Brokers WHo Fail Test More likely to be Criminals

The More Times a Qualifying Exam Was Retaken, the Higher the Average Total of Black Marks

By

JEAN EAGLESHAM and
ROB BARRY

More than 51,500 stockbrokers failed a basic exam needed to sell securities at least once, according to data that Wall Street regulators don’t disclose to investors, and those who repeatedly failed have on average worse disciplinary records.

The more times a broker failed, the higher the average total of black marks was, such as criminal charges and firings, a Wall Street Journal analysis of the data found. Those who failed the test more than twice, for example, were 77% more likely to report a felony or…

ENTIRE ARTICLE at Wall St. Journal.com

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Negotiate Better!

by BOB SULLIVAN on APRIL 7, 2014

Wow – $7,500 off!! Not exactly.

NOTE: This is the third in an ongoing series of stories that explain complex behavioral economics ideas in simple was, and use them to your advantage in everyday life. READ there entire Everyday Econ series.

There’s a car dealer outside New York City who aggressively advertises $7,500 discounts for buyers who show up for a “sale.” The sale is, of course, temporarily permanent, and offered for every Hallmark holiday. How can he do it?

Listen carefully to the ad, and you’ll hear the phrase discounted … from the posted dealer price. Unless you were born yesterday, you know exactly what’s going on.  The dealer increases the price, then offers the $7,500 discount on that higher price.  So if we all know what’s going on, does that old saw really work?

You bet it does.  The phenomenon is called “anchoring.”  And we fall for it all the time. But understand how anchoring works, and you can at least save yourself a lot of wasted time the next time you negotiate to buy a car. And you might even save some money.

Behaviorists use the word anchoring to describe the basic human tendency to attribute out-weighted importance to the first piece of information you receive in a situation. Anchoring happens in many aspects of life, but let’s stick with money. If a car dealer tells you the price of a car is $20,000, but then offers to sell it to you for $15,000, you will be convinced you are getting a much better deal than if he straight-up offered to sell it for $15,000.  That first number thrown out there, the $20,000, serves as an anchor — a first reference point. Every other price becomes an adjustment of that price.  Buyers can’t help but see the $15,000 offer as a $5,000 discount — hence the New York City salesman’s tactic.

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Right about now, you are probably thinking this is hogwash, and that you know better. Everybody knows that a typical car dealer move is to negotiate from a high price. And if you know that, you are immune from the tactic, right?

Wrong.

Not only are you mistaken, but it’s this level of overconfidence that salespeople prey on most. The only thing more dangerous than an under-informed consumer is an arrogant one.

Numerous studies show anchoring at work. Behavioral economics legend Daniel Kahneman conducted some of the first research into anchoring back in the 1970s. He asked subjects to quickly guess at the solution for one of two math problems — 8x7x6x5x4x3x2x1 or 1x2x3x4x5x6x7x8.  Those given the series of numbers starting from 8 guessed, on average, 2,250. Those who started from 1 guessed 512. (The right answer is at the end of this column).

Now if you think you are above anchoring, here’s a key result for you.  Even when subjects are told about anchoring, and warned not to let it influence their opinions on the price of things, it does. One study asked participants when Gandhi died – they were then told he might have died at either 9 years old or 140 years old. The group initially told 140 guessed nearly 20 years older (57) than the other group (40).

Back to negotiation.  Real estate agents sometimes have outsized confidence in their ability to “price” homes that are put on the market, or to assess whether a price is too high or too low.  In his great book “The Two-Headed Quarter: How to see through deceptive numbers,” Loyola professor Joseph Ganem described a study which proved that. Real estate agents were asked to appraise a home based on a 10-page packet of information where the only variance was the list price. When it was $119,000, the average appraisal was $114,000. When the list price was $149,000, the average appraisal was $128,700. In other words, simply by changing the first price suggestion made agents raise their perceived value of a home by $35,000.

Worse yet, the agents were blissfully unaware of the influence the list price had on their appraisal.

“Only 10 percent of the agents mentioned listing price as one of their top three considerations,” Ganem writes. “It is interesting that anchoring effects influence experts without their being aware of, or at the very least, willing to admit the influence.”

The only thing more dangerous than an uninformed consumer is an arrogant one.

