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Managing Credit Card Debt; Loan Modification Scams; Telemarketing Fraud; Pet Care Costs

Aired July 11, 2009 - 09:30   ET


GERRI WILLIS, CNN NEWS ANCHOR: Hello, I'm Gerri Willis and this is YOUR BOTTOM LINE, the show that saves you money.

Be debt free. We'll tell you how to manage your credit card debt. Fighting fraud, how to spot the warning signs and protect yourself from a scam. And fool proofing your resume, tips and tricks to stand out from the crowd. YOUR BOTTOM LINE starts right now.

We begin with the very latest on the troubles many of us are having when it comes to paying our bills. Delinquencies on consumer debts, that's auto loans, credit cards and home equity loans rose to a record level in the first quarter of 2009, that's up slightly from the previous quarter.

Now that, according to the American Bankers Association, even worse, the percentage of borrowers at least 30 days late paying a balance is the highest since the group began keeping records way back in 1974. And despite government efforts to get banks to lend more, card issuers are lending less. In the first four months of the year banks issued 9.8 million new credit cards, that's nearly a 40 percent drop from the same time last year, according to Equifax Credit Bureau data.

Low risk borrowers can still get credit, but they're getting less than before. The average limit on a new card after rising during the recession, well it slipped this year to $4,594.

Now, managing your credit card debt may seem impossible, but you can do it by creating a plan and sticking to it. Michelle Jones is the senior vice president of counseling at the Consumer Credit Counseling Service of Greater Atlanta.

Michelle, great to see you.

MICHELLE JONES, CONSUMER CREDIT COUNSELING: Thanks, good to see you again, as well.

WILLIS: All right. Let's get right down to it here. How do I handle the credit card debt for the typical credit card holder it's over $10,000 and now the credit card issuers are making it so much harder on me, how do I pay that down?

JONES: Well, there are several things that you can do, Gerri. One is if you have several credit cards, which most Americans do, and you want to start paying those off, the first thing you want to do is look at how you can snowball those payments. By snowball what I mean is, you take any extra money you have available and put it towards one of your credit cards and just make the minimum payment on the other ones. You're going to see...

WILLIS: So, how do I pick that card, though? Because, a lot of people say you pick the card with the highest interest rate, but you actually have different advice, here.

JONES: You know, that is one reasonable way to pay down your debt, to look at the one with the highest interest rate. But, another thing that some people would prefer to do is start making payments on the lowest balance cards first. And the reason for that is that you get a real psychological lift when you pay off those debts. You can say, OK, I had six credit cards, now I'm down to five. And you can really make fast progress that way. And that's a good way to stay motivated.

WILLIS: Right, that's interesting. There is a great feeling when you get one of those paid off completely, really makes you want to go and pay off the other one.

Let's talk about debt consolidation. A lot of people think about doing this. Is it good news? Is it bad news for people who have a lot of debt?

JONES: You know, it really depends and you want to look at those offers carefully. If you have one credit card with a very high interest rate, it may very well make sense for you to transfer that to a lower rate card. You have to be aware that some credit issuers are charging higher fees now for those balance transfers, so you want to be sure and do the math, because that can take the bite out of it.

WILLIS: Right, I love that. OK, you know, we had credit card reform, remember that, you know, the president signed off on that way back at the end of May and I thought life was going to get better, but clearly the numbers are getting worse. It's obvious people are making mistakes with the credit cards. What are the biggest ones?

JONES: Well, the biggest ones are failing to stay current on your payments. I mean that's when your interest rates can really go up. You can really start to see extra fees. And we've seen some credit card companies that are lowering your available credit balance so that when you start -- you may go over the limit without really realizing it.

WILLIS: Right and that's always a disaster. Let's talk just a little bit here about the idea that credit card debt, guess what, is what they call unsecured debt. That means nobody's coming after your house, nobody's coming after your car if you fail to make a payment. Knowing that, what advice would you give to consumers -- Michelle.

JONES: Well, I would say, absolutely, if you're considering consolidating your debt, the way not to do that is to attach it to your house. So, do not take out a home equity line of credit or something like that where it would attach your credit card debt to your house.

As you said, in this unsecured debt, there's no physical property they can take from you if you get behind on those payments. However, you turn that into a line of credit on your house and you've put your home at risk for credit card debt.

WILLIS: That is great advice, Michelle. Thank you for that.

JONES: You're welcome. Thank you.

WILLIS: One of the few businesses that's flourishing during the recession is the foreclosure rescue industry. Companies charging a fee for preparing loan modification documents say they're out to help consumers save their homes. But housing counselors, they say that's not a promise you can take to the bank.


SIGI ARROYO, HOMEOWNER: We are writing this letter directly to you to explain our family's unfortunate set of circumstances...

