A Beautiful Model for Fraud

Take a look at this:

A Beautiful Model for Fraud and here is the accompanying article:

The great credit unwind of '08.

How To Spot A Scam, Part 6: Roommate Scam

This is the way the scam works:

A person claiming to be a potential roommate sends a check for an amount far above the amount owed (this is a HUGE red flag). They then request that the balance be sent back to them so that they can buy an airline ticket or some other expense (which is bogus). The check they send is fake.

Check the links and instructions I provide in this post.

Also, go to FakeChecks.org and report it.

How To Spot A Scam, Part 5: Tax Scams

Bankrate.com has a list of the "dirty dozen" tax scams and how to spot them. Here are the list of tax scams covered:

1. Telephone tax refund abuses
2. Abusive Roth IRAs
3. Tax-related identity theft phishing
4. Disguised corporate ownership
5. Zero wage claims
6. Return preparer fraud
7. American Indian employment credit
8. Illegitimate trusts
9. Structured entity credits
10. Improper charitable deductions
11. Form 843 tax abatement
12. Frivolous arguments

Number 12 is the most common one that I am aware of. Here is the entry from Bankrate.com:

12. Frivolous arguments

This is probably the most notorious of scams. Promoters have advocated numerous false claims over the years, including that the 16th Amendment concerning congressional power to lay and collect income taxes was never ratified, wages are not income, filing a return and paying taxes are merely voluntary and being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. The IRS and courts have consistently held that such arguments are frivolous. Taxpayers have the right to contest their tax liabilities in court, says the IRS, but no one has the right to disobey the law that allows the government to collect the taxes.

...

The absence of a particular scheme from the annual dirty dozen rankings should not be taken as an indication that the IRS is unaware of it or not taking steps to counter it. While some schemes might not be as active this tax season, the IRS says taxpayers should remain wary because old scams often resurface or evolve.

If you encounter any of these schemes, or are approached with a new one, the IRS wants to know. Report suspected tax fraud by calling toll-free (800) 829-3676.

Turn in tax cheats and con artists

You also can report suspected tax fraud by sending in Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. Include as much information as you can, including who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. You don't have to give the IRS your name or address, although it is helpful to do so. The agency says it will keep your information confidential. And if the IRS recovers any tax revenue based on your tip, you might be entitled to a reward. In that case, tax officials will need to know how to get in touch with you.

And remember: If you are ever offered a "surefire" tax-saving opportunity, it never hurts to be a little skeptical.

"When it comes to taxes, everyone has to pay their fair share," says IRS Commissioner Everson. "I urge taxpayers not to be taken in by hucksters who promise to lower or eliminate taxes. Getting caught up in the dirty dozen or similar schemes can lead to big headaches."

And remember the old adage: "If it seems too good to be true, it probably is." If you have any legitimate tax questions or need help with them, only use a certified state-licensed professional or Certified Public Accountant (CPA). If you feel you cannot afford a professional, there are many tax programs (TaxCut, TurboTax, etc.) available at many retail outlets that are easy to use and they will go through any potential tax credits or breaks you might be entitled to. There are also different versions of each of these products to match your specific need. For instance, the cheapest version can be used if you are merely a wage earner and don't have that many deductions and the more expensive version is for those who may have a business for which they need to use Schedule C. For your convenience (and, potentially, a small monetary gain on my part) I have provided a link to Amazon.com for each of the products I have mentioned.

If you do think you want to do it yourself, give yourself plenty of time (set aside at least a full day; even better: plan an entire weekend to prepare your tax returns, if necessary). You only have to do it once per year; and once it's done, it's done.

Mortgage Servicers Gouge Debtors

A report in today's New York Times, Dubious Fees Hit Borrowers in Foreclosures, shows how mortgage servicers can profit from the foreclosure process to the detriment of not only the borrower, but the economy as a whole.

Because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures.

Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.

