08.20.08

You Can Only Know So Many, So Be Choosy

Posted in Uncategorized at 03:37 by lnxwalt

I am “the tech guy” at work, so I get asked pretty regularly how someone can know whether an online merchant is trustworthy. And honestly, I have found that you cannot know that any particular merchant is trustworthy in the absence of someone you trust reporting their experiences with a company.

First, let me tell you what you should not trust, or at least not very much.

  • If the site is encrypted and “secure”, all that means is that it will not be easy for someone to steal your information as it transfers to the site–it says nothing about what happens once the information gets there.
  • Those seals of approval that say a site is “hacker-proof” mean nothing, because online vandals could suddenly find an undiscovered flaw at any time.
  • The green highlighting on the address bar on certain encrypted sites is also deceptive. It means that the site owner went through some additional identity verification. But all identity tells you is whom you are dealing with. It says nothing about whether that individual or organization is honest or deceptive, nor does it tell you how well the site is safeguarded against tricks that could leave you unintentionally sending your information to some organized crime ring.
  • Likewise, when an encrypted site doesn’t use a security certificate vendor that your browser company approves of, you’ll get warnings that the certificate is invalid or could not be verified. Sometimes invalid is invalid–perhaps the certificate is expired or revoked–and sometimes invalid is quite valid, such as https://mail.yahoo.com/, which gives an error because the certificate is for https://login.yahoo.com/. Sometimes, you will get an error because the site’s owner signed the site’s certificate themselves. This is similar to people who are born in certain areas or time periods when reliable records are not available, using witness testimony, family Bibles, and church records to verify their identities. (If you don’t see it yet, all that a state issued identification card does is say that the state agrees that the witnesses [such as the doctor that signed your birth certificate] are reliable. Similarly, a certificate signed by one of the major certificate companies merely says that they say your site’s identification documents are reliable based on the testimony of the site owner.)

But this is not intended to scare you. I just do not want you to be deceived that just because your address bar turns gold or green that you can trust that site with your money or your private information.

In a way, it is similar to conducting business over the telephone. Unless you have personally met someone and spoken with them long enough to reliably recognize the person’s voice, conducting any financial transaction over the telephone is inherently dangerous. You really have no way to know whom you are talking to. And so, you should be at least as careful about whom you give financial or personal information to when you are on a telephone call as you are on the Web.

Which brings me to the point. I do not do business with unknown parties without some kind of personal recommendation. I do not buy a lot of things online, because there are very few organizations that I trust with my information. I do not buy anything over the phone for the same reason. In general, I walk into a retail location to purchase whatever I am getting. If I’m in an area long enough, I get to have a feeling about which of the locally-owned business are worthy of trust. Sometimes, I misjudge, as will you. Which why I try to err on the side of caution.

You can only know a certain number of companies, as to whether they are reliable or trustworthy. For others, you can either throw caution to the wind or you can choose to avoid them. We all do both, based on some inner (and probably unconscious) self-preservation system. We do, however, have to choose where the balance lies. In non-personal, electronic transactions, we have no way to “sense” where the balance should be. We have to think about things and try to overrule our emotions in this area.

With online transactions, though, we have a kind of trusted recommender. You do not have to give your credit card information directly to Joe’s Fertilizer Factory–you can conduct the transaction using PayPal, Google’s Checkout, or one of several other payment intermediaries. Many of these have anti-fraud protections built into the service. I recommend that you look for PayPal or Checkout on every site you choose to do business with. In this way, you can have a small number of trusted partners who help you to do business with hundreds of other businesses.

If you operate an online business and you are not using PayPal and Checkout, why not? You are losing out on potential sales. Because both vendors have the trust of the general public, they tend to calm prepurchase anxiety. Also, the offer some protection to your business–no more worries about fraulent credit purchases.

08.11.08

Financial Companies’ Predatory Actions Threaten US Stability

Posted in Political, Society at 05:02 by lnxwalt

The Poverty Business

In recent years, a range of businesses have made financing more readily available to even the riskiest of borrowers. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge.

Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%. Roughly the same thing happened with mortgage loans: a leap from a 6.4% gap to one of 25.5%. “It’s not only that the poor are paying more; the poor are paying a lot more,” says Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.

In college classes on finance, we learned that reward follows risk. In one particular class, FIN 432: Financial Institutions and Capital Formation, we discussed in great depth the thrift crisis of the 1980s. One of the primary causes was the removal of the interest caps that limited the amount of interest that banks and other consumer finance institutions could charge and collect. Overnight, rates went up and most of their assets consisted of long-term fixed rate real estate loans.

In today’s economy, one of the chief problems is that those caps are not low enough and any enforcement is long after the fact. It does not take much looking around to realize that there is an imbalance. People, like the woman in the article, are placed at a disadvantage versus lending corporations, who control the contracts to prevent individual consumers from having any legal refuge or remedy. Even the extreme remedy, bankruptcy, has been stripped of some of its restorative power, as some debts may survive bankruptcy.

I call upon Congress and our regulatory agencies to immediately act to contain and restrain the actions of all consumer finance lenders. The next US Attorney General should set a goal of marching fifty financial industry CEOs into courtrooms in orange jumpsuits and leg irons in the first eighteen months of the next administration. Already, many people do not vote because they do not see their voices as being heard. They feel that their votes have no effect on the course of this nation or their day to day lives. But fifty no-bail arrest warrants, complete with heavy TV coverage, will do a lot to restore confidence in our system of governance. I suggest that the fifty CEOs be accompanied by 25 CFOs and 25 regulatory agency heads (or employees, where applicable) who stonewalled action against the misbehavior.

It would be too much to hope for public hangings. If that woman saw the person who arranged her exploitive auto loan hanged, she would begin to have hope that justice will prevail, and so would numerous others who have experienced similar situations. However, we will have to be content with prison sentences for the scumbags getting rich by targeting lower-income people with take-it-or-leave-it financing contracts. This, even though they risk turning us into one of those third world countries where they change leadership as often as we change our underpants.

I also want to take this opportunity to praise the honestly-run, small locally-owned businesses (SLOBs) in your community. There are plenty of scammers, large and small, but the honest SLOBs deserve your business. They deserve your support. They deserve your advocacy. They are the businesses that will hire your nephew, your brother-in-law, and the kid down the street. While the big guys lay off more people than they hire, smaller businesses are the ones that keep the economy going. Shop the local stores, buy the locally-produced products, hire locally-owned companies for your service needs, do at least some of your banking with a locally-owned bank. Celebrate your small, locally-owned businesses (SLOBs), for they are real American heroes.