Author: Dawn Kennedy

Great News- We Now Get FREE Credit Freezes

Posted on by Dawn Kennedy

It’s November! Tis the season for increased identity theft. The increased risk is due to the sheer number of transactions, hacking attempts, and ecommerce fraud attempts, which is staggering. Even more staggering? According to a report by the Identity Theft Resource Center, while most consumers detect identity theft within three months about 16% of consumers won’t detect identity theft for three years. Wow.

One of the more surprising things I read on this topic is that stolen personal information was widely used to purchase very authentic looking “fake” paychecks and other documents online, which thieves used to open accounts and even rent apartments. Since chip cards are making it harder to commit credit card fraud, auto loan fraud is growing. And the thieves are creating “synthetic identities” where the fraudsters steal some of a consumers real information and combine it with fake information, such as using a new address for statements.

The consistent thread in all identity theft schemes is that a fraudster has a consumer’s personal information. Maybe not everything, but enough to convince someone else that the thief is really the identity of the victim. And the credit bureaus have that personal information. They have it all. The three credit reporting bureaus are goldmines for personal information for ID thieves, and these keepers of your info have been hacked by savvy criminals to get it.

The only option is to freeze your credit report. A “credit freeze” restricts access to your credit reports to themselves and currently open accounts. But not everyone took the steps required to freeze accounts, even if they were not looking to open new credit, because those freezes averaged about $30.00 and were only free AFTER they were a victim of ID theft. And there were additional fees to “thaw” the account for access by new lenders for a specified period of time. But now all of those fees are gone. You do not have to pay a fee anymore. New credit law changes, effective September 21, 2018, mean any consumer can freeze and unfreeze their credit file for free. Here’s what you need to know.

1. You have to contact each bureau individually to have the freeze placed on each.
Here are the contact links and numbers to do so. You will have to verify your identity with personal info to freeze your reports, so have that ready.

• Equifax or 800-349-9960
• Experian or 888-397-3742
• TransUnion or 888-909-8872

2. You can get a free freeze for your children who are under 16. And you can also place a free freeze for anyone that you have a valid power of attorney for, when you are a fiduciary, guardian or a conservator.

3. You can still access your own credit reporting records and can order your free annual credit reports from www.annualcreditreport.com. Make sure you only use Annual Credit report, that’s the free one authorized by federal law.

4. Any current creditors or debt collectors will continue to have access after the freeze is placed.

For more information, you can read the Frequently Asked Questions (FAQ’s) directly from the Federal Trade Commission. I encourage every consumer to set aside time before the holidays to put freezes on their credit reports, which will help to protect themselves, their children, and people at risk, from identity theft.

 

Continue reading “Great News- We Now Get FREE Credit Freezes” →

Your New “UltraFICO” Score! A Good Thing?

Posted on by Dawn Kennedy

The Fair Issacs Corporation, the creators of the mysteriously calculated FICO Credit Score, are changing the scoring method using new criteria, again. In early 2019, a new scoring method will allow consumers to contribute their banking information to a third party, Finicity, which, “allows Americans to benefit from positive financial behaviors.” The idea is that if you are newer to credit, or have a lower score, the credit bureau can have a look at your checking, savings, and money market accounts to check your credit worthiness. One argument in support of this new approach is that consumers do not currently have any input into their credit scores, because the FICO is calculated only on debt account data submitted by creditors and lenders.

Fair enough. What could possibly go wrong?

From my lowly perch, a lot. First of all, while the consumer will have a choice of accounts to include, they will not have any control over how it is collected, and whether the information is kept by the credit bureau. The process, as published in the Wall Street Journal, is as follows,“Experian will compile consumers’ banking information with help from financial-technology firm Finicity and will distribute the new score to lenders.” Yeah, read that again, Experian will send a summary of consumer bank accounts to lenders. FICO won’t keep any of that information after the score is calculated, but the credit bureau will have your banking Information.

