The representatives believe the payday loan companies prey on poor, under-educated citizens by lending them money at outrageous interest rates and by charging high fees. Dallas is home to more than 200 payday-lending or check-cashing stores, with most of them located south of the Trinity River.

The payday loan industry has powerful lobbyists in Austin, and they have given thousands of dollars to legislators. So the odds are slim that any state-wide laws will be passed to further regulate these businesses. However, through zoning, individual cities can limit these companies from setting up shop within a certain distance from a similar store, or within a certain distance from a major highway.

The companies sued by the FTC are Debt Consultants of America Inc., Debt Professionals of America Inc. and Financial Freedom Processing Inc., formerly known as Financial Freedom of America Inc. All three deny any wrongdoing.

According to the FTC, the companies charged consumers upfront administrative fees, monthly maintenance fees, negotiation fees and, in some instances, a cancellation fee. As a result, even when the companies negotiated a debt settlement “in numerous instances, consumers’ account balances increase from the time of enrollment to the time of settlement.”

Because of a controversy over debt settlement companies, the FTC is enforcing a new rule that prohibits debt settlement companies from collecting fees in advance until they’ve shown effective results for their clients.

On July 2, a 74-year-old Dallas widow named Yvonne Sands received her monthly Social Security check of $1,360. Shortly after 7:30 a.m., she withdrew money from the bank and drove off to renew four payday loans with annual percentage rates of about 250 percent to more than 300 percent.

In the past year, Yvonne Sands of Dallas has paid more than twice as much in fees as the $1,850 she borrowed in four payday loans. A separate loan had a 660 percent interest rate. ‘I’m just trying to dig myself out of this hole I’m in,’ she said.

Sands can’t afford to pay back the loans all at once, and they come due every month. So each month, she takes out new loans to pay for the old ones, shelling out nearly $400 in fees in the process.

Over the last year, Sands has paid more than $4,200 in fees on those four loans – far more than the $1,850 she received in principal. And that’s not counting fees on two other loans she paid off earlier this year, one of which carried an annual rate of about 660 percent.

“I’m just trying to dig myself out of this hole I’m in,” Sands said.

For better or worse, millions of Americans like Sands borrow billions of dollars a year from payday lenders. Catering to low- and middle-income customers, payday lenders provide quick cash to just about anyone with a checking account and a steady income.

Marriage is as much a financial partnership as it is an emotional one, and you need to go into it with your eyes wide open.

“Before you get serious with someone – certainly before you step to the altar – you want to know how your financial lives are going to commingle,” said Craig Watts, spokesman for FICO, the company that developed the widely used credit score.

Decide who will handle the bill-paying responsibilities and how the bills will be divvied up.

One reader told me that he and his fiancee exchanged their credit reports and scores before they married. That’s not a bad idea if you’re both comfortable with that.

“Your FICO scores offer a neat snapshot of how you’ve each handled your money – student loans, car payments, credit cards,” said Deborah Owens, author of A Purse of Your Own, an investments and financial book for women. “FICO scores will reveal who has more financial acumen and if there are areas that the two of you need to address.

“You fell in love with the man and not his money,” she adds, “but how he handles his finances can tell you a lot about his values, character and future money behavior.”

At some point during your marriage, you will undoubtedly think about purchasing a home or car, so you’ll want to know your future spouse’s potential for qualifying for new credit.

“You’re not just mingling your personal life with this person,” Watts said. “You’re also mingling your aspirations and your ability to achieve those goals. Not having your eyes open on any liabilities when it comes to the financial side means you really are walking blind into your future.”

There’s one misconception I want to clear up. Some people think married couples have one credit score and one credit report. Not true.

“Some people think that once you get married, then your credit histories must get mingled at the credit bureau so now you have a joint credit score,” Watts said. “You always have an individual credit score based on your personal history.”

However, if you get a joint credit card account or co-sign for a loan with your spouse, “now your credit reports start looking more similar,” he said.

And if your spouse forgets to make the loan payment on that joint account or co-signed loan, your credit will be hurt along with your partner’s.

If both of you need a loan and you’re the one with good credit, you should apply for credit based on your credit history.

So be honest and discuss finances with your partner because his or her financial burdens will affect your credit.

