Mary of Goldendale, WA

Mary Alice Belov planned to put gas in her car, then buy groceries. What she didn’t plan on was the $10 gas purchase freezing $50 of her bank account and forcing Belov, a small-business owner from Goldendale, Wash., to put items from her cart back on the shelf. Blame the all too common "debit hold."

Banks may put a hold on an account when they’ve given the green light to use the card for a purchase whose final amount is unknown. That’s exactly what happens thousands of times a day at gas pumps across the country. You swipe your debit card, the gas station asks your bank for approval, and along with saying yes, the bank may freeze up to $75 of your money for several days, no matter how little gas you buy. That debit hold can put you into the red if you don’t keep much money in your account.

Christopher of Brandon, OR

I am a property manager and I’m required to maintain a client trust account into which I deposit rent checks before disbursing them to property owners. Bank of America is notoriously bad about holding checks & fails to notify us of insufficient funds checks until the middle of the month. We have to place a 5 day hold on rent checks deposited into the trust account and we don’t get notification that a check has cleared from BoA for at least another 5 days after that. This creates tension with owners since they have to wait until at least the 12th of the month to receive their payment. It puts me in a legal bind and I’m worried about being audited. I have been forced to ask tenants with BoA accounts to pay in cash. I don’t have this problem with tenants that use other banks.

Larry of Portland, OR

I deposited a check from Morgan Stanley-Smith Barney, which was a partial distribution from my IRA account to significantly pay down my home equity credit line. The bank that holds my credit line put a hold on the deposited check. This hold on all deposited funds over $5,000 left me unable to pay my bills as planned. I had to cancel previously set up on-line payments and then reset them. I had to pay additional interest on $22,000 that was put on hold. I had the frustration and hassle of trying to correct the situation with the bank by phone and email which was an hour or two of wasted time. Wells Fargo put a hold on funds represented by check from Morgan Stanley-Smith Barney on the pretense that the funds might not be available. The check hold forced me to pay added interest to Wells Fargo while they utilized the readily accessible funds for 10 business days.

Rachel of Raleigh, NC

"[The banks] clear the largest amounts first because they want to charge the [$35] fee on the $1 purchase." —Rachel

Rachel is a married mother of three, who finds it difficult to manage her household when overdraft fees pile up. Throughout 2008, she paid $1000 in overdraft fees – and in October alone she paid almost $500. By the end of the first week in October, when she realized she had overdrawn her account, Rachel found 7 overdraft charges for debit card transactions. Through the following week, Rachel also had overdrawn on five more debit card transactions because she needed to use her card and simply could not catch up on the overdraft fees.

All of the purchases which caused Rachel’s account to overdraft were for less than $20 each, and at least half of these were under $10. The smallest of these charges was for a $1 beverage purchased at a gas station; however, all of these transactions were penalized for a $35 fee. In describing her bank’s overdraft policy, Rachel explained, “They clear the largest amounts first because they want to charge the [$35] fee on the $1 purchase.” After working with the Better Business Bureau, Rachel was able to get a few of her overdraft charges reversed but the bank refused to refund any more.

The overdraft fees deducted from her account took away from the grocery money Rachel uses to feed her children – she describes: “When you’re taking $300 from us in two weeks, we get behind on other expenses. It literally took us two months to catch up.” Although she would rather be declined on small purchases, Rachel would like recurring payments, such as her car payments, to be processed even in the event of an overdraft – she explained, “They should give us an option – if it was something like a car payment I would probably want [the bank] to put the payment through, but not the little debit card purchases.”

Vanessa of Columbus, OH

"I got into this huge overdraft whirlpool that just pulled me under" —Vanessa

Vanessa is a small business owner in commercial interior design who has recently been struggling with unfair banking practices. In May 2008, the bank which she had done business with for ten years suddenly disabled her pre-existing overdraft program. Prior to this, Vanessa had a line of credit with a very reasonable interest rate connected to her account to be drawn upon in the event of an overdraft. Starting February 2008 this option was no longer offered but she was never notified of this change and incurred a number of overdrafts unknowingly. The bank eventually reversed these charges and linked a new credit card to her account; however, the account failed to draw upon the new credit card and again she was being charged overdraft fees.

After many frustrating encounters with her bank, Vanessa changed banks and was enrolled in another overdraft program. Because she has a business account, Vanessa is required to call or e-mail the bank to initiate money transfers. On two occasions, her bank has erred in processing these transactions, and she was charged overdraft fees. The fees are currently being disputed with the bank as Vanessa has documentation of completing the transfers. Vanessa is mostly distressed about the way banks charge overdrafts – she describes: “By the time I am notified about the overdraft, several checks have already processed, and the overdraft of under $25 can become as much as $200 or more. The total sum is mostly bank charges.”

In her frustration, she notes: “Sometimes overdraft charges aren’t posted until 3 days after the day of the overdraft, and then it takes at least 2 days to get to me. This allows a lot of time to pile up charges of $37.50 per check, and $7.00 a day for each overdraft.” When Vanessa contacted the new bank in August and asked for an alternative overdraft solution, she was told that it would involve a line of credit for which she did not qualify. Almost five months later, Vanessa contacted the bank again and was now offered the option of opening a savings account which could be drawn upon in the event of an overdraft. Vanessa is fed up with the errors, overdraft fees, and misinformation from her bank. She plans to close her account as soon as the outstanding disputes are settled.

Richard of Elk Grove, CA

"What actually happened was, my bank had not reversed any of the holds – even the original hold of $100, and had subsequently placed $762.00 in holds on funds in my account." —Richard

Richard and his wife were in the final stages of buying a home, and rented a U-Haul truck for the day that they were expecting to move. Unfortunately, they closed escrow five days later than originally planned, and ended up keeping the U-Haul truck during that time. The U-Haul rental center initially charged a $100 hold to cover the cost of the rental agreement. On the fourth day, U-Haul placed another $400 hold on Richard’s account, for which he began incurring $30 overdraft fees as the money the bank was holding for U-Haul was no longer part of his available balance.

When Richard contacted his bank, he was told that the two holds would be reversed on the 30th of the month. However, when Richard returned the truck to U-Haul on the 26th, the agent told him that the two previous holds had been reversed, and he was only being charged the cost of the actual rental - $262.00. Richard explains, “What actually happened was, my bank had not reversed any of the holds – even the original hold of $100, and had subsequently placed $762.00 ($100.00+$400.00+$262.00) in holds on funds in my account.” In total, Richard was assessed 8 overdraft fees ($240) that his bank was not willing to reverse. If the bank had not processed the holds and the actual amount due at the same time, Richard would not have incurred any overdraft fees.

Joyce of Greensboro, NC

Joyce runs a small business out of North Carolina, and has very recently run into trouble with overdraft fees. In January 2009, Joyce overdrew her business checking account and Bank of America transferred $155 from her personal account without notifying her, to cover the deficit. A week later, Joyce had also overdrawn her personal business account 7 times for $35 each, because her bank’s unauthorized money transfer left her personal checking account in the negative. One of the charges which caused an overdraft fee was for as little as $5, while most of the others were for less than $35.

With the current state of the economy, Joyce’s business has not been doing very well. The money that she uses from her Social Security checks to support the minimal expenses of maintaining her business was being confiscated for the overdraft fees she owed Bank of America. Joyce contacted the bank and was given the run-around. When she finally spoke with the appropriate representative, she was offered a reverse on the overdraft fees if she could pay the amount she actually owed – but Joyce simply did not have the money at the moment. Because she could not pay immediately, the bank representative told her, “if you’re not going to pay us right away we’re not going to remove your overdrafts – we’ll be turning your account over to collections.”

Joyce was never given the option to opt-out of her overdraft protection, nor could she recall when her bank had adopted this policy. She couldn’t believe how quickly and unexpectedly everything happened as she explained: “Thursday my money was there, and Friday it was gone. All of a sudden they take the money out and everything is overdrawn.” Joyce chose to take her business elsewhere and no longer does business with Bank of America – she describes “I would not wish Bank of America on anybody.”

