FTC Issues Report on Social Security Numbers and Identity Theft
Published: December 29, 2008
The commission recommends adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers.

The Federal Trade Commission (FTC) issued a report on Dec. 17 recommending five measures to help prevent Social Security numbers (SSNs) from being used for identity theft. Principal among the report's recommendations is that Congress consider taking action to strengthen the procedures that private-sector organizations use to authenticate their customers' identities.

The FTC report states that adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers would make it harder for identity thieves to use SSNs and other stolen information to consummate their fraud.

“The first step in minimizing the role of SSNs in identity theft is to limit the demand for SSNs by making it more difficult for thieves to use them to open new accounts, access existing accounts, or obtain other benefits or services,” the FTC report states.

Currently, the only private-sector organizations subject to nationwide authentication standards are financial institutions regulated by the federal banking agencies. The FTC's report recommends that Congress consider establishing similar standards to cover all private-sector entities that maintain consumer accounts. Such standards would require organizations to adopt reasonable procedures for authenticating customers, but would also allow them to adopt a program that is compatible with their size and the nature of their business.

The FTC report also recommends that steps be taken to reduce the unnecessary display and transmission of SSNs, but noted that such restrictions must be approached carefully. A number of important functions in the U.S. economy depend on use of and access to SSNs, and the report concluded that overly restrictive attempts to limit the availability of SSNs could unintentionally curtail those functions. Finally, the report recommends steps to improve data security, increase outreach to consumers and businesses on the protection of SSNs, and enhance coordination and information sharing among organizations that routinely use SSNs.

The report was developed pursuant to a recommendation of the President's Identity Theft Task Force, which was established in May 2006 to develop a coordinated plan to prevent identity theft, prosecute identity thieves, and help victims recover from the crime. The report is based on extensive fact finding by the FTC and other federal agencies, including public comments and a workshop the FTC conducted on Dec. 10-11, 2007.

The task force agencies have undertaken a series of measures to curtail the use of SSNs by federal agencies as well. Information on those efforts can be found in the President's Identity Theft Task Force Report, which summarizes the steps taken to implement the Task Force recommendations.

This article is provided as a service of ACA International's Legal and Government Affairs Department.

Consumer Confidence Hovers Near Six-Year Low
Published: December 29, 2008
Americans’ confidence in their future personal financial conditions, current conditions and the jobs market continues to erode.

Consumer sentiment plunged to a near all-time low as Americans continued to be bombarded with bleak economic news, according to the most recent results of the Royal Bank of Canada (RBC) Consumer Attitudes and Spending by Household (CASH) Index.

The survey found that while consumer attitudes regarding investing show signs of stabilizing, Americans' confidence in their future personal financial conditions, current conditions and the jobs market continues to erode. As a result, the overall RBC CASH Index stands at 15.3 for December, 19.4 points below November's 34.7 level, and nearly in line with the all-time low of 14.6 reached in July 2008.

The RBC Jobs Index dropped more than 8 points in December to 65.6, compared to 74.0 last month. Personal job loss experience has now touched half of all Americans, as 50 percent of consumers report job loss in their immediate circle, compared to 48 percent last month and 43 per cent in October.

Americans' gloomy outlook was underscored by the plunge seen in the RBC Expectations Index, which dropped 44.5 points, to -21.2, the first time the index has been in negative territory since August 2008. The sharp decline in the index is being driven by job worries and a drop in consumers' expectations for their local economy. In December, nearly one-third of consumers (31 percent) said they believe their local economy will be weaker six months from now, up from 24 percent last month.

The RBC Current Conditions Index dropped to an all-time low in December and currently stands at 16.5, compared to 25.6 last month. Consumers' worries over the current state of their local economy fed the decline in the index, as more than half of all Americans (53 percent) rate their local economy as weak to very weak, up from 46 percent last month. Ratings of current personal finances also declined, with 36 percent of Americans rating their current financial situation as weak, compared to 33 percent in November.

