It is bad enough that we are continuing to bail out Freddie Mac and Fannie Mae for their irresponsibility in the financial crisis.  It is bad enough that the politicians turned their backs and let these two mortgage giants get away with murder.

Former CEO Franklin Raines and other executives are being accused of shifting accounting around so that losses could be understated in order to pay those execs bigger bonuses.  Yes, it was all about the fraudulent accounting which was a fitting story that led up to the bigger crisis – which was the mortgage meltdown.

He has already had to pay back millions of dollars of fines.  However, the Wall Street Journal described those fines as a drop in the bucket considering the enormous amount of money he was paid through the years.

As if everything that you thought could never happen, things that you never could believe, and stories from the financial crisis that you thought were a lie, hold onto your wallet because this story takes the prize.  Guess who gets to pick up the legal bill for these executives that were suspected of fraud?  Yes, you guessed – you and I are picking up their bills. 

You and I have paid over 100 million dollars to protect the innocence of those who are suspected of fraud and resided over the irresponsibility of the two mortgage giants and their part in the financial crisis.  We also continue to bail out and support these companies so that they can operate. 

If these executives are found liable, then they have to pay back the legal fees.  Just ask the recipients of the OJ Simpson lawsuit how that payback is going.

It just steams me to no end that these guys are getting a free ride in court and our tax dollars are paying for it.  The attorneys for Raines have already been paid $38 million.   The sad thing is that mountains of evidence already exist that the word “suspected” needs to be removed.  These guys appear to be very guilty.  Yet, we pick up the bill for their legal costs.   Only in America….

I was listening to a local sports station this morning.  Typically, they have the fairly aggressive ads that are more marketing smoke and mirrors than anything.  In other words, a lot of their advertisers make big promises with very little to back it up.  The problem with this type of marketing is that you can make a broad and general statement and the listener can come away with many different interpretations.

Let’s take, as a great example, the latest debt reduction ad that I heard this morning.  It is an attorney-based firm that markets on the same hope that all of them use.  It is the hope that all Americans who are drowning in debt want to believe.  There is a solution to getting out of debt that is painless.  There is a solution to raising your credit score overnight. 

Here were the claims from this particular commercial:

“There is a new federal law that allows you to wipe out your debt.”

I don’t claim to know everything about the whole debt game.  I did research it for three years before writing my book and I do keep up with the politicians and whatever comes out of Washington.  There is no law that allows anyone to just wipe out their debt.  The only exception is the law that has been around for decades – bankruptcy.  However, since 2005, bankruptcy sure isn’t the debt walk away solution that it was prior to the politicians “reforming” it. 

“Most of our clients’ credit scores went up within a month.”

Is that an improvement of 1 or 2 points or the type of improvement that will get you new credit?  The reality is that negative items stay on your credit report for 7 ½ years past the first missed score and only then can they be removed unless someone voluntarily removes them. 

Of course, there is another trick these services use.  They tell you to notify the credit reporting agencies that everything is wrong, you are disputing it, and request that it be removed.  By law, the credit reporting agency has to investigate.  They send out a request to the creditor to verify the accuracy of the item in question.  If the creditor doesn’t respond within 30 days, the credit reporting agency has to remove it.  Wow, it does work!!  Well, not really.  The item is only suppressed.  At some point, the creditor does respond and the negative item goes right back on the report.

That is not only smoke and mirrors.  It is telling the consumer to lie to the credit reporting agency.  Unfortunately in writing my book, about the only thing that I uncovered consistently is the reality of debt.  The debt business is a big game and makes these businesses a lot of money. Unfortunately, it does nothing for the consumer except build false hopes.

So, what is the answer?  A solid, well-calculated game plan.  That is the good news.  However, it isn’t instantaneous nor does it occur without some changes.  If you want more information on the real way to get out of debt, go check out Deceptive Money.

Every year we run into the same mess.  As a country, we have only so much money that we can borrow to run the day to day operations.  Every year we get to a point where we are going to max out our country’s credit limit. 

This would be the same as if you had a credit card with a 15,000 credit limit, and a balance of 14,900, and you need to charge another 1,000.  In order to do that, you would need to call the credit card company and get them to raise the credit limit. 

Just imagine that scenario with a few more zeros attached to it and you would have our national credit line.

The politicians have to vote to raise the limit and all of the sudden the Republicans have grown a conscious and now want to be financially responsible.  This isn’t anything against the Republicans.  Generally speaking, they are all the same once you take those party affiliations away. 

Virginia Politician, Frank Wolf, is one of the first to threaten to vote no against raising the debt ceiling.  He warned that “if the debt is not curbed, America could fall off a fiscal cliff and watch countries like China take its place.” 