Anyone hear about the hack on Equifax? Anyone? Of course, you have. Well, have you heard about the Experian hack? 15 Million T-Mobile customers personal data was hacked via Experian, including social security and passport numbers. Lovely. Since I don’t use T-Mobile, I am already standing in line to provide my banking info. Eyeroll. It’s already happened once, and they will not be less of a target if they are the bureau with your bank accounts.

Cybersecurity aside, who here believes that when the UltraFICO is available, creditors will accept the FICO? Lenders know the consumer can opt in banking information, so why not rely on the UltraFICO for lending decisions? This is the plot from the classic children’s book by Laura Joffe Numeroff, If You Give a Mouse a Cookie. The lesson? If you give a mouse a cookie, he will want a glass of milk, then a straw, then a napkin, and on and on.

So, why the change? Benevolent Credit Bureaus? Hardly. Since the housing melt down, the pool of traditionally “highly qualified” borrowers shrunk. The change is due to lenders requesting, “credit-reporting firms and FICO to figure out a way to help them boost lending without taking on significantly more risk.” Oh.

As a consumer law advocate, I see danger ahead. Who would be “at fault” if banking information is compromised? Any hack could mean consumer’s accounts are cleaned out until the necessary fraud investigations are completed, and the money is returned by the bank. Missed or late mortgage, car payments, or utility bills can have consequences and mean financial insecurity for the most basic needs of a family. Will your mortgage company waive the late fee if it isn’t your fault? Will the electric company leave the lights on? If not, late fees on every bill owed by the American family could add up to hundreds of dollars. And over 75% of families already live paycheck to paycheck. In my humble opinion, a “free” 12-month credit monitoring product is not going to repair that mess. Or, maybe I am just a cynic and Fair Isaacs is looking out for consumers.

 

photo:credit.org

The Sinking Fund- My Car Tags Were Due Again

Posted on by Dawn Kennedy

In many states, the driver’s license and car registration expire on your birthday. The not so gentle reminder that you are a year older, and they want money. When you stop and really think about it, there are probably a few things that are renewed annually. My Microsoft 365 for example, some insurance types, etc. These are not necessarily discretionary items- many of us need computer programs and certain insurances to work and protect our property. So, because I am a nerd, I started to think about the annual fees we pay, and when they are due.

Lawyering bar fees and practice related fees aside (which are also annual) our family pays roughly $468.00 a year for various things. Our computer programs, including virus and malware stuff, state registration renewal on two vehicles, and yes, I have Amazon Prime (I can explain, but I don’t want to). The due dates are sprinkled throughout the year, with some due in November, March, July… you get the idea. Since we know these fees are coming every year, we should plan for them. Lots of people plan for Christmas, birthdays, holidays and may save a bit aside, but not for our expected, routine, boring annual commitments.

If we round up our annual commitments to $500.00 a year, and divide that by twelve, I have to save roughly $42.00 a month to cover these fees. If I receive 26 paychecks a year (paid bi-weekly) I have to save about $19.25 each payday to meet our commitments. This is the basic idea of a “sinking fund,” aptly named because businesses deposit money into these accounts to “sink the debt” (fun fact)**.

Placing the estimated amount of money into a “holding” type account or reserving them separately in your checking account will allow you to have the funds available when the payments are due. Here are a few things to consider when you decide to start a sinking fund, and save a little each payday for your expected annual expenses:

1. Make sure IF you open a separate CHECKING account at the bank, you have a FREE account. Service fees will eat up what you put aside and cause you to go a bit backwards. I recommend a small(ish) regional bank or credit union for these accounts.

2. Do NOT open a SAVINGS type account if you will make frequent withdrawals to pay these bills as they come due. “Regulation D” is a federal rule that limits the amount to free transfers or withdrawals to six, afterward, you can be charged a fee for each additional .

3. Have that baby emergency fund,$500-$1000.00 saved, BEFORE you start a sinking fund. Those pesky little emergencies, such as the need to buy a tire or repair a leaking faucet, can quickly eat up the money you allocated for other expenses.

