Los Angeles Default Rates Marginally Increased in March; the Other Four MSAs Decreased New York, April 17, 2012 – Data through March 2012, released today by S&P Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults showed that, with the exception of bank card, all loan types saw a decrease in default rates for the third consecutive month. In addition, the four that did decrease posted their lowest rates since the end of the recent economic crisis. The national composite declined to 1.96% in March from the 2.09% February rate. The first mortgage default rate decreased from February’s 2.02% to March’s 1.88%. Second mortgage and auto loans default rates also declined from 1.20% and 1.22% in February to 1.03% and 1.11% in March, respectively. Bank card was the only loan type where default rates increased in March to 4.47% from its 4.41% February level.

“The first quarter of 2012 was largely positive for the consumer,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “Not only have we resumed the downward trend in consumer default rates that began in the spring of 2009, but we appear to be reaching new lows across most loan types. The first three months of 2012 show broad based declines in default rates with first and second mortgage, auto and composite default rates all reaching post-recession lows.

“The first mortgage default rate fell by 14 basis points in March, bringing this rate below the prior August 2011 low.  The second mortgage rate fell by even more during the month, 17 basis points.  Both second mortgage and auto default rates are also at their lowest in the three-plus year history of these data.  While the bank card rate rose, it was not by much and is still close to the recent low reported just last month.

“Four of the five cities we cover saw their default rates drop.  For the third consecutive month, Chicago saw a decline, moving from 2.84% in December to 2.35% in March.  That’s almost half a percentage point and one of the two cities to post new lows. New York and Miami both fell for the second consecutive month. New York decreased slightly from 2.04% in February to 2.01% in March. Miami dropped almost a full percentage point, from 4.54% in February to 3.62% in March.  While it still remains the highest default rate, Miami is the other city to hit a post-recession low.  Dallas moved down from 1.61% in February to 1.44% in March and retains the lowest rate among the five cities we follow. Los Angeles was the only city where default rates marginally rose, from 1.87% to 1.88%.”

The table below summarizes the March 2012 results for the S&P/Experian Credit Default Indices. These data are not seasonally adjusted and are not subject to revision.

The table below provides the S&P/Experian Consumer Default Composite Indices for the five MSAs:

Collections & Credit Risk | Friday, April 13, 2012

The Deloitte Consumer Spending Index climbed higher in March, marking only the third monthly increase in the past 12 months.

The Index tracks consumer cash flow as an indicator of future consumer spending.

“The Index turned upward as the pace of declining new home prices slowed,” says Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index.  “Despite this improved performance, there is little evidence the housing market is picking up.  On the positive side, initial unemployment claims continue to move lower from a year ago.”

According to Deloitte’s analysis, recent developments that indicate consumer cash flow may be strained despite a steady increase in real consumer spending include:

•    Real incomes fell 0.1% in February even as consumer spending rose, and are up just 0.3% from a year ago.
•    The savings rate has fallen from 4.7% to 3.7% over the past two months, adding roughly $110 billion to consumer spending. Without that decline, instead of rising by 0.7%, spending would have fallen. Real consumer spending is up 1.8% from a year ago.
•    Gasoline prices continue to rise. The average price of gasoline rose 4 cents last week to $3.97 a gallon up $0.68 since mid-December.
Highlights of the Index include:

Tax Burden: The tax burden continues to rise slowly even as tax revenues collected by the Federal government stagnate. Much of the increase is coming at the state and local level where tax increases have been needed to meet balanced budget requirements. The tax rate is up 10.15% from a year ago.

Initial Unemployment Claims: Claims continue to move lower from a year ago, and were at 354,750 in the most recent month. Falling jobless claims are one of the bright lights in an otherwise darkening outlook for consumer finances.

Real Wages: With energy prices rising, real wages continue to fall, and are down 1.2% from a year ago.

Real Home Prices: Prices fell slightly in the most recent month, dropping 1.2% from a year ago, which is less than last month’s decrease of more than 12%. A slowdown in the pace of real home prices is a positive as it becomes less of a drag on the Index.

The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — rose to 1.80 from an upwardly revised reading of 1.52 the previous month.

“The warmer weather is helping consumers shake off the winter doldrums, but they remain vigilant about their pocketbooks, particularly in the face of rising gas prices this spring,” adds Alison Paul, vice chairman, Deloitte LLP and  retail & distribution sector leader. ”In our third annual spring survey of U.S. households, consumers told us they are feeling slightly better about the economy and their finances compared to a year ago. While 67% indicate they plan to spend the same or more this year, nearly 80% say higher prices could cause them to change their spending in the months ahead.

