June 24, 2021

Extended Warranties for Cars Are ‘Fraught With Peril for Consumers’

As a single mother with one child, she worried about an unexpected repair on her six-year-old car and signed up with Driver’s Protection of St. Louis. “She fooled me. I bought it,” she said.

After she paid about $2,000 in premiums, the car’s check-engine light came on. She was pleased that she had the policy because the engine was supposed to be covered. But the company said that the specific engine parts needed were not listed in the contract. So she took out a $550 loan to get her car fixed. The company did not respond to her request for a refund. Officials at Driver’s Protection could not be reached at either at the company’s phone number or through its Facebook page.

More and more customers like Ms. Latham are interested in vehicle service contracts. The business is expected to grow to involve billions of dollars in sales, according to a 2019 report by Colonnade Advisors, an investment banking firm based in Florida.

The reason for the growth: People are keeping their vehicles longer, and they worry about repair costs — particularly during the pandemic. “The last thing people wanted to do was taking public transportation or being without a vehicle,” said Gina Cocking, Colonnade’s chief executive. “Having a vehicle service contract was a pitch that resonated with a lot of people.”

Service contracts are also becoming more familiar, Ms. Cocking said. People buy them for smartphones and refrigerators and increasingly see them on television. “Those commercials are coming on all the time. When you see those, it starts to normalize the product,” she said.

While business is increasing, so are complaints, according to the B.B.B. In 2019, the Better Business Bureau in the United States and Canada got about 6,700 complaints about companies offering service contracts. Last year, that increased 21 percent to almost 8,200.

That may not seem like a large number nationwide, but a small number of complaints is not necessarily a gauge of consumer satisfaction, said Amy J. Schmitz, a law professor at the University of Missouri, where she specializes in consumer protection. A 2004 survey by the Federal Trade Commission found that only about 8 percent of unhappy consumers filed complaints with state or federal officials.

Article source: https://www.nytimes.com/2021/06/24/business/extended-car-warranties.html

Banks Slowly Offer Alternatives to Overdraft Fees, a Bane of Struggling Spenders

“The most egregious practices are largely the same as they have been for nearly 20 years,” said Rebecca Borné, a senior policy counsel at the Center for Responsible Lending, an advocacy group. “Charging a fee averaging $35 apiece for things that cost the bank very little, charging overdraft fees on small debit transactions, charging up to $140 in fees in a single day and calling that a limit.”

It’s not clear whether the Consumer Financial Protection Bureau or other regulators will pursue any changes. “Overdrafts have the potential to be very costly for consumers,” a bureau spokeswoman said, “and we are continuing to monitor market activity in this area.”

But lawmakers have taken notice. Democrats in both chambers of Congress plan to reintroduce bills that would create more overdraft protections, banning overdraft fees on debit transactions while adding other safeguards.

And during a hearing last month, Senator Elizabeth Warren, Democrat of Massachusetts, rebuked big bank executives for continuing to charge overdraft fees to struggling consumers during a pandemic.

Ms. Warren called Jamie Dimon, the chief executive of JPMorgan Chase, “star of the overdraft show,” noting that his bank collected nearly $1.5 billion in overdraft fees last year. (A JPMorgan spokeswoman said it waived more than $430 million in overdraft fees at customers’ requests from January 2020 through March 2021.)

Many large and regional banks offer accounts without overdraft fees, where overdrawn amounts are simply declined, but some have begun only recently: Chase began offering such account in 2019, and Wells Fargo started last year. The top 20 banks nonetheless collected about $6 billion in overdraft fees in 2020, down 32 percent from 2019, while the three largest banks, Bank of America, JPMorgan and Wells Fargo, accounted for $4 billion of that, Mr. Cassidy of RBC Capital said.

In many cases, however, it has been smaller banks that have netted outsize fees. Aaron Klein, a senior fellow at the Brookings Institution, recently found that several small banks had become “overdraft giants, relying on overdraft fees as their main source of profit.” At six banks, overdraft revenues accounted for more than half of their profit, he said.

