Credit card firms hurry to raise rates

November 6th, 2009

From the Boston Globe

By Megan Woolhouse Globe Staff / November 6, 2009

Some top 30% as new rules loom

Credit card companies are rushing to increase interest rates to historic highs of more than 30 percent, cut credit limits, and add new fees, even for customers who pay their bills on time.

Lenders are making the moves in advance of tougher federal regulations for credit cards scheduled to take effect on Feb. 22. The new rules will limit how companies can modify credit card agreements, specifically prohibiting them from retroactively raising interest rates and fees on existing balances.

US Representative Barney Frank, the Massachusetts Democrat who chairs the Financial Services Committee and is a leader in the effort to revamp credit card policies, said banks have “abused’’ the nine-month period granted them to re-tool their practices.

“I didn’t think they would be as blatant as they were about doing this,’’ he said. “There’s no justification for raising rates retroactively. This is really just a way for them to make more money.’’

As a result of ever-escalating rates and fees, cardholders like Carole Hoppe Mezian of Norwood dread the arrival of their monthly statements. Hoppe Mezian carries a $10,000 balance on her Discover card and says she sometimes can’t make payments on time. Since May, her interest rate has ballooned from 14.99 percent to 29.99 percent, and the minimum due on her September bill was $771, mostly in interest and penalties.

“I might have been better off going to the Mafia and getting a loan that way,’’ she said.

Matthew Towson, a Discover spokesman, said the company is willing to work with Hoppe Mezian to help manage her debt.

A study by The Pew Charitable Trusts, an independent nonprofit, found the median interest rate advertised by most credit card companies in July 2009 was 13 to 23 percent higher than rates in December 2008.

To counteract the barrage of hikes, a bill now under consideration in Congress would move up to Dec. 1 enactment of the new rules. The House approved the accelerated plan Wednesday. But the bill’s prospects in the Senate appear dim; many senators say a shortened deadline would cause banks to issue fewer cards, making it more difficult for consumers who most need credit to obtain it.

After years of complaints from consumer advocacy groups about credit companies’ pricing practices, some rules have already been changed. For instance, portions of the new law enacted in August require banks to give customers 45-day notice of any changes in an agreement. Consumers can opt out of an impending increase, keeping their card at the lower interest rate, but only until the card expires. After that, they must apply for a new card. They can also avoid the interest hike by closing the account and arranging to pay off the balance at the lower interest rate.

Ken Clayton, a senior vice president of the American Bankers Association, a trade group, said recent rate increases were not an effort to circumvent the new regulations, but the result of massive losses faced by the credit card industry because of the recession. More than 10 percent of all credit card customers have defaulted on payments this year, he said. “There’s a shared risk here,’’ he said. “Credit card companies are making loans to people every day and the rates people are charged are affected by whether people are paying them back.’’

There are no limits on how much interest a credit card company can charge, and the new law, passed in May, will not change that. Some consumer groups called for a 36 percent cap on credit card rates, but Frank said legislators did not institute a limit because most credit card companies would immediately “go up to that rate.’’

While credit cards are becoming more expensive, interest rates set by the Federal Reserve have been at record lows for a year, allowing banks and credit card issuers to borrow money more cheaply. The prime rate – the amount banks charge their best customers to borrow money – is 3.25 percent. Credit card companies charge far above that because borrowing on a card is considered riskier.

At Bank of America, one of the biggest credit card providers in the country, credit card revenue dropped slightly between 2007 and 2008, from $14 billion to $13.3 billion. The bank received more than $40 billion in federal bailout money.

Lauren Bowne, a staff attorney at Consumers Union, the nonprofit publisher of Consumer Reports, called interest rates of 30 percent and above “astronomical.’’ In the past, lenders have charged up to 30 percent, but typically only to risky customers. But such rates are now being applied to many more consumers, including those with pristine credit.

In addition to upping interest rates, banks are using fees to generate revenue, Bowne said, noting that some consumers have even been assessed fees for not using their cards often enough.

Betty Reiss, a Bank of America Corp. spokeswoman, said it implemented a rate increase after the new legislation was passed, but agreed not to raise rates again unless a customer is late two or more times in a paying a bill.

The upward trend in rates and fees has led to calls for even more regulation from consumer groups like the Industrial Areas Foundation. Spokesman Arnie Graf said many major banks are recouping lost profits at consumers’ expense. Many of the nation’s biggest credit card issuers are banks that benefited from billions in taxpayer money to help them recover from their own bad investments, he said.

“These are essentially dead banks borrowing from the government at nearly zero percent and loaning it out at 29.99 percent,’’ Graf said. “Hell, anyone can do that.’’

Megan Woolhouse can be reached at mwoolhouse@globe.com.

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Debt-Relief Firms Attract Complaints

October 18th, 2009

From The Wall Street Journal

By ELEANOR LAISE

Wally Bowman, a part-time security guard in Miamisburg, Ohio, had roughly $15,000 in credit-card debt when he signed up with a “debt settlement” firm last year. The company said it could resolve his debts for far less than the amount he owed and advised the 63-year-old to stop making payments to his creditors, according to Mr. Bowman.

Mr. Bowman paid hundreds of dollars in up-front fees and made regular monthly payments of $249 to Hess Kennedy, but the Coral Springs, Fla., firm never settled any of his debts, he says. By the time he dropped out of the program this summer, Mr. Bowman says, his debt had ballooned to about $20,000, due to interest and late fees, and creditors were threatening to garnish his wages. Finally, he filed for bankruptcy last month.

“I wish I had done that to begin with,” Mr. Bowman says. “I’d have been much better off.”

As the economy weakens, a growing number of consumers are paying big money for services from debt-settlement companies that purport to help them settle their debts for a fraction of what they owe. But as Mr. Bowman’s experience shows, customers can end up wishing they hadn’t sought such help.

At financial-services Web site Credit.com, the number of complaints about debt-settlement companies received so far this year is already double the number received in all of 2007, says John Ulzheimer, the site’s president of consumer education. The Federal Trade Commission, which has also seen an increase in consumer complaints, was concerned enough about the issue that it held a workshop late last month to examine debt-settlement business practices.

Dealing With Debt

Some tips for consumers who are buried in bills:

  • Consumers who can’t pay their bills on time should contact creditors immediately to try to work out a payment plan.
  • If you can’t manage your debt on your own, consider working with a nonprofit credit-counseling organization.
  • But beware: Some nonprofits have been linked to for-profit companies and offer little educational value to consumers.

