Marketplace - American Public Media

1 in 3 Americans have past due debt

Tue, 2014-07-29 13:29

This just in from the Department of Phone-Calls-You’d-Rather-Not-Get: one in three Americans with credit files had some kind of debt in collection last year, according to a new report.  All told, that's about 77 million consumers who are poised to get one of those inherently stressful calls from a debt collector.

The Urban Institute partnered with Encore Capital Group, the country's largest publicly traded consumer debt buyer, on the study. To understand the significance of these findings, here’s a little context:

When a debt goes into collection, it basically means the original people you owe money to (maybe a bank or a credit card company or a doctor's office) have given up trying to get it back on their own and a third party is now involved. In some cases, the original creditor sends the debt to an internal collections department to handle it. In other cases, they hire an outside agency to collect for them. In still other cases, the debt is sold to another company altogether. 

The collector is usually paid on commission, based on how much of the debt can be recovered. Meaning, if you have a debt that's sent in to collection, you basically become a name on a spreadsheet for the debt collector.

Gustavo Montoya, an emergency room nursing assistant in San Diego, ended up on one of these debtor spreadsheets a few years ago. He'd taken a loan for $3,000 from Wells Fargo to help pay for living expenses while he was in school. Then, in 2011, he was contacted by a different company, one he'd never heard of, who had bought his debt. 

For two years, the new company called him every day, until another one started calling instead. Montoya, who was unemployed at the time, says he tried to explain his situation to the collectors that called him. 

“The economy was still bad," Montoya said, "I was finding difficulty getting employment. It was really stressful."

Graphic courtesy of the Urban Institute.

Beyond the stress, falling into collection can have big repercussions, says Suzanne Martindale, a staff attorney with Consumers Union. It can affect your credit score, your ability to get a loan in the future, even your ability to get a job. The growing practice of passing debt from one collector to another, or selling it to another debt buyer, means that in a matter of months there can be several different people from different companies claiming you owe debt to them.

“Many consumers I’ve spoken with are just utterly confused — 'who’s telling me the truth here, what are my rights, and how can I resolve the problem and just get on with my life?'”

Mark Schiffman, with the Association of Credit and Collection Professionals, an industry group, says the collections process can be stressful. but it can also be an important step in keeping the economy moving.

“Businesses use those moneys to pay their bills, to pay rent, to keep operational costs, to pay salaries.”

Even once the original creditor has written off a debt as a loss, and sold it to a third party, the act of debt collection itself can be big business too.

Graphic by Shea Huffman/Marketplace

1 in 3 Americans have past due debt. What this means.

Tue, 2014-07-29 13:29

This just in from the Department of Phone-Calls-You’d-Rather-Not-Get: one in three Americans with credit files had some kind of debt in collection last year, according to a new report.  All told that's about 77 million consumers who were poised to get one of those inherently stressful calls from a debt collector.

The Urban Institute partnered with Encore Capital Group, the country's largest publicly traded consumer debt buyer, on the study. To understand the significance of these findings, here’s a little context:

When a debt goes in to collection, it basically means the original people you owe money to — maybe a bank or a credit card company or a doctor's office — have given up trying to get it back on their own and a third party is now involved. In some cases, the original creditor sends the debt to an internal collections department to handle it. In other cases, they hire an outside agency to collect for them. In still other cases, the debt is sold to another company altogether. 

The collector is usually paid on commission, based on how much of the debt can be recovered. Meaning, if you have a debt that's sent in to collection, you basically become for the debt collector, a name on a spreadsheet.

Gustavo Montoya, an emergency room nursing assistant in San Diego, ended up on one of these debtor spread sheets a few years ago. He'd taken a loan for $3,000 from Wells Fargo to help pay for living expenses while he was in school. Then, in 2011, he was contacted by a different company, one he'd never heard of, who had bought his debt. 

For two years, the new company called him every day, until another one started calling instead.  Montoya, who was unemployed at the time, says he tried to explain his situation to the collectors that called him.  “The economy was still bad," Montoya said, "I was finding difficulty getting employment. It was really stressful."

Beyond the stress, falling into collection can have big repercussions, says Suzanne Martindale, a staff attorney with Consumers Union. It can affect your credit score, your ability to get a loan in the future, even your ability to get a job.  And the growing practice of passing debt from one collector to another, or selling it to another debt buyer, means that in a matter of months there can be several different people from different companies claiming you owe debt to them.

