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The question that you must ask yourself is “What have I done to prepare for financial success?” Have I done anything? When will I begin a Family Financial Plan?

Last month we discussed the importance of establishing your Family Financial Plan. The question that you must ask yourself is “What have I done to prepare for financial success?”  Have I done anything?  When will I begin a Family Financial Plan?

There are three Roadblocks to Financial Success.  They are:

1-Inflation
2-Taxes
3-Procrastination

There are six keys to Financial Success.  They are:

1-Risk Management
2-Cash Management
3-Investment Planning
4-Tax Planning
5-Retirement Planning
6-Estate Planning.

We will discuss each of the six keys over time, beginning this month with Risk Management.

A well-designed risk management program may help protect you against disaster without burdening you with payments for protection you don’t really need.  Prudent investors must be willing to cover the cost of minor financial setbacks themselves.

Insurance is not meant to insulate you from the cost of every head cold or automobile fender bender.  The idea is to protect you from catastrophe, not to improve your standard of living by filing a claim.

So the question is “Are You Properly Insured?”

As many as 67 percent of the homes in the United States are underinsured.

Consider the following:

a) Fewer than 40 percent of workers have long-term disability insurance through their employer and o­nly two percent buy it o­n their own.

b) About o­ne-third of all nursing home costs are being paid out of pocket by individuals and their families.

c) These are just a few of the startling statistics that many people are not aware of.

The Risk Protection that most people need to be concerned with and to “do” something about are:

1-Medical
2-Long-Term Care
3-Property & Casualty
4-Liability
5-Life
6-Disability

We will go into each of these areas in more detail later o­n but will briefly discuss them each now.

There are three broad types of health care coverage: preferred provider organizations (PPO), health maintenance organizations (HMO) and indemnity plans.

Medicare is an important area to protect yourself with if you’re over age 65.

Long-term care is o­ne of the greatest risks faced by Americans today.  Currently, 44% of individuals age 65 and over can expect to spend time in a nursing home or have home health care required.

Disability Income Insurance is an area that is neglected by most working Americans.  This type of insurance helps replace income lost because of accident or illness.

With Property & Casualty Insurance, we typically think of homeowner’s and automobile insurance.  Homeowners need protection against liability and theft of or damage to their property.  The majority of Americans drive cars and automatically insure them.  The areas of protection in an automobile plan are:  a) liability, b) uninsured and underinsured, c) collision and comprehensive, d) medical payments and e) personal injury protection.

Life insurance has many purposes.  Whether wealthy or not, there is always a need for life insurance.  The primary purpose is to protect your dependents financially in the event of your death.  Used properly, life insurance is a great blessing to many families in their time of need.

With any of these areas, you must be wise in your decisions.  You can pay too much and you can pay too little for the protection that you and your family need for your Family Risk Management.  It is vitally important that you do hours of research or simply visit with someone that is an expert in the Risk Management area.

The bottom line is that you need to take the first step of your Family Financial Plan with your Risk Management analysis.  Get the plan going!!!! You, and your family, will feel such peace knowing that a plan is in effect.

Good Luck.

The arrival of a new year always begs the question: “Am I in a better financial position than I was last year?” These Financial New Year’s Resolutions can help you improve your financial position.

The arrival of a new year always begs the question: “Am I in a better financial position than I was last year?” This doesn’t mean “Am I making more money?” because most of us find that as our income increases, our expenses do, too. What the question really means is “Am I making better, more-informed financial decisions than I was last year?” If you can answer a hearty yes, then hooray for you! However, the rest of us probably have room for some improvement. What follows are “Financial New Year’s Resolutions” that you may be able to use to improve your financial position. Don’t try to initiate them all at o­nce or you will be too overwhelmed to accomplish anything. Select o­ne or two that you can work o­n and build from there.

Resolution #1 – I hereby resolve to spend less than I receive through earnings or other sources of income.

This is probably the most important resolution you can make. Living within your means brings peace of mind. It also saves all that interest you may be paying. Many people find that using a budget to track their spending helps them to keep their spending within limits. If you don’t have a budget, make o­ne!

In addition, if you aren’t carrying a large debt load, you should be putting aside a small amount of money each pay period and gradually working up to a larger amount. It is a good idea to work toward having 3-6 months’ living expenses in an accessible savings account. This will be a cushion in case of medical emergencies, loss of job, etc. Remember that putting money aside does not mean that you can put an equivalent amount o­n the credit card if you run short! You’ll pay more interest o­n your debt than you’ll receive o­n your savings (which is why you should pay off high-interest debts before establishing a large savings account).

Resolution #2 – I hereby resolve to decrease my debts and not add to them any further.

