Debt, Credit Card & Consolidation Current News Digest

You don't hear the words "poodle," "tinfoil hat," and First Amendment in the same sentence often, but they are indeed linked in a classic Facebook melodrama.

Dale Blank runs a Facebook page devoted to accumulating as many fans as possible for a farcical picture of a beloved poodle named Bitsy sporting a tin hat — perhaps a bit like the one you might mentally draw on someone who was espousing tiresome conspiracy theories.

Blank's intentionally clumsy Photoshop job, and his quest for fans, has a specific target — Fox News broadcaster Glenn Beck.  On Feb. 8, Blank created the page with the stated intention of proving that his tin-hatted poodle could accumulate more Facebook fans than Beck, a favorite among conservative talk-show fans. 

Within a week, thanks to several bumps from the blogosphere, the poodle was well on his way, claiming nearly 300,000 fans — and enjoying logarithmic growth. Beck's page stands at about 500,000.

(Full disclosure: both easily dwarf the Bob Sullivan fan page, which sits at a modest 3,400.  Take from that what you will).

But on Feb. 18, the Facebook police arrived and broke up the party. Blank's page wasn't removed, but it was "publish-blocked."  He could no longer post updates or solicit fans in other Facebook ways. The fan-base growth ground to a halt.

That put the tin-hatted poodle at the center of a dispute over First Amendment free speech rights and censorship. There were virtual howls that Facebook was actively siding with Glen Beck over the Poodle, that perhaps someone at Facebook was siding with the conservatives, or at least had developed a hatred for left-wing sarcasm.

In the grand tradition of the Internet, that's overstating things a bit. Facebook, as a private company, has wide latitude in its ability to take down posts and pages that it decides run afoul of its terms of service.  Even Blank said he doesn't want to raise the possibility of a conservative, subversive anti-poodle attack — that's just the kind of knee-jerk reaction he's trying to mock.

"I'm not coming from a place where I think everything is a conspiracy," said Blank, who lives near Milwaukee.  In fact, he didn’t really have his heart set on poking fun of Beck. He simply picked the most popular target, in part to demonstrate how cheap popularity is on the Internet and on Facebook.  “I’m not so much anti-Glenn Beck as I am pro rational thought.”

Still, the conspiracy theories appeared.  It didn't help that Facebook initially failed to give Blank an explanation for taking away his ability to publish. Then, when an explanation finally arrived this week, its vagueness only added fuel to the fire.

"A Facebook administrator looks into each report thoroughly in order to decide the appropriate course of action. If no violation of our Statement of Rights and Responsibilities has occurred, then no warning will be sent," wrote a woman identifying herself as Marissa from Facebook's User Operations department, according to an e-mail provided by Blank. "If a violation has occurred, then a warning or more severe actions are taken. Unfortunately, for technical and security reasons, we are unable to provide details regarding the removed content. We apologize for any inconvenience."

Blank wasn't buying that.

"Technical and security reasons? That's just a cover for the real reason," he said. "I like to think it's not a political thing. When I see some of the pages out there devoted to (criticizing President Obama) that haven't been publish-blocked, you wonder a little.  But I don't want to delve into that.  I just want to know why I was blocked."

Facebook offered a generic explanation to msnbc.com in an e-mail.

“Pages are meant for entities like public figures, musical artists, businesses, and organizations so they can share information, interact with fans, and create a highly engaging presence on Facebook.  They're distinct from groups or personal profiles and designed specifically for these entities’ needs to communicate, distribute content, engage fans, and capture new audiences virally through fans’ recommendations to their friends,” the statement said. “We restrict the publishing rights of Pages that impersonate other entities, represent generic concepts, spam users, or otherwise violate our Pages guidelines.  Unless they also violate our content policies, however, these Pages are left up so that those who are interested in seeing their updates and interacting with them can still do so. These policies are designed to ensure Facebook remains a safe, secure and trusted environment for our users.”

Some might find that explanation vague as well. But before providing some helpful speculation on Facebook's actions, it seems necessary to offer some context for Blank's Poodle-vs.-Beck vote-off.  When creating the page, Blank drew on a Facebook fan-building technique that's been around at least since January.

The "bet this can get more votes than that" format has exploded in popularity in recent weeks. There's even another Facebook page that asks, "Can this dung beetle get more fans than Glenn Beck?"  But Beck is hardly the only target.  The trend appears to have taken off with a page devoted to discerning whether a picture of a pickle — yes, the kind you eat — could amass more fans than the Canadian band Nickelback. The pickle, with 2.6 million sign-ups, has won the battle, at least for now.

Nor are the groups limited to witty liberals or music haters. A group allowing people to vote for a picture of a steak over the animal rights group PETA has amassed hundreds of thousands of sign ups.

 To its credit, Facebook has recently taken a hard stand against the presence of hate groups on its site, and is working much more quickly to remove offensive material.  That, in some cases, includes pages which serve no purpose other than to criticize famous people or organizations. Facebook users have reacted by creating these "this can get more fans than that" as a clever end-around to counter elimination of these "hater" pages. So Blank thinks that Facebook might be putting a halt to these new pages, too.