4. In the beginning, you may have a bit of overlap with what’s due and what is saved, so you may have to pay a bit more and continue saving. I know if you are living paycheck to paycheck this doesn’t always allow much room, but if you don’t start soon enough before the next expense, you may have to stretch. Example: You have $85.00 due in three months. You typically put away $21.00/ month. In three months, you have $63.00 saved, but are $21.00 short. Pay the $85.00, but still try to put away the $21.00 so you are on track for the next expense due.

It’s so easy to get frustrated we forget when the annual bills come due, and of course they still come due. Consider the sinking fund as a way to put a little away each check to cover what you will need. The stress is really reduced when the amount you need for an expected expense isn’t squeezed 100% from the same paycheck.

**And for all of you bond asset types, yes, there is a sinking fund term meaning to pay a trustee an amount to retire bond debts before they come due… though most of us have no idea what that even means. I just don’t want angry email.

Where Did 2018 Go? Thoughts on the 12 Weeks Until Black Friday

Posted on by Dawn Kennedy

This past weekend consisted of various discussion with the (grown) children about Halloween costumes for the grands and some early planning for the holidays, and it hit me, we are close to the 2018 holiday season. This year has flown by, way too quickly. And now there are only 12 weeks until Black Friday, or for many people, six paydays. But before you close this article, call me “scrooge”, and delete me from your friends list because I want to chat about the Black Friday in September, give me a moment, and I will explain. So why is “Black Friday” my measure of the season and not the actual festivities on, say, Christmas or Hanukah?? Because that shopping day after the turkey traditionally “kicks off” the holiday season. And the spending begins for many. And we love to spend.

In 2017, consumers spent an average of $967.00, between Black Friday and Cyber Monday, accounting for approximately 20% of ALL annual online shopping those days. The amount budgeted on gifts for children has averaged about $500.00 per child, relatively unchanged over the last few years. But gifts aside, there are other expenses around the big season from food, wrapping paper, shipping costs, travel expenses, and new outfits that don’t always make it into the average household budget. In fact, last year almost two-thirds of the average holiday budget went to “non-gift” spending.

All these articles quaintly mention the “holiday budget” as if this was planned in advance. I really don’t know anyone, myself included, who likes a holiday budget. Because sometimes I see something and think, “wow, this is great for…”and want to purchase that thing. For many people, the total holiday cost is really only unveiled after the revelry as the statements start coming in the mail. And the reality comes in January that for too many people, they blew out past the budget, and accumulated quite a bit of debt for the season. The average American woke up in January 2018 with over $1050.00 in DEBT. Not what was spent as a whole, but what they spent in the hole to finance the season. For the 78% of average American families living paycheck to paycheck, an additional $1000.00 in debt, and at incredibly high interest rates, is a burden.

Good news, we all have twelve weeks, or an average of six paychecks to squirrel away some cash. But even better? Companies with seasonal hiring opportunities are at the best it has been in years, and with low unemployment, retailers are competing for seasonal employees. The reported average wage is $12.00/ hour for temps, but Costco is reportedly paying $20.00 and hour!

It’s not too early to start to plan the season. And not just where you are going for dinner on which days. It’s time to think about how to pay for it. Too many people raid emergency funds and take loans from retirement accounts to fund the holidays. And because these holidays come every year, it can become a vicious cycle. But, with all this time available before the shopping and revelry begins, that second job, or extra shift, or part-time side hustle may be just what you need to make this season “Merry and Bright.”

source: imtresidential.com

Medical Debt Collections and Credit Reporting

Posted on by Dawn Kennedy

 

Around this time last year, the three credit reporting agencies had to change their rules (due to an agreement with several state’s attorney generals in 2015) surrounding reporting of a consumer’s medical debt in collections. Now, they basically have to give consumers a standard 180 day “grace period” before reporting medical collections on the consumer credit report. Another reporting change requires the bureaus to remove a past due medical bill that is later paid by insurance.