Linda of Valley Village, CA

Linda is an independent contractor from California who does not usually have problems with overdrafts. However, in February 2005, Linda incurred over $500 in overdraft fees because Wells Fargo had not notified her of the negative balance in her account, and continued to allow charges on her debit card. One week from the initial overdraft, Linda had unknowingly overdrawn her account 15 times – half of these transactions were debit charges under $20, and only three of these purchases were for more than $33.

Upon discovering that her account was charged $33 for each of these overdrafts, Linda contacted the bank and asked for the fees to be reversed. Strangely enough, Linda describes: “I was told that a bank manager had been aware of the overages from the very first [overdraft], but because I was a longtime customer he let them go through.” Linda objected to this explanation. She would have preferred that her purchases be denied so that she would become immediately aware that her account was in a negative balance. Eventually, the bank agreed to reduce the fees by $166 and Linda still ended up paying $331 for overdrafts that wouldn’t have occurred had the initial overdraft purchase been declined. On her next statement, Linda was surprised to also find a $2 fee for speaking to a bank representative over the telephone.

Linda was not given the option to opt-out of overdraft protection, nor was she aware that this was possible. After this incident, Linda has been careful not to overdraft but still remains wary of her bank’s policies – she explains “If that was their way of rewarding a longtime, good customer, something is definitely wrong.”

Justin of Clifton Park, NY

"To tack on fees and change policies to increase fee income is completely intolerable." —Justin

Since the beginning of 2008, Justin has incurred excessive overdrafts because of an arbitrary change in his bank’s policy. Justin keeps two accounts separately – one for general spending, and the other for bills. He explains, “Previously, the bank would process credits prior to debits so if I went over in my spending account I could transfer money from my bills account and be covered with no overdraft charges. This has changed; now if I go over in my spending account, which I have, even if I transfer money the same day (which is immediately available), I receive an overdraft fee.” Now, in addition to not being able to replenish his account immediately in order to avoid overdrafts, he is also being charged additional overdrafts as his bank chooses to debit the larger overdrafts before the smaller ones.

At one point, Justin was charged $385 for 11 overdrafts over a ten day period. Some of these transactions were for less than $10 – all but two were worth less than $50. Eventually, after multiple telephone calls to the bank, Justin was refunded $100 of his $385 total overdraft fees. Justin would rather have his debit card denied on transactions that would cause overdrafts. He wishes that he could choose whether the bank should cover transactions which overdraw his accounts, and he feels that “to tack on fees and change policies to increase fee income is completely intolerable.”

Catherine of Mentor, OH

"Some of the overdrafts were directly caused by the fees themselves." —Catherine

Catherine is a disabled single mother raising two disabled children, who has recently gone back to school for a nursing degree. She struggles to cover her family’s expenses with the Social Security Disability checks that she receives, and sometimes there just isn’t enough.

In August 2008, Catherine received about $1200 in overdraft fees for overdrafts totaling less than $300 without even realizing it. At least half of these $39 overdraft fees were for $1.75 coffees which she purchases between classes when she doesn’t have time to eat. Catherine explains, “Some of the overdrafts were directly caused by the fees themselves.” Prior to this, her bank had also held her deposits for a nine day processing period, leading to overdrafts when she paid bills before her money was available.

After two weeks and $1200 in overdraft fees, Catherine contacted her bank and asked about opening a line of credit through the bank to be drawn upon in the event of an overdraft. She was told by the bank representative that this option was not available, but that she could opt-out of the overdraft program. Catherine had never been informed that this was possible and enthusiastically chose to opt-out. She has had no overdraft problems since.

Vickie of West Virginia

"Banks are making a killing with overdraft fees – they rob people without a gun and get away with it." —Vickie

Vickie relies on Social Security checks as her only source of income and is having trouble with her bank’s overdraft policy. Over the past eight years, Vickie has paid her bank over $1,000 in overdraft fees alone. On one of these occasions, her account was overdrafted by only 2 pennies, and for this she incurred an overdraft fee of $34. When she first opened her account in 2001, the fee for overdrafts was $30 – and over the years it has increased to $32 and now is $34.

Vickie has also experienced overdrafts fees triggering other overdrafts because her bank does not notify her when she has a negative balance. Often times, these overdraft fees are deducted from her social security check deposits which she finds particularly upsetting. She describes, “If you miss one little thing in [your account], it can set you way back.”

In her frustration Vickie explains, “If [the overdraft] was just two dollars, they didn’t care – if two dollars knocked you out of balance then [the effect] is like dominos, they just don’t care.” For now, Vickie nervously watches her account balances in fear of overdrafting again.

Mary of Tolland, CT

Mary has suffered greatly from excessive overdraft fees. As a freelance administrative assistant, she has many responsibilities that don’t leave her much time to watch her bank account. On countless occasions, Mary has deposited checks thinking that the amounts would be available immediately – as the bank tellers assured the deposits would “go in right away”. Unfortunately, Mary has overdrafted her account on numerous occasions because her bank sometimes put a hold on her deposits, triggering a $25 fee each time.

In one instance, Mary was charged $400 in overdraft fees resulting from a delayed deposit. These fees were later reversed after her bank acknowledged that she had not been at fault. Mary has also had trouble with restaurants and gas stations putting holds for “double or triple” the amounts of her purchases, leading to more overdrafts even though she had enough in her account to cover the actual transaction amount.

Mary estimates that she has incurred overdraft fees at least 50 times in situations over the past year where unfair banking policies have led her to overdraft – 80% of these overdrafts were for purchase amounts much less than $25. If she could, Mary would prefer to be declined by retailers in the event that her debit transactions would cause an overdraft. After more than $1250 in overdraft fees, Mary is tired of haggling with her bank.

Clifford of Spokane, WA

Clifford has been stung by high overdraft loan fees, like many Americans. After he lost his job in 2007, he got hit with multiple overdraft fees, even though he has tried to keep a close eye on his finances.

Over the past two years he estimates that he has overdrafted 70-80 times, and 80% of these transactions were for amounts much less than the $35 fees which were debited from his checking account each time. He offered this example: “If I overdraft my account for a $5.50 transaction and my bank charged me $34, the interest rate for that mini-loan is quite large – 618.18%”. Some of these fees were caused by holds on his deposits, as well as overdrafts induced by other overdrafts. He also points to the problem of having two debit cards connected to a joint account, and the inevitable difficulty that he and his wife experience in constantly tracking their balance. From his experiences, Clifford admits that he would rather be declined at a retailer and suffer the embarrassment than put himself another $35 in the negative.

Not being allowed to opt-out of his bank’s “overdraft protection” policy has hindered his financial situation significantly. On multiple occasions, he contacted his bank and was denied the ability to opt-out of the program. As an alternative, his bank suggested that he link his checking account to a second account. Clifford now pays a $15 transfer fee every time he overdrafts his checking account, and the amount is borrowed from the secondary account. He admits that this is still less than the previous $35 fee, but objects to the idea of paying the bank to borrow his own money.

Nancy of Tampa, FL

"I cannot accept as fair and reasonable, a $35 fee for a $2.79 cup of coffee!" —Nancy

Nancy is a divorced mother, raising two children without child-support – and with such a tight budget she sometimes overdrafts her checking account because the bank will allow an ATM purchase to go through, even though the funds are not available. She overdraws her account about 3 – 4 times per year at $35 per item each time. Sometimes there are as many as six $35 overdraft fees assessed to her account at one time. Approximately 90% of the overdrafts are caused by transactions worth less than $5. Most of these overdrafts occur during fast food or coffee purchases for $2 - $3, or charges at the gas station when she uses her debit card.