So, how can you use the anchoring effect to your advantage?  Believe it or not, despite what many negotiators say, it’s often smart to be the first person to name a dollar figure when negotiating a price or a salary.  And you might as well be a little like the car dealer at the beginning of this story.  If you want a $1,000 raise, ask for $1,500 … or even $2,000. If you want to buy a car for $20,000, offer $16,000.  The dealer will probably laugh, but that’s OK — you laughed at the advertisement, didn’t you?

(The correct answer is 40,320).

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Kevin Trudeau Going to Prison

Kevin Trudeau, the television pitchman and author who amassed a fortune telling consumers his secrets about how to get free money, how to lose weight and how to cure a number of illnesses the natural way, is headed to federal prison.

Trudeau, 51, was sentenced to 10 years on Monday for criminal contempt for violating a 2004 federal court order that prohibited him from making misleading infomercials and misrepresenting his weight-loss books. During Monday’s sentencing hearing he also got a tongue-lashing from U.S. District Judge Ronald Guzman, according to the U.S. attorney’s office in Chicago.

“Since the age of 25, (Trudeau) has attempted to cheat others for his own personal gain,” Guzman said in Monday’s sentencing hearing.

In a sentencing memo, prosecutors called Trudeau an “unrepentant, untiring, and uncontrollable huckster who has defrauded the unsuspecting for 30 years.”

Trudeau was convicted of criminal contempt by a jury in November 2013 and has been in federal custody since his conviction.

Evidence was presented at his trial that Trudeau appeared in three infomercials in 2006 and 2007, and in those infomercials he misrepresented the contents of one of his weight-loss books. The U.S. attorney said those infomercials were not only untrue, but they violated the 2004 court order that prohibited the infomercials.

According to his book covers, several of his books have been number one on the New York Times bestseller list.

Trudeau’s defense attorney Tom Kirsch told CNN Monday night that his client intends to file a notice of appeal in the case.

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Ten sneaky plumber tricks

Here are 10 plumbers’ tricks of the trade you may run into, plus how to spot those tricks, find good plumbers and get good value for your money.


1. Working unlicensed and uninsured

Unlicensed and uninsured tradespeople usually charge less. But you’re taking a big risk hiring them.

Most cities require homeowners to use licensed and insured contractors, even when you don’t need a permit. One exception: Do-it-yourselfers often may do construction on their own homes. “But they must use licensed professionals for structural, electrical and plumbing work,” MSN Real Estate says.

With unlicensed tradespeople, there’s nowhere to turn if the work is poorly done. A building inspector can require you to tear out the job and do it again. Banks won’t lend money on homes with work done illegally.

Still not convinced? Here’s what the Magnolia Voice, a neighborhood newspaper in Seattle, says:

Of the major trades, only two are required by law for the individual to be licensed: electricians and plumbers, according to (plumber Evan) Conklin. Why? Because shoddy work by any of these two trades can kill you. Think about an improperly vented hot water tank powered by natural gas. In no time you have a home filled with deadly fumes.

Hiring a plumber? Ask to see identification, a state license and proof of current insurance. To check licensing and insurance credentials, call your state’s licensing department and state insurance commissioner.

“A contractor also needs two kinds of insurance: liability, to compensate you if the work fails, and workers’ compensation insurance, in case someone is injured on the job,” MSN Real Estate says.

2. Estimating a job sight unseen

How can a plumber realistically estimate his price for a job he hasn’t seen? He can’t. Don’t accept a quote without an in-person inspection. And get it in writing.

While plumbers can’t quote a price without seeing the job, they can tell you their hourly rate and if they have a minimum charge They can also give you a ballpark idea of the time involved on certain small, predictable jobs — installing a new shower head or clearing a plugged kitchen sink, for example. But even small jobs can be more complicated than you realize.

Here’s what to expect from a reputable plumber, according to Atomic Plumbing, a Virginia company:

A plumber will come to your home and talk to you about your needs and expectations. Then the contractor will perform a visual inspection to determine the scope of the project. This should be followed up by a written quote detailing all of the plumbing services required and the associated costs. The plumber will hopefully walk you through the quote and discuss any payment options.

3. Lowballing the bid

A surprisingly cheap bid should make your antennae perk up. Something’s probably wrong.

Plumbing is notoriously expensive and fees can vary widely, so this is something that’s hard to judge. “In Southern California, where I am located, the cost of (fixing) a drain clog ranges from $75 to $250 depending on who you call,”writes plumber Aaron Stickley at About.com.

