Tag Archives: finances

Desperate Needs, Gouging Measures…

IMG_2231When I lived and worked in Zimbabwe, my parents and I lived in different cities, about an eight-hour drive apart. My father, however, was in town at least once a month for meetings and, when he came to town, we would meet for and evening of dinner and catching up. On one such evening, we were sitting in his hotel suite, eating dinner and watching the news. There was a piece on about an Ebola outbreak in the Democratic Republic of Congo. At the time, people were speculating that people living in the area where the outbreak had occurred had come across dead animals in the forests and had eaten them. Handling the dead animals (which had been killed by the Ebola virus) had infected them with the virus. I looked over at my father and said, “Why would they eat a random dead animal they came across in the woods? I mean, wouldn’t they ask themselves what had killed this animal and wouldn’t they be scared of being killed by the same thing?”

My father looked at me and said, “My dear, you can’t judge them. You don’t know what you would do if you were starving? Who knows what you would eat.”

Since, at that moment I was working my way through a three-course dinner, it didn’t seem like the appropriate moment to argue with my father, but I was pretty sure that no kind of hunger would lead me to eat dodgy food. I do know now that I was judging because I am fortunate enough to have many food options.

It turns out that investigators now think that fruit bats, not mysteriously dead animals are to blame for the spread of Ebola, but I thought about this conversation with my father when I read a piece in the New York Times about usury charges being brought against several payday loan companies, their owner and two of his associates. Usury is one of those not often heard words that is at home in the bible or a Shakespeare play, but it basically is illegally lending money at very high interest rates. I first heard analysis of payday loans on the NPR podcast, Planet Money, who, in 2010, discussed payday lenders. The concept of a payday loan is that people take out a small loan that is that is then paid back using the borrower’s next pay check. These loans, however, charge much higher interest rates than banks or credit cards do. The Planet Money episode referred to rates of over 500%. A more recent Planet Money piece spoke of a loan being offered at an annual interest rate of over1,300%. Many people debate payday loans and the people who take them out. Some argue that people who take out these loans are people who are irresponsible with their money and the payday loan rates are so high because the borrowers are risky. Others will talk about how payday lenders target people with low incomes and get them into a cycle where they end up spending years paying high fees and never being able to repay their initial balances.

In the state of New York, all this debate is moot because payday loans are illegal. When announcing the indictments, on 12 August, the Manhattan District Attorney, Cyril Vance, encouraged victims of payday lending schemes to call the Major Economic Crimes hotline. This is important to know, whether you received the loan at a storefront or online, the practice is illegal in New York, seventeen other states and District of Columbia. This is because, when people feel they have few options, people with few scruples like to take advantage of the situation. These are the types of people who offer to lend you $750 for a week, at a cost of $225. To make this point clearer, if you borrowed that $750 for a year and paid this interest on the loan every week, you would pay a total of $11,700 in interest. That is a lot of money to pay for $750 and I think that most people would agree that charging that kind of interest qualifies as usury.

Even if payday loans are legal where you live, the lenders still have to comply with rules that govern their industry. If you believe that you or someone you know is being taken advantage of, with regard to a payday loan, you can either call your local district attorney’s offices or get in touch with the Consumer Financial Protection Bureau (CFPB), which is the federal agency whose mission is to protect consumers of financial products. It is important to know that there are protections in the system and there may be more options than you think, when it comes to finding ways to pay debts or make ends meet and not every option involves interest rates that would make your calculator give you the side-eye. Knowledge is power and sometimes knowledge can also save you money and keep you from having your rights violated.

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A Better Mousetrap

IMG_2078Growing up, Saturday was the day that my mother ran errands and, because she tended to attack several items on her to-do list in one car trip, she tended to drag us along with her. At times errands involved going to the grocery shopping and this invariably meant my mother paid the bill by check. Now, writing out a check takes long enough but my mother never rushed the process, and I mean never. She would write out the check amount in numbers and words, pausing to direct the packer not to mix food types in the same bag. She would sign the check slowly, and beautifully and then, just when you thought she was done, she would balance her checkbook. It did not matter how long the line behind her was, she would take her time and complete her process. It did not matter how much grumbling was going on, she would ignore everyone, as she made sure that her numbers were correct.

Last week, I returned from an amazing trip to Zimbabwe, where I was the maid of honor at my sister’s wedding. I love traveling to Zimbabwe for countless reasons; one of these is seeing the changes to the financial systems that I see every time I go back. My last trip to Zimbabwe was a little over a year ago and I wrote about the process I went through in order to get a prepaid phone line. During this trip, I only had to deal with two people and I did not have to travel from one desk to another in order to get things done. I still had to hand over identification but this time, I could hand over the original and the phone company made a copy for me. The system was more computerized and I only needed to deal with one agent but I left with sufficient paperwork for my transaction. The SIM card for my phone line and airtime both had pre-printed serial numbers and I also received one receipt for my transaction, where I bought a line and airtime.