Here are some of the examples from the story:

In one example, [Katherine M. Porter, associate professor of law at the University of Iowa] found that a lender had filed a claim stating that the borrower owed more than $1 million. But after the loan history was scrutinized, the balance turned out to be $60,000. And a judge in Louisiana is considering an award for sanctions against Wells Fargo in a case in which the bank assessed improper fees and charges that added more than $24,000 to a borrower’s loan.

...

On Oct. 9, the Chapter 13 trustee in Pittsburgh asked the court to sanction Countrywide, the nation’s largest loan servicer, saying that the company had lost or destroyed more than $500,000 in checks paid by homeowners in foreclosure from December 2005 to April 2007.

The trustee, Ronda J. Winnecour, said in court filings that she was concerned that even as Countrywide misplaced or destroyed the checks, it levied charges on the borrowers, including late fees and legal costs.

...

Loan servicing is extremely lucrative. Servicers, which collect payments from borrowers and pass them on to investors who own the loans, generally receive a percentage of income from a loan, often 0.25 percent on a prime mortgage and 0.50 percent on a subprime loan. Servicers typically generate profit margins of about 20 percent.

Now that big lenders are originating fewer mortgages, servicing revenues make up a greater percentage of earnings. Because servicers typically keep late fees and certain other charges assessed on delinquent or defaulted loans, “a borrower’s default can present a servicer with an opportunity for additional profit,” Ms. Porter said.

The amounts can be significant. Late fees accounted for 11.5 percent of servicing revenues in 2006 at Ocwen Financial, a big servicing company. At Countrywide, $285 million came from late fees last year, up 20 percent from 2005. Late fees accounted for 7.5 percent of Countrywide’s servicing revenue last year.

But these are not the only charges borrowers face. Others include $145 in something called “demand fees,” $137 in overnight delivery fees, fax fees of $50 and payoff statement charges of $60. Property inspection fees can be levied every month or so, and fees can be imposed every two months to cover assessments of a home’s worth.

...

Jeffrey M. Norton, a lawyer who represents the Trevinos, said that although MERS pays a flat rate of $400 or $500 to its lawyers during a foreclosure, the legal fees that it demands from borrowers are three or four times that.

...

Based on the study, mortgage creditors in the 1,733 cases put in claims for almost $6 million more than the loan debts listed by borrowers in the bankruptcy filings. The discrepancies are too big, Ms. Porter said, to be simple record-keeping errors.

Michael L. Jones, a homeowner going through a Chapter 13 bankruptcy in Louisiana, experienced such a discrepancy with Wells Fargo Home Mortgage. After being told that he owed $231,463.97 on his mortgage, he disputed the amount and ultimately sued Wells Fargo.

In April, Elizabeth W. Magner, a federal bankruptcy judge in Louisiana, ruled that Wells Fargo overcharged Mr. Jones by $24,450.65, or 12 percent more than what the court said he actually owed. The court attributed some of that to arithmetic errors but found that Wells Fargo had improperly added charges, including $6,741.67 in commissions to the sheriff’s office that were not owed, almost $13,000 in additional interest and fees for 16 unnecessary inspections of the borrowers’ property in the 29 months the case was pending.

“Incredibly, Wells Fargo also argues that it was debtor’s burden to verify that its accounting was correct,” the judge wrote, “even though Wells Fargo failed to disclose the details of that accounting until it was sued.”

And to think that this is probably just the tip of the iceberg. Examples like these show why regulation of the mortgage industry is sorely needed.

Tanta, at Calculated Risk, has her own take on the article -- including her questioning of some of the assertions made in the article.

Myanmar's Atrocities Exposed

Back in February, I wrote about human rights abuses against the Christian minority in Myanmar in my post Myanmar: The Other Killing Field. Now, according to reports on CNN, it appears that abuses are happening even to Buddhist monks.

Thankfully, Anderson Cooper with his 360° program has been bringing these activities to light (and CNN in general). He also has been reporting about abuses in this country by auto insurance companies against their insureds. This isn't the first time that Anderson Cooper has reported about hardball practices by auto insurance practices.