The Florida attorney general’s office has received more than 1,400 complaints about debt-settlement and other debt-relief companies this year through early October, compared with fewer than 890 for all of last year, and Attorney General Bill McCollum plans a push for licensing requirements and to strengthen other rules governing the industry.

Some major creditors, including American Express Co., say they won’t even work with debt-settlement companies, though the companies dispute this. “There’s no service or benefit that a debt-settlement company can offer our card members that they don’t receive from working with us directly,” says Lisa Gonzalez, a spokeswoman for American Express.

Regulators, consumer advocates and industry groups are taking a closer look at debt-settlement firms. But even some nonprofit organizations that offer alternatives, such as credit counseling and education, have come under scrutiny, with the Internal Revenue Service examining their ties to for-profit outfits.

Hess Kennedy, the firm hired by Mr. Bowman, was sued by the Florida attorney general earlier this year for allegedly violating the state’s laws on unfair and deceptive trade practices. The firm was placed in receivership in July, and on Monday, a Florida Circuit Court judge entered an order to wind down the firm and approved a process for consumers to apply to get their money back. The firm referred questions to an attorney, who didn’t respond to requests for comment.

Hefty Up-Front Fees

Debt-settlement companies generally advise clients to make monthly payments into a special account instead of paying creditors. The firm promises to use the accumulated cash to settle debts for pennies on the dollar. They often charge hefty up-front fees, and their tactics can trash customers’ credit scores, boost their tax bills and leave them in greater debt than when they started.

Rules governing these firms vary by state, but a number of states have recently passed laws allowing for-profit credit-counseling and debt-settlement firms to do business within their borders. Membership in the Association of Settlement Companies, a debt-settlement industry trade group, has roughly doubled in the past year, to more than 150.

Because the industry has so many new people, “there’s a lot of misunderstanding about how a company should be run, what are good standards and business practices,” says Wesley Young, an executive board member at the trade group. In recent months the association has begun monitoring its members’ sales practices and Web sites to be sure they meet the group’s standards, he says. It hasn’t yet taken any action.

Regulators are concerned about misleading debt-settlement sales practices. In a string of recent cases against such companies, the FTC alleged that firms misled consumers about what services they could deliver, how long it would take and how much it would cost, says Alice Hrdy, an assistant director of the FTC’s division of financial practices. And though many debt-settlement companies are set up to look like legal services, “usually it’s a sham,” says Norman Googel, an assistant attorney general in West Virginia. Consumers often don’t receive any legitimate legal services, “and the lawyer is like the Wizard of Oz back there behind the curtain,” Mr. Googel says.

The high fees charged by debt-settlement firms can prolong the process of paying off debts. The companies often charge an up-front fee of 10% or 15% of the total amount owed. They may also charge monthly fees of about $50, and a back-end fee of about 20% or 30% of the amount “saved” for clients in a settlement.

Credit-Card Lawsuits

Meanwhile, creditors aren’t getting any payment, so interest and late fees accrue, debt rises and clients get a steady stream of calls from creditors and collection agencies. They may even be sued and have their wages garnished. Lawsuits against credit-card holders are becoming more common as card issuers increasingly sell delinquent accounts to debt purchasers, regulators say.

Debt-settlement companies often refuse refund requests, says West Virginia’s Mr. Googel. And though regulators may try to get money returned to customers, these companies are generally not well-capitalized, “and often the consumer harm vastly outstrips whatever assets the company would have,” says the FTC’s Ms. Hrdy.

Consumers in debt-settlement plans often see their credit scores tank. While they’re not making payments, of course, their scores will drop. But settling a debt for less than the amount owed is also “a serious negative on your credit score” and stays on your credit report for seven years, says Barry Paperno, consumer operations manager at Fair Isaac Corp., which developed the widely used FICO credit score. Debt settlement can also boost consumers’ tax bills, since they generally must pay income tax on the amount of debt forgiven in a settlement.

Even when companies deliver, many customers drop out of the programs early. David Gillson of Sherwood, Ark., a 38-year-old quality-control manager at a construction firm, signed up with debt-settlement firm Elite Financial Solutions of Fort Lauderdale, Fla., in 2006. He owed more than $71,000 in seven different credit-card accounts. Elite helped him reach two settlements within the first year or so.

‘Just Horrendous’

But the collection-agency calls were “just horrendous,” Mr. Gillson says, and his credit score was plummeting, two creditors sued him, and his wages were garnished. Given his reduced wages, he couldn’t afford to put anything in the debt-settlement account, and he dropped out of the program in June.

Elite’s contracts “clearly explain all the negatives, such as garnishment, that interest rates will accrue and that late fees will apply,” says a supervisor at the firm.

Consumers who can’t work out debt problems on their own do have alternatives. Many nonprofit credit-counseling organizations offer “debt-management plans,” in which consumers steadily pay the full balance owed but often get concessions from creditors such as lower interest charges and waived fees. Such nonprofit programs come with some consumer protections. For example, they must provide services tailored to the needs of individual clients and charge reasonable fees.

But even here, consumers must tread carefully. The IRS began examining nonprofit credit-counseling organizations several years ago and found that many were funneling fees to for-profit companies, or doing little or nothing to educate consumers. In its initial examination, the IRS looked at 63 organizations, and in 49 of those cases either the IRS issued proposed or final revocations of nonprofit status, or the organization went out of business or became a for-profit firm on its own.

Write to Eleanor Laise at eleanor.laise@wsj.com

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Bay State bankruptcy filings jump

October 15th, 2009

From the Boston Herald

By Thomas Grillo
Thursday, October 15, 2009

The number of Bay State residents filing for Chapter 7 bankruptcy protection increased 35 percent in the first three quarters of 2009 compared to a year ago, according to a report released this morning by The Warren Group.

“A growing number of people are being forced into bankruptcy because job losses and salary cuts have made it difficult for them to pay their bills. Some have relied on credit cards to pay for even basic living expenses and now are seeking protection under bankruptcy law as a last resort,” said Timothy Warren, CEO of The Warren Group in a statement.

