The refund anticipation loan (RAL) is made when a company offers to give a consumer a loan equal to their anticipated tax refund. The idea is the consumer is able to access the funds much faster rather than waiting for a refund. In this particular request by the CFA, the U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC) is asked to enforce banking rules that already prohibit deceptive advertising and false tax return preparation.

The mystery shopping uncovered the fact that some commercial tax preparers are falsifying tax refunds that overstated refunds. The consumer would take out a loan based on the refund amount and then owe penalties and interest on an exaggerated amount in addition to having to pay back more than was actually refunded.

There is a federal 2007 guidance that requires RALs made by banks through commercial tax preparers to meet certain disclosure, capital, and advertising standards. Instead a number of lawsuits already brought by federal regulators in addition to consumer advocate mystery shopping have revealed that banks are not meeting the standards.

The CFA want the OCC to begin stricter enforcement of the banks making the RAL loans. The CFA wants activities stopped that include inflated refunds, false tax return preparations, misleading advertising, false refund claims, and others. In fact the CFA wants RALs barred entirely after the current tax season ends.

Making Refund Anticipation Loans is big business. There are millions of dollars in loans made each tax season and mostly to low income consumers needing the cash. In the opinion of the CFA, the RAL is predatory lending which is the basis for the request they be stopped entirely. Over 8 million taxpayers took out RALs in 2008 and they amounted to $378 million. In addition, there was $68 million in fees paid on these loans.

The CFA wants the largest RAL provider, JP Morgan Chase, to take responsibility for all 13,000 tax preparers giving RAL loans to consumers through the bank. Chase would have to act as the regulator and insure predatory lending is not occurring. This means Chase would have to monitor advertising, tax preparation practices, and perform random testing. Other banks funding RAL loans would have to do the same.

The letter from CFA to OCC was signed by a number of consumer advocate organizations. The CFA is a nonprofit organization and is made up of 280 consumer advocate groups. It claims 50 million memberships which is why it is able to exert its influence while protecting consumer rights. In the opinion of the CFA, the entire business of Refund Anticipation Loans should end.

The company first requires a fee be paid before any assistance is given. In many cases the fee is paid and the consumer gets nothing in return. It is a fraud and a scam that preys on desperate people and the Federal Trade Commission (FTC) wants them to stop. This is yet another scam that has been developed by taking advantage of current market conditions.

The FTC has proposed that mortgage relief companies be barred from charging upfront fees. The government agency wants these businesses to only be allowed to charge a fee after services have been provided. This would put a serious crimp in their ability to operate their frauds.

The condition of the economy has made ripe conditions for scammers and frauds. High unemployment and falling house prices have led to millions of consumers being threatened with the loss of their homes. The fact that consumers working directly with mortgage companies have been largely unsuccessful in getting their mortgages modified has made using an intermediary look beneficial. The mortgage relief company promises help to consumers stuck in a mire of paperwork or unable to even get the mortgage company to work with them.

The market conditions have led to a whole industry that promises consumers assistance with mortgage modifications and relief from foreclosure. Many of these companies simply take the fees paid and never provide any help to the consumer. The FTC has already brought 28 cases against mortgage relief companies for misrepresentation.

The misrepresentation involves implying the mortgage relief company works with the government and the modification programs such as the Making Home Affordable Program. They do not. In reality, it is con artists convincing consumers to give them fees for services they will never receive. It is a predatory practice. The mortgage relief company tells consumers to stop contacting their mortgage company so they don’t find out until it’s too late that they have been scammed.

The new rules would require the mortgage relief companies to reveal they are a for-profit business and what their true affiliations are with the mortgage companies and government agencies. The mortgage relief companies would also have to tell the consumer the full amount that will have to be paid and that there are no guarantees their mortgages will be modified. There are many other requirements also, and they are all designed to force the mortgage relief company to tell the truth about what it is offering.

