Apr 27 2024

CFPB Report Finds Many College-Sponsored Financial Products Charge High and Unusual Fees

The Consumer Financial Protection Bureau (CFPB) issued a report in December 2023 highlighting that many college-sponsored financial products have higher fees and worse terms and conditions compared to typical market products. The CFPB report identifies college-sponsored deposit accounts with fees above prevailing market rates, which institutions are required to consider under Department of Education rules designed to protect students’ interests.

Many colleges offer sponsored and co-branded financial products to students and alumni, such as deposit accounts, credit cards, and prepaid cards. Students may be likely to accept their school’s recommendation of a bank account or credit card when they arrive on campus, meaning that colleges and their financial institution partners may not face competitive pressure to lower fees or provide low-cost products. These arrangements can be lucrative for schools, as financial institutions pay tens of millions of dollars every year to colleges and universities, including flat-fee marketing deals and per-signup kickbacks.

In 2022, the CFPB’s College Banking and Credit Card Agreements report described the high fees charged on student banking products endorsed by colleges. The report made clear that financial institutions and colleges may be steering students into expensive financial products. Today’s report found that many colleges continue to employ marketing strategies that may mislead students into accepting products that may not be the best choice for them. Among the student risks identified in today’s report:

  • Colleges’ financial product partners may charge students high or atypical fees: Although most of the largest banks have moved away from charging overdraft and non-sufficient funds (NSF) fees in recent years, some of the sponsored deposit accounts in the report do charge students those fees. Thus, students who follow their school’s advice may be steered into accounts that cost them much more than what they would pay in the open market.
  • Fees paid by students often vary by institution type: The average fee burden varies by the type of institution. The report finds that accountholders at Historically Black Colleges and Universities (HBCUs), for-profit colleges, and Hispanic-servicing institutions (HSIs) all pay higher-than-average fees per account.
  • Students face unexpected fees at graduation: Some financial institutions impose additional fees when a student graduates or reaches a certain age, relying on “sunset” clauses in the products’ terms and conditions. Students who sign up for a product marketed as free may thus end up being charged monthly maintenance fees, or overdraft and NSF fees they did not anticipate.

The report notes that the CFPB will continue to examine these practices and identify possible violations of federal consumer financial protection laws.

For more information, click here.


Teaching Suggestions

  1. Ask students if they use college-sponsored and co-branded credit card (s).  If so, what has been their experience?
  2. Is it ethical for colleges and universities to promote college-sponsored financial products? Make a list of pros and cons.

Discussion Questions

  1. Why do many college-sponsored financial products have higher fees and worse terms and conditions compared to typical market products?
  2. Should colleges take a hard look at the fees and terms of the products they pitch to their students and alumni?  Why or why not?
Apr 13 2024

BE READY TO ANSWER THESE INTERVIEW QUESTIONS

Several CEOs were asked “If you could only ask one question of a prospective employee, what would that be?” Here are some examples designed to quickly assess the important skills and personality traits desired in a new hire:

  • How would you describe yourself in one word? The best candidates know who they are, and take time to reflect before answering this question.
  • What is the last thing you’ve learned? This question provides insight into a candidate’s curiosity and passion for learning – two highly desired skills for many work situations.
  • What didn’t you get a chance to include on your resume? This question allows the interviewer to dig deeper than what is on a person’s resume. 
  • How long are you willing to fail at this job before you succeed? While this question might disorient a person, a good candidate will express perseverance for success as well as seeking guidance to guide their path. 
  • What’s in the news today? A person’s awareness of current events can reveal how interesting someone is as a person, and how effective they might be at work. 
  • What percentage of your life do you control? This question can determine if a person can force change to happen or allows change to happen to them.
  • Tell me something that’s true, that almost nobody agrees with you on. This question can reveal people who aren’t afraid to speak their minds and possess originality of thinking.   
  • So, what’s your story? This question has no correct answer, but requires a creative response related to their character, imagination, and ability to communicate a feeling.

Being prepared for these and other questions requires knowing yourself, communicating your competencies and experiences, and researching the company and job position.  One other question you might consider: How did you prepare for this interview?

For additional information on interview questions, click here.

Teaching Suggestions

  • Have students practice their interview skills using some of these questions.
  • Have students talk to others to obtain suggestions for preparing for an interview and tips for effective interviewing.

Discussion Questions 

  1. What mistakes might a person make when answering interview questions?
  2. What actions would you recommend for a person to improve their interview skills?
Mar 30 2024

AVOIDING FINANCIAL ABUSE

According to the Center for Financial Security, nearly every domestic violence Bottom of Formsurvivor also experienced financial abuse. Also referred to as financial exploitation, this domestic mistreatment can result in victims losing access to their financial resources along with having their credit ruined.

