The Convenience of Automatic Payment Plans May Come With a Price
Q. I signed up to pay my health club bill with an automated setup that took money directly from my checking account. But recently the gym dinged us for an extra charge that we didn’t authorize. Can they do that?
*
A. Oh, probably.
Somewhere in the agreement you signed to set up your electronic funds transfer there is likely to be weasel wording that allows your gym to do what it did.
EFTs are a godsend to busy people, and when you’re dealing with reputable companies, they make life easier. Automatic payments allow you to pay utilities, your mortgage and other recurring obligations on time and without hassling with checkbooks and stamps.
When you’re dealing with scuzzballs, however, EFTs can be a nightmare. Health clubs are notorious for billing abuses, sometimes charging people for months after they ended their memberships.
Banks can make correcting problems difficult as well.
Gail Hillebrand, an attorney for the Consumers Union in San Francisco, said she was told by her bank that she couldn’t end an automatic transfer she had set up to pay her mortgage even though she had just refinanced the loan with another lender. Fortunately, the first mortgage company honored her request to end the transfers. Otherwise, her bank told her she would have had to close the account to stop the payments.
If you have any question about the honesty or reliability of the company, opt for an automatic plan that bills your credit card rather than your checking account.
Then if you have a dispute, your credit card issuer acts as a kind of buffer. You can write to the issuer within 60 days of receiving your statement with the erroneous charge, and the credit card company will investigate the problem. That doesn’t mean you won’t have to pay a charge if it’s legitimate, but it does give you more leverage to fight charges that aren’t.
Seeking a Stock Market Soothsayer
Q. Back in April, were brokers aware that the stock market was about to experience a downward correction whereby they could advise their clients to hold off new purchases until the market stabilized, and thus not be in an immediate loss position?
A. It sounds as if you’re asking whether you should sue your broker for the third-quarter market downturn. Nice try.
Nobody can predict the market. Anyone who could surely wouldn’t be a stockbroker. Such a soothsayer would be holed up in some remote mansion--in Omaha, say--making fistfuls of money, not spending time advising you about your picayune portfolio.
If you can’t handle losses, you shouldn’t be in the stock market. If you have to be in the stock market-- because you had the bad judgment not to be born to wealth, and you want to retire someday--you have to learn to handle the downside. Rather than spending energy cursing your broker, learn more about investing and the vagaries of the markets. Reading the investing articles in these pages is a good start.
Closing Costs Were Far From Estimate
Q. Recently I refinanced a loan on my existing home. The lender furnished me with an estimate of closing costs, but these turned out to be well below what the actual settlement charges were. Does the lender have any liability for underestimating the closing costs?
A. For all practical purposes, no, which is why many a disreputable lender pulls such bait-and-switch tactics every day.
Various lending regulators have proposed solutions to the problem that would put actual teeth in laws that prohibit such practices. In the meantime, consumers would be smart to check with friends and neighbors about which companies give straight deals, and not choose a lender based on interest rates alone.
Debtors, Get Low Rate and Stick to It
Q. My wife and I are currently $25,000 in credit card debt, which we’re paying off at the rate of about $1,000 a month. We’re rolling the debt to take advantage of introductory interest rate offers, but we’ve heard that there are debt services available that can negotiate a lower interest rate for us from the credit card companies. Could you tell us the names of some of these nonprofit debt consolidation services and if using them would have a deleterious effect on our credit rating? And please don’t Dr. Laura us. We know, we know, we know we were idiots for getting so far in debt.
A. Yes, you were, but you deserve hearty congratulations for making such an effort to dump that debt.
You can find the nonprofit Consumer Credit Counseling Service in your phone book, but that’s probably not the route you want to take. The service works best for people who are having trouble making their minimum payments or are falling behind in their payments. The negotiating that CCCS does for its customers is reflected in the customers’ credit reports, and although it’s better than having a bankruptcy on your record, it could still make lenders leery.
Rolling your debt from card to card can also hurt your credit rating, by the way. Lenders are suspicious of people who open up a lot of credit lines. You can try to offset that suspicion by closing your old accounts after opening new ones, but credit issuers often resist your efforts, and accounts you closed years ago can still pop up as open on your credit report.
You probably would be better off getting a card with a 9.9% rate and sticking with it. You can find a list of low-rate issuers at CardWeb, either on the Internet at https://www.cardweb.com or by calling (800) 344-7714. At the rate you’re going, you’ll have that debt paid off in a couple of years--that is, if you’ve stopped adding to the pile by charging more. Which you have, right?
A Bit of Couples Counseling
Q. My wife has discovered that I had hidden some cash in the house and is giving me hell for it. I did it so that I could help my mother and other family members with their medical costs and other expenses. The suggestion that I do so came from my father-in-law, who knows how inconsiderate my wife can be. Can I request a legal division of our assets now and keep separate accounts and earnings from now on?
A. Yes. It’s called getting a divorce.
As long as you’re married, what you earn is considered community property in California. You can keep as separate property the assets you had before marriage (unless you subsequently put those assets in both your names, or used community funds to maintain or improve the assets). You can also keep separate any inheritances or gifts you receive. Other than that, it’s share and share alike.
Psychologists will tell you that we play out our major emotional dramas through our relationships with money. If that’s true, it sounds like you and your wife have the makings for a movie of the week, at least. She might be unreasonable about sharing with your family, but you’re being deceptive and dishonest.
Banks May Insure Car With Loans
Q. I have another suggestion for the reader who failed to get adequate insurance on his new truck that was subsequently stolen. Most banks and other institutions carry insurance that covers loans in this situation. The reader should immediately contact the lender, be straight about his failure to get enough insurance and find out if it has the coverage. He will have to pay the premium, but that’s a heck of a lot better than paying the whole loan amount. As an ex-bank vice president, I can assure you and him that the bank should be more than willing to file the claim. They, too, pay a yearly premium for the blanket coverage on this type of instrument.
A. That’s an excellent suggestion--and one that, surprisingly, wasn’t mentioned by my insurance sources when I brought the reader’s situation to their attention. Wish I’d had you on my Rolodex!
Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions on a variety of financial issues in this column, but she regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