“Many consumers I’ve spoken with are just utterly confused—who’s telling me the truth here, what are my rights, and how can I resolve the problem and just get on with my life?”

Mark Schiffman, with the Association of Credit and Collection Professionals, an industry group, says the collections process can be stressful. But that it can also be an important step in keeping the economy moving.

“Businesses use those moneys to pay their bills, to pay rent, to keep operational costs, to pay salaries.”

But even once the original creditor has written off a debt as a loss, and sold it to a third party, the act of debt collection itself can be big business too.

New sanctions against Russia could hurt US firms

Tue, 2014-07-29 13:29

The European Union is joining the U.S. in imposing tough, new sanctions against Russia, which continues to support separatists in eastern Ukraine.

The new measures include an arms embargo and restricted sales of technology and equipment for Russia's oil industry.

In a big change, the new sanctions target sectors rather than just individuals in President Vladimir Putin's inner circle.

“The shootdown of the Malaysian aircraft I think has changed the equation,” says Kenneth Yalowitz, a former U.S. ambassador to Belarus and Georgia, and now a global fellow with the Woodrow Wilson Center.

But the new EU sanctions and the U.S. ones already in place haven’t hit American businesses as badly as some feared.

“U.S. companies, if anything, breathed a little sigh of relief today that they’re not going to be held out relative to their European counterparts,” says Doug Rediker, a visiting fellow at the Peterson Institute for International Economics.

Russia is not a big trading partner with the U.S. Some companies like ExxonMobil and Citigroup might suffer a bit, but the biggest risk is Russian retaliation against big brands like McDonalds, claiming things like "'some health concerns' — in quotes — that were expressed by Russian authorities,” says Rediker.

Other potential targets include companies like Visa, MasterCard, and big U.S. accounting firms.

Others see little damage to U.S. companies so far.

“Retaliatory sanctions against businesses in the West, to the extent there have been any, they haven’t been very impactful,” says David Levine, partner with the law firm McDermott, Will & Emery.

A big question now is whether Western governments will have the stomach to continue sanctions for moral reasons, or whether trade and commercial interests will win out.

Competitive swimming struggles to stay afloat

Tue, 2014-07-29 12:42

During these hot summer days, lots of kids are taking advantage of the closest swimming pool, but only a few are diving in for the local swim team. That’s why USA Swimming has kicked off an aggressive campaign to remind kids that swimming is, in their words, “the funnest sport there is.”

One of the ads in the SwimToday campaign shows a girl wearing goggles, dropping into a pool of blue water in slow motion. Then, you hear a voice saying, “Basketball... softball... cannonball... Which sounds the most fun to you?”

Matt Farrell is Chief Marketing Officer of USA Swimming. He says he wants kids to know there are other sports to consider. Farrell says their survey shows parents are one major problem when it comes to getting kids in the pool - 80 percent of parents overlook swimming as an organized sport.

“It was as if parents said, 'I’ve taught my kid to swim, I’ve checked the box, I’m a good parent, I’ve made them safe. Now let’s go play soccer, let’s play basketball,'” says Farrell.

Misha Neal, 15, of Durham, North Carolina swims for her high school team and for the YMCA. She remembers when it was time to make that big decision.

“I was doing a lot of sports at the time... I was also in gymnastics and track, and I had to pick. I remember Daddy telling me that I was better at swimming,” she says.

Misha has thrived, often coming in number one in the 50 Freestyle. USA Swimming is working to remind more kids of all the positives the sport has to offer, like teamwork, confidence, health and fitness. 

Mark Anthony Neal, Misha’s dad, says Misha adores her teammates and has overcome the obstacles of swimming competitively.

Even the hair issue: "We knew that our daughter was serious about swimming, you know, when she was told matter of factly she wouldn’t be able to get a perm, she wouldn’t be able to put any chemicals in her hair, [and] she said 'That’s fine.'”

 The SwimToday ads are making the rounds on social media. They first television airing will be during the upcoming Phillips 66 National Championships.

Refrigerators are running in China

Tue, 2014-07-29 12:02

In the early '90s, only one Chinese family in ten owned a refrigerator. Today, 90 percent of urban Chinese households have one. This mass move toward refrigeration had a huge effect on the country’s economy, culture and environment.

