While downturns in the economy might force ethical lenders to become more careful about extending lines of credit, the opposite is true of predatory lenders who prey upon consumers in difficult circumstances. It may seem that creditors are not writing new loans or opening new lines of credit for consumers with good credit scores and that is generally true in a poor economy. Creditors would much rather stake a higher risk consumer and charge them considerably higher interest rates. This makes it possible for the creditor to earn a greater return in a shorter period of time regardless of the fact the higher risk consumer will probably end up defaulting somewhere down the line.

Predatory lenders often pile up mountains of consumer debt and then sell that debt to other banks and lenders who have experienced collections departments or who employ in-house collection agencies to go after debtors. If the collection attempts fail, those bad loans can be deducted as operational business losses by the creditor and written off as an ordinary loss less 10%.

Companies like Capital One and HSBC are at the top of the list because they issue high interest rate cards to anyone who will sign on the dotted line and charge them ridiculous interest rates and fees. When the cardholders default on the loans, the issuiing banks who traditionally took the damage as a tax write-off, are now strapped for cash and lack sufficient equity to leverage more consumers into their trap.

If you are wondering how this scenario could possibly be profitable, it is in the short term but in the long run, this strategy is fatalistic, as we are seeing with the recent collapse of the lending industry which has required federal bailouts. This doesn’t mean that these lenders who started the mess with their unethical tactics are going to close up shop and run away, in fact, it means the opposite. Expect more and more high risk lines of credit to be opened by people with poor credit histories and more predatory lenders targeting these high risk consumers because the American taxpayer will foot the bill in the end.

Tagged: poor economy, predatory lender, creditors

Beware of a new scam that is using the iKobo.com’s name to try and get your personal information. iKobo is a “person to person” money transfer agent or payment processor much like Paypal and they do not send unsolicited emails such as this one asking for you to send information back to them.

Here’s a copy of the phishing email…

Our Ref: IKG/NGN/ICO Your Ref: Dear Beneficiary, iKobo is a company that specializes in money transfers. With them, you send money to the any countries with your MasterCard or Visa. The recipient gets your transfer put onto a secured Visa debit card which can be used worldwide at ATM locations for cash withdrawals. This debit card, which is reusable, is shipped to the recipient first. As part of our commitment in bringing our services to the world to the world, I wish to announce to you that your email emerged as one of the luck winners to receive a grant of 2.8 Million US Dollars. This fund would be made available to you through your an iKobo Visa card. Your Personal identification Number is 2222. Name On Card: iKobo Beneficiary iKobo Visa Card Number: 4147202034772580 Expire: 01/2010 Cvv Number: 369 We have concluded plans to deliver this card to your as soon as possible. You are to send us the following details: FULL NAME: DELIVERY ADDRESS: PHONE NUMBER COUNTRY: OCCUPATION: MARITAL STATUS: SEX: AGE: We look forward to hearing from you soon. Copyright © 2001-2008 iKobo, Inc. https://www.ikobo.com

Chances are, if you send the minimal required information, these scammers will have somebody contact you and ask for further information or possibly for you to make a deposit in order to claim the supposed grant of 2.8 Million. This is a classic scam where the con artists will try to win your trust until they can get what they want from you.

There are several clues to this email being a scam located in the email headers. To begin with, the email was relayed through a hosting account on siteground.com for the domain wshf.org using the email client “SquirrelMail/1.4.13″ and email account (nochumson@wshf.org) which is possibly forging the email address of somebody named Howard Nochumson, who is listed as the administrative contact for the “Washington Square Health Foundation”, the legit owner of the wshf.org domain. The IP the email originated from (80.255.62.236) seems to have quite a history of spamming and appears to be some sort of satellite service operated by Intelsat Global Service Corporation (intelsat.com) who has a Washington, DC address in their contact information, yet is listing an Atlanta, Georgia (404) area code in their abuse contact information.

Nowhere is there any record of the email being sent from, nor relayed through iKobo’s mail servers, although it is quite strange this type 419 Phishing scheme is usually routed through Nigeria, it’s odd to see all the corresponding IP’s pointing to US locations only.

Nevertheless, do not ever respond to emails such as this which claim you have won a large sum of money and the decision as based on your email address selection alone. These type of emails are always 100% guaranteed scams.

A wave of panic swept over the financial markets causing the Dow Jones industrials to drop over 700 points during trading amidst fears the financial bailout package would be rejected by the House of Representatives. The vote was at 207 for vs. 226 against when the official voting time for the plan expired, but House leadership hasn’t officially closed the vote.