Getting out of debt is probably the most popular resolution next to weight loss. With the average American household carrying thousands of dollars in just consumer debt, it’s no wonder that many are seeking debt relief. Evaluate your financial situation and find “extra” money that you can apply toward debts. For example, let’s say that every morning you spend $2 o­n a beverage o­n your way to work. That’s $10 a week or $520 a year that could be put to paying off debts. Simple Joe even has a program that can show you the best way to eliminate your debts so that it takes the least amount of time and you pay the least amount of interest. Most importantly, vow to not add to your current debt load. Save up for things you would like to buy!

Resolution #3 – I hereby resolve to increase my financial education and apply it.

Learn more about your money and how to make it work for you. Read books, articles, magazines, etc.; attend seminars; investigate websites that teach you about money. Simple Joe’s website offers links to several good books and articles to help you get going. Several articles offer expanded advice o­n many of the topics discussed in this article. Many books may be available at your local library. Start small – you can’t possibly assimilate everything in o­ne go around. Select o­ne area of interest, such as budgeting or investing, and learn all you can about it.

Resolution #4 – I hereby resolve to start a retirement account if I don’t have o­ne. If I do have o­ne, I will put more money into it.

Check with your employment to see if they offer a 401k plan and whether they match a percentage of your contributions. If they do match, that’s like free money to you! Gradually work up to the maximum allowable contribution. If a 401k plan is not available to you, then find out about IRAs or Roth IRAs. Your financial institution can help you to understand the strengths and deficiencies of these two retirement plans, as can many websites. The most important thing is to be putting money aside for retirement. You don’t want to have to work through your retirement years!

Resolution #5 – I hereby resolve to set up a will and trust.

If you own anything at all or you have children, you need to have both a will and a living revocable trust. Both of these help to express your wishes and protect your assets upon your death. Don’t let that burden fall to your children. Estate taxes alone could eat up much if not all that is left after paying off your debts if your estate is not properly protected. Locate a good attorney dealing with wills and trusts to help you get going. Ask friends for references or call your local law university to find out who teaches this area of law there and whether or not he/she is in private practice as well. Expect to pay several hundred to several thousand dollars, depending o­n how complicated your affairs are. This is o­ne of the few ways in which you can truly buy peace of mind.

Although there have been several ideas presented here, there are many more resolutions you could make to help out your financial position. The important thing is to pick something and get going. If it will help, write out your resolution and put it where it can remind you several times a day. Remember – if you’re standing still, you’re not moving forward!

The ultra-wealthy would say that The Tortoise Approach is the riskiest form of investment there is. That no matter how “diversified” you think you are in your investment vehicle of choice, your eggs are essentially all in o­ne basket-the Stock Market…….

No doubt you are familiar with Aesop’s fable The Tortoise and the Hare. In case you aren’t, let me sum it up for you: The Hare challenges the Tortoise to a race, which the Tortoise accepts. The race begins and the Hare lazes around (because he knows he can outrun the Tortoise any day) while the Tortoise begins his slow progress to the finish line. When the Tortoise is close to winning the race, the Hare begins running for dear life, vainly hoping to beat the Tortoise. The Tortoise’s victory is often described as “Slow and steady wins the race.”

For years this is how the financial advisement industry has characterized retirement preparation: Start early, invest often, invest for the long term, dollar-cost average, etc. No doubt you’re familiar with these terms and others connected with what I call “The Tortoise Approach.” The Tortoises are those who’ve been following the counsel of the self-appointed financial experts. They have been meticulously and methodically planning and investing so that they will be ready to cross the finish line. However, the Hares may have neglected to adequately prepare; they may be at a point where the financial “experts” have told them that they may just be out of luck unless they come up with thousands of dollars to invest quickly and regularly. Essentially, they’re told that they need to run with all their might to catch up.

Well, I’ve got news for you. The American Dream has rewritten Aesop’s fable and in the modern version, both the Tortoise and the Hare can win. Both can achieve financial freedom using different approaches, and achieving them at different times.

Most of you are probably very familiar with The Tortoise Approach. This truly is the “slow and steady” approach to wealth. It involves years of planning and investing in 401(k)’s, IRAs, 403(b)’s, SEPs, etc. And in the end, if you’re “lucky” and the stock market keeps heading in the “right” direction, you could actually retire with more than a million dollars invested and ready for your use. Low risk? Those who do it seem to think so; after all, that’s what the financial “experts” tell them: “Diversify, diversify, diversify-and you’ll be okay.” They spread their investments across low-, medium-, and high-risk opportunities. They do it regularly and automatically. They are told to “sacrifice now” and “reap the benefits later.” For many people, this is the best approach.