“You’re talking about a lifetime commitment here, and you want to make sure that you understand the risks that you’re taking by mingling your future with your partner,” Watts said.

CNNMoney.com recently ran a good article about five bad habits that can kill your credit score. Here are excerpts:

Your FICO score is a numerical measure of your creditworthiness that ranges from 300 to 850. While there are a few different credit scoring systems available, it’s the FICO score, created by the Fair Isaac Corporation, that most lenders look at when they check your credit.

Lenders have already raised their standards by about 20 to 40 points this year, according to Barry Paperno, consumer operations manager at FICO. So while a score in the 720 to 740 range would have gotten you the best rates on a mortgage in the past, you now need a score of at least 760 to snag the best loans.

FICO focuses on five categories when calculating your score: How much debt you have, your payment history, your debt utilization ratio (how much you owe in relation to your credit limits), how far back your credit history goes and your mix of various types of credit. Here are a few things that can wreak havoc on your score and wreck your chances of getting an affordable loan:

1. Making late payments

A single late payment on a credit card or other loan could ding your score by as much as 110 points if you already had a great score and 80 points for someone with an average score. So the best thing you can do to improve your score is make payments on time.

“This continues to be the number one reason scores are lower,” said Paperno. “In addition to being a heavily weighted part of your score, if you’re late on a payment, it’s going to continue to appear on your credit report for about seven years.”

Since payment history accounts for about 35% of your total score, it’s really important to start paying on time.

2. Carrying a big balance

Your debt utilization ratio accounts for almost 30% of your score. So carrying too much debt will not only cost you a fortune in interest, it can also destroy your credit rating.

As part of the CARD Act that went into effect last month, credit card issuers must now include a chart with your bills that shows how long it will take to pay off your balance if you only make the minimum payments. The chart will also display how much you need to pay each billing cycle in order to completely pay off your balance in three years.

3. Closing a credit line

As credit card companies jack up interest rates and add inactivity fees to compensate for lost revenues, it’s tempting to just close your accounts. But closing a line of credit could impact your debt to utilization ratio. For example, if you have two credit cards with a limit of $1,000 each and a $400 balance on one card, closing the other account will immediately double your debt to utilization ratio from 20% to 40%.

But the negative effect varies greatly. Closing one card could have a very small impact if you have lots of other high-limit cards. You can also counteract some of the impact by opening up a new line of credit. But beware: that can also impact your score.

4. Opening a credit line

“When you open a new account, you’ll knock some points off your score,” said Paperno. “The reason why is that the people who open new accounts tend to be of a higher risk level immediately after opening a new account.”

In order to open a new account, a credit card company will need to check your credit, and a typical “hard” inquiry like this will lower your score by about five points, plus the cost of opening a new line of credit typically ranges from five to 15 points.

But the temporary ding only lasts about six months, so if you’re in a stable financial situation, the score reduction could be worth it, said Paperno. ”You can look at it as a long-term strategy and go in with the idea that you might lose a few points now but in the long run you might be better off because you’ll have more credit available,” he said.

5. Defaulting

Defaulting on a loan is the single worst thing you can do for your credit, said Rex Johnson, founder of credit union consulting firm Lending Solutions Consulting. And given the down economy, more people are damaging their credit scores through foreclosures, credit card charge offs and bankruptcies. A home foreclosure, for example, might dock about 200 points off your score and a short sale could cost you around 80 to 90 points, said Johnson.

When you’re shopping for a free credit report — totally free — you can skip that singing pirate in the commercials. Free isn’t free with this guy unless you buy something else — but what would you expect from a pirate? If you’re confused by which “Free Credit Report” is really free — and believe me, plenty of consumers are — things should soon clear up.

Beginning April 1, some ads for free credit reports will have to include disclosures that you might have to spend money for credit monitoring or other services to get a “free” credit report from that outfit. By Sept. 1, such disclosures will be mandated in all TV and radio ads.

You also should know that you have a legal right to get a free report on your credit through www.AnnualCreditReport.com or by calling 877-322-8228. But federal law only provides for free credit reports — not credit scores. So you still might find yourself a bit flustered.

This is the first major change in credit report rules since 2003, when Congress enacted the law giving everyone free access to one report each year.