In February 2009, Nancy noticed that she had incurred multiple overdraft charges even though her online statement did not show any negative balances. After contacting her bank, Nancy explained: “The bank claims they are looking at a ‘different screen’ than the screen they provide me of my account online. They claim their screen is in ‘real time’ and the online screen provided for clients to view is not.” Through providing documentation and by making numerous complaints, Nancy was eventually refunded $87 out of the $175 she was charged for the 5 overdrafts. An issue which she wasn’t able to fix, however, was the fact that her bank pays larger debits before smaller debits causing her to incur more overdrafts than necessary. Her bank’s policies affect Nancy greatly: “If you live week to week like most of us, you can’t afford to be out $175 in overdraft fees; particularly when your balance can cover most of the items, but the bank is choosing to pay the larger item – thus assessing numerous overdraft fees on the smaller items.” Nancy feels that the bank should be required to “pay as many items as they can with the amount of money we have in our checking account, and only assess a fair and reasonable fee for the items the account does not have funds to cover.” Nancy went on to state that “a $35 overdraft fee is abusive on a $3 fast food purchase – the bank should be required to charge a fair percentage of the actual charge as their fee.” Nancy explains, “A smaller item would incur a smaller fee, while a larger item, such as a car payment or mortgage payment, would incur a larger fee. This would be a fair and reasonable practice by the very banks as a taxpayer I am bailing out!”

In her banking experience, Nancy has also had problems with restaurants placing holds on her debit card. She explains, “I had a $20 meal - [the restaurant] swiped my card and I received a $20 hold. After I added $5 for the tip, they swiped another $25. [The bank] was now applying two holds for a total of $45 against my account. It took 3 days for the first hold of $20 to drop off.” These holds cause overdraft fees that cause even more overdraft fees because her account remains in the negative – even though she actually did have enough money in the account to pay for the meal initially.

Nancy wants to be able to choose the types of transactions to apply her overdraft protection to, but realizes this option is not realistic. She says, “if the bank requires all or nothing – I would choose nothing,” and continues to explain, “if you don’t have the money in your account, your ATM card should not let you make the purchase– but more often than not the banks let it go through because they know they can hit us with that $35 fee per transaction.” When she attempted to opt-out of overdraft protection with a bank representative, she was told that if a transaction came through and there wasn’t enough money in her account to cover it, they would deny it but would still charge her $35 for an “insufficient funds” fee. The bank representative further explained that “if we pay the item as a courtesy to you, you will be charged an overdraft protection fee of $35, if you opt out of overdraft protection, we will still charge you a $35 fee, which we call an insufficient funds fee for returning that item. Our bank has every right to charge the fees we assess.” In closing, Nancy really feels that the dollar amount of the fee they charge is “abusive.” Nancy reiterates that “the overdraft protection fee and insufficient funds fee need to be based on a percentage of the actual charge. It is absurd to charge a customer $35 for a $2 transaction! If the bank wanted to charge me a $35 fee for paying my $1,200 rent check, I could accept that as fair and reasonable. However, I cannot accept as fair and reasonable, a $35 fee for a $2.79 cup of coffee!”

Justin of Crestone, CO

" [the representative] said his hands were tied because the bank rules were the bank rules…" —Justin

Because Justin’s business accepts credit cards, he is required to keep a merchant account connected to his Chase business account. This merchant feature accepts the full amount of a customer’s payment and deposits the credit into the business account, and then automatically deducts a fee for the use of the merchant account.

In October 2008 Justin’s credit card deducted $250 from his checking account as part of his monthly auto-pay – he was unaware that he had less than $250 in his account at the time. Justin was charged a $35 fee for being overdrawn. Justin then used his business debit card to make a $400 purchase causing another unintentional overdraft – he assumed that if there was not enough money in the account to cover the transaction it would be denied. Within three days, Justin had also accepted a credit card payment from a customer for $150, and when the merchant account deducted its $4.48 usage fee, Justin incurred another $35 overdraft fee. Because Justin did not realize that his account was overdrawn, he was charged an extra $27.50 fee for each of the two overdrafts that were left unresolved.

With $160 total overdraft fees in just three days, Justin contacted his bank representative. Justin recalls, “[the representative] said his hands were tied because the bank rules were the bank rules – when I told him that I don’t want overdrafts, and that if I have insufficient funds my charges should be denied, he told me that he could not turn off my overdraft service.” Eventually, half of Justin’s overdraft fees were reversed – but he explains, “With my business, it takes at least $150 to make a $70 profit.” Although he was able to reduce his overdraft charges, Justin attributes his experience to Chase’s “bad policy.”

Don of Ohio

"It was a snowball effect, I couldn’t get away from it –the more you put in the more they take out." —Don

Don and his wife rely on a limited income – the paycheck from his part time job, and the social security payment she receives for disability. Don checks his account balances regularly, but has recently been hit with a flurry of overdraft fees because of his bank’s overdraft policy.

In October 2008, Don used his debit card and overdrafted his checking account by 85 cents. Before the bank opened the next day, Don deposited $30 at the ATM thinking that this would cover the 85 cent overdraft – only to discover a day later that he had incurred two overdraft fees, one for the 85 cents and the other because the $30 he had deposited did not cover the deficit caused by the first fee. The second overdraft triggered another overdraft fee and a $5 per day fee for each was also added. Altogether Don got hit with $120 in overdraft fees for an 85 cent overdraft. After haggling with this bank, Don reached a compromise where he only had to pay one of the $35 overdraft fees.

A few months later, in February 2009, Don decided to make a car payment through his bank’s online services, for the first time. When he placed this payment for $399, the website stated that it would take 5 business days for the transfer to process. To his surprise, in a few days, Don checked his account and found $468 in overdraft fees. Over two days, Don had used his debit card to make a number of small purchases, mostly under $10, with the understanding that his car payment would be pending for 5 days. To the contrary – the bank had deducted the $399 immediately even though the transaction was still processing, and left his account $64 overdrawn. Each of the small purchases incurred the $35 overdraft fee and he was also paying a $5 per day fee for each overdraft. Luckily, Don was able to negotiate his $468 overdraft fee down to $66, which he thought was unfair. In retrospect, Don explains: “[sixty six dollars] was a hell of a lot more than a 42 cent stamp,” which is what it would have cost him to make his car payment by mailing a paper check.

He would have preferred that the bank decline all of the transactions which caused overdrafts. . Don has resolved never to make an online payment through his bank again and is exasperated with all of the trouble he has gone through because of the bank’s overdraft policy.

Brian of Gardnerville, NV

"As someone who pays every bill and my mortgage on time every month, I have been unjustly penalized." —Brian

Over the past seven years, by paying his creditors on time all of the time and monitoring his spending, Brian had successfully increased his credit score from the low 600’s to a recent 705.

In March 2008, Amex dropped Brian’s credit limit from $8400 to $6000, and then finally to $4300 in February 2009. This most recent reduction brought Brian’s credit limit to $650 below his outstanding balance and although he was not charged any over limit fees, his credit score was negatively affected. After calling Amex numerous times and speaking with various departments, Brian describes: “I get stonewalled at every corner. [The representatives] repeat that they responded to negative information in my [credit] reports.” To the contrary – Brian receives credit report and FICO score updates monthly, and explains, “I fail to see the negative information they allude to and I assume that they’re reading from a script. I have even suggested they pull the report they are referencing and we go through the report line by line. No takers on that challenge.”

When Brian realized that his Amex credit limit had been lowered to less than his balance, he paid it down accordingly. Brian had cash available for the purchases he had made on the card at the time, but had chosen to use credit to take advantage of Amex’s offer to double manufacturer warranties. Had he known that his credit limit would be abruptly reduced and credit score dinged, Brian would have used different forms of payment.

He was notified one month later by Bank of America that his interest rate on another credit card was increasing 4% because of his recently decreased credit score and the over-limit account on his credit report. Now that his hard-earned FICO score has been reduced 35 points through no fault of his own, Brian is incredibly frustrated: “as someone who pays every bill and my mortgage on time every month, I have been unjustly penalized.”

Ronald of Lumberton, NC

"the phone rep will not help, and will not transfer me to anyone who can until the [payments] are current." —Ronald

In June 2008, Ronald lost his job and now relies on unemployment checks as his only source of income. At the end of 2008, he was late on a payment by one day and his Chase Mastercard interest rate went from 4.99% to 24.99%. Prior to this, Ronald had never missed a payment and has maintained a great credit history.