However, the ultra-wealthy would say that The Tortoise Approach is the riskiest form of investment there is. That no matter how “diversified” you think you are in your investment vehicle of choice, your eggs are essentially all in o­ne basket-the Stock Market, prone to all its foibles, follies, frustrations, and failures. This is why the ultra-wealthy use “The Hare Approach.” In the modern version of our fable, the Hare doesn’t dawdle around; he just finds a better way to build a bigger mousetrap. He may even be able to beat the Tortoise to the finish line, even when there is little time left.

The ultra-wealthy know that there are essentially four fast tracks to wealth: real estate, building businesses, internet/information services, and stocks. They learn the skills, knowledge, and tactics that lower their risk. Understanding how to function in these areas brings them greater rewards and ever-increasing wealth. (When was the last time your IRA offered you a 30% or higher rate of return?)

Too risky, you say? Well, that all depends o­n your point of view. Your tolerance for risk is directly proportional to your fear. Fear has its roots in ignorance. Knowledge expels that fear. To the ultra-wealthy the Hare Approach is less risky because knowledge backs their investment decisions, unlike most Tortoises who really don’t understand or comprehend what they’re investing in; they just keep plodding away. The Hares prefer to take the bull by the horns, rather than by the tail!

What is it that draws people to The Hare Approach? They don’t want to “sacrifice now” and “reap the benefits later.” They want to learn how to “get it now and still have it later.” They choose freedom over security. They become the masters of residual income, money that works for them so they don’t have to.

How can you do it? Get educated! There’s no o­ne right way for everybody. Your path to wealth is as individual as you are. There is an abundance of information at your fingertips: websites, books, financial magazines, e-zines, financial newsletters, motivational speeches o­n cassette or CD. Learn about the four fast tracks of wealth and decide which interests you most. Prepare, Pursue, and Prosper! If you’re like most wealthy people, you’ll probably make your money in at least two or more of these areas.

Both the Tortoise and the Hare can win. There is plenty to go around. It’s just a matter of when you want your results! How is this possible? It’s the American Dream, my friend, and the Land of Opportunity is ripe for harvesting.

There are three major factors that affect how much you pay for a loan. Understanding these factors can save you time, money and frustration.

There are three major factors that affect how much you pay for a loan. Understanding these factors can save you time, money and frustration.

1. The Federal Reserve Discount Interest Rate.

Banks and other lending institutions borrow money from the Federal Reserve Banks. The discount rate is the interest rate a Federal Reserve Bank charges eligible financial institutions to borrow funds o­n a short-term basis. This rate is set by the boards of directors of the Federal Reserve Banks. The discount rate has a direct effect o­n the “Prime Interest Rate”, which is the interest rate o­n short-term loans that banks charge their commercial customers with high credit ratings. You can get live information o­n the current Prime Rate at www.FedPrimeRate.info.

Of the three major factors that affect your interest rate, this is the o­ne you have the least amount of control over.

2. Your FICO Score and Credit Report.

There are companies that gather and sell information about information o­n where you work and live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. They are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau. Potential lenders will get your credit report from the credit bureau.

The FICO score is a method of determining the likelihood that credit users will pay their bills. It condenses a borrowers credit history into a single number.

You can protect your FICO score and credit report by paying your bills o­n time and not over-extending yourself. You also have the right to have false information removed from your credit report.

3. Lender Business Factors.

Banks and other lenders are in business to make a profit. They also exist in a competitive market. Like all businesses, they will balance their profit margin with competitive factors. If they charge too little, based o­n your credit history and the prime rate, they risk going out of business. If they charge too much, they risk losing you to a competitor. Therefore, in order to get the best deal you can, you should shop around.

Keep o­ne thing in mind when you are shopping around. o­ne of the things that affects your FICO score is the number of times your credit report has been accessed in a certain period of time. Therefore allowing too many potential lenders to run your credit report in a short period of time could be counterproductive. Three or four is typically a safe number. If you request an o­n line quote from several lenders, they won’t typically run your credit report until after they have made their initial quote.

(You must explicitly provide a potential lender with permission to run your credit report. For that, they usually need your Social Security Number.)

In summary, the three major factors you pay for a loan are the prime rate, your credit history (FICO score) and business conditions such as competition. In order to get the best rate you can, you can do two things, keep up a good credit history by paying your bills o­n time, and shopping around for the best rate.

A team makes all the difference between winning and losing. The losers of this world are those people who take it upon themselves to do everything single-handedly. These are the do-it-yourself-at-all-costs folks. They believe that nobody can do things as well as they can. Winners, however, understand the importance of synergy (1+1 = more than 2). Winners assemble a team.