Blank spent a lot of time reading the Facebook policy for fan pages. They require that a fan page be devoted to some kind of sincere commercial enterprise, and the creator have a real link to that enterprise.  The rules became an issue during the Olympics, when a user created a fan page devoted to the wacky Norwegian Olympic team's curling pants. Facebook temporarily shut the page down, until the creator linked to a Web site selling the pants.

Blank feels he's satisfied the requirement by purchasing the domain BobTheWonderPoodle.com, and linking to that site.

Fast growth might be the problem.

Another possible explanation, according to Blank: Facebook keeps a close eye on groups that experience overnight, logarithmic growth.  In the wake of the Haiti disaster, hundreds of groups sprang up claiming that they'd donate $1 for each new member, or offering some similar crowd-gathering incentive.  The groups enjoyed astronomical growth, but — again, to the firm's credit — they were quickly removed out of concern that spammers might take advantage of members, and that many of the claims were fraudulent.

"There seems to be a crackdown on anything that shows rapid growth," said Blank, a Web developer by trade. "But if they are trying to crack down on that, there is no clear policy."

Also unclear – and a question that might never be answered– just how popular could a photo of a dog wearing tin hat be?

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You don't hear the words "poodle," "tinfoil hat," and First Amendment in the same sentence often, but they are indeed linked in a classic Facebook melodrama.

Dale Blank runs a Facebook page devoted to accumulating as many fans as possible for a farcical picture of a beloved poodle named Bitsy sporting a tin hat — perhaps a bit like the one you might mentally draw on someone who was espousing tiresome conspiracy theories.

Blank's intentionally clumsy Photoshop job, and his quest for fans, has a specific target — Fox News broadcaster Glenn Beck.  On Feb. 8, Blank created the page with the stated intention of proving that his tin-hatted poodle could accumulate more Facebook fans than Beck, a favorite among conservative talk-show fans. 

Within a week, thanks to several bumps from the blogosphere, the poodle was well on his way, claiming nearly 300,000 fans — and enjoying logarithmic growth. Beck's page stands at about 500,000.

(Full disclosure: both easily dwarf the Bob Sullivan fan page, which sits at a modest 3,400.  Take from that what you will).

But on Feb. 18, the Facebook police arrived and broke up the party. Blank's page wasn't removed, but it was "publish-blocked."  He could no longer post updates or solicit fans in other Facebook ways. The fan-base growth ground to a halt.

That put the tin-hatted poodle at the center of a dispute over First Amendment free speech rights and censorship. There were virtual howls that Facebook was actively siding with Glen Beck over the Poodle, that perhaps someone at Facebook was siding with the conservatives, or at least had developed a hatred for left-wing sarcasm.

In the grand tradition of the Internet, that's overstating things a bit. Facebook, as a private company, has wide latitude in its ability to take down posts and pages that it decides run afoul of its terms of service.  Even Blank said he doesn't want to raise the possibility of a conservative, subversive anti-poodle attack — that's just the kind of knee-jerk reaction he's trying to mock.

"I'm not coming from a place where I think everything is a conspiracy," said Blank, who lives near Milwaukee.  In fact, he didn’t really have his heart set on poking fun of Beck. He simply picked the most popular target, in part to demonstrate how cheap popularity is on the Internet and on Facebook.  “I’m not so much anti-Glenn Beck as I am pro rational thought.”

Still, the conspiracy theories appeared.  It didn't help that Facebook initially failed to give Blank an explanation for taking away his ability to publish. Then, when an explanation finally arrived this week, its vagueness only added fuel to the fire.

"A Facebook administrator looks into each report thoroughly in order to decide the appropriate course of action. If no violation of our Statement of Rights and Responsibilities has occurred, then no warning will be sent," wrote a woman identifying herself as Marissa from Facebook's User Operations department, according to an e-mail provided by Blank. "If a violation has occurred, then a warning or more severe actions are taken. Unfortunately, for technical and security reasons, we are unable to provide details regarding the removed content. We apologize for any inconvenience."

Blank wasn't buying that.

"Technical and security reasons? That's just a cover for the real reason," he said. "I like to think it's not a political thing. When I see some of the pages out there devoted to (criticizing President Obama) that haven't been publish-blocked, you wonder a little.  But I don't want to delve into that.  I just want to know why I was blocked."

Facebook offered a generic explanation to msnbc.com in an e-mail.

“Pages are meant for entities like public figures, musical artists, businesses, and organizations so they can share information, interact with fans, and create a highly engaging presence on Facebook.  They're distinct from groups or personal profiles and designed specifically for these entities’ needs to communicate, distribute content, engage fans, and capture new audiences virally through fans’ recommendations to their friends,” the statement said. “We restrict the publishing rights of Pages that impersonate other entities, represent generic concepts, spam users, or otherwise violate our Pages guidelines.  Unless they also violate our content policies, however, these Pages are left up so that those who are interested in seeing their updates and interacting with them can still do so.  These policies are designed to ensure Facebook remains a safe, secure and trusted environment for our users.”

Some might find that explanation a bit vague, as well. But before providing some helpful speculation on Facebook's actions, it seems necessary to offer some context for Blank's Poodle-vs.-Beck vote-off.  When creating the page, Blank drew on a Facebook fan-building technique that's been around at least since January.