The new rules can only apply to businesses that fall within the FTC’s jurisdiction. That largely encompasses all private businesses except for banks, thrifts, and federal credit unions. But these businesses are regulated by federal banking commissions and the Federal Reserve so there are still controls over fraudulent practices.

One of the most important steps consumers can take to protect themselves is being alert as to how and where they spend money. Scam artists like to prey on the desperate and like to offer great deals that sound appealing on the surface. For example, some scams involve making job offers. That may sound pretty good until discovering a fee needs to be paid up front.

This is one of the top scams being perpetrated because scammers target people based on their needs many times. The job offer scams are particularly distressing because the criminals tell people desperate for a job they need to pay a fee for a credit check. Instead the consumer’s credit card is charged and there is no job and no credit check.

The Better Business Bureau is warning people to be alert to possible scams. The best way to protect yourself is to be wary of any transaction that requires paying an upfront fee. Most legitimate companies don’t require a fee for things like running credit reports because a consumer is entitled to a free one each year.

Another common scam is one that involves a scam artist offering a way to help a consolidate or lower debt. Once again the scammer requires a fee up front. The criminal collects the fee as cash or as a credit card charge and the scammer is never seen again.

Yet another frequent scam is connected with promises of helping a business or person obtain stimulus funds. Websites offering government grants have always been around but there is a new desperation in the marketplace today due to unemployment and foreclosures.

There are ways to protect yourself from becoming a victim of a scam. For example, you can make sure you read the fine print on anything you are thinking about signing. The old adage is so applicable today. If it sounds too good to be true then it probably is too true.

Consumers can also avoid verbal agreements or arrangements. A legitimate business will put all agreements in writing. If you decide to answer an advertisement then you it is important to make sure you use caution at all times. Ads that promise easy fixes for debt problems or promises ways you can make money quickly and with little effort should be avoided. There are no easy fixes in life unless you win the lottery and the chances of that are quite slim.

Speaking of lotteries…that is yet another scam. Con artists will claim they have a check that belongs to you, and in order to collect it all you need to do is send a “processing fee”. These kinds of scams are often connected with claims the consumer has won a contest or lottery of some kind.

All scams should be reported to the Better Business Bureau and your state’s attorney general’s office. The best defense against consumer scams is education.

Though the fees are high, they do serve a purpose which is why there is a market for them. People with credit problems have trouble getting credit cards and these types of credit card accounts are good for building credit as long as payments are made on time.

With the passage of the new Credit CARD Act, consumers can expect to see some changes to the subprime card account conditions. For examples, interest rates are expected to go up, and in many cases they already have increased. There are also companies issuing these cards that have already changed the interest rates from fixed to variable. In fact, there will probably be all kinds of new fees showing up on all credit cards and not just subprime cards.

The problem is that the fee-harvesting cards already have high rates of interest and fees so increases make the cards even more expensive to hold. The National Foundation for Credit Counseling is not happy with the increasing fees. As a spokesman so aptly point out, people using these cards are often people who have trouble managing their debt. Adding more fees to the cards only makes the situation worse.

There are some requirements of the new law that will benefit the subprime card holders. For example, the fees to obtain the card cannot exceed 25 percent of the approved limit during the first year. There is a catch though. The fees can be assessed at 50 percent of the approved credit limit but must be spread out over at least five billing cycles.

The subprime credit card companies are bracing for a lower level of business in 2010. In fact, First Premier says it expects the number of new monthly accounts to drop from 200,000 to 20,000.

The new law requires credit card companies to be more honest about how they describe their interest rates and fees. Full disclosure in understandable language is required. For example, instead of saying the interest rate is 10% and the fees are $147, the company must say they charge 75 percent interest the first year.

The Credit CARD Act rules are going to probably result in some subprime card companies going out of business. Though the cards do not have the most desirable fees, they do serve a particular market that needs the service. People who use these types of cards often do so just to rebuild credit. Once the credit score is restored, the consumer can drop the card and get another that is not subprime.

During 2010 there will be a lot of changes in the credit card industry. The full impact will not be known for many months.