A financially abusive relationship may be characterized by:

  • the abuser refusing to share financial information and taking control of the family finances.
  • the abuser uses an intimidation tactic of quickly getting angry when asked about family finances or major purchases.
  • the abuser puts the victim on a very low allowance, which may not even be enough to cover basic needs.
  • the abuser discourages the victim to have a job or harasses the victim at work, which can result in losing their job.
  • the abuser makes late payments or no payments to ruin the victim’s credit. 
  • the abuser forces a power-of-attorney agreement to legally steal money or property from the victim.

Financial abusers attempt to control the relationship by making victims feel powerless and unable to support themselves and their children. To avoid or escape financial abuse while building self-esteem and dignity, take the following actions:

  • Obtain increased financial knowledge, which can allow a person to escape the abusive relationship.
  • Monitor your credit report to determine your current situation and to plan actions to repair your credit.
  • Find a safe place to stay with family, friends, or a shelter to connect to a support network.
  • Clear your browser history, which would not allow the abuser to view your search activity when seeking help.

Financial abuse can occur in marriage and other relationships. Family members and caregivers may steal or misuse the funds of aging relatives.

For additional information on financial abuse, click here.

Teaching Suggestions

  • Have students talk to others to learn about difficult financial relationships they may have encountered.
  • Have students create a visual proposal (poster or slide presentation) with suggestions to avoid becoming a victim of financial abuse.

Discussion Questions 

  1. How might a person become better aware of the signs of a financially abusive situation?
  2. Describe actions you would recommend to a person who faces a difficult financial situation.    
Mar 16 2024

14 DIGITAL ASSET RISKS TO REMEMBER

There is no such thing as a risk-free trade or investment. Generally, bigger expected returns come with a greater risk of loss. The more you understand the risks of your investment, the more effectively you can minimize their potential effects. Here are some common risks associated with digital assets:

1. Unsupervised trading. Over-the-counter cash-market trading platforms—where you can buy or sell digital assets for dollars—are not supervised by regulators like other exchanges, banks, or brokers.

 2. Inconsistent customer protections. Some virtual currency platforms may be missing critical system safeguards and customer protections, such as protection against hacks or segregating customer assets. Without adequate safeguards, you may lose some or all of your digital assets.

3. Commingled customer assets. Over-the-counter trading platforms are commonly custodians of your assets. When you trade, you trade against the platform and your funds are held and recorded by the platform on its centralized system—not the blockchain. In these situations, your assets may be mixed with other customers’ assets, or could be used by the platform for operational purposes. If the platform is hacked, goes bankrupt, or disappears, you may not be able to get your money back.

4. Most new projects fail. And, others could be frauds. Take time to research and understand the project, the technology, use-case, demand, competing projects, governance, who’s behind the effort, the developers’ track records, how your money will be used, and when or if you can get it back. Was the code audited by a reliable third party and security tested? Closely review white papers and other documents. If they don’t make sense, or don’t exist, walk away.

5. Hacker attacks. In a digital environment hacking is always a threat. Hackers generally seek out the greatest amount of money and the least resistance. Only keep funds you are ready to spend or trade in wallets connected to the internet. Keep the rest in a cold (offline) wallet.

6. Phishing attacks. If you receive an email or text about your trading account; a transaction; a new product, wallet, or service; or receive an urgent request to contact customer support, do not click any links, open attachments or use QR codes. Phishing attacks often pose as popular brands or companies and the links provided in the emails go to imposter sites that steal your account.

7. Lost or stolen private keys. Your private key is your digital signature. If it is lost or stolen you will no longer have access to your assets. You can recreate a private key, with your digital wallet’s seed phrase—a string of words that when encrypted create the private key. Never give your private key or seed phrase to anyone.

8. New and novel. Compared to other forms of investing, digital assets are relatively new. They don’t have long, historical track records, which makes it harder to predict how they will react in different market conditions.

9. High volatility. Many digital assets are difficult to value. Uncertainty, changes in sentiment, economic conditions, or even a social media comment, can send market values rising or falling sharply.

10. Liquidity risk. It may be hard to sell digital assets that aren’t commonly traded. Lightly traded assets are also easier to manipulate.

11. Run risk. Stablecoins are not insured, and may not actually be supported by all the stabilizing assets they claim. If stablecoin owners lose confidence and rush for the exits, the panic could lock out some customers and leave them with worthless coins. Runs on one stablecoin can also cause ripple effects in other coins or other parts of the digital economy.

