Provide easy, new access to credit facilitates sales. For that reason businesses want such easy access maintained. They don’t want people unable to buy just because they don’t have the money.

Financial institutions make a great deal of money providing easy access to credit. They don’t want to slow it down. While they do want to reduce fraud, they are perfectly happy to allow a fair amount of fraud while they can still make a lot of money.

What this means is the financial system has less incentive to eliminate identity theft than the people that have to clean up after it happens to them. There should be better ways to make identity theft much more difficult.

At a lessor level it should also be more difficult to steal one credit card (which also creates a big hassle for us, in trying to clean things up after fraud occurs). I suggested a way to make credit cards more secure and useful. When Apple Pay was announced I learned they are doing basically what I suggested.

Apple Pay doesn’t share information that can be used to steal your credit card. Apple Pay gives the retailer a 1 time use code for that purchase. It can’t be used, even if someone steals it to use your credit card for more purchases. I also believe Apple Pay doesn’t share other details with the retailer, though maybe I am wrong – I think it is just like you giving them cash (they don’t have your name, address, phone number, etc.).

Much of the information businesses share in the USA is considered private in Europe and companies are not allowed to share that personal information. This makes identity theft and invasions of your privacy more difficult. I wish the USA would move more in that direction.

If you have details stolen (a wallet…) you can put a note with credit agencies that results in them be less free to make it easy for financial institutions to give credit without sensible protections against misuse. But you can’t do this just as a matter of course. I believe we should have the ability to protect ourselves from the massive headache caused by businesses providing credit in our name. But we don’t have such protection now, because of the big money in keeping credit super easy (and thus fraud fairly easy).

Having to clean up after identity you may well have to hire someone to help clean up your credit report. To do so, look for credit repair companies with good reviews and a good reputation.

I would imagine choosing to put in extra protections against identity theft would mean we would have less easy access to credit. For example, I wish I could say you cannot provide a new credit under my name that isn’t using my address on file and without confirmation from my email. Also you are required to send an email, send a text message and send a postal letter, and update my credit agency file (in a way I can view) one week before credit is allowed.

There should also be options such as you must get a positive reply from me. A citizen choosing to have better protection against identity theft would give up immediate access to credit. But I would happily do so. I believe millions of others would too. And given how many people are victims every years, millions or hundreds of thousand a new customers for such a service would likely result.

Business should not be allowed to store credit card numbers that can be stolen and used. The credit card providers should generate a unique credit card number for the business to store that will only work for the purchaser at that business.

Also credit card providers should let me generate credit card numbers as I wish for use online (that are unique and can be stopped at any time I wish). If I get some customer hostile business that makes canceling a huge pain I should just be able to turn off that credit card “number.”

Laws should be adjusted to allow this consumer controlled spending and require that any subscription service must take the turning off of the payments as cancellation.

For some plan where the consumer agrees up front to say 12 months of payments then special timed numbers should be created where the potentially convoluted process used now remain for the first 12 months.

Also users should be able to interact with there credit reports and do things like turn on extra barriers to granting credit (things like they have to be delayed for 14 days after a text, email [to as many addresses and the consumer wants to enter] and postal notification are sent to the user. Variations on how these work is fine (for example, setting criteria for acceptance of the new credit early at the consumers option if certain conditions are met (signing into the web site and confirming information…).

Better security on the cards themselves are also needed in the USA. The costs of improvement are not just the expenses credit card and retailers face but the huge burden to consumers from abuse of the insecure system in place for more than a decade. It is well past time the USA caught up with the rest of the world for on-card security.

The providers have done a lousy job of reducing the enormous burden of fraud on consumers. As well as failing to deal adequately with customer hostile business practices (such as making canceling very cumbersome and continuing to debit the consumer’s credit card account).

Related: Protect Yourself from Credit Card Fraud – Personal Finance Tips on the Proper use of Credit Cards – Continued Credit Card Company Customer Dis-Service – Banks Hoping they Paid Politicians Enough to Protect Billions in Excessive Fees

As I have said, the behavior (driven by the poor ethical standards of the “leaders” of our financial institution) of our financial institutions means, as a a customer, you have to be on guard for their tactics to trick you out of your money. Essentially you have to expect them to behave like a pickpockets and be on guard against them at all times. This is an extremely sad state of affairs: that the ethical failings of such critically important players in our economy are so widespread, long-lasting and accepted. However, as we have seen, they profit from this behavior and their long track record of such behavior provides evidence they will continue acting in this way.

Discover to refund $200 million to credit card customers

It is very good to see the Consumer Financial Protection Bureau taking action to protect the consumers from the financial institutions continued efforts to evade the law and take a little bit from millions of consumers. This type of behavior has been tolerated previously, and should never have been. The financial institutions strategy to take small amounts from millions of people was a wise way of dealing with the tendency of law enforcement to ignore such “small infractions” – they didn’t seem to bother seeing that taking small amounts from millions of people results in hundreds of millions of dollars in ill gotten gains.