Thank you, Mr. Cooper, for bringing these issues to light.

Worst Is Yet To Come?

From the article Housing seer says there's worse to come:

So, with subprime mortgage losses and credit woes now the No. 1 topic in the markets, what does the former Goldman Sachs investment banker see next for the housing market and the U.S. economy?

Well, if you thought things were bad now, just wait. Think bank failures, recession, soaring default rates, home prices plunging by at least one-third and layoffs rippling across the economy. The unwinding could take five to seven years before the housing market hits bottom, he says.

As a former Wall Street insider, Mr. Talbott has a better appreciation than most for how large financial institutions operate. And what he senses now is a massive effort to conceal the extent of the toxic sludge buried beneath some of the biggest names in the business.

"Everybody is hiding and not disclosing losses," he says. "They're all winking and nodding at each other because they've all got this stuff on their books."

With 40 per cent of some banks' assets invested in residential mortgages, they won't be able to conceal their losses forever. Faced with rising defaults, banks are already pulling back on lending. The lack of credit, in turn, will exert a major drag on the economy, which for years has been fuelled by easy money. That's why Mr. Talbott says a recession in the next 12 to 18 months is a certainty.

...

The subprime meltdown has been described as a liquidity squeeze, which makes it sound like a temporary problem that can be cured with an injection of cash. But the problem is far more serious, he says.

"Giving a bank more cash doesn't solve the problem. What they're sitting on is huge losses and they can't recognize those losses without endangering their entire book equity and threatening bankruptcy and threatening a run on the banks."

I don't know if things will get that bad, but it's a potential scenario. I suspect this very scenario that could happen is what is worrying many Americans.

Countrywide

Hat tip to Calculated Risk

Read this story from the Chicago Tribune and see if you don't agree that that there is some serious need of judicial and congressional intervention to prevent these types of abuses. Here is part of it:

PITTSBURGH - For Donna and Steve Love, the plan seemed perfect.

Priced out of the Boston-area housing market, where 2-bedroom homes can cost about $500,000, the working-class couple thought it was time to head to a more affordable market.

They chose Pittsburgh. They liked the city, thought they could get jobs there and were sure they could afford a home without having to win the lottery.

After finding their home -- a $59,000, 3-bedroom, brick row house near the city's downtown that they paid for with a subprime loan -- they moved in June of 2006 and tried to settle into their new life.

But within a year, they were facing foreclosure, their relationship was strained to the near-breaking point and their emotions were in tatters as they tried to hold onto their home.

"Sometimes I feel like I have post-traumatic stress disorder," said Donna Love, 46.

Their story has been repeated thousands of times this year alone, as the subprime mortgage market, made up of loans to consumers with a higher default risk, continues its dramatic collapse.

...

The Loves qualified as subprime candidates because of their income level and because Steve Love, 30, had so little prior credit history.

"I believe in paying in cash," said Steve, who worked as a night manager at a CVS pharmacy near Boston, a job he expected to replicate by transferring to a Pittsburgh CVS store.

...

In March 2006, they reached what they thought were final terms for the loan: $5,000 down, a 7.75 percent interest rate, fixed for two years and then adjustable for the remaining 28 years, with a cap of 14.75 percent.

The $429 mortgage payments would be higher than they expected, but still within their budget -- equal to less than one week of Steve's salary with CVS. Plus, it was still cheaper than their $700-a-month rent in a suburb of Boston.

Then, on April 20, two weeks before the May 3 closing date, they said they got mortgage documents in the mail with a letter that said they should sign all the papers and return them as soon as possible.

But they quickly noticed the final contract listed a higher interest rate of 12.125 percent, with a cap of 19.125 percent. That pushed the monthly mortgage payments up more than $200 to $692 a month.

"We both said, 'Oh my God!' and started reading page by page," recalled Steve Love.

They called Countrywide and talked to several representatives who told them "that the fluctuating market went up and investors had asked for a higher percentage rate on the loans, and this was the best they could do," he said.