12. Counterparty risk. Blockchain transactions were designed to be unchangeable. Once your digital asset is sent to another wallet you cannot get it back. This makes knowing exactly who is on the other side of a transaction critically important. There are no do-overs or charge-backs.

13. Watch out on social media. Most digital asset scams begin on social media or messaging apps. Never make digital asset payments to people you meet online. And don’t rely solely on tips or claims you see on social media platforms.

14. Data can be manipulated. Criminals can hack social media profiles or easily create new aliases. Fraudulent platforms can also control what you see on their websites or trading apps, and can manipulate you to trade or invest more.

For more information, click here.

Click to access DigitalAssetRisks.pdf

Teaching Suggestions:

  • Ask students if they or their families have invested in digital assets.  If so, what has been their experience?
  • Ask students to prepare a list of potential risks of investing in digital assets.

Discussion Questions:

  1. Why is important to work with trading platforms that are registered to do business in the United States and your individual state?
  2. What can digital assets investors do to mitigate hacker and phishing attacks?
Mar 2 2024

DANGERS OF DEBIT CARD USE

Debit cards do not provide the same protection as credit cards when lost or stolen. As a result, money experts recommend not using a debit card in these situations:

  • When buying airline tickets; if the airline goes out of business, you may have no recourse for a refund.
  • Non-bank ATMs are more likely to have skimmers that steal debit card information.
  • When making a gas station purchase a hold may be put on funds in your bank account, which could result in Bottom of Forman overdrawn balance when trying to make other purchases.
  • Use a credit card for online buying for stronger legal protection to dispute a charge.
  • In restaurants with high turnover, a dishonest employee may get access to your card number; again, a credit card provides more protection.
  • When buying appliances a credit card may give you an extra warranty, which would not be

available with a debit card.

With a debit card you can be responsible for up to $50 of unauthorized transactions if you report a lost or stolen card within two business days. Then, your liability can be as high as $500 for fraudulent charges if you don’t report the situation within 60 days after receiving your statement.  After that, you have the potential of unlimited losses for unauthorized use of your debit card.  In contrast, with a credit card, you are not responsible for unauthorized charges of more than $50.

Consider only using your debit card to withdraw cash to make purchases. Since not everyone will take a cash-only approach to control spending, there is another action to protect yourself. Use a second checking account for your debit card. Fund this second account only with money that you plan to use for debit card activity. Then, in case of a lost card or fraud, you would only lose the smaller amount kept in that second account with your main checking account not at risk. 

For additional information on debit cards, click here.

Teaching Suggestions

  • Have students survey several people to determine common uses of debit cards.
  • Have students create a podcast to warn others of the dangers associated with debit cards.  

Discussion Questions 

  1. Why should consumers become more aware of the potential dangers of debit cards?
  2. What actions do you take to protect your debit and credit cards?
Feb 17 2024

BETTER CUSTOMER SERVICE

Every purchase experience is enhanced by strong customer service. When unsatisfactory service is encountered, the following actions are suggested:

  • Be brief, clear, and concise about the problem and be reasonable about what actions you would like.
  • Consider posting your concern on the company’s social media site.  Many companies monitor social media for customer dissatisfaction.
  • If your complaint involves a bank, credit card company or other financial service provider, file a complaint with the Consumer Financial Protection Bureau at ConsumerFinance.gov/complaints. For other complaints, especially from local companies, the Better Business Bureau might be of assistance.
  • Elliott Advocacy, a nonprofit organization, provides resources and suggests actions to resolve issues. Their website (www.elliott.org/company-contacts) has the names and contact information for customer service managers of most major companies.
  • Another nonprofit advocacy organization is the Consumer Action Center (https://clark.com/about-consumer-action-center/), which helps with consumer problems for free. Phone number is 636-492-5275.
  • For more extensive problems, especially those related to real estate or motor vehicles, Karens for Hire (www.karensforhire.com) is a paid service usually costing less than $100.

When seeking action, be sure to avoid these behaviors to obtain better customer service:

  • Do not communicate anger or hostility, which can result in you being viewed as the problem rather than your legitimate concern.
  • Do not contact the CEO; instead, consider a manager or vice president at the operational level.
  • Do not threaten with not doing business with the company in the future. Saying that could remove the incentive for the organization to address your complaint.

You may need to use an array of tactics to obtain the satisfaction you desire. Remember, not every action will be effective in every situation. Most important, to improve your chances of success, be kind even when you are frustrated. “Polite persistence” is the key. 

For additional information on obtaining better customer service, click here.

Teaching Suggestions

  • Have students talk to others to learn about actions they have taken to resolve consumer problems.
  • Have students create a video, poster, or slide presentation with recommendations for wise shopping and to avoid consumer problems.