“Republicans supplied less votes than Democrats had expected, convincing Democrats to vote against the bailout bill so as not to put their seats at risk,” Clusterstock’s John Carney reports. “Both parties are now negotiating vote trading, with the Democrats arguing the Republicans should get at least 9 more of their members to vote ‘Yea,’ bringing the Republican favorable votes up to signficiantly. At issue, many on the Hill believe, how many seats each party should put at risk by voting for this deeply unpopular bailout.”

The weight of failed mortgage debt could be felt as the market plunged to levels not seen since the terrorist attacks of 9/11. Brokers and investment bankers were seen hanging their heads in disbelief as the market continued to experience volatility on a level that was a rougher ride than the most terrifying rollercoaster.

“Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that,” said Chris Johnson president of Johnson Research Group. “This isn’t a market for the timid.”

In tech stock news, both Apple Inc. (APPL) and Google (GOOG) plunged to 52 week lows.

Shares of Apple Inc. plunged to a 52-week low Monday after analysts downgraded the stock because they believe slowing consumer spending will hit its computer business. The stock fell $18.16, or 14 percent, to $110.08 in midday trading. Earlier in the day, the shares touched $105.77, the lowest level since early 2007.

Google’s share price slipped deep into the mud in trading Monday falling below their 52-week low of $406.38 and then below $400 to $398.50. That’s a price they’ve not seen since September of 2006 and its furlongs away from their 52-week high of $747.24 back in 2007.

In brighter news, sales of razor blades, rope and handguns were through the roof as CEO’s and other market makers were seen loading up on these supplies in record numbers.

This year, we’ve seen prominent financials companies such as Lehman Brothers, AIG, Fannie Mae and Freddie Mac on the ropes amidst a slumping economy. Although Senator John McCain seems to believe the economy is in good shape, truth is working middle class Americans have felt the pinch first but now it’s the time for the upper middle class, those making $100,000 per year and upwards to start tightening their belts.

While the average middle class American might be fortunate enough to own a home and a car, it’s the upper middle and upper class Americans who live and die by their stock portfolios. Wall Street’s woes are going to have a direct impact on suburban, upper middle class communities around the US and not just because the proposed $700 billion bailout will result in higher taxes for most Americans. The pain will spread beyond the banks themselves to their back office and IT operations, accountants, lawyers, and other professional service employees who depend on work from finance companies.

BusinessWeek compiled a compelling list of Towns That Will Be Hit Hardest by Financial Crisis. The list is based on the amount of a city or town’s population that is employed in or around the finance and real estate industry.

1. Darien, Conn.
Share population in finance and real estate: 27.23%
Nearest large city: New York
Population: 20,666
Median salary: $168,687

2. Bloomington, Ill.
Share population in finance and real estate: 26.31%
Nearest large city: Chicago
Population: 70,395
Median salary: $54,971

3. Hoboken, N.J.
Share population in finance and real estate: 23.33%
Nearest large city: New York
Population: 40,002
Median salary: $81,356

4. West Des Moines, Iowa
Share population in finance and real estate: 22.15%
Nearest large city: Des Moines
Population: 54,627
Median salary: $61,303

5. Garden City, N.Y.
Share population in finance and real estate: 20.22%
Nearest large city: New York
Population: 21,671
Median salary: $121,831

6. Summit, N.J.
Share population in finance and real estate: 19.74%
Nearest large city: New York
Population: 20,618
Median salary: $111,497

7. Westport, Conn.
Share population in finance and real estate: 19.39%
Nearest large city: New York
Population: 26,822
Median salary: $137,133

8. University Park, Tex.
Share population in finance and real estate: 18.83%
Nearest large city: Dallas
Population: 24,582
Median salary: $110,976

9. Wethersfield, Conn.
Share population in finance and real estate: 18.73%
Nearest large city: Hartford
Population: 26,146
Median salary: $63,359

10. Mountain Brook, Ala.
Share population in finance and real estate: 18.66%
Nearest large city: Birmingham
Population: 20,654
Median salary: $115,148

Jeremy Nowak, currently president of The Reinvestment Fund and a board member of the Philadelphia Federal Reserve, said the cities and towns on the list aren’t necessarily in trouble just yet. Much of it depends on the steadfastness of the local employers and a potential resurgence of businesses. Not all banks are doing badly at this juncture, he said. And the insurance industry is, so far, relatively healthy, despite the myriad of troubles besieging industry giant AIG (American Insurance Group).

