Your Money In The News – July 22nd

Credit Card Behaviors of Debt-Free People – CheatSheet

American consumer debt is closing in on 1 trillion, but not everyone shares the national average of roughly $8,000 per household. There are people who have resisted running up credit card debt. What are they doing differently?

They have less debt overall which means smaller balances on car loans and mortgages. They also have higher credit scores and fewer open cards. While multiple cards can be a good tool to increase your credit score, they should not be an invitation to spend. Multiple cards only help your credit score if you keep zero to low balances on them.

If you have debt, how can you become like those who don’t?

• Stop using credit cards as an emergency fund. Build an emergency fund over time with cash.
• Become more aggressive about paying off what you owe.
• Save for big expenses before you need them, avoid having to finance them later.
• Try to adopt the habit of paying bills in full.
• Avoid purchases that require financing.
• Create a lifestyle for yourself that makes it less necessary to acquire debt in the first place.

Private Student Loan Borrowers Who Lawyer Up Are Bringing to Light the Extent of Fraud and Mismanagement in the Private Student Loan Industry – NYT

During the subprime mortgage crisis, billions of dollars in mortgage loans were ruled uncollectible by courts because of missing or fake documentation. Right now, a similar situation is playing out in the private student loan market. How does this happen?

Private student loans are made by big banks and have fewer consumer protections than federal loans. They also come with a higher interest rate and often target the most vulnerable borrowers. The big banks bundle the loans and sell them to a depositor. The depositor, in turn, sells them to a trust. The trust then employers a servicer to collect payments, and engages debt collectors and law firms to aggressively pursue the collection of outstanding loans.

National Collegiate Trust is one of the biggest holder of private student loans with 15 trusts worth over 15 billion. It has brought tens of thousands of lawsuits against consumers in the last 5 years. Trusts win many of these lawsuits automatically because the borrowers do not show up to fight back.

Yet, hundreds of these cases have been dismissed when the borrower actually shows up to contest them because of missing or fraudulent paperwork. The loans have passed through so many hands that it has become difficult to prove who is actually owed the money. As more borrowers lawyer up and contest, fraud and mismanagement are coming to light, resulting in dismissals.

Should I Get a Lawyer and Contest My Private Student Loan? – Bloomberg

In light of the current Private Student Loan Crisis, many borrowers are asking this question. Thousands of Americans have been sued in the past few years for allegedly defaulting on student loans. When a borrower doesn’t show up in court, a default judgment is passed and the borrower can have wages and bank accounts garnished for years.

However, borrowers who have contested have found that some creditors haven’t been able to prove in court that they actually own the debt, prompting judges to dismiss the loans in part or in full. One attorney said he’s represented at least a dozen clients who were sued by various National Collegiate trusts, and every case was dismissed before trial.

If you are sued, you should definitely show up and contest. However, if you can afford to make payments, you probably should. Deliberately defaulting on your debt and hoping for a dismissal is a huge gamble. It can destroy your credit. And there is a chance that you could lose which would leave you on the hook for lawyer’s fees and National Collegiate’s legal fees, on top of the debt you already owe.

Shop Your Values For Under 3 Bucks – Fast Company

The founders of a new platform called Brandless which launched July 11 want to do away with the inflated cost of consumer goods. They have created a new platform where people can shop their values and find organic, non-GMO and gluten free products under 3 dollars each.

Each product undergoes rigorous testing, tweaking, and iteration at their product development center. Their goal is to provide a broad selection of products at a price accessible to anyone.

In addition, with each purchase on the site, Brandless will automatically donate a meal through the nonprofit Feeding America. Brandless plans to expand with more products, partnerships, and initiatives to put people first, create a community, and usher in a new phase of modern consumption.

Maine Proposes Bill To Pay 15% of Student Loan Debt – WCSH

Maine has a problem. There are not enough young people living there. Young people in Maine have a problem. They have too much outstanding debt and not enough income. So many are leaving the state in search of higher paying jobs.

Democratic Senator Nate Libby has recognized this and has proposed a bill that would authorize $100 million for graduates who plan to work and live in Maine for at least five years.

While there are still a lot of specifics to be worked out, generally a person can qualify even if they did not attend college in Main. They simply have to live and work there for five years. The bill is scheduled to go before the Appropriations Committee this week.

With The Rise In Federal Fund Interest Rates, Consumers Ought to Be Bank Shopping – MarketWatch

When the Federal Reserve announced in June it would be raising the federal-funds’ rate by a range between 1% and 1.25%, many personal-finance experts warned that credit-card interest rates would also rise immediately because banks would have to pay more to borrow from the Federal Reserve and pass that cost on to consumers. In theory, the rise in rates should also translate to savings accounts. But they haven’t.

Interest rates on online-only checking accounts have remained flat, and interest rates on online-only savings accounts have risen only about 0.12%. People don’t often switch banks because it can be a hassle. However, now might be a good time to go shopping for better rates.

For example, over the long term, a difference between 1.2% and .08% on an initial deposit of $10,000, with additional deposits of $100 each month and interest compounded monthly over 30 years, yields an additional $5,000. That’s worth a bit of hassle.

Millennials Can See That Capitalism Isn’t Working, And They’re Ready to Invent Something Better – Fast Company

Robert Kennedy once famously said that the GDP “does not allow for the health of our children, the quality of their education, or the joy of their play . . . it measures everything, in short, except that which makes life worthwhile.”

In today’s economy, it is imperative to grow GDP even though we know this does nothing to reduce poverty, protect natural resources, nor enhance the health and happiness of the majority of the people on the planet.

Capitalism is a system that is programmed to subordinate life to the imperative of profit. 51% of Americans between the ages of 18 and 29 no longer support the system of capitalism, 64% of Britons believe that capitalism is unfair and increases inequality.

The problem is that today’s economic goal is growth and growth alone. But uncontrolled growth and sustainable development cannot exist. Anything that grows forever becomes a cancer and destroys the very system upon which it depends.

All over the world people fighting the outcomes of capitalism’s destruction. In America, they are fighting the Keystone pipeline. In Britain, they are fighting the privatization of the National Health Service. In India, they are fighting corporate land grabs. In Brazil, they are fighting the destruction of the Amazon rainforest. And in China, they are fighting poverty-level wages. This shows our collective conscious.

But by focusing on symptoms only, we risk missing the underlying cause. And the cause is capitalism. If we keep pounding on the wedge of inequality and chewing through our living planet, the whole thing is going to implode.