WILLIS (voice-over): Sigi Arroyo is asking for a mortgage modification. He's not alone. RealtyTrac predicts four million foreclosure filings this year. Arroyo doesn't want to be one of them.

Enter Chris Mozilo, the brains behind a timely internet start-up in Phoenix called

Yes, that Mozilo. Chris Mozilo is the nephew of Angelo Mozilo of Countrywide, the company that helped trigger the mortgage meltdown that forced millions into foreclosure. This Mozilo says he wants to help victims of that debacle.

CHRIS MOZILO, EMODIFYMYLOAN.COM: It was a terrible business mistake that entire industry made and certainly he was in the center of that being CEO of the largest of the mortgage companies.

WILLIS: His site walks homeowners through the modification process. It charges $97 to do that.

MOZILO: What we're trying to do is put that information and put those tools in the hands of the homeowner, themselves, so they don't have to pay thousands of dollars for a loan modification company.

MARIETTA RODRIGUEZ, NEIGHBORWORKS AMERICA: You do not need to pay for someone to help you facilitate a loan modification or a short sale. There are over 1,700 HUD approved housing counseling agencies...

WILLIS: And yet, loan modification companies are thriving. Even Mozilo agrees that his line of business needs a watchdog.

MOZILO: It is right ripe for fraud. There have been people arrested and taken to jail because they are taking advantage of people.

WILLIS: Arroyo, who found a free counseling service says you don't get what you pay for.

ARROYO: If someone is looking to modify their loan, I strongly recommend them not to pay a single penny.

(END VIDEOTAPE) WILLIS: The Arizona Attorney General's office says it has already received 100 complaints about the so-called foreclosure rescue industry this year and that it's the fastest growing scam in the state. And just last month, New York attorney general, Andrew Cuomo, subpoenaed information from 14 loan modification companies, as part of a nationwide investigation.

The FTC's Bureau of Consumer Protection is out with a new fraud warning video. Listen to what one former telemarketer, himself convicted of fraud, had to say.


UNIDENTIFIED MALE: You never saw me in your life. You saw a commercial on TV, you got on the phone with me, you spoke to me for 10 seconds, I gave you some names to call and I gave you some things to look up. And you called me back three days later and you wrote me a check for $50,000. Does that sound a little screwed up?


WILLIS: Up next, we'll tell you the warning signs and how you can protect yourself from getting ripped off.


WILLIS: Just last week, we learned the story of an 86-year-old woman who lost her life savings to telemarketing fraud. Lois Morrow of Gwinnett County, Georgia was defrauded of about $200,000.


LOIS MORROW, DEFRAUDED OF NEARLY $200,000: They called me and told me I had won certain amount of money and different ways for me to acquire it. I would have to send money. I just kept thinking -- when I talked to people, I believed what people tell me.


WILLIS: So sad. Well Lois, like many victims of fraud said she feels pathetic and embarrassed. But, she is said she wants others to hear her story so they don't get taken advantage of. So, just how does this sort of thing happen and why? Well, according to the FTC, scams and frauds are on the rise due to the troubled economy. Take a listen to their new public service announcement and just how much money one former fraudster used to pull in.


UNIDENTIFIED MALE: I think the catalyst is money. In my best month I made 50,000.

ANNOUNCER: In 2005, Jim was convicted for his role in a business opportunity scam.

UNIDENTIFIED MALE: There was ridiculous money being made. You know, you could take down $20 million in eight months.

ANNOUNCER: He sold the American dream, the dream of being your own boss.

UNIDENTIFIED MALE: It's learning how to listen and manipulate people. Once you understand the dynamics of what you're trying to do, which is separate them from their money, that's it.


WILLIS: So, let's get you armed to protect yourself and avoid these scams. Karen Hobbs is an attorney for the Federal Trade Commission. She's joining us now from Washington.

Karen, I just get angry listening to that. I mean, these are people out to rip you off. With these business opportunity scams, what are the red flags? Because, you know, there are legitimate opportunities out there. How do you find the fake ones?

KAREN HOBBS, FEDERAL TRADE COMMISSION: Look, the tell-tale warning side of a business opportunity fraud is a guaranteed earnings claim or a guaranteed success claim. There are also other signs which is a "money back guarantee." Look, if you fail at a business, no one is going to give you your money back. That's another telltale sign. The other thing that these scammers like to do is make you hurry up with your decision. They don't want you to do your due diligence.

WILLIS: All right, stay at home, you're guaranteed to make money. All that means you're in big trouble if you get involved. And, of course, there are documents that these people should give you if you're signing up. What are those documents and what am I looking for -- Karen.

HOBBS: That's right, for a business opportunity, you're supposed to receive a disclosure form and that disclosure form has a lot of very good information in it, in particular, the history of the principles of the company. They need to tell you if they've ever been sued before, if they've been sued for fraud, in particular by the Federal Trade Commission or other agencies. And they should also give you a list of references that you can call and ask them about their experiences. They also need to give you a very extensive list of prior purchasers.