Refrigeration is a multi-billion dollar industry in China, heavily subsidized by the government.

China is “refrigerating for the exact same reasons we did” says Nicola Twilley, who wrote about refrigeration in China for New York Times Magazine. “You can’t really feed an urban population of consumers without refrigeration.”

In her article, Twilley visits a factory that belongs to Sanquan, one of the largest frozen dumpling manufacturers in China. Many freezers in Chinese homes are filled with these dumplings, much the way you’d find TV dinners in American freezers.

Listen to the full conversation in the audio player above.

ERs are still busy, Affordable Care Act and all

Tue, 2014-07-29 11:27

One of the arguments in favor of the Affordable Care Act was that it would reduce dependency on emergency rooms by covering more people with basic preventive care. Now, millions of people are newly covered by Obamacare. So are emergency departments seeing a slowdown?

Not so much.  

On the street in downtown Dayton, Ohio, Rebekah Jacobsen says before the Affordable Care Act, she racked up thousands in medical bills.

“I didn’t have health care. I didn’t have anything,” she says. Now, she’s on Medicaid, the health insurance program for low-income people. Ohio’s one of the 27 states that expanded their program with federal funds available under the new law. But Jacobsen was in the emergency room just last month—admittedly not for the most serious problem.

“I thought I had lice, and I didn’t,” she says. Her head was itching, and it turned out to be dandruff.

An ER visit for dandruff  is just the kind of situation some people will point to as burdening the whole system. Jacobsen says she would have gone to a regular doctor to see if she had lice, but it was the middle of the night. With her new insurance, the ER trip didn’t cost her anything.

Up the road at Miami Valley Hospital, Dr. Darin Pangalangan, an emergency doctor and head of the Emergency and Trauma Institute for Premier Health, says he thinks people should be able to use the ER when they need to - or even just think they need to.

“You cannot go to your family doctor at midnight. They’re not open at midnight,” he says. He says it’s not an abuse of the system to access an ER if you think you may have a problem, and you can’t get in to see a regular doctor. What’s more, emergency doctors are bound by law to help anyone who comes in the door— regardless of their ability to pay —to at least investigate to see if they have a serious problem. Most people who walk through the doors come in with problems that need immediate attention.

The still-looming Obamacare question though, is this: Will people actually depend on ERs less for basic care once they’re insured, driving costs down for everyone? Or will more people, like Rebekah Jacobsen, go to the ER because, well, now they can?

“The cost of going to the emergency department might be a major deterrent for the uninsured,” says Katherine Baicker, a Harvard health economist who worked on a study of new Medicaid recipients in Oregon. She found that people who got on Medicaid then went to the ER more. “Once they have access to insurance, they can go to the emergency department without being concerned about being presented with an enormous bill at the end.”

Howard Mell, a spokesman for the American College of Emergency Physicians, says many of his members are seeing increased traffic, though ER visits were already on the rise.

“Most emergency departments have actually seen an increase in the amount of people coming through the door,” Mell says. “It’s not a huge increase, but it’s certainly noticeable.”

But the experts don’t all agree: another study in Massachusetts found expanding to near-universal health coverage led to fewer people using emergency rooms in cases when it wasn’t really an emergency. And still another study looking at Medicaid recipients in Ohio found that expanded Medicaid coverage could help reduce ER visits and increase the use of primary care. Doctors at MetroHealth, the county hospital at the center of that study, say integrating patients into a “patient-centered medical home” model of care helps keep people focused on primary and preventive care, and makes them less likely to show up at an ER when they don't need to.

Overall, the jury is still out—some 13 million people are just now settling into having health insurance, either through Medicaid or the ACA exchanges. It’s not clear yet how all those people might use the ER differently, and what strategies providers might use to cut costs to the overall system. Regardless, one recent study found emergency rooms in the United States are generally profitable, and predicted a rise in revenues and profit margins for ERs as more people get covered.

Still, emergency care is an expensive way to get help to people who don’t have immediate, severe conditions, which is why health networks like Premier in Dayton are trying to offer alternatives. Kathryn Lorenz is a doctor at what’s called an "after hours clinic" in Troy, Ohio—they’re open from 5 to 9 p.m. weekdays, and offer weekend hours.

