Business, Career, Personal finance, Small business

Tracking Down a Payment

I remember being on a New York subway train in the fall of 2001. The doors of the train burst open at the World Trade Center stop. People rushed into the subway car bringing a gush of wind. They filled every space. As the doors closed, a sense of urgency filled the compartment, and conversations buzzed. I turned to a lady who had found a seat. Her face seemed frozen and emotionless. “What’s going on,” I asked. She told me a plane had hit one of the twin towers.

She ran out the building and saw a ball of fire coming from the tower she escaped. A friend was with her at first. She told her friend, “Stop looking at the building.” She tried to pull her friend along as she ran to safety, but her friend was too mesmerized by the fiery spectacle and paralyzed with fear. The woman had to leave her friend behind.

I watched her as she told the story and realized her face was masked with horror and not the lack of emotion I originally thought. It was as if I could see the blaze of fire in her eyes. It wasn’t the flaming bodies she saw plummeting from the building that terrified her. No, instead it was: “I don’t have a job. How am I going to get paid?”

Contacting the Appropriate Authorities

Fortunately, events, such as the terrorist attacks on September 11, 2001, haven’t occurred often in the U.S, but other events such as natural disasters and an unstable economic climate are just as tragic. These events have plagued  business communities with bankruptcies, the closings and even corruption.

Are you still waiting for payment for the work you’ve performed?

After confronting your employer about the payment to no avail, try contacting your local government. Visit your state’s labor department; you can do this in person or online. Either way, request paperwork that will let you file a claim. You could also file a claim with the court.

Filing a claim will help when you file your taxes because it shows the IRS you tried to track down the debt. It will justify your reasons for deducting the amount on your 1040 form on line 21, which is used for other income. You can take this deduction as long as the amount you’re trying to recoup is included in the total income earned for that year. For example, as long as that amount shows up as part of the income on your W-2, which is like  an employer’s acknowledgement the money was earned.

Avoid Delinquent Payments

Take steps to avoid this whole dilemma to begin with by doing the following:
*Check out who you’re dealing with by calling the Better Business Bureau to find out whether any complaints were made and find out about any issues with payment histories.

*Negotiate and establish the terms of payment in a formal contract and make sure it addresses how it plans to pay your wages if an unfortunate event arises.

*Request a down payment or a retainer.

*Schedule payments.

*Keep a log of the payments you received.

*Follow up on a bill that’s owed.

Get a feel for the workplace by asking yourself:

*Is this a positive environment?

*Are the people productive?

*Is it an ethical business?

*Does the employer or owner often communicate with the employees about the activities of the business?

Events that are out of your control occur so stay aware of the changes taking place at work, within its culture and the nation’s economic climate to make sure you don’t experience the unpleasant circumstance of not receiving your wages.

Photo Credit: AmbroMaggie Smith 

Personal finance

A New Alternative for Underbanked Taxpayers

The U.S. government is offering millions of Americans, who have limited or no access to traditional banking services, an alternative to sketchy loan programs. The government notified 600,000 low- and moderate-income taxpayers via ground mail in January about activating a My AccountCard Visa Prepaid Debit Card. This card allows for the direct deposit of their 2010 federal tax refund onto the card.

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“This innovative card can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures,” explained Neal Wolin, deputy secretary of the U.S Treasury department in the press release.

Upon receiving the letter the recipients learn how to sign up for the program, the cards’ features and how to use it to receive their refund and go about everyday financial transactions. The cards’ features include “free point of sale transactions, free online bill pay, free ATM cash withdrawals at more than 15,000 ATM machines nationwide, and free cash back at participating retail stores,” according to the release.

Approximately 9 million people are unbanked, according to the FDIC. They do not have a checking or savings accounts. Roughly 21 million are under-banked. They rely on alternative financial services instead of their checking or savings accounts.

Some under-banked and unbanked taxpayers seeking quick access to their tax refund opted for Refund Anticipation Loans (RAL). These short-term loans are usually for one to two weeks and are secured by the taxpayers’ refund checks. Banks issue them and tax preparers facilitate them. Annual interest rates are usually in the triple-digits, such as the 149% at Republic Bank & Trust of Kentucky. Consumer advocates found lenders of these programs prey on low-income individuals residing in areas with no banks or individuals with limited knowledge of English or no personal finance skills. The lenders would partner with rent-to-own stores and check-cashing companies.

 Last year, federal regulators blocked these types of banks from funding these loans at places such as Jackson Hewitt Tax Services and H&R Block.

Although cheaper than the RALs, the Refund Anticipation Check (RAC) has become another questionable product for consumer advocacy groups. The bank opens a temporary bank account for the IRS to directly deposit the check. The cost to set up the account is typically $30. Consumer watchdogs advise opening up “real” bank accounts so taxpayers can avoid the check cashing fees to access their money from the RAC.

Meanwhile, the Treasury is trying out different variations of the My AccountCrd to evaluate which product features, fee structures and marketing messages resonate well with the taxpayers and whether the program can become an integral part of tax filing and the refund process.

Has this program worked for you?  Has it worked in the banking industry?

