Get Wisdom: Beaware Of Installment Purchases [ Daily Compounding ], Buy Now & Pay Later Debt Fallacies

 

BEWARE OF INSTALLMENT PURCHASES:  Purchasing a commodity over a period of time. The buyer gains the use of the commodity immediately and then pays for it in periodic payments called installments. The dark side of “installment purchases'' is that many credit card companies calculate daily balances and interest results on a DAILY COMPOUNDING RATE WITH INTERESTS NOTED IN VERY SMALL DETAILS.

• If you didn’t know, now you do, most credit companies earn money from both the merchant and the purchaser. Most purchasers pay nothing for credit card purchases unless they do not pay their monthly bills by the due date. The merchants are charged a percentage fee on every credit card sale. As a result, many smaller stores may have a minimum amount for credit card sales. 

The complexity of calculating finance charges on credit cards should be reviewed and read in its entirety. Now you know that every type of finance chargers are NOT EQUAL, OR FAIR, BUT WE MUST UNDERSTAND “ALL FINANCE CHARGES” BEFORE SIGNING THE CONTRACT. 

DON'T BE GUILTY BY ASSOCIATION: Finance Charges Seen & Unseen

For example, some lenders charge interest on an AVERAGE DAILY BALANCE. If you have a finance, accounting, or economic background you might be familiar with this type of simple charge, however, for most Americans we just want to BUY NOW & PAY LATER. In addition, lenders and their finance charges may; or may not include:

• Fees for extending credit

• Credit card or loan fees

• Loan origination fees,

• Membership fees,

• Credit card fees,

• Administrative fees

• Insurance premium fees; and any fees associated with these fees are all bundled together and are called FINANCE CHARGES.  

ADDITIONAL FEES; AKA, FINANCE CHARGES MAY, OR MAY NOT BE

• One-time fee,

• Annual or Monthly Fees...when these fees and charges are inter-tangled together. It makes it difficult to reconcile all charges and/or the ability to understand these charges in laymen's terms, or Mr. Clayborn says ``'' Make It Simple and Sound-Minded.”

For example, the passage of the CREDIT CARD ACT has saved billions of dollars for consumers and businesses too; however, not all consumers are aware of this unique federal law. 

Credit Card Accountability Responsibility and Disclosure (or CARD) Act, according to a CFPB report which was signed into law in May 2009, the CARD Act cracked down on sneaky FINANCE CHARGES; AND OTHER FEES THAT HAD, hidden penalties, retroactive rate increases, and a variety of other once-common industry practices. Three years later, the total cost of credit – including all fees, interest, and finance charges paid by cardholders – has fallen by two percent, the CFPB calculated. A recent academic paper reached similar conclusions, finding that new credit card regulations had reduced overall borrowing costs on cards by 2.8 percent (adjusted for the level of debt), saving consumers just over $20 billion a year.

The credit card is a better, safer product today than it was before the CARD Act. Still, abusive practices remain. Deferred-interest cards woo consumers with the promise of interest-free installment purchases, only to hit them with retroactive, accumulated interest if a payment doesn’t come in by a certain date. The marketing of unfair add-on products continues. (The CFPB and other regulators recently forced some of the biggest names in the business to return almost $800 million to consumers over add-on abuses.) But the CARD Act’s success shows that such problems can be solved and that regulations to protect consumers can make markets more efficient in the process.

In fact, there are many federal laws, state laws; as well as, the Consumer Protection laws that make ALL LENDERS EXPLAIN THEIR VARIOUS FEES & RATES TO CONSUMERS. The Consumer Financial Protection Bureau was specifically created to solve this problem and let's pray and petition our leaders that the CFPB continue to do a good job. Mr. Clayborn receives email notifications from this agency and you can too, if necessary. 

• CFPB resources and websites are listed below. 

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LENDERS AND BORROWERS SHOULD EXPLAIN CONVERTING INTEREST RATES. In other words, the language should be fully detailed that in this contract; or relationship what are MONTHLY & ANNUAL RATES

For example: so years ago, Mr. Clayborn has an accounting disagreement with a major consumer, Mr. Clayborn reconcile my charges with their charades with their formula such as: 

FOR EXAMPLE:; A typical rule is “To convert an annual rate to a monthly rate, divide the annual rate by 12 [ months]; to convert a monthly rate to an annual rate; multiply the monthly by 12.”

Sadly, our senior citizens- in other words, our mothers and fathers have been the most sought-after victims. These predators and pretenders want to take our parent's and grandparents' wealth and retirement assess-lets spread the news to our seniors and aged citizens. Who has certainly worked very hard to enjoy their retirement years..