The "bet this can get more votes than that" format has exploded in popularity in recent weeks. There's even another Facebook page that asks, "Can this dung beetle get more fans than Glenn Beck?"  But Beck is hardly the only target.  The trend appears to have taken off with a page devoted to discerning whether a picture of a pickle — yes, the kind you eat — could amass more fans than the Canadian band Nickelback. The pickle, with 2.6 million sign-ups, has won the battle, at least for now.

Nor are the groups limited to witty liberals or music haters. A group allowing people to vote for a picture of a steak over the animal rights group PETA has amassed hundreds of thousands of sign ups.

 To its credit, Facebook has recently taken a hard stand against the presence of hate groups on its site, and is working much more quickly to remove offensive material.  That, in some cases, includes pages which serve no purpose other than to criticize famous people or organizations. Facebook users have reacted by creating these "this can get more fans than that" as a clever end-around to counter elimination of these "hater" pages. So Blank thinks that Facebook might be putting a halt to these new pages, too.

Blank spent a lot of time reading the Facebook policy for fan pages. They require that a fan page be devoted to some kind of sincere commercial enterprise, and the creator have a real link to that enterprise.  The rules became an issue during the Olympics, when a user created a fan page devoted to the wacky Norwegian Olympic team's curling pants. Facebook temporarily shut the page down, until the creator linked to a Web site selling the pants.

Blank feels he's satisfied the requirement by purchasing the domain BobTheWonderPoodle.com, and linking to that site.

Fast growth might be the problem.

Another possible explanation, according to Blank: Facebook keeps a close eye on groups that experience overnight, logarithmic growth.  In the wake of the Haiti disaster, hundreds of groups sprang up claiming that they'd donate $1 for each new member, or offering some similar crowd-gathering incentive.  The groups enjoyed astronomical growth, but — again, to the firm's credit — they were quickly removed out of concern that spammers might take advantage of members, and that many of the claims were fraudulent.

"There seems to be a crackdown on anything that shows rapid growth," said Blank, a Web developer by trade. "But if they are trying to crack down on that, there is no clear policy."

Also unclear – and a question that might never be answered– just how popular could a photo of a dog wearing tin hat be?

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Gifttree.com seeks alternatives to credit cards InternetRetailer.com Though 90% of purchases made on Gifttree.com are paid with credit cards, Craig Bowen, the site's president, would welcome growth in other payment methods, …

At a recent gathering of amateur consumer advocates in New York City, discussion turned to this thorny topic: How do you focus the rage people feel about rip-offs on fixing the problem?  Consumers are quick to anger when a company unjustly charges a $35 late fee, but they seem far more reluctant to get involved as Congress debates legislation that would make the $35 fee illegal. Why? One obvious reason: Congress is slow and the legislative process is confusing.  

So here's a quick scorecard on the debate over creation of the proposed Consumer Financial Protection Agency, which would be the first new federal consumer protection agency since the 1970s.  While the congressional made-for-TV kabuki dance that will decide its fate won't take place for another several weeks, the real end game is happening right now, as Washington, D.C., appears to be slumbering under three feet of snow. So this is a good time to pay attention.

In case you missed the last episode, here's a quick background: Harvard bankruptcy professor Elizabeth Warren proposed a new agency several years ago that would regulate consumer contracts on financial matters like credit cards and mortgages. Warren, now a bit of a cult hero in consumer advocate circles, is currently chair of the oversight panel Congress set up to monitor the TARP bailout. Banks don't like her much, but she's the odds-on favorite to head the new consumer agency should it be signed into law.

During his campaign, President Barack Obama supported the idea of a new consumer protection agency, and he has called for its creation several times in the past year. In December, Rep. Barney Frank, D-Mass., ushered legislation through the House of Representatives — barely — that would create the agency. The Wall Street Reform and Consumer Protection Act passed by a 223-202 vote.

Note that this bill does much more than create a new consumer agency; it includes a full set of financial regulatory reform proposals. But creation of the consumer agency appears to be the most divisive issue.  Supporters say that only an independent agency could act as a worthy adversary to the banking industry. Opponents argue that it's folly to create a single-purpose bank regulator that has no interest in the safety and soundness of the institutions or the overall health of the industry.

Given the tight House vote, debate in the Senate was expected to be difficult,  and so far it has not disappointed.

Retiring Sen. Chris Dodd, D-Conn., is head of the Senate Banking Committee, which now controls the fate of the legislation. Last year, he'd indicated unflinching support for it. But in January, he flinched. Numerous reports indicated his willingness to negotiate away creation of the agency in exchange for other regulatory concessions from Republicans – specifically the senior Republican on the Banking Committee, Sen. Richard Shelby of Alabama.

The news sent consumer groups into a tizzy, with some predicting this meant the death of the Consumer Financial Protection Agency.

But turned out the obituaries were premature.  Last week, Dodd's office announced that he had reached an impasse with Shelby, and that he was abandoning efforts at a compromise. Instead, he said, he would propose legislation that resembled the House bill.

