Dr-Fix-It! Notebook Archive:
Congratulations! You've been Pre-approved!
First Off . . . I want you to know that I open and REPLY TO every one of those bullshit credit offers I receive in the mail every morning. Every one. And, I enjoy doing it. Read on; I will tell you why . . .
Maybe the average credit consumer is too young to remember the 'good old days' of shady credit. Maybe the general public has just grown to trust the open and honest disclosure of credit terms. Maybe people don't care. Maybe they don't want to understand the mathematics involved with the APR. Whatever the reason, shady credit offers seem to be making a comeback!
Nowadays, the public naively believes that credit terms published in advertisements and in contracts are stated correctly. But, I recall the days before there was "Truth in Lending". Every store, credit union or auto dealership had their own unique way of calculating interest. Back then, you see, interest rates were not standardized to the APR (Annual Percentage Rate) as they are now. Shopping for credit could be pretty confusing.
I remember "way - back - when" a finance company in my town used 'upfront simple interest' . When I financed my first Jeep, I borrowed $1000 for two years at 5% interest. Let's see. . . 5% of a $1000 is $50. Multiplied by two years is $100. That makes the total $1100. Divide that by 24 months and the monthly payment works out to $48.33 a month. Sign some papers and out the door I go with a new car! No harm done. All perfectly legal. It was an upstanding and accepted way of lending money at the time. I didn't know I was really paying an APR of about 9.33 % . I didn't care. I was a kid with a new Jeep!
The federal Truth In Lending Act was enacted by Congress in 1968. The law was designed to standardize credit transactions by requiring clear disclosure of key terms of the lending arrangement and all of the costs. The law mandates that full disclosure be made of the most important credit terms: the Finance Charge, the Annual Percentage Rate, the amount of the loan, the sum of all of the payments and the over-all cost of the contract.
Now, it seems that shady credit operators are making a comeback. Reading the mail, I must give these people their due. It takes some pretty clever writing to make a sales pitch for a shady credit deal while still complying with the Truth In Lending Act.
For instance, my first bit of mail this morning reads:
"Imagine! A $200,000 mortgage with a payment of $490 !"
They are not lying. An outright lie would be illegal. They really will give you a $200,000 loan with a payment of $490. The key word here is 'a'. 'A' as in 'one'. 'A' as in 'Single'. If you read the fine print (which is required by law) you will find the first payment of the loan will be $490. And, sometimes the fine print will even quote an enticing APR figure. Beware. All that good stuff applies only to the first payment. After that, the rate adjusts. Any hope of a low payment disappears. Refinance with this 'generous' offer and say good-bye to your house.
OK . . . On to the next piece of mail:
"Refinance at 1.95% Fixed ! We can get you 1.95% and No Points!"
1.95% fixed interest? They are not lying. That would violate the Truth In Lending Act. They really WILL give you a loan with an interest rate of 1.95 % fixed for some period of time. Notice the ad doesn't say 1.95% APR. I suppose that people nowadays are so used to seeing an interest rate quoted as an annual rate that they have forgotten about 'shady credit'. Maybe 1.95% is not an annual interest rate. Maybe it's 1.95% per MONTH . Or maybe it's 1.95% for a short term at the beginning of the mortgage with a big cement balloon at the end of the term. Or maybe it's 1.95% for the term of the loan with negative amortization. Yes, with this 'generous' offer, you can make payments and owe even more! What a great deal !
YAWN . . . Normally, it's not necessary to scan more than the headline to recognise pure boring bull! Please, Mr. Credit Crook, stop sending me mail!
If you are like me, you are getting tired of bullshit credit offers filling the mailbox every day. It's not a cure-all, but you can reduce the flow of junk mail by "opting - out" of having your financial information screened for promotional purposes. But beware: You have to be careful where you "opt-out".
Don't "opt-out" on-line. I won't mention the name of the web site. But, there is at least one web site run by a direct - marketing group that alleges to provide a convenient 'one-stop' way for individuals to "opt-out" of prescreened credit offers. True, your request EVENTUALLY will get submitted to Equifax, Experian, Innovis and TransUnion to fulfill the promise of taking your name off the direct mail list. But, Internet feedback seems to indicate that this web site is used to collect prescreening information. During the time they hold your "opt-out" request, they bombard you with junk mail. Nice, huh? More junk, not less. . . at least for a few months.
On their web site, the Federal Trade Commission publishes a toll-free number that enables consumers to "opt-out" of all pre-approved credit offers with just one phone call. Anyone might logically think that this is a service of the Federal Trade Commission or the major credit bureaus. WRONG! It is also run by a direct - marketing group. That number is 1-888-5-OPTOUT (1-888-567-8688) . I publish it here because internet feedback suggests this phone number is a reasonably safe way to "opt-out" with one call. Perhaps it is because there are stronger consumer protection laws in place for telephone commerce as opposed to the internet. At any rate, it is the option I chose to "opt-out" of all pre-approved credit offers.
When I called 1-888-5-OPTOUT, the recording suggested several times that I log onto their web site. I chose to remain on the phone to place my "opt-out" request. I verbally answered questions given by an automated speech-recognition processor. The experience of "opting-out" took me less than three minutes. The "opt-out" request takes six to eight weeks to process. Oh, it doesn't work 100%. I still get junk mail.
So, being juvenile at heart, I retaliate !
As I said, I open and REPLY to every one of those pre-approved credit offers I receive. Here is what I do: I open the envelope and locate the reply form. On the form, I draw a line through the credit application and the signature line with a broad-tipped red Magic Marker. Sometimes, I also jot a witty note . . . Then, I stuff all the paper back into the Business Reply Envelope. I'll also include used food wrappers, cut-up cereal boxes and other waste paper. The point is to make the Business Reply Envelope is nice and heavy.
You see, those people on the other end have to pay the postage on their Business Reply Envelope. They have to pay to receive the bullshit I send them. I think there is a certain poetic justice in them having to pay good money to see my trash. I think that it is only fair.
Congratulations Mr.Credit Crook!
Based on your past performance, I have pre-approved YOU to receive my household trash!
You've earned it!