Consumer Bankruptcies Hit 5-Year High in 2010

According to estimates, the number of American taxpayers who filed for bankruptcy protection in 2010 was the highest in nearly half a decade. Experts predict these numbers could increase in 2011 as Americans continue to struggle with debt and an uncertain economy.

Reuters reports:

Roughly 1.53 million consumer bankruptcy petitions were filed in 2010, up 9 percent from 1.41 million in 2009, according to the American Bankruptcy Institute, citing data from the National Bankruptcy Research Center.

Filings in December totaled 118,146, up 4 percent from a year earlier and 3 percent from November's total.

The full-year total is the highest since the 2.04 million recorded in 2005, when there was a rush to seek bankruptcy protection ahead of a stricter federal law taking effect in October of that year.

Samuel Gerdano, executive director of the ABI, said filings are rising even as consumers try to cut spending and debt after the 2008 financial crisis and accompanying recession, and with the unemployment rate at 9.8 percent.

He said there is usually a 12- to 18-month lag between declines in consumer spending and bankruptcy levels.

According to the Federal Reserve, U.S. consumer credit outstanding has fallen in 19 of the last 21 months for which data are available, declining to $2.41 trillion in October 2010 from $2.57 trillion in January 2009.

"Consumers have been on sort of a strike when it comes to taking on more debt, as they become more aware of the dangers of high debt burdens in a weak economy," Gerdano said.

Continue reading at Reuters.com...

Black Friday 2010: Buy American

As our economy continues to struggle, many Americans are looking for ways to help. According to WalletPop.com, one of the best ways consumers can help with economic recovery is to ensure items you buy are made in the country. Especially as we get closer to the Black Friday holiday, where many taxpayers do most of their holiday shopping. Check out the following article from WalletPop.com.

It's the rare story about retailing that doesn't garner reader comments about where the products are made. It's also the rare retailer that makes the effort to stock only American made goods. Deborah Leydig is one of those retailers. Her Barrington, Ill. business stocks exclusively products made in this country, something that has become increasingly difficult to do.

"Deborah Leydig is in search of a can opener manufactured in the U.S.," opens a story in the Chicago Tribune. "The artist-turned-merchant had been stocking the iconic Swing-A-Way can opener, but had to stop this year when production moved overseas."

For decades, American companies have been outsourcing labor and relying on foreign production to stabilize businesses at home. Over time, it incurs cost to the environment, negatively affects our employment rates, and discredits our claims of sustainability. In a utilitarian sense, trade and commerce with other economies are of course necessary, but, is it healthy for us to rely on foreign systems? Especially when we are so proud of being self-reliant.

Leydig is just one example of a well-intentioned business owner trying to save jobs in the U.S., and she is not alone. Conscious consumerism is on the rise. Americans are buying environment-friendly goods, fair-trade products, and locally grown or made food at increasing rates.

Continue reading at WalletPop.com…

A Tax Cut Both Parties Should Love -- But Don't

Tax cuts and rebate checks to stimulate the economy have been discussed frequently in the media. However, some economists are now suggesting that a payroll tax holiday would be more effective. Even the nonpartisan Congressional Budget Office agrees that a payroll tax holiday would be more likely to increase consumer spending.

CNNMoney.com reports

The payroll tax is the amount paid by both employers and employees to fund Social Security. Each pay 6.2% of a worker's salary, up to the first $106,800 of income.

Because of that limit, the tax is one of the most regressive in place today, hitting the working poor and middle class much harder than the wealthy.

The nonpartisan Congressional Budget Office estimated earlier this year that eliminating payroll taxes was roughly two to four times more effective in spurring economic activity than a reduction in income taxes, the policy option that's getting most of the attention in Congress.

"This is a better tax cut than a general income tax cut," said Roberton Williams, senior fellow with the Tax Policy Center. He said getting more money to workers who earn less increases the chance that it will be spent rather than saved, a concept popular among Democrats.

Read more here

Warren: Regulation Will Help Customers and Banks

The newly appointed Consumer Financial Protection bureau adviser Elizabeth Warren has spoken up, and is claiming that financial regulation consolidation will benefit both consumers and banks alike. On Wednesday she gave a speech and shared her hope that Americans will begin seeing banks as friends and not enemies.

