Finance

Top Ten Consumer Fraud and Consumer Scams

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

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Yesterday, the Federal Trade Commission released a statistical survey of fraud in America, and the figures are astonishing. The FTC report survey shows that 30.2 million adults, approximately 13.5 percent of the adult population have been victims of fraud so far this year.

The main avenue for consumer fraud entailed deceptive weight-loss products, ensnaring about 4.8 million consumers. The consumers report two other methods involving fraudulent buyers club memberships and foreign lottery offers.

The lottery scamsters enticed victims into giving out their personal bank account information by telling them that they had won a foreign lottery. Of course, the bank account information was needed to “transfer the winnings.” In the case of consumer scam involving buyers clubs, victims were sold “memberships” they had not purchased.

The FTC consumer report shows consumer scams of several hues. The top ten consumer fraud on the FTC consumer reports*:

1. “Fraudulent Weight-Loss Products (4.8 million victims)
2. Foreign Lottery Scams (3.2 million victims)
3. Unauthorized Billing - Buyers Clubs (3.2 million victims)
4. Prize Promotions (2.7 million victims)
5. Work-at-Home Programs (2.4 million victims)
6. Credit Card Insurance (2.1 million victims)
7. Unauthorized Billing - Internet Services (1.8 million victims)
8. Advance-Fee Loans (1.7 million victims)
9. Credit Repair Scams (1.2 million victims)
10. Business Opportunities (.8 million victims)”

The consumer affairs in regards to fraud are mainly handled by the FTC Bureau of Consumer Protection. The bureau’ mission is to protect consumers against unfair, misleading, fraudulent or deceptive practices. The Bureau addresses consumer complaints, protects consumer rights, develops rules for consumer protections, conducts investigations, enforces consumer protection laws, sues people and businesses who violate the law, and educates businesses and consumers about their fundamental duties and rights.

The FTC is a consumer protection agency that not only offers consumer fraud protection but also shares and collects consumer fraud and identity theft information making them available to law enforcement agencies across the country.

The consumer report found fraud cut across age, race, and education demographics. Young consumers between 35 and 44 were thirty-two percent more likely to be ensnared than consumers between 65 and 74 years of age. African American were 22 percent of the victims, Hispanics 18 percent, and Whites 12 percent. Furthermore, college educated consumers were less likely to be defrauded than consumers without a college degree*.

The main avenues of fraudulent advertising as reported by consumers were:

• Print advertising, direct mail, includes catalogs, magazine and newspaper and advertising, and flyer’s and posters - 27%
• Internet, includes Web sites, e-mail, and auction sites - 22%
• Radio or television - 21%
• Telemarketing - 9%
• Others - 21%

If it sounds too good to be true, it probably is. You must be constantly vigilant against offers or promotions that provide quick fixes, easy money, instant remedies to various ills, and income without effort. Remember, anything in life worth doing is going to be difficult, requiring you to challenge yourself. I live by this creed, if you imbibe it as well, you are less likely to deceive yourself and be deceived by others in life.

*Source: Federal Trade Commission Consumer Fraud Survey 2007

Finance

GDP: Gross Domestic Product Fails as an Indicator of Economic Welfare - Part 1

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

Conceivably there is no other headline that captures the essence of the Gross Domestic Product or GDP better than the Reuters headline after the catastrophes of hurricanes Katrina and Rita.

The disasters ravaged the citizens of our country, over 850,000 homes damaged, thousands of people becoming refugees, devastation of over 1.3 million acres of forests, avoidable deaths of 1,836 men, women, and children, and more unthinkable residual destruction.

Herein, the above catastrophes profoundly illustrate the fallacies of using GDP as an indicator of economic health and wellness. Pragmatic economists for decades have been shouting from the rooftops that the GDP is an inadequate reflection of the true economic welfare of America and Americans. American government officials and politicians always talk about economic progress; their solutions for sustainable and consistent growth of the economy come in various hues. However, there is one common theme, one commonality in their arguments; they always cite the Gross Domestic Product or GDP as the only measure of economic progress. Unfortunately, the GDP is not the universal indicator of growth as the above officials make it to be. The lackadaisical use of US GDP by politicians and government officials as the one size fits all benchmark of economic health and wellness is a disservice to the American public. Alas, the public is not provided the true picture of economic progress. Herein, I will endeavor to clarify GDP and offer some alternatives for benchmarking economic health and wellness.