A month later, Ronald made a payment online. He paid his bill on the due date, but because it was after 4:00PM it was posted as another late payment. Consequently, Ronald’s interest rate was increased another 5%, to 29.99%. In his frustration, Ronald explained “[Chase] is worse than a loan shark. Loan sharks charge outrageous rates but at least they don’t change on you.”

On multiple occasions, Ronald contacted Chase and was told that he could get help from an account specialist, but only after his balance was paid in full. Ronald describes, “the phone rep will not help, and will not transfer me to anyone who can until the [payments] are current.” Ronald decided to close the account, and he explained: “I have told them repeatedly that I can’t pay 29.99% interest.”

As soon as the account was canceled, Ronald’s interest rate was reduced and he received a check for over $500 to refund the money he had paid for the increased interest. A few weeks later, Ronald received an e-mail from Chase stating that he owed $200, yet the website will not let him make a payment because according to his online account he does not owe this money. Ronald has since sent an e-mail for clarification and is awaiting the reply.

Sherrie of Plainfield Illinois

Cash Call is the worst. I borrowed $5000 and now I'm having problems making the payments. They won't take partial payments and I can't pay the full amount. They call and e-mail all day of all hours. Once I got behind, I found out all my payments are as if I haven’t paid anything. The others, I keep extending and this isn’t good either. I thought I didn’t have the money, but with all these fees, I did have it, just not at one time. The fees are "too" high and I can't afford to pay. One company garnisheed my pay check which put me further behind.

Alex of San Francisco, CA

My credit score has been ruined. I can't afford life sustaining medication. The credit cards I do have now have mostly small limits, and interest rates of 23% or more, because I run out of money from my pension check within two weeks every month. I'm often paying over one hundred dollars in fees to the bank, and sometimes $39 to several of the credit cards. I'm falling further and further behind on the debts. I made an agreement to pay one collection agency a small sum monthly to satisfy the debt, but now a second collection agency is phoning me twice a day. They want to collect on $21,000 to a past conglomeration of Bank of America, too. They imply nasty threats. I'm 77 years old, living in a studio apartment in downtown San Francisco. I survive most of the time on beans.

Joe and Josephine of Sacramento, CA

"…faced with paying either the mortgage on a house that will never sell at a profit or his assisted living expenses, he had no alternative but to stop paying the mortgage." —Josephine

Many of America’s senior citizens are caught between a rock and a hard place as the devastating effects of the mortgage foreclosure crisis have hit this community. Faced with the difficult decision of continuing to pay for an “underwater” mortgage or to sell his home at a loss, Joe B. a 90-year-old retired British army veteran from Sacramento, California, is now facing foreclosure as he struggles to pay for his assisted living expenses. The sale of his home was supposed to pay for his continuing care, but the house has been empty for over a year, and his expenses have depleted his reserves.

Joe’s daughter, Josephine, has been fighting to keep up with her 90-year-old father’s finances. His 2-bedroom Sacramento, California home is currently two months away from foreclosure—a victim of slumping home values in the area. His home which was once valued at $189,000 a year and a half ago, is now listed at $118,000 (a 37% decline). His realtor says that similar homes are selling for $25,000 to $30,000 less. Any price much less than the currently listed price will not cover the mortgage, closing costs and realtor’s fees.

Sacramento has been hit hard by the foreclosure crisis as well-kept homes like Joe’s compete with abandoned, boarded up homes that are in a state of disrepair. As foreclosed homes are offered by banks at rock-bottom prices, many long-term owners needing to sell face the prospect of losing huge sums as the amount of their mortgage exceeds the going value of their home.

A year and a half ago, Joe refinanced his mortgage and took money out to pay for assisted living costs of $2700 per month. He never imagined that a year and a half later the house would still be on the market, worth less than the mortgage. The original plan was to have his home sold by now to pay for his desperately needed assisted living costs. His fixed income of $1000 had been supplemented with money from the refinance to cover his mortgage, home expenses, and assisted living care; but now that fund is completely gone. Josephine explains that “he kept paying all expenses as long as there was something left from the refinance funds, but faced with paying either the mortgage on a house that will never sell at a profit or his assisted living expenses, he had no alternative but to stop paying the mortgage.”

She explains that basic needs have been minimized in order to cover the bare necessities of Joe’s budget. But Joe is still being billed for taxes, utilities, and sewer charges. Josephine explains that she has even asked the city to stop charging for trash pickup—because there is no trash, as no one lives in the house—but was told that it is a mandatory charge that must be paid.

She hopes that Congress will take up the fight to stem foreclosures because of the effects it has on seniors and their families, and hopes that they will “fight the battle seniors can’t fight for themselves”

Johnnie Lee Bussie

"You don't want to lose what you already got, because it's hard to start all over again." —Johnnie Lee Bussie

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Johnnie Lee Bussie is 73 years old and lives with his 78-year old disabled wife in Atlanta, Georgia. The Bussies are in danger of losing the home they have owned since 1999. In June 2005, the Bussie's then existing mortgage loan was refinanced by a lender with two complex loans that are now in default and the subject of this foreclosure. The Bussies say that the lender failed to explain to them that it was extending them two mortgage loans with two separate monthly payments. The Bussies thought they were getting one fixed rate mortgage. Instead they were given an adjustable rate mortgage with a low "teaser rate" for two years which meant that the low initial payments were only temporary. They also were given a second loan from the same lender which will require a balloon payment of $24,400 at the end of 15 years. When the loans were made, the Bussies were living primarily on fixed retirement income. When the payments went up after the first two years, the Bussies couldn't afford the payments and were facing a March 4, 2008 foreclosure. They were able to stop the foreclosure when they obtained a loan modification from the lender. However, even with the loan modification, the Bussies have not been able to afford their loan payments and are now facing foreclosure once again. Their lawyer has been trying to save their home and has offered to settle their two mortgage loan obligations with a short pay-off using with the proceeds of a FHA-insured reverse mortgage. On December 9, 2008 the lender refused this offer.

Vernon Frontz

"If I didn't live here, I'd have to go to one of these senior citizen homes and live there . . . I'm very depressed about the situation." —Vernon Frontz

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Vernon Frontz is 92 years old. As of January 30, 2009 Mr. Frontz is on the verge of losing his Atlanta, Georgia home of 44 years to foreclosure. Mr. Frontz had existing mortgage payments of approximately $900 per month. In 2007, Mr. Frontz was sold a new 40 year adjustable rate mortgage by telephone. He said an individual called him offering to refinance his existing mortgage with a new loan with lower monthly payments. Mr. Frontz said it sounded like a good offer and agreed to a new loan with monthly payments he thought he could afford.

Mr. Frontz said he was shocked to learn that the low monthly payments he thought he would have for the life of the loan were only initial monthly payments and that his Minimum payments would go up one year after the loan was made. He said that a few months after he got the loan, his daughter reviewed his papers and told him that the loan application had incorrectly listed his monthly income as $4,480. Mr. Frontz said he had no idea where that number had come from, especially since his only income, from a railroad retirement pension and other social security income was only about $1,400 per month.

Mr. Frontz' daughter then consulted a lawyer about her father's mortgage and discovered that he had been given an Interest Only Pay Option, 40 year, adjustable rate mortgage (ARM) in the amount of $231,000. The first month's payment on the mortgage starting April 1, 2007 was $669.52, which was based on the teaser rate of 1.75 for the first month only. After that, the minimum payment was still $669.52 for the remainder of the first year. However this payment amount no longer paid the full amount interest accruing monthly. As a result, even though Mr. Frontz continued to make mortgage payments, his loan was negatively amortizing which meant his principal balance increased each month that he paid the minimum payment, slowly reducing his equity, even while he was making payments. Further, once Mr. Frontz' principal loan balance reached 115% of the principal amount borrowed, a certain eventuality given the negative amortization feature of his loan, his minimum payment would increase substantially, making it even more difficult for him to pay this loan.

According to the loan terms, on April 1, 2008, one year after the loan closed and every year thereafter, the payment amount would change. After the first year, his minimum payment increased to $719.73 and he could no longer afford the payments. After the first three years of the loan, Mr. Frontz will be obligated to make a minimum payment of $1,958.55 for the next 37 years, on an income of about $1,400 per month. Additionally, Mr. Frontz will have to pay a $6,121 prepayment penalty if he refinances the loan before February 27, 2010.

