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rth Star
Documentary looks at
lending and practices
of debt collectors By Teresa McUsic Special to the
Star-Telegram
Consumerism has hit independent movies, in the wake
of indie hits such as 2004's Super Size Me,
about the fast-food industry, and this year's An
Inconvenient Truth, Al Gore's warning about
global warming.
Now comes Maxed Out, an independent film on
the credit-card and collection industries made with
the help of two local consumer pit bulls: advocate
Bud Hibbs and attorney Jerry Jarzombek.
The film, scheduled for release next year, will have
its first local preview Saturday at the
Modern Art Museum. Hibbs and Jarzombek, members of
the National Association of Consumer Advocates, will
answer questions afterward.
Next week, a national distribution deal for the film
and DVD will be announced, director James Scurlock
said. Simon & Schuster will publish the companion
book, which is expected to be released this winter.
The film looks at the dramatic changes in lending
and collection practices since the 1980s. It focuses
on real people caught in financial traps.
"I was shocked by what we found," Scurlock said. "I
started the movie looking at consumerism and how
we're spending too much money, but the project
really transformed to how the financial industry has
been baiting and hooking people for the past 25
years."
Part of that transformation, Scurlock said, came
from sitting at a coffeehouse in
Fort Worth two years ago with Hibbs and Jarzombek.
"I was asking around for information from a network
of journalists, professors and advocates, and
[Hibbs'] name kept coming up," Scurlock said.
It's easy to see why. Hibbs has been a consumer
advocate in the area since his first book, Stop
It!, hit the shelves. It told how to stop
abusive practices by debt collectors.
He has appeared on The Oprah Winfrey Show,
Today and other national talk shows. He became a
regular on several major-market radio stations,
including KRLD/1080 AM.
Now he's getting ready to launch a talk show with a
satellite radio company that will be called Voice
of the American Consumer. He's working on his
third book deal, and his Web site,
www.budhibbs.com, gets more than 1 million hits
a week, Hibbs said.
He said his office advises consumers on a sliding
scale, working at no cost for members of the
military and single mothers. His staff investigates
the companies behind his clients' complaints,
looking for connections and flaws.
"We like to expose illegal conduct of the
debt-collection industry," he said, based on
provisions in the federal Fair Debt Collections
Practice Act of 1978.
In the film, Hibbs says the lending and collection
industries are much more predatory on consumers
today than they were a generation ago.
"The bottom line is, the deck is stacked against you
from Day 1," he says. "If you're smart enough to
understand that and know that, God bless you. If
not, boy, are they going to make a lot of money off
of you."
Bankers and debt collectors have a different view.
Tracey Mills, an American Bankers Association
spokeswoman, said the banking industry's
credit-access expansion has had positive effects on
consumers.
"There are very unfortunate stories about people who
have gotten into trouble," she said. "But there are
also many stories about people who benefited from
credit that we hear all the time."
The collection industry, which the movie also
portrays in a harsh light, does have some rogue
players but overall acts ethically and legally, said
Dwain James, executive director of the American
Collectors Association of Texas.
James said that those who don't follow the laws find
lawsuits filed against them.
Jarzombek frequently sues debt collectors. He
recently sued a
New York
agency on behalf of a
Bedford
mother and daughter. According to the filing, a
company employee called a neighbor and said she was
working with the Bedford police to make an arrest.
Relaying such a threat is illegal.
Hibbs calls the movie's portrayal of predatory
lending and collection practices "the human side of
debt."
Two of the victims featured are mothers whose
children committed suicide after incurring
substantial credit-card debt as college students.
The mothers, Janne O'Donnell and Trisha Johnson,
both from
Oklahoma,
had children at the
University
of Texas and the University of Central Oklahoma,
respectively.
O'Donnell's son had racked up $11,000 in credit-card
debt and discussed the pressure with his mother a
week before his suicide. Johnson's daughter, who had
$2,500 in debt, was surrounded by credit-card bills
when she was found dead.
The mothers said in the movie that they were still
getting credit-card offers for their kids, Scurlock
said.
The Consumer Federation of America has noted that
college students are a particular focus of lenders,
receiving credit offers totaling tens of thousands
of dollars. It has recommended that Congress
restrict lenders' ability to offer credit to young
people with low incomes, but no action has been
taken.
Jarzombek and Hibbs said that big-name banks are
resorting to predatory loan tactics that were once
associated with payday lenders and pawnshops. They
see it this way: The banks target customers with low
incomes or debt problems, offering them credit cards
with low rates that expire in a year. When the
accounts become delinquent, the banks raise interest
rates on the money already borrowed and collect
fees. When the accounts fail, the banks sell them
for pennies on the dollar to collection agencies,
who often work outside the law.
Again, Mills with the
ABA argues that the movie's viewpoint is not valid.