The GDP is used to define the market value of services and goods produced within US borders irrespective of nationality during a period of time. This differs from Gross National Product or GNP which is the total value of all final services and goods produced by Americans irrespective of their location globally. Hence, GDP and GNP are almost similar and yet wholly dissimilar; GDP (or GDI - Gross Domestic Income) focuses within the region in which income is generated and GNP (or GNI - Gross National Income) measures accrual of income to a region. The GDP reflects the economic production within the US. The most common method of estimating production is the expenditure method.

This approach evaluates the amount that government and people expend on finished goods, investment for business in plants and equipment, and net exports of America. However, GDP counts only final services and goods while certain things are not counted towards GDP:

• sales between companies
• savings & financial investments
• level of utility the public gets from consumption and production
  • doesn’t measure the effects to the public or environment’s well-being as a direct result of a financial transaction

So, GDP counts many transactions as benefits to the current economy at the expense of future growth.

Henceforth, GDP is a national average which ignores the importance of the distribution of income or economic wealth. Here are some examples of what GDP doesn’t measure:

• Simply doesn’t distinguish between financial transactions that diminish the well-being of people or environment.
• Simply doesn’t distinguish costs from benefits, presupposes that every financial transaction profits people and environmental well-being.

A Look through the GDP Prism

• GDP: Income Includes Depletion of Natural Capital

GDP treats natural capital depletion as income, unlike in accounting where it is measured as depreciation of an asset. This is counter intuitive as this would mean there is an inverse relationship with regards to depletion of natural resources and GDP count; hence, as more natural resources are used up, the GDP will increase.

• GDP: Crime and Natural Disasters are Viewed as Economic Benefits

Crime is counted as a benefit to the economy from the GDP prism, since crime spurs consumption of security items, repair or replacement of property, and spending on crime prevention security services. Damage caused by the recent natural disaster Hurricane Katrina through the GDP prism injected billions of dollars into the economy and is seen as an economic benefit, completely ignoring the negative impact upon people and the environment.

• GDP: Ignores Income Distribution

The GDP doesn’t take into account the distribution of income, as all tides don’t lift all boats. During two decades of GDP increase by over 50 percent between 1973 to 1993, wages declined by 14 percent. Also, in 1980, the real income of the top 5 percent of the households rose by 20 percent. The GDP increase was presented as a benefit to all Americans, it benefited a select few.

• GDP: Overlooks the Disadvantages of Financing the Economy through Debt

America borrows money mainly from abroad to sustain the economy. The main avenue for economic sustainability is by procuring cash through debt, by sale of our US Treasuries. This activity contributes to the GDP; alas, the debt has to be repaid. Americans mainly go into debt for consumption not capital investment. Herein, this national and personal debt must ultimately be repaid; this downside of excessive debt is not reflected in the GDP.

• GDP: Disregards Non-financial Services

The GDP doesn’t include any services of non-financial transactions such as volunteer work, elderly parental care, child care and such are not measured. Remember only monetized services are measured for the GDP. Herein, as non-financial services are replaced with more monetized services, from the GDP prism it is seen as economic progress.

• GDP: Goes Up with Rise in Environmental Pollution

The Environmental Protection Agency’s multi-billion dollar Superfund Clean-up Program of waste and toxic sites will take over 3 decades to complete, during which time the economic activity generated and expenditure for the clean-up will be added to the GDP. The initial economic activity used to generate the waste was added to the GDP, the ensuing clean-up will again add to the GDP. Thus, polluting the environment is seen as an economic benefit through the prism of GDP.

Consequently, the GDP is used whimsically by government and political officials to portray an unrealistic view of the health and wellness of America and Americans. There are measures available that can reflect the true picture to the American public. After all, we and our children have a stake in the wellbeing of our nation in all spheres; thence, we desire and deserve information critical to the wellbeing of present and future generations of Americans.

Part 2: Coming soon

Finance

Credit Card Companies Target College Students - Part 1

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

As new and existing college students start school this semester, they will be greeted by more than professors. They will encounter an affable smile, a pleasant disposition of a friendly stranger bearing gifts. Yes, this warm and fuzzy stranger is willing to part with his $1 frisbee, $3 pen, a $5 shirt, or possibly an older version of the iPod for free, in return for your valuable private information and John Hancock at the bottom of the credit card application. Welcome to the new millennium, where schools allow purveyors of plastic money to roam free the corridors of higher learning looking for their latest vulnerable prey, the college student.