Article source: https://www.nytimes.com/2021/06/22/your-money/overdraft-fees-banks.html

Add Boats to the List of What’s Hard to Find (and More Expensive)

“It’s the first time I’ve owned a boat, because I was told you don’t own these things, you charter them,” Mr. Pierce said. “I had multiple problems with chartering. There was a general lack of availability but also a lack of choice.”

Mr. Pierce, who divides his time between Puerto Rico and Florida, said he justified the purchase because he lives next to the water. But in his first few months of ownership, he has been paying what he called “a never-ending stream of expenses you don’t expect.”

“It consumes a great deal of capital,” he said. “Yesterday, I got a bill for some woodwork, and it was $150,000.”

One alternative between outright ownership and chartering is the country club model. Barton Gray and Freedom Boat Club are two of the big clubs. Their members have access to a wide range of boats but have to reserve them and may not always be able to use the boat they want when they want it — on Father’s Day, for instance, or the Fourth of July, when lots of members want to be on the water.

The goal of the Freedom Boat Club, which is owned by the large boat maker Brunswick, is to get people out in smaller vessels that they can captain themselves. The club charges an initiation fee of $5,000 to $7,000 and then monthly dues of $350 to $450, depending on the market. Its 40,000 members have access to about 3,200 boats, all under 24 feet long.

Freedom Boat Club has added nearly 10,000 members since the pandemic began, said Brenna Preisser, president of the business acceleration division at Brunswick. “Boating is one of those great social-distancing activities,” she said, adding that the club has one boat for every eight to 10 members.

Barton Gray operates more like a full-service country club, charging a $20,000 initiation fee and annual dues. Those dues vary from $39,000 to use the smallest boats, at 36 feet, to $114,500 to use any boat in the fleet and to be first in line for reservations a season in advance. (In the summer, the boats are up North, but they go to Florida and the Carolinas for the winter.) Most members pay $54,000, which gives them access to all the boats but limits them to booking four charters at a time.

Article source: https://www.nytimes.com/2021/06/18/your-money/boats-sales-charters-wealthy.html

That Cheap Car Rental May Be a Fraud

One of the complaints, from early June, involved a call to a company purporting to be Budget. The consumer paid $280 on a prepaid Visa card. When he couldn’t reach the number again — the line was repeatedly busy — he found and called the actual Budget number and was told that no reservation had been booked and that he should report the fraud to the authorities.

Another complaint, in late May, said a company that the consumer believed to be Alamo had “pretended to rent me a car only to take my money and stop answering the phone.”

“The bottom line is that, always, the car doesn’t exist,” said Claire Rosenzweig, chief executive of the Better Business Bureau serving metropolitan New York.

Enterprise Holdings, which includes the Enterprise, Alamo and National brands, doesn’t consider these cases to be “prevalent” but has had recent reports of “some gift card-related issues,” a spokeswoman for the company, Lisa Martini, said in an email. Enterprise alerted customers about the gift-card scheme in March.

Enterprise accepts prepaid cards as payment only at the end of a rental and will not ask for payment information or card numbers over the phone, Ms. Martini said. Prepaying for a reservation may be an option but is never mandatory.

“A website that requires payment or asks for the purchase of a gift card, and to provide the card number and PIN, should cause alarm,” she said.

Similarly, Hertz “will never ask you for prepaid card details over the phone as these cards are ONLY accepted at time of return,” its website says.

Article source: https://www.nytimes.com/2021/06/18/your-money/fake-rental-car-sites.html

From the Heart to Higher Education: The 2021 College Essays on Money

Despite the loud busking music, arcade lights and swarms of people, it was hard to be distracted from the corner street stall serving steaming cupfuls of tteokbokki — a medley of rice cake and fish cake covered in a concoction of hot sweet sauce. I gulped when I felt my friend tugging on the sleeve of my jacket, anticipating that he wanted to try it. After all, I promised to treat him out if he visited me in Korea over winter break.