"There are very strict regulations against predatory
lenders," she said. Also, "banks compete most
heavily for customers with decent credit histories
and scores because those are the people who will pay
them back."
Jarzombek and Hibbs said
Texas laws are among the best at protecting
consumers against the strong-arm practices of
collection agencies.
"We live in the most consumer-friendly area in the
nation," Hibbs said. "They can't garnish your wages,
and they can't take our houses. But people need to
understand their rights."
Teresa McUsic's column appears Monday and Fridays.
She can be reached at
TMcUsic@SavvyConsumer.net.
By Teresa McUsic
Special to the STAR-TELEGRAM
Higher penalties Credit-card fees
and penalties have skyrocketed over
the past 10 years, according to a report released
last week by the
Government Accountability Office.
Among the GAO's findings: Penalties for late
payments and credit-limit overruns have more than
doubled since 1995.
For those who have made late payments, interest
rates have climbed to 35
percent, although four out of five customers pay
less than 20 percent.
Disclosure statements are too complex for the
average American to
understand.
But at least one Fort Worth bank is going against
the trend, offering a card
without any fees for being late or over the limit
and a variable interest
rate of 9.25 percent, just 1 percent over the prime
rate.
First Command Bank has offered the card to the
public for nearly two years,
but it's just now showing up on comparative card Web
sites. Bank officials
said they intend to market more extensively by
year's end.
"It's one of the most consumer-friendly cards I've
seen out there. It's the
most fee-friendly card I'm aware of," said Curtis
Arnold, founder of the
U.S. Citizens for Fair Credit Card Terms. The group
compares more than 1,000
offers at its Web site,
www.cardratings.com.
Like many cards, the First Command Platinum Visa
charges no annual fee. But
Arnold noted another feature -- the card charges no
fee for either cash
advances or balance transfers.
"That's very rare," Arnold said. "It's become much
more widespread to not
have a cap on a balance-transfer fee, which before
were typically capped at
$50 to $75."
Instead, the transfer fee is usually 3 percent of
the balance, Arnold said.
So a consumer who transferred $10,000 to take
advantage of a no-interest
offer would be charged a $300 fee.
Likewise, cash-advance fees are creeping into the
system in the form of
interest tacked on the first day the cash advance is
taken, Arnold said.
Previously, cash advances were factored into the 25-
or 30-day grace period
with other charges on the card, enabling a consumer
to get cash without
paying extra.
Bud Hibbs, a Fort Worth consumer advocate,
said banks have also started
raising their interest rates on customers whose
credit scores fall.
Hibbs said he recently circulated information on the
First Command card to
members of the National Association of Consumer
Advocates.
"What everybody liked about it is they don't tie it
just to their FICO
score," he said. The FICO score is a credit score
developed by Fair Isaac &
Co.
To offer the card, First Command looks at a
combination of the applicant's
FICO score, debt-to-income ratio and total unsecured
debt, bank President
David White said. The credit picture allows a lower
FICO score, for example,
if the debt-income ratio is also low, he said.
The bank also allows for two or three late payments,
again at the discretion
of the bank, he said.
Although the consumer-friendly card is available to
the public, it was begun
as a product to serve military customers of the
bank's holding company,
First Command Financial Planning, White said.
"It's in the best interest of the enterprise to have
products at the bank to
make available to clients in order for them to
achieve their
financial-planning goals," he said. "If we had a
card that was predatory in
nature, it would hurt the support available in our
efforts to help clients
to reach their financial goals and objectives."
First Command Bank started in 1997 to serve
active-duty military personnel
but expanded to the general public two years ago, he
said.
First Command Financial Planning, which began in
1958 to serve the military,
has overhauled its management, sales force and
products, including
eliminating high-load contractual investments, in
recent years after
reaching a $12 million settlement with the
Securities and Exchange
Commission in 2004. The SEC found the planning firm
in violation of federal
securities laws in selling mutual funds.
The financial planner retained its clients, who were
reimbursed $4.5 million
in refunds and paid $7 million toward a financial
educational program for
enlisted personnel.
Now, the bank is poised to take its
consumer-friendly credit card to a
broader market, particularly through its online
presence, White said.
Consumers can find an application at the bank's Web
site.
Arnold and Hibbs recommend that consumers vote with
their feet by switching
cards when interest rates, fees and penalties jump.
Besides the First
Command card, Arnold likes the Capital One Platinum
Prestige MasterCard with
a variable interest rate of 6.81 percent and the
Simmons Bank Platinum Visa
with a fixed rate of 7.25 percent.
www.firstcommandbank.com
What to watch for
Banks regularly change the terms of their
credit-card offers.
Consumers need
to watch out for:
Interest rates that increase when your credit score
goes down.
Balance-transfer fees without a cap that are based
on a percentage of
transfer.
Interest accruing on cash advances from the day of
transaction without a
25-day grace period.
Variable interest rates instead of fixed.
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