These credit card predators offer the above free allurements and enticements to hook students and eventually trap them in a cycle of debt. For schools to allow these card companies on campus to target students is at minimum stupefying and at worst complicity in the exploitation of naïve students. My previous articles about the student loan scandals and how many universities are part and parcel of the college loan debacle, reflects an atmosphere on campuses that taking advantage of students is okay.

Families send their children off to college to obtain knowledge, not credit card debt. Alas, that is what is occurring and it is getting worse. Students are starting their lives at school with new hopes and dreams, which turn into nightmares of unending consumer credit debt. Remember, on top of any college student loan that they may have, credit card debt is an added crushing weight.

For it is, majority of college and university students do not have the life experiences nor the financial sophistication to understand the complexities of credit cards, even many adults dont. Students dont understand interest rates, fees, and consumer rights associated with these instruments of debt.

So it is little wonder, that college students are racking up thousands of dollars in credit debt and ruining their credit rating. Consequently, bad credit will lead to bad credit scores on their credit reports, taking years for credit repair. So, along with counseling on their school subjects, students will need credit counseling as well. It is not surprising without any college, university, and governmental oversight, students and their families are left to their own devices to be vigilant against predatory marketing by credit card companies.

Part 2: Coming soon…

Finance

Students Need To Examine Student Loans

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

As students and their families battle rising college and university tuition costs, a new front has opened up with the recent student loan scandal. The ensuing fall semester has many of them worried about the student loan process, can they trust it. Their confidence in the entire student loan process has been shaken to the core, especially their faith in the university financial aid officials.

Earlier this year, New York Attorney General Andrew Cuomo started an investigation into the student loan industry based on allegations raised by a full-page New York Times advertisement that questioned the ethical practices of schools and student loan lenders. No one could have foretold the national controversy the investigation would create, let alone the student loan industry and schools. For students a student loan, private student loan, or federal student loan is critical to their educational needs.

Getting a good college loan not only impacts sustenance of college education, also student finances after graduation. After graduation, the student loan becomes a personal loan, thence the original loan terms come into play. If the original terms of the student loan are unfair, it can be costly for many years to come, unless student loan consolidation or refinancing occurs.

Anyone who has applied for a student loan can understand how challenging it can be, even financial aid officials sometimes have a tough time with the complexity. With each passing day, new developments add to the process’s complexity of student lending. Initially, university financial aid officials formulated lists of preferred lenders which consisted of a half-dozen student loan lenders that agreed to provide students with favorable loan terms in return for a consistent slice of the schools’ loans.

The preferred lender list was supposed to help borrowers navigate through the confusing array of government programs, private loans, discounts, and such. Over time, things went horribly wrong, Congress failed to make adjustments in student aid and grants to maintain parity with rising tuitions costs. Alas, private financial companies filled the increasing disparity by offering various private student loans.

Currently, the student loan business stands at $85 billion. Ultimately, greed took over both sides of the student loan spectrum, the colleges and the lenders. The recent investigation has revealed, that lenders offered various bribes such as trips, meals, company stock, and other gifts in return for inclusion on the preferred lenders list. In many appalling instances, private lenders provided their own staffers to financial aid offices without they or the colleges disclosing to borrowers who they worked for. Financial aid advice is meant to be impartial, unbiased, and in the best interest of the student.

Also, schools wanted a piece of the student loan gravy train, so they partook in revenue-sharing agreements with student lenders in return for a piece of the loan. Of course, while college officials were enjoying their cozy relationships with the lenders, they were slowly relinquishing the ethical underpinnings of their relationships with students.

The evisceration of ethics, morals, and good judgment on part of schools in relation to student loans is truly breathtaking. One would hope private student loan lenders would exercise ethics and good citizenship but it is not taken for granted by the general public. But students and their families do not view colleges and universities, private or public through the same prism as private business; they take it for granted that schools and their officials maintain the highest integrity and ethical standards. They innately believe that the financial aid officials are looking out for their interest, in getting them the best and most competitive student loan.