Warren, meanwhile, fresh from preaching to the choir during an appearance on Jon Stewart's “The Daily Show,” penned an impassioned op-ed in the Wall Street Journal reiterating the need for the agency.

“The same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the president’s proposal,” she wrote.

On Wednesday, Senate reform talks got a jump start, when Dodd opened negotiations with a different Republican on the Banking Committee, Sen. Bob Corker of Tennessee.  Both made public statements about the renewed talks on Thursday.

"Senator Corker has proved to be a serious thinker and a valuable asset to this committee,” Dodd said in his statement. “For that reason, I called him Tuesday night and asked him to negotiate the financial reform bill with me. We met in my office on Wednesday and given the importance of these issues he agreed. I am more optimistic than I have been in several weeks that we can develop a consensus bill to bring about the reforms the financial sector so desperately needs to prevent another economic crisis."

But does that mean creation of the agency is likely now?  Not at all.  Corker said Friday he is merely picking up where Shelby left off

"Like most Republicans I believe a stand-alone agency for consumer protection or separating those protections from safety and soundness are nonstarters,” he said, according to Reuters. 

What are they taking so long talking about?

There appear to be two issues which have bogged down — and might ultimately kill - the agency.  The first  is independence. The second, a bit more subtle, is an effort to protect the independence of state-level consumer protections.

By now, creation of a completely independent CFPA — something Republicans have compared to the Environmental Protection Agency — seems off the table. Most reports indicate that the agency will survive only if it is part of another regulator. It might be housed in the Treasury Department or be a part of the Federal Reserve, but could retain some independent rule-making authority.  And that's the sticking point.

In October, while there was a flurry of stories concerning the potential watering down of the new agency, Warren spoke to msnbc.com and appeared to draw a line in the sand. At the time, some areas of regulation, such as car loans, were removed from its purview by the House of Representatives. 

"I draw the line at independence," she said. "If the new agency isn't independent, it isn't worth doing."

But this week, a source familiar with the negotiations said consumer groups have warmed to the idea of the agency being housed in the Treasury Department, as long as it has full independence within the department, comparable to the Office of the Comptroller of the Currency, which is also technically part of Treasury.

Balber, from Consumer Watchdog, said the key distinction involves independent rule-making authority,

"It would depend on how something like that is structured," she said.  "The key is that no one would have veto power or some other form of power to weaken the agency's decisions. So a stand-alone agency that's part of Treasury could work," she said. "I don’t think it would work if it were housed within a prudential banking regulator (such the Federal Reserve). They are looking first and foremost at bank profits."

Meanwhile, state officials are worried about an issue that rears its head every time Congress considers consumer protection legislation – pre-emption.  Nationwide firms and industry groups often argue that federal law should trump, or pre-empt, state law, so that they don't have to abide by 51 different sets of rules. For example, a new federal law to require 45-day notice when raising a consumers' interest rate would override an existing state provision that requires a longer warning period. Obviously, state lawmakers and attorneys general have bitter distaste for pre-emption, which reduces their power and ability to regulate.

Because of hang-ups over the independence of the agency, negotiators haven't even begun to deal with the thorny issue of pre-emption yet, according to another source familiar with the talks. That means there are still significant obstacles in its way.

Meanwhile, opponents continue to voice their objections to creation of the agency. The U.S. Chamber of Commerce is leading the public fight, airing commercials that say the agency would hurt small businesses and making its case at the Web site Stopthecfpa.com.

Noted Republican pollster Frank Luntz has even gotten into the act, recently publishing a talking points memo called "The Language of Financial Reform." In it, he advises opponents of the Consumer Financial Protection Agency to paint it with the broad brush of "big government."

"Creating another costly government bureaucracy on top of existing bureaucracy isn’t a solution - it helped cause the problem," he advises, according to the memo obtained by The Huffington Post. He also instructs opponents to appeal to their voters by saying the legislation is full of "lobbyist loopholes" for industries like car dealers and pawn brokers.

There are two other x-factors that might become part of the discussion.  If a large U.S. bank supported creation of the agency, that would make it more palatable to Republicans.  Earlier this month, Bloomberg reported that Bank of America CEO Brian Moynihan has told White House officials that the bank was not "lobbying against the agency." The bank stopped short of supporting it, however.

Meanwhile, it's unclear how much the force of Elizabeth Warren's personality and popularity might be adding to the financial industry's aversion to the agency.  Banks are used to dealing with faceless, nameless bureaucrats.  A popular consumer advocate with a ready-made bully pulpit might be part of the reason they are digging in their heels. 

So the future of the agency, and the legislation, seems entirely up in the air, a moving target — another reason that U.S. consumers might find it difficult to engage in the debate.  Most observers feel that Dodd has the votes he needs to pass even the most liberal version of the bill through the Banking Committee, and that he intends to bring some financial reform bill to a vote on the Senate floor, probably in March. There, it is likely to find the same fate as health reform — it won't have 60 supporters and will die a parliamentary death unless at least some Republicans support it.  A source familiar with the discussions said Rep. Barney Frank wants to force a Senate vote, which would require Republicans opponents to cast a potentially unpopular vote against consumer reforms.  Balber is among many consumer advocates who would like to see issue come to a head.

