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Today’s guest on the Consumerism Commentary Podcast is Preeti Vissa, community reinvestment director of The Greenlining Institute, an organization whose mission is to empower communities of color and other disadvantaged groups through multi-ethnic economic and leadership development, civil rights, and anti-redlining activities.

Consumerism Commentary Podcast #99
Swipe Fees: S04E21 / 123

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Table of contents

[00:00] Introduction from Bryan J Busch
[00:37] Interview with Preeti Vissa
[00:46] About the Greenlining Institute and community reinvestment
[03:11] The debate over interchange fees
[04:14] The effect of interchange fees
[04:48] Are we being overcharged?
[06:07] How merchants might change if fees are reduced
[06:49] The current proposal to regulate swipe fees
[07:23] What banks are saying about the proposal
[09:41] The need to increase checking account costs
[12:06] Unbanked and underbanked Americans
[13:26] Different banks and bank products are affected differently
[14:32] The new rules for overdraft fees
[15:15] The Consumer Finance Protection Bureau
[17:32] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Full transcript

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As of today, Zions Bank offers one of the highest interest rates among high-interest savings accounts. Is it worthwhile to move your money there to take advantage of this interest rate? Today’s interest rate environment is not the best for moving money from bank to bank in search of the highest rate, so the more appropriate question is whether Zions Bank is a good choice for someone who is not currently taking advantage of a high-yield savings account. If you do not have a high-yield savings account and the money you keep for short-term expenses like emergencies is earning only 0.25% APY or less, as many are, open a high-yield savings account anywhere and start giving your cash a fighting chance against inflation — if not at Zions Bank, anywhere.

I’ve gone through the process of opening a Zions Bank savings account. This article contains a review of my experiences. Read the full article →

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The Credit CARD Act of 2009 required the Federal Trade Commission to regulate marketing surrounding products offered by the credit reporting agencies (Experian, Equifax, and Transunion). Starting this month, offers like FreeCreditReport.com must be transparent about their offers when they are tied to “free trials.”

It’s easy for us to single out Experian’s FreeCreditReport.com because not only have they produced the most familiar advertising, with catchy jingles promoting a product that requires enrollment in an expensive and usually unnecessary service, but also because the FTC has used them as an example. Here is the official opinion from the FTC:

… [S]ince issuance of the original Rule [designating AnnualCreditReport.com as the official centralized location for customers to receive an annual credit report from each of the three bureaus], there has been a proliferation of confusing advertising regarding where consumers can obtain their free annual file disclosures. Some nationwide CRAs and others have advertised “free credit reports” in connection with the purchase of products and services, such as credit scores and credit monitoring. Although some advertising predated the original Rule, the bulk of the advertising for “free credit reports” now takes advantage of consumers’ general knowledge that free annual file disclosures are available under federal law. These advertisements direct consumers not to AnnualCreditReport.com, the authorized source for free annual file disclosures, but to commercial websites operated by nationwide CRAs or others that sell a variety of products and services. Further, when a consumer uses an Internet search engine to locate the website for free annual file disclosures, the search engine will usually list “sponsored” links — again, selling products and services — such as “FreeCreditReport.com” first.

As a result of this advertising, consumers are often misled and
confused about where to obtain the free annual file disclosure mandated by federal law. Indeed, the Commission has received numerous consumer complaints demonstrating confusion and frustration about how and where to obtain a free annual file disclosure. As discussed below, comments received during this proceeding further illustrate both consumer confusion with and frustration in obtaining “free annual file disclosures” and “free credit reports.”

Experian’s FreeCreditReport.com now does a better job of warning customers that obtaining a credit report through this commercial website requires enrollment in a service that costs $14.95 monthly. While the company is offering a “trial” of this program, if you don’t cancel within 7 days, you will be charged the first fee. In fact, if you look at the fine print, you have have less than 7 days after you receive your credit report.

Another major change is the program itself: FreeCreditReport.com no longer offers free credit reports. Presumably skirting some of the requirements of the new law, the website now offers these formerly free credit reports for sale for $1.