Far too much of the bad practices are continuing. And when they are caught the consequences are far too small (which is why they keep behaving unethically). Discover is only being charged $14 million in civil penalties for their lapses (and has to return $200 million it took unfairly).

It is good to have police to try and catch literal pickpockets. And it is good to have the Consumer Financial Protection Bureau to catch financial institutions that take far more than pickpockets can dream of away from the wallets of consumers.

Related: Capital One Bank Agrees to Refund $150 Million to 2 Million Customers and Pay $60 Million in Fines – Very Bad Customer Service from Discover Card – Credit Card Regulation Has Reduced Abuse By Banks – Continued Credit Card Company Customer Dis-Service – I Strongly Support the Consumer Financial Protection Bureau

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Sadly, Congress refused to allow the person that should have headed to the Consumer Financial Protection Bureau (CFPB) to do so: Elizabeth Warren. If we are lucky she will be joining congress as the new senator from Massachusetts to reduce the amount of big donnor favoritism that prevails there now. That attitude will still prevail, she will just be one voice standing against the many bought and paid for politicians we keep sending back to Washington (there are a couple now, but they are vastly outnumbered).

Even with congressional attempts to stop the CFPB from being able to enforce laws against their big donnors, the CFPB has announced their first public enforcement action: an order requiring Capital One Bank to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This is a good, small step that is helping creating a rule of law instead of a rule of those capturing regulators and giving lots of cash to politicians. But it is a very small step. The system is still mainly about captured regulators and giving lots of cash to politicians.

This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for add-on products such as payment protection and credit monitoring when they activated their credit cards.

“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”

Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:

• Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
• Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
• Misinformed about cost of the products: Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
• Enrolled without their consent: Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.

One of the less obvious costs of a poor credit rating these days is large companies see you as someone to take advantage of. They often target those with poor credit for extremely lousy deals that they wouldn’t try to sell to those with good credit. The presumption, I would imagine, is someone able to maintain a good credit rating is much less likely fall for our lousy deals.

Related: Protect Yourself from Credit Card Fraud (facilitated by financial institutions) – Anti-Market Policies from Our Talking Head and Political Class – Banks Hope they Paid Politicians Enough to Protect Billions in Excessive Fees

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Chart showing loan delinquency rates from 2000-2011, shows seasonally adjusted data for all banks for consumer and real estate loans. The chart is available for use with attribution. Data from the Federal Reserve.

Residential real estate delinquency rates increased in the first half of 2011 in the USA. Other debt delinquency rates decreased. Credit card delinquency rates have actually reached a 17 year low.

While the job market remains poor and the serious long term problems created by governments spending beyond their means (for decades) and allowing too big to fail institutions to destroy economic wealth and create great risk for world economic stability the USA economy does exhibit positive signs. The economy continues to grow – slowly but still growing. And the reduction in delinquency rates is a good sign. Though the residential and business real estate rates are far far too high.

Related: Consumer and Real Estate Loan Delinquency Rates 2000-2010 – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Government Debt as Percent of GDP 1998-2010 for OECD

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I have written about the importance of protecting yourself against the companies that provide you financial services. There are few (if any) industries that as systemically try to trick and deceive customers out of large amounts of money as the financial services sector does. In addition to watching them, you it also makes sense to watch your credit card charges. For some reason attorneys general let large scale financial fraud go with much less policing than petty theft by juveniles (if some kids come in and take your TV they will be in trouble, if some large bank does the same thing to all of the household goods of many people that never even were their customers criminal charges are ignored for everyone involved – one of many such examples of bad decisions by attorneys general).

Because financial fraudsters are allowed to continue without much fear of prosecution: thousands, or tens or thousands, or hundreds of thousands and then maybe something will be done, of course that is a lot of people to suffer before action is taken. For that reason we are subject to long standing schemes to take money fraudulently go on for a long time. I wouldn’t even be surprised if most companies found to have taken money that isn’t theirs are left off when they refund money to those people that caught them and that is seen as ok.

Given this state of affairs, many have discovered just sending bills to people and companies and billing your credit card for things you didn’t order is a good way to steal money. Since law enforcement is extremely lax about stopping this. It is in your interest to protect yourself.

Bill Guard is one new service to watch your credit card charges and alert you to potentially fraudulent charges. It seems like a pretty good idea. Like Google flagging spam email for you. I really would think credit card companies should do this (they do but I guess not nearly well enough – no surprise there). I don’t so much love the idea of sharing credit card info with these people. And I don’t charge much so I can review my bill easily, myself. I can imagine lots of others though have difficulty remember every charge. If so, this may well be wise.
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You should review your credit reports annually (at least) to correct any errors. Also doing so can be a tool to help you spot identity theft.

