Now Leaving, Debtors Prison

Prior to its abolishment on the Federal level in the early 19th century, citizens could be placed in prison for failure to repay their debts. Debtors prisons were cold and unwelcoming buildings with no heat, cramped living quarters, and overcrowding. This made for unbearable and nausiating living conditions for citizens that owed as little as fifty cents, sharing their misery with criminals and mentally ill patients.
Today, citizens can still be jailed in the traditional sense for debts owed, but are traditionally limited to those that do not pay alimony and child support, and those who have committed fraud.

But the rest of us who have trouble repaying our consumer and business debts face a different type of debtors prison. One that allows us to freely walk the streets and shop the wealth of consumer goods found in the United States, but only if we bear enough cash to make the purchases. Credit reports and representative FICO score tells potential creditors in three numbers if they should lease an individual a place to live, provide an individual with monthly working capital, and offer an individual larger debts for capital expenditures. With strong credit all of these options are feasible but become limited as an individual’s credit rating declines. I have spent the past three years in nouveau debtors prison watching as my friends elevated themselves into new cars, new homes, and new lives while I put all of my efforts into erasing $13,645.22 in consumer debt. But today marks the end of my tenure here, after my final payment of $1,198.98.
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American Express - $0
Best Buy - $0
Circuit City - $0
Chase - $0
Target - $0
Total - $0
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This experience has taught me that taking responsibility for my mistakes, continuous hard work, and patience can lead to unexpected dividends. First and foremost, I have become accustomed to living effectively within an urban environment on a strict budget. My automobile and the associated insurance, maintenance, and gasoline expense has made way for walking, biking, and taking public transportation. And within walking distance, I have access to restauraunts, retail shopping, doctors, grocers, and many other services that I have needed or may need in the future. This experience has also driven me how to set goals, maintain focus on those goals, and attain them sooner than expected. Three years ago my goals were to repay old debt and build a small amount of savings. Today my goals are to buy a house, save for retirement, and build bootstrap | economist into a viable business. And finally, it has taught me how to be a better banker. My experience has provided me with first-hand insight into the warning signs of an over-leveredged customer, and the understanding to work with at-risk customers to provide them an opportunity to repay their debts.

As I journey through the entrance gate of debtors prison, the self-gratification of fully repaying my debt in an expeditious manner is a gift that I will own for my entire life.

Mergers and Acquisitions

My first opportunity to learn the banking industry came while I was searching for my third, six-month cooperative education experience while attending Drexel University’s LeBow College of Business. My first two cooperative education experiences had placed me with large corporate companies and I was seeking a localized experience. I chose to work at Roxborough Manayunk Bank (RMB) because the position allowed me to gain exposure to the loan underwriting process and work directly with the Bank’s Chief Credit Officer. At RMB I learned how to calculate industry standard ratios and underwrite basic commercial loans, but RMB’s sale to Citizens Bank within my first week of working is what solidified the experience for me.

The merger provided me an opportunity to learn first hand how employees of a small community Bank act as their employer is merged with an international banking conglomerate. I watched as employees slowly left the company, seeking oportunities with other community banks. I observed managers tried their best to keep loyal employees motivated while workload dwindled and decisions were being made elsewhere. And I remember the sinking feeling I had when I left the basement office of RMB’s main branch for the last time.

But the acquisition and merging process is not entirely cold. My colleagues from the credit side of RMB that stayed throughout the acquisition, were all offered positions with Citizens Bank. I personally served out the remaining month and a half of my cooperative education experience at one of the Bank’s regional offices in Center City Philadelphia, where I learned the difference between offering customers small mortgages and credit lines and offering customers industry-specific loan products and interest rate risk management products. And as my cooperative education experience neared its end, I moved into a teller position so that I could continue my banking industry education.

Personal Branding

In banking, it is often touted as part of the four (4) C’s of credit that repayment of our loans comes from the character of the individual(s) who operate the businesses that we lend to. This requires banks to perform their necessary due dilligence including but not limited to how the company has historically handled their accounts payable, handled their prior debt obligations, and how the principals have historically handled their personal expenses. These factors plus market trends in the industries that the business serves and the overall economy are combined to form a risk profile for our potential customer. This provides a snapshot for the Bank to weight two decisions, whether or not to lend to the potential customer and the appropriate fees and interest rate to charge the customer to compensate for the risk.