Other problems surface

"We weren't sure if we would ever find another property we'd agree on. We'd already rented our apartment. We'd resigned our jobs. We were afraid of losing our $1,000 deposit [on the home]. There was just a huge fear factor there," Donna Love said.

The couple decided to go ahead with the loan, figuring they could refinance in six months.

The lenders do this because of these people's commitments, they are without adequate bargaining power. This problem is playing out (pardon the pun) countrywide. We need to get some serious oversight and remedies and quick.

John Edwards Proposes Regulation of Credit Cards

From Business Week:

As President, what would you do to help middle-class Americans reduce credit- card debt and help lower-income people avoid getting trapped by predatory credit-card lenders?

What we're going to do is restore balance in the credit-card market. I am proposing a Borrower's Security Act that would do the following: first, require credit-card companies to disclose the true cost of making only minimum payments, as many consumers do. Second, I would restore a 10-day grace period before imposing late fees and penalty rates. Third, apply interest-rate increases to future balances only. And fourth, end the practice of universal default, where a creditor can change a borrower's terms based on their debt payments to other creditors. We also need a new consumer protection commission, which I would call the Family Savings & Credit Commission, whose job it'll be to review all the financial services products that are being marketed to families and ensure that the terms are reasonable and fairly disclosed. [The commission would] oversee all types of financial institutions whether chartered under federal or state law.

The more John Edwards says, the more I like about his candidacy . . . and the closer I get to solidifying my support for him. He is the one candidate that seems to be really honing in on economic policies that are the most critical for the middle and lower classes. He may not have Hillary Clinton's money, and he may not have as much charisma as Barack Obama, but he is hitting every issue that I care about.

Read the entire interview for other bold proposals from John Edwards.

Credit Card Defaults Rising

I actually saw this on Calculated Risk yesterday, and now Barry Ritholtz is reporting it, too.

I think we are starting to see the signs of bad economic mojo on the horizon. Actually, we had signs of it before, but now it should start to become obvious to financial pundits.

I will wrote more about this later; but I still don't regret getting out of the bankruptcy practice. The new law's pitfalls combined with people who won't be able to pay will create problems for years to come.

Oklahoma Supreme Court Strikes Down Retroactive Mandatory Arbitration Clause

In BILBREY v. CINGULAR WIRELESS, L.L.C., 2007 OK 54:

The issue before this Court is whether a named plaintiff in a class action lawsuit must be dismissed when that plaintiff subsequently signs a consumer form-contract containing a mandatory arbitration clause that includes a class action waiver. We find the clause unenforceable.

...

¶14 Consumers signing such adhesion contracts are susceptible to unpleasant surprises prepared for the protection of the corporation, not the consumer. The law has begun to take a more active role in the protection of the consumer against abuses. That consumers have not read or do not understand the implications of contract provisions has been implicitly recognized in our insurance case law by the use of the phrase "hidden in policy provisions." Max True Plastering Co., 1996 OK 28, ¶ 2, 912 P.2d at 863. As a result, new rules in such adhesion contracts have been applied to protect the "reasonable expectations" of the parties. Max True Plastering Co., 1996 OK 28, ¶ 6, 912 P.2d at 864.

¶15 The question we must answer is whether the clause in the May 23, 2001, contract that asserts the parties "agree" to arbitrate any disputes arising from any prior agreement including those from predecessors in interest, is enforceable. The question is not whether the arbitration clause in the May 23, 2001, contract is valid as it relates to that specific contract, but whether it controls the previous Southwestern Bell Mobile Systems contract, which is the contract at the center of this class action.

...

¶20 Cingular cites Barnes v. Helfenbein, 1976 OK 33, 548 P.2d 1014, which provides the test for unconscionability.

"The basic test of unconscionability of a contract is whether under the circumstances existing at the time of making of the contract, and in light of the general commercial background and commercial need of a particular case, clauses are so one-sided as to oppress or unfairly surprise one of the parties. Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties, together with contractual terms which are unreasonably favorable to the other party."