“You can walk in up to the last minute and we would see you,” says Lorenz. The clinic helps folks who can’t get a quick appointment with a family doctor for something acute like back pain, poison ivy or lice. It’s a less costly option than an ER, but Lorenz also says there are things she can’t do for patients here. “A lot of times I’m wrestling them to go to the ER, and telling them, 'yes, you must pay your co-pay and get in there because you have a life-threatening illness.'”

It’s not like most people are in a huge rush to go to an emergency room. Take Dayton resident Roberta Gilliam. She says she recently got Medicaid, and she’s been taking advantage of it by getting preventive care, not by going to the ER.

“I’ve had my pap smear, I’ve had my mammograms, I’ve had my dentures, my X-rays, I’m getting ready to get a partial,” she says. “It’s been a blessing.”

It’s the safety net she’s grateful for.

“When anybody can get insurance, you know they’re happy to have insurance,” she says. “Especially the ones that can’t afford insurance.”

Emergency care is really just one small piece of the puzzle: more people getting coverage is likely to mean more use of all kinds of health services. The basic economic principle is, when something becomes cheaper for people, they use more of it.

PODCAST: Lobbying for tech

Tue, 2014-07-29 03:00

In spite of typically slower summer months, analysts are watching today's meeting of the Fed and wondering what the content of the forthcoming announcement will signal. Plus, the white house is arguing that global warming needs to be addressed for both the environment and the economy. More on that report. Plus, as tech companies get larger, so do their voices. More on a new crop of tech lobbyists who are hoping to shape policy. 

America's coal heads overseas

Tue, 2014-07-29 02:00

America is in a slow transition to cleaner energy, which means carbon-spewing coal power plants are high on the hit list. But we still mine lots of coal in America. Energy reporter Dina Cappiello has been looking into what happens to all that coal we're not burning here.

Click the media player above to hear reporter Dina Cappiello in conversation with Marketplace Morning Report guest host Mark Garrison.

A start-up incubator for veterans

Tue, 2014-07-29 02:00

Veterans often face unique challenges getting conventional employment when returning from military service; challenges which can be compounded when trying to found or staff their own business.

The Bunker, an incubator in Chicago opening later this year, looks to close that gap. Joseph Kopser is the CEO of RideScout, a company that has been selected to join.

“The first thing they have to do is learn the language,” he said. In fact, one of the chief benefits of an incubator that is veteran-focused is that it teaches participants the language of the business world, which becomes important when pitching the venture to others.

Additionally, he advised veterans reach out to former colleagues in the military who can vouch for their character. 

Click the media player above to hear Joseph Kosper in conversation with Marketplace Tech guest host Noel King.


CORRECTION: An earlier version of this story incorrectly spelled the name of Joseph Kopser. The text has been corrected.

IPOs - why the frenzy ?

Tue, 2014-07-29 02:00

The 20-plus companies that are looking to go public this week hope to collectively raise about $6.7 billion dollars, with about half of it for General Electric’s consumer lending firm Synchrony Financial.

"That's going to be a $3 billion IPO, the biggest we've seen since the May, 2012 IPO of Facebook," says Kathleen Smith, a principal with the IPO fund manager Renaissance Capital.  She labels Mobileye another one of this week’s "shiny objects." The company makes the technology that tells you when your car might hit the one in front of you. "It has about a 50 percent share of that market, very high growth and very profitable, so all investors are looking at that." 

Smith cautions that this week’s batch of potential IPOs is a big one for the market to digest.  

It’s also the right kind of market, says John E. Fitzgibbon, Jr. of IPOScoop.com.  

"You’ve got to have the bull running down the street and you’ve got to have the wind at its back," he says.  

Fitzgibbon thinks this year might even be the biggest one for IPOs since the dot-com bubble, but he points out that a lot of the offerings are fetching discounted prices. This week's IPO frenzy is an "End of Summer sale" that he predicts is just getting started.

"It’s like Macy’s department store; if it doesn’t sell, mark it down and drop it to the basement."  

Who are all these companies, anyway? We rounded up the most notable IPOs from this record-breaking week and grouped the companies up according to their business.

Consumer finance
Synchrony Financial's IPO is not only the biggest offering of the week by far, but at about $3 billion it's poised to raise more than any IPO this year. Synchrony is GE's consumer finance arm, facilitating store-brand credit cards and financing programs for big-name retailers like Amazon and Wal-Mart.