Mr. Frontz' lawyer has offered to use the proceeds of a reverse mortgage Mr. Frontz' has qualified for to pay off the delinquent mortgage. As of January 30, 2009, the lender had refused this offer. Mr. Frontz is fearful that he will soon lose his beloved home in foreclosure and have to spend the rest of his days in a senior citizen home.

Eloise Grant

"I found a notice on the door that said the property was in foreclosure. I didn't know what to do." —Eloise Grant

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Eloise Grant is 67 years old. Until January 2009, she resided in a home she rented in Elk Grove, California. Shortly before Thanksgiving in 2008, Mrs. Grant was surprised to find a notice posted on the outside of her home. The notice said the house she was renting was in foreclosure and would soon be sold. Mrs. Grant said she always paid her rent and her landlord had never told her there was a problem.

Mrs. Grant said she called the number listed on the notice and the person with whom she spoke told her that she had better move her things out of the house because she might find all of her belongings on the sidewalk after the sale. Frightened and confused, Mrs. Grant did everything she could to keep life as normal as possible for her household even though she knew she would have to move soon.

Mrs. Grant's home was the family gathering place for her adult children and many grandchildren. She wanted to find an affordable home in the same Elk Grove community so that the children in her care would not have to change schools and move away from their friends. While shouldering the burden of finding a solution, Mrs. Grant said that her hair began to fall out and she unconsciously held her breath on many occasions.

After much searching, Mrs. Grant was unable to find suitable rental housing until her niece offered her home in Sacramento, California. Mrs. Grant moved to Sacramento shortly after the Christmas holiday, where the children under her care now attend school.

Tomás Hernandez

"It didn't turn out the way they said it would. The only option we have is to leave our house." —Tomás Hernandez

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Tomás Hernandez of San José, California is a 42 year old Spanish-speaking first time homeowner. He has struggled to make his mortgage payments on a refinance loan. In January 2009 he missed his first payment and is now in default. He and several other San José, California area Hispanic residents have sued the loan broker, the loan brokerage company, the real estate agent, the private lender and several others involved in the purchase and financing of their homes. They say that the defendants in their lawsuit were involved in a conspiracy targeting Hispanic households for predatory loans. The suit was filed on October 22, 2007 in United States District Court in the Northern District of California.

This is the Hernandez family story, according to Mr. Hernandez and the court documents in the lawsuit. In approximately October 2005 Mr. Hernandez and his wife wanted to find out if they were qualified to buy a home. They were referred to a local Spanish speaking real estate agent who markets her services to Latino families. They contacted the agent to inquire but then did not follow up. After a month, the agent invited them to meet with her. They accepted and said the agent checked their credit and told them they had good credit. When she asked them about their total monthly income, they said it was approximately $6,000 to $7,000 per month. The Hernandezes say they told the agent that they could only afford a monthly payment of $2,300 to $2,400 per month and that the agent said she could show them homes with that monthly payment.

Mr. Hernandez said that one month later, the real estate agent called them to let them know she found a home for $762,000 that they would like. Mrs. Hernandez told the real estate agent that the price was too high and said the real estate agent assured her not to worry, that a loan agent could give her a low payment. According to the Hernandezes, the real estate agent called back an hour later to tell them she had negotiated a lower price of $750,000 for the home.

Later that day, a loan agent called the Hernandezes to set up an appointment for the same day. They say the loan agent promised them low interest loans and they relied on these assurances. The Hernandezes say the loan agent negotiated with them in Spanish through a translator who was an employee of the loan agent, but the loan documents presented for their signature were all in English. They say that neither the loan agent nor the translator explained what was contained in the documents.

Mrs. Hernandez attempted to confirm that the payments would be approximately $2,500, in the range that the Hernandezes thought they could afford. The broker, through the translator, told them for the first time that the monthly payments would actually be $4664. The Hernandezes told the loan broker they couldn't afford the loan. The Hernandezes say that the loan broker told them not to worry that in six months she would be able to refinance their loan into an affordable fixed rate mortgage requiring a payment between $2,400 and $2,600. The Hernandezes said they relied on this assurance and continued with the purchase transaction. The Hernandezes said they were barely able to make the payments of $4,664 for the first few months but they did so with the understanding that their payments would be reduced in April or May of 2006.

In April 2006, Mr. Hernandez went back to the loan broker to get the loan refinanced as promised. Once again, they spoke with the loan broker through a translator. The Hernandezes were asked to give the loan broker their bank statements which they say showed that they had less than $500 in their bank account. They say they were never asked for their current income, but that Mrs. Hernandez volunteered that information, letting the loan agent know that their income had decreased.

A few days later, the Hernandezes were called to the loan broker's office to sign documents which were all in English. While signing the documents, the Hernandezes saw a document that looked like their total payment would be $3,600 per month, over $1,000 per month higher than what they were expecting. Mrs. Hernandez asked for an explanation but was told that the loan agent and the original translator were not available to provide the explanation, even though Mrs. Hernandez said she could hear the loan agent's voice coming from another office. The Hernandezes thought that because they had already signed a number of documents they could not back out so they continued signing while another employee of the loan broker urged them to do so, they said.

After they had signed all the documents, the Hernandezes said a notary arrived and the loan broker came into the room. They say this is when they learned that they had actually signed for three loans and that the notary was from the private lender who had given them one of the loans.

The first refinance loan was an adjustable rate mortgage loan in the amount of $596,000. This loan offered the Hernandezes an introductory payment of $1,986.18 for the first month of the loan only. Thereafter the interest rates would continue to change every month based on the current rates for the LIBOR index rate plus a margin of 2.975 rounded to the nearest 0.125%. The loan had a rate cap of 9.950 and a floor of 2.975.

The loan places a limit on the amount of unpaid principal balance that the Hernandez can carry on this loan. If their outstanding balance exceeds 115% of what they borrowed, a new higher minimum payment will be triggered. Their loan has a payment option feature which sets the minimum payment due at a sum that is lower than what would be required to pay the monthly interest due on the loan. By paying only the minimum amount required, the loan also has a negative amortization feature which means that even though the Hernandezes are making the minimum payment required, their loan balance is not reduced, and in fact continues to grow towards the 115 % trigger for higher minimum payments.

The Hernandezes say they did not understand that the principal they owed on the house would continue to increase as they made payments. To avoid this result, the Hernandezes would have to make the fully amortizing monthly payment which is the amount necessary to pay the loan off (Principal and interest) at the maturity date in substantially equal payments. In November 2008, the fully amortizing payment amount was $4,491.30, which is $2,296.02 more than the minimum monthly payment required at that time and greatly in excess of the $2,500 per month payment the Hernandez said they could afford.

From that loan, according to the loan closing statement prepared by the title and escrow company handling the refinance loan, the lender paid the loan broker a premium, known as a yield spread premium, in the amount of $17,880 for refinancing the Hernandez' mortgage.

The second loan was from another lender for $74,450 and required fixed monthly payments of $533.37 for 15 years at a rate of 7.75%. After 15 years, a balloon payment of approximately $57,000 would be due.

The third loan was from a private investor in the amount of $108,125. This was an interest only loan at 10% for two years. After two years, a balloon payment of the entire loan ($108,125) was due. The Hernandezes discovered that only approximately $85,000 of the private investor loan was credited to the refinance. The Hernandezes allege that the other approximately $23,000 was taken as up front fees by the lender.

Mr. Hernandez says there's nothing he can do to save his home. He cannot afford his payments and he can't refinance, he says, because the home's value has declined below what he owes on the loans. His lawyer said Mr. Hernandez tried to get a loan modification but his lender refused because Mr. Hernandez had not missed a payment. He says his only option is to lose the house and remarked, "This is the first and I think will be the last home I ever own."