"We are still concerned that something less than consumer agency will come out of this," she said. "Right now, things are constantly shifting. We are calling on Dodd to make his position clear. … Meaningful financial reform must make the marketplace safer for everyday Americans."

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Last year, you probably read a lot in the news about the Credit CARD Act of 2009 and how it had credit card companies running for the hills. There were stories about how issuers were going to start implementing annual fees, cut back on reward programs, and how the credit card industry was going to get rocked. While some of it has come true (Citi has notified some cardholders that there would be an annual fee unless they spent a certain amount each year), much of it was just pre-bill posturing.

What Is It?

H.R. 627 The Credit CARD Act of 2009 amended the Truth in Lending Act to establish new rules for what credit card issuers could do to credit card holders. The bill put in place several consumer protections, most notably restrictions on interest rate hikes, fees, and penalties, that will begin taking effect this month. Several other notable provisions include bans on issuing cards to minors (under the age of 18) and increasing the requirements for those under the age of 21.

Some provisions went into effect on August 20 but the bulk of the major changes will begin in one week, on February 22nd. This article will discuss those changes you should see next week as they were outlined by the Federal Reserve (they issued guidelines explaining how the provisions of the Act were to be followed).

The Credit CARD Act’s original name was the Credit Card Accountability Responsibility and Disclosure Act of 2009 until it was shortened to CARD and the bill was signed into law by President Obama on May 22nd, 2009.

Major CARD Act Rules

I suspect most issuers will be in compliance, as they’ve had almost a year to put these changes into effect, it’s still important to know the law in case unscrupulous issuers try to pull some tricks.

• Card issuers cannot increase the interest rate on a credit card within the first year unless (not limited to this list but these are the most common reasons): 1) it’s the end of an introductory rate, 2) it is a variable rate tied to an index like the LIBOR, 3) cardholder is more than 60 days late on a payment (though the cardholder can get back to the original interest rate if they are on time for six months).
• *Issuers can increase minimum payment requirements without notification and cardholders cannot opt out (the argument is that this is actually good for cardholders).
• Issuers cannot retroactively apply rate increases to existing balances.
• Interest rates can be increased as long as issuers give 45 days advanced notice (this applies to any change to the credit card agreement) and permit customers to opt out. (cardholders more than 60 days late cannot reject APR increases)
• When you make a monthly payment, any amount over the minimum payment due must be applied to the highest interest rate balance first, then the next, etc.
• Double cycle billing is not permitted.
• Universal default is not permitted.
• Monthly statement due dates must be the same day every month. If that happens to be a weekend or holiday on a particular month, the payment must be applied on the next business day without penalties. If the issuer changes their address or their payment procedure, the issuer cannot charge late fees to anyone for 60 days. (you can change your statement due date by asking the issuer)
• Over-limit must be opt in and the cardholder must be able to opt out anytime. If a cardholder opts out and a charge would put them over their credit limit, the charge will be rejected.
• Issuers cannot charge customers extra fees to pay their bill unless it is an expedited payment.
• Statements must be sent to cardholders at least 21 days before due dates.

What does opting out of an interest rate hike mean? In the case of card agreement changes, cardholders have the right to “opt out” of those changes. When you opt out, you will no longer be able to use the card to make purchases but you continue to pay off the balance at the original interest rate. The credit card company has a few options for what they can do:

• Have you repay over five years,
• Charge a minimum payment that is equal to twice the percentage charged before they changed the terms,
• Keep the same payment as before.

NOTE: None of the options include complete repayment of the balance.

New Rules for Minors, College Students

• Those under the age of 21 will need to get co-signers or prove they have an independent source of income and can repay the debt.
• If a college or alumni association makes a deal with credit card marketers that discloses student/alumni information, this must be disclosed to the Federal Reserve Board.
• Credit card companies will not be allowed to setup within 1,000 yards from campus and offer gifts to students to get them to sign up for a credit card. No more tables of funny t-shirts for you to apply for a credit card!

New Gift Card Rules

The Card Act wasn’t restricted to just credit cards, it instituted new rules for gift cards as well. Prepaid cards, gift cards and certificates cannot expire within 5 years unless the terms are clearly stated. The Act also bans dormancy or inactivity fees unless the card has not be used in a 12 month period and the fees are clearly stated. Remember, your state gift card protections may exceed these federal protections and the strongest law wins.

The law has some other less specific provisions that probably don’t apply to most people. It calls out for various studies on credit availability, merchant interchange fees (what the credit card processing industry charges businesses to accept cards), and other credit related items. There are provisions for credit card debt and estate issues, financial literacy, and a bit on what happens if an issuer violates the law (minimum fine of $500 and a max of $5,000).

Whew! That’s a lot isn’t it? Please let me know what you think of the act!

(Photo: thetruthabout)

Credit CARD Act of 2009 Guide: How It Affects Us from personal finance blog Bargaineering.com.

It’s the President’s Day long weekend so we’ve packed our bags and have headed for L.A. for the next few days. Here are a few things we’re doing to make this trip pretty light on the wallet: one thing we’ve discovered traveling as a family unit — the cheapest way to vacation is by renting a house. There are 5 of us on this trip and we’re paying $300 a night for a 5 bedroom in West Hollywood. Not bad! It’s easy enough to find vacation rentals off the Internet, and so far, all our experiences doing things this way have been pretty positive.