Medicine
Of the this week's huge group of IPOs, more than half are for biotechnology and pharmaceutical firms. The biggest player is Catalent, a multi-armed drug development and delivery company that's expected to offer 42.5 million shares at $19-$22 a share, according to Renaissance Capital. Catalent's nearly $1 billion deal dwarfs about a dozen other companies focused on everything from gene therapy to medical imaging to epilepsy treatment.

Technology
Mobileye is certainly a "shiny object" this week as it looks to raise half a billion dollars. The Israeli firm is the leading supplier of sensors that detect a potential collision. Investors are keeping a special eye on the company amid rumors of a potential partnership with Tesla to build self-driving cars.

Mobile gaming
It's no secret mobile gaming is big business, and developer IDreamSky has become a leader by adapting existing titles like "Fruit Ninja" and "Temple Run" for Chinese markets. That model has earned IDreamSky 100 million active users and $65 million in the year ending last March. They are looking to raise a little more than $100 million this week.

Energy
There are a handful of energy companies up for offering next week, but the largest is another big spin-off. Transocean Partners, LLC is a small portion of oil rig giant Transocean, which hopes to sell $350 million in shares. Spinning off Transocean Partner's three rigs in the Gulf of Mexico will reportedly offer Transocean more financial flexibility, but the Wall Street Journal notes this practice can be a tax dodge

Graphic by Shea Huffman/Marketplace

The latest acquisition for tech companies? Lobbyists

Tue, 2014-07-29 02:00

Tech companies are growing up. And, like a lot of teenagers, they want more control over how they’re treated. Now, those companies are taking steps to make sure they’re heard.

Last month, drivers for ride-sharing companies Uber and Lyft flooded the California Capitol building. They were there to protest a bill that would toughen regulations on their industry. Senator Alex Padilla noted the discussion was one that wouldn’t have happened a few years ago.

“The wonderful challenge that we have on complex issues like this is, in large part, driven by technology and innovation and things that 50 years ago people wouldn’t have imagined, forcing important public policy questions,” Padilla said.

Now tech companies want to influence how these questions are answered.

Robert Callahan is the Executive Director of the California branch of the Internet Association. That’s a relatively new lobbying group that represents many large tech companies such as Google, Amazon, Facebook, eBay, Twitter, Yahoo, Yelp, Uber and Lyft.   

The Association also lobbies on issues at the federal level. Callahan said there’s plenty to work on, like net neutrality and patent reform.

“But also just issues that you would never have thought about,” he said. “Like, what are the decedent rights to a social media account after the account holder passes away?”

But as tech companies start to pay expensive lobbyists, some are asking what that will ultimately cost their customers.

Timothy Karr is with Free Press, a group that works for what it calls a “free and open Internet.”  

“You know, in general, I don’t think corporate lobbyists are serving the interest of consumers,” Karr said.

He’s especially concerned with how media use is being regulated.

“People are listening to music, they are sharing video files. And because it’s become much more prominent in the way people use, share, and consume media, it also has a much higher profile in policy discussions,” he said.

And the growing clout of tech companies means they’ll likely have a larger role in future legislative discussions.

TSA crowdsources crowd problems

Tue, 2014-07-29 01:00

There’s a contest underway you may not know about. The Transportation Security Administration is offering $15,000 in prize money to anyone who can help it come up with a faster check-in system.

Some 1.8 million passengers fly daily across the U.S., and as the TSA knows all too well, many of them complain about long security lines and time-consuming pat-downs.

So, for three weeks, anyone can submit a proposal to help solve expected problems with TSA’s fast lane or “PreCheck” program, which the TSA "allows low-risk travelers to experience expedited, more efficient security screening." It seems to be doing well so far at Raleigh-Durham International Airport, says spokesman Andrew Sawyer.

“We’ve noticed that since PreCheck came to RDU a little over a year ago, we do see a lot of our customers using it,” said Sawyer.

As more people register for the pre-check system, it’s bound to get as clogged as the regular one that leaves travelers with no shoes and open laptops. 

Duke University Professor David Schanzer is director of the Triangle Center on Terrorism and Homeland Security. He says getting ideas from the public could be a winning strategy.