Tim Burns, public affairs director for the Better Business Bureau serving Eastern Michigan, said more than 10,000 consumer complaints were filed nationwide in the past three years against Experian’s Consumerinfo.comv and FreeCreditReport.com. Generally, people thought their reports were free but did not know they were signing up for other costly services.

And now, if you go to www.freecreditreport.com, you’ll see a disclaimer at the top that says: “Free credit reports are available under Federal law at: AnnualCreditReport.com.”

An Experian spokesperson said via e-mail this week that “Experian just received the final rules issued by the FTC regarding the marketing of free credit reports, and we are currently reviewing them to determine the appropriate actions to support our business. We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law.”

If you order a free credit report at the Experian site, you do get one — when you also begin a free trial membership in Triple Advantage Credit Monitoring. If you don’t cancel that membership within the 7-day trial period, you’ll be billed $14.95 a month. Most consumers would likely agree with Levin, who said, “free credit reports aren’t supposed to produce $15-per-month charges on a person’s credit card.”

The pitchman in the commercial says, “a man should always dress for the job he wants. So why am I dressed up like a pirate in this restaurant?” Maybe he needed a second job to pay for that “free report” on his credit.

The Federal Reserve’s new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010.

What your credit card company has to tell you

• When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can
  • increase your interest rate;
  • change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or
  • make other significant changes to the terms of your card.

  If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations.

  For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).

  The company does not have to send you a 45-day advance notice if

  • you have a variable interest rate tied to an index; if the index goes up, the company does not have to provide notice before your rate goes up;
  • your introductory rate expires and reverts to the previously disclosed “go-to” rate;
  • your rate increases because you are in a workout agreement and you haven’t made your payments as agreed.
• How long it will take to pay off your balance. Your monthly credit card bill will include information on how long it will take you to pay off your balance if you only make minimum payments. It will also tell you how much you would need to pay each month in order to pay off your balance in three years. For example, suppose you owe $3,000 and your interest rate is 14.4%–your bill might look like this:

Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.

Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

New rules regarding rates, fees, and limits

• No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
  • If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
  • If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card.
  • If you are more than 60 days late in paying your bill, your rate can go up.
  • If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.
• Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
• Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
  • If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
• Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.
• Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account.
  • If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

Changes to billing and payments

• Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition
  • Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
  • The payment cut-off time cannot be earlier than 5 p.m. on the due date.
  • If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
• Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:
  • If you made a purchase under a deferred interest plan (for example, “no interest if paid in full by March, 2012″), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.
• No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.

If you are having financial problems — facing possible foreclosure, receiving harassing phone calls from debt collectors, confronting bills you just can’t pay, considering filing for bankruptcy — we will give you a FREE telephone consultation with our bankruptcy and consumer lawyer, Ms. Kathleen Munden. Ms. Munden has represented hundreds of clients with financial problems over the past 14 years, and she wants to help you too.

Just Contact us now and ask for the special “Get To Know Us” free consultation.

Call Us — We’re Easy To Talk To.

You would think that as a bankruptcy lawyer, I would never fall victim to a scam. Unfortunately, I saw one of the commercials while I was waiting impatiently for a webpage to load on my laptop, which has become increasingly slow over the past few months. In a weak moment, I went to the website and downloaded the program, after paying $30.00 for the privilege.

At first, I was pleasantly surprised. My computer did indeed speed up noticeably, and I was very happy with the result. However, when I turned on my computer the next morning, I was greeted by a succession of Viagra ads, porno websites, and warnings that I needed to go back to the website and download the company’s anti-virus program. For another $30.00, of course.

Fortunately, I wasn’t that gullible, and I tried to go to the websites for Microsoft, Norton, and McAfee to download a reputable anti-virus program. The FinallyFast program blocked all my efforts to go to those websites, and I had to give up and go buy a program to load manually.

When I told the salesman at the computer store what was going on, he told me that the program might not allow me to load the Norton software I had purchased. He was right. My first attempts to load the program failed. Fortunately, Norton had a fix for that on the CD, and I was finally able to load the program.

