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.”

View other Debit card articles here

Follow us on Facebook here

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.

To read more about this click here

To read about more info on credit card delinquencies click here

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.

View Video here

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

To read other articles on Consumer debt click here

 By Hope Nelson-Pope, The Motley Fool

It can happen days, months, or years after getting your first credit card.

One day you look at the bill, and the minimum payment is almost out of reach. Years of purchases, enumerated monthly on sheets of paper, spell out what seems to be a lifetime of repayments and a small fortune in interest accrual. Maybe using those credit cards got you through college and you never broke the habit. Maybe you’ve got a sweet tooth for shopping. Or maybe, like so many people in this era, you and your family have fallen on hard times, and when the choice was between seeing your electricity cut off or putting the bill on credit, a little extra debt didn’t seem so bad.

However it happened, now you’re mired in debt and staring down a mountain of bills just as you’re trying to position yourself for retirement. It’s a horrifying situation, one you never expected to find yourself in, at least not now, when you should be dreaming about your upcoming golden years.

Take a deep breath. You’re not alone. And you can dig out.

Step 1: Know thy enemy.

Before you can do anything about your debt, you’ve got to know where your finances actually stand. Map out your current financial status, including all those ugly bits you’d just as soon not mention.

First, write out a detailed budget for your regular expenditures. Of course you’ll include the usual suspects — mortgage/rent, utilities, telephone, and groceries. But don’t forget to widen your budget to focus on other regular expenses.

Do you subscribe to Netflix (NFLX)? Pay a monthly fee for cable? How much are you spending on entertainment? Dining out? Shopping? What about those once-a-year expenses it’s so easy to forget, like insurance, new eyeglasses, car maintenance, or new school wardrobes for the kids? Figuring in all of these numbers will help you determine the true state of your finances.

But you can’t stop at a budget and call it a day. You need to map out the exact amount of debt you hold and itemize it based on its source. You’ve already plugged your cards’ minimum payments into your budget. But now, take it a step further and create a new chart listing the balance, interest rate, and minimum payments for each of your debts. Don’t forget to include student and auto loans, too!

Once you know what you’re dealing with on both sides of the financial coin, you can begin your quest to drive down your debt.

Remember: It’s not easy. But it is doable.

Step 2: Snowball like it’s December.

Now that you know the cold, hard facts of your financial situation, it’s time to get to work. You want to make your money work for you in an efficient manner — after all, with interest rates bearing down on your accounts, time is of the essence!

One word: snowball.

Now, in order to make good use of the snowball method, you’ve got to have the funds for your minimum payments well in hand. (If you don’t, then scroll on down to Step Three and I’ll meet you back up here when you’re finished.) The key to snowballing your debt is to pay the minimums each month on every debt, but then take an additional amount and apply it to one predetermined debt — let’s call it Debt A — until it dwindles down to nothing.

Once Debt A is gone, you take the money you were paying on it (minimum and extra together) and add it to what you were paying on Debt B until that debt is paid off. Lather, rinse, repeat until you’re debt-free.

If you’re looking for a quick win, select the debt with the lowest balance and work your way up. You’ll feel a sense of accomplishment sooner, which will help keep you on track toward your long-term goal.

But even though I’m a fan of the quick payoff, this snowball method isn’t my favorite. Find the debt with the biggest interest rate and get to work. It doesn’t just pay down your debt; it also saves you all the extra interest you would be paying, and a few extra percentage points can really add up.

So if I had three credit cards that looked like this:

Then I would arrange my snowball like this:

This way, no matter what the balances are, I’m paying down Card C quicker so I don’t have to sacrifice as much of my hard-earned money to interest alone. It takes diligence to pay in to a card that may not seem like the “quickest win,” but it’ll save you some cash in the long run.
Step three: Give your cash flow a nudge.

Use your current profession as a jumping-off point for additional work — if you’re a teacher by day, why not be a private tutor by night? Or set your alarm clock for the ripe old time of 3 a.m. and head out for a paper route (they’re not just for kids on bicycles anymore).

In short, sometimes the key to debt reduction is to give your cash flow a quick infusion. It’s often inconvenient, to be sure, but the payoff can be worth it.

Step 4: Invest in your future.

It may take months or even years, but if you consistently pay down your debt, you will eventually see the light at the end of the tunnel: financial freedom. It’s not a bad place to live. But your journey doesn’t end there.

Once you’re debt-free, your former snowball can help manifest those golden years you’ve been dreaming about. You can save that money in a savings or money market account. Create an emergency fund that will sustain you through life’s tough times (and life does bring with it some unexpected crises) so you won’t have to load up your credit cards with expenses you can’t afford to pay back. When you’ve got that under control, keep on saving — with an eye toward a long-term account to fund your retirement dreams.

If you’ve got a long-term time horizon, you might want to consider investments that bring a higher return. If you’re long on time but short on expertise, an index fund or ETF, such as the Vanguard Total Stock Market Index (VTSMX) or SPDR S&P 500 (SPY), may be a sensible choice. With one investment, you’ll access companies spanning the breadth of the S&P 500, including ExxonMobil (XOM), General Electric (GE), and Microsoft (MSFT).

The path from the red to the black side of the ledger can be long, but take heart. With some deft financial moves and a basket of patience, you can climb back out — and with money in your pockets, to boot.

Hope Nelson-Pope is online coordinating editor at The Motley Fool. She owns shares of Microsoft but none of the other companies mentioned in this article. The Motley Fool owns shares of Microsoft and has sold short shares of SPDR S&P 500. Motley Fool newsletter services have recommended buying shares of Netflix and Microsoft, as well as creating a bull call spread position in Microsoft.

Check out article here

You may know them as those annoying scraps of paper that litter your purse or flutter from your wallet at inopportune moments, but receipts for credit card transactions are actually worth paying attention to.

Here’s what you probably didn’t know about them, but should:

Receipts are more secure than you think … Unless a merchant made a big mistake, you won’t see your whole credit card number on a receipt. That’s because the federal Fair and Accurate Credit Transactions Act — an amendment to the Fair Credit Reporting Act that took effect in 2006 — legislated that for better financial security, only the last four or five digits of your card number can appear. That’s why you see something like XXX-XXXX-1234 instead. Your card expiration date can’t show either.

To Read More click here