“While $15,000 seems like a lot to win in a contest, in the scheme of federal contracting if you come up with some really good ideas and solutions, it could be a bargain,” said Schanzer.

It’s a bargain for the federal government which, by the way, charges $85 just to apply for that pre check-in program.

This isn't the TSA's first time reaching out online. While airport security might be crowded and brusque, the TSA's web presence is affable, helpful, and surprisingly self-aware.

Their blog (yes, they have a blog) features tips for any kind of traveler imaginable.

Pregnant? Transporting gun parts? Got bear repellent in your carry-on? All three? They have a guide for you. There's also a kids section, wherein an adorable dog family shows youngsters how to go through a checkpoint — or at least gives them a picture of a checkpoint to color while mom and dad put their shoes, belts and jackets back on.

But the best thing about the TSA's online footprint, by far, is its Instagram account. There, under the hashtag #TSACatch, the organization documents the strangest confiscated items. Each photo contains a detailed and sometimes irreverent explanation for the confiscation and how you can avoid having your own lipstick taser taken away. Ditto for grenades, two (2!) different sets of Batarangs, novelty alarm clocks that look like bombs, and more.

All the photos are culled from the TSA's comprehensive week-in-review blog posts, which are interesting reads themselves. The TSA also realizes the importance of pets on Instagram, and regularly features its K-9 unit. Check out some of our favorite posts below:

[<a href="//storify.com/Marketplace/the-tsa-s-amazing-instagram" target="_blank">View the story "The TSA's amazing Instagram" on Storify</a>]

What's happened since Detroit turned off delinquent residents' taps

Mon, 2014-07-28 13:33

Detroit threatened residents behind on their water bills in March: Pay up, or we’ll shut you off. The story has been building up ever since. 

Here's what you need to know:

The threat applies to about half the city's water customers. Before declaring a 15-day moratorium last week, the city did turn off the taps on thousands of households, setting off protests, official condemnation from human-rights experts at the U.N., and grumbling from the judge overseeing the city’s ongoing bankruptcy case that the city already has enough public-relations problems.

It's a scare tactic, but it's working. Latimer says the residential shutoffs were always intended as a scare tactic, to combat what he calls "a culture that’s developed: 'Since you’re not cutting me off, I’m not going to pay you.' And what we’ve found when we shut residents off is that 60 percent are coming in and paying."

It's not just private citizens. Corporate customers— including both private companies and branches of the government— have also fallen behind on their bills, to the tune of millions of dollars. Why didn’t the city shut them down first? Officials say they have turned off close to 19,000 residential accounts, but could not provide a number for corporate customers.

Darryl Latimer, the Water and Sewage Department’s deputy director says he’s been going after corporate deadbeats, too. Often, they’re disputing part of their bill, and negotiating takes time. He says that paid off with Chrysler Group: The company gave Detriot a check for $2.9 million— and the city recognized that Chrylser no longer owns some of the properties that were in dispute. The Detroit Public Schools, he says, have paid off about three quarters of a $12 million tab.

Customers are reporting difficulties in dealing with the water department. Shea Howell, a volunteer with the People’s Water Board Coalition, says residential customers do not get similar treatment. "Many, many resident also have problems with their bills," she says. "They also have problems they’d like to talk with the water department about, and they can’t even get through on the water department’s service lines." She says customers report wait times of up to four hours on hold.

What makes this unique? The scale of Detroit’s problems make it unusual, says Janice Beecher, director of the Institute for Public Utilities at Michigan State University. "What we don’t have in the water sector is a really clear policy for coping with something like this, so in some ways it’s a learn-as-you-go process," she says. "I do think it will go down as a case study in this sort of problem."

Residential shutoffs are due to resume next week.

An interesting campaign spawned from Twitter. Detroit’s water shutoffs also prompted some Twitter users to create an online platform where donors can directly pay off the water bill for a Detroiter in need.