For many Americans, the increase in medical debt is due to higher deductibles and out of pocket costs for healthcare, timely payment by insurance to providers, and the decision by insurers that a provider was “out of network” resulting in a lower reimbursement and the outstanding costs passed on to the consumer. A fun little statistic related to the rules change is that up to 80% of bills submitted by providers to insurers are incorrect the first time. So insurance doesn’t pay them, the bills must be corrected and resubmitted for payment. This results in delays in settling medical bills. Sometimes for months.

The 180-day reporting delay is good for consumers with medical debt because these bills are often passed to collections quickly, within 30-60 days after the payment was due. Faster than many creditors will pass off non-medical debt accounts. This allows time for consumers to deal with insurance, pay their medical bills, and work on billing disputes even if the account is with collectors.

It is important to note that, while it is true that it will no longer have as big an impact on the “FICO” and VantageScore credit scoring models for 180 days, other credit scoring models that lenders use have not adopted this approach. So, you still need to watch your credit report if you are facing medical debts in collections.

Here are a few other things to consider if you or someone you know is facing medical debt:

• You are not alone. Around 43 million Americans had medical debt on their credit reports last year. The average amount of medical debt in collections was $579.00 last year. With 78% of Americans living paycheck to paycheck, this is a large enough number to cause financial hardship.

• While medical debt should NOT be ignored, if you are struggling with debt, it should be given a lower priority than other consumer debt, such as credit cards and personal loans. To do this, the medical debt must remain a “medical-debt,” meaning do not borrow or pay these debts with a credit card.

• Collectors will often try to push you to pay the bill, even suggesting you just put the balance on a card. But if you pay the medical debt with a credit card, you can limit your ability to settle the debt, or seek financial assistance from the hospital or other agency. You can stop collectors from calling by making your request in writing. You just need to send a letter.

• There are statutes that protect consumers who owe medical debt from being turned away from the emergency room for medical care. And, according to the National Consumer Law Center:

“If you request financial assistance from a nonprofit hospital, the hospital cannot deny you care in any part of the hospital because of an old bill until it determines whether you are eligible for financial assistance. You usually have about eight months (240 days) from when you first received the old bill to request such financial assistance.”

• Medical debt is a big reason for bankruptcy, but not why you think. When people are too ill to work, income plummets, savings can be exhausted and often medical debt was transferred to credit cards.

Remember, you now have 180 days to get medical bills handled before they hit your Equifax, Experian, or TransUnion credit report. You can dispute anything erroneously reported and have the records of medical bills that were paid by insurance removed.

Budgeting for Two: You and Your Business

Posted on by Dawn Kennedy

In a recent trend, I am learning that more and more entrepreneurs do not have a bright line separation between their business budget and their personal budget. And you NEED to have both. Separately. The written business budget is the plan to spend the businesses money. You need a business budget to know what you “must make” each month to cover all overhead and expenses. A personal written budget is the plan to spend your personal money. You need to make a written personal budget, so you know what your minimum “take home” salary needs to be. And yes, that “side hustle” is a small business, so even if it is “only” worked part-time, you must have a separate budget.

Once you know what the business needs to make and what you personally need to take home, you can prevent “co-mingling” your business and personal money. And it takes only a moment to fix: just write yourself a “reasonable salary” paycheck. On the personal side, after your paycheck, set aside the amount for your personal taxes. Have an accountant help you figure out your quarterly deposits but set aside each month (or each payday) towards your quarterly. Pay yourself on a regular basis (yes, for startups this can be hard). However, if you pay yourself a paycheck, on a regular cycle, you can budget personally.

If that sounds like an unnecessary “extra step” because it’s really all “your money anyway” you are skipping an opportunity to manage your finances better on both sides of the table. Many businesses have an “ebb and flow” of income and expenses. Proper budgeting allows for the buildup of a business emergency fund, the “management reserve” if you will. This is any money that the business has earned that is not needed for current expenses. This “extra” money, so to speak, should be set aside for lean months, when you are struggling to meet your minimums. By making yourself an expense, instead of just a “leftover” you know what you must do to make sure a regular paycheck comes in.