Chapter 7 bankruptcy filing is the most common option for individuals who are seeking relief from their debts and accounted for 82 percent of bankruptcy filings tracked by The Warren Group in Massachusetts during the third quarter of 2009. People seeking Chapter 7 bankruptcy protection can eliminate most debt after non-exempt assets are used to pay off creditors.

There were 11,872 Chapter 7 bankruptcy filings in Massachusetts from January through September, up from 8,777 during the same months in 2008 and almost double the 6,229 filings during the same period in 2007.

Third quarter Chapter 7 filings totaled 4,098, a 34 percent increase from 3,055 in the third quarter of 2008, but 8.7 percent lower than the second quarter’s 4,489 filings.

While there has been a significant increase in the number of Chapter 7 bankruptcy filings this year compared to the prior three years, the number of filings is below the level in the first three quarters of 2005.

Filings soared in 2005 shortly before a federal law went into effect that made it tougher and more expensive for consumers to file for Chapter 7 bankruptcy protection. The law requires debtors to file under Chapter 13 if their income exceeds the median income in their state. While Chapter 7 essentially wipes away debt, Chapter 13 requires debtors to arrange for a three- or five-year debt repayment plan.

Chapter 13 bankruptcy filings in Massachusetts dropped 23 percent to 2,463 in the first three quarters of 2009 from 3,216 in the first three quarters of 2008, The Warren Group reported. There were 869 Chapter 13 filings in the third quarter, down 7.2 percent from 936 in the third quarter of 2008 and 5.4 percent fewer than the 919 filings in the second quarter of 2009.

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Credit Scores: Can You Get Them Free?

October 8th, 2009

From the Wall Street Journal

By JANE J. KIM

If you are curious about your credit scores, you may have tried one of the plethora of Web sites and services that offer some free credit information, then lure you into paying for your scores, usually as part of a credit-monitoring package.

Consumers are entitled by law to a free credit report—which is simply a record of your borrowing and repayment history—but the numerical scores derived from these reports will cost you, in part because credit-reporting agencies aren’t required by law to provide them for free to consumers along with the reports.

Now, a handful of companies are launching services that give consumers at least a glimpse at their credit scores free of charge. The sites—Credit.com Inc., Credit Karma Inc.’s CreditKarma.com and Quizzle.com—also offer a window into the key factors that go into calculating your score, what you can do to improve them and how your credit stacks up against others. Last week, for example, Credit.com launched a free Credit Report Card that shows consumers how they’re likely to rate across five credit-scoring models.

All three sites, which have ties to the credit industry, aim to make money through advertising or fees if users sign up for products their partners offer on the site, such as credit-monitoring services, credit cards or mortgages.

As banks clamp down on lending, it’s become more critical than ever to know your credit score. Financial institutions use them to determine the granting and pricing of everything from credit and insurance, to cellphone usage and, in some cases, employment.

For years, the best way consumers could get their scores was to buy them from one of the three major credit-reporting bureaus—Equifax Inc., Experian Group Ltd. and TransUnion LLC—or from Fair Isaac Corp., the maker of the widely used FICO credit score. Consumers can also get a free credit report at AnnualCreditReport.com once every 12 months from each of the three bureaus, but the site, which was created by the bureaus, sells scores separately, usually for about $8 each.

The reports can span pages of detailed account history, and can be hard for most people to decipher. And even if you pay for a numerical score—which financial-services companies use as a quick way to assess your creditworthiness—the information can be confusing.

There is variation among credit scores, depending on which scoring model is being used and which credit bureau the data are pulled from. Lenders can choose from FICO, the VantageScore—a score developed by the three credit bureaus—or from any one of the credit bureaus’ own scores. Adding to the confusion, lenders can choose from multiple versions of the same scoring model. FICO, for example, recently rolled out its latest version, FICO 08.

To gauge how easy-to-use and accurate the three new sites are, we pulled our credit scores—which may or may not be the actual scores lenders see—and compared the data with information in the credit reports and scores we obtained from AnnualCreditReport.com. (All three sites do a “soft pull” on your credit file, which they pay for, and which doesn’t hurt your score, according to the companies. In other cases, applying for new credit is considered a “hard” query, and can hurt your credit score.)

Getting the scores from the sites was relatively quick and painless. To get started, you have to set up an account and answer several “identity verification” questions. While you don’t have to sign up for any services or provide a credit-card number, you do have to provide your Social Security number at Credit.com and CreditKarma.com.

Quizzle.com, by contrast, uses information you provide when setting up your account to locate your credit report at Experian. Then it tries to verify your identity using information in your credit report. But if those questions are based on incorrect information—or if you can’t remember the answer—you might be prompted to enter your Social Security number.

Encrypted Data

All the sites say they encrypt any data that are stored in their files. CreditKarma, for example, strips out any personal account information from users’ data and immediately deletes the Social Security number once it is used to pull a credit report.

Overall, the information the free sites provided matched closely with what was in our actual credit reports. But the credit scores varied from the ones we bought through AnnualCreditReport.com, since they relied on different credit-scoring models. Despite the variations, the free scores were in the same credit tier as the scores we bought, giving us a good sense for how lenders would view our credit.

All the free sites provided a top-line summary of our credit by highlighting the pieces of data that they thought we were most likely to be interested in, such as how many open and closed accounts we have, our total balances and whether there were any red flags that we should be concerned about.

Credit.com’s Credit Report Card boiled down our 20-plus-page TransUnion credit report into an easy-to-digest format. The report graded us on a scale of A to F across key factors that went into calculating our score, and showed us how important each factor was to our score. While we scored a C-minus on “inquiries” (in part because we recently refinanced our mortgage), that category made up only 10% of our score. By contrast, we scored an A-plus on our payment history, which made up 35% of our score.

Credit.com doesn’t yet provide an exact credit score, but estimates where your score will likely fall across the credit-risk spectrum as defined by five major credit-scoring models, including FICO, VantageScore and other consumer credit scores. The site allows users to get updated scores once a month for free.

Report Cards

CreditKarma.com, which also relies on TransUnion data, gives you one of the same credit scores that TransUnion sells directly to consumers. In addition, it provides a report card grading consumers from A to F across seven key components affecting their scores and ranks the importance of each factor on a scale of high, medium or low. Users can also play around with a credit-simulator tool to see how their scores might change if, say, they applied for a new credit card with a $10,000 credit limit, or foreclosed on their home. The site allows you to check your score every day.