What is the Consumer Financial Protection Bureau?

The Consumer Financial Protection Bureau (CFPB) was created to make sure that the financial products and services that  Americans depend on every day —including credit cards, mortgages, and loans—work better for the people who use them.

Established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, CFPB is charged with overseeing the Federal financial laws that specifically protect consumers—people who keep their money in banks and credit unions, pay for goods and services with their credit cards, and rely on loans to buy homes or pay for college, among other services.

The Bureau is tasked with making sure people understand the fine print that explains the risks involved in using these services and ensuring the banks, credit unions, and other financial companies that provide them play by the rules.

Why do we need a Consumer Financial Protection Bureau?

Before CFPB was established, seven different Federal agencies were responsible for various aspects of consumer financial protection. No single agency had effective tools to set the rules or oversee the whole market, and that is part of what led to an economic crash of epic proportions. As President Obama explained in his speech in Osawatomie:

We all know the story by now:  Mortgages sold to people who couldn’t afford them, or sometimes even understand them.  Banks and investors are allowed to keep packaging the risk and selling it off.  Huge bets – and huge bonuses – made with other people’s money on the line.  Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all. 

Moving forward, CFPB will be the single, consumer-focused regulating authority, consolidating the existing authorities scattered throughout the Federal government under one roof.  And, the Bureau’s oversight includes the large banks and credit unions that had historically been regulated by the Federal government, as well as independent and privately-owned “non-bank financial institutions” that had never been regulated before.

This means that for the first time, the Federal government will be able to regulate the activities of independent payday lenders, private mortgage lenders and servicers, debt collectors, credit reporting agencies, and private student loan companies.

Why is it so important to regulate these so-called non-bank financial institutions?

Non-bank institutions offer important services like access to credit and access to payment systems for many people who are unable to rely on banks. But, these entities haven’t typically been subject to Federal supervision, and providers are often less clear about costs, terms, and penalties than better-regulated alternatives. As a result, hidden fees and undisclosed fines can make these services more expensive for the people who use them.

Regulating these industries will restrict the use of unfair, deceptive, and abusive practices against consumers and ensure providers offer clear, upfront information about the rights and responsibilities of the people who depend on them.

Not regulating these providers, on the other hand, is bad news for individual consumers, many of whom are already financially vulnerable.

For example:

Nearly 20 million Americans use payday lenders. Studies have found that payday lenders charge their clients, on average, $16 for a $100, two-week loan—a 400 percent annual percentage rate.  If borrowers miss payments they begin to accumulate huge penalty fees and can fall into a debt-and-fee spiral that may be hard to escape, and end up with even fewer funds to pay for essentials.  

In the run-up to the financial crisis, unregulated, non-bank lenders were among the largest originators of subprime mortgages. The default rate on subprime mortgages issued in 2006 now exceeds 50 percent.

Nearly 50 percent of claims made against debt collectors cite harassment. Currently, there is about $1.2 trillion of delinquent consumer debt, and many people who fall behind on their debt payments lack the resources to protect themselves from predatory collection behavior, which can lead them to make financial decisions without having all the facts.

One in five Americans over the age of 65 has been the victim of a financial scam.

Twenty-nine percent of young people between the ages of 22 and 29 reports delaying or not pursuing further education because of their debt.

How can the Consumer Financial Protection Bureau protect me and my money?

The Wall Street Reform Act gave CPFB a wide array of tools to promote fair, transparent, competitive markets. CFPB’s duties fall into three main buckets:

Educate

CFPB provides financial education to consumers and ensures people are able to get the information they need to make sound financial decisions.

A fair, efficient, and transparent market depends upon consumers’ ability to compare the costs, benefits, and risks of different products effectively—and to use that information to choose the product that is best for them. Fine print and overly long agreements can make it difficult for consumers to understand and compare products.

Enforce

As a cop on the beat, CFPB is responsible for rule-making, supervision, and enforcement of Federal consumer financial protection laws and restricting unfair, deceptive, or abusive acts or practices against consumers.

No provider, regardless of size or type, should be able to build a business model around a set of practices that target consumers unfairly. With consistent rules that apply across the marketplace, consumers receive strong protections regardless of whether they deal with a bank or a nonbank financial company.

Research

The Bureau also takes consumer complaints, researches consumer behavior, and monitors financial markets for new risks to consumers.

Monitoring financial institutions and analyzing how people respond and interact with them gives CFPB more information about hazards consumers encounter when dealing with various companies and entities and also provides a comprehensive look at the health of the entire system.