Americans' overall opinions regarding investing remained relatively stable this month although at the lowest level ever. The RBC Investment Index, which was at 34.8 in November, currently stands at 31.0, a new low since the index was created in 2002. Americans continue to be cautious about making major purchases and two-thirds of Americans (65 percent) now believe the next 30 days will be a bad time to invest in the stock market, versus 62 percent last month.

View the entire RBC CASH Index report.

This article is provided as a service of ACA's Creditors International Division.

Bankruptcy Filings Increase 34 Percent
Published: December 29, 2008
Business filings during the third quarter of 2008 eclipsed the number of filings during the entire previous year.

The 292,291 total U.S. bankruptcies filed during the third quarter of 2008 (July 1 – Sept. 30) represented a 34 percent increase over the 218,909 cases filed over the same period in 2007, according to data released by the Administrative Office of the U.S. Courts. Total filings for the first nine months of 2008 (Jan. 1 – Sept. 30) were up 35 percent to 841,496, compared to the 622,999 filings during the same period in 2007.

“The dramatic spike in both personal and business bankruptcies reflects an economy in distress, with worried consumers over-extended and unable to supply the spending typically needed to keep the national economy going,” said American Bankruptcy Institute Executive Director Samuel J. Gerdano.

The 29,960 business bankruptcies recorded during the first three quarters of 2008 (Jan. 1 – Sept. 30) have eclipsed the full year 2007 (Jan. 1- Dec. 31) business filing total of 28,137. Business filings represented the sharpest increase during the three-month period ending Sept. 30, 2008, with 11,504 filings, up 61 percent over the 7,167 business filings in 2007. Chapter 11 business filings spiked to 2,485 during the third quarter of 2008, an increase of 76 percent over the 1,410 filings during the similar period in 2007. Chapter 7 business filings also increased to 7,927 during the three-month period ending Sept. 30, 2008, representing a 65 percent increase over the 4,816 filings during the similar period in 2007.

Consumer filings totaled 280,787 during the third quarter of 2008 (July 1-Sept. 30), representing a 33 percent increase over the 211,742 filed during the same period of 2007. Consumer chapter 7 filings during the 2008 third quarter totaled 187,227, an increase of 47 percent over the 2007 third quarter total of 127,192. Chapter 13 consumer filings also increased during the three-month period ending Sept. 30, 2008, with the 93,333 filings, representing an 11 percent increase over the 84,376 filings during the same period in 2007.

The 1,042,993 total filings for the 12-month period ending Sept. 30 were up more than 30 percent from the same period in 2007, which totaled 801,269. The bankruptcy filing rate per thousand U.S. residents totaled 3.38 for all chapters during the 12-month period ending Sept. 30, 2008, as 2.21 Americans per thousand filed for chapter 7 while 1.15 per thousand filed for chapter 13 bankruptcy, all increases from the similar period a year ago. Tennessee was the state with the highest per capita filing rate in the country, with 7.27 residents per thousand filing in all chapters, and also had the highest per capita filing rate for chapter 13 filings at 4.16. The state with the highest per capita filing rate for chapter 7 bankruptcy was Nevada at 4.30 per thousand for the 12-month period ended Sept. 30, 2008.

American Household Debt Falls For First Time Since 1952
Published: December 22, 2008
Debt fell approximately $30 billion in the third quarter to $13.91 trillion.

For the first time in more than 50 years, U.S. household debt fell, according to the Federal Reserve's Dec. 11, 2008, flow of funds report. The report provides statistics for the third quarter of 2008 regarding the flow of debt and credit for different debt forms, including household debt, nonfinancial business debt, state and local government debt, and domestic nonfinancial debt.

According to report, household debt fell .8 percent at a seasonally adjusted annual rate in the third quarter to $13.91 trillion. The decrease constitutes approximately $30 billion dollars. The decrease in household debt shows consumer spending choices have clearly been affected by the struggling economy.

The shift in consumer spending may affect the credit and collection industry's ability to effectively service the U.S. economy. To put the Federal Reserve's report into perspective, remember the credit and collection industry returned approximately $40 billion to the U.S. economy in 2007, according to an independent survey by PricewaterhouseCoopers. Consumer spending habits can significantly affect credit grantors and debt collectors.