Carl Lee

"It wasn't the end of the world, but it felt like it." —Carl Lee

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Carl Lee of Westchester, Illinois is 42 years old and lost his home to foreclosure in 2006. He now lives in a home he rents with his wife and young daughter. When Mr. Lee purchased his first home in 2002 it was the fulfillment of a life-long dream to finally become a homeowner. Mr. Lee thought that the loan he was sold was a fixed rate mortgage and that his monthly payments would be the same for the life of the loan. He was surprised when he realized he had received an adjustable rate loan and that his initial payment would go up, and continue to rise in the future.

The loan payments soon became unaffordable and Mr. Lee fell behind. When he was two months behind, Mr. Lee said he began working with a potential lender who promised him lower payments. By the time the new lender had the loan refinance documents ready for the Lees to sign, they were four months behind on their mortgage payments. Mr. Lee said when he saw the new payments that would be required by the new refinance loan, he knew he could not afford them and notified the lender. Then, Mr. Lee said, the new lender assured him that he would make the loan affordable by giving the Lees a second "piggy-back" mortgage loan, (in addition to the new first mortgage loan). The second "piggy-back" loan was supposed to give the Lees an additional source of cash with which to pay their new refinance loan.

Feeling the pressure of being four months behind on his mortgage, Mr. Lee said he felt he had no choice but to accept this arrangement. Mr. Lee said the piggy-back loan never came, his wife lost her job and he immediately found himself struggling to make the payments on the new loan. The Lees relied on the help of family and friends to make some of their payments. After unsuccessfully trying to negotiate with the lender for more affordable terms, the Lees could no longer make their payments and their home was sold in foreclosure.

Langdon McAlpin

"I got the feeling I was just a number. They've hurt a lot of people, we're just one of them." —Langdon McAlpin

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Langdon McAlpin, a disabled police officer from Loganville, Georgia, is 67 years old. The lender who now holds his loan has declined Mr. McAlpin's offer to pay off the loan with a new reverse mortgage. As of January 30, 2009, Mr. McAlpin is on the verge of losing his home of 19 years to foreclosure.

Mr. McAlpin had been a city of Decatur police officer for 23 years when he was struck by a vehicle while directing traffic in 1989. He suffered severe physical injuries including a significant head injury and is permanently disabled from work as a result. In 2004, the McAlpins refinanced and were sold an adjustable rate mortgage (ARM) that they could not afford. Mr. McAlpin said the lender told them they were qualified for the loan, but in fact that was not true. The ARM they received had a fixed initial interest rate for the first two years that continued to change every six months thereafter. His income, on the other hand, was limited and fixed and Mrs. McAlpin was unemployed. The only household income came from Mr. McAlpin's pension disability check in the amount of $2,039.62. After a deduction of $250 for Mr. McAlpin's medical insurance, the McAlpins had $1,789.62 net monthly income available to pay the new mortgage payments and their other household expenses.

After the loan was made, the McAlpin's initial monthly principal and interest payments on the new mortgage were $888.71. After the city and county property taxes and homeowners insurance were escrowed into the payment ($221.91 per month), the total monthly housing payments for the McAlpins were $1,110.62. The initial mortgage payment consumed a staggering 62.06% of the McAlpin's net monthly income and the McAlpins struggled to make the payments. Two years later, the interest rate adjusted and the escrow payments increased inflating their monthly mortgage payments to $1,378.52. Six months, later their monthly mortgage payments rose again to $1,487.92. Six months later, on July 1, 2007 the total mortgage payment effective on August 1, 2007 was $1,576.46, or over 88% of the McAlpin's net monthly income.

On October 26, 2007, the Georgia Department of Banking and Finance revoked the mortgage lending license of the original lender involved in the McAlpin mortgage loan and entered into a consent order with its owners to resolve allegations pertaining to violations of the Georgia Residential Mortgage Act and agency rules. However, the McAlpin loan has been transferred and assigned to another lender who is not subject to the Georgia Department of Banking and Finance action against the original lender. Through his lawyer, Mr. McAlpin is alleging that the purchaser of the loan knew or should have known of the legal claims against the original lender and should have more closely inspected the documents in the loan files it purchased. Had it done so, the McAlpin's allege, it would have discovered that that this was a clearly unaffordable loan.

Argy Tripodis

"They've told us we can either walk away, we can look at foreclosure. That's not a nice choice." —Argy Tripodis

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Argy Tripodis of Hobart, Indiana is 42 years old and is in danger of losing the home she has shared with her family of five since 2002.

Mrs. Tripodis works full-time and is the mother of three children. Her husband, Yiannis, also works full-time to support the family. The Tripodis family purchased their home in a Hobart subdivision with the dream of spending many years there and investing their hard earned mortgage payments in growing the home's equity. Mr. and Mrs. Tripodis purchased their home with an adjustable rate mortgage (ARM) which adjusted frequently and required increasingly more expensive mortgage payments. After the Tripodis' youngest child was born two years ago, Mrs. Tripodis' income declined because she was caring for her baby. When she returned to work, a significant portion of her paycheck went to pay for childcare for her youngest child.

In order to try to stabilize the escalating mortgage payments, Mr. and Mrs. Tripodis tried to refinance their mortgage but were unsuccessful. They then filed bankruptcy but were surprised to learn that the bankruptcy did not keep their mortgage payments from going up even though their other debts were managed through the bankruptcy proceeding which was discharged in Bankruptcy Court in April 2007 after the Tripodises completed their Chapter 13 plan.

In November 2006 the Tripodises refinanced into another mortgage, but the payments are still unaffordable and consume over 40% of their take home income. They feel that they are caught in a bind. They cannot afford their payments, nor can they afford to sell because in the current real estate market their home value has declined. The Tripodises believe that refinancing would be the best way to get a lower mortgage payment they could afford so that they can stay in their home. But because they will have to pay an $11,000 prepayment penalty if they refinance their mortgage before November 21, 2009, refinancing may not be an option.

Mrs. Tripodis has been trying for a year to convince her lender to reduce or eliminate the prepayment penalty on their mortgage so that they can afford to refinance, but the lender has been unwilling to do so. In the hardship letter she sent to her lender, she told the lender that she and her husband are having difficulty making the monthly mortgage payments and meeting their other expenses, including medical bills, because her husband's pay, which is based mostly on tips, has declined. She has complained to the Illinois Attorney General about the lender's prepayment penalty policy but this has not had an impact.

Besides their paychecks, the Tripodises receive a limited amount of help from Mr. Tripodis' mother and sometimes have to borrow money from other relatives. Even so, they are living paycheck to paycheck and often run out of food in between pay periods.

Brian from Springfield, PA

Brian having lived and travelled abroad has always been very conscious of his surroundings. When travelling, he normally used travelers checks to protect his money and personal banking information.

In March 2010, Brian and his girlfriend were travelling in Egypt when he used a prepaid travel card. They bought the card, a AAA Travel MoneyCard, from his local AAA office and “loaded” the card with $1,400 USD because he was told that the card was more convenient and just as safe as travelers checks. He received the card and a number to call should they encounter any problems in Egypt.

After a few days in Cairo, they boarded a Nile cruise boat and went to Kom Ombo. Brian went to a local ATM which he noted had a green security port to withdraw 2000 EGP (approximately $350 USD), but after entering his PIN while covering the keypad, no money came out of the machine. They were out of cash until they arrived in Aswan, where he asked his local tour guide to take him to a secure bank where he could try his ATM card again. When the withdrawal failed again, he thought that the amount may have been over the ATM’s limit and tried to withdraw half the amount, 1000 EGP. This time he was successful, however it would prove to be the last time he would be able to withdrawal money from his prepaid card in Egypt. When he started receiving “insufficient funds” messages during later attempts, he called the number he had been given by AAA, only to find out that the number wasn’t the right international number. They managed the rest of their vacation with credit cards, and not having cash was troublesome to say the least.