Discussion Questions 

  1. What actions do you believe are most effective for obtaining strong customer service when encountering a consumer problem?
  2. Describe a potential consumer problem situation. What actions would you suggest to resolve this concern?    
Feb 3 2024

Do you need life insurance?

Think about your age, your financial situation, and if you have loved ones who depend on your income. If you do decide to shop for life insurance, here are some things to consider.

  1. How much life insurance do you need?

Life insurance helps your loved ones with financial needs when you die. Consider your mortgage and other debts, how much income would need to be replaced, money to cover a funeral, and college for the kids. Add those up, and you’ll have a good idea of how much insurance you’ll need.

2. Term or permanent?

There are two main categories of life insurance:

Term life insurance is the simplest and least expensive option. It covers you for a set period of time. You might consider term life insurance when you have a family that depends on your financial support or while you have a mortgage. For example, you may want a term life policy that lasts until your children are out of school.

Permanent life insurance provides coverage for your entire life as long as you keep up the payments. Because of the length of coverage, it costs more than term life insurance. These policies may have features that offer a cash value that can be used to invest or pay some of the premiums later in life. Permanent life policies are complicated so it’s best to talk to a financial planner when deciding if one is right for you. If you do buy a permanent life policy, make sure to check with your agent each year to see how the policy is doing and if you need to adjust your payments.

3. How much will it cost?

Insurance companies consider things like your age, health, job, and tobacco and alcohol use when setting prices. It will cost more to purchase life insurance as you get older and if you have health problems. Some companies may require a medical exam before selling you life insurance.

4. Who will benefit?

You can leave money to a spouse, children, other family member, or friend. This is known as the policy’s beneficiary. You can also name an institution as your beneficiary, such as a business or charity. And you can choose more than one beneficiary and specify how the money will be divided.

For more information, click here.

Teaching Suggestions:

  • Have students create situations which point out the different reasons for buying Life Insurance.
  • Have students survey several other people to determine their reasons for buying Life Insurance.

Discussion Questions:

  1. What is the relationship between age and the amount a person pays for life insurance?
  2. What personal, social, and financial factors should influence the amount of life insurance a person might desire?
  3. Why might many insurance agents dissuade you from buying low-cost-term insurance?
Jan 20 2024

Money in Retirement

Is your money going to run out in retirement?  If you don’t plan ahead you could face some financial challenges in retirement. The best way to make sure you have money for the long-term to live the life you want to lead in retirement is to get an early start by setting goals and creating a saving and investing plan that will help you achieve those goals. If you’re getting a late start, don’t lose hope. There are ways you can make up some ground.

Start Early

The earlier you start, the less money you’ll need to invest to reach your financial goals. And, there’s a great feature that really helps build wealth. Through the power of compounding, you can earn interest on the money you save and on the interest that money earns. You can watch your money grow over time even if you only put a small amount of money into savings right now.

Set Goals

Consider the lifestyle you want to lead. Here are some important questions to ask yourself as you plan your retirement:

  • Have you thought about major living expenses related to housing, healthcare, food, clothing, and transportation?
  • Do you like to spend money at will or are you the type of person who always lives within a budget?
  •  What types of leisure activities and hobbies do you hope to pursue in retirement?

Make a Plan

Now that you’ve considered your lifestyle and goals, it’s time to make a plan. Investor.gov has free financial planning tools and resources that can help. It’s saving and investing roadmap and Savings Goal Calculator can help guide you as you create a plan that helps you reach your goals. Whenever you’re creating a plan, it’s important to consider your risk tolerance, investment options, fees/costs involved in investing, your debt, and keeping money into an emergency fund.

Contribute to Your Employer’s Retirement Accounts

Contribute to your employer’s retirement accounts, such as a 401(k), 403(b) or 457(b) plan. Most importantly, if your employer contributes to these accounts, take full advantage of these matching funds. Suppose, your employer contributes 50 cents for every dollar you save up to five percent of your salary. If you make $50,000 a year, and contribute at least $2,500 to these accounts, your employer will add an extra $1,250 to that amount. That’s an immediate 50 percent return. Take advantage of the “free money” as no other investment will give you that kind of guaranteed return. Also, start your own Roth or a traditional IRA.

Make Up Ground

If you’re getting a later start, there are ways you can make up some ground. If you’re over 50, you can consider contributing more to your workplace and individual retirement plans. The IRS allows investors to contribute $22,500 per year to a workplace retirement plan, like a 401(k), but will allow you to make an additional $7,500 in “catch-up” contributions if you are over the age of 50. Similarly, you can contribute $6,500 per year to an IRA that you set up yourself, but investors over 50 can contribute an additional $1,000 per year. 