WILLIS: Well Karen, you talk about people who are references. In this particular fraud, people did get references but they were fake. How far do you go in checking out these references?

HOBBS: Look, you need to go as far as you can. You need to meet people in person. You need to open up their books and take a look and if they are asking you for money up front, you really need to do your homework first.

WILLIS: All right. So I need to see these references, I need to see their results on paper. One of the problems is, is these people try to rush you through the process. If you don't sign up today, Karen, we're going to move on to somebody else. Is that a red flag? HOBBS: That's a huge red flag. If you're going to be investing 10, 15, $20,000 in a business and upwards, you need to take your time and these folks should give you that time. This is a huge investment.

WILLIS: And I should be getting some earnings numbers as well, right? I mean, those documents that are disclosure documents, should show me some real results.

HOBBS: Look, if someone is making an earnings claim, they need to give you documentation that substantiates that earnings claim. If they say you can make $100,000 a year with this business opportunity or I've made $100,000 a year in this business opportunity, they need to give you the proof.

WILLIS: And, of course, this isn't the only kind of fraud out there that people are encountering. There's these phony government grant frauds, I hear about this all the time. You've really got to be careful when picking up the telephone.

HOBBS: Absolutely. If someone is calling you on the phone and they are asking you for money up front for anything, you should be very, very skeptical. Do your due diligence.

WILLIS: Do your due diligence, and be careful. What is it the fellow told us, fast nos and slow yeses.

HOBBS: That's right.

WILLIS: That's the way to vet those projects. Karen Hobbs, thank you so much for your help today.

HOBBS: You're welcome.

WILLIS: As more consumers are falling behind on their bills, the collections industry is trying harder than ever to collect that debt. According to the FTC, more complaints are lodged against the debt collection industry than any other. But you should know, there are strict laws about how debt collectors have to do business.

First off, they have to identify themselves as debt collectors, they can't harass you and they can't talk about your debt to anybody but you or your attorney. You shouldn't be getting phone calls before 8:00 a.m. or after 9:00 p.m. and they can't threaten to sue you if they don't have any intention of doing so or misrepresent the amount of money you owe.

Your resume is your chance to make a great first impression on a potential employer. How to avoid mistakes that could kill your chances of getting a job, next.


WILLIS: As the unemployment rate climbs and companies continue to cut costs, workers are feeling lucky just to have a job, even if it's one they don't like. An Adecco survey found that more than half of workers with a job, well, they're planning to look for a new one as soon as the economy turns around.

And with even unhappy workers staying put the job market is tougher than ever. In May there were nearly six unemployed workers for every available job.

So, if you've been sending out your resume left and right and the offers are few and far between it might not be you, it could be your resume. Our next guest says there are boilerplate resume phrases that can be killing your chances of getting that interview.

Liz Ryan is a workplace expert in Denver.

Liz, I want to talk about some of these phrases that you say are boilerplate. I think they're phrases we've all been using for a long time, like "team player." You name it, I think we use them all. What are those phrases and why shouldn't you use them?

LIZ RYAN, WORKPLACE EXPERT: Well, you know, Gerri, some of them we're so trained to use, we don't think twice about. "Team player" is a great example. "Result oriented professional," "bottom line orientation," "strong work ethic". The trouble with the phrases is that they don't carry weight for us in a job search.

WILLIS: What do you mean? They sound like they describe what I want to be. I want to be a team player, I want to have work ethic, I want prove that to the employer. So, why wouldn't I put it on my resume?

RYAN: Great question. Because they don't prove a thing. Actually, what those boilerplate phrases are, Gerri, are empty boasts. What we should be using that precious real estate on a resume for is to prove that we're a team player, to tell a little story about our work ethic to show that we have a bottom line orientation instead of just claiming that which anybody could put on their resume, and they do.

WILLIS: I think people got in a habit of using these phrases over and over again, and it became a shorthand, if you will. And, of course, now, a lot of people use those phrases because they feel like that's what they expect the employer expects to hear. They're pulling out phrases from ads for these jobs and know their computers looking at the resumes and they want to make sure they're frankly using the right, you know, kind of language so that they'll to be paid attention to.

RYAN: The reason the companies use that corporate speak language is because they've drawn it from hundreds of job descriptions, job ads that they've written before. They don't have a way to ask us about what we've done specifically that gets to the heart of what they're looking for, but we have the benefit of our background and our experience, and we need to use that and bring more of ourselves, concrete, specific accomplishments, into the resume. Kill the boilerplate, it's dead. Right? It doesn't help us.

WILLIS: All right, but that long description, that's going to take me past a single one-page resume which so many people recommend.

