Archive for May 2011

Twitter and Credit Cards Not A Good Mix (Forbes)   Leave a comment

Blippy, the service that was backed by Twitter co-founder Evan Williams, allowed users to announce and share their purchases with credit cards on Twitter. But, despite prestigious venture capital backing and a cute name, the service never caught on and is now being shut down.

The concept was to create a new social ecommerce platform where registered users could broadcast their credit card purchases on Twitter and share the thrill of the purchase with friends and others in the Blippy community. Customers could “tweet” their receipts so every time they bought a pair of shoes, IPAD, or even a movie ticket, they could share the experience and get feedback in the form of comments or reviews from other Blippy users. The idea was interesting, but customers didn’t bite. The site attracted only 100,000 registered users, and of that, only 30% used Blippy’s services to share data.

Blippy is based in Silicon Valley and backed by leading venture capital firms and angel investors including Charles River Ventures, August Capital, Sequoia Capital, Ron Conway, Philip Kaplan, Evan Williams, Jason Calacanis, James Hong, and Ariel Poler.

According to, the company was valued at $46.2M last year. Management says Blippy is not folding, but rather using what it learned to initiate some new projects. It will not be using its resources to continue Blippy in its current business model, however.

The model never took off with consumers as people are growing more cautious about sharing their personal information online. The growth of identity theft around the world has created an unwillingness to expose personal data, especially for recreational purposes.

Blippy actually had a small security leak and that may have contributed to the demise of the once-touted service.

Ashvin Kumar, CEO of Blippy, was quoted on as stating: “The decision was whether to focus Blippy on mobile products or try something new and we made the decision that we wanted to try something new…Our key product metrics haven’t gone up, we iterated a lot but not enough to create significant user adoption, at least not enough to warrant us spending more time on it.”

Blippy’s story is evidence that start-ups’s are cyclical. Just In April 2010, the company was worth approximately $42.million.  In January 2010, the Twitter for Credit Card Company raised $1.6 million in seed capital from big names such as Sequoia Capital, Charles River Ventures and Chief executive Arie Poler. Investor’s such as Sequoia’s Roelof Botha and William’s were customers.
Analogous to most new companies, when media paid attention traffic grew. Otherwise, the company struggled.  Blippy also has privacy issues. Many credit card transactions were erroneously exposed. Before the company could establish an updated security plan, a problem occurred with the electronic portion that protects against fraud.

Blippy is not giving up just yet.  The company is working hard to learn from their mistakes and create new projects. Plans are in the works, which they have not discussed yet.


Posted May 28, 2011 by ilanamelissagreene in Uncategorized

Credit Card Defaults and Unemployment Rates on the Rise Again (Forbes)   Leave a comment

After months of credit card defaults and unemployment rates decreasing, the latest S&P/Experian credit indices and the U.S. Bureau of Labor Statistics data show that April 2011 is a whole different story. Data released through the month shows an increase in the number of Americans who defaulted on credit cards and lost their jobs.

The Numbers

The data recently released for the S&P/Experian Consumer Credit Default indices through April 2011 reports changes in consumer credit defaults. April marked the first time in eleven months that there has been an increase in bank card rates, and second mortgage rates also showed a significant increase. Bank card defaults rose from 5.59% in March to 5.91% in April, while second mortgage defaults rose from 1.42% to 1.51%. Additionally, according to the U.S. Bureau of Labor Statistics, the unemployment rate went from 8.8% in March to 9.0% in April, back to where it was at the beginning of the year.

What This Means

In April, credit card default rates increased by 5.71% from the previous month, but this is still an overall credit card default rate decrease of 35.45% from the same time last year. Second mortgage rates are also down by 39.39% from this time last year, despite the fact that there was an increase of 6.03% from last month. The Managing Director and Chairman of the Index Committee for S&P Indices, David M. Blitzer, questions whether these changes are simply temporary or the beginning of a descent backwards.

As far as unemployment rates are concerned, the lowest rate in 2010 reported by the U.S. Bureau of Labor Statistics was 9.4%. Therefore, 9.0% might not necessarily indicate that things are worsening. Though there are ups and downs, the economy has been slowly recovering. Hopefully, we will see unemployment rates climb back down to 6% or even 5% as they were back in 2008 before the worst of the economic downturn had hit.