“We also found that consumers’ use of mobile and online continues to grow across the board. This suggests that digital channels should be one of retailers’ strongest competitive plays to capture the consumer, particularly those shoppers keeping an eye on their household budgets,” she says.

Baltimore, MD (April 3, 2012) - Executives at ClearOne Advantage, a Maryland-based debt resolution company, are encouraged by recent efforts being made by federal regulators in creating stricter guidelines for credit card payment protection plans, and urge consumers to make educated decisions before signing up.

“These plans are being marketed to credit card customers as a safety net for unforeseen misfortunes, but all may not be what it seems”, says Tomas Gordon, CEO of ClearOne Advantage.

Protection plans, offered by credit card issuers such as Discover, Bank of America, Citibank and others as a way to put monthly payments on hold in times of illness or financial distress, have become big business for credit card companies. Credit lenders collected $2.4 billion in fees from the 24 million credit card accounts enrolled in payment protection plans in 2009, according to a report released by the Government Accountability Office in March 2011 on the nine largest credit lenders. From those collected fees, lenders posted $1.3 billion in pretax profits, with an additional quarter of the fees going to marketing costs and administering the plans. Only 21% of fees, roughly $518 million annually, are spent on paying out actual benefits to customers, the report found.

Some have noted that the increase in marketing efforts of payment plans by their issuers has come as a way to circumvent the regulations that were introduced into the industry by the 2009 passage of the federal Credit CARD Act, which aims to secure transparency and fairness to consumer credit practices, have made credit issuers more reliant on the revenue generated from their payment protection plans.

Furthermore, opponents argue that the plans are often confusing and offer no real value to consumers who need them. For example, plans are often marketed without disclosing much of the initial fine print and banks return only 21 cents of every dollar in payment-protection premiums to consumers in the form of suspended or cancelled debt, a recent report found.

“The belief among consumers that these plans act as a type of emergency insurance is misleading and regulation of this auxiliary product is necessary”, Gordon said.

Calls for deeper regulation have not gone unanswered. The January 26 regulatory filing by Discover Financial Services has prompted both the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) to further investigate the company’s business practices, including credit protection plans. Industry watchdogs are hopeful the probe will lead to heightened transparency and fairness for one of the credit industry’s most profitable commodities. 

“There are certainly other means that consumers can achieve a financial peace of mind in times of crisis,” said Gordon. “At ClearOne Advantage, we aim to guide individuals struggling with debt in ways that are both beneficial and cost-effective.”

To learn more visit ClearOneAdvantage.com.

ABOUT:

ClearOne Advantage is a full-service debt settlement company providing settlements of credit cards and other unsecured debts. Our executive leadership team is comprised of financial industry professionals with expertise in many of the industries that provide consumer lending services, making ClearOne Advantage the obvious choice when looking to settle debt. To learn more about the products and services that make ClearOne Advantage an easy choice in debt settlement call 1-888-785-5376 or visit ClearOneAdvantage.com.

RESOURCES:

Government Accountability Office Report on Consumer Costs for Credit Protection (March2011)

Consumer Bureau Threatens Banks’ Credit Card Protection Profits (American Banker)

###

By Caroline Salas Gage

(Updates with mortgage originations in sixth paragraph.)

Feb. 27 (Bloomberg) — Household debt in the U.S. declined 1.1 percent during the fourth quarter as real-estate borrowing fell, according to a Federal Reserve Bank of New York survey.

Consumer indebtedness shrank $126 billion from the end of September to $11.53 trillion on Dec. 31, according to a quarterly report on household debt and credit released today by the district bank. Mortgages and home-equity lines of credit declined a combined $146 billion, and total delinquency rates dropped to 9.8 percent of outstanding debt “in some stage of delinquency,” from 10 percent at the end of September.

“While we continue to see improvements in the delinquent balances and delinquency transition rates this quarter, there has been a noticeable decrease in the rate of improvement compared to 2009-2010,” Andrew Haughwout, vice president and economist at the New York Fed, said in a statement. “Overall, it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels.”

Three straight months of faster job growth coupled with a stock market rally since late 2011 are helping make Americans more optimistic about an economic recovery that Fed Chairman Ben S. Bernanke said has been slowed by weakness in the housing market. Policy makers last month said their benchmark interest rate is likely to stay “exceptionally low” through at least late 2014 to help the recovery gain traction, extending an earlier date of mid-2013.

New Foreclosures

About 289,000 consumers showed new foreclosures on their credit reports in the fourth quarter, up 9.5 percent from the third quarter, the New York Fed’s survey showed. There were 425,000 new bankruptcies, 14.9 percent less than in the last three months of 2010.