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Foreclosures, Mortgages, Personal finance

Updates to Property Valuations and Abandoned Foreclosures

Updated property valuations may just be the key in reducing crime, decreased property values and additional costs to local governments related to servicer-abandoned foreclosures, according to the U.S. Government Accountability Office report, “Mortgage Foreclosures: Additional Mortgage Servicer Actions Could Help Reduce the Frequency and Impact of Abandoned Foreclosures.”

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Servicers, such as banks, have walked away from foreclosures once they realize the cost to complete the procedure is much higher than the anticipated proceeds from the property’s sale.  When these foreclosures are abandoned, communities are often clueless because the servicers don’t have to tell the community the property is abandoned.  Befuddled homeowners find out the property is still in their possession along with responsibility for paying the debt, taxes and maintenance. 

If mortgage servicers were provided with updated property valuations before initiating a foreclosure on a property,  lower-value properties or those in areas more likely to face steep declines in value could be saved.

Abandoned foreclosures are often rare, according to the government report. They made up one percent of vacant homes between January 2008 and March 2010. These foreclosures are typically concentrated in economically-distressed areas and involve loans made to borrowers with lower quality credit. Vacant homes are often associated with abandoned foreclosures. They’re costly for the local government to maintain and demolish and often attract crime and decrease property value.

Communities try to mitigate the effects of these desolate properties but face delayed action.  Some resolutions community groups have tried include increased counseling to prevent borrowers from leaving their homes too early and asking servicers to list properties that are vacant on a centralized registry so they know where to focus their attention. They’ve also created land banks to increase incentives for servicers to complete instead of abandon foreclosures. 

However, these efforts, according to the report, require funds, may not be appropriate for all communities and may just encourage the servicer to walk away.

How do you think updated property valuations will help the abandoned foreclosure issue?

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Investments, Luxury lifestyles, Personal finance

Guess Who’s Becoming Risk-Averse?

Notice how some young, wealthy individuals are claiming fewer bragging rights and becoming more frugal? A greater number of Millennials are adopting more risk-averse behavior.

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A high percentage of individuals in this group, ranging from 18 to 34 years old, are gravitating to more conservative, financial investment vehicles and strategies compared to older investors, according to last year’s Merrill Lynch Affluent Insights Quarterly

survey, which questioned a sample of 1000 affluent Americans with investable assets of more than $250,000.

“It is understandable that younger investors who have experienced or witnessed the market swings during the past decade and the impact they may have had on their family would be skeptical about more moderate or aggressive investment strategies,” said Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management in the survey’s press release.

Now, more wealthy parents emphasize financial “know-how” to their children. According to the review, two out of five respondents are spending more time speaking to their children about financial matters, and 74 percent have shared some form of the advice offered from their advisor, such as managing a budget, investing for retirement and managing checking or saving accounts.

Avoiding financial investments or taking a more conservative approach at a younger age can damage the asset growth sought during the long-stretch, warned Krawcheck. “It is our job as advisors and as an industry to help restore investor confidence so that risk aversion doesn’t leave the next generation of investors inadequately prepared for the future,” she advised.

How have you noticed wealthy individuals show risk aversion with their investments?

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Personal finance

Debtor’s Prison: Barriers to Employment

A plague of debt infected the unemployed and underemployed during the Great Recession. Yet, some of these needy yet trustworthy workers were denied job opportunities because of their ”bad credit.” 

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Many employers review credit during the hiring process, but civil rights groups cry foul because of a concern that some groups of job-seekers experience discrimination. Meanwhile, employment lawyers await and prep for a wave of litigation.

Employers most likely credit-check workers in positions that have access to money, such as tellers, cashiers and finance officers, but more employers have adopted the credit check as a job performance predictor for positions that are not financial or fiduciary. Credit background checks have been used by 60 percent of employers questioned by the Society of Human Resources Management in its 2010 survey, which interviewed 433 randomly selected members.  Forty-seven percent used credit screening for select candidates, and 13 percent used it for all job applicants.

The credit checks are legal. The employer is required to get the job seeker’s permission before proceeding with the review, but the Equal Employment Opportunity Commission stated the practice may violate federal employment discrimination laws. The checks could disproportionately screen out women, minorities and other protected groups. 

“Title VII of the Civil Rights Act of 1964 was intended to eliminate practices that serve as arbitrary barriers to employment because of a job applicant’s race,” said Regional Attorney Debra Lawrence of the EEOC’s Philadelphia District Office in a press release. “Employers need to be mindful that any hiring practice be job-related and not screen out groups of people, even if it does so unintentionally.”

Employment lawyers are currently examining and scrutinizing the EEOC’s lawsuit against Kaplan Higher Education, a provider of post-secondary education, according to Lawyers USA. The agency alleged candidates were denied jobs based on their credit histories, which distinctly affected African-American applicants nationwide.

U.S. Congress members have tried to change the law. Democratic Congressman Steve Cohen of Tennessee authored the Equal Employment for All Act. It banned the use of credit checks in the hiring process, but the bill didn’t pass.  Opponents argued financially distressed federal employees with security clearances are a red flag.  According to a U.S. Government Accountability Office report “Payday Lending: Federal Law Enforcement Uses a Multilayered Approach to Identify Employees in Financial Distress,” some investigators associated with federal agencies, such as the Transportation Security Administration and the Federal Bureau of Investigation, examine credit reports from the three major credit reporting bureaus and weigh the extent, circumstances and severity of risky financial debts. 