We also decided to take our family van for a short-ish 6 hour commute, which trades airline tickets (for 5) and a rental for a few tanks of gas.

And finally, we also got some affordable passes into our favorite amusement parks in Southern California (Disneyland and Universal Studios), which we got in advance, care of a good friend who’s also a blogging colleague and a native of L.A. — who else but Cap from Stop Buying Crap who’s always willing to lend a hand. The guy knows how to get discounts!

Our outlay should be much cheaper than what most tourists shell out because of the extra planning we’ve done. Now all we have to do is have fun! So I need to keep this a bit short as we scramble to head out to dinner in a new town. Incidentally, the last quick jaunt we had was when we visited the Russian River. Hmmm…. maybe we should try to be more ambitious about our vacations in the future.

Disneyland & Universal Studios, Here We Come!

Good news from the Federal Reserve this week. The interest rates on your home equity loans should remain low for a while longer.

How The Rates On Your Home Equity Loans Work

The interest rates on your home equity loans are most likely based on Prime Rate. Prime Rate usually tracks the Fed Funds Rate plus 3%. The Federal Reserve’s Federal Open Market Committee (FOMC) is the body that decides when to raise or lower the Fed Funds Rate. The FOMC decided this week to leave the Fed Funds Rate unchanged, signaling several more weeks of cheap home equity loans.

The Current Fed Funds Rate

Currently the Fed Funds Rate has been at 0.000% - 0.250% for over a year. The Feds have been keeping interest rates low in order to stimulate the economy. As the economy shows signs of slow growth, the FOMC has been considering when to start raising their key interest rate. Interest rates will have to go up as a tighter monetary policy becomes appropriate, primarily to fight inflation.

What The FOMC Said This Week

The committee’s press release reiterated that interest rates on loansshould remain low for an “extended period.” While it may feel like you’re hearing the same old news, there was something different this time. One of the Fed Governor’s dissented, making the vote to keep interest rates unchanged at 9-1. Kansas City Fed President Thomas Hoenig commented that the economy was doing much better and that low interest rates should not be expected to continue. This may not seem like big news, but it is a change. If the next time the FOMC meets, another Governor dissents, it will surely mean that the FOMC is nearer to raising interest rates.

Find A New Home Equity Loan

Because home equity loans are so cheap, now is an excellent time to use the equity in your home for college tuition, home improvements, or credit card debt consolidation. The equity in your home might be the answer to solving any number of problems you may be having. Use the equity to start a business or meet other life goals. A new home equity loan can make a big difference in your life. Speak to a lender about home equity loans today.

Bank of America has agreed to modify some of its home equity loans in cooperation with the government’s Home Affordable Modification Program (HAMP). Without such cooperation, borrowers can e denied loan modifications that could save their homes. Home equity lenders must agree to subordinate or release their liens before a first mortgage loan can be modified. Bank of America’s decision to work with federal modification programs could inspire more second mortgage lenders to follow suit. Although HAMP modified 66,465 mortgages as of December 31, 2009, almost 800,000 mortgage loans remain in trial modification status.

Mortgage Loan Modifications: Bank of America Going the Extra Mile

Bank of America cites concerns that modifying the first mortgage without modifying second mortgages (which typically includes home equity loans and balances owed on home equity lines of credit) may result in a modified loan that remains unaffordable for borrowers.

In a statement, Barbara Desoer, president of B of A Home Loans suggested that modifying home equity loans would further lower borrowers’ combined monthly mortgage payments. This could encourage financially challenged borrowers to stay in their homes rather than walking away from high payments on mortgage loan amounts exceeding their home’s current value.

Mortgage Loan Modification: Why Your Second Mortgage Lender Must Agree

Mortgage loans are secured by your home. In order to document their security interest, mortgage companies record mortgage documents with the county where your home is located. Recorded mortgage documents establish a sequence of lien holders that typically looks like this, with recording dates earliest to latest establishing priority:

1. Your county or local property tax authority, zoning restrictions, utility easements, and other covenants affecting your property.
2. Your primary mortgage loan (either the mortgage you used to buy your home, or a refinance mortgage loan)
3. Your home equity loan.

Modifying your primary mortgage loan requires recording new loan documents showing the modified terms of your mortgage. If your home equity lender does not agree to record a subordination agreement, the second mortgage could move into senior position over your modified first mortgage. Primary mortgage lenders do not allow this, so a home equity lender’s refusal to cooperate would cause your primary mortgage lender to refuse a loan modification. When preparing to contact your primary mortgage lender or a housing counselor about modifying your mortgage loan, make sure to have contact information for your home equity lender available.

Home equity lenders forfeit their interest in a home when the primary mortgage lender takes title to your property through foreclosure. Given this circumstance, it makes sense for first mortgage lenders and home equity lenders to work together in foreclosure prevention programs.