Imagine if you will that you are NASCAR driver. (Now don’t overextend this metaphor-just go with the flow!) You start the race and put the pedal to the metal. The crowd is flying by in a whirl of colors. You’re exhilarated by the speed. You’re starting to pass some of the other drivers. You are feeling pretty confident about this race. “Eat my dust!” you yell to no o­ne in particular. Just when you’re at the top of your game, you suddenly realize your fuel is getting low. You pull over to the side, turn off the car, get out, refuel it yourself, get back in and restart the car, and off you go o­nce again, having lost valuable time.

A few laps later and things are looking up. You’re starting to cut down some of the lead that the other cars have had o­n you. Next thing you know you blow a tire, which you had forgotten to check at your refueling pit stop. So o­nce again you exit the race, turn off the car, get out, change the tire, get back in and reenter the race. Now you’re o­nly 30 laps behind, but you think, “This baby’s got power-no problem!” You hit the gas pedal and try to make up for lost time. After o­nly a few laps, though, you’re low in fuel-again! o­nce more you exit the race and refuel your car yourself. As you watch your competitors flying by, you are beginning to realize that this is a race you cannot win.

You compare yourself to the winner of the race and wonder what the difference is. Is it your car? No, it’s the same model as his. Is it his accessories? Wrong again. You’ve got everything he does. Is it your skills? Who knows? You seem to drive just as well as he does. Then what seems to be lacking? He must have something you don’t. You rack your brain and finally conclude that the o­nly thing he has that you don’t is a “small” thing called a TEAM. His team takes care of his refueling and tire changing and all those necessary details, allowing him to focus o­n the task at hand – winning. You, o­n the other hand, have been trying to do it all yourself.

A team makes all the difference between winning and losing. The losers of this world are those people who take it upon themselves to do everything single-handedly. These are the do-it-yourself-at-all-costs folks. They believe that nobody can do things as well as they can. Winners, however, understand the importance of synergy (1+1 = more than 2). Winners assemble a team.

How do you win the Super Bowl, Stanley Cup, World Series, NBA Championship, World Cup, or any other athletic event for that matter? With a team consisting of coaches, players, staff, and a whole lot of other supporting people. Nobody wins o­n his own. A great coach is nothing without great players. A great player gets nowhere without a great coach (and probably a great agent, too!). Great coaches and players can do nothing without facilities and the people to take care of them; without doctors and nutritionists, physical therapists and other sports medicine professionals; without team owners and financial backing from advertisers. The list could go o­n endlessly.

You see, everything you do is inherently connected to a team: eating your food, reading your newspaper, buying a home, driving to work. Think about all the teams involved in each of these situations. In fact, the world is so dependent o­n connections that we cannot function without teams. And yet when it comes to money that is exactly what many of us try to do. We think we know everything we need to know about handling our finances, and no way are we going to pay someone to help us, even if it nets us more in the long run.

Like the winners of the world, the wealthy of the world assemble teams to help them build their financial futures and keep them. The wealthy see their team as an investment, an investment to protect their investments, so to speak. Their team consists of (but is not limited to): a good honest attorney, a tax consultant, an accountant, and many others whose job it is to keep them [the wealthy] wealthy.

So, how would you go about building a team whose job it is to lead you o­n to financial victory? The first place to start is a mentor, who is probably the most important part of your team. A mentor is someone or something that guides you along your path to wealth (and presumably he or she has already walked that road). Mentors don’t have to be actual people (although this is extremely useful for feedback and o­ne-on-one support). Mentors can also be books and other information. Experiences can also serve as mentors. You may have many mentors at different points in your life; often they show up just when you seem to need them. Mentors can also be key to introducing you to other potential team members, such as attorneys, planners, consultants, investors, accountants, etc.

Using a team to achieve your goals is really much simpler than doing it yourself. Nobody can know everything about everything, which is why there are different jobs for different people. There is no way you could learn in your lifetime everything you need to know to achieve financial success if you try to learn it all by yourself, o­ne piece of information at a time. Using the collective resources of your team will greatly simplify your life and infinitely expand your returns. Truly, a team is the o­nly way to win. GO, TEAM, GO!

Do unexpected car repairs, quarterly insurance payments or those darned property taxes find you hard pressed to squeeze o­ne more dollar out of an already stretched monthly budget? Or do you usually end up reaching for the plastic in your wallet to make up the difference? Those inevitable expenses can put less stress o­n your bank balance — and your mind — if you learn to expect them and save in advance.

Do unexpected car repairs, quarterly insurance payments or those darned property taxes find you hard pressed to squeeze o­ne more dollar out of an already stretched monthly budget? Or do you usually end up reaching for the plastic in your wallet to make up the difference? Those inevitable expenses can put less stress o­n your bank balance — and your mind — if you learn to expect them and save in advance.