 Some states have taken action to alleviate or reduce the review of job-seeker credit histories. So far, Hawaii, Illinois, Oregon and Washington have banned or restrained credit screening of job applicants. The EEOC is examining employers’ treatment of the unemployed in applicant pools.

How important are credit histories for businesses?

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Investments, Luxury lifestyles, Mortgages, Personal finance

Luxury Rentals: Making “Sound Investments”

Real estate agents reveal more uber-rich Americans are renting instead of buying homes.

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In New York, rentals of $10,000 to $100,000 are on the rise, according to the New York Times. The luxury market there has been the slowest to recover from the housing market collapse. Brokers told the paper it appeared buying was not a “sound investment” to wealthy New Yorkers at this time, and it’s likely they didn’t want to put, “35 percent down on an apartment when its resale value still comes with a big questionable market.”

The upsurge in luxury renting is boosting profits for companies, such as Corporate Mansions. Owner Bill Lyons’ business multiplied from the distressed properties and vacant homes near the Las Vegas Strip in Nevada’s ritziest neighborhoods. Lyons’ business rents luxury properties to wealthy executives and A-list celebrity clientele for thousands of dollars per week. He and his team arranged deals with banks for homes and then resurrected the property, he told the Las Vegas Business Press. Lyons added that he hopes to sell the homes, but he’s waiting and creating a revenue model that will work until the market picks up.

Affluent Americans are living more modestly and are looking for more value for their dollar. Six figure income-earners even led the “coupon enthusiast” frenzy during the recession. “In fact, more affluent households dominate coupon usage: 38% of “super heavy” users and 41% of “enthusiasts” come from households with incomes greater than $70,000,” according to The Nielsen Company’s Nielsen Wire blog entitled, “The Coupon Comeback.” “Households with income of $100,000 and up were the primary drivers of coupon growth in 2009,” it said. The wealthy Americans, American Express found, have also been gulping down more fast food.

Many of these Americans experienced a rapid decline in their fortunes during the recession. Increased investments in stock and real estate prior to the economic decline were among the culprits. These acquisitions exposed them to the nasty fluctuations in the overall market. Many found the financial shock a cathartic experience. They learned that their financial reserve was not as secure as they once thought.

The economic recovery is enabling affluent Americans to grow their wealth the same way they lost it, Jonathan Parker, a professor of consumer finance at Northwestern University told The Street. Towards the end of 2010 the luxury goods market saw more activity as the wealthy incurred more frequent first-class flights and stayed at high-end hotels.

Do you think it is better to rent or own a home? Why?

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Investments, Personal finance

Financial Planners: Clarifying Their Role

Financial planning is a growing industry, and it needs a regulatory system. That’s according to the U.S. Government Accountability study entitled “Consumer Finance: Regulatory Coverage Generally Exists for Financial Planners but Consumer Protection Issues Remain.” It found “no specific, direct regulations” of financial planners exist at the federal or state level.

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Vague regulations have left consumers confused about what financial planners do and the rules that apply to them according to The Financial Planning Coalition, a consumer watchdog group consisting of 75,000 stakeholders. It pointed to a survey, commissioned by the Financial Planning Association, indicating that 83% of voters questioned wanted increased regulation of professionals who referred to themselves as “financial planners.”

“While the GAO study did not reach the conclusion we advocated,” said Charles A. Moran, CFP, 2011 Chair of the Board of Directors of the Certified Financial Planner Board of Standards, Inc. in a news release, “it recognized significant consumer protection issues and outlined steps to address them. The study will help inform our ongoing discussions with policymakers and will provide an important building block in our efforts to achieve recognition of the rapidly growing financial planning profession.”

Although the regulatory structure available covers most of these planners’ services, the “attention paid to enforcing existing regulation varies” and consumer issues can arise, according to the U.S. Government Accountability Office report “Consumer Finance: Regulatory Coverage Generally Exists for Financial Planner, but Consumer Protection Issues Remain.”

These consumer issues include uncertainty about when a financial planner is required to serve the clients’ best interests and the inability to decipher or understand the numerous titles and designations financial planners may adopt.

However, the extent of the problem is unclear because the Securities and Exchange Commission doesn’t record data on complaints, examination results and enforcement activities relative to financial planners.

The report suggests identifying risk and problem areas is needed and would be beneficial to planners themselves for identifying problems stemming from financial planning services.

Stakeholders proposed different avenues to address the regulation, according to the report, such as developing a federally chartered board overseeing financial planners as a distinct profession, beefing up oversight of investment advisers’ regulatory organizations, broadening the reasonable standard of care to more financial services, and identifying standards for financial planners and the designations they use.

However, adding changes to the current structure isn’t necessary, according to the regulatory agencies and financial services industry representatives questioned in the release. What exists is adequate for most financial planning activities, they claimed.

The report encouraged more discussion on the issue.

What trends are you seeing in this field?

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