelve months so you get your employer match every month. It shouldn't take too much fiddling--maybe lowering your contribution from twenty percent a month to fifteen or so. Your Human Resources department can advise you best on how much the company matches and how to adjust your contributions accordingly.

Julyette Jacobs: Thanks for your reply, and pointing out that the person wants to do what is needed to receive the full company match. We were thinking mainly about getting the $ invested.

Arlington, Va.: What is a mutual fund and where can I start one?

Julyette Jacobs: A mutual is a group of investments managed by professionals, according to stated investment objectives. When you buy shares in a mutual fund, you are buying a slice of the fund's total investments. Contact a financial professional for a good recommedation, that fits your needs. We continue to recommend financial professionals, because each person has a very unique situation (age, income, goals, debt, etc.)

Columbia Md.: I'm not in debt -- always pay off monthly credit card bill, am working first permanent job after grad school, no school loans, only have monthly car loan payments that are easily covered assuming that I continue to work. No rent because I'm still living with family. This leaves me a relatively large fraction of my paycheck available.

Yet I feel hesitant to put money in seemingly unaccessible places -- eg I know I should start investing -- or to change my situation to where less is available or to take loans, eg. perhaps renting-buying a new place. I think it is from being very unfamiliar with the financial world and taking risks, I think.

Do you have any suggestions on how to gauge whether a given amount of debt or spending is reasonable or not? Suggestions on an approach to becoming more comfortable with finances and risk?

Julyette Jacobs: Increase your knowledge and education. There are many books, websites ( newspapers (Michelle's and other columns)classes and seminars, newsletters and tv programs. We've found from our experience the more they learn about finance the more comfortable they become in taking steps to enhance their own financial future.

You may also want to sit down with a qualified financial professional to discuss your needs. A pat on the back to you, for staying out of debt!

Michelle Singletary: Man, so many questions, so little time. So sorry if we didn't get to all your question but I'll be back in two weeks. Mostly, thanks to Ms. Jacobs and the folks at Financial Literacy Center for taking the time to answer some very good and thoughtful questions. Now don't forget that there is an archive of my column on this web site. I've dealt with many of the issues raised today and hope to do more in the future. Also feel free to e-mail me with suggestions for future columns. I'm always looking for ideas and people to profile. Take care and I wish you good financial health!!!

College Kids and Credit

If your teenager headed off to college this fall, you probably already knew many of the new experiences that awaited him or her on campus. New friends, classes, all night cram sessions and stale pizza–all the staples of college life. You probably went shopping for dorm essentials and talked to your child about the importance of getting good grades and regularly attending classes. But another topic that you should discuss is that of money and credit card management.

Today’s college students can be overwhelmed with credit card offers when they walk onto campuses. On many campuses there are booths offering free food, school supplies and T-shirts to persuade students to apply for a credit card. For credit card companies, visiting college campuses is a sound investment–most college students with credit cards will remain loyal to their first credit card company for several years.

When you consider that credit card companies tend to make their profits from long-term customers that carry a revolving balance, college campuses are the ideal location for credit card solicitors.

Many college students are not yet responsible enough to manage credit and have their own credit cards. But, by educating your children in advance, you will help them act responsibly when they do receive a credit card. If you’ve been preparing your child to handle credit, the transition to independence will be reasonably painless. Here are some simple tips to share with your child:

• One card is sufficient.
• Make sure when applying for a credit card that tuition and allowances are not included as “income.”
• The higher the income level, the higher the credit limit will be.
• Pay all your bills on time! The quickest way to damage your credit history is by not making timely payments to creditors.
• Don’t let anyone borrow your credit card–even your best friend. You will be held responsible for all charges.
• Record all transactions so you’ve got an idea of how much the bill will be at the end of the month.
• Keep the card active by periodically charging (and then paying off) small purchases.
• Create a spending and budget plan–monthly credit card payments should never exceed 20% of your monthly income.
• If credit card debt occurs, ask for help. Don’t wait until the accounts have been sold to a collection agency before seeking help.
• Don’t forget that credit is a serious matter. If debt is unavoidable and bankruptcy is the only alternative, it will remain for up to 10 years on your credit report.

If you haven’t talked to your teenager about credit, or if you have younger children still living at home, here are some simple ways to begin teaching them about good credit:
• Consider making your teenager an authorized user on one of your credit cards. S/he will receive a credit card with his/her name on it, but s/he will be tied in directly to your account. You will be held liable for any charges s/he makes on the card, but it is a good learning tool. Make sure s/he keeps a record of what they spend and that s/he can afford to pay you for the items purchased on credit.
• If your teenager is older and has demonstrated good financial responsibility in the past, consider cosigning for a credit card. This card will be in your child’s name, but again, you are ultimately liable if s/he cannot pay for his or her purchases. However, this card, unlike the authorized user card, allows your child to begin building his own credit history, because s/he is the primary user on the account.