Too often, irregular occurring expenses get left out of our financial equation. Our income stretches to cover the regular monthly expenses and the remainder trickles away toward little things like the morning espresso or lunches out or a dozen other daily splurges. We choose not to think about the brakes that are getting spongy or the plumbing that’s beginning to make strange noises. And we end up riding a financial roller coaster, never knowing when the next crisis will throw us for a loop.

Planning and saving for those events can help prevent an ordinary life from turning into a crisis and can also cut down dependence o­n credit cards. Not having savings is a major reason people get into debt — event when they don’t have problems controlling their spending.

An Anti-Emergency Fund™ is the way to anticipate and save for those irregular events that are anything but unexpected. The Anti-Emergency Fund™ is the foundation of the three-part savings plan we’ll be discussing in this and coming issues of Financial Fitness. With a little advanced planning, a broken water heater, a high winter heating bill or the family vacation don’t have to result in financial emergencies. An Anti- Emergency account helps in saving for those variable expenses, both expected and unexpected, that inevitably occur.

Some people call this their “emergency fund,” but it’s really a savings fund that helps you prevent financial disasters. No, you can’t predict when your car is going to break down, but you can predict that it will occasionally need maintenance and repairs and set aside a little money in advance for those events.

Here are some steps to help you get started o­n your Anti-Emergency Fund™:

Identify your irregular expenses. Take an inventory of those variable expenses that occur throughout the year. Looking back at checking account registers and credit card statements can help you do this. Some examples of these include property taxes, insurance premiums, vacations, car tune-ups, holidays and birthdays. List as many of your non-monthly expenses as you can remember.

Write the anticipated amounts o­n the calendar. In many cases, you will know when the expenses are due to occur. In others, you won’t. But you know that sooner or later a car will have problems or an appliance will break down. Try to anticipate these expenses and list them somewhat earlier than you actually expect them to come up. Be sure to update your calendar as you discover more expenses.

Include money in your monthly spending plan for non-monthly expenses. If your car insurance, for example, is due in May, set aside a small portion each month starting in February. That way, when May rolls around you can transfer the expense to your spending plan and have money available to pay it. Setting aside even a few dollars each month for foreseeable expenses can make it easier to manage your money throughout the year.

You may think you don’t have any “extra” money during the month to set aside, but repairing your car or paying your insurance are not optional expenses. By setting aside small amounts ahead of time, you’re avoiding larger money woes ahead. So you may need to find ways to reduce your regular monthly spending. By tracking your expenses, you may discover areas where you can trim your monthly spending with o­nly small sacrifices. Costs of twice-weekly trips to the drive through or a professional manicure can add up quickly over a month. The important thing is to start today. It may be discouraging at first if you find that you don’t have enough money to fully fund your Anti- Emergency Fund™, but you’ll begin to succeed the minute you start the process. Small amounts of savings add up quickly and start compounding immediately!

One of the mistakes people make when trying to get their finances under control is not having a savings account. They may reason that it’s better to put money toward reducing credit card debt at 18 percent interest than to toss it into a low-interest regular savings account. The problem is that if you don’t have money set aside for those unavoidable bills, you inevitably end up adding to your credit card balance to cover the difference.

Stabilizing your debt means agreeing not to incur new charges and to begin paying down what you owe. A savings account is a key element in making that happen — and in improving your financial fitness!

Most of the time this “convenience fee” is applied to something that is actually saving the business or organization thousands, tens of thousands, even millions of dollars a year.

It sounds appropriate, the business or organization goes out of it’s way to provide you a new or extended service that saves you time and money and you pay a small fee for this added service.

But most of the time this “convenience fee” is applied to something that is actually saving the business or organization thousands, tens of thousands, even millions of dollars a year. Not o­nly are they cutting costs but they are increasing revenue by socking you with another fee for a service you already pay for through your regular payments or fees.

This tirade was sparked by my having to pay a $2 “convenience” fee to pay some state sales taxes. While $2 isn’t much and it was more convenient to be able to pay o­n-line rather than having to write a check, find a stamp and remember to mail it, I am annoyed that it was charged in the first place.

Since the transaction was done entirely o­n-line, the state saved o­n payroll costs for a state employee that would have to open my letter, extract the information, figure out what the payment was for, lookup my account o­n their computer system, enter the payment information, and prepare the check for submission to the bank.

This may o­nly take a state employee a grand total of 10 minutes, but if that is all the person does all day long and they get paid $10 an hour (though most likely it is much more when you add in all those great state benefits), then it would cost the state $80 for that day’s work.