Hence, students and their families never questioned the merits of the preferred lenders list or the accompanying recommendations of college financial aid officials. Unfortunately, greed manifested itself; colleges worked hand-in-glove with private lenders in exploiting students and their families.

So far, Andrew Cuomo has settled with the major offenders such as, Sallie Mae, Nelnet Inc., JP Morgan Chase, Citibank, and Bank of America and some colleges have already signed a code of conduct. He has recovered $19 million in settlements thus far, for student loan borrowers. This is just the beginning of a long overdue remedy and overhaul of the unethical practices in the student loan industry.

Finance

Student Loans: Students & Their Families Need Choice

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

In the last few months, the world of the student loan industry has gone through a 180 degree change. It all started with an investigation spearheaded by New York Attorney General Mario Cuomo into the nexus between universities and student loan lenders. Cuomo unearthed many unsettling issues that were not known to the general public.

The investigation uncovered the cozy relationship between colleges and lenders. Some student loan lenders had been offering special incentives to college financial-aid officials in return for placement on the colleges preferred lender lists. A lender’s placement on this preferred list guarantees that it will get special notice by the borrower.

Neither the students nor their parents were ever informed about the conflict of interest inherent in this type of nexus between the student loan lenders and colleges. The borrowers werent aware that possible competitive lower interest rate student loans, student loan debt consolidations, private student loans, federal student loans, and student financial aid options were offered online by popular student loan sites such as PremierStudentLoan.com.

PremierStudentLoan.com is a great place to get loan quotes, helpful tips & advice, research your loan options and get in touch with lenders that offer competitive low student loan rates.

Thankfully, Congress is looking into it this issue, parents and students are more aware, many colleges and lenders are cleaning up their act.

Looking back I cant believe that I might have lost out on an opportunity to get a lower interest rate and save thousands of dollars in interest just because the financial aid people were looking out for the lender’ interest and not mine. After all, that is their job duty, to work on behalf of students to get them the most competitive rates. I would like to get your thoughts on the matter. Share with me your experience about your college student loan process.

Finance

Inflation Fears on Fed’s Radar

Written by: Gaurav Bhola, MSM, Managing Editor & Community Manager

The Chairman of the Federal Reserve Ben Bernanke fears that inflation might flare up in the near future. He is expected to convey his concerns to the House of Representatives’ Financial Services Committee on Wednesday. He will also address the Senate Banking Committee regarding his assessment. Bernanke will present two days of the central bank’s monetary policy report which is part of a twice-yearly ritual of testimony before Congress.

The report is a critical forecast of the nation’s inflation, unemployment, and growth figures. It is surprising that even the precipitous increase in consumer and oil prices in the last few years has not prompted either a recession or high inflation. According to the Labor Department consumer prices rose 2.7 percent during the 12 months ending in May.

The 1970s steep hikes in oil pooled with presumption of high inflation fueled double-digit consumer price increases and sluggish economic growth. Also, the 1979 Iranian revolution sent oil prices soaring with inflation of 13.5 percent in 1980. These expectations of impending inflation can cause havoc with an economy.

For the Fed the next couple of years will be important with regards to keeping high inflation at bay. They are ready to meet any challenges especially after having core inflation slide for the third straight month in May to 1.9 percent. The Chairman would be content if inflation lowered further and stayed low for a while.

Preferably, the Fed would like to see consumer and business inflation anticipation to be deflated because these expectations may become self-fulfilling. If inflation anticipation is steady then it wont be affected by causes such as pendulating oil prices, employment news, economic highs and lows or other facets of a vibrant economy. Herein, if consumers anticipate prices are on the rise, they are more apt to pay higher prices; if businesses anticipate inflation to go up, they may be faster to increase prices to cover costs.

The Fed believes that inflation expectations have a direct impact on actual inflation, thus the Feds ability to attain price stability. It is a constant struggle for the Fed to determine what leads to inflation expectations and how that influences businesses’ price-setting decisions.

Bernanke believes the Feds ability to foretell inflation and envisage how inflation will react to policy is contingent upon the Feds ability to measure and comprehend what determines the public’ outlook of inflation.

However, the growth outlook for the economy is of critical importance. It is most likely we will have marginal growth next year. Fortunately, the housing arena has not had much impact on the collective economy which may change in the future.