One thing Quizzle.com offers that the others don’t is a free credit report—and the ability to dispute errors on your Experian credit report on the site. In addition to the free score and report, Quizzle.com also offers a number of mortgage-related tools, so you can see how much the value of your house has changed. The site limits users to a new score and report every six months.

All of the sites have been retooling their models to make their scores more consistent with the scores most lenders are likely to use. On Wednesday, for example, Quizzle.com—which is owned by Rock Holdings Inc. and is in the same family of companies as mortgage lender Quicken Loans—replaced the Experian score it had previously offered. The new score is still based on users’ Experian credit files, but is designed to more closely track FICO scores, which range from 300 to 850, the higher the better.

The free sites also offered some helpful tips on how to improve our credit. To keep our overall debt usage low, for example, Credit.com warned us not to close any of our credit-card accounts, since that could cause our “utilization rate”—the amount of available credit that we’re using—to go up and our credit score to go down.

Instead, it advised us to cut up the cards to prevent them from being used fraudulently. Quizzle.com also launched on Wednesday a fee-based service ($75 for four months) that gives users personalized, specific advice on what they can do to improve their scores.

None of the free sites share or sell your personal information with other third parties, although they do aggregate users’ demographic data to help other people see how their credit compares to others.

Pitching Products

There is some product pitching on the new Web sites. Given its ties to the mortgage-lending industry, Quizzle.com’s advice seemed more tilted toward mortgage-related solutions. The site recommended that we consolidate revolving credit-card debt into a mortgage as a way to improve our credit score.

CreditKarma.com pitched us various offers based on our credit profile, while Credit.com offered us the chance to buy our credit report and credit-monitoring services from its TransUnion partner.

We still aren’t convinced these sites are an adequate substitute for getting your own credit report. The actual reports from AnnualCreditReport.com provided many more specifics about our payment history, previous employers and addresses. They also included account numbers—making it easier in some cases to track down certain accounts—and showed us which lenders had recently inquired about our credit.

Write to Jane J. Kim at jane.kim@wsj.com

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IRS to Mine Home Loan Deduction Data to Snag Tax Cheats

September 22nd, 2009

From the Walls Street Journal

Eva Rosenberg | MarketWatch

The mortgage-interest deduction claimed by millions of homeowners every year may prove to be a useful window for the IRS to peek into taxpayers’ income situation — and potentially reap millions of dollars in unpaid taxes.

First, some history. Each year, your lender sends you a Form 1098, known as the mortgage-interest statement. The IRS gets a copy, too. It shows the total interest you paid as part of your monthly mortgage payment.

Historically, the IRS computers have been matching the totals on those Forms 1098 to ensure that you didn’t deduct more mortgage-interest expense than the lender reported. When deductions are higher than the total amounts on all Forms 1098 with your Social Security number and that of your spouse, the IRS sends you a letter. They ask you to identify the lender whose interest you are deducting.

The goal is twofold: To ensure you don’t deduct interest you didn’t pay, and to ensure that the person you paid reported the interest income. This makes perfect sense.

New use for 1098s

But there’s an interesting way to use those 1098 forms to catch non-filers and tax cheats, according to a new report by J. Russell George, the Treasury Inspector General for Taxpayer Administration, also known as TIGTA.

According to the TIGTA report, the IRS had their computer match up filed tax returns with Form 1098s from 2004 and 2005 showing residential mortgage interest paid by individuals. There were hundreds of thousands of 1098s that had no corresponding tax return on file. After some filtering, IRS sent notices to 227,019 non-filers asking that they either file their tax returns or explain why they do not need to file. (Many people were living on savings or tax-free income.)

As a result, nearly 70,000 new tax returns were filed for those two years by the non-filers. For 2005, about 28,000 of those tax returns generated $276 million in assessments. TIGTA estimates that in a given year, this type of audit system will generate between $352 million and $900 million per year in additional tax assessments.

Of course, simply assessing taxes does not guarantee they can be collected. Remember, many people who earned a great deal of money last year or the year before are nearly broke now.

What’s the likelihood that this money will be collected? George and his staff don’t deal in that kind of information. And the IRS doesn’t publish statistics that track collections by these criteria. But look at this population logically:

  • The Form 1098 shows mortgage interest actually paid, not just assessed.
  • These people are paying mortgage interest of $10,000 or more (the TIGTA study considered Forms 1098 with interest of $20,000 or more). People wouldn’t waste that kind of money without equity in the home.
  • Therefore, even if they don’t pay the taxes, when the IRS or a state files a lien, there’s apt to be enough equity in the house to force the taxpayer to pay the tax bill if they refinance or sell.

This is a brilliant collection tactic, don’t you think?

Expect to see more of this from IRS

In response to TIGTA’s recommendations, the IRS said it will expand an existing local audit project on the mortgage-interest deduction to a Nationwide Compliance Initiative Project. IRS’s Small Business/Self-Employed Division will study existing processes to ensure that mortgage interest is appropriately considered when selecting non-filer cases for further examination.

Don’t expect to see this implemented within the next year or so, according to Eric Smith, an IRS spokesman. Who will be targeted? Smith says it’s premature to speculate on the contours of any possible program. So, you can take a deep breath — for now.

But will a similar program be coming soon to a state near you?

California started a pilot program in 2007, says John Barrett, a spokesman for the California Franchise Tax Board. The FTB sent out 56,000 notices to folks with mortgage interest of $10,000 or more. The state collected about $40 million dollars.

To select the winners of this mortgage lottery, California runs a screening process, eliminating folks whose records show indications of savings or other non-taxable sources of funds. After all, as long as worldwide income is less than $14,845 in 2008, there is no need to file a California tax return.

With these IRS and California pilot programs showing such rich results, you can expect your state to implement this kind of scavenger hunt, too. Get ready!

How will this affect you?

When you get a notice, there are two ways to respond. The right way and the wrong way. Consider the following two examples.

In West Hills, Calif., tax attorney Bruce Drooks has a client who received a notice from the California Franchise Tax Board asking how he pays his mortgage. His client responded to the notice on his own, before contacting Drooks, saying the source of the mortgage money was gifts from family.

California thanked the gentleman and promptly requested proof, including copies of the checks or wire transfers used to give him the money, the names and Social Security numbers of the people making his mortgage payments, and the first two pages of their tax returns! In fact, the FTB wants this information for any other years they’ve been paying his mortgage. This could get ugly.