But if I do the work myself through my o­n-line payment as do another 48 people, not o­nly does this poor employee have nothing to do that day, but the state saves $80+ in payroll costs. But also the state charges each of these 48 people a “convenience fee” of $2. So the state also increased revenue by $96. For a total net gain to the state of $176+ per day.

What is interesting is that the $80+ dollars that was saved is less than the total of the convenience fees.

But I can see a reason for the convenience fee. If I owe $100 taxes and I want to use my AmEx card to pay it, AmEx charges for the transaction. So the state is right in charging me extra for the “convenience” of using my credit card.

But if I just saved the state by doing the transaction and recording the information myself o­n-line, didn’t I just save the state some money. If AmEx charges the state a high 3% fee o­n tranactions, my $100 trasaction would cost the state $3. If the total cost for the 10 minutes the state employee to open and process my payment is more than $3 then the state saved money.

If the state pays the employee a measley $10/hour plus benefits and we estimate the total payroll costs at $14/hour and add in half again for the costs of the building, utlitiles and equipment that employee uses we get a total of $21/hour cost.

So the 10 minutes it would have taken the state employee to process my payment would cost the state about $3.50. If the state saves $3.50 by giving me the convenience of paying my bill o­n-line and it costs the state $3.00 for the credit card processing fee, didn’t the state just save an additional $0.50 o­n my o­ne transaction alone.

$0.50 is not much but add that up over the state population and over several years and it is significant savings. Also, it these times of tax increases and government budget woes you would think that any savings or reduction in expenses would be a welcomed thing.

So why is the state being stingy and additionally charging me a “convenience fee” when I am helping them to save money? Should they give me a discount to encourage me to try their new system.

Once I have used the system (if it is a well designed system) I will probably use it in the future, thus saving them additional money for years to come. People should be encouraged and rewarded for going out of their comfort zone to try something new, especially if it saves the business or organization money.

And don’t even get me started o­n bank ATM fees. This same argument can be used o­n banks and their ATM “convenience fees”. Everyone knows that they saved billions of dollars over the last 20 years with ATMs.

In the meantime, I will use and even appreciate the convenience of paying my tax bill o­n-line, but I will cringe each time I am charged a “convenience fee” for helping my state save money. Tax breaks anyone?

New changes in the FCRA (Fair Credit Reporting Act) regarding identity theft are presented here.

New changes in the FCRA (Fair Credit Reporting Act) regarding identity theft are presented here.  Further detailed information can be found at the Federal Trade Commission site, http://www.ftc.gov/, under “Fair Credit Reporting Act”. This is just a general step-by-step guide to start the process.

File Police Report:

It is very important to establish time of discovery and action.
Submit relevant copies of documents relating to the case.
Itemize all creditors affected and properly identify them by their name, your account number and amount involved.
Obtain copies of the police report.  At the very least get the file number.
Be persistent.  Local authorities may tell you they can’t take a report.  If that is the case then try going to the county or state police.  If you’re told that identity theft is not a crime under your state law, then ask to file a “Miscellaneous Incident Report”.

It is okay if you don’t have everything needed at the time you are filling out the report.  You can follow up later with additional information.  Just be sure to obtain an updated police report.

Contact Credit Reporting Agencies (CRA):

Experian
888-397-3742
PO Box 9532
Allen TX, 75013

Equifax
800-525-6285
PO Box 740241
Atlanta GA, 30374-0241

TransUnion
800-680-7289
Fraud Victim Assistance Department
PO Box 6790
Fullerton CA, 92634-6790

Call to activate a fraud alert.  You o­nly need to call o­ne agency, as they will notify the other two agencies for you.

1.      A credit report will be sent to you along with a credit score.

2.      You will be opted out from creditors receiving your name for solicitation purposes for a period of 5 years.

3.      Follow up the dispute with the credit-reporting agency.

4.      Put your request in writing.  Mail it “Return Receipt Requested” and “Certified”.

5.      Keep original copy for your records.

When corresponding with the CRA include the following:

Full name
Address
Copy of Social Security Card
Copy of government-issued identification card
Date of birth
Copy of police report or file number
Notarized copy of the FTC ID theft affidavit
Name and account number for each account disputed
Copies of any relevant documentation involved with the ID theft case
A statement that the information is not relating to any transaction by you, the consumer

For extended fraud alerts the CRA needs:

A copy of a telephone bill showing both your home address and the telephone number you want added to the credit report.
A request for a victim statement to be added to your credit file.  The statement will say something like “Please verify identity before extending credit.  Victim of ID Theft.  Phone number is _______”

This will remain o­n your credit report for 7 years or until you write back requesting it to be canceled.  In addition, you are entitled to receive two free copies of your credit report and score within the first 12 months.

The following is an excerpt from the Fair Credit Reporting Act o­n the FTC web site.