Most importantly, remember that learning to use credit is a new experience for many college-bound students. While it may seem nerve racking to let your child open credit cards in his/her own name, it is an invaluable learning tool for the real world. Talk to your child about using credit responsibly and about the consequences of collecting a lot of debt. Make your child comfortable when s/he is asking for advice regarding good money management. By doing so, your child will be more at ease and possibly inform you of credit problems before they get out of hand.

Sunday, August 12, 2007

Counselor shortage: Bankruptcy filers face delays

A new era of bankruptcy law begins today amid fears that a lack of qualified credit counselors could lead to major service delays and paid "counseling'' conducted solely by phone or automated Internet programs.

Under the new U.S. bankruptcy law, people seeking personal bankruptcy must first attend mandatory credit counseling at approved agencies.

But a Herald review shows that only one Massachusetts-based credit counseling agency has been approved so far that can provide in-person counseling for local people seeking bankruptcy.

And that firm - Community Service Network Inc. of Stoneham - admits it's currently understaffed and needs infrastructure improvements to handle inquiries from potential customers.

Meanwhile, the five other credit counseling agencies approved to do business in Massachusetts are based in Georgia, Texas, Michigan and California - and anyone using their $50 or more counseling services will have to do so via phone or Internet.

"There's a lot of disorganization and a lot of scrambling going on,'' said Travis Plunkett, legislative director of the Consumer Federation of America. "It could take months or longer to work out (the problems) in this new system.''

Plunkett expressed concern that those who want face-to-face counseling won't be able to get it - and those who prefer phone calls may find service lines jammed.

"There absolutely could be a shortage'' of approved credit counselors, said Deanne Loonin, an attorney with the National Consumer Law Center in Boston. "We have some pretty serious concerns.''

The U.S. Trustees, an arm of the Justice Department that is overseeing the program, has approved only 50 credit counseling agencies nationwide to handle the mandatory counseling services. More are expected to be approved in coming weeks and months.

But the Internal Revenue Service has said it may move to yank the nonprofit status of the largest credit-counseling agencies - a move that could further strain the new system as it struggles to get off the ground.

Jane Limprecht, a spokeswoman for the U.S. Trustees, said her office doesn't think there will be major problems in coming weeks. She added the U.S. Trustees are working hard to implement tough counseling requirements and guidelines.

Bankruptcy lite: Dark side of credit counseling - Part 3

Barry-Smith said not all counselors clearly stipulate that debt management or debt consolidation can harm someone's credit rating.

David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, said the industry is aware of past abuses by some counselors and is cracking down on the problem. "We have very strong standards,'' he said of his membership requirements.

But Plunkett said one of the problems is simply trying to determine which counselors provide quality work and which don't.

"I've covered this industry for seven years,'' he said, ``and even I have a hard time figuring out'' who provides good services.

Bankruptcy lite: Dark side of credit counseling - Part 2

Last year, Reilly's office cracked down on one Massachusetts credit counseling agency, Agawam-based Cambridge Credit Counseling Corp., which the attorney general claims had charged unfair fees and ran operations like a for-profit company. Reilly's lawsuit against Cambridge Credit is still pending.

Credit counselors, who legally must be nonprofit in Massachusetts, are supposed to help customers with debt management and other services. An agency typically negotiates with creditors for lower interest rate payments. Customers then hand funds over to counselors, who in turn pay off creditors.

But Barry-Smith said counselors sometimes charge upfront fees of $150 to $1,500, with monthly fees ranging from $30 to $50.

Often the fees are so high, said Barry-Smith, that they wipe out any savings customers may have gotten from lower interest rates negotiated by credit counselors.

Deanne Loonin, a staff attorney at Boston's National Consumer Law Center, said the new bankruptcy law sets no limits on fees, though the statute says they should be "reasonable.''
To make matters worse, someone who uses debt management - with payments negotiated and made through credit counselors - may see points knocked off their credit ratings for using a third party to help manage their finances.

A spokesman for Trans Union, one of the major credit-rating bureaus, acknowledged that debt management can sometimes harm consumer credit scores, depending on how it's reported to the agency by creditors.

He gave no other specifics.

However, a spokeswoman for Experian, another credit-rating firm, said her company does not view debt-management as a negative factor in credit scoring.

Nonetheless, the message a consumer sends to banks and other lenders when using debt management services is clear: I needed help to pay my bills.

Debt consolidation - in which people combine credit-card debts into one new loan account, usually at lower interest rates - may also knock a few points off of someone's rating. The theory is that people have taken out a new loan - and therefore it's a new risk.