Although Drooks’ client is undoubtedly truthful, this is going to be a major inconvenience to the family members helping him out.

Across the country, Laurence Rubin, a certified public accountant and a partner at Aronson & Company in Rockville, Md., has a client whose letter from the IRS arrived a couple of months ago. This fellow’s Form 1098 mortgage interest showed $45,000, and he had not filed a tax return. They guy didn’t respond to the IRS himself. He brought the notice to Rubin, who responded for him.

Rubin has a philosophy when it comes to the IRS and state tax-agency correspondence. He aims to settle the matter at once, rather than letting it turn into some agent’s career project. Rubin’s response included proof of the source of the funds — the relevant page of a divorce agreement showing a very generous settlement. Since he knew the IRS would ultimately ask for it anyway, Rubin included a copy of the bank statement showing that money in the bank account, and how little interest it was earning.

With all the relevant back-up documents, Rubin outlined the situation, proving the client’s income is too low to require filing a tax return. Rubin’s client got a thank-you letter from the IRS saying the file was closed.

See, that’s how you do it. Don’t equivocate or be vague. Give the agency useful information straight off and you won’t get the kind of terrifying letter Drooks’ client got from California.

Review your tax return before filing it

Read Page 14 of the TIGTA report. It includes an example of how the IRS works backwards from your tax return or the data they have on file from W-2s, 1099s, 1098s, etc. to compute how much money you need to live on in the area where you live. See the report.

Use this concept to review your own tax return before filing it. If the bottom line on your tax return does not support your living expenses, consider adding a statement to your tax return explaining how you’re paying your living expenses. Is it non-taxable income from state bonds, or draws from partnerships? Are you drawing down savings? Are you a trust-fund baby, where the trust is paying all the taxes? The IRS doesn’t know any of this until you tell them.

A word of warning: Did you know that if you don’t file a tax return, the IRS and your state can audit that year forever? Yes indeed! If the government is really desperate for money and finds that you owe them money and have the funds to pay the taxes, beware. If you have not filed tax returns for years, file them now and close the statute of limitations for audits and collections. Otherwise the un-filed years are always in jeopardy.

One last tip, file a tax return for yourself or your senior relatives, even if you have no filing obligation. It locks up that statute of limitations and protects you from intrusive inquiries years later, when tax authorities are trying to raise money.

Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRS. She is the author of the new e-book “The 100% Home-Based Business Tax Solution.” Reach her at taxwatch@gmail.com.

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Short sales wallop credit scores

September 15th, 2009

From the Boston Herald

By Kenneth R. Harney / The Nation’s Housing
Sunday, September 13, 2009

When you do a short sale of a house, or modify the mortgage, is there much of an impact on your credit score? What if you walk away from the mortgage altogether?

A scoring company created by the three national credit bureaus – Equifax, Experian and TransUnion – has some eye-opening numbers. VantageScore Solutions LLC, whose risk-prediction scores are now being used by some of the largest mortgage companies and banks, has found that the way consumers handle their mortgage problems can have profound effects on their credit scores.

For example, some alternatives – such as loan modifications that roll late payments and penalties into the principal debt owed on the house – can actually increase borrowers’ scores modestly. Refinancings of underwater, negative equity mortgages – such as the Obama administration’s “home affordable” refis through Fannie Mae and Freddie Mac – may have little or no negative impact on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing.

The Vantage score, the primary competitor to the long-dominant FICO score, rates borrowers on a scale ranging from 501 – subprime, highest risk – to 990, super-prime, the lowest risk. Unlike FICO, where scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are approximately the same for each consumer.

When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little impact on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.

But in fact, according to VantageScore researchers, short sales can trigger big drops in scores. Sarah Davies, senior vice president of analytics, said a homeowner who previously had an excellent score of 862 might plummet 120 to 130 points immediately as the result of a short sale.

While it’s true the lender may lose less money through a short sale compared with a foreclosure, Davies said in an interview, “it’s still a derogatory event.”

What happens when borrowers walk away from their mortgage debts altogether – the so-called “strategic defaults” that have become commonplace in some large markets, especially in California? They can count on 140- to 150-point immediate hits to their scores, plus negative marks on their credit bureau files for up to seven years.

People who file for bankruptcy protection covering all their debts – the mortgage, credit cards, auto loans, etc. – get hit with declines that are the scoring equivalent of a nuclear bomb: an average 355- to 365-point collapse in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.

With all the mortgage delinquencies, short sales and foreclosures experienced by American consumers in the past couple of years, has there been a deterioration of average scores across the board? Absolutely.

For example, roughly 36.6 million of the 213 million consumers tracked by the three national credit bureaus in the first quarter of 2008 had Vantage scores above 900 – the super-prime credit rung. That select group represented 17.2 percent of the country’s consumers. But by the end of the second quarter of this year, just 15.4 percent – 33.3 million out of 216.9 million individuals’ files – were left among the elite. By credit industry standards, that’s huge.

More Americans’ scores are slipping into the worst credit category as well. In the third quarter of 2006, 34.4 million consumers were in the lowest segment – 16.6 percent of 206.9 million individuals. But by the second quarter of this year, 18.3 percent of all files were in that category – 39.8 million consumers out of 216.9 million.

Most of these changes – fewer people with excellent credit, more people in the lowest brackets – have been caused by late payments on home mortgages, serious delinquencies, short sales and foreclosures, according to VantageScore researchers.

But the bottom-line good news about scores is that homeowners facing financial stress can experience minimal dings to their credit if they contact their loan servicer or lender early in the game – when they first discover that they may have trouble making their monthly payments – and take the first steps toward a loan modification or refinancing.

“Start that conversation early,” said Barrett Burns, a former lender and now CEO of VantageScore. If you wait and fall several payments behind before seeking a modification, “you can lose 240 points on your score” and damage your ability to obtain credit – on anything – for years.

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Is This the End of Free Checking?

September 3rd, 2009

Fron the Wall Street Journal

Banks under pressure to meet revenue goals are taking away this perk.

By KELLI B. GRANT

Free checking is going the way of the free lunch.

Once a common benefit at most commercial banks, free checking is becoming more of a hassle than a perk. Getting your checking fees waived increasingly requires meeting so many conditions and wading through so much fine print that, for many customers, it’s hardly worth the trouble.