“A CRA shall block the reporting of any information in the file of a consumer that the consumer identifies as information that resulted from an alleged identity theft.

A CRA may decline to block, or may rescind any block, of information relating to a consumer, if the CRA determines that:

The information was blocked in error or a block was requested by the consumer in error.
The information was blocked, based o­n a material misrepresentation of fact by the consumer relevant to the request to block.
The consumer obtained possession of goods, services, or money because of the blocked transaction or transmission.”

If a block of information is declined, the credit-reporting agency will be obligated to notify you within 5 business days that the blocked information has been added back to the credit report.

Regardless of the block in place, Federal, State, or local law enforcement agencies will still have access to this information to complete their investigations.

Disclosures to consumers

A consumer can request that the first 5 digits of the social security number not be included in the credit report. The Fair Credit Reporting Act states that if “the CRA has received appropriate proof of the identity of the requester, the CRA shall so truncate such number in such disclosure.”

Additional items of importance to do:

Call the Federal Trade Commission at (877) 438-4338 or visit their web site, http://www.ftc.gov/, to report your fraud case.
Request their booklet titled “When Bad Things Happen To Your Good Name”.
This book contains the needed ID Theft Affidavit.
Be sure to read this book, there may be other relevant organizations you will need to contact in connection to your identity theft case.

Contacting Creditors and Collection Agencies:

Inform creditors immediately to close accounts connected with the identity theft.
On existing accounts, request for a new account number, change pin number, and password protect.
Inform the creditor that you wish to opt out from receiving solicitation by telephone or mail from them or their affiliates unless it is law enforcement.
Ask for their specific address for disputing fraud.

Will need to send in writing, “Return Receipt Requested” and “Certified” mail the following:

Full name.
Address.
Copy of Government-issued Identification Card.
Copy of Police Report or file number.
Notarized copy of the FTC ID Theft Affidavit.
Copies of any relevant information proving that such accounts appearing o­n credit report do not belong to you.
A statement that the information is not information relating to any transaction by you the consumer.

Note: Additional information may be requested, and various lenders may require additional forms.

A consumer has a right to request and receive documentation in connection to the fraudulent account or transaction from the creditor at no charge.

It is important to keep original documentation received in connection with the ID Theft.

If you correspond by telephone then also keep notes of the following:

Time of the call.
Phone number called.
Name of customer service representative who helped you.
Outline of what you talked about with them and what follow ups you will need in connection to the call.

Policies that will be changed o­n the creditors end to further protect consumers as stated in The Fair Credit Reporting Act:

“If a card issuer receives notification of a change of address for an existing account, and within a short period of time (during at least the first 30 days after such notification is received) receives a request for an additional or replacement card for the same account, the card issue may not issue the additional or replacement card, unless the card issuer:

Notifies the cardholder of the request at the former address of the cardholder and provides to the cardholder a means of promptly reporting incorrect address changes.
Notifies the cardholder of the request by such other means of communication as the cardholder and the card issuer previously agreed to.”

Prohibition o­n Sale or Transfer of Debt Caused by Identity Theft as stated in the Fair Credit Reporting Act.

“No company shall sell, transfer for consideration, or place for collection a debt that they have been notified resulted from identity theft.

Note: Nothing in this subsection shall be construed to prohibit:

1.      The repurchase of a debt in any case in which the assignee of the debt requires such repurchase because the debt has resulted from identity theft.

2.      The securitization of a debt or the pledging of a portfolio of debt as collateral in connection with a borrowing.

3.      The transfer of debt because of a merger, acquisition, purchase and assumption transaction, or transfer of substantially all of the assets of an entity.”

Notice of Discrepancy in Address
If a company has requested a consumer report relating to a consumer from a CRA, the Fair Credit Reporting Act states if “the request includes an address for the consumer that substantially differs from the addresses in the file of the consumer, and the agency provides a consumer report in response to the request, the CRA shall notify the requester of the existence of the discrepancy.”

Pammila Phillis is a staff writer for CardRatings.com. She is also a frequent contributor to the CardRatings.com message board and to the Star Credit Repair forum, a forum that she administers.

You probably know something about the problem of identity theft—situations in which a con artist uses someone else’s name, Social Security number or other personal details to make purchases, take out loans or commit fraud in the name of an innocent victim.

You probably know something about the problem of identity theft—situations in which a con artist uses someone else’s name, Social Security number or other personal details to make purchases, take out loans or commit fraud in the name of an innocent victim. But do you know how you, with the help of credit reports and credit bureaus, can help spot or stop the theft of your identity?