This week, President Obama signed into law a bill that lets taxpayers claim donations made to earthquake relief in Haiti on their 2009 tax returns. If you make a cash contribution between January 11th, 2010 and March 1st, 2010 towards relief aid for earthquake victims in Haiti, you can claim it on your 2009 tax return. Specifically, you are permitted to treat the donation as having been made on December 31st, 2009 for tax purposes.

All other normal donation rules apply such as the burden of proof/written documentation (though, as I’ll explain below, they’ve specifically called out a methodology for text message donations) and how to deduction charitable donations you must itemize your deductions. Unfortunately, non-cash contributions are not eligible for this speedy deduction.

Finally, you are not required to claim the deduction on your 2009 return. Based on your tax situation, it may be better for you to claim the deduction in 2010 rather than in 2009. For example, if will not be itemizing deductions in 2009, you will want to wait until 2010. You cannot claim the deduction for both years.

Text Message Donations

In addition to making the charitable contribution effective December 31st, the bill added clarification on what constituted “written documentation” for text message donations. If you can produce a telephone bill showing the name of the donee organization, the date, and the amount of the contribution, then you will have met the recordkeeping requirements of the Internal Revenue Code to claim the donation. The donee organization must be eligible to receive tax-deductible charitable contributions and you can use this IRS tool to lookup eligible organizations.

H.R. 4462

H.R.4462 – To accelerate the income tax benefits for charitable cash contributions for the relief of victims of the earthquake in Haiti was the House bill, passed on 1/20 by the House of Representatives and passed by the Senate on 1/21. It is quite possibly one of the shortest bills I’ve ever seen (though I haven’t read through many) – bill text.

For more information, please read the IRS bulletin: Haiti Relief Donations Qualify for Immediate Tax Relief.

Claim Haiti Relief Donations on Your 2009 Tax Return from personal finance blog Bargaineering.com.

Deb and Rick Franklin

For nine months, Deb Franklin said, she did exactly what JP Morgan Chase and President Barack Obama told her to do. She made her mortgage payments on time, delivered via Western Union, after they were reduced from $1,433 to $1,233 through Obama's Making Home Affordable program. After three payments, the mortgage relief was supposed to become permanent, but a maddening string of paperwork headaches landed her in limbo. Then, on the day after Christmas, a "bomb dropped" on her life.

A letter from a law firm representing Chase said the bank had begun foreclosure proceedings against her. 

"It was devastating, just devastating," Franklin said. "I ended up on the couch shaking so badly that my husband started piling blankets on me saying, 'Are you OK?' And I told him, 'I'm not cold, I'm scared.' "

The Franklins are exactly the kind of family the Making Home Affordable program was designed to rescue. They were trying to hang on to their primary home, had enough income to make significant monthly payments and their home’s  value was still within shouting distance of their mortgage balance. Home values in rural Airville, Pa. — just across the Maryland border, near Baltimore — never exploded like those in America's big cities, so market value of their modest split-level hadn’t fallen far.

But instead of hope and help, the Franklins say their 10-month odyssey through the Making Home Affordable program raised their mortgage balance from $187,000 to $207,000, ruined their credit score, leading to cancellation of their credit cards, and now — despite making all their payments — put them on the brink of losing their home.

Franklin has been told by bank representatives that the foreclosure notice was sent in error, but she doesn't buy it. On a single day in early January, she says, one Chase representative told her that the loan modification plan had been denied, another said it was approved and a third told her the foreclosure had been "suspended."

"I check my county auctions every Monday to make sure my house isn't on there,” she said. “I don't believe anything they say anymore."

Some 4 million American homeowners qualify for the Making Home Affordable program, and around 850,000 of them have been offered lower payments on a trial basis, according to the Treasury Department.  Enrollees see their mortgage payments reduced to 31 percent of their income through interest rate reductions, fee waivers and lengthening of mortgage terms.  Entrants are told that if they make three "temporary" modification payments on time, they will qualify for permanent relief. But as of December, only 66,000 had seen their mortgage permanently modified – a number dwarfed by the 2.8 million foreclosures completed last year.

Until the lower loan payments are made permanent, banks are entitled to continue with foreclosure proceedings.

Franklin is one of many homeowners who have enrolled in the Home Affordable Modification Program (HAMP), offered as part of Making Home Affordable, who later compared their experiences through the Web site LoanSafe.org. They found that many of them had similar tales of lost paperwork, surprise foreclosure notices and ruined credit.  Msnbc.com reviewed about two dozen such stories involving virtually every major bank. Franklin, who shared an extensive diary of events she said she kept during her attempt to modify her mortgage, is typical.

"I don't know if President Obama knows what's going on," she said, adding that she recently sent a long fax message to the White House chronicling her Red Tape nightmare. "I don't know what else to do."

The Franklins' home

The Franklins hadn’t suffered significant loss of income during the recession. Rather, health problems and family emergencies pushed them to the brink of financial ruin, placing the home they’ve lived in since 1984 at risk. When their adult child had a near-fatal car accident in July 2008, they emptied their bank account to help him and his three children through the ordeal. Soon, their $1,433 monthly mortgage payments were overwhelming their budget, and they began to dip into their retirement savings. So Franklin was one of the first in line last March after President Obama announced the Making Home Affordable program.