The cups of tteokbokki, garnished with sesame leaves and tempura, was a high-end variant of the street food, nothing like the kind from my childhood. Its price of 3,500 Korean won was also nothing like I recalled, either, simply charged more for being sold on a busy street. If I denied the purchase, I could console my friend and brother by purchasing more substantial meals elsewhere. Or we could spend on overpriced food now to indulge in the immediate gratification of a convenient but ephemeral snack.

At every seemingly inconsequential expenditure, I weigh the pros and cons of possible purchases as if I held my entire fate in my hands. To be generously hospitable, but recklessly drain the travel allowance we needed to stretch across two weeks? Or to be budgetarily shrewd, but possibly risk being classified as stingy? That is the question, and a calculus I so dearly detest.

Unable to secure subsequent employment and saddled by alimony complications, there was no room in my dad’s household to be embarrassed by austerity or scraping for crumbs. Ever since I was taught to dilute shampoo with water, I’ve revised my formula to reduce irritation to the eye. Every visit to a fast-food chain included asking for a sheet of discount coupons — the parameters of all future menu choice — and a past receipt containing the code of a completed survey to redeem for a free cheeseburger. Exploiting combinations of multiple promotions to maximize savings at such establishments felt as thrilling as cracking war cryptography, critical for minimizing cash casualties.

However, while disciplined restriction of expenses may be virtuous in private, at outings, even those amongst friends, spending less — when it comes to status — paradoxically costs more. In Asian family-style eating customs, a dish ordered is typically available to everyone, and the total bill, regardless of what you did or did not consume, is divided evenly. Too ashamed to ask for myself to be excluded from paying for dishes I did not order or partake in, I’ve opted out of invitations to meals altogether. I am wary even of meals where the inviting host has offered to treat everyone, fearful that if I only attended “free meals” I would be pinned as a parasite.

Although I can now conduct t-tests to extract correlations between multiple variables, calculate marginal propensities to import and assess whether a developing country elsewhere in the world is at risk of becoming stuck in the middle-income trap, my day-to-day decisions still revolve around elementary arithmetic. I feel haunted, cursed by the compulsion to diligently subtract pennies from purchases hoping it will eventually pile up into a mere dollar, as if the slightest misjudgment in a single buy would tip my family’s balance sheet into irrecoverable poverty.

Will I ever stop stressing over overspending?

I’m not sure I ever will.

But I do know this. As I handed over 7,000 won in exchange for two cups of tteokbokki to share amongst the three of us — my friend, my brother and myself — I am reminded that even if we are not swimming in splendor, we can still uphold our dignity through the generosity of sharing. Restricting one’s conscience only around ruminating which roads will lead to riches risks blindness toward rarer wealth: friends and family who do not measure one’s worth based on their net worth. Maybe one day, such rigorous monitoring of financial activity won’t be necessary, but even if not, this is still enough.

Article source: https://www.nytimes.com/2021/06/18/your-money/college-essays-on-money.html

With Start of Hurricane Season, It’s Time to Consider Flood Insurance

Homeowners can buy private coverage to add to their federal flood policies or buy an entirely private policy. Private coverage is offered by independent companies, including Lloyd’s of London, TypTap and Aon Edge. It often offers much higher coverage limits, as well as extra benefits like “loss of use,” which pays for your lodging if your home is uninhabitable. Private insurers, however, don’t have to offer you coverage if they consider your property too risky. And they may decline to renew your policy if your property is, in fact, damaged in a flood.

Unlike federal flood policies, private policies typically don’t include a surcharge for second homes that can greatly increase the annual premium.

Mr. Braley cited what he described as an “extreme” example: A small, historic house in Oak Bluffs on Martha’s Vineyard qualified for a private policy of $1,700 a year, compared with $11,800 for a federal policy.

It’s worth getting a quote for private coverage to compare with federal coverage to see which works best for you, said Amy Bach, executive director of United Policyholders, a consumer advocacy agency.

Here are some questions and answers about flood insurance:

Is flood insurance required?