The mortgage lending crisis has had a particularly significant effect on household debt numbers. According to a recent CNNMoney.com article, “Debt mainly fell because more than a million Americans have lost their homes to foreclosure since the housing crisis hit in August 2007. When a home is foreclosed upon, the debt is transferred away from the homeowner to the bank. As a result, home mortgage debt sank a whopping 2.4 percent in the quarter."

Nevertheless, businesses offering goods and services to consumers will also likely suffer due to the shift in consumer spending decisions.

“Consumers are going through a major change in their spending and savings habits," former Federal Reserve Governor Lyle Gramley told CNNMoney.com. "Throughout the housing bubble, consumers had a savings rate of zero, relying on the rising price of their homes. Now they're saving money for the future instead of spending it."

This article is provided as a service of ACA International's Legal and Government Affairs Department.

Foreclosures Decreased in November
Published: December 22, 2008
One in every 488 U.S. housing units received a foreclosure filing.

Foreclosure filings—default notices, auction sale notices and bank repossessions—decreased 7 percent in November, according to the RealtyTrac November 2008 U.S. Foreclosure Market Report. Foreclosures were reported on 259,085 U.S. properties during the month, a 7 percent decrease from the previous month but still up 28 percent from November 2007.

The report also shows one in every 488 U.S. housing units received a foreclosure filing in November.

“Foreclosure activity in November hit the lowest level we've seen since June, thanks in part to recently enacted laws that have extended the foreclosure process in some states, along with more aggressive loan modification programs and self-imposed holiday foreclosure moratoriums introduced by some lenders,” said James J. Saccacio, chief executive officer of RealtyTrac. “There are several indications, however, that this lower activity is simply a temporary lull before another foreclosure storm hits in the coming months.

“Delinquencies on loans not yet in the foreclosure process jumped to nearly 7 percent in the third quarter, a record high, according to the Mortgage Bankers Association,” Saccacio continued. ”And more than half of the homeowners who received loan modifications to reduce monthly mortgage payments in the first half of 2008 are already delinquent on their loans again, according to the U.S. Office of Thrift Supervision. Many of these delinquencies could turn into foreclosures next year.”

This article is provided as a service of ACA's Creditors International Division.

Most Americans Don’t Understand Basic Economics
Published: December 11, 2008
New survey shows the majority of consumers can’t correctly answer questions about borrowing, interest rates and even basic math..

The Center for Economic and Entrepreneurial Literacy (CEEL) recently released a new survey underscoring the need for increased education on personal finance and economic issues. The national survey shows an overwhelming number of Americans are unable to answer some of the most basic questions about borrowing, interest rates, terminology and even basic math. More troubling is that many Americans admit to making poor decisions with their own personal finances.

Startling highlights from the survey include:

• 54 percent of respondents could not identify what a subprime mortgage was.
• 56 percent of respondents could not identify FICO score as the most important factor in getting a loan.
• 65 percent of respondents could not identify what would remain if you subtracted 25 percent from 8. One in three respondents could not identify what 1 percent of 50,000 was.
• 75 percent did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances and short-term payday loans.
• Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.
• 35 percent of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.

More details can be found at http://www.econ4u.org.

Many Companies Report Flat or Deteriorating Working Capital
Published: December 11, 2008
Only 37 percent of companies had a working capital improvement program in place during the past five years..

Two-thirds (67 percent) of senior financial executives said their company's working capital is flat or has deteriorated as compared to three years ago, with little relief in sight, according to a global survey by KPMG LLP, the audit, tax and advisory firm.

According to the survey, which polled more than 550 companies across the United States and Europe, 83 percent of executives said managing working capital was the highest or a high priority at their companies, yet only 37 percent of those surveyed had a working capital improvement program in place during the past five years. And of those respondents who did not have a working capital improvement program, 70 percent predict their working capital will stay the same or decrease.

In addition to deficient working capital management programs, an overwhelming number of companies fail to produce reliable cash forecasts. Although almost all respondents (95 percent) report forecasting their cash flows, only 14 percent of respondents report achieving accurate forecasts in the last 12 months.

