San Diego Law Today

Finally, something that makes sense….

Banks have been making millions of dollars from consumers by simply covering small purchases made with an ATM card when there’s not enough money in the account, then charging big fees for doing so. That is why a little $4 latte can cost you $34 on your bank statement. You charged the $4 when your balance was almost zero, and the bank charged you another $30 to cover the balance.

Come this summer one bank, Bank of America, recently announced that it will no longer cover the price of the purchase if the money is not there. They will simply decline the purchase. Now that makes sense. It is too bad that the bank has to save the customer from themselves, but, in today’s economy, it is necessary.

In the future, I expect this to be a mandated practice for all banks. The only way an overdraft fee can be allowed would be at the election of the customer. I also think that the fees associated with the overdraft protection will be more costly to make up for the lost revenues.

Tags: bank fees, Bankruptcy myths

The State of California has decided to add insult to injury to those who have lost their home through foreclosure or have sold it at a short sale.

The tax break preventing the issuance of a 1099 cancellation of debt is no longer available starting tax year 2009. Previously, for tax year 2007 and 2008, mortgage companies who held second mortgages were not allowed to issue 1099s for cancellation of debt on short sales or foreclosed primary residences. Now they can, do, and will in the future.

As a result, the State of California will be assessing an income tax based on the amount of debt forgiven. A huge tax bill may result, depending on the net loss. Further, the holder of that mortgage can pursue collections of the total amount of outstanding balance. The biggest losers will be homeowners who have lost their residences.

The best way to not only avoid the tax liability but to prevent collections of the deficiency balance is to file a bankruptcy.

Tags: Bankruptcy myths, Foreclosure

The newly enacted credit card reform bill was designed to help consumers better manage their credit card debt, with provisions for less volatile interest rates, more communication and fixed payment policies.

In theory, the changes should help San Diego consumers with credit card debt manage their bills better, but it’s not a bed of roses. Sure, credit card companies have to play by more rules now, but they are still going to find ways to make their money.

Here is how the new way of handling credit card debt will affect you.

• Interest Rates:
  Credit card companies can no longer jack up your interest rate on the existing balance, and they must notify you of an increase in the rate on new purchases 45 days before the rate increase. But they will more than make up for this by increasing the interest rate on new purchases and eliminating fixed-rate credit cards. That way they can vary the interest rate on a balance.

• Fees:
  Companies can no longer charge fees when you go over your limit or when you pay your bill over the phone. But rest assured that they’ll probably find new and more costly fees for services that are currently free.

• Statements:
  The new credit card statements are supposed to be more informative, with information on how long it will take you to pay off the balance, etc. This is likely to be more confusing to most consumers, making it harder to understand the cost of credit.

• Due Dates:
  Your statement must arrive 21 days before the due date, and your due date will be the same every month. If the day falls on a weekend or holiday, it is due the next normal business day.

• Minimum Payments:
  Credit Card Companies are now required to apply any amounts over the minimum payment to the balance with the highest interest rate. If you are just making minimum payments, you never reduce the balance by very much.

• What Stays the Same:
  Credit card companies can still lower your available balance and cancel your card for any reason and without notice.
• And the best advice about your credit card doesn’t change either:
  • Never use your credit cards to finance other debt, such as pay taxes or insurance, and, if you do use your credit cards, try to pay them off each month.
  • Do your best not to use your credit cards for normal living expenses, such as food, gas, etc.
  • If you’re starting to get into trouble with your credit card payments, do not hesitate… consult a bankruptcy professional right away before the situation becomes worse. You can put your house, car and other possessions into danger if you find yourself too far behind on payments.

Tags: Bankruptcy myths, credit cards