If you have a property in a high-risk area, your mortgage lender will probably require you to carry flood insurance. You may want to buy coverage, however, even if your home is in an area that traditionally has not flooded. A quarter of flood claims come from properties outside high-risk areas, according to FEMA, but most homeowners in those areas are eligible for lower rates.

Because of climate change, it’s not just properties near the coast that are at risk from flooding, Ms. Bach said. Inland homes can be inundated by heavy rain, and properties near hilly areas devastated by wildfires can suffer erosion, leading to damage by flash floods.

“Don’t assume if your area hasn’t flooded before, it won’t now,” she said. “We’re in a new era.”

According to FEMA, one inch of water can cause $25,000 in damage.

Article source: https://www.nytimes.com/2021/06/11/your-money/flood-insurance-cost-coverage.html

Federal PLUS College Loans Can Trap Parents in Debt

“Things really spiral out of control for borrowers who face repeated economic or financial ups and downs, especially when they have high-interest loans like PLUS loans,” Mr. Looney said.

“For a financially secure, high-income parent that makes automatic payments,” he added, “the loans work fine. But if anything bad happens, it’s a disaster.”

Parent PLUS loans also have fewer protections than other student loans. If borrowers can’t afford to pay, they generally have access only to the most expensive income-driven repayment plan, which requires borrowers to pay 20 percent of their discretionary income for 25 years; anything remaining is forgiven. Like other student debts, PLUS loans are not automatically discharged through bankruptcy, but require a separate proceeding with more stringent legal hurdles. The consequences of default are serious: The government can confiscate tax refunds and garnish wages and Social Security.

While data on default rates for parent PLUS loans is limited, they are far lower than for loans taken by undergraduates — but still worrisome, student loan researchers said. To keep debts manageable, parents should borrow no more than what they earn in a year — for all children, said Mark Kantrowitz, an expert on financial aid.

“A significant portion of parents are borrowing more,” he added.

Misty Wyscarver, 55, of Caldwell, Ohio, has put her four children through college, and now carries nearly $194,000 in parent PLUS loans for three of them. Her youngest graduated in May 2020.

“We qualified for very little student aid,” Ms. Wyscarver said. “The kids only received Pell grants when two kids were enrolled at the same time.”

Despite the heavy load, she may be one of the more fortunate. As a public servant for more than 30 years, Ms. Wyscarver qualifies for the public service loan forgiveness program, which, given her salary of $50,000, reduces her monthly payments to about $250 from $2,000. After 120 payments, over 10 years, any remaining balance is forgiven. But to remain eligible through the nine years of payments remaining for her youngest child’s education, she needs to continue holding a qualifying job.

Article source: https://www.nytimes.com/2021/06/06/your-money/parent-plus-loans-debt.html

Ron Lieber: Invest in the People You Love

During the pandemic, Ms. Reynolds, who lives in Seattle, paid for a lawyer to help relatives of a deceased friend from Minneapolis who were trying to navigate the legal process after her death. “Going through probate alone is like walking through a country where they speak a language that you have never even heard before,” she said.

Having the money to pay to help friends is not a requirement, though. In the years after her husband’s death, Ms. Reynolds found herself easily remembering the birthdays and death anniversaries that people close to her were marking — or was just more inclined to text when she was thinking of them.

“One version of this is ‘I have more, so I will spend more to care for the people I love,’” said Mr. Woodland, the social worker who runs the therapist network. “I also think it’s almost easier to spend money than to spend time, to say that ‘I prioritize you and want to know you in a more intimate way.’”

Among couples with children, time has often been its own fraught asset these 15 months. Even if you won back your commuting time, you may have been stuffed in a home with two adults working and children who needed all manner of supervision. It has been a form of quality time, perhaps, but maybe not precisely what you needed to renew or reinforce your romantic bonds.

To people seeking to shore those up, Eve Rodsky offers a counterintuitive possibility: Be as thoughtful about spending time apart as you are about time together. Ms. Rodsky, the author of “Fair Play: A Game-Changing Solution for When You Have Too Much to Do (and More Life to Live),” learned this from surveying 1,000 members of the community that she has built around her work.