Just about everywhere I went, I was struck by the technological advancements since my last trip. More and more transactions are becoming completely computerized and the changes give me the opportunity to observe whether the advancements have weakened control systems and whether the designs of the new systems took control systems into account. One place where we saw significant changes was with the highway toll system. Last year, most of the toll stations were merely agents standing at a point in the road, with armed guards to make sure that no one tried to fly through the stations without paying. This year, there were built up with automatic booms that let drivers through, after they had paid. These stations had cameras installed in various places and these cameras transmitted images to a central office, as one of the controls to ensure that all vehicles passing through the stations were charged. Just as had happened the year before, every time we drove through a toll station, we received a receipt for our payment. The additional controls, such as the automatic boom and the cameras, added layers of controls without adding time to the process of going through the tollgates.

The challenge, when it comes to the technological advancements, is to ensure that those using them do not pave their cowpaths. This is a concept very well explained by Tom Hood. There is a big risk of using new technologies to do the same things in the same way; instead of using these technologies reimagine processes. It is very easy to dress up the same old processes in a fancy new exterior and convince yourself that you have created a new process. I shall keep taking notes during my future trips, as technological advancements continue to see whether people are paving cowpaths or creating superhighways.

Thankfully for those standing in line behind her, my mother no longer writes checks when she goes shopping. She has found new ways to keep track of her finances that ensure that her numbers are correct but that take less time than writing a check and balancing her checkbook used to. I even had a paper trail for the exhilarating lion walk that I went on at Antelope Park, a lion conservancy just outside Gweru, in Zimbabwe. I had a receipt for my payment and I also signed an indemnity form to prove that I went willingly, just in case the lions got grumpy, smelt my fear or just wanted to play with me with their massive paws!

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Regular Check-Ups

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Several years ago, I received a phone call from my bank. I was surprised to receive this phone call as I was probably this bank’s least profitable customer. I had recently moved to New York, it was my first bank account there and the account was remarkable only in how low its balances could get, especially just after I paid my rent check. The very nice woman on the line was calling to let me know that the bank believed that they had discovered fraudulent activity in my account. The bank noticed that, at least once a week, between $9.95 and $14.95 was being withdrawn from my account. The withdrawals were regular and, every time it happened, the name of the company making the withdrawal was slightly different from before. The regularity of the withdrawals, along with the amounts and the slight name changes, were all red flags for the bank. I was very grateful that the bank had spotted this and, quite frankly, rather shocked. I had assumed two things – first, that I was too poor to rob and, second, that the small transactions going through my account, on the rare occasions that I actually noticed them, were trips to the pharmacy or a lunch that I had forgotten about. It turned out that I was wrong on both accounts and an unscrupulous party took advantage of the lax attitude I had toward my finances. For over three months, at least once a week, money had trickled out of my account. Luckily for me, the bank helped me trace the amounts and credited my account. It seems that, in more recent times, banks are more likely to allow this kind of fraud to continue. They have decided to earn fees from these transactions instead of alerting their customers of these possible frauds.

After this incident, feeling violated by this invasion of my space (and funds) I became very diligent about checking my money. I had been very lucky. Yes, my money was being taken without my knowledge, but I was able to recover most of the funds and I had the bank looking out for me. Not many are so fortunate these days. It is important, therefore, to take steps to minimize the chances of unauthorized access to your bank account or, at the very least, to be able to quickly spot, stop and dispute transactions that you don’t recognize.

  • Be very careful about who you give your personal and financial information to, especially when this request comes via a cold call. Even if the person on the line sounds official, check the credentials. If need be, hang up and call up the organization that claims to be on the phone, using the contact number that you have in your records. If the person on the phone is a valid representative, they will not mind you checking to make sure things are above-board.
  • Check your bank and credit card balances often – at least once a week, if you can. Just about every bank has online banking facilities available to customers. Here, you can review recent transactions and make sure you know what happened with each one.
  • Be aware of the risks to seniors that you know, be they relatives or friends. Because of programs that tend to affect seniors, such as medicare and social security, they are particular targets for the unscrupulous. Fraudsters will call senior citizens and either cajole or scare them into giving up their information. Check in with those who may be vulnerable, either because of advancing age or lack of computer savvy, and make sure no one is raiding their accounts.
  • Safeguard the physical information you have on your accounts. Keep statements and account numbers in a safe place. The last thing you want is to find out that a guest or someone who has worked in your home, has taken your information and used it to gain access to your money. Don’t leave the temptation out in the open – that is only asking for trouble.
  • Should you come across odd activity in your account, be sure to call your financial institution and look into the matter. Time is of the essence here as, often, after a time, it becomes near impossible to reverse a transaction, even if you can show that it was unauthorized.

Once keeping track of your money becomes a habit, it also becomes a very simple exercise. If you check-in regularly, there are only a few transactions to remember at a time. Also if you check-in regularly, you will also become more familiar with your own spending patterns and be better able to spot irregularities. As a bonus, if you check-in regularly, you may also realize that you have bad spending habits that need some rehabilitation. It doesn’t matter how much or how little money you believe you have, there is always enough for someone to take away from you. All of this monitoring of finances may sound a touch paranoid, but paranoid is often better than broke.

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