 Prior to the passage of the Wall Street Reform Act (LINK), no single agency had effective tools to establish standards for and oversee the whole market, and consumer financial protection was no one’s top priority. The result was a system where no one was sufficiently accountable for getting the job done. We saw the outcome of this structure—both in the 2008 financial crisis and in its aftermath. 

What progress has the Consumer Finance Protection Bureau already made?

Among CFPB’s many accomplishments since its launch a little more than a year ago, the Bureau introduced three “Know Before You Owe” campaigns focused on redesigning the materials people use to make decisions about mortgages, student loans, and credit cards.

Know Before You Owe: Mortgages

When people take out a loan to purchase a home or refinance their mortgage, they receive two key disclosure forms that explain the final terms and costs of the loans. Unfortunately, the technical and legal jargon used in these forms may be more confusing than helpful. Complicated and lengthy disclosures can make it hard to answer or even ask the right questions. Many buyers don’t know what they don’t know until it’s too late.

CFPB launched Know Before You Owe to replace these two forms with one disclosure that is easier to use and understand. Throughout the process, the Bureau solicited feedback on their website about how to make the form as clear and simple as possible.

To learn more, click here.

Know Before You Owe: Student Loans

The increasing cost of higher education, the financial crisis, and continuing tough economic times mean that more students will rely on loans to pay for tuition and make ends meet while in school. Students should be able to understand the costs, risks, and benefits of the loans they will use to help pay for their educations.

CFPB created a sample financial aid shopping sheet as an example of how schools might improve the information they present to prospective students and their families that helps them better understand available financial aid options and repayment costs. 

The shopping sheet is only a “thought starter” and CFPB is asking for feedback on how to best present the information students and their families think is most important. Check out the sample and let CFPB know what you think here.

 Know Before You Owe: Credit Cards

Credit cards are the most commonly used form of consumer credit. Almost two out of three families now have at least one credit card, and almost half of all families carry a balance. 

 To help the millions of Americans who use credit cards better understand their card agreements, CFPB developed a prototype shorter, simpler credit card agreement that clearly spells out terms for the consumer.

 To see the prototype agreement, and leave your comments, click here.

ALL US CITIZENS HAVE RESOURCES, BUT DO WE KNOW ABOUT THESE RESOURCES SUCH AS:

• Learn what protections you have against credit discrimination through the Equal Credit Opportunity Act and the Fair Housing Act.

If you think you've been discriminated against in a credit-related matter, file a mortgage loan complaint or a complaint about a credit card transaction.

Information for service members, veterans, and their families: Military life can have some extra challenges that can sometimes have powerful financial repercussions, and service members should be able to accomplish their mission without worrying about illegal or harmful financial practices. CFPB's Office of Servicemember Affairs ensures that military personnel and their families have a voice at the Consumer Financial Protection Bureau.

Information for older Americans: Older Americans face many financial challenges as they age. They have opportunities to travel, explore new fields of work or hobbies, or spend time with family and friends. But often scam artists or bad advice take away these opportunities. CFPB's Office of Financial Protection for Older Americans offers seniors information and tools to navigate safely through financial challenges.

Information for homeowners having trouble paying their mortgage: CFPB can help you get connected to a HUD-approved housing counselor. At no cost to you, the counselor can help you work with your mortgage company to try to avoid foreclosure. A housing counselor can help you organize your finances, understand your mortgage options, and find a solution that works for you.

Don't see what you're looking for? Visit consumerfinance.gov or explore their resources for getting help now.

Websites Works Cited

“CARD Act Rules Review Pursuant to the Regulatory Flexibility Act; Request for Information Regarding Consumer Credit Card Market.” Federal Register, 28 Aug. 2020, www.federalregister.gov/documents/2020/08/28/2020-19112/card-act-rules-review-pursuant-to-the-regulatory-flexibility-act-request-for-information-regarding.

“CFPB Report: Three Years After the CARD Act, Card Holders Have Saved Billions.” Americans for Financial Reform, 16 Oct. 2013, webcache.googleusercontent.com/search?q=cache:t_VEKoYfUmMJ:ourfinancialsecurity.org/2013/10/three-years-after-the-card-act-big-changes-for-card-holders/+&cd=1&hl=en&ct=clnk&gl=us.

“Consumer Financial Protection Bureau 101: Why We Need a Consumer Watchdog.” National Archives and Records Administration, National Archives and Records Administration, obamawhitehouse.archives.gov/blog/2012/01/04/consumer-financial-protection-bureau-101-why-we-need-consumer-watchdog.

“Final Rules.” Consumer Financial Protection Bureau, 20 Aug. 2021, www.consumerfinance.gov/rules-policy/final-rules/?topics=credit-card-act.