Barnes, 1976 OK 33, at ¶ 23, 548 P.2d at 1020.

...

¶22 Despite Cingular's argument, it defies reason to conclude that Bilbrey intended to halt a class action suit filed February 15, 2001, in exchange for a free cell phone on May 23, 2001. He even continued to pursue the case for another ten months at which time Cingular finally discovered the arbitration clause. Clearly, Bilbrey did not know the implications of the May 23, 2001, contract, and Cingular's agents, the attorneys in this lawsuit, did not realize he had signed it. It is equally clear that both Bilbrey and Cingular's agents were surprised by Bilbrey's signing a contract that could potentially result in the dismissal of a class action lawsuit that was currently being actively prosecuted by Bilbrey and vigorously defended by Cingular.

¶23 Such an effect is one-sided and unreasonably favorable to Cingular. The cases cited by Cingular that give effect to retrospective clauses in arbitration agreements are not on point.7 We accordingly find the retroactive clause in the arbitration agreement unconscionable as it relates to a presently active lawsuit that would be dismissed if this clause were given effect.

Hat Tip: Elaine Dowling at Consumer Law Updates

How To Spot A Scam, Part 2

Here is part 1

If you can answer "YES" to any of the following questions, you could be involved in a FRAUD or about to be SCAMMED:

Is the check from an item that you sold on the internet or Ebay such as a car, boat, jewelry or other easily sold or pawned item?

Is the amount of the check more than the item's selling price?

Did you receive the check via an overnight delivery service?

Is the check connected to communicating with someone via e-mail?

Is the check drawn on a business or individual account that is different from the person buying your item or product?

Have you been informed that you were the winner of a lottery? Was the supposed lottery in another country?

Have you been instructed to either "wire," "send" or "ship" money as soon as possible, to a large U.S. city or another country? (For that matter, are you being asked to "re-ship" a product to another country?)

Have you been asked to pay money to receive a deposit from another country?

Are you receiving pay or commission for facilitating money transfers (or product "re-shipments") through your account?

Did you respond to an e-mail requesting you confirm, update or provide your account information?

Have you been hired to be a "secret shopper?"

Have you been asked to help get money out of another country? (Another related method is to tell you that you will be getting part of an inheritance or business transaction.)

Have you been recruited to do any job and asked to keep it a secret?

If you answered "YES" to any of the above statements, go to your bank and tell them immediately.

AVOID BECOMING A VICTIM

Ultimately, whatever yarn is spun, most scams come down to getting a consumer to send money via a wire transfer overseas. It is never a good idea to wire money, particularly out of the country. Avoiding wire transfers would put a big dent in the success of scams from Nigeria, Australia, Canada, England, Mexico and other foreign countries.

Other advice for consumers:

Use Google. Dozens of sites now index large lists of names and other elements of Nigerian scams. If unsure, put parts of the story into the Google search engine (you can do that from my page here on the left side of the page) and click. If it is a scam, it is likely someone else on the internet will have published a complaint.

Verify the legitimacy of a bank. The FDIC maintains a database of federally insured banks on its web site.

Always use a credit card. Consumers have wide protection when paying for internet-based transactions with a credit card. Checks are easily forged -- even cashier's checks, sometimes called bank checks. U.S. consumers think they are guaranteed.

Banks can take up to two weeks to confirm authenticity of a cashier's check, according to the American Bankers Association -- even if the funds are made available to the depositor. If a check doesn't check out, the bank will take its money back. The consumer will be on the hook for any withdrawals made against that deposited amount.

Thanks to Bank of Oklahoma for much of this information.

Debt Buyers Gone Wild

On Warren Reports at TPM Cafe they are discussing The Debt Divide here in America. Anyway, one poster, BabyBelle, posted something that I think is very pertinent to the issue of overcharging for debt that is being collected by collection agencies and "debt buyers":

Maxed Out is available on DVD at Amazon now. I just ordered a copy. Looking forward to seeing it.

These debt buyers should be outlawed.