Mortgage originations for 2011 amounted to $1.55 trillion, the lowest since 2000 and down 3.1 percent from 2010, according to the New York Fed report. Bernanke and the policy-setting Federal Open Market Committee are debating a new round of mortgage-bond purchases to help boost the housing market and the economy.

Non-real estate borrowing climbed $20 billion, or 0.8 percent, to $2.635 trillion, according to the New York Fed survey.

The New York Fed report is based on data compiled by the district bank’s Consumer Credit Panel, a “nationally representative random sample” from Equifax Inc. credit-report data, the statement said. The Fed’s quarterly flow of funds report includes household debt, along with debt measures for non-financial businesses, state and local governments and the federal government.

Confidence among U.S. consumers rose more than forecast in February, reaching a one-year high as Americans grew more upbeat about the outlook for the economy.

The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 75.3 this month from 75 in January. The median estimate in a Bloomberg News survey called for 73, after a preliminary reading of 72.5.

–Editors: James Tyson, Kevin Costelloe

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

When looking at my checking account online, I noticed an $80 withdrawal I hadn’t made - from an ATM steps from my apartment door that I use only in emergencies.

Before I could call the bank, it contacted me. Someone had attempted to use my debit account to pay for $331 worth of merchandise about 800 miles from my home, at a Wal-Mart in Tennessee. A week later, another of my cards was fraudulently used at several gas stations in Arkansas. The following week, an acquaintance in Florida posted an update on Facebook saying someone fraudulently used his debit card information to pay for hotel rooms in Texas.

Is this type of scam becoming more common? Statistics say yes. Data breaches were a whopping 67 percent more common among Americans in 2011, affecting about 1.4 million more adults than in 2010, according to the 2012 Identity Fraud Report from Javelin Strategy & Research. In all, 15 percent of Americans in 2011 were notified about data breaches affecting them. These breaches are a key factor in identity fraud, the unauthorized use of another person’s personal information for illicit monetary gain.

The factor that makes debit cards so appealing and sensible - using money that you already have in your checking account - is also part of their danger. “The law does not provide the same protections from fraudulent charges that you get with the use of a credit card,” said Steven J.J. Weisman, author of “The Truth About Avoiding Scams.” “If you do not detect the theft from your account promptly, you could risk having your entire account drained.”

Let’s run down some of the risks of debit card usage, both legal and illegal, and what consumers can do about them.

Skimming is the process of stealing card numbers using a device installed in ATMs or in the swipe device that’s used to access an ATM lobby; the pin number is captured using micro-cameras. The information is then used to make a counterfeit clone of the original card and is used to buy goods and services or withdraw cash.

It’s a practice that is on the rise. According to the Nilson Report, “Fraud losses from theft of credit card skimming is on pace to total $10 billion by 2015.”

Mike Urban, the director of financial crimes risk management at Fiserv, a provider of financial solutions to the financial world, discussed the rapid spread of card fraud, which outpaced credit fraud losses for the first time in 2011. Urban said that PIN and chip cards will be vital to curtailing ATM skimming, network hacks and retail fraud, at least in cases where the card must be physically present for use.

“Chip and PIN cards are the ‘next generation’ of payment cards,” said Urban. “They are used throughout Europe, Asia and more recently Canada and Mexico.” These cards use dynamic data in the chip which is encrypted, and Urban says they are much more difficult to replicate than the current “static” magnetic stripe.

“The reason counterfeit card fraud is such a growing problem is the ease with which the data can be stolen and copied to another card,” he continues. “The PIN is just as important as the chip. PIN-based transactions have significantly less fraud than signature transactions.”

Card skimming at restaurants is a leading cause of credit card fraud, according to the Mercator Advisory Group, which says restaurants account for the majority of card-skimming incidents. When diners hand over their cards to unscrupulous servers, charges can be entered twice. Greg Meyer, community relations manager for Meriwest Credit Union, advises checking your account the next day to make sure you were only charged once, and for the right amount.

A product called The Rail, currerntly in beta testing in the Seattle area, offers a solution which brings the card processing system to the table.

One thing on consumers’ side is that for the banks issuing the debit cards, it’s in their best interest to stay on top of fraud. “Almost all debit card issuers use real-time fraud detection applications, which inspect all characteristics of a transaction and compare it to the card holder’s normal behavior to identify anomalies and the level of fraud risk in a transaction,” said Urban. “That level of risk is translated to a numeric score that indicates the likelihood the transaction is fraud.”