Whether the free trial period for a product is the original 30 days offered years ago or the more recent 7 days, customers should be fully informed from the start and should not have to face unreasonable obstacles when attempting to cancel membership. Some responsibility obviously rests on the consumer to fully research any product before providing personal information like Social Security Numbers and credit card numbers, and this is doubly so for any product advertised as “free.”

Customers should also be able to expect companies to advertise using statements that aren’t misleading and to be able to cancel any membership, whether in “trial” or “full” status, without much hassle. I’ve read many reports of customers working for months to cancel these memberships, with customer service representatives being unhelpful or willfully lying to those customers. If a representative from a company tells me my membership is canceled effective immediately, I would expect to see no further charges.

Free Annual File Disclosures; Final Rule [pdf], Federal Trade Commission, March 3, 2010

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Earlier this Fall, the IRS was offering an amnesty program for offshore tax cheats to come forward and admit their wrongdoing, thereby getting a more lenient punishment.

Nearly 15,000 Americans who knew they were cheating came forward and admitted their bad behavior. From Reuters:

While IRS officials were still analyzing the amount of offshore assets declared in the amnesty program, Shulman said, “we are talking about billions of dollars coming into the U.S. Treasury” from the new disclosures.

This is not the end of the story. Combining these (perhaps) brave souls to the 4,450 accounts which are forcibly being turned over from the Swiss bank UBS, there are just under 20,000 leads that the IRS is now following. For example, they may find that some of the largest account holders were advised by the same unscrupulous high-powered tax adviser. And now we know his or her name, and we can investigate, and find even more cheaters.

This is happening on a State level, as well. According to the Wall Street Journal:

This year, 12 states had amnesties, up from the annual average of two or three. Another 10 or 15 are likely to follow suit in 2010.

If you live in a State with a State Income Tax, and you suspect you might be guilty of tax evasion, I’d recommend you set up a news alert for “[state name] tax amnesty” so that you can have plenty of time to weigh your options.

The Editorial Part

On a personal note, this will probably end up being my favorite story of the year. It takes the cynical view that if you’re wealthy enough, you can buy the power needed to keep more than you’re supposed to, and makes a big ol’ dent in that belief.

We have a big budget deficit, and I believe that’s because the previous administration’s ideas didn’t work out the way they were supposed to. Many people fear that their taxes will be raised as a result, though the only plans I’ve seen to raise taxes will affect maybe 5% of Americans. Amazingly, some people think that their taxes have already been raised (these people are either getting their news from some untrustworthy sources, or their paychecks are coming with a free mirage).

Happily, sometimes you don’t have to raise taxes; you just have to be serious about collecting them.

Nearly 15,000 Americans admit offshore tax cheating, Kim Dixon, Reuters, 17 Nov. 2009
More States Jump on Tax-Amnesty Bandwagon, Arden Dale, Wall Street Journal, 19 Nov. 2009

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Treasury Secretary Henry Paulson Wants to Reform the Financial System

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The Federal Reserve may soon become much more powerful if Treasury Secretary Henry Paulson has his way. Earlier today, he released the “Blueprint for a Modernized Financial Regulatory Structure,” which includes a number of recommendations designed to take power away from the U.S. Securities and Exchange Commission. Paulson’s recommendations The Federal Reserve should be able ... Continue reading this article…

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Money Magazine: No Fees? Get It in Writing!

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Money Magazine is sharing an interesting piece of advice in their September issue. This comes from “The Mole,” the magazine’s “underciver financial planner.” If your financial advisor or broker tells you there are no fees for a particular investment or no risk for some product, ask to confirm in in writing. Even though my clients ... Continue reading this article…

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FNBO Direct 6.0% APY Savings and Media Blitz

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A few days ago, I received a press release from the marketing company representing the First National Bank of Omaha, which recently created FNBO Direct to compete with online outfits like ING Direct and HSBC Direct. The new FNBO Direct account, with no minimums and no fees, offers 6.0 percent APY through September 28. The big ... Continue reading this article…

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Kiplinger’s Personal Finance: Must-Read Bloggers

by Flexo

By David Landis October 2006 These days, anyone — and we mean anyone — can claim to be an expert. You simply launch a blog on the Internet and type away. Technorati, a blog search engine, claims to track 50 million bloggers. Blogs are journals shared with the world via the Internet. They can contain ... Continue reading this article…

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