I had a debt sold to one and I was scared and agreed to make monthly payments. They kept me in the dark about the interest they were charging me.

All the while I thought I was repaying a debt when they were not applying any to principal. It was only when I started asking questions that I found out the truth. I never seriously consided suicide, but I was in a deep depression when I realized I had sent so much money and believed I was doing the right thing, only to be lining the pockets of these crooks!

As long as debt buying is allowed there should be [strict] laws and enforcement. One of those laws should be the only interest they can charge is for the amount they purchsed the debt for. So if they buy debt for pennies on the dollar which I have heard they do, then charge interest on those pennies. I personally feel they should not be allowed to charge any interest though.

(Editorial comment: This used to be the law, I think. I seem to remember a time that the interest could not be collected once the debt was turned over to a collection agency. That may have changed in recent years, or perhaps no one has successfully challenged it in the courts. -- OkieLawyer)

The debt I had that was sold to them was ALL interest and fees that Citibank had piled on. The original amount of the debt had been paid. Then these bottom feeders piled on more. I thought interest was charged for money borrowed. I didn't borrow money from any collection agency!

Woe to anyone who is foolish with a credit card or has unexpected problems and gets behind. You'll get screwed by the [credit card companies] with loan shark interest which will lead to you going over the limit if you are unable to pay the balance...and then you will get over the limit fees, even though you have not purchased a thing! And then if the the bottom feeders get your debt they will get their chance with you.

I have lerrned my lesson. Every credit card offer I receive is shredded. I have savings and I live within my means now.

As far as ways to save, if you need furnishings and don't mind some hard work , check out Craig's list.

I have always admired those who could take an old piece of furniture and refinish it, but I was reluctant because of the dire health warnings on some of the products used to strip the paint off. There are now safe products for this work with no harmful fumes. I have found some beautiful solid wood furniture on Craig's [list] for low cost and even free and refinished many nice pieces of furniture. It looks great and is better quality than many things sold brand new.

An interesting fact about the movie MaxedOut, it was inspired by a scheme whereby my alma mater, the University of Oklahoma, received $3 million for allowing credit card companies to market to students on campus. I highly recommend the movie.

Dealing With Debt Collectors

My fellow bankruptcy attorney and new blogger, Elaine Dowling, claims that MarketWatch is playing with her world view.

Elaine gives a hint of the kind of thing we bankruptcy lawyers deal with all the time:

The FTC also alleges that debt collectors who obtain authorization to do automatic debts from checking accounts sometimes take more than the amount authorized. Some have even given debtors an incorrect address so letters disputing debts won’t be received. That’s almost clever, actually.

And then there's the problem with multiple debt collectors on a single original debt. It is also not unusual to have a debt collector try to collect on a debt that has been discharged in bankruptcy years after the fact. Being able to get people's credit reports directly has helped some, but the debts get sold so often that it is virtually impossible to track all the agencies down to notify them of a pending or filed bankruptcy or to try to negotiate a settlement on the debt.

Then there is the issue of the credit reporting agencies not noting all the debts that have been discharged in the bankruptcy. That means an old client will call me years later asking for a copy of the bankruptcy papers to prove the debt was listed. That is always a hassle to deal with.

Basically, what these stories show is how the collection agencies are overreaching in many instances. I realize there are abuses on both sides. There are some people who are just plain deadbeats, and they don't deserve to get credit at any interest rate. "Cash with ID," as we'd say. But at this time in history, most of the abuses are taking place on the side of the credit industry because of their increased bargaining power due to the 2005 BAPCPA changes in the bankruptcy code.

Why The Poor Pay More

In a comment left over at Warren Reports, someone mentioned a study done by the Annie E. Casey Foundation that showed how the poor pay more for normal goods and services than do more affluent Americans. Many of these costs are starting to reach into middle class America.

New Bill Seeks To Curb Credit Card Abuses

From Credit Slips:

H.R. 1461, the Credit CARD Act of 2007 and S. 1935, the Stop Unfair Practices in Credit Cards Act or SUPCCA has been introduced.