But even newly minted plumbers can charge $35 an hour after a four- or five-year apprenticeship, according to Oregon Tradeswomen Inc.

Angie’s List says:

A common plumbing scam is to give a low estimate that doesn’t account for all of the labor needed. You will then need to pay for the additional labor before the plumber finishes the job, putting you in a tough situation.

You’ll get an idea of what’s a reasonable cost for your job by collecting several competing bids.

4. Padding the estimate

Another approach is to pump up the bid with inflated prices and unnecessary items. You can spot jacked-up prices by getting several competing estimates.

Don’t be overly suspicious, however. Advises Reader’s Digest:

A company that has a good reputation for quality service might charge a little more up-front, but you’ll save in the long run by avoiding callbacks and extra charges. Look for a company that warranties its service for up to a year for major installations or repairs.

5. Showing up uninvited

Call the police if a “plumber” knocks on your door and tries to convince you to hire him. This is often a tip-off to fraud or to a burglar checking out your home’s vulnerabilities.

Plenty of people — elderly homeowners in particular — are targeted by con artists with a good line of patter. An 81-year-old Baton Rouge, La., woman told WAFB-TV that two men appeared at her home pretending to work for a local plumbing company. She saw through them and called police.

Don’t invite anyone into your home whom you have not first checked out. Find trustworthy plumbers by collecting recommendations from:

  • Friends and colleagues. They’re best, since you know them and can trust their judgment.
  • Reviews. Good sources include Angie’s List (paid subscription) and Yelp (free).
  • Plumbers’ supply or plumbing fixture store. “They don’t tolerate bad plumbers,” says Reader’s Digest.
  • The Better Business Bureau. Use the BBB for finding complaints, BBB alerts, enforcement actions and companies with low grades. The BBB’s high grades are less useful, says Consumer Reports.
  • A Web search. Search a company’s name (look up the correct name and spelling) in quotes and add words like “fraud,” “review” or “complaint” to the search.

6. Using bait-and-switch tactics

Bait-and-switch is a deceptive marketing practice: A company advertises one product or service and then tries substituting something else, or an inferior version.

When you obtain bids, get the make and model of parts or equipment included, to compare with the final product.

7. Pushing you for cash

A plumber may ask you to pay under the table in cash and forgo a receipt — maybe with the offer of a discounted price. It’s a sign he’s cheating on his taxes. It’s your decision, of course, but how fair is this to the rest of the taxpayers? Also, a worker who is dishonest in one area may well be dishonest in others.

Whatever you do, get a written receipt for the work done in case something goes wrong and to use for possibly deducting the work at tax time. If a plumber won’t provide a receipt, find another plumber.

8. Bringing in extra workers

Occasionally, a plumbing company may send out more workers than are needed for your job. It’s a way of charging extra for a one-person job.

If your job is a complex one, a second plumber may truly be justified. So just ask, when you order the work, how many plumbers will be coming, how long the work should take, the hourly rate charged and any other fees.

9. Charging high rates for the first hour

Many service providers have a minimum charge for the first hour on the job. Nothing wrong with that. It takes them time and money to get out the door.

But if your job is a small one and the plumber finishes before the hour is up, ask her to take care of other small jobs to fill out the hour.

Care2.com suggests, “Ask him to replace washers, gaskets or O-rings, tighten faucet stems or other small tasks around the home, or ask him for a quick inspection so you’ll be able to identify where wear and tear might indicate future problems will develop.”

Another solution: Rather than paying by the hour, ask a plumber to charge you by the job, suggests Reader’s Digest.

10. Pushing you to pay up before the work is done

It’s reasonable for a plumber to ask for a down payment of up to half of the estimate to cover parts and give assurance that you’ll pay up.

It’s not reasonable to ask you to pay the full bill before the job is completely finished and you are satisfied.

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Interesting Comment by FLorida Supreme Court About Profits of Insurance Companies

In a case holding that limits/caps on non-economic damages in wrongful death medical malpractice cases are unconstitutional, the Florida Supreme Court commented that insurance companies are ripping off doctors.

The court noted that between 2003 and 2010 there were four medmal insurance companies with an increase in their net income of more than 4300 percent. With that kind of income, the court wrote, “the insurance industry should pass savings onto Florida physicians in the form of reduced malpractice insurance premiums.”