Posted May 28, 2011 by ilanamelissagreene in Uncategorized

Can We Still Trust Debit Cards?(Forbes)   Leave a comment

Earlier this month, debit PIN pads were tampered with at Michael’s locations throughout the Chicago area, which exposed the credit and debit card information of the craft store’s customers. Now, the company has discovered that the fraud reached throughout 20 states, which include 90 keypads in 80 stores in the country. The security breech impacted check line terminals in Illinois, Colorado, Delaware, Georgia, Iowa, Massachusetts, Maryland, North Carolina, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Virginia and Washington. Over the years, consumers have become dependent on debit cards.  The surprising news about the breech at Michael’s is a huge blow as many customers view debit cards as a reliable, safe and easy method of payment.

Michael’s originally removed 964 pads that showed signs of tampering. But now with the discovered extent of the problem, they’re removing another 7,200 as a precautionary measure. All PIN pads are being carefully scrutinized in each one of its Canadian stores as well. Until the replacement of all of the pads with new models is complete, consumers are advised to use cash, credit cards or signature-based debit cards.

Breeches with these types of terminals are not uncommon. Often, they occur when criminals pretending to be keypad repair contractors gain access to employees’ machines.  Scammers then switch the pads in the machines with fraudulent ones. These new pads then record account numbers from the magnetic stripe and PIN codes of customers’ cards. As soon as the devices become filled with card data, scammers can upload the information from the terminals through a cellular network.  With this data, scammers can produce forgeries of cards. The process is relatively simple and usually only requires a white piece of plastic.

While the company refused to provide specific details, we do know that banking and law enforcement executives reached out to Michael’s to inform the company of the fraudulent transactions. Credit card companies are working with Michael’s to target the specific cause of the fraud.

In the mean time, Michael’s advises customers to check with their financial institutions for signs of potential tampering. Any customer who notices fraudulent activity on their accounts should immediately contact Michael’s.  Customers are quick to react to the fraud with a number of customers freezing their bank accounts. At Marquette Bank, 3% of customers that are possible victims of the crime are freezing their accounts.

Although closing accounts and freezing debit cards can help protect customers after the fact, questions remain about how consumers and retailers can prevent such breeches from occurring.  Should retailers eliminate electronic PIN pads entirely and return to requiring signatures for transactions? And should customers consider credit card offers instead of debit cards since signatures are generally necessary for their use? Keeping a close eye on the situation with Michael’s in the coming weeks could lead to answers to these important questions.

Posted May 28, 2011 by ilanamelissagreene in Uncategorized

Consumer Debt Reverses Downward Trend   Leave a comment

The total of all consumer debt has been steadily decreasing over the past two years; prior to the last quarter, it was down 8.2 percent from its peak in 2008. A new report released by the Federal Reserve indicates that the trend is reversing itself. U.S. household debt rose by .3% in the first quarter of 2011.

According to the Fed, rates on delinquencies, foreclosures and bankruptcies are slowly improving. Consumer debt, which includes mortgages, credit cards and student loans, is still lower than it was at its highest point in the third quarter of 2008 and is 15% less than a year ago.

It is still unclear whether or not consumers are paying their debts on charge offs that occurred because of defaults, according to the Fed’s data. The amount of charge-offs totaled $822 billion of household debt from mid-2008 to the end of 2010

Unfortunately, debt has become a way of life for most Americans.  In the last two years, US households have been able to accrue $658 billion in mortgage and credit card debts. In the mid-2000s, consumer debts exceeded the $10 trillion mark.

According to the Fed, credit card limits increased at the beginning of this year to about $30 billion, but have still dropped from their mid-2008 levels. The number of open credit accounts is 24 percent less than its 2008 peak. Since the end of 2008, balances are 20% lower. At a national level, foreclosures have dropped; approximately 368,000 foreclosures were added to credit reports in the first quarter.

Followed by an improvement on revolving and credit card lines, consumers’ borrowing improved for 6 consecutive months in March. As a result, banks are more optimistic and are loosening their policies on lending terms. The effects of these more lax terms will likely to continue the increase in consumer debt; whether Americans learned anything from the recent economic downturn in terms of borrowing conservatively remains to be seen.

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Posted May 24, 2011 by ilanamelissagreene in Uncategorized

American Express Nixes Purchase of Medical Marijuana   Leave a comment

Starting April 30th, consumers using their American Express cards to buy medical marijuana received notice that their cards were declined. The rejection of the cards is due to American Express’ decision to no longer allow purchases of such products with their cards. American Express made this move despite the fact that the purchase of medical marijuana is legal in 15 states.
So far, American Express has given no reason for the new rule, leaving medical marijuana dispensaries and their customers guessing at possible causes. One theory is that the card issuer has received complaints from companies about their employees using their American Express cards to purchase medical marijuana. American Express may also have received a high number of fraudulent or unauthorized charges from medical marijuana dispensaries due to people using forged or stolen cards to obtain pot.
While legal marijuana may be used for illegal purposes, a lot of sick patients need the drug. Many would argue that American Express’ move is an audacious one, wondering how the company can overrule a practice that 15 states have made legal.
Visa, Discover and MasterCard have not established similar policies. Only time will tell if the companies will follow suit, leaving medical marijuana dispensaries as cash and check only enterprises.