Many people have changed during the pandemic. Maybe your partner has in ways you haven’t even recognized. So offering time — and a budget — toward whomever that person wants to become is its own act of service.

“The permission to be unavailable to each other is the investment that they have in each other,” Ms. Rodsky said in a recent interview. Now, she and her husband each have a weekend day to themselves; she has Saturday this week.

Article source: https://www.nytimes.com/2021/06/05/your-money/best-investment-people-you-love.html

Here Are Some Tips for Teenagers on Landing a Summer Job

Teenagers should keep in mind that they may be competing against more experienced people for job openings, as unemployed adults are also looking for work, Mr. Challenger said. So if you lack an employment history, emphasize other qualities: Flexibility is often an advantage for younger applicants, who may be able to accommodate a patchwork schedule that combines weekdays, evenings and weekends.

It’s also smart to do some basic online research about the company you’re applying to, Ms. Konkel of Indeed said.

Laura Francis, a career strategist in Oakland, Calif., who works with teenagers, advised doing “reconnaissance” of businesses you might be interested in to see what employees were wearing so you could dress accordingly.

Be aware that many shops and restaurants need to hire urgently right now. “This summer is different,” she said. “These places are hungry to hire.” So while you may be planning on simply checking out a location and dropping off an application, you may be asked questions on the spot.

“Be ready,” Ms. Francis said. Dress like you’re looking for a job, and have something to say about why you want to work there and what you can offer. And don’t be shy about following up if you don’t hear back right away.

“Don’t worry about being pesky,” she said. “You want it. Go get it.”

If you are an employee of a company, your employer will generally withhold payroll taxes, like those for Social Security and Medicare, from your paycheck. “There’s no getting out of that,” said Rhonda Collins, the director of tax content and government relations for the National Association of Tax Professionals. (The I.R.S. allows an exception for children under 18 who work for their parents in a family business.)

Parents might want to talk with teenagers to explain why their first paychecks will probably be less than what they have calculated in their heads, said Cari Weston, the director of tax practice and ethics with the American Institute of Certified Public Accountants.

Article source: https://www.nytimes.com/2021/06/04/your-money/getting-a-summer-job.html

How to Tell if a Company’s Claim of Ethical Practices Is True

Vital Farms said in a statement that it intended to defend itself against the accusations and that its practices had been independently audited.

“We are transparent about what happens to male chicks as well as what happens once hens reach their post-laying life,” the statement said. “As for the industry-standard practice of dulling the tips of hens’ beaks, that is not done to harm the birds, but to protect them.” It added, “We are pleased to offer products that value animals including by providing hens a meaningfully better life than the confinement they would face in the industrialized food system.”

Nisha Devarajan, a spokeswoman for Vital Farms, declined to go beyond the statement or to make the executives named in the suit available to talk, citing the litigation.

What investors can do involves the same type of due diligence they do with any investment, just through a sustainable lens. Doug Heske, chief executive at Newday Impact, which manages $250 million with a sustainability strategy, said the firm looks at not just how the company treats its shareholders but also all the people who contribute to what the company does.

“For us as an organization, there’s this common thread that runs through most companies that behave in a responsible way, and it’s rooted in long-term decisions and strategies,” he said. “That’s a driver of returns. There’s no such thing as a perfect publicly traded company.”

Investors can also look for any shareholder actions.

“Look at the range of shareholder resolutions filed urging changes in policy or disclosures,” said Timothy Smith, director of E.S.G. share owner engagement at Boston Trust Walden, a wealth management firm.

Victor Zhang, chief investment officer at the asset manager American Century Investments, said that after making an investment, investors needed to check in regularly to ensure the company’s E.S.G. practices remained the same. It’s often easier to monitor and police larger companies for greenwashing than smaller, niche companies, he said.

Article source: https://www.nytimes.com/2021/05/28/your-money/company-ethical-practices.html