First, here’s why you should care about fighting ID theft. It is, by far, the most common fraud complaint that consumers bring to law enforcement authorities and consumer protection groups. According to the latest data compiled by the Federal Trade Commission (FTC), identity theft in 2002 topped the list of consumer fraud complaints for the third year in a row, accounting for 43 percent of the total. And while federal laws and industry practices can limit your liability if you become a victim of identity theft, it can take you a very long time (even years) to repair the damage. That includes notifying creditors and law enforcement that you’ve been victimized, closing tainted accounts and opening new o­nes, and correcting your credit report.

You also may be denied loans, jobs, housing, insurance or other opportunities if an ID theft shatters your reputation and credit rating. “A thief can secretly run up thousands of dollars in bills using your name and a different or fictitious address, and you may not be aware of this until you are turned down o­n an application because the delinquent debt was recorded o­n your credit report,” says Michael L. Jackson, Associate Director of the FDIC’s electronic banking branch.

Another good reason to guard against ID theft is that “you protect yourself and other consumers from higher interest rates and fees that lenders charge to recoup losses from fraudulent credit cards and loans,” explains Cora Lee Page, a Consumer Affairs Specialist with the FDIC.

So, how can you use credit bureaus and your credit report to protect against identity theft?

Monitor your credit report for warning signs, including loans or leases that have been wrongfully taken out in your name. Also, pay close attention to the “inquiries” section of the report that shows who has requested a copy of your credit history. That’s because thieves sometimes impersonate business people with a legitimate right to obtain credit reports. “Once crooks have the information in your credit report, they can either attempt a financial scam in your name or at least determine your vulnerability as a target of identity theft,” says Jackson.

In general, you should consider obtaining copies of your credit report from the three major credit bureaus about o­nce a year to verify that the information is correct. But be aware that there are services that will frequently (even daily) monitor your credit report for possible signs of fraud or theft. “These services don’t necessarily prevent identity theft from happening, but they can alert you to changes in your credit file that may indicate identity theft,” says Jackson. He adds that the fees for these services (often $70 or $80 for a yearly subscription) can be more costly than obtaining periodic credit reports o­n your own, but the added level of convenience may be worth the cost.

If you find suspicious transactions o­n your credit report, take the following steps:

• Contact creditors to discuss questionable items and close accounts that you believe are fraudulent or have unauthorized transactions.
• Call the fraud department at each of the major credit bureaus to ask that a “fraud alert” be placed in your file, so that lenders will be alerted to the fact that you may be a fraud victim. Ask that the fraud alert state that you do not want new credit extended without contacting you first.
• Contact the local police to file a report. Keep a copy in case you need it later as proof of the crime.
• Consider filing a complaint with the FTC, which will store the information in its database so that it can be accessed by law enforcement agencies worldwide. The FTC also can provide information o­n what steps victims should take and sometimes will refer cases to other government agencies or private organizations for further action.

You can read articles about identity theft and financial frauds in past issues of FDIC Consumer News at www.fdic.gov/consumers/consumer/news, including a special feature o­n ID theft in the Summer 2000 edition called “When a Criminal’s Cover Is Your Identity.”

You may already be familiar with Check 21, a federal law that came into effect o­n October 28, 2004. If you’re like me, this may be something you hadn’t heard about until just yesterday. The Check Clearing for the 21st Century Act, otherwise known as Check 21, is the process of turning the checks your write into images and transmitting them by computer.

You may already be familiar with Check 21, a federal law that came into effect o­n October 28, 2004. If you’re like me, this may be something you hadn’t heard about until just yesterday. The
Check Clearing for the 21st Century Act, otherwise known as Check 21, is the process of turning the checks your write into images and transmitting them by computer.

What does this mean to you?

Expect the time your check clears to decrease drastically. If you live paycheck to paycheck and often count o­n a o­ne or two day “grace period” to get funds into your account after paying bills, you’ll need to re-organize your budgeting process. Checks will clear in a matter of hours now, not days.

You will no longer be getting your cancelled checks back with your bank statement. If you get anything at all, it will be a “substitute check” which is a certain kind of copy of your original check.

You may be charged extra fees. It’s possible that by using this method, your check will be paid twice: o­nce with the original and o­nce with the scanned image. Or there may be an error made in the amount a check was written for in the process of turning an paper check into an electronic
check.

What you should do:

Re-organize your budget. You have to make sure that you have the funds in your account to cover every check you write to avoid bouncing any checks.

Request substitute checks. You will not be entitled to a credit to your account if an error has been made unless you have a substitute check.

Balance your checkbook. If you are not in the habit of balancing your checkbook with your bank statement each month, you need to start. This will ensure that you’ll find any mistakes that may have been made.

Learn more. Consumer’s Union did not support Check 21. Find out why and learn more about Check 21.