Instantly, the virus was detected and eliminated. I was so relieved, and immediately did what I should have done to begin with — researched the website from which I had downloaded the program. I found hundreds of consumer complaints, and added my experience to every website I could find that addressed the problem.

And, of course, I should already have had a good anti-virus program installed on my computer. The program I had expired a few months ago, and I had planned to buy a new computer, so I didn’t resubscribe. Then I forgot about it, until I needed it. Never again. I hope my experience will keep a few people from the same expense and frustration.

Running up your credit card bills could be extra costly this year as card issuers scramble to change many terms before federal rules restricting their practices take effect in February.

They’re raising annual percentage rates, instituting fees, slashing credit limits and even closing some accounts, all of which could put consumers who carry large balances in a bind.

Consumers “need to really think twice about how they’re paying for the holidays this year,” said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. “If you’re planning on carrying a balance and you’re going to charge up a bunch of things during the holidays, today’s [credit card] terms may not be tomorrow’s terms.”

Translation: The purchases you make now and in December could have a higher annual percentage rate in January.

If you do use a credit card, don’t charge anything that you can’t pay off in three months.

“Credit card rates are now too high to just charge something and assume you will be able to pay for it,” said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site.

Don’t even think about just making the minimum payment.

“If you charge $1,000 on a credit card with an interest rate of 15 percent and just pay $25 of your balance each month, it will take you until May of 2014 to pay off this Christmas, and you will pay an additional $370 in interest,” Hardekopf said.

To protect yourself from having to use credit cards, develop a spending plan before you venture out to the mall. This isn’t as restrictive as you might think. In fact, it can be quite liberating because it will keep you from making impulse purchases.

Mark suggests making a list of the people you’re buying for, how much you’re spending on them and what you want to purchase.

“Every aisle is going to be filled with impulse purchases, so you don’t want to fall prey to that,” he said. “It’s usually the minor expenses that ruin our budgets, so creating a list for each and every item will help keep your budget in line.”

Pay in cash or through a debit card. But if you use a debit card, keep track of your spending and your bank balance so you don’t overdraw your account.

“It’s really hard to outspend the cash you have,” Mark said. “You can’t have $600 and end up spending $1,000.”

Studies have shown that consumers typically spend 12 percent to 18 percent less when they pay with cash, Hardekopf said.

“Counting out and handing over cash is a sobering reminder of how much items really cost,” he said. “It makes you pause and consider if the purchase is really worth your labor.”

Retailers are going into this holiday season with leaner inventories than last year because they don’t want to be forced to give huge discounts to move the goods.

That means door-buster deals may be more limited this year.

Take advantage of coupons and promotion codes from retailers.

Finally, remember that you don’t have to spend money to give to others.

“If you’re thinking, ‘I don’t have enough cash or credit,’ remember that money does not equal love at the holidays, and you can supplement that with gifts of time and love,” Mark said.

To keep your finances under control this holiday season, follow these tips:

•Create a detailed budget.

•Don’t wait until the last minute to shop; many retailers already are offering great deals.

•Collect coupons.

•Use credit cards prudently. Don’t charge anything that you can’t pay off in three months.

•Make your gift instead of buying it. It will hold special significance for the recipient.

•Give of yourself. Consider doing a chore for a friend or offer to baby-sit. Do things that don’t require money but still convey the spirit of giving.

SOURCE: Consumer Credit Counseling Service of Greater Dallas

In a bid to avoid an overload of foreclosed houses in its inventory, Fannie Mae has introduced a new program that would give homeowners facing foreclosure the option of leasing their houses for one year. The program could keep thousands of families in their homes, but critics worry that the Government-backed lender, which has received billions of dollars in bail-out funds, could end up losing even more money.

The “Deed For Lease” program would allow homeowners to transfer title to their homes back to Fannie Mae, in exchange for a one-year lease, with possible extensions after that lease term ends. The goal is to allow homeowners to remain in their homes, and for Fannie Mae to avoid the expensive and lengthy process of foreclosing on the homes.

The program helps “eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower’s credit record. “It shows that you put your best effort to work out a solution,” said Gabe Del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. “The preferred option is allowing people to retain ownership,” he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don’t qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

This program will be particularly attractive to homeowners who owe more on their house than it is worth. By paying the market rate of rent in their area, they may actually be paying less per month in rent than they were paying on their inflated mortgage.