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The Wrong Way to Boost Credit Scores

Don’t know much about credit reports and scores? Here’s a primer on separating the good information on credit from the bad.

  • Common sense tells us that not all advice can be good advice. While there are different schools of thought on how to best manage your credit or achieve the best credit scores, there are plenty of credit-boosting ideas out there that, if implemented, could instead tank your scores.

In order to separate the good advice from the bad, you need to know credit scoring basics.

First, there are dozens of different scores out there, and you never know which model a particular lender may use. Rather than focus on the number, pay attention to what generally drives your scores: behavior.

You’ll want to pay your bills on time, use very little of your available credit, establish a long history of good credit use, maintain a mix of credit accounts and apply conservatively for new lines of credit.

With that in mind, here are two practices you should avoid if you’re trying to improve your credit.

1. Closing old accounts

You may have heard the advice that you should close any accounts you don’t use anymore, but that’s usually a bad idea.

First, it can raise your credit utilization — the ratio of credit that you use compared to your credit limits. Even if you rarely use that credit card with a $1,000 limit, keeping it open keeps that extra $1,000 in your available credit, giving you more room to borrow using other cards without hurting your utilization rate. Take it away, and you’ll either need to cut spending in order to protect your utilization, or you’ll suffer the credit-score consequences.

Credit utilization is the second-most important factor (after payment history) in determining your credit scores. Also important is the length of time a credit line has been open, so closing an old account can reduce the average age of your credit, causing your scores to sag.

Keep in mind that if you don’t use a credit card for awhile, the issuer may close the account or reduce your credit limit, so make sure you’re on top of all your accounts. Using a credit card once a month and setting it to auto-pay could be enough to keep the account open and your available credit as high as possible.

2. Carrying a balance

Credit cards offer the luxury of paying later for something you want to buy now, but that’s an easy thing to misuse.

Not being able to pay the bill in full is one thing (and you should put a plan in place to pay that debt down), but there’s no reason to carry a balance if you can afford to make the payment when it comes due. It’s a common misconception that carrying a balance will help your credit scores, said Gerri Detweiler, Credit.com’s director of consumer education.

“They don’t understand how things are reported, and they end up with high utilization,” she said.

Basically, if you continue to make purchases on your credit card without paying off the balance, you’ll end up using more and more of your available credit. Factor in the extra money you’ll owe in interest, and carrying a balance isn’t a ticket to the high credit scores you want.

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Social Media and your Credit Score

  • The days of airing out your personal life on Facebook, Twitter or any of the other social media outlets may be coming to an end if you want to preserve your good credit.

Man with laptop © Image Source/SuperStockWhy so? According to The Wall Street Journal, Facebook, Twitter and other social media outlets are being mined by some lenders to reach conclusions about your creditworthiness.

So, if you’ve considered going on a rant about your former employer because you were laid off, hold that thought. Or if you were evicted as a result of a foreclosure, social media may not be the place to express your disgust with the stubborn mortgage company.

By no means am I asserting that these actions will earn you an immediate rejection by potential lenders, but they may raise eyebrows and ding your wallet in the form of higher interest rates.

What about my traditional credit score?

According to myFICO, your FICO score is made up of five distinct factors:

  • Payment history, which accounts for 35 percent of your score.
  • Outstanding balances, which account for 30 percent.
  • Duration of credit history, which accounts for 15 percent.
  • New credit accounts, which account for 10 percent.
  • Types of credit used, which account for 10 percent.

However, FICO is considering getting on board with social media monitoring, which could present a major issue because its scoring model is used in more than 90 percent of lenders’ decisions, the Journal says.

Is this a fair practice?

Considering the fact that some have nothing better to do than sit on social media outlets and create fake profiles, absolutely not. You certainly wouldn’t want a creditor analyzing a profile that’s not yours; it sort of reminds me of identity theft, but from a social perspective.

And even if the profile is indeed yours, is it really fair to have to censor every move you make in your private life?Kirsten Salyer writes on Bloomberg View that 71 percent of people using social media already self-edit what they post. Will they now have to evaluate what they write from a credit point of view?

Plus, she observes, nothing requires creditors to make sure that the information they read on social media is true.
Which lenders are adopting this model?

Before your nerves take over and you start deleting profiles, it’s important to understand that not every lender is following this model. According to CNN Money, only a handful of startup lending companies are.