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Posted May 24, 2011 by ilanamelissagreene in Uncategorized

Credit Card Companies See Drop in Defaults and Late Payments   Leave a comment

Now that all the data is in, it’s confirmed that five out of the six largest creditcard issuers have reported reductions in late payments and defaults for the month of April. Only Bank of America said that defaults rose.

The 6 largest credit card conglomerates stated that consumers are more aware of their spending and payment patterns. With the exception of Bank of America, late payments and defaults on card balances hit record lows.

Bank of America reported that charge-offs grew to 8.25% of annualized balances last month, up from 8.18% in March. This, however, is significantly lower than the August 2009 peak of 14.53%.

Capital One saw the largest fall in defaults, a decrease from 4.97% annualized and the biggest drop among issuers since 2007.  American Express maintained its position with the lowest default rate of 3.5%. Citigroup had a late payment rate of 3.87%, down from 4.21% in March. Discover ‘s late payment dropped 2.86% in April. JP Morgan’s late payments dropped 3.15%, while Fitch’s uncollectables also reported at a two-year low.

Charge-offs are high from a historical perspective, but numbers are headed towards the former average at a faster rate than initially expected. According to the Federal Reserve ‘s data, the industry charge-off rate grew to 10.9% at one point during the downturn. 

Credit card users are spending more responsibly than they were a year ago. Consumers are improving on a consistent basis. Rates for the largest companies are above the pre-downturn average of 3.82%. The top 6 card issuers reported that in 2008, more than $70 billion in uncollectable debt was written off.

To help avoid late payments, consumers are setting up automatic payments more frequently. Americans are spending wisely and are more likely to buy within their means. As a result, cardholders are carrying less debt. The total revolving debt held by U.S. consumers was $785.04 billion in March compared to a peak of $973.63 billion in August 2008. Credit card companies are smarter as well. Cardholders that defaulted are no longer unable to get credit cards, eliminating the problem before it starts.

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Posted May 21, 2011 by ilanamelissagreene in Uncategorized

Fighting Back Against Debt Collectors   Leave a comment

Debt collectors have a talent for hassling consumers –even those who don’t deserve it. According to the Federal Trade Commission, complaints about debt collectors rose by 17 percent to 140,036 in 2010, nearly triple the number lodged in 2002. Situations regarding collectors account for 27 percent of all FTC complaints.

The problem is not just a federal one; state agencies also receive complaints about collectors. Reportedly in South Carolina alone, 54,147 consumers indicated that they were harassed nonstop by collectors. Of those filing complaints, 4,182 said that collectors went so far as to threaten violence. The South Carolina Department of Consumer Affairs says that debt collection was the top consumer complaint category in the state.

To date, the largest case against collectors occurred in March when West Asset Management, one of the leading accounts receivable companies in the country, settled with the Federal Trade Commission at a cost of $28 billion. The FTC had the company under heavy scrutiny for years after receiving 1,000s of complaints about harassing phone calls. Among the reasons for the complaints were the use of obscene language and inaccurate reporting of debts. As a result of the steep fine, all employees at West Asset Management must now sign disclosures delineating specifically what their duties and liabilities are under the law.

The current Fair Debt Agency is limited on some of the policies that they can enforce. For example, the agency can’t physically block firms from collecting debts. In addition, they can’t create new rules, such as policies pertaining to contact on cell phones, emails and voicemails from collectors. The regulator’s primary goal is to prohibit abusive practices such as harassment, lies and intimidation.

 The FTC currently seeks to help victims of abusive collections practices through educational “Facts For Consumers” brochures. The pamphlets discuss specifically what collectors may do to recover debts. The brochure makes it clear to consumers that collectors may never use threats of harm and violence, false statements or obscene language. They may also not threaten to publish a list of consumers who are unable to pay debts. Educating consumers is necessary. Last year, 30% of consumers that filled out a debt collection complaint stated that they had never received any form of written communication about their debts. The majority of consumers aren’t even aware that they can argue a collection notice in writing. Debt collectors might finally be put in their place when the Consumer Financial Protection Bureau rolls into action on July 21st. The new Agency has the power to aggressively investigate complaints and also write new rules. When it launches, the Consumer Financial Protection Bureau will further examine debt collection Read more:

Posted May 19, 2011 by ilanamelissagreene in Uncategorized