"Instead of seeing banks as their friends, as I did when I put my babysitting money in a savings account at Penn Square National Bank so my brothers didn't borrow it out of my sock drawer, too many Americans see dealing with banks like handling snakes - do it long enough and you'll get bit," she said in a speech Wednesday to the Financial Services Roundtable in Washington.

She said the new law will force banks and non-bank lenders to be subject to federal examination and will consolidate consumer financial protection activities performed by seven different agencies into one agency, "closing gaps in oversight."

Warren said the purpose was to make these lenders more palatable and user-friendly for the American people.

"Thanks to the new law, for the first time ever, we will have a single federal agency charged with writing the rules for all mortgages and all credit cards, regardless of whether they are issued by a federally chartered bank, a state chartered credit union, or a group of unlicensed investors," said Warren, in her speech to the Financial Services Roundtable.

Continue reading at CNN.com…

The New Overdraft and Debit Laws Explained

According to reports, in the year 2006 overdraft fees accounted for approximately 6% of banking revenue in this country. Fortunately, on August 15^th a handful of new laws went into affect to protect consumers in this country from excessive banking fees. However, in addition to targeting overdraft fees and debit cards, the new rules also have a significant impact on gift card practices in this country. To help all of my readers understand the full affect of the new laws, I have put together the following article explaining the most important new overdraft and gift card rules.

I. Overdraft Protection Laws

What is overdraft protection?

Before the new law was passed, banks could automatically enroll customers in overdraft protection, which would allow you to charge more than you had in your checking account. Instead of declining the transaction, the bank would approve it, and then charge you with a $20-40 overdraft fee.

Opt in or out

Starting August 15th, banks were forced to discontinue overdraft protection services unless customers sign up for it. This means you can decide whether or not you want your card to get approved when you have insufficient funds.

Disclosure mailers

As part of the new laws, financial institutions have been required to notify customers of how overdraft protection will affect their bank account. This is because of new disclosure laws that aim to increase consumer transparency in the banking industry, and also explains why you have probably received extra mail from your bank over the past few weeks.

Checks and bills

According to the new law, banks can still charge overdraft fees for checks or automatic withdrawals from your account that are higher than your available balance. The overdraft fee rules only apply to ATM debit and check card transactions. You bank may have an option to turn off all overdraft options, but you should ask your financial institution for more information.

Alternative overdraft protection

There are other ways to protect yourself from having your debit card declined than enrolling in overdraft protection. If your bank offers online banking then you could make a habit of checking your balance every day to make sure you do not overspend. Some financial institutions also offer cell phone alerts when your balance is low.

II. Gift Card Laws

Fees

Until now, the gift card industry has gone relatively unregulated. However, the new overdraft and debit laws also have implications on gift cards. As of August 15^th, companies that issue gift cards cannot charge excessive fees that lower the card’s available balance. The new law limits the number of fees that can be charged to a one-time fee when the card is purchased, and only one additional charge per month. Additionally, inactivity fees cannot be charged at all unless the card has not been used for over a year.

Expiration

The new law states that gift cards cannot expire for at least five years. Prior to this new rule, some gift cards would expire in as little as a year.

Disclosure

Much like the new bank laws, companies who offer gift cards must now disclose fees and expiration dates to customers. For gift cards, the disclosure must be on the card itself, along with a toll-free number or website to find more information if need be.

Prepaid debit and phone cards

Unfortunately the new gift card laws do not apply to prepaid debit cards or prepaid phone cards; the rules only apply to gift cards.

Consumer, Tax Groups Call For Ban On US Tax Strategy Patents

From the Wall Street Journal.com:

Consumer and taxpayer organizations urged Congress on Wednesday to ban the patenting of tax strategies, saying they "pose a significant threat to American families and businesses."

U.S. law allows for the patenting of a system or method for reducing or deferring taxes. The number of tax-strategy patents has grown to 117 issued and 151 pending, according to a coalition of 18 taxpayer and consumer groups including the American Institute of Certified Public Accountants and the U.S. federation of state Public Interest Research Groups. The coalition said it fears an "even greater explosion in both applications and patents issued over the next several years."