“These are places to watch,” Nowak said. “This will be the starting point for future investigation, and not the answer.”

Wouldn’t it be nice if the US Government were there to bail out each and every one of us whenever we’ve made poor financial decisions or mismanged our businesses?

While the average American family may be carrying $10K in credit card debt due to staggering interest rates offered by credit card companies, there is no relief in sight for them. There are also uncountable Americans who have carried auto insurance, homeowners insurance and health insurance for their entire adult lives without a single claim ever made. I’m one.

I’ve been paying outrageous auto insurance rates for the last 20 years without a single incedent, a single claim filed, not even a parking ticket, yet my rates continue to rise year to year, partly attributed to other drivers negligence. It’s the same with my homeowners insurance and my health insurance. God forbid I ever need to use either but still, the homeowners insurance on my home in Florida tripled from appx. $2000 per year in 2003 to over $6000 per year in 2008. With those costs on the rise, it’s ludicrous to me that AIG is having difficulties keeping their head above water.

According to an MSNBC article, the US government has agreed to a bail out of insurer AIG in the amount of $80 billion. Yes, that’s billion, not million…

In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG. The Federal Reserve said in a statement it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy. It also could “lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,” the Fed said. …. The Fed said in return for the loan, the government will receive a 79.9 percent equity stake in AIG.

So what this means is that once again, taxpayers are going to bear the brunt of a loan made to a mis-run corporation. While the business world can be unforgiving to the average business, companies like AIG have a fairy godmother to sprinkle pixie dust on their poor business decisions and make it all go away at the expense of taxpayers.

My question is, “Where were government regulators when AIG was getting this large” and why wasn’t action taken by the National Association of Insurance Commissioners? How does a company such as AIG get so far in debt without notice of AIG’s key executives? While Chairman/CEO, Mr. Robert B. Willumstad has an undisclosed stake in AIG, other key executives account for appx. $20 million in base pay alone before any performance incentives and bonuses. Here’s the to eschelon at AIG and what they are earning while allowing the taxpayer to foot their salaries and incentives:

It just boggles my mind that four men earning over $20 million between them, one at the top with an undisclosed amount, could mismanage a business like AIG and end up crying for a government bailout. Anybody else would be fired, terminated without any severance pay if they fouled up as badly as these “key executives” at AIG did. Granted, the lot of them will probably be on their way out due to the AIG bailout but chances are they will each walk away with millions of dollars in their pockets while the average taxpayer will feel the pinch.

The stock market plummeted today as paniced investors reacted on news of Lehman Brothers Holdings Inc. bankruptcy filing and news of a forced sale of Merrill Lynch to Bank of America for $50 billion in stock. The Dow Jones Industrial Average sank under $11,000 to $10,917, a whalloping 4.42% loss for the major index. Tech stocks on the NASDAQ didn’t fare much better with the index losing 81.36 points or 3.60% of it’s value from the previous trading day. The losses today were the major indexes worst single day point drops since the September 2001 terrorist attacks.

The chilling effect was not felt solely in the US Markets as stocks also posted big losses in markets across much of the world. Investors remain anxious about American International Group Inc. (AIG), which is seeking emergency government funding to bail them out. A potential shutdown of the world’s largest insurance provider would likely have dire implications far beyond the scope of the Lehman Brothers bankruptcy which is the largest US bankruptcy on record.

“I think as we get closer to the close, people continue to get more nervous,” said Ryan Larson, senior equity trader at Voyageur Asset Management, a unit of RBC Dain Rauscher. “People sense that there is still a lot more pain to be felt.”

In other circles, Treasury Secretary Henry Paulson said Monday the American people can remain confident in the “soundness and resilience in the American financial system.”

Despite the bloodletting on Wall Street, Treasury bond prices soared on Monday and Oil prices closed below $100 a barrel, a 7 month low. Crude prices have now essentially given up all of their gains for the year, extending a steep, two-month long slide from record levels above $147 a barrel to today’s current position.

Economists say the Fed is preparing to meet Tuesday to once again cut a key interest rate this week or possibly later this year as a result of the carnage on Wall Street. In an effort to calm investors worries, the hugely unpopular President Bush assured the country his administration is “working to reduce disruptions and minimize the impact of these developments on the broader economy.”