Why am I so adamant about this? Because we made this mistake early on as business owners. Using the business cash out of the till as it comes in, without tracking, can become a huge issue for taxes, as well as making overhead payments on time. What bills are you paying? Did you pay personal self-employment taxes on your draw? Do you know how much you’ve taken this week? Month? In fact, debt and taxes doom many small businesses. And you should know where it’s all going. This can be a huge challenge when you are just starting up, but you can make the decision early to schedule yourself in the budget, wait between paydays, and do not just write business checks for personal bills. Happy entrepreneuring!

                    www.nancynwilson.com

What We Wish We Knew in 2013: Insurance for Self-Employed People

Posted on by Dawn Kennedy

NOTE: I am not an insurance agent, I don’t sell any policies, and that is best left to the professionals in the field. This is just mine and my husband Mike’s story. A story about what we wish we knew to protect our family as small business owners. I am sharing primarily because it is a money topic, and many, many people have small businesses that generate at least part of the family’s income each month. I am just going to share our raw story, and our mistake that closed our company, threw us into severe financial difficulty, and took three and a half years to dig out. Also, this post is not about life insurance, the most obvious, or even insurance for our physical business. I want to share the types of insurance that we didn’t know about but can perhaps prevent financial ruin for another family. 

When Mike wanted to start a consulting business in 2011, I was so excited. And it was great. It really was. Mike and I followed the state guide, took all the legal steps, got our licenses and set up our office space in our home. Then we took courses through the Small Business Administration, met with awesome advisors through SCORE. In short, we followed the “rules.” We had a business plan, a (now defunct) website, worked hard, read everything, learned a lot, make a ton of rookie mistakes, embraced them, kept going. After about a year or so, we thought we had it figured out. And for the business, we sorta did.

But today we talk about UNEQ Consulting (pronounced unique), LLC, in the past tense. Because it’s been gone since March of 2014. Because on November 1st 2013, Mike was working at a site in Eufaula, Alabama and fell head first 18 feet off of a ladder. Onto concrete. Yup. In three seconds, our life was changed forever.

Here’s why it’s important. Because what we didn’t do, and really never thought about, was protecting our family as self-employed small business owners. Mike survived the accident. Thank God. Had he passed? This is a different conversation. But Mike survived, with a severe head injury and years of rehabilitation ahead.

So, here’s the short list of what we wish we knew:

• What types of insurance we needed to protect our family- not just the business
• The importance of disability insurance on Mike, or “business continuity” or Key Man insurance.
• That in many states, unemployment insurance is for the employed- just not the self-employed
• And that Social Security has an “exclusionary” period for around five months, where even if you are approved, there is no back pay
• Oh, that we shouldn’t incur debt, because we had debt. For example, credit cards “we paid off every month” until the deductibles started needing to be paid, and I had to choose
• We wish that for all of the business preparation, that we would have been told to go and speak with someone about what we may need for this unlikely situation.

This November 1st 2018 will mark five years since our life changing event. Mike has made an amazing recovery, but it has taken years of digging in and working hard to recover financially. We paid it all in full, including the IRS lien on the house (for back self-employment taxes), and have sworn off debt. We hope that this post reaches just one person who needs to read it. Please share our story with every self-employed person and small business owner you know.

Check Your Free Credit Report to Detect Identity Theft Early

Posted on by Dawn Kennedy

Many consumers have become wise to the ways of internet scammers, no longer falling for phishing attacks or clicking fraudulent links to their accounts. Many hackers and scammers are going after companies that hold the consumer data “secure.” With all of the recent data breaches on financial institutions,credit bureaus,and email companies everywhere, it’s natural to be a little wary of identity theft. The Equifax breach was particularly awful for consumers because particularly sensitive personal data was stolen such as where you grew up and your mother’s maiden name, the info for those two layer “security questions.”