RYAN: Oh, you don't need a long description. I say two pages is perfectly fine for a person who's been in the workforce for seven to 10 years. In fact, two pages is standard. But, you don't need a long description. A resume exercise, writing a resume is a wordsmithing exercise and I do it all day long, and I sit on t-h-e-s- a-u-r-u-s dot com, and find stronger words, better words, more human words to describe what we've done.

WILLIS: I got to get you to this, Liz, I mean, I think this is really important. A lot of people out there, they're getting older, they've been in the workplace a long time, they have tons of experience, and because they feel like that, you know, employers are trying to steer away from people in their age group, they're taking out words like "manager," they're taking out words that show they're experience. Is that the right thing to do?

RYAN: It depends. The most important thing, Gerri, is to be relevant to the job description. What people do is they send out the same resume, the same cover letter for every job. That does not help us. We have to really read that job ad and make sure we're speaking of the accomplishments in our background that are the most relevant. If it's a manager job, we'll talk about management. If it's not, maybe we don't need to emphasize the management in our background because that could obviously mark us as overqualified.

WILLIS: All right, Liz, thanks for your help, today, we really appreciate it.

RYAN: Thank you.

WILLIS: We love our pets, but from food to vet bills to doggy day care, the cost of owning one, hey, it really adds up. How to save money and make sure your pets are getting the best care.


WILLIS: As you can see, owning a pet isn't cheap, so if you're trying to cut back on some household expenses, but don't know where to start where wen it comes to your dog or your cat, our next guest is here to help.

Mandy Walker is a senior projects editor at "Consumer Reports" and coming back as well "Tazzie" (ph).

Come here, sweetie..All right, stay. Yes. You're a good doggy. OK. Isn't he a great dog? I love this dog.

OK, well, let's talk about how to save money taking care of "Tazzie." How about food?

AMANDA WALKER, CONSUMER REPORTS: Food, you know, you think the most expensive items, food items out there might be best. But in fact, that's not necessarily the case. You might be paying for some fancy labels or some fancy marketing. Som you want it look for a "complete and balanced" on the label that means it can probably be the pet's sole source of food and then ask your vet what other things to look for, like do they want the first ingredient to be turkey, chicken or beef? What bout wheat gluten? Some say maybe not, so... WILLIS: Is well balanced the phrase to look for?

WALKER: Yes, "complete and balanced" is what you want to look for. Because it probably means it could be the only thing that they eat, if need be.

WILLIS: What about meds? Doggy meds? Can be really expensive.

WALKER: They can be so expensive.

WILLIS: People spend a lot of money keeping their dogs safe.

WALKER: Yeah, absolutely. Well, you want to talk to your vet and find out if there's a human version of whatever the medication is available that you might be able to get at Costco, at your own local pharmacy for less. You want to do some comparison shopping if possible. Also ask if there's a generic available, just like you would for people medication.

WILLIS: All right, well that makes a lot of sense. Do you like doggy insurance? Does that make a lot of sense?

WALKER: We tend not to recommend it. We find that in most cases you're probably going to pay more than it will cover. It's like people insurance, there are co-pays and deductibles and premiums to pay and there are ceilings on the coverages, as well. So, in most cases you probably do well to put money aside yourself for expenses, because they get more expensive as they get older.

WILLIS: All right, so we have food, we have pharma, we have medical insurance for our puppies. What about going on vacation? What's the best way to save money? Do you put your puppy any a kennel?

WALKER: Well, you can certainly do that. The at least expensive way is to do a trade with family or friends, see if they can care for your pet when you go away and then you'll care for theirs, obviously. Also, check with your vet, because a lot of the technicians -- a lot of the technicians will take care of pets and other pets, and then do have some -- for less than you would pay an actual boarding facility.

And then you've got with medical expertise, so it's great if they're on medications or just in case something happens. If you do go to a boarding facility, check it out carefully, go back where "Taz" would stay, make sure it's big enough, make sure there's no odor and that it's very clean.

WILLIS: That makes a great -- yeah, makes a lot of sense.

WALKER: Yeah, you want to check it ou.

WILLIS: And, "Tazzie," of course, she had her own mind, and she went back to her own -- any other tips out there for people who are really trying to save money? Because people spend so much dough on their pets and they want to keep them, they don't want to have to take them to a pound? WALKER: No. It's hards in the tough times. You can save a lot of money buying in bulk. You an buy food in bulk, you can buy supplies like flea medications in bulk. And as far as toys go, less can actually be more. They only need a few toys to play with. You can rotate toys. Keep them out a week, put some away. Then when you bring the others back out a week later, it's all new to them.

WILLIS: All right. Great dog, great interview, great information. Thanks so much for your help today.

WALKER: Sure, my pleasure.

WILLIS: As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week right here on CNN, and you can catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time.

And you can hear much more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi at 1:00 p.m. Eastern