She and her husband received a quick response after signing up March 2 on Chase’s Web site. They were told to call the bank two weeks later. Then, when they filed a 37-page packet with Chase later that month, they were told their application was “in underwriting. “ On April 22, they were told their modification was approved and a new payment of $1,233 was to be paid via Western Union beginning May 1.  If they managed to also complete payments on June 1 and July 1, their modification would be made permanent, Franklin said Chase employees told them.

The first sign of potential trouble came almost immediately.  On May 1, she said she was told during a phone call that her actual payment should have been $1,233.18 – so she was short 18 cents. If the 18 cents didn't arrive soon, her modification would be "canceled," she quoted the Chase employee as saying. She sent Chase a check for $1, to be safe, and on June 1 and July 1, she sent payment via Western Union for $1,234. Calls to Chase after each payment elicited the same response: "Everything is on track," Franklin said.

But in July, when the modification was to be made permanent, she said she was told that Chase's loan department was overwhelmed and that she would have to wait another 45 to 60 days. In the meantime, her log shows that Chase employees told her to keep making the temporary modified payments.

Things began to go south in August. She received a notice of default from the bank, which demanded $11,000 in late fees and unpaid mortgage payments to bring the loan current. A Chase operator told her to ignore the letter and to keep making modified payments.

Meanwhile, other parts of her financial life began to unravel.  Despite making the payments prescribed by Chase, the bank had reported her to the credit bureaus as having made only partial payments on her mortgage.  Her credit score plummeted from 660 to 444, and penalty credit card interest rates kicked in. In a short time, her cards rocketed from 8.99 and 14.99 percent to 29 percent. 

"They did not tell us that would happen when we entered the program," she said. "For many people, their credit is destroyed. I know people who say they never would have entered the program if they knew that."

(A Treasury Department official told the New York Times recently that many early applicants to the Making Home Affordable program did see severe credit score hits of “30 to 100 points.” But the official said that in November, banks developed a new way to report mortgage modification recipients to the credit bureaus that does not do as much damage to their credit scores.)

On Aug. 31, before making her next payment, Franklin called to check her status.  At this point, the operator said her paperwork was missing and told her to re-fax the entire 37-page application. She sent the documentation and submitted the payment.

On Sept. 29, she was told that her modification had been approved, but she still had to wait for some delayed paperwork — perhaps another 30 to 60 days.

On Oct. 10, she received a letter from Chase telling her to call immediately because her modification was at risk.  When she called, she said, an operator told her that the letters were "computer generated," and she should “disregard” them.

When a letter arrived on Dec. 7 from Chase warning her that "although we received a payment on your loan, it was not sufficient to bring the loan current," she was given the same advice by a Chase operator: "Disregard those letters." She was reminded that stable income and stable payment history were the most important factors in modification decisions. 

She was about to make her eighth trial payment when the nightmare letter arrived indicating foreclosure had begun.

“The law firm of Shapiro & DeNardo, LLC has been retained to initiate a lawsuit to foreclose the mortgage on your property,” it read. It indicated her loan balance was now $213,362.41 – more than $20,000 larger than when she’d entered the HAMP program. When she called the law firm, she was told that $13,235 was required to bring the loan current.

A call to Chase shed little light on the situation. 

"We were told the foreclosure process marches on even if you are in the modification," she said.

But an operator also told her that all her paperwork was in order, and she should receive her final modification within the week.  After a few more phone calls, a supervisor asked that she once again re-fax the application.

Two days later, a Chase operator who said he was in Florida called to say the modification had been denied, and demanded $13,235 to stop the foreclosure. A return call to Chase produced a different response: The family was approved for the permanent modification, the operator told her. A call to the lawyers’ office confirmed that the foreclosure was suspended.

But as of Monday, the Franklins were still awaiting final paperwork, and assurance that they will be allowed to remain in their home of 26 years. The most recent information, she said, came from a Chase operator, who told her there would be no new information until Feb. 1. On that date, Franklin will make her 10th modified payment.

“This whole thing just doesn’t seem like it makes sense,” she said. “Everybody is into the big political story here, but I think people are too wrapped up in that to know what’s really going on and try to deal with it.”

In a statement to msnbc.com Chase apologized for “incorrectly sending a foreclosure notice.”

Chase spokesman Tom Kelly said that the firm processed many other modification applications quickly, and had ramped up quickly to deal with an “unprecedented volume of customers” seeking mortgage help. He said the firm offered 600,000 trial modifications and approved 120,000 during 2009. Meanwhile, it added 5,000 employees to an existing staff of 8,000 who work with delinquent borrowers, he said. 

While Kelly declined to discuss most specifics of Franklin’s case, the statement placed some of the blame for delay on the family.

“We set up the borrower's trial modification payment using information the customer provided,” the statement read. “When we received the documentation, we learned that the family's income was significantly different.  As a result, we continue to review how we can best help the family.” 

So for now, Deb Franklin continues to scan the newspapers every week, making sure her home hasn’t been put up for sale.  She had a scare on Monday.

“I checked the sheriff's sale this morning and my heart sank when I saw a home on our road listed for auction,” she said.  “All I saw was the name of our road at first, but it was not us….Whew, dodged another one this week.”

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