Overdraft Fees

Fees for overdrawing a checking account are another potential downside to using debit cards - they can be seen as expensive loans. It’s easier for this to happen with a debit card than with a check, since people usually track checkbook balances with their register.

Customers typically have no warning, nor are their cards declined; and most customers would not choose to go into overdraft mode if they were aware, according to The Center for Responsible Lending.

Consumers who overcharge on their debit card are hit with fees averaging $30 to $35 for each charge. Sometimes, instead of deducting transactions in chronological order, those offending charges are deducted from the account in order from larger to smaller ones, which maximizes the amount of penalty fees. This practice is currently under investigation by the Consumer Financial Protection Bureau.

A proposed method to raise awareness on this issue is called the penalty box, which will appear on statements to show how much consumers are paying in fees, akin to the warning credit cards are now required to provide on statements.

How Consumers Can Protect Themselves

Watch what you share on social media. Many people - 68 percent, according to the Identity Fraud Report - include information on their public profiles that are often used by financial institutions to verify a customer’s identity: your full birthdate, your pet’s name, your high school.

The quicker fraudulent debit card activity is caught, the better. Monitor bank accounts online and set up alerts for when withdrawals or large purchases are made with your debit card.

For online purchases and banking, use only secure Internet connections, not public wi-fi.

“To avoid the possibility of card skimming, stop using your debit card immediately and destroy it,” joked Greg Meyer, who has had his own card information skimmed. “I am being facetious, but it seems to be the only way to avoid it.”

Ways to lessen the risk of skimming, however, include covering your hand when entering your pin, and avoiding the sketchier ATMs out there, especially ones more likely to be accessed by scammers - like freestanding ones found on city sidewalks.

Meyer has another suggestion: Don’t sign the back of your credit card. “You are only giving a thief your signature to copy,” he said. Instead, he advises people to take an indelible marker and write “Ask for identification” in block letters.

“It may not stop the little stuff like the thief spending $10 at the local market or even $25 at a restaurant, but when the big charge of $400 is made at Home Depot, it is my hope that someone looks at the back of the card and asks for ID.”

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CHICAGO, IL, Feb 22, 2012 (MARKETWIRE via COMTEX) — The national credit card delinquency rate (the ratio of borrowers 90 or more days past due) reached 0.78% in the fourth quarter of 2011, a drop of almost 5% from the same period one year ago and continuing well below historical norms. Average credit card debt per borrower increased $239 from the same period last year to $5,204, though it too remains near record-low levels. For the quarter, credit card delinquencies and debt both experienced seasonal increases. This information is reported by TransUnion and is part of its ongoing series of quarterly analyses of credit-active U.S. consumers, evaluating how they are managing credit related to mortgages, credit cards and auto loans.

“2011 closed out with the lowest year-end card delinquency rate nationwide since 1995,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “This is the net result of riskier loans having worked their way through the system, cautious risk management strategies on the part of lenders and consumers working to maintain the health and good status of their card relationships.”

Total card originations in 2011 grew by more than 14% relative to 2010. Moreover, in 2010 only 21.8% of new card accounts went to consumers with a VantageScore(R) lower than 700 (on a scale of 501 - 990); In 2011, that number had risen to 25.2%. So not only are more non-prime consumers gaining access to card credits, they also comprise a larger percentage of the cards entering the market. “We have seen a shift toward non-prime borrowers beginning in the second half of 2010 and continuing through the fourth quarter of 2011, which makes the current low delinquency rates even more remarkable,” added Becker. “This shift is driven in part by the fierce competition among lenders for prime borrowers, as well as the effects of ongoing consumer deleveraging efforts in the prime credit range. As a result, many lenders have put more of a focus on originating cards in the non-prime market.”

On a quarter-over-quarter basis, delinquency rates have risen slightly from the all-time low reached in Q2 2011. This is driven mostly by seasonality. “We are still well below historical delinquency norms for credit cards, indicating that consumers are still effectively managing this debt and their relationship with the credit card providers.”

Credit card delinquencies rose 9.9% from 0.71% in Q3 2011 to 0.78% in Q4 2011 while average credit card debt per borrower increased $442 from $4,762 to $5,204 in that same timeframe.

Between the third and fourth quarters of 2011, only Maine, New Hampshire, the District of Columbia, and Alaska experienced decreases in their credit card delinquency rates, and two states remained unchanged. On a more granular level, 79% of metropolitan statistical areas (MSAs) saw increases in their respective credit card delinquency rates in Q4 2011. This was down compared to last quarter, when 89% of MSAs experienced an increase.