The real free credit report site (for those in the USA), annualcreditreport.com, is provided by government regulation (so those that don’t believe in regulation would maybe rather use one of the sites advertising “free” credit reports). But I suggest using the government provided reports and I would suggest spreading the requests out during the year (you get 3 a year, 1 from each of the nationwide consumer credit reporting companies).

The site also has a large frequently asked question section including:

How do I request a “fraud alert” be placed on my file?
You have the right to ask that nationwide consumer credit reporting companies place “fraud alerts” in your file to let potential creditors and others know that you may be a victim of identity theft. A fraud alert can make it more difficult for someone to get credit in your name because it tells creditors to follow certain procedures to protect you. It also may delay your ability to obtain credit. You may place a fraud alert in your file by calling just one of the three nationwide consumer credit reporting companies. As soon as that agency processes your fraud alert, it will notify the other two, which then also must place fraud alerts in your file.

Where can I find out more about credit reports, my rights as a consumer, the Fair Credit Reporting Act and the FACT Act?
Please visit www.ftc.gov/credit

Related: Credit Card Tips – Personal Finance Basics: Avoid Debt – Save Some of Each Raise – Personal Finance Basics: Long Term Disability Insurance

I strongly support Elizabeth Warren and strongly support her for to head the Consumer Financial Protection Bureau. She would do a great deal to improve the economy of the USA. And she would do a great deal to improve the life of tens or hundreds of millions of people. We have allowed a few people to bribe our elected officials to distort markets to damage hundreds of millions and provide huge gains for a few. We need to support capitalism not crooked elites breaking capitalism to favor their allies at the expense of the economy and those who want to benefit from free markets. It is very difficult to impede the greed fueled distortions that politicians put in place to break free markets and provide huge benefits to those who pay them. Elizabeth Warren is one of the few that is knowledgeable and skillful enough to reduce the damage those people cause the economy and everyone else.

Why I Support Elizabeth Warren and the CFPB

There are few political appointments I care much about. They normally are so co-opted even if they have good ideas they can’t get anything done. Don Berwick is a great person to have lead health care reform. The system is so messed up I am skeptical he can actually get much done, but I also strongly support him.

Elizabeth Warren is excellent and wise enough to actually accomplish things even with those who will attempt to thwart and improvements in the financial system that move forward capitalism at the expense of a few nobles that are protected by political allies. I have no doubt those in power will still thwart most efforts to stop politically sanctioned distortion of markets to enrich a few people that then pay a portion of their gains to the politicians that let them ruin free markets for their own huge personal gains.

Very few political appointees make much difference. If Elizabeth Warren gets this position she will have a good chance and making a huge difference o the quality of life for hundreds of millions of people and the economy overall. That is true even though she will have to continually fight those politicians seeking to protect the anti-competitive benefits they have lavished upon those that pay them to enact policies that benefit them at the expense of everyone else.

Related: If you Can’t Explain it, You Can’t Sell It – Middle Class Families from 1970-2005 (webcast of Elizabeth Warren) – What the Financial Sector Did to Us – Politicians Again Raising Taxes On Your Children

USA consumers pay huge fees on debit cards not found in most other rich countries. Other countries provide debit cards with much cheaper fees than USA banks mandate now given their anti-competitive oligopolistic pricing power. I haven’t seen anyone (that isn’t in the pay of banks) arguing for keeping excessive fees in place. But there are lots of people being paid by the banks (including most likely, “your” representative).

Banks want a favor — at your expense

David Frum, special assistant to President George Bush, is exactly right.

The caps were part of the huge bailout taxpayers gave banks and were meant to be a partial watering down of a few of the smaller favors their bought and paid for politicians had given them over the years (as “punishment” for their misdeeds).
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The chart shows the total percent of delinquent loans by commercial banks in the USA.

The second half of 2010 saw real estate, agricultural, credit card and other loan delinquencies decrease. The rates are still quite high but at least are moving in the right direction. Residential real estate delinquencies decreased 138 basis points in the second half of 2010, to 9.94%, which brought them to just below the rate at the end of 2009. In the second half of 2010, commercial real estate delinquencies decreased 77 basis points to 7.97% (which was also exactly 77 basis points less than at the end of 2009. Agricultural loan delinquencies decreased 76 basis points, to 2.55% (down 53 basis points from the end of 2009). Consumer loan delinquencies decreased, with credit card delinquencies down 90 basis points to 4.17% and other consumer loan delinquencies down 27 basis points to 3.1%. The credit card delinquency rate decreased a very impressive 219 basis points in 210.

Related: Real Estate and Consumer Loan Delinquency Rates 2000 through June 2010 – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Bond Rates Remain Low, Little Change in Late 2009 – posts with charts showing economic data
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