The Consumers Union has expressed the opinion that the law is an important first step in establishing rules that limit the credit card company’s ability to use tricks to capture consumers in unmanageable debt. The new law addresses billing, disclosure, marketing to college students, and the infamous introductory offers that come in the mail.

There are things the new law does not address though. The credit card companies can still raise interest rates as high as they want and can add new fees too for opening, closing, or making account changes. They can still reduce account credit limits too without giving the card hold any warning.

A plethora of fees that will show up on consumer accounts are expected. In many cases the addition of new fees started months ago. The financial institutions have been crafty too. For example, Fifth Third Bank began charging $19 when a card is not used for 12 months. In other words, it is a fee for not charging. Banks are charging for printed statements, cash advances, minimum account charges, paying online and more.

The Credit CARD law clearly does not limit fees and that means the credit card companies are free to replace as much of the revenue lost through new regulations as desired with new fees. In the opinion of the Center for Responsible Lending the card issuers are able to do pretty much what they want still.

What else does the new law not do? It does not prevent credit card companies from raising interest rates on new purchases. Though interest rates cannot go up on purchases already mad, the new rates can be as high as the company wants to charge. For example, First Premier Bank offered a credit card with a 79.9 percent interest rate. You have to speculate as to the type of customer who would accept such an exorbitant rate.

The law also does not stop the credit card companies from lowering credit card balances which can lower a credit score. The Credit CARD Act does not apply to business credit cards. That means many small businesses will still face the same problems as before when working with the lenders. The law does instruct the Federal Reserve to study how businesses use credit cards.

The next step according to consumer advocates is to extend the law to include limits on fees and interest rates. Though that could happen, it probably will not happen anytime soon. The credit card companies are already expected to lose revenues during a time when the economy is struggling to recover. It is unlikely Congress will address in the near future what the Credit CARD Act does not do.

The underwater home is one in which the market value of the house is less than the mortgage value. That means the homeowner will have problems selling the house because cash would have to be paid for the difference between the current mortgage amount and sales price. These houses are also very difficult to refinance for the same reason. A lot of cash would have to be paid to the mortgage company to bring the mortgage balance below the value of the home.

Typically, the underwater home is at a higher risk of foreclosure too. But no one seems to know exactly what to do about this situation. It is creating a gridlock in the housing industry and dampening requests for new mortgages.

Houses where the homeowner owes more than the house is worth are said to have negative equity. Percentage wise, there are 21.4 percent of single family homes that are underwater as of December 2009. The average value of a home fell to $186,200.

Millions more Americans are expected to go into foreclosure in 2010.There are currently over 1 out of every 1,000 homes in foreclosure or expected to go into foreclosure. Foreclosure resales accounted for 20.3 percent of U.S. home sales in December.

The unprecedented loss of homes by American families is truly a tragedy in the eyes of many. Millions of middle-class families who have paid for years, sometimes decades, on their homes are losing them due to falling market prices and unemployment.

There is a true danger of a double dip in the housing industry and that has many analysts worried. If the bottom has not been reached yet that means more homes will lose value putting homeowners at financial risk. Some families choose to walk away from underwater homes because there is little incentive to pay high mortgages that reflect over-valued home prices. In many cases the homeowner continuing to pay the mortgage is doing so more out of sense of pride than anything else. The fact is that a mortgage is a contract and defaulting on the contract is not an easy decision.

A double dip is defined as two periods during which home prices fall, and the periods are separated by a period of stabilization or even price increases. The good news is that the prices of homes are expected to stabilize this year. Unfortunately that is not soon enough for many.

The Obama administration has been working with banks to make mortgage modifications, secured by the federal government, easier to complete. This is intended to help homeowners avoid foreclosure and help the housing market stabilize. Though the intent is admirable, it is questionable as to whether enough homeowners will qualify for the program to make it effective.