With all due respect Mr. Wolf, I think that America has already slipped off of that fiscal cliff.  It is a little too late for taking action and a little too late to want to champion fiscal responsibility. 

Yes, there is no question that they need to cut all of the ridiculous irresponsible spending.  All you have to do is go back and look at the last stimulus bill and see the trillions of dollars that were wasted on nothing that has anything to do with being financially responsible.

For any politician that wants to wage war on financial responsibility and vote no, be careful for what you wish for.  Just vote no and send our country into default and then see our financial system try to deal with that one. 

So, please save the grandioso threats and the “we the people” speeches about financial responsibility.  The politicians in Washington have already screwed up the system.  We all know the debt ceiling needs to be raised to function.  So, go ahead and raise it then do something impressive and make massive cuts.  That would include political benefits, the luxuries of political living (just for principle) and all of the pork spending that has been allocated as political favor payback. 

The most important thing the politicians can do is once and for all remove all of the politics and do something that really just benefits the people.     

The scam business is doing well.  Scammers are getting smarter and more effective in ripping off people.  There are many variations of scams.  Chances are you will find yourself in a situation where you might get the opportunity to fall for one.

In my many years in radio, I have had the opportunity to look at all types of scams and have found that it is actually very easy to protect yourself.  So arm yourself with the following tips:

1)    If you are approached with a request for personal information, don’t give it.

If you get a call from ______ (insert any one of the following – fraud department of a credit card company, the police department, someone in charge of jury duty, prize notification department, the utility company, etc) and they ask you for your information, don’t give it to them.  This is how so many identities are stolen.  Only give information when YOU initiate a call or contact.  That especially applies to e-mail.  Always verify that you are talking to the right people.

2)    If it is too good to be true, verify because it usually is too good to be true.

Old wisdom never dies.  There is an enormous amount of truth to this nugget of wisdom.  For instance, do you really think that someone wants to give you money for doing nothing?  It is one of the best filters. 

3)    NEVER put up with pressure

If someone is pressuring you to do something, don’t allow it. Legitimate transactions don’t require pressure. 

4)    Get a second opinion if not sure

Seek the experience of someone you trust.  Getting a second, third or even fourth opinion never hurts.  You want to have peace when you make decisions.

5)    The most important, pray about all of your decisions

This should be a no brainer. Unfortunately, there is a tendency to pick and chose.  You can’t be 99% on this one.  The problems start when we play lone ranger.  If it is the right decision, you will get peace about it.  Never act without that peace.       

I write in my book, Deceptive Money, to stay current with your accounts NO MATTER WHAT!  If you don’t, you risk going into collections.  If you don’t pay the debt collectors, the absolute worst case scenario could take place.  You could get the dreaded lawsuit.

As a last alternative, creditors or debt collectors (whoever owns your debt) can file a lawsuit against you in order to win a judgment.  This basically gives the creditor other avenues to collect the debt.  It is simply the worst case scenario and worth avoiding.

According to the Wall Street Journal, there “is a surge in lawsuits against people who aren’t paying their bills.” 

Here is the scenario – The creditor gives up on collecting the defaulted debt. They then write it off as a bad debt and sell it to a debt buyer.  It is estimated that 450 debt buyers purchased 100 billion dollars worth of distressed loans last year.  The debt buyer buys all of these defaulted debts from creditors and files lawsuits against them. One attorney described the process to me as “rubber stamping” lawsuits.

So how this is good news for the consumer?  The court systems are JAMMED with debt collection lawsuits.  The one small claims court in Indianapolis had to impose a limit of 500 new debt collections cases per every two weeks on one law firm.  One judge said that he was hearing 400 cases a day.

Let me build the case for the good news.  Encore, the largest publically traded debt buyer, gives us a good example. They win 94% of their cases because the majority don’t have lawyers, may not even know they are being sued, don’t show up in court, and don’t take any action.

I would suggest that this is a statistic that reaches across the entire debt collection business.  So, let me ask you a question.  If you are a debt collector and you know that by filing a lawsuit you are going to have a 94% success rate in getting a default judgment against the debtor, where would you invest your time?  Would you invest your time with the consumer with or without the lawyer?

If you are getting sued, fight it!  At least pay money for an attorney to write a letter on your behalf.  Show up in court and make the debt collector prove that they have a valid case.  It has been proven that in many cases, these debt collectors cannot even prove the debt is owed. Plus, due to the robo-signing scandal that is currently occurring with mortgage companies and banks, judges are more sensitive to these issues. 

I cannot guarantee that your case will get thrown out or that you will win it.  However, I do believe that you increase your odds with an attorney on your side. 

Please know that I am not an attorney and not trying to give legal advice.  This opinion comes from years of research that went into writing my book, Deceptive Money.