Financial Literacy May Protect Consumers in Tough Times

   

After a couple years of tight credit and rising identity-theft rates, financial literacy may be the greatest tool for consumers struggling with their personal finances.

Some federal agencies are taking action to help Americans understand their rights, and the director of student retention at one Minnesota university launched a financial literacy program to educate young people about money management.

The rules are changing

Last year, Congress signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. This established new protections for consumers against unfair credit card practices, like sudden interest-rate or penalty hikes. A tracking study conducted by FreeScore.com showed that over 50% of American consumers are unaware of effect that the new law will have on them.

The Federal Reserve Board launched a website to help consumers better understand what this law meant for their credit. PDFs and interactive pop-ups walk consumers through some of the Credit CARD Act's protections.

"These online tools and resources will help consumers make well-informed decisions about their use of credit," said Fed governor Elizabeth A. Duke. "We will update the site regularly to provide the most useful and current information."

Parts of the website, including the "5 Tips" guides on responsibly maintaining credit, are available in Spanish. A glossary of credit-related terms and laws on the website may further clear up credit questions. It also provides links and information about contacting the Fed.

After noticing that debt derailed many a student's education, St. Catherine University's Ellen Richter-Norgel launched a financial literacy program. According to a report in the (Minneapolis-St. Paul) Star Tribune, the school hosted a series of speakers and sparked dialogue about debt and budgeting.

"Sometimes, I think you have to be in a crisis to get the help you need," Richter-Norgel told the newspaper. "Once you go, you're empowered by the information you get."

Trade commission takes action

Starting April 1, the websites advertising "free credit reports" will be required to include a disclosure from the Federal Trade Commission (FTC). This disclosure will direct visitors to the government-endorsed annualcreditreport.com and away from websites that often charge monthly fees for monitoring.

The FTC also launched a new animated video to educate consumers about filing a complaint. The video, which is available in Spanish, identifies various types of scams and directs consumers to ftc.gov/complaint to file a report.

Identity theft, and credit card fraud in particular, topped the list of consumer complaints last year, according to the FTC. This crime accounted for 21 percent of total complaints, with the highest incidence reported in metropolitan areas.

According to a recent report by Javelin Strategy & Research, more than 11 million Americans, or one in every 20 adults, were victims of identity fraud last year. The report also showed that consumers reported such crimes more quickly than in previous years.

The FTC suggests that those suspecting they are compromised place a fraud alert on their credit reports as soon as possible. The next steps include closing any concerned accounts, filing a police report and reporting the fraud to the FTC.