The 30-year fixed rate mortgages are currently being financed at 4.94 percent. This is the lowest rate seen since 18-December-2009. The numbers were released by the Mortgage Bankers Association and are cause for concern. They clearly show consumers are still struggling or unwilling to spend money which is not surprising since the unemployment rate remains at 10 percent nationwide.

The number of applications for new home mortgages and refinanced mortgages declined by 1.2 percent for the week ending 5-February-2010. The interest rates on 30-year fixed mortgages have not fallen below 5 percent since December, and it had been hoped the low interest rates would spur the housing market.

The one glimmer of hope is that this may be a temporary decline and the number of applications will begin to trend upward again. The lowest that mortgage rates have fallen over the last twelve months is to 4.61 percent in March 2009. The prediction is that mortgage rates will increase on 30-year fixed mortgages to 5.5 percent by the middle of this year.

To stimulate the economy, the Federal Reserve has been buying mortgage-backed securities and that program is ending in March. Ending the program probably means that interest rates will begin to rise because the securities purchases worked to lower borrowing costs. The mortgage industry has been in a 3-year slump as housing prices continue to fall.

Despite signs of a recovery, it is clear that the U.S. economy has a long way to go before it will be on even ground again. In the fourth quarter of 2009, one out of every five U.S. homes was underwater. This means the mortgage is more than the market value of the house. There is still ongoing debate between the banks and the government policymakers as to how the banks should remove the inflated assets from the balance sheets.

The number of foreclosures continues to rise too. Consumers are cautioned to be alert to possible scams. There is a dearth of mortgage relief companies offering consumers assistance with getting their mortgages modified. The companies require a fee up front for their services and then fail to deliver help.

The Federal Trade Commission has proposed new rules that would ban these mortgage relief companies from charging up-front fees. They would not be allowed to charge a fee until services were provided as promised.

The total number of mortgage applications for the first week of February was made up of 69.7 percent refinancings with the balance being new mortgage applications. The 15-year mortgage rates are low also at 4.33 percent.

What recovery?

Statistically speaking there is a recovery in progress. Government officials reported that the U.S. economy has grown by 5.7 percent on an annualized basis during the fourth quarter of 2009. That rate more than doubled the third quarter 2009 rate which was at 2.2 percent.

For consumers though the question concerns when the growth in the Gross Domestic Product (GDP) will equate to new job creation. With the U.S. unemployment rate at a staggering 10 percent, millions of Americans are looking for work. In fact, the 10 percent rate does not even include those who are under-employed and those who have quit looking for work all together. Add those people into the equation and unemployment actually approaches 18 percent or higher.

So when will the expanding economy actually benefit consumers? Unfortunately economists believe the high GDP growth rate in the fourth quarter was a perfect storm of one-time factors. These factors include restocking of inventories at the start of a new year and government stimulus spending.

Both of these factors are temporary and when activity ends…so will GDP expansion for the most part. What is not known is how much these two factors contributed to the 5.7 percent.

What this all means for consumers is that new job creation is expected to remain slow. In fact, many economists are predicting the economy will be in an upswing through the middle of the year and then fall back. As long as businesses believe expansion is temporary, they are not going to add employees to their payrolls. It is really as simple as that in terms of jobs.

If consumers don’t find jobs and credit stays tight the economy is not going to rebound. That is also a simple fact. Consumers must spend in order for the economy to improve. Not all economists believe the economy will stall though. Some believe it will continue to grow through 2010 as long as the government does not do anything to throw a monkey wrench into the works.

Currently, interest rates are expected to remain low. And the government has introduced a new program to give businesses a $5,000 tax credit for each new employee added. Small businesses are key to job growth.

Unfortunately, in order to generate the hundreds of thousands of new jobs needed each month, to recover from a loss of over 7 million, the economy needs to grow at a fairly fast pace. But predictions are that GDP expansion will grow at 3 percent or less and that is not enough.

So in 2010 consumers face more of the same – the same being continued high unemployment and tight credit – for at least another 6 months and maybe longer. That is not news the unemployed want to hear, but it is the unvarnished truth.