If you know someone who could use assistance w/a water bill of $250 or less, we want to connect them to a donor here http://t.co/CEu7jojx51

— Tiffani Ashley Bell (@tiffani) July 18, 2014

You all are straight helping knock down water bills for folks. DIRECT. For ex: http://t.co/FDD6ZoRySZ #DetroitWater pic.twitter.com/CexEaON4uV

— Tiffani Ashley Bell (@tiffani) July 22, 2014

Three more accounts with 0 balances this morning #DetroitWater pic.twitter.com/HldO544JlE

— Kristy Tillman (@KristyT) July 23, 2014

Detroit turns off taps of delinquent residents, mainly

Mon, 2014-07-28 13:33

Detroit threatened residents behind on their water bills in March: Pay up, or we’ll shut you off. What made the threat especially noteworthy was that it applied to about half of the city’s water customers. Before declaring a 15-day moratorium last week, the city did turn off the taps on thousands of households, setting off protests, official condemnation from human-rights experts at the U.N., and grumbling from the judge overseeing the city’s ongoing bankruptcy case that the city already has enough public-relations problems.

Meanwhile, one question has come up repeatedly: Corporate customers— including both private companies and branches of the government— have also fallen behind on their bills, to the tune of millions of dollars. Why didn’t the city shut them down first? Officials say they have turned off close to 19,000 residential accounts, but could not provide a number for corporate customers.

Darryl Latimer, the Water and Sewerage Department’s deputy director,  says the residential shutoffs were always intended as a scare tactic, to combat what he calls "a culture that’s developed: 'Since you’re not cutting me off, I’m not going to pay you.' And what we’ve found when we shut residents off is that 60 percent are coming in and paying."

Latimer says he’s been going after corporate deadbeats, too. Often, they’re disputing part of their bill, and negotiating takes time. He says that paid off with Chrysler Group: The company gave Detriot a check for $2.9 million— and the city recognized that Chrylser no longer owns some of the properties that were in dispute. The Detroit Public Schools, he says, have paid off about three quarters of a $12 million tab.

Shea Howell, a volunteer with the People’s Water Board Coalition, says residential customers do not get similar treatment. "Many, many resident also have problems with their bills," she says. "They also have problems they’d like to talk with the water department about, and they can’t even get through on the water department’s service lines." She says customers report wait times of up to four hours on hold.

The scale of Detroit’s problems make it unusual, says Janice Beecher, director of the Institute for Public Utilities at Michigan State University. "What we don’t have in the water sector is a really clear policy for coping with something like this, so in some ways it’s a learn-as-you-go process," she says. "I do think it will go down as a case study in this sort of problem."

Residential shutoffs are due to resume next week.

Detroit’s water shutoffs also prompted some Twitter users to create an online platform where donors can directly pay off the water bill for a Detroiter in need.

Dollar stores adapt to an improving economy

Mon, 2014-07-28 13:33

There's really only one reason consumers shop at the dollar store. 

Joe Feldman,  Senior Managing Director and Assistant Director of research with Telsey Advisory group, says Family Dollar played around with its raison d'etre more than was wise: “One would think that a dollar store would be at an everyday low price." But, Feldman notes, its name notwithstanding, Family Dollar has been embracing a multipricing strategy - which wasn't a hit with consumers. 

“Maybe they’re not shopping at Family Dollar, they may be shopping at Dollar General,” he says, referring to one of the store's competitors.

The entire dollar store industry has slowed down this year. One reason — middle and upper middle class consumers can now afford to shop somewhere else.

Robert Campagnino, head of consumer research at SSR, says dollar stores have started selling higher-margin discretionary items which can prove to be problematic.  If there is a recovery, says Campagnino,  lower income consumers are not feeling it.

“So what’s happened when their consumer has been under pressure is that higher margin category has been where the sales weakness has been,” he says.

Even some staples are a hard sell. Like food, which Sandeep Dahiya, a professor of finance at Georgetown University’s McDonough School of Business, says dollar stores have been increasingly getting into.

“The operations involved in selling something that has low shelf life is very different than selling soap. Soap doesn’t go bad... If that three pound chuck doesn’t get sold today tomorrow it will be thrown out,” he says.

Family Dollar says its sale means a good deal for shareholders, employees and shoppers. Joe Feldman says Dollar Stores, all of them, need to continue to make sure they have the right price.

What the Zillow-Trulia deal means for real estate

Mon, 2014-07-28 13:33

During the housing bubble, websites focused on the real estate sector sprung up like "for sale" signs in a hot neighborhood. Over the past couple of years, out of sight of the headlines, those companies have been merging and buying each other out. It's called "a roll-up," and it happens when a sector begins to mature.