Such patents may creating a monopoly for patent holders to determine who can and cannot take advantage of parts of the tax code, the groups said. Meanwhile, tax advisors, who are generally not patent experts, have the burden of being aware of such patents and face potential lawsuits for violating them.

The coalition urged lawmakers to include the ban in a tax bill or other piece of legislation Congress must attend to before adjourning.

Consumer Prices Rise, but Underlying Trend Flat

From MSN Money.com:

Underlying inflation pressures were muted in August, keeping deflation fears alive, even though a rise in food and energy costs drove overall consumer prices higher.

The core consumer price index was flat last month, the Labor Department said on Friday, defying financial market expectations of a 0.1 percent gain. The core CPI, which excludes food and energy prices, rose 0.1 percent in July.

While the report strengthened the Federal Reserve's bias toward further monetary easing, the data was not so weak that the U.S. central bank is expected to announce new steps to ease monetary policy when it meets on Tuesday to assess the economy, analysts said.

"It keeps alive the possibility that the trend could turn negative over the next year or two, but the numbers are not weak enough to encourage them to start a new purchasing program next week," said Jim O'Sullivan, chief economist at MF Global in New York.

The overall CPI rose 0.3 percent, lifted by higher food and energy costs, after a similar gain in July. August's rise was a touch above expectations of a 0.2 percent increase.

Student Loan Debt Exceeds Credit Card Debt In USA

Almost all Americans have at least some credit card debt, however according to USAToday.com the total student loan debt exceeds credit card debt in the country. As of June, the consumers in the country carry a total balance of $828 billion of credit card debt, while students owe an astounding $850 billion in loan debt.

Oddly, some students don't even know how much they owe — or to whom.

"I'm scared to know," said Carla George, 20, of Detroit, a junior majoring in biology at Wayne State University. She knows that her mother, at one point borrowed about $10,000 through a federal Parent Loan for Undergraduate Students. The PLUS loan lets parents borrow for costs not covered by a financial aid package.

George estimates that she has taken out at least $10,000 in other loans.

"I think it's a whole bunch more," she said.

A college diploma and a good job are supposed to be the payoff for years of hard work in school. But for thousands of today's students, there's going to be a payback, too — as those loans come due after graduation.

Some college students are failing financially long before they get a diploma — or a ‘grown-up’ paycheck.

"Students are far worse off today with student loan debt," said Alan Collinge, who runs a website called StudentLoanJustice.org, where students discuss their troubles with college loans.

With tuition far outpacing inflation for the past 20 years, student borrowing has continued to grow — a whopping 25% last year. Some students who are borrowing never expected to, but their parents have lost jobs or suffered other financial setbacks in the recession.

Continue reading at USA Today.com…

Cardholders Prefer Debit as Credit-Card Use Falls

For the first time the total payment volume of debit cards in this country surpassed credit-card volume. As this article from Bloomberg.com explains, this trend will continue in 2010 as more taxpayers are trying to avoid incurring more debt. Considering the way of our economy at present, I think it absolutely great that people are being more conscientious about incurring more debt!

At San Francisco-based Visa Inc., the world’s biggest payments network, the total payment volume for debit cards increased by 7.9 percent in 2009 to $883 billion as credit-card volume declined by 7.3 percent to $764 billion. Volume for debit cards at No. 2 MasterCard Inc. in Purchase, New York, rose by 5.8 percent and 2.8 percent at No. 4 Riverwoods, Illinois-based Discover Financial Services.

“Consumers are turning from one form of plastic to another,” said James Van Dyke, President and Founder of Javelin. “Credit cards are falling out of favor as cardholders become more cautious and look for more conservative payment methods.”

Fifty-six percent of consumers said they had used a credit card in the past month compared with 87 percent who said they had in 2007, according to the study, which surveyed 3,294 people in November 2009 for that question. Other findings were based on data collected online from 5,211 respondents in March 2010 and 5,000 consumers in November 2009. If the rate of decline continues, 45 percent of consumers will reach for a credit card in 2010, the study said.

Continue reading at Bloomberg.com…

Time to Tax Those Checked Bag Fees?

When you go to book an flight it can be difficult to estimate the final cost until you are actually boarding the plane because of all the fees and taxes that get added on. ABC News published a great article on these excessive fees, and what the future will hold for them. You can find a section of the piece below, or head on over to ABC News.com for the full text.