When I was using my credit cards to finance fancy dinners, flashy cars, and expensive gifts during college, I knowingly jeopardized my personal brand. Mesmerized by America’s buy now and pay later philosophy, my credit card companies considered me a high-risk customer as evidenced by late payments and interest rates that rivaled batting averages. Coupled with my lack of a savings account, my personal brand became a rubber stamp with the word “DECLINE” in bold block letters. Although my friends had the foresight to maintain their financial solvency in college, there were many of my colleagues that graduated with similar debt levels as myself. But the difference lies in how we handled the challenge. Unfortunately, success stories such as my own are often overshadowed by those who refuse to take responsibility for their spending habits. About a month ago, I ran into a former colleague of mine from college who discussed his personal situation with me. Hampered by high-balance credit cards and student loans from college with a humble annual salary, he decided to neglect the credit cards altogether and maintain his consumerist lifestyle. Having a blatent lack of ownership for wastrel spending will ultimately hurt his personal brand when it is time to purchase a house, apply for new credit, and find future employment.

But the beauty of America is that it favors those who work hard and I have a hard-earned opportunity to try again.

Mint Misses on Data Privacy Protection

My marketing and technology infrastructure advisor, Roman, recently sent me an e-mail inviting me to try Mint. For those who may be unfamiliar, Mint is a personal finance management application available free on the internet. Mint allows its customers to centralize their banking, savings, credit card, and brokerage accounts to get a snapshot of where and how they are spending their money. And one of Mint’s most discussed features is that the application will search those transactions, and provide its customers with opportunities to reduce credit card interest rates and improve savings account interest rates.

Uploaded with plasq’s Skitch!

Mint goes way beyond just reporting and budget tracking. Using a patent-pending search algorithm, Mint constantly searches through thousands of offers from hundreds of providers to find the best deals on everything from bank accounts to credit cards; cable, phone and Internet plans; and more. Mint’s suggestions are “unique to you” based on your individual spending patterns. For example, if you have $20,000 in a bank account that’s earning no interest, Mint might recommend a high interest rate savings account from ING or HSBC. Acting on that suggestion would give you an extra $900 in interest income over a year.
Mint.com - About Us

I originally tested Mint while it was in private beta, and while I liked its sleek interface, I was concerned about identity fraud risk from how it calculates opportunities to improve its customers’ interest rates. The application searches its customers’ financial transactions and uses that data to offer services from its partner organizations. To address these concerns, CEO Aaron Patzer states:

I’ll make a bold statement: You’re safer on Mint then with online banking. On Mint, you’re completely anonymous. We never ask for a name, address, or SSN - just an email. We know about your finances…but not about you. We’re also independently verified by Verisign, TrustE, and several outside agencies.
Aaron Patzer
Founder & CEO, Mint.com

What Patzer has not addressed is how a company operating for less than three years; Mint was founded in November 2005, can provide its customers with more security than long-standing financial institutions that have substantial risk management procedures in place. Personal financial data is extremely sensitive which is why financial institutions go to great lengths to keep it protected. Data security within a financial institution starts with website encryption, continues with intricate password management, and finishes with barring employees from accessing personal e-mail websites and social networking websites from behind the corporate firewall. This mitigates the risk that employees will inadvertantly disclose sensitive customer data. Additionally, financial institutions are regulated by a number of Federal and State regulatory agencies to ensure that they are maintaining sound data privacy procedures.

The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and promoting lending to lower-income segments. Even individual cities enact their own financial regulation laws (for example, for usury lending).
Wikipedia - Bank Regulation

In my humble opinion, it would be irresponsible to trust personal financial data to a company that does not follow the same data privacy precautions.