To make matters worse, in my humble opinion, the guardians of your credit report (and mysteriously calculated “score”) actually charge consumers hard earned dollars for access to their OWN information. The nerve! But my feelings aside, checking your credit report is an important part of taking control of your money. The Fair Credit Reporting Act, FCRA, authorizes one free credit report each year from each of the three credit reporting bureaus. There is only one link that is “federally certified” so do not click into any of the 34 ads on the way to annualcreditreport.com

I do not generally recommend anyone order all of them at once. You get one a year from each bureau, so ordering one from one of the three bureaus every four months provides a continuous look throughout the year. You can look for unauthorized accounts, errors in reporting, suspicious activity and even addresses that are not yours. If you find something that shouldn’t be there, or there are balance issues, or additional addresses, you can file a “dispute” with the credit bureau so the issue can be investigated.

CAUTION: you can only file a dispute if something on your report is incorrect. There are a ton of “cure your credit report” scams out there, so beware. If your credit report has taken a hit due to debt issues, bankruptcy, or just poor money management, such as forgetting to mail the payment on time, it will take time to rebuild. It’s a marathon, not a sprint.

If you are a victim of identity theft, you MUST take action as soon as you detect it. This includes filing a police report, contacting the lenders (who are also victims of the thief), putting a fraud alert or freezing your credit report. A step-by-step process is available from the Federal Trade Commission’s identity theft website. Yup, sadly that’s a thing.

Why is My Paycheck Short? I wasn’t Sued

Posted on by Dawn Kennedy

When a debt is in default to a federal agency, notably student loans for many Americans, a debtor’s wages can be garnished without a lawsuit through a process known as “Administrative Wage Garnishment” (AWG). This process is different from garnishments based on having a judgment against someone after a lawsuit, because the Treasury does not need to obtain a court order to have an employer withhold up to15% of an employee’s “disposable income.”

Now, there are specific rules surrounding these processes to get you to pay back the debt. For example, an employee must be at the current job for at least 12 months, and the employee left the previous job involuntarily through something like a layoff. But generally, they can take your money, right out of your paycheck, without taking you to court. And it can be frustrating and scary because the agency is in control of the money, and you are short and have other bills to pay.

The Debt Management Service

The Debt Management Service and their Office of Debt Management (ODM) is basically the Treasury’s collection agency. In addition to AWG, there are other processes that can be used to collect on debts owed to the government, such as taking tax refunds to apply to debts, called an “offset.” If you are a Veteran receiving disability compensation, or a retiree, your money can be garnished to satisfy an ODM debt. In fact, your entire monthly disability compensation benefit can be taken. If you receive a Social Security check, and are, or your student borrower is, in default, they can garnish your social security check. Not kidding here.

This post is meant to be a strong reminder that nobody should ignore federal debts. Again, getting a letter from a government agency can be frightening. Period. The Internal Revenue Service (IRS) is the best known, and there are a ton of ads on tv for help with “tax debt.” But these other types of federal debt? Many people are surprised at the power these other agencies have. Not unlike the IRS.

If you are being garnished, and you do not owe a debt to the agency, my suggestion is to contact a lawyer immediately. You may be a victim of identity theft, or the treasury may have wrong information about the debtor, and you are unfortunately targeted. There are stories of two “John Smiths” with a single digit off on the Social Security or account number. Make sure you do not ignore the notices that you may think are just mistakes, you may end up with a paycheck surprise. Not in a good way.

Steps You Can (and should) Take

Student Loans- if you are more than a few months behind in payments, know that after 270 days they CAN intercept your tax return and garnish your wages. If you take steps, such as contacting the servicer, there are steps to take. If you are already in garnishment, get some legal or financial help to see what you need to do to “rehab” your account and stop the garnishment.

Other Federal Debts- similar advice, contact the Treasury Department in charge of collecting your debt, or get legal or financial help in dealing with the agency. For Veterans there may be an option for a waiver, or a payment plan so you receive a portion of your compensation while paying back principal debt.

Final tip. Remain calm and respectful. If you receive a letter, call the numbers on the letter. If not, here is the general contact site for the Treasury Collections Department. You can take back control of your money, even if you are being garnished by a government agency. Get a plan, get help if you need it, and you can get through it.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from The Law Office of Dawn K. Kennedy or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.