Enough Money

Starting early, setting goals, creating a diversified plan for the long term, making regular contributions to your retirement accounts, and sticking to your plan all adds up to helping to make sure you have enough money in your retirement to live the life you want to lead.

For More Information, click here.

Teaching Suggestions:

  • Have students suggest actions that can be taken at different stages of the adult cycle to have financially successful retirement.
  • Ask students to create a list of non-financial actions that a person can take to plan for a fulfilling retirement.
  • Create a list of factors that influence the spending patterns of retired individuals.

Discussion Questions:

  1. What financial and personal difficulties are associated with inadequate retirement planning?
  2. Why is an IRA still beneficial for retirement planning even for individuals who may not qualify for the contribution deduction?
Jan 6 2024

Artificial Intelligence in Forecasting Severe Storms, Hurricanes, Floods, and Wildfires

Government Accounting Office (GAO) found that machine learning, a type of artificial intelligence (AI) that uses algorithms to identify patterns in information, is being applied to forecasting models for natural hazards—such as severe storms, hurricanes, floods, and wildfires—that can lead to natural disasters. A goal is to improve the warning time for severe storms.

 GAO identified potential benefits of applying machine learning to weather forecasting, including:

  • Reducing the time required to make forecasts.
  • Increasing model accuracy.
  • Reducing the uncertainty of model output.

Forecasting natural disasters using machine learning GAO also identified challenges to the use of machine learning. For example:

  1. Data limitations hamper the training of machine learning models and can reduce accuracy
  2. A lack of trust and understanding of the algorithms as well as concerns about bias
  3. Limited coordination and collaboration create challenges for fully developing some machine learning models.
  4. Workforce and resource gaps also create challenges.

For More Information, click here.

Teaching Suggestions:

  • Make a list of potential benefits of machine learning to weather forecasting in relation to insurance costs.
  • Make a list of potential dangers using machine learning in forecasting natural disasters in relation to insurance costs.

Discussion Questions:

  1. Do you believe that insurance premiums should be calculated based upon forecasting models for natural hazards. such as severe storms, hurricanes, floods, and wild fires? 
  2. What are some challenges to the use of machine learning in forecasting natural disasters?
Dec 23 2023

Global Consumer Protection

In late 2023, the Federal Trade Commission (FTC) signed a cooperation agreement with the consumer protection authorities of the four Latin American countries–Chile, Colombia, Mexico, and Peru– to combat fraud both inside and outside the United States.

The Multilateral Memorandum of Understanding (MMOU) promotes cooperation across Latin America, including information-sharing to further investigations and policy development, as well as other types of assistance on cross-border enforcement matters.

Low-cost online communications allow scammers to target consumers regardless of where they live. The increasingly global nature of commerce—and fraud—poses an enforcement challenge for consumer protection authorities around the world. From 2019 to 2022, fraud reports against companies in Chile, Colombia, Mexico and Peru more than doubled, from 6,103 to 12,869. At the same time, total losses reported by consumers skyrocketed—from $39.4 million in 2019 to $237.9 million in 2022. Reports about online shopping were the top complaint during this same period, with losses increasing from $3.8 million in 2019 to $49.5 million in 2022. Social media was the top contact method consumers cited at 41 percent of reports in 2022. These four countries represent about 225 million people and combined make up the eighth biggest economy in the world.

In signing the MMOU, the FTC and consumer protection authorities in these countries agreed to cooperate in investigations related to violations of consumer protection laws. Specifically, the MMOU encourages participants to:

  • Share complaints submitted by consumers;
  • Provide investigative assistance, with appropriate safeguards, including sharing of information relating to defendants, their assets and/or their deceptive conduct;
  • Coordinate enforcement actions against cross-border violations of law;
  • Provide other practical case assistance, where appropriate, in the enforcement of consumer protection laws, such as gathering evidence;
  • Participate in econsumer.gov, which allows consumers from around the world to report fraud and provides consumer protection agencies around the world with access to important data about potential violations;
  • Cooperate on non-investigatory matters such as exchanging approaches to consumer protection policy issues and participating in staff exchanges, joint training programs and workshops.


For More Information, click here.

Teaching Suggestions:

  • Ask students to debate the issue “Should governmental agencies be involved in protecting consumers”? Why or why not?
  • Ask students to make a list of national and international consumer protection agencies where they can report international and national scams and to learn about other steps they can take to combat fraud.

Discussion Questions:

  1. What actions can consumers take to protect themselves from national and international scams?
  2. How can your complaints help consumer protection agencies around the world to spot trends and work together to prevent international scams?