In the last couple years, Zillow snapped up New York apartment site StreetEasy and HotPads. Trulia bought Market Leader and last month was rumored to be close to buying Realtor.com. Today came the biggest deal yet: Zillow said it agreed to buy rival Trulia for about $3.5 billion. The pair will create the proverbial 800-pound gorilla for online real estate. Part of the reason for the merger-mania is that when it comes to online real estate, bigger is pretty much always better.

"In internet-based economies, scale matters a lot," says Nic Retsinas, a professor of real estate at the Harvard Business School. "And as the two largest players in this marketplace, the possibility of them coming together gave them advantages of scale."

Together Zillow and Trulia will command more than 60 percent of online real estate traffic. That mega-market share is a big part of the reason we’re seeing this deal.

"As one company takes a leadership position, it amasses enormous capital," says Glenn Kelman, CEO of real estate site Redfin. "So you see Wall Street really rewarding the number-one player in the space and that gives them the capital to buy other companies."

The real estate market is recovering slowly, but the online real estate space is booming. Redfin is growing by 50 percent a year.

Growth is likely to continue as more people get online and the internet generation comes of home-buying age. "People do love to look at what their house is worth," says Richard Green, director of the USC Lusk Center for Real Estate. "And, let’s face it, they want to look at what their neighbor’s house is worth."

Still, Green doesn’t think we’ll see many more mergers of this kind. He says most of the deals that could be done have been done.

Sending 57,000 kids back to their home country costs

Mon, 2014-07-28 12:30

From October 2013 to June 2014, more than 57,000 unaccompanied minors have migrated to the United States, most from El Salvador, Guatemala and Honduras. One solution for dealing with these children is to send them back home, a plan both President Obama and congressional Republicans endorse.

But with that many kids and toddlers being juggled around the system, that simple-sounding solution could actually create an even bigger strain on resources.

"Money would help deal with the influx now," says Esme Deprez, U.S Border Reporter for Bloomberg Businessweek. "We’re seeing shelters overwhelmed, we’re seeing processing centers that are run by border patrol agents completely overwhelmed, courts overwhelmed as well. The system is being stretched at every turn."

The White House has asked Congress for $3.7 billion in emergency funds, but Deprez says there is not a lot of hope that Congress will act.

"They’re going on break for five weeks on July 31," says Deprez. "So, even if they do pass separate bills in the House and Senate, we don’t know if they’re going to come to an agreement and reconcile the two."

If Congress were to approve the emergency funds requested, it would include $879 million to pay for the minors’ prosecution, deportation and to help expedite their court hearings.

"The bulk of the money would go to care for the newly-arrived children and the shelters," says Deprez.

Listen to the full conversation in the audio player above.

Gag rules: illegal, but alive and well

Mon, 2014-07-28 12:15

The National Labor Relations Act of 1935 (NLRA) "guarantees basic rights of private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action including strike if necessary."

Despite the NLRA, some companies still threaten their employees with lowering their pay or hours and even with termination if they discuss their pay with other employees.

"Gag rules are illegal," says Nancy Koehn of the Harvard Business School. "But there is no question that they are alive and well in America."

There are many disadvantages for workers who don’t know if they’re getting paid fairly or not, says Koehn.

"If you have no sense of what your pay is on some kid of latter of compensation across the organization, you have no sense of what kind of organization this is in terms of how they reward people for a job well done," says Koehn.

Listen to the full conversation in the audio player above.

Russia ordered to pay $50 billion to oil shareholders

Mon, 2014-07-28 12:03

There was more bad news for Russia today. The Hague, an international arbitration court, ruled the country acted improperly when it confiscated the assets of the oil company Yukos back in 2003.

The court’s ruling requires Russia to pay $50 billion to former Yukos shareholders but “there’s no likelihood that they will simply roll over and hand the cash over” says the BBC’s Andrew Walker.

Russia has already says it will appeal the ruling but Walker says shareholders of Yukos could fight back. They could get a court order to seize some of Russia’s commercial assets but that would likely take years.

The ruling probably won’t mean much to other companies with an eye to invest in Russia. Walker says Russia already has a poor reputation when it comes to creating a good climate for business.

“Investors that get involved in Russia are typically doing it because they think that the energy resources there are so large that there must ultimately be the potential to make money. “

Walker notes that tomorrow, EU officials will meet to consider sanctions against the energy, arms, and financial sectors in Russia.

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