Most significantly, the Senate bill will:

* For consumers not in default, prohibit credit card companies from unilaterally raising the interest rate disclosed at the time a consumer enters into a credit unless the consumer agrees in writing
* For consumers in default, limit the interest rate increase the credit card may charge (called the "penalty rate") to no more than 7% greater than the rate before the default
* Allow interest rate increases to apply only to future purchases, not existing balances on a credit card
* Prohibit credit card companies from charging interest on fees they assessed on their customers
* Allow credit card companies to impose only one over-limit fee if the company allows the customer to exceed the card limit
* Prohibit credit card companies from charging a fee to pay a balance in full

Do We Need New Ways To Calculate Inflation?

An interesting discussion regarding inflation has started over at the TPM Cafe. But I found the comment by James Kroeger the most compelling one against using the current system:

I think an important part of the picture you are missing, Jared, is the fact that it is possible for different income groups to experience different rates of inflation.

During the past couple of decades---thanks to the export of jobs overseas and the huge tax cuts the Republicans have given to rich people---the lower classes have been experiencing lower measured rates of inflation while at the same time wealthy Americans have been experiencing dramatically higher [unmeasured] rates of inflation.

That is to say, cheap imports and the continuing chronic labor surplus have combined to put downward pressure on both wages and prices for the lower classes. At the same time, the big tax-cut giveaway that the Republicans threw at America's wealthiest households drove up both their disposable incomes and the prices that are charged by the markets that serve the rich: luxury markets and real estate markets and art markets and the stock market.

You see, rich people really don't mind inflation if it is their own incomes that is inflating; they just don't want inflation to occur in the lower classes because their wages are generally a cost of the upper classes.

Not only is it possible for members of different classes to experience different rates of inflation, it is even possible for one income group to experience inflation while another income group is experiencing either deflation or disinflation. These hidden facts would be revealed if the data collectors at the BLS were to calculate and publish the different inflation rates (cost-of-living indexes) that are relevant to different income groups, producing an 'inflation spectrum' of sorts.

This would be done by using different 'market baskets' that are clearly relevant to different income groups. When the price of stocks or real estate or art skyrockets, the 'cost of being rich' goes up dramatically. This kind of statistical initiative would provide much more valuable information for policy makers than the current use of the CPI or the GDP deflator as a measurement of the 'burden' that inflation is supposedly imposing on all of us.

See if you can't discuss this with your economists friends over at the EPI. Then, perhaps you'll want to spend some time reading through this:

Make The American People Richer.

**Update**:Here is a link to the thread so you can follow the follow-up comments as well.

If I am reading this right, it seems that the inflation indicator is skewed toward the investor and wealthy classes. That is to say: the poor and middle class can be sinking by the effects of inflation, but because their inflationary pressures are never measured, the reality never gets reported.

I have watched this debate between Mish (Global Economic Analysis) and Barry Ritholtz (Big Picture). If what Mr. Kroeger is saying is correct, both of them would be correct from their own point of view.

What do my readers think?

More Student Loan Abuses By Lenders Alleged

From Today's Washington Post:

Lenders Misusing Student Database

Improper Searches Raise Privacy Fears

By Amit R. Paley
Washington Post Staff Writer
Sunday, April 15, 2007; A01

Some lending companies with access to a national database that contains confidential information on tens of millions of student borrowers have repeatedly searched it in ways that violate federal rules, raising alarms about data mining and abuse of privacy, government and university officials said.

The improper searching has grown so pervasive that officials said the Education Department is considering a temporary shutdown of the government-run database to review access policies and tighten security. Some worry that businesses are trolling for marketing data they can use to bombard students with mass mailings or other solicitations.

Students' Social Security numbers, e-mail addresses, phone numbers, birth dates and sensitive financial information such as loan balances are in the database, which contains 60 million student records and is covered by federal privacy laws. "We are just in shock that student data could be compromised like this," said Nancy Hoover, director of financial aid at Denison University in Ohio.