During the first nine months of 2009, Fannie Mae foreclosed on over 90,000 homes, and accepted 2,000 “deeds in lieu of foreclosure,” where the homeowners deeded the homes back to Fannie Mae and then walked away.

While Fannie Mae executives say the company’s motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. “That’s folly,” says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

“Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded,” he said. “It’s going to cost a fortune.”

The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter as the taxpayers’ bill from the housing market bust keeps getting bigger. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.8 billion, including $883 million in dividends paid to the Treasury Department.

Pessimists like Schiff say the recent stability in the housing market is just temporary, and argue that there is a huge backlog of foreclosed homes that haven’t gone on the market. Refusing to sell those homes, they say, only prolongs the problem.

But other experts say that Fannie Mae’s new policy could make sense, even if prices don’t rebound quickly. The company will get rental income while avoiding costly foreclosure expenses. It will also help to safeguard the homes, which are less likely to be vandalized when occupied.

“There are a whole lot of costs you avoid,” said Thomas Lawler, a former Fannie Mae economist. “You don’t necessarily have to believe that home prices a year from now will be higher than today.”

Fannie Mae’s sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be completed and only allows month-to-month leases. Freddie Mac declined to detail how many borrowers have participated.

The two companies purchase loans from banks and sell them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, about half of all U.S. mortgages. They have been badly hurt by the housing bust and have required $96 billion in federal aid since being seized by government regulators 14 months ago.

To find out whether your home loan is owned by Fannie Mae or Freddie Mac, try these Web sites:

Fannie Mae http://loanlookup.fanniemae.com/loanlookup/

Freddie Mac: http://www.freddiemac.com/mymortgage

If you have questions about foreclosure or any related legal matters, please contact our bankruptcy and consumer law firm. There is no charge for that first phone call.

In June, HAMP officials began conducting rigorous reviews of mortgage servicers, and have now started a “second look” program, under which servicers’ decisions to approve or deny HAMP modifications will be scrutinized. Compliance officers are also analyzing HAMP-modified loans to track error rates with servicers.

Government officials have tried to stimulate the rate of modifications several times. The Treasury Department has set a goal of 4 million mortgage modifications by 2012, but estimates indicate that only about half that number will actually be modified.

Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said, “The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” He may insert a cramdown provision into legislation that would overhaul the financial system, which would allow bankruptcy judges to lower the balances on mortgages to the market value of the property and set new interest rates. That bill will become a top priority in early 2010.

Complaints concerning predatory lending and mortgage practices were sixth, with complaints about telemarketers, automobile repair, automobile warranties, and telecom slamming rounding out the top 10.

“With the recession and increased foreclosure rates, consumers need to be on high alert. Too many people are being swindled out of their hard-earned money by scam artists,” said Hawaii Attorney General Mark Bennett, who co-chairs the NAAG Consumer Protection Committee with Montana Attorney General Steve Bullock.

Assuming no other homes were on the market, it would take 1.35 years to sell the properties, based on the current pace of existing-home sales. A change in the mix of foreclosures and traditional sales over different parts of the year raised prices in the period, as the distressed share shrank. Accounting for efforts to have more loans reworked to avert foreclosure will not make much of a difference in the shadow inventory, with optimistic assumptions leading to a reduction in the amount by 1 million.

For example, debt collectors often give false or misleading information about their company and who they represent. By entering the phone number from your caller I.D. onto the website, you may be able to find out more about the collector, where it is located, and other information from people who have had similar experiences and perhaps have done further research into the identity of the callers. Or you may be able to confirm whether or not a caller is involved in a phone scam or other illegal activity. Reporting these calls to your state attorney general or other consumer groups could help uncover such scams and save you and other members of the public from losing money or prevent damage to your credit rating.

If you are experiencing harassing phone calls from debt collectors or have questions concerning other consumer issues, please give us a call. Our consumer law department is ready to answer your questions and offer help to resolve your consumer problems.