“Banks, just like airlines and local governments, need to fill the revenue gap,” says Greg McBride, the senior analyst for Bankrate.com. “They’re looking to fee increases to do that.”

Banks are experimenting with a variety of tactics to increase revenue. In May, Fifth Third Bank rolled out its Secure Checking Account program, which costs $8 per month and includes identity theft alerts, discounts on a safety deposit box and a connected emergency fund savings account. And regional bank BBVA Compass offers a program called Built-to-Order Checking, a free no-frills account that offers add-on features for $2 a piece, including interest accrual, free use of other banks’ ATMs and one overdraft fee pardon per year. Last year, Chase renamed its Chase Free Checking program Chase Checking; it is free only for accountholders who use direct deposit or make at least five debit card purchases per statement period — otherwise, users pay $6 a month.

Changes to federal regulations have triggered the cascade of new fees. Already cash-strapped banks anticipate declining revenue from credit cards as rules from the CARD Act take effect, says Hank Israel, director of Novantas, a financial services consulting firm in New York. The Federal Reserve has also said it plans to address overdraft fees, which are projected to bring in $38.5 billion in 2009, according to industry consultant Moebs Services, which has studied overdraft fee strategies. That means fewer profits to subsidize free accounts and the costs of maintaining branches.

Expect a slow transition away from free checking as banks test what changes will bring in revenue without alienating customers, Israel says. “It comes down to, what’s more important: convenience or price?” he says. Consumers who value local branch services will need to pay for that convenience while cost-conscious accountholders are likely to be steered toward online-only accounts, which cost less in overhead but offer less accessibility.

Banks are also likely to add more strings, such as requiring regular checking account use to avoid fees or obtain better deals on other products, McBride says. For example, Wells Fargo requires an account to apply for its credit cards. Chase’s new Mortgage Cash Back program offers 1% back on their monthly Chase mortgage payment when you make automatic payments from a Chase checking account.

“For most people, the answer is still to find a free checking account,” McBride says. Look for free-account conditions you can easily meet, as well as policies and features that can help you avoid other fees (for example, lots of local ATMs and low-cost overdraft protection). Your employer can also help you score free checking. Many companies offer access to credit unions or have special relationships with big banks that yield higher-tier accounts without the regular fee.

Here are five options for free checking accounts at national banks:

Big-Bank Requirements for Free Accounts

Bank of America My Access Checking Account

Requirements: Customers who open an account online will have the monthly maintenance fee of $8.95 waived.

Chase Checking

Requirements: Accountholders who use direct deposit or make five debit transactions per month can avoid the $6 monthly service fee.

Citibank EZ Checking

Requirements: Customers who use direct deposit, make two monthly bill payments or maintain a combined $1,500 balance will pay no fees. Otherwise, they’ll pay a monthly maintenance fee of $7.50 to $9.50 as well as 50 cents to $1 per check (varies by state).

SunTrust Free Checking

Requirements: None.

Wachovia Free Checking

Requirements: None.

*Data from individual banks.

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What to Expect As New Rules on Credit Cards Take Effect

August 19th, 2009

From the Wall Street Journal

By JANE J. KIM

Credit-card users get new protections this week, the first of a series of federal actions that constrain card issuers from changing terms on customers.

Starting Thursday, banks must comply with parts of the recently passed Credit Card Act of 2009 by mailing bills at least 21 days before their due dates and providing at least 45 days’ notice before making a significant change to their rates or fees. Currently, banks are generally required to mail billing statements at least 14 days in advance and provide a 15-day notice of altered fees or rates. The new rules also will bar banks from increasing fees and rates without warning when a consumer misses a payment or exceeds a credit limit.

Consumers also will be allowed to avoid future interest-rate increases and pay off any outstanding balance over time under the original rate terms. Currently, if a consumer gets hit with a penalty rate, for example, they aren’t given the option to reject the rates.

The bulk of the legislation’s key provisions will take effect in February 2010, including limits on interest-rate increases on existing balances. The following July will see the introduction of new disclosure rules, drafted and approved by the Federal Reserve Board and other banking regulators.

In anticipation of the legislation, major card issuers have been raising interest rates and fees, reducing credit lines and closing accounts. Banks say the changes also are being driven by the weak economy, which has resulted in higher losses and funding costs. Earlier this month, for example, American Express Co. notified its Blue, Optima and co-branded credit-card customers that it was raising interest rates by an average of two to four percentage points. Other changes to these cards, which take effect with customers’ October billing statements, include higher rates and fees for cash advances and late payments. American Express also eliminated fees for customers who exceed their credit limits, months before the legislation clamps down on a host of card fees.

Favoring Variable Rates

Other issuers, such as Bank of America Corp., J.P. Morgan Chase & Co.’s Chase Card Services and Discover Financial Services, recently converted customers’ fixed rates to variable ones. The changes will make it easier for issuers to bump up the rates they charge without notifying customers. By contrast, banks must currently notify fixed-rate card holders of any change in rates.

Banks are also paring back their rewards programs. Citigroup Inc., for example, has started adding annual fees to some of its rewards cards, such as the Citi Diamond Preferred Rewards card. Under the Discover More Card rewards program, customers can earn an additional 5% back on purchases in categories that rotate quarterly; for the third quarter, however, the cap on purchases that qualify for the cash-back bonus was lowered to $300 from $400. Meanwhile, Chase last fall scaled back the bonus opportunities on its no-fee Chase Freedom cards. For Chase Freedom card customers wanting to earn a fixed 3% bonus for spending in the grocery, gasoline and fast-food categories, Chase now levies a $30 annual fee.

While the new legislation will help eliminate sudden rate increases and force more disclosure, the banking industry has said the restrictions will reduce available credit. The cost of borrowing also will rise, companies say, since they will have to be more careful about giving credit. Average interest rates on credit cards rose slightly to 14.43% through May, according to the Federal Reserve, although rates are still below historical levels of 18% and 19% that were typical 20 years ago.

According to Consumer Action’s 2009 credit-card survey, which looked at 39 cards from 22 financial institutions, rates and fees began climbing this spring. The advocacy group said more credit cards now come with minimum cash-advance fees and higher balance-transfer and foreign-transaction fees.

“There’s no question that issuers are taking advantage of this window before it closes to make as many changes as freely as they’ve been accustomed to,” said Ruth Susswein, Consumer Action’s deputy director, national priorities.