Education Department spokeswoman Katherine McLane said the agency has spent more than $650,000 since 2003 to safeguard the database. The department has blocked thousands of users that it deemed unqualified for access after security reviews, McLane said, and it has blocked 246 users from the student loan industry for inappropriately accessing the data.

In general, the department allows lenders to search records in the database only if they have a student's permission or a financial relationship with the student.

The department has been "vigilant in its monitoring for unauthorized uses" of the database, McLane said.

Concerns about possible abuses of the database are emerging as the student loan industry is under investigation by congressional Democrats and the New York attorney general. Critics say the $85 billion-a-year industry has cozied up to government and university officials who are in a position to help lenders.

For the complete story, click the link.

No Free Lunch

Today I got a letter inviting me to an Internet Income Training (aka Internet Marketing Training, aka Internet Marketing Conference) seminar to be held on three dates in Oklahoma City. You can see a virtually identical copy of the letter here. There was a little insert in the envelope signed by a "C. R. Sanderson." I did a Google search for "C. R. Sanderson Internet Income Training" and this page came up first. This "C. R. Sanderson" (aka Clint Sanderson, aka C. Rex Sanderson) apparently has quite a history.

The other letter is signed by a "C. Kevin Oliver."

RipOffReport.com has a link that leads you to believe they have checked him out and found him to be legit. But really now, why all the name changes? Why so many bad reports?

The Better Business Bureau has an alert about the company here.

An article in the Billings Gazette says this:

Scams du jour

Despite being on the national Do Not Call list, a retired couple living in Shepherd is receiving a rash of telephone calls recently that sound like scams.

The caller claims to represent a law office and says he has an "important message" and they should call immediately. The couple isn't biting.

Also, one reader who received a flier for seminars in Billings thinks the offer of making big money by working part time on your home computer sounded too good to be true.

The flier promises two free meals and business organizer if she and a guest would sit through a 1 1/2 hour presentation Monday and Tuesday in Billings by Internet Marketing Conference. Internet Marketing's Vice President Clint Sanderson apparently uses other company names such as iMergent Inc, StoresOnline Inc., and iNetSeminars.

The sales literature contains testimonies from purported clients claiming they make more than $50,000 a month using this method.

So, the reader hopped on the Internet and found media articles saying that Sanderson has been involved in at least two lawsuits. The state of Utah alleged violations of federal securities laws and the Texas attorney general filed an injunction to stop SOL from misrepresenting the amount of income that can be made using SOL Web sites.

Here is what the Texas Attorney General Website says:

iMergent / Storesonline.com (August 2005)

Utah-based business opportunity marketer iMergent, doing business as Storesonline.com (SOL) sold website packages that included storefront websites, store building software, credit card processing licenses and coaching assistance. Formerly known as Galaxy Mall Inc., SOL claimed its software and services would enable consumers to create successful websites and sell their own products or services online at a large profit. SOL’s products were marketed through hotel seminars and training sessions held in cities across Texas. The total price could top $4,000.

On February 22, 2005, the OAG filed suit in Bexar County District Court against iMergent Inc. and its officers, Brandon Lewis and Donald Danks. The lawsuit came in response to consumer complaints that the software did not work and that the company charged for technical support it had advertised as being free.

Lawsuit Press Release

On August 11, 2005, the Attorney General obtained an Agreed Temporary Injunction that bars SOL from engaging in these illegal acts. Negotiations are continuing on attorney fees, notice to consumers and restitution for consumers who file complaints.

Based on the letter I received, it looks like they have changed the name to StoresOnlinePro.com.

Besides the lawsuit from the Texas AG's office, there is another private law firm that apparently has filed a class action lawsuit against the company.

This enterprise has expanded to almost every other English-speaking country: Canada, England, Australia and New Zealand.

Based on the information gleaned from the internet, consumers and small-business owners who wish to have a web presence should be extremely careful about doing business with any of these entities. The vast majority of the information obtained (especially from the government entities) have resulted in negative feedback or reports about the company or companies.