Ralph Tornes, who lives in Florida, is pursuing a lawsuit against Bank of America for charging him nearly $500 in overdraft fees in 2008 after it rearranged his purchases from largest to smallest. In May 2008, for instance, Mr. Tornes had $195 in his account when he made two debit purchases for $8 and $13; the bank also processed a bill payment of $256. He claims that Bank of America took his purchases out of chronological order and ran the biggest one through first. So instead of paying $35 for one overdraft fee, he was stuck with three, for a total of $105.

As a result of increasing consumer protests about these practices, regulators are considering the implementation of rules to disallow overdraft fees unless consumers have given permission to allow charges to be run through when there is insufficient money in the account to cover them. In addition, banks would be required to run the charges through in increasing order, allowing smaller charges to be paid without overdrawing the account and resulting in fewer overdraft charges.

Michael Moebs, an economist who advises banks and credit unions, said such legislation would effectively kill overdraft services, causing an estimated 1,000 banks and 2,000 credit unions to fold within two years. That is because 45% of the nation’s banks and credit unions collect more from overdraft services than they make in profits, he said.

“Will they be able to replace it with another fee?” Mr. Moebs said. “Not immediately and not soon enough.” They will certainly try. For instance, some banks have said they might slap a monthly fee of between $10 to $20 on every free checking account. At the moment, people who pay overdraft fees help subsidize the free accounts of those who do not.

In all, $27 billion in fee income flows from covering overdrafts from debit card purchases, ATM transactions, checks and automatic payments for bills like utilities; an additional $11.5 billion arrives from bounced checks and other instances in which banks refuse to pay overdrafts, Mr. Moebs said.

Advocacy groups say banks are making a fortune because consumers are unaware of the exorbitant costs of overdraft services. And banks, they argue, have an incentive to keep it that way.

Rory Foster, a former branch manager in Illinois, said that Wells Fargo based its compensation for managers in part on overall branch profitability. Fee income, including that from overdrafts, is part of the calculation. A spokeswoman for Wells Fargo, Richele J. Messick, said the bank did not tie branch manager pay directly to fee collection.

Much of the information in this blog comes from an article in the New York Times, where you can get further information on this topic.

Loan Resolution Corp. chief operating officer Travis Olsen said one of the top 10 servicers has hired his firm to manage the short sale process. “We will take their borrowers who have been denied a home retention plan and hand-hold them during the rest of the process,” he said. The COO also noted that his Scottsdale, Ariz.-based pre-foreclosure asset-management company has received requests for bids from several top-five servicers.

Treasury is expected to provide incentives for servicers to conduct short sales and share some of the costs of paying off second lien holders. “The final details of the [short sale] program are being finalized, and will be announced as soon as completed,” HUD assistant secretary David Stevens told a congressional panel on Wednesday (Sept. 9).

In a short sale, the lender agrees to accept a loss on the sale of the property and forgive the remaining balance on the mortgage. If a short sale doesn’t work, the next stop is foreclosure. It usually takes LRC a couple of days or weeks to complete a short sale after the buyer makes an offer, while the timeline for servicers can be 60-120 days. “We can sometimes approve short sales the same day the offer is received,” Mr. Olsen said.

Although reverse mortgages have been available in Texas for more than 10 years, only about 7,000 were taken out in 2008. However, that number is increasing as older baby boomers and other seniors discover this way to free up their home equity to serve present or future cash needs.

The homeowner continues to live in the home, pay property taxes, and pay homeowner’s insurance. But the reverse mortgage lender will give the homeowner the equity and pay off any existing mortgage. The new lender will have a first lien on the property.

Reverse mortgages can take several forms — a lump sum, a monthly payment, a combination of both, or a line of credit. The loans are not suitable for everyone, and to make it work, seniors should have at least 50% equity in their homes.

The economic stimulus package passed in January 2009 increased the cap on reverse mortgages to $625,500, but that limit is in effect only until the end of 2009, when Congress will reconsider what the cap will be. The stimulus package also reduced the origination fee to 2% on the initial $200,000 of the home’s value and 1% on the rest, up to a cap of $6,000. But even with that reduction, there are significant costs to obtaining a reverse mortgage, including origination fees, title costs, appraisal fees, and all the normal closing costs of a regular mortgage.

Several reputable organizations offer counseling and information about reverse mortgages, including the AARP and the National Reverse Mortgage Lenders Association.