Changes to card terms are causing some consumers to alter their spending patterns.

After Bank of America raised his 7.9% fixed rate to a 13.9% variable rate last spring, Mark Nilles paid off his remaining balance, shopped around for another card and canceled his BofA card. In the future, the Arvada, Colo., hydrologist said he plans to rely on savings or shorter-term, fixed-rate loans instead of credit cards to pay for one-time expenses.

“It made me reassess everything that I was doing credit-wise,” said Mr. Nilles.

More Fudge Room

For now, consumers should check their statement due dates to make sure they’re getting the required additional time to pay their bills. Some people may want to adjust any automatic debits coming out of their checking accounts to make sure they’re not paying their bills sooner than they need to, said John Ulzheimer of Credit.com, a consumer-education Web site. “This gives you a little more of a fudge period,” he said.

Consumers are likely to find better credit-card deals if they also have a checking account at the bank. Under Chase Card Services’ Chase Exclusives program, for example, Chase Freedom card holders who also have checking accounts at the bank can earn up to 10% more points on their spending.

The bank also rolled out a new credit card, “Slate From Chase,” that automatically refunds the 12th month’s interest charges each year if customers enroll in the bank’s AutoPay program from a Chase checking account.

Meanwhile, for a limited time, Citi is offering some customers an additional 2% cash-back bonus on qualified spending on Citi credit cards if customers also have a banking relationship at the company.

Write to Jane J. Kim at jane.kim@wsj.com

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‘Underwater’ Need Not Mean Foreclosure

August 18th, 2009

From the Wall Street Journal

Why Most People Who Owe More Than a Property’s Worth Will Still Keep Their Homes

By KAREN BLUMENTHAL

What does being “underwater” in your house really mean? Probably not that you’re drowning.

The number of underwater homeowners — those who owe more on their mortgages than their home is now worth — has been growing sharply since 2006 as real-estate prices have tumbled. By some estimates, between one in six and one in eight homeowners are in that position, most of them people who bought homes in the past few years or who put down small or no down payments.

This worries economists and policy makers, since owing more than your home is worth is the first step toward foreclosure. And it’s a concern to the rest of us because foreclosures are roiling the financial markets and, closer to home, they drag down our neighborhoods. (Most people who still have equity, by contrast, would rather sell their houses at a loss than lose what’s left of their investment.)

In response to concerns about rising foreclosure and delinquency rates, federal regulators are studying possible new programs aimed at needy homeowners. There are concerns that such programs could attract a flood of applications from those who don’t truly need assistance or encourage lenders to push homeowners into foreclosure. At the same time, lenders such as J.P. Morgan Chase and Bank of America have committed to working on new loan terms for the most-distressed homeowners.

But experts who have studied previous sharp housing downturns in Texas, California, New York and Massachusetts say that being underwater, while unpleasant, doesn’t lead huge numbers of homeowners to default on their mortgages and end up in foreclosure.

Christopher L. Foote, Kristopher Gerardi and Paul S. Willen of the Boston Federal Reserve Bank studied more than 100,000 homeowners who were underwater in Massachusetts in 1991 and found that just 6.4% of them lost their homes to foreclosure over the next three years, according to a paper published in the September Journal of Urban Economics. The vast majority of homeowners simply continued paying as usual because they focused on the affordability of their payments, not on what they owed, and they believed home values would eventually recover.

The economists found that homeowners typically lost their homes only after at least two things happened: Their home values dropped and they either couldn’t afford the payments or stopped making payments after losing hope that prices would eventually recover.

Homeowners in California also were more likely than expected to keep paying during the deep 1990s slump, says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. More people turned in their keys in Ohio and Michigan during the difficult 1980s downturn because they lost faith in an economic turnaround.

Typically, homeowners fall behind after a job loss, divorce or serious illness. In the current downturn, foreclosures are higher than in previous cycles because more homeowners reached beyond their means to buy their homes and simply can’t keep up the payments. As a result, the Boston economists project that up to 8% of underwater Massachusetts homeowners could lose their homes between now and 2010 — a significant amount, but still not catastrophic.

So what does this all mean for you?

If you have a low-interest fixed-rate loan, you have a valuable asset that might be hard to replace in the current market, no matter what your home’s value is. Keeping that mortgage current has some value, even if it means cutting other household expenses.

In addition, the penalties for defaulting are great. In most cases, walking away from a mortgage can knock a top credit score down to the cellar, says Ethan Dornhelm, a senior scientist at Fair Isaac Corp., which sells credit-scoring formulas to credit bureaus.

A person with a stellar credit score from the high 700s to the top score of 850 would see it drop more than 200 points. A person whose credit score is lower may see it fall by fewer points, but still end up with a score in the mid 500s. At that level, reasonably priced new debt, from credit cards to car loans, will be out of reach. In addition, a default could lead landlords and utilities to require more cash up front and even affect your job prospects.

If the borrower continues to pay other debts on time, the score will climb gradually, though it may take three to five years to return to “good” scores, from the mid-600s and up. Scores of 790 or more — which are rewarded with the lowest interest rates — won’t be attainable for at least seven years, when the default blemish finally disappears, Mr. Dornhelm says.

Fannie Mae requires borrowers who have lost their homes to foreclosure to wait five years before it will accept a loan from them, though borrowers who had extenuating circumstances, such as an illness or job loss, may requalify within three years.

What’s more, lenders in most states can go after homeowners for an unpaid balance on a mortgage. That’s a real risk, especially if you have other assets.

The longer you stay in your house, the better the chances of making it through this down cycle. Though a return to peak prices may take five or 10 years, some housing markets may start to bounce back once credit becomes more available. Meanwhile, you’ll be reducing your mortgage as you make your payments.

Lenders aren’t going to renegotiate just because prices have fallen, but if you truly can’t afford your payments, contact your mortgage servicer to see if you can rework your interest rate or work out new payment options. The federal Hope for Homeowners program, which began Oct. 1, is intended to provide some relief if lenders will agree to reduce the loan amount to 90% of the home’s current value.

If you can’t get help from your lender, try contacting a credit counselor certified by the Department of Housing and Urban Development. These counselors have direct access to lenders’ loss-mitigation departments, which consumers don’t, says Natalie Lohrenz, counseling administrator for Consumer Credit Counseling Service of Orange County, Calif. A list of HUD-certified counselors is available through Hope Now, a consortium of lenders and counselors. (Call 888-995-HOPE or go to www.hopenow.com.)