After a few days in Cairo, they boarded a Nile cruise boat and went to Kom Ombo. Brian went to a local ATM which he noted had a green security port to withdraw 2000 EGP (approximately $350 USD), but after entering his PIN while covering the keypad, no money came out of the machine. Brian then tried to withdraw a smaller amount 1000 EGP (Approximately $175 USD) thinking that there was some kind of restriction on the amount that can be withdrawn at an ATM, but that too failed. They were out of cash until they arrived in Aswan, where he asked his local tour guide to take him to a secure bank where he could try his ATM card again. He tried to withdraw 2000 EGP first, which failed and then tried a lesser amount of 1000 EGP, which was successful. That was the last amount of money withdrawn from the card. This time he was successful, however it would prove to be the last time he would be able to withdrawal money from his prepaid card in Egypt. When he started receiving “insufficient funds” messages during later attempts, he called the number he had been given by AAA, only to find out that the number wasn’t the right international number. They managed the rest of their vacation with credit cards, and not having cash was troublesome to say the least.

When he returned home, he called AAA since they had originally sold him the prepaid travel card claiming that it would protect him from fraud. Not being able to access his money, Brian was hoping to recover almost $600 that had been unaccounted for. The branch manager printed out the card’s transaction history and helped Brian complete the necessary forms to file his claim.

This is when Brian discovered that the bank that serviced his account was MetaBank. An analysis of the transactions confirms that it was in Kom Ombo, where the ATM was compromised and the scam occurred. According to the transaction history, the two transactions in Kom Ombo were in fact successful. MetaBank does not cover fraudulent claims for prepaid travel cards on international ATM/PIN transactions. After writing and working with service agents over the phone, MetaBank will not refund his money even though he has receipts of the failed withdrawal attempts and a transaction history on the card that does not match his travelling itinerary.

Pete of Locust Grove, VA

I purchased a $50 MasterCard for my adult son who lives in Germany. He was headed with his fiancé to NYC for a week before headed back to Germany. I purchased the card from CVS Pharmacy in Locust Grove, VA, and he tried to use it in NYC. Apparently it wasn't scanned properly. He couldn't use the card; and each time he called the MasterCard help number, there was no answer. So now I'm out the $50 and he has a worthless card that no one will do anything about.

Bob of Tempe, Arizona

The merchant was unable to tell me what balance remained on the card, making it very difficult to spend the last 10%. Also, the merchant could not take the remaining balance as partial payment and allow me to pay the remainder in cash. Thus, the last 10% was almost impossible to spend, which was very good for the card's issuer but bad for the consumer (me)!

Scott of Norman, OK

I received a $50 gift card for Christmas. I was encouraged to activate the card as soon as possible, so I did. I did not realize that it would be so expensive for the company to borrow my brother's money, but after 6 months, stiff fees were assessed. When I needed the cash, I went to the website and found that I had not accessed the balance for so long that they refused to send my password, but I would have to call their 1-800 number. To activate it, I had to pay a service fee and then another service fee to get my balance. I found that I had approximately $17.50 left and had lost $32.50 in fees or 65%. I can't imagine a worse investment. Now I just carry traveler's checks, but increasingly stores do not accept them. My credit union used to sell Travelers Checks but now they only sell debit cards. No shelter there, though I imagine they get more money for the "free" service of buying plastic.

Judith of Worcester, MA

We have three malls in Central Massachusetts and the ownership of the mall is constantly selling their own prepaid card at holiday time primarily. As soon as one purchases this card if not used right away at any of the stores in the mall it automatically reduces in value. This is the Simon Properties Gift Card. You may see this advertising at this time of year. Attorney General Martha Coakley and WCVB Channel 5 Boston, MA Susan Wornick (Consumer Reporter) have repeatedly asked them to cease and desist from this practice but it still continues to this day because it's a money maker for the upkeep of all malls which they (Simon) hold ownership. Maybe you might have more influence than us, the consumers. Just avoid altogether.

Stuart of Porter Ranch, CA

People have giving me gift cards before. They had monthly fees that were deducted from the amount on the card if you didn't use them by a certain date after they were purchased. However, being a gift, I didn't know when they were purchased and therefore were subject to the monthly fee.

Katherine of Philadelphia, PA

The bank charges a fee to activate a gift card- and there was no way to tell how much was left. I still have one with $2.00 and something left on it. It's hard to buy something with that amount and since I can't tell how much there is it's hard to use!

Ed of Lawrenceville, NJ

Prepaid gift ards are a rip-off! My wife is a school teacher and gets gift cards from her students. The balances start to decline after receiving the cards. You can't cash them in. When you use the card at a restaurant they automatically add 15% gratuity even with take out food. You can't use them everywhere. We have had card balances expire. If we get a gift card we use it ALL as soon as possible. I stopped giving gift cards due to the hassle. We now give checks or Amex gift checks.

John of Belmont, CA

Last holiday season, John Houston received a turntable as a gift. He didn’t need it and returned it to Sharper Image, receipt in hand, but the store would only give him a refund in the form of a store credit.

Soon after that, Houston, a hospital administrator from Belmont, Calif., learned that Sharper Image had filed for bankruptcy. He quickly tried to use the credit, but the store refused it and told him he’d have to file a claim in bankruptcy court. “The retailer didn’t really care, and I’m out $200,” he says. He submitted the paperwork and is waiting for the court’s decision.

Consumers Union has long warned of the hidden fees and expiration dates of many gift cards. Now there’s another twist: If a retailer goes bankrupt, its gift cards and merchandise credits might be worth little or nothing. That could add up to a big hit; Sharper Image customers might lose some $40 million in gift cards and credits, according to court records.

In bankruptcy court, such unused funds are treated as debt. A retailer can ask the court for permission to continue to accept them. If the court says no, the cards are worth little more than the plastic they’re printed on. Consumers may be left with only one option: to file a claim as an unsecured creditor in the bankruptcy proceedings, a cumbersome process.

Nicholas of theTownship Of Washington, NJ

I got caught by surprise when I found out that the AMEX gift card I had purchased for my daughter and misplaced for a few months before I found it again and gave it to her it had expired and it was worthless. Another time that I tried to use an AMEX gift card again that was given to my wife as a present from her students, I found out that there was no value left in it because AMEX was charging a $2.50 per month maintenance fee. Needless to say that I will never buy or use AMEX gift cards again.

Dennis of Palo Alto, CA

My 16-year-old son was headed to Spain for a month-long cultural program. We wanted a secure way to send with him at least some of his spending money plus an easy way to transfer more to him, if needed. We found a couple of cards marketed specifically for parents to use to help teach children about money management (VisaBucks?) As you describe, the fees were ridiculous and ever-present. About the only way to avoid some of the initial fees was to have a pre-existing relationship (an account) with the bank selling the card. So we backed away from this apparent rip-off that seemed worse than just "nickel and diming."

Martha, San Martin, CA

For Martha, a letter from the ExxonMobile Credit Center in June 2003 marked the beginning of three troublesome years dealing with the damage caused by identity theft. The ExxonMobile letter regarding her new card surprised Martha – she had never applied for one.

Martha immediately took action: canceling the fake account, alerting the authorities about the apparent identity theft and placing a 90-day fraud alert on her credit files. She believed that her trouble was over. But almost a year later, Martha discovered that she had a large overdue credit balance on a Fleet CC account which had been open for nearly a year.

“My nightmare started all over, once more having to contact all the credit bureaus, my financial institutions, filing amended police reports, contesting the charges with Fleet CC,” writes Martha, who adds that her credit history was damaged as a result of the fraudulent account.

As for how the identity theft occurred, Martha discovered that fellow employees at her workplace had also become victims. Her former employer believes that a former employee in the payroll department stole sensitive information from company files that was used to commit fraud. To date, the thief has not yet been caught. Martha hopes that all the trouble is now behind her, yet wonders, “Is the matter now settled? I surely hope so, but I still lie awake at night waiting for the next shoe to drop.”

John, Virginia

John and his wife were both victims of identity theft. They first discovered something was wrong when the thief tried to open multiple credit cards with American Express in his wife’s name. They soon learned that their names, Social Security numbers, dates of birth, address, and telephone number had been stolen and used to apply for credit cards at several companies. They are still not sure how their identities were stolen.