The statistics the Census Bureau collected are grim. Unemployment rates for families with children have doubled in the last two years. In these same families there were 6 percent of the husbands unemployed and 4 percent of the wives. Among the unmarried parents, the unemployment figures are much worse. There were 16 percent single fathers unemployed and 8 percent single mothers.

Buried in these numbers is the fact that in families with children there were fewer homes where both parents worked and it was because more men were unemployed. In 2009 there were only 59 percent of married couple households where both mother and father worked.

The Census Bureau also looked at figures based on race. Among African-American married couples, there was 12 percent reporting that only the wife was employed. In fact, many stay-at-home moms have had to enter the job market to support the family as male unemployment rose.

The Census Bureau also looked at how many children live in a two parent home. Among Asians, the rate was 85 percent. Among the non-Hispanic whites, the rate was 78 percent. Among the blacks, the rate was 38 percent. Among the Hispanic households the rate was 69 percent.

The recession has led to many households combining resources. Children graduating from college have had to return home upon graduation after being unable to obtain employment. Families are sharing homes and apartments to cut expenses in half. The ways people are surviving through the recession are often innovative too. There are families living in tents and campers in trailer parks after losing homes to foreclosure.

As the economy recovers it is hoped that jobs will become available. But that is not going to happen quickly. The Federal Reserve has issued a report that indicates unemployment will remain high into 2011 and possibly 2012 with high being in the 7 percent to 9 percent range. Unemployment is still at 10 percent, but even that number does not include those who have given up looking for a job after collecting unemployment for months.

The government is planning on funding additional stimulus programs that are intended to create new jobs. For example, funds are being released that are intended to create “green” jobs such as for home weatherproofing. Only 20 percent of stimulus funds were actually committed in 2009 and there will be a much larger percent issued in 2010 creating a bell curve.

Of course, for consumer struggling to endure unemployment the promise of government jobs is ringing somewhat hollow. The recession is now 2 years old and many households are living on unemployment benefits that have been extended several times. What happens when the extensions end? Their message to Washington is really quite simple: we need jobs.

Though the credit card scam targeted a particular group of people, there are lessons for everyone in the story. In this particular situation, union workers were sent offers for credit cards that had low interest rates. To obtain the card a fee had to be paid. The marketing material indicated that bad credit is not a problem. What was hidden in the fine print is where the scam is found.

The first deceptive practice is burying the information that the membership fee does not guarantee the credit card will be approved. The second deception was that approved credit cards could only be used to buy items out of a particular catalogue. The offer was presented as a regular credit card, but it was not.

The Ohio Attorney General Richard Cordray issued a public announcement warning union workers they are being targeted with this particular credit card offer requiring an advance fee. But he also provided valuable information for all consumers concerning how to avoid becoming a victim of a credit card scam.

First he advises people to reconsider accepting any offer that sounds too good to be true. Credit card companies are in business to make money and not to help people. AG Cordray also notes that guarantees a loan will be approved are probably not true. A legitimate financial institution is not going to approve a loan without doing credit checks first. The offers that come in the mail claiming that bad credit is not a problem should be looked at with suspicion.

There are other signs a company many not be legitimate. For example, if you are asked to send a membership fee to a post office box using overnight mail or wire services the chances are the offer is not legitimate. If you have never heard of the company then it’s time to do some research. Sending money to a company guaranteeing a loan or credit card that you are unfamiliar with is a clear path to being scammed.

You can research any company through the Better Business Bureau and the Attorney General’s Office. A legitimate company will have a business license and consumers can verify legitimacy fairly easily. It’s important to review complaints that have been filed against companies also. In the case of the union workers who are being targeted, many have filed complaints with the Attorney General’s office in Ohio so that others are not lured in by the offer.

Finally, you should never provide your personal bank account or other financial information to anyone unless you know for a fact the company is legitimate. Despite all the warnings constantly published, millions of consumers continue to give out their personal financial information to people and businesses they don’t know. To sum all this information up: it’s always better to err on the side of caution.