The Journal indicated that borrowers with bad or little to no credit history or without bank accounts are the ones primarily being placed under the microscope. The companies’ reasoning: to give those who may have otherwise been denied a chance to qualify on the grounds of other factors.

What do you think? Should your social media postings be used to determine whether you’re likely to repay a loan?

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An Ironic Telephone Call

I received a call today from a well-known retired collection lawyer.  We had litigated cases against one another in the past.

He was a zealous and talented adversary.  He worked hard, and got good results for his clients.

He sold his practice about 5 years ago, and was looking forward to the retired life.

About two years after retiring, he got sick.  The medical costs and expenses caused him severe economic hardship. He was unable to pay his mortgage.

THIS IS ONE OF THE LAST PEOPLE ON EARTH I EVER THOUGHT I WOULD HEAR FROM TO DEFEND A MORTGAGE FORECLOSURE CASE.  I promise you that this gentleman never thought he would call me.

People in this situation are from all walks of life.  They are not bad people, who do not want to pay their bills.  We should not call them “deadbeats” or other derogatory terms.

These are almost always people who have, through little or no fault of their own, fallen on hard times.  They need help, and some understanding.

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Identity Theft/Protection

By: Frank W. Abagnale; Subject of the book, movie and Broadway musical “Catch Me If You Can”; Today, one of the world’s leading authorities on identity theft and secure documents.

By now you’ve heard about the recent spate of data breaches that took place over the holiday season with a number of retailers. The stories have ranged from the number of people potentially affected to a growing “blame game” between the financial services and retail industries over security. But, the media is only just beginning to touch upon the most important part of the story—your personal identification information was stolen and has probably already been sold to identity thieves.

As Fraud of the Day readers, you know why this is important: because all those identities are out there just waiting for the right criminal to come along and use them to steal government benefits or services. And, since tax season just kicked off on January 31, your federal and state tax refunds are high value targets for criminals.

Identity thieves—mostly organized criminal groups based out of Russia—are smart. They know retailers typically offer a year of free credit monitoring when a data breach becomes public. But, the criminals don’t mind because identities are like fine wine—the older they are the more valuable they are. These criminals will hold onto these identities for years for the purpose of credit card or bank fraud. They will even use data mining technology to find the most affluent identities and steal from them when the time is right. (Coincidentally, this is the same data mining technology retailers use to send you coupons and special offers based on your buying history.)

Here’s why it is so important to be focused on this during tax season. If your identity is used to file a tax return with the federal government or the 43 states that require you to file a federal return, you won’t know until you go to file for your return and find out someone has already collected your refund. You’ll never learn about Stolen Identity Refund Fraud (SIRF) from your credit report. So, even though identity thieves like to hang on to identities for a while before using them, the one exception to this rule is using the identity to steal government benefits or services—or your tax refund.

So, what can you do?

1. Demand action from Congress, the Executive Branch, state legislators and governors. Identity-based technology exists that can protect your identity. It’s time to take a fresh look at the SIRF problem and invest in new technology to solve it.

2. File your refund as early as possible. That way, you have a fighting chance of getting to your refund before the identity thieves.

3. Focus on fraud prevention. The more you do to protect your identity, the less chance you will have of being victimized. I put this into practice every day when working with the Federal Bureau of Investigation and designing check security features for my private sector clients. If you make the check difficult to counterfeit or forge, the criminal isn’t likely to try to forge your check; they are going to go to the next person who hasn’t taken all those precautions.

4. Don’t put personal identification information out on social media, or elsewhere on the Internet. Think about it, a popular social media site asks you for a host of personal information: your full name, email address, birth date (so friends can wish you happy birthday), job title and company, education and phone number. How much more information does a criminal really need to file for a tax return in your name?

When it comes to the recent data breaches, the damage is done. But, moving forward, you have a choice: criminals aren’t looking for challenges, they are looking for opportunities. If you make it easy for someone to steal from you, the chances are someone will.

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Beware of Target Free Credit Monitoring Offer

Target has apparently sent out e mails to tens of thousands customers affected by the recent security breach, offering those consumers free credit monitoring.

Be careful!

Apparently, Target has made a genuine offer. However, scammers are sending out similar offers while masquerading as Target.

This is a mess fraught with serious perils. Be careful responding to any e mail offering you free credit monitoring!

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