Based on revised economic assumptions, TransUnion forecasts that credit card borrower delinquency rates could continue to drift upward in the short term, but then begin to gradually drop towards the end of the year. This forecast is based on seasonality effects and various other economic factors such as anticipated gross state product, consumer sentiment, disposable income, and employment conditions. The forecast changes as the economy deviates from a conservative economic forecast, or if there are unanticipated shocks to the economy affecting recovery.

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WASHINGTON – The nation’s new cop on the consumer-finance beat is zeroing in on debt collectors and credit reporting companies.

The Consumer Financial Protection Bureau on Thursday proposed to add debt collectors and credit bureaus to the list of industries that agency officials can supervise in-person.

The agency gained the power to oversee payday lenders, mortgage companies and private student lenders last month, after President Obama used a recess appointment to install its director. It also can write rules to supervise other big companies.

Officials say they chose debt collectors and credit bureaus because those industries touch a vast number of consumers. They say consumers can’t shop around if a debt collector is abusive or unfair.

It’s the first time those industries would face in-person supervision similar to bank oversight.

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By James S. Granelli Los Angeles Times

February 15, 2012, 2:30 p.m.

Got your cellphones and your landline phones on the nation’s Do Not Call list, but you’re still getting telemarketing calls at dinner time? Especially those aggravating automated robo-calls?

The Federal Communications Commission clamped down on telemarketers Wednesday – even those you do business with, such as your bank – by placing severe limits on robo-calling and even texting.

FCC Chairman Julius Genachowski said Congress and his agency have long recognized the need for consumers to have control over the telemarketing calls that come into their homes, and the FCC has long had rules to put consumers in control.

“But despite these clear ground rules, too many telemarketers, aided by autodialers and prerecorded messages, have continued to call consumers who don’t want to hear from them,” Genachowski said.

In a 3-0 vote, the commissioners adopted changes to its telemarketing rules that:

– Require telemarketers to obtain prior written consent before placing robo-calls to consumers,

– Eliminate the exemption for companies that have an “established business relationship” with consumers,

– Require telemarketers to provide an automated, interactive opt-out mechanism during each robocall so consumers can immediately tell the telemarketer to stop calling and

– Strictly limit the number of so-called dead-air calls in which consumers answer phones and hear nothing.

Commissioner Robert M. McDowell bemoaned the seemingly constant telemarketing calls. “Sometimes, it seems like there’s no escape,” he said.

McDowell noted that the rules, which also are more consistent with Federal Trade Commission regulations, were narrowly limited to telemarketing robo-calls. He said the changes do not affect current requirements about informational calls or calls involving charities or political speech.

And with the election season upon us, you’ll definitely want to take those calls from Mitt, Rick, Newt and Barack.Read More Collection articles here

 Collections & Credit Risk | Wednesday, February 8, 2012

U.S. consumer debt unexpectedly climbed for the fourth straight month in December, a sign of increasing demand, willingness to spend and that consumers are feeling more confident about the economy.

The Federal Reserve report Tuesday showed that the total of all consumer credit outstanding grew a little softer $19.3 billion, or 9.3% at annual rate, in December after surging to a decade-high of $20.4 billion in November. The increase was the biggest gain in a decade, and much larger than expected by Wall Street economists.

Non-revolving credit, including student loans, car loans and loans for mobile homes, advanced 11.8% at annual rate to $1697.3 billion in the month from $1680.8 billion in November. Improving labor market condition coupled with increasing pay rate boosted demand on autos.

Auto sector posted another strong month for car sales, with 14.1 million annual rate cars sold last month. Also, demand on student loans increased as more Americans go back to school.

Revolving credit, which mostly measures credit card use, edged up 4.1% at annual rate to $801 billion in December from $798.2 billion in the prior month. Spending on credit cards grew for the second straight month as consumers continued to use credit cards more to purchase goods and gifts for holiday seasons.

Besides, since some of big banks imposed new fees on debit card use, more debit-card owners switched to credit card to avoid those fees.

For the year, total consumer credit rose 3.7%, the largest increase since 2007.

“We view this report as being consistent with broader trends of increased bank willingness to lend to consumers and increased consumer demand for credit” seen in the Fed’s recent survey on loan officers, said Cooper Howes, economist at Barclays Capital in a note to clients.

Most of the gain in non-revolving credit in December came from student loans, Howes said.

Credit card debt declined from a peak of $972.2 billion in September 2008 to $790.2 billion last April. Since then, the trend has flattened out and picked up to $801.0 billion in December.To read original article click here

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