Bankruptcy lite: Dark side of credit counseling

To thousands of over-extended consumers every year, it looks like a face-saving alternative to the unpleasant consequences of personal bankruptcy.

But the relentless come-ons from credit counselors to debt-ridden Americans rarely mention the exorbitant fees that are often involved, or the industry's dirty little secret: third-party debt management can be hazardous to your credit score.

Attorney General Tom Reilly's office routinely receives dozens - and sometimes hundreds - of complaints a year about shady credit counselors known for lining their pockets at the expense of desperate customers.

But next week, a new federal law will require those who are seeking personal bankruptcy to first attend credit counseling sessions - forcing financially vulnerable people into the clutches of an industry with a questionable record.

It is so riddled with unscrupulous operators that the Internal Revenue Service said earlier this week it may yank the tax-exempt status of about 20 credit-counseling firms nationwide - accounting for half the industry's revenue - due to hundreds of complaints about deceptive business practices.

"Congress couldn't have picked a worse time to mandatate use of credit counselors,'' said Travis Plunkett, legislative director of the Consumer Federation of America. ``There are a number of predatory (counselors) out there.''

Plunkett and other watchdog groups praised the Justice Department's U.S. Trustees for coming up with a list of what it considers legitimate nonprofit credit counselors who must be used by those seeking personal bankruptcy.

The new law, backed by the loan industry and OK'd by Congress in March, requires that any debtor who files for bankruptcy after Oct. 17, 2005, must undergo credit counseling within six months before they file for bankruptcy.

But Chris Barry-Smith, an assitant attorney general in Reilly's office, said his office plans to be "diligent'' in monitoring what happens due to the industry's dubious record.

"A number of states - including Massachusetts - are going to keep a close eye on matters,'' he said.

Saturday, August 11, 2007

Gov. Easley Signs Senate Bill 353

Gov. Mike Easley today launched a new effort by the Department of Revenue to collect $150 million in back taxes during the next two years. In a ceremony held at the State Capitol, Gov. Easley signed into law SB 353 or 'Project Collect Tax' -- an initiative that will focus on collecting overdue individual and corporate taxes.
"This is money that would pay the cost of educating our children, of paving our roads and highways, of keeping our air and our environment clean," Easley said.
Through Project Collect Tax, the Department of Revenue will begin to collect money owed from delinquent taxpayers who have ignored requests for payment and repeated efforts by the Department to reach a reasonable agreement. The new law allows the Department to charge delinquent taxpayers an additional fee that will help cover the costs of collecting these taxes.
Starting August 22, 2001, the Department will send a notice to every taxpayer who has an account with the Department that is at least 90 days past due. The Department estimates there are at least 490,000 such accounts and expects to collect $150 million in back taxes over the next two years.
"Ninety percent of our citizens and businesses pay their taxes on time and according to the law," said Revenue Secretary Norris Tolson. "The other ten percent are forcing us to use honest taxpayers' money to subsidize them. That day is over."
Sen. John Kerr, Rep. Gordon Allen, and Rep. Joe Tolson joined Gov. Easley and Secretary Tolson for the bill signing ceremony to kick off the effort.
After receiving a notice from the state Department of Revenue, taxpayers will have 30 days to contact the Department and settle their accounts. After those 30 days, the Department will begin its full-scale effort to collect any funds that have not been paid and a 20 percent collection fee will be imposed. Under Project Collect Tax, taxpayers who already have payment plans with the Department of Revenue to settle tax debts will not have to pay the collection fee.
"We intend to be fair, honest, and straightforward in all our dealings with taxpayers -- just as we always have been," said Tolson. "However we cannot allow the number of unpaid tax accounts to continue to grow. It is not fair to honest taxpayers and it is a disservice to future generations of North Carolinians."

Date: 8/20/01

Project Collect Tax

Project Collect Tax is an initiative to boost compliance with the state revenue laws. The project focuses on the collection of delinquent tax debts over 90 days old.
Based on a new law recently passed by the NC General Assembly, every delinquent taxpayer will receive a special notice from NCDOR informing them of the amount of the debt and allowing the delinquent account holder 30 days to pay in full or set up a payment plan. If the debt is not paid within the allotted time, a 20% fee will be added to the total tax debt. In some cases the account may be referred to a private collection agency for further action.
In the coming months, NCDOR plans to invest in new personnel and technologies to aid citizens in becoming compliant with the state's revenue laws. Increasing compliance with these laws benefits every North Carolinian by ensuring that each citizen is treated fairly and that vital government entities have adequate resources to accomplish their missions.
The following links provide more detailed information regarding Project Collect Tax.