Soon after the letter from American Express arrived, John requested a credit report and discovered that multiple inquiries were made at several credit issuers. He called all of the companies and prevented the inquiries from becoming accounts. However, two weeks later, the thief managed to open a credit card account and charge $1300 in merchandise. The company eventually grew suspicious and called John. Later, the thief received a $10,000 line of credit with Wells Fargo. John visited his local Wells Fargo branch, proved his identity, and canceled the card. The thief also managed to change his address on John’s checking account by visiting a local branch of his bank.

John invested a significant amount of time and energy cleaning up his credit report and working to protect himself against further fraudulent activity. He placed a fraud alert on his credit report, which created additional work because one credit bureau was not notified of the fraud alert. However, he has been satisfied with the alert and believes it has played a large role in preventing further fraudulent activity. John also pays for a credit protection service.

The thief learned about the fraud alert John placed on his credit report. At one point, the thief called an issuer and pretended to be the victim! Fortunately, the fraud alert required the issuer to contact the real John. At one point, an issuer had the thief and John on the phone at the same time. Unsure of what else to do, the issuer hung up on the thief.

John also reported the crime to the local police department in Northern Virginia. Since the crimes took place in Maryland, the local police had no jurisdiction over the case. The Maryland police were not interested investigating either because there were no significant damages. Fortunately, a fraud detective in Northern Virginia took interest in John’s case. While off-duty, he posted “Wanted” posters in the neighborhood near the address the perpetrator had listed. John believes the officer also contributed to stopping the fraudulent activity.

John was relieved to learn that the identity theft did not affect his credit score. He attributes this to the many hours he spent speaking with credit issuers, in person and on the phone.

“The time I invested was like taking another part-time job,” John told Consumers Union, “I don’t know where I found the time.”

Don, Texas

Don learned he was a victim of identity theft when he received a collection notice from Sprint Wireless. He was surprised to receive the notice from Sprint because he had never been a customer of the company. It appeared that someone had opened an account in his name using stolen information about him. Don filed a complaint with Sprint and sent the company copies of his driver’s license and social security card, hoping to prove his real identity.

Don also drove to several Sprint stores in the Dallas area, attempting to fix the mix-up. He showed them copies of his identification and explained he had never been a Sprint customer. One manager told Don that he believed him, but there was nothing else that he could do.

Don learned a similar fraudulent account in his name had been set up at TXU Energy, which led to the company turning off his electricity during the hottest days of summer. Don paid six-hundred dollars to reconnect. TXU Energy also charged him an additional $450 for a deposit. He hired a lawyer and sent letters to the credit bureaus explaining he had been a victim of identity theft.

Don says that he is most upset about the effect the identity theft has had on his credit report. His credit score dropped from 820 to 580, and he has had difficulty obtaining new credit. He is also seeking employment and notes that his poor credit has made it difficult to get a job.

Unfortunately, Don has not worked out the problem with Sprint. He has recently received another collection notice from Sprint. He worries that his credit will be further damaged.

“This has cost me a lot of blood, sweat, and tears,” Don told the Consumers Union, “It’s certainly not over yet.”

Margaret, Illinois

Margaret received a call from an angry bill collector, demanding that she pay a balance on a credit card. Margaret pointed out that she had never opened the credit card account in question. The bill collector called Margaret a “liar” and told her that she was going to lose her home and go to jail. Margaret requested her credit report so that she could get information about the fraudulent account. She learned that a thief had obtained her social security number and credit score. The thief had opened new accounts in Margaret’s name and added his or her name to the accounts. The identity thief then charged several thousand dollars at an electronics store.

Margaret called the credit card companies and canceled the illegitimate accounts in her name. She also notified the local police department, which took a report. The department also cooperated with the credit card issuers to help the companies determine it was a matter of fraud. However, Margaret has not been notified of any investigation or arrest in the case.

“The bill collectors and credit card companies treated me as though I was the criminal,” Margaret told the Consumers Union, “It’s frustrating that identity theft victims have to jump through so many hoops.”

The credit card fraud was not the fist time Margaret had dealt with identity theft. Several years earlier, she was pregnant and received a bill for a hysterectomy. It appeared that an identity thief was obtaining medical services in her name. Margaret continues to try to solve the problem with her health insurance.

Naomi B, Florida

Miami resident Naomi B heard about the security breach at DSW a month before she was notified by the company that her personal information had been compromised. DSW urged Naomi B to check her credit reports to make sure there had been no fraudulent activity.

For Naomi B, ensuring the safety of her identity became a time-consuming task. After deciding to cancel all but two of her credit cards, Naomi B spent hours on the phone with credit card companies convincing them to cancel her accounts.

In the months that followed, Naomi B received notices that her information had also been involved in security breaches at Chase Mortgage and Capital One. Soon after hearing about these breaches, Naomi B placed a freeze on her credit report. A security freeze locks, or freezes access to consumer credit reports and credit score. Naomi B believes that the freeze prevented thieves from opening new credit accounts in her name.

Since the initial breach notifications, Naomi B not received communication or assistance from Chase, Capital One, or DSW. She looks forward to leaving the hassle the security breaches behind her.

“I’ve given up living in fear and have opted just to live,” Naomi B told Consumers Union.

Bette, Florida

Although Bette’s identity was stolen in 2003, she did not find out about the theft until she received a bill from a collection agency in April 2006. The bill was for an account at a cable company in a city where Bette had never lived. Bette and her husband went to the cable company’s offices and proved they did not live at the address listed on the account. The cable company promptly canceled the account.

Soon, Bette learned that the thief had used her name and Social Security number to open a fraudulent account with Verizon. The thief had also managed to change her name on her caller I.D. from Bette’s name to her own. Fortunately, the change helped the local police track down the thief. She worked in a medical office where Bette was a patient. She had stolen Bette’s Social Security number from an office database.

Bette placed fraud alerts and a freeze on her consumer credit reports. A security freeze locks access to the credit score and reports. Without this information, a business will not issue new credit to a thief. Bette has been pleased with the freeze and fraud alerts. There have been no new fraudulent charges on her credit accounts.

Bette has spent many hours working to get the fraudulent information removed from her consumer credit reports. The theft substantially lowered her credit score. She applied for new cards and was denied credit. Bette is happy to report that now all of the fraudulent information has been removed from her credit report, and her credit score has risen to where it was before the identity theft occurred.

Bette believes that Social Security Numbers should not be used as identification numbers at medical offices and elsewhere. She also thinks that utilities should be listed on consumer credit reports. Then, she might have found out about the theft sooner.

“I cringe every time I have to write down my Social Security number,” she told Consumers Union, “I can’t help worrying it will happen again.”

Summer of Berkeley, CA

Summer of Berkeley, CA

In 2005, Summer received an e-mail from the University of California at Berkeley informing her that their database had been hacked and that her personal information had been stolen. The stolen information included Summer’s date of birth, her address, credit card information, and her social security number.

Soon, Summer discovered that a thief made fraudulent charges to one of her credit cards. She immediately closed her Wells Fargo credit card and checking accounts and opened new ones. The bank promptly removed the fraudulent charges from her credit card account.

Soon after the thief made the fraudulent charges, Summer put a fraud alert on her credit report through a credit bureau. The credit bureau told her that no new accounts would be opened without the bureau calling her to confirm them and would prevent her from receiving additional credit card offers. As far as Summer knows, the fraud alert worked. However, she still received credit card offers in the mail.

Summer called the University of California at Berkeley to see if the university offered assistance to victims. The person she spoke with offered no help, other than directing Summer to a for-profit credit monitoring company whose services she was already using.

In November 2006, more fraudulent charges appeared on an American Express card account which had been listed in UC Berkeley’s database. American Express removed the charges from her account.

On December 12, 2006 Summer received an e-mail about another security breach, this time at the University of California at Los Angeles (UCLA). Summer had applied for graduate studies there but had never attended. UCLA was much more helpful than Berkeley, directing Summer to a hotline and a website created after the breach. There have been no fraudulent charges related to the UCLA breach.

“I can’t help but feel these institutions, which collect our personal information, should be more responsible for safeguarding it,” Summer told Consumers Union, “With the UC Berkeley incident, I couldn’t help but feel absolutely left alone to deal with their incompetence. I hope that universities can become more accountable for the mismanagement of personal information.”