"In turbulent times, when access to credit is curtailed, effective cash and working capital management practices can be essential to stay competitive or simply afloat," said Brad Hillier, a managing director in KPMG LLP's Advisory Services practice. "There's no doubt that companies have heightened cash management concerns today as compared to just a few months ago. Companies that have a disciplined approach to cash and working capital management are in a better position to take advantage of opportunities available in a tumultuous market–such as making acquisitions or strategic investments."

Addressing forecasting, Hillier noted that accurate forecasting is critical to effectively managing a business in a difficult economy. "Not only is forecasting a necessary tool for improving working capital performance, it is especially critical in times like these for making strategic business decisions," Hillier said. "Many companies do not gather the right data to produce accurate forecasts, nor do they have the right people involved in the process. In addition to improving the forecasting and reporting processes, executives should consider using other best practices, such as targeting metrics and establishing dashboards and controls that offer better visibility into cash performance."

Despite the fact that studies have shown that the best performing businesses tend to be those that link working capital performance to managerial incentives, the KPMG survey found that almost a quarter of respondents (24 percent) had not correlated working capital with compensation.

Two-Thirds of Companies Plan to Scale Back Hiring
Published: December 4, 2008
One-third of companies expect layoffs; numbers show a substantial deterioration in hiring trends..

Two-thirds of U.S. employers and recruiters plan to scale back hiring plans over the next six months, according to a new survey. One-third of companies believe layoffs are likely.

The Dice Holdings survey of more than 1,000 hiring companies and recruiters paints a picture of the job market that has deteriorated since the summer, when the economy was already in turmoil. Companies expecting layoffs represented diverse industries, including gaming and hotels, pharmaceuticals, technology, manufacturing and advertising.

Dice Holdings surveyed an equivalent group in June and their responses were not as severe, with 20 percent expecting layoffs and 52 percent planning to scale back hiring. The shift in outlook underscores how quickly companies are adjusting their plans to the current economy.

“Companies were uncertain about the economy back in June, and were adjusting hiring plans,” said Scot Melland, chairman, president and CEO of Dice Holdings Inc. “Now we're seeing more companies express the need to cut back on hiring or discuss layoffs, preparing for what they see as a difficult year in 2009.”

In fact, 29 percent of respondents indicated hiring reductions would be substantial—double the number expecting that level of cutbacks when surveyed in June. Some 27 percent reported no change to their hiring plans and six percent were unsure.

When will hiring return to normal? A number of respondents (44 percent) say they are not sure and are waiting to see how the economy evolves. Of those willing to take a calendar guess, the largest percentage, 33 percent, are expecting hiring to normalize in the second half of 2009.

Mortgage Attorneys See Surge in Cases
Published: December 4, 2008
Lawsuits and regulatory actions tied to compliance violations totaled 18 in the third quarter, rising from just four cases covered in the prior two quarters combined..

Legal actions tied to mortgage compliance, mortgage fraud and regulatory orders have surged, according to the Third Quarter Mortgage Litigation Report released by MortgageDaily.com. The report, based on active cases covered by MortgageDaily.com, was prepared in conjunction with Weiner Brodsky Sidman Kider PC.

Lawsuits and regulatory actions tied to compliance violations totaled 18 in the third quarter, rising from just three cases covered in the prior quarter. During the first quarter, just one case was tracked. Third-quarter compliance actions were concentrated on RESPA and TILA violations.

Cases involving mortgage fraud totaled 18 during the latest period, up from seven during the second quarter. Only three fraud cases were tracked in the first quarter. Individual criminal cases were generally excluded.

The third quarter report was the first time regulatory actions against financial institutions and mortgage licensees were covered in the report. The number of actions tracked was 126. Much of the activity was tied to bank regulator actions against undercapitalized institutions.

A total of 200 active cases were tracked in the latest report. Many fell into more than one of the 30 categories covered. Excluding regulatory actions, 74 cases were tracked—soaring from 45 in the second quarter and 42 cases in the first quarter. During all of last year, 195 cases were tracked.