So you're at JFK and there's your grandma, waiting in line at security, when she gets pulled aside by the TSA for a "special" going-over (while you do a slow burn). Guess what? You're paying for that.

You might be surprised at some of the things you pay for, courtesy of all those taxes and fees levied on that airline ticket of yours. I don't think you'd mind paying some of them, but it's not cheap -- and if you think the taxes and fees make up about 10 percent of your ticket price or so, think again.

Here's an example: you're so jazzed that you've scored one of those elusive $99 each-way cross country fares that you don't even care that it's not a nonstop. However, it's not a $200 fare either, not when you add in the taxes and fees. Let me show the figures for this roundtrip airfare:

Base airfare: $200

Federal Excise Tax: $15

Federal Flight Segment Tax: $14.80

Passenger Facility Charge: $18 (Note this charge can vary and may be lower.)

September 11 Fee: $10

Total airfare: $200. Total taxes and fees: $57.80 for a total ticket price of $257.80. And the taxes and fees represent 28.9 percent of your ticket -- almost 30 percent. Of course, this doesn't include a checked-bag fee (or Spirit's new carry-on fee, which could cost as much as $45 each-way).

Continue reading at ABC News.com…

Personal Savings Rate Climbs to 1-Year High

From CNNMoney.com:

Americans saved a slightly larger chunk of their disposable income for a third straight month in June, pushing the personal savings rate to its highest level in a year, according to government data released Tuesday.

The Commerce Department reported that personal savings totaled $725.9 billion, or 6.4% of post-tax income, up from $713.9 billion, or 6.3%, in May. The rate was the highest since June 2009, when the reading came in at 6.7%.

"The rebound in the savings rate is encouraging," said Mark Vitner, senior economist at Wells Fargo. "It means that spending is likely to rise more in line with income whenever it grows."

In addition to lifting spending, a higher savings rate also means that households have a better cushion to pay down debt.

The report showed that personal income and spending were virtually unchanged during the month.

Oil Hovers Near $77 On US Economy, Crude Demand

From the Associated Press:

Oil prices hovered near $77 barrel Thursday in Asia amid signs of a slowing U.S. economy and weak demand for crude.

Benchmark crude for September delivery was up 16 cents at $77.15 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 51 cents to settle at $76.99 on Wednesday.

Oil has traded near $75 most of this year on mixed U.S. economic news — corporate earnings have rebounded but the unemployment rate remains high. On Wednesday, a Federal Reserve report said the economic recovery is slowing in some parts of the country.

Oil consumption also appears to be sluggish. Crude supplies grew by 7.3 million barrels last week, according to the Energy Department's Energy Information Administration. Analysts expected a drop of 2.3 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Supplies of gasoline and distillates, which include diesel and heating oil, also rose.

Barclays Capital said in a report that the main driver of oil prices has been skittish sentiment about the economic recovery. "It may take a while before the ghosts from the previous crisis go away entirely."

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Consumers Say: "In tweets we trust"

According to the second annual Digital Influence Index study, 75% of U.S. consumers are more likely to trust companies that microblog on popular sites like Twitter.com. The study also noted that 90% of consumers use the Internet to either buy, or compare prices on items.

Some 75 percent of people surveyed said they view companies that microblog -- sending short, frequent messages on sites like Twitter or status updates on social networks like Facebook -- as more deserving of their trust than those that do not, according to a survey by Fleishman-Hillard, conducted with market research firm Harris Interactive.

The second annual Digital Influence Index study, released at the Reuters Consumer and Retail Summit in New York, researches the extent to which the Internet affects consumer behavior.

The findings on Twitter are particularly notable in a year where many leading corporations found themselves in crisis mode, from BP's role in the Gulf oil disaster to recalls from Toyota Motor Corp and Johnson & Johnson and a viral campaign against new diapers from Procter & Gamble on Facebook.

"What really matters here I think is that the rules of crisis engagement that we've known for years and years still apply, but they still apply in a much more accelerated way," Dave Senay, Chief Executive of Fleishman-Hillard, told Reuters in a telephone interview.

Continue reading at Reuters.com…