If you need to sell the property and can’t afford to cover the shortfall, your lender may agree to a “short sale,” in which you sell at a price below the mortgage amount. This is a much more complicated transaction to pull off than a regular home sale, though, and it may hurt your credit score if the lender reports that you failed to pay off the whole obligation.

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Cardholders Get Rude Surprise at the Register

August 14th, 2009

From the Wall Street Journal

Reassessing Risk, Issuers Quietly Cancel Accounts, And It’s Perfectly Legal

By MARY PILON

In March, Mary Horowitz was trying to pay for a birthday spa treatment when she learned that American Express had canceled her card.

The Durham, N.C., lawyer spent the afternoon on the phone with AmEx customer service. Representatives told her that her card was canceled and that a letter was on its way that would tell her more. Ms. Horowitz had received no advanced notification of the cancellation and had successfully used the card two weeks before.

“The spa was great,” she says, “but it was a pitiful day.”

A few days after the spa incident, she received a letter confirming that the issuer had cut her off because of information contained in her credit report. She checked her credit report, and it was clean except for a late car payment in December 2005, she says.

More and more consumers are getting to the cash register to find that their credit cards have been canceled without their knowledge. Consumers say that it is often embarrassing to have a card declined in front of friends and other customers, and that it is frustrating when customer service is able to confirm only that the card was canceled, but not why.

But while it may seem to be bad form, in some cases, it is legal for a credit-card issuer to close an active account, like Ms. Horowitz’s, and notify the cardholder, or send out a letter, after the fact. Even when closure notifications are received before a consumer experiences card denial at a register, letters can be lost in mailboxes, as consumers shuffle through piles of junk mail. Those who have recently changed addresses or are traveling are often left in the dust.

Although the law governing notification of account closures is nothing new, its effects are increasingly being felt by consumers as card issuers try to curb their own risk in an uncertain economy. It is unclear how many consumers have been hit by instant card cancellation, but cardholders at AmEx, Bank of America Corp., Citigroup Inc. J.P. Morgan Chase & Co. and HSBC Holdings PLC also say they have recently had their active cards canceled before they received notice.

When Lane Gold’s HSBC Cash or Fly Platinum MasterCard was turned away at a Hoboken, N.J., sushi restaurant in April, he feared the worst. “You start thinking of everything bad that could have happened,” Mr. Gold says. “Was the number stolen? Is it fraud?”

It wasn’t fraud, he learned after calling customer service. He was told that the bank had canceled his card and that it was “reassessing risk,” he says. He has never missed a payment, monitors his credit score and doesn’t carry a balance on any of his credit cards, he says. He ended up paying with another credit card at the restaurant.

If an issuer cancels an account due to customer inactivity, default or delinquency, notification to the cardholder isn’t required, according to the Equal Credit Opportunity Act. However, an issuer is required to notify consumers about an account closure if the issuer terminates it based on other factors, such as information from a consumer’s credit report. In these cases, like Ms. Horowitz’s, written notification is provided within 30 days of—not necessarily prior to—the account’s being closed.

New regulations from the Federal Reserve, the first of which go into effect Aug. 20, and rules from Congress that unroll in February 2010 will still permit card issuers to cancel accounts without providing advance notice. The regulations will curb other controversial practices. They will prohibit card issuers from hitting borrowers with an additional fee if they go over the credit limit on their card. Cardholders will also receive 45 days notice in the change of terms, such as an interest rate increase or reduction in credit limit. But the 45 days’ notice won’t apply to account closures, regulators say.

In recent years, issuers have been closing inactive accounts, or accounts that haven’t been used in a year or more, to cut down on risk. If an account is closed because it is deemed “inactive,” many issuers, like Bank of America, won’t notify the cardholder at all, nor are they required to. BofA says open credit lines are a credit risk to the bank. Other large issuers, like Chase, are doing the same.

Chase says that it is managing potential exposure by evaluating active accounts and closing inactive accounts. “Inactive cards with large open credit lines present a real risk of fraudulent use and large potential liabilities for Chase,” the bank said in a statement.

There is new concern that active lines of credit, or lines that have been used within the past year, also pose potential risks to issuers, says John Ulzheimer, head of educational services for Credit.com, a credit-education Web site. Although cancellations aren’t directly affected by the new regulations, the reassessment of customers by issuers “is part of the pro-active housekeeping” before new regulations take effect, he says.

Mr. Ulzheimer says he thinks many card issuers are also worried about the unemployment rate, home values and overall tightening of consumer credit. “Issuers depended on these things going up, too,” he says.

Also troubling to issuers are rising delinquency rates on consumer credit cards. The credit-card delinquency rate, which measures the percentage of consumers who are 90 or more days delinquent on one or more credit cards, rose to 1.32% at the end of the first quarter of this year, according to credit reporting agency TransUnion, from 0.91% two years earlier.

The ultimate shakeout for consumers can be confusion.

Mallorie Schultz found out that both of her Chase credit cards had been canceled when she called to activate her new cards, bearing her new last name. (She was married in February.)

The accounting-firm office manager in San Diego, Calif., was shocked when Chase customer service told her the two cards, with limits of $1,000 and $2,500, would be closed. She carried a balance of $700 and $1,000 on the cards, respectively, and had used them regularly in the past year. She said she has never missed a payment on either of those cards, or any other. Ms. Schultz is one of 20 million former Washington Mutual credit-card holders who transitioned to Chase after WaMu was purchased last year. The letter she got from Chase listed reasons her account could have been canceled, she says. When she called customer service to find out which specific reason applied to her, she was referred to a credit-reporting agency, she says.

In addition to managing wedding expenses, Ms. Schultz says she has been helping her parents with their bills. Having her lines of credit gone has caused a financial scramble, she says.

American Express Co. doesn’t comment on specific cases but said it emails customers about credit-limit reductions. AmEx, Bank of America, Citigroup, J.P. Morgan Chase, HSBC all said that they are re-evaluating risk and comply with the current laws. They also said it is possible for consumers to have their cards canceled, and, consistent with the law, be notified within 30 days after cancellation.

“It’s extremely frustrating,” Ms. Schultz says. Chase “chopped me off when I was already down.”

Write to Mary Pilon at mary.pilon@wsj.com

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