Successful Debt Reduction

This post serves as an update to Let My Loss be Your Gain, an article I wrote last year for Geezeo, a personal finance web community. When I graduated from college in June 2005, I had $13,645.24 in revolving credit card debt, no savings, and was making less than $40,000 per year.
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American Express - $3,565.22
Best Buy - $704.30
Circuit City - $2,010.99
Chase - $3,687.42
Target - $3,677.31
Total - $13,645.22
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As we approach June 2008, I have substantially reduced my debt by cutting back on my expenses, saving money, and working hard to increase my salary by over 50%. It is with proud-tears that I present a three-year update of my college credit card balances.
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American Express - $0
Best Buy - $0
Circuit City - $0
Chase - $0
Target - $1,198.87
Total - $1,198.87
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It has been a difficult task, but by June 2008 my collegiate debt will be completely repaid. An accomplishment I never imagined when I joined Money Management International three years ago. Needless to say, I am excited to put this debt behind me and move on as a fiscally responsible adult.

My bootstrap business experiment

One week ago I had lunch with my marketing and technology infrastructure advisor, and he asked me to describe the name “bootstrap | economist” in my own words. While in my mind I knew exactly why I chose the name bootstrap | economist, I found it challenging to accurately portray my thoughts in words and syllables. I rediscovered a post I made in March discussing my reasons for starting bootstrap | economist, but found that it lacked explanation of how I chose the name:

I started bootstrap | economist because I had a lot of ideas and I wanted to set them free on the web. I have been sharing parts of my life online for years, but this was my first time not hiding behind corporate firewalls and forum moderators. I had been keeping an offline journal for several months prior to starting bootstrap | economist, and realized that if I published my thoughts I would have an opportunity to help others and not just myself.
a (re)introduction

I chose bootstrap for the philosophy utilized by many web technology startups, where aspiring chief executive officers rely on wit and intuition to build viable businesses instead of substantial investments by venture capitalists. This philosophy is particularly important to me because my wastrel spending in college has limited my access to credit. Without the safety of a credit card behind me to fund temporary shortfalls in my personal working capital, I have had to carefully juggle my cash to ensure that it lasts throughout each pay period. I chose economist; a term typically reserved for those who specialize in the science of economics, in memorandum of my grandfather. He himself was an economist, humbly serving the United States government in his earlier years, and sharing his knowledge to students in South Florida and Kingston, Jamaica until his unexpected death in December 2003.

When combined, bootstrap | economist is a business mentality challenging entrepreneurs to understand the internal and external drivers of their industry and develop fiscally responsible business processes. While reflecting on my earlier post, I neglected to mention that bootstrap | economist foregoes intensive audio and visual multimedia in favor of a low-bandwidth design. This provides my writers and I with a global printing press, easily accessed by developing internet communities who do not benefit from the high bandwidth internet services many of us take for granted. And at less than fifteen dollars per month to operate, modest advertising income of twenty dollars per month provides bootstrap | economist with an operating profit of 25%.

Privilege of Opportunity

Long gone are the glory days of American business when companies strove to groom stars from within. Strong training and mentoring programs that companies used to mold employees into confident extensions of their brand, have been replaced by bare bones frameworks of top-heavy management and unhappy supporting casts. Many of my colleagues in American business dangle one foot out the door, and carelessly disregard momentum within their company for a few dollars more every pay period. While their are other underlying reasons behind their dissatisfaction and eminent departure, additional pay ultimately tops the scale towards leaving. But instead of lamenting over the injustices of American business, I seek out managers willing to teach me the formalities and informalities of my business. Beginning with my first co-operative education experience at Wyeth Pharmaceuticals through my current position with Commerce Bank, these managers have provided me with the requisite confidence to succeed in American business. Throughout the years I have learned how to interact with internal and external customers, and build the products that they want to see.

My experience at Wyeth Pharmaceuticals stands out because I was only nineteen years old, and had an experience that I could only dream of whien I was stocking shelves of appliances at Best Buy. The job was a management information systems support position within Wyeth Pharmaceuticals’ Logistics and Supply Chain department, and was passed along to me by a classmate who accepted a position with another company. My primary task was to support an external consultant who was building the framework of a data warehouse that would ultimately build efficiencies between Wyeth Pharmaceuticals’ refining, manufacturing, and distribution channels. The task was mostly data entry with a tinge of analytical work, but it opened up opportunities for side projects to enhance my hands on education.

On one particular day, my team leader invited me into his office to discuss my interest in creating a set of project management forms that would improve workflow within the Logistics and Supply Chain department. Difficulties had arose between the several teams that comprised the Logistics and Supply Chain department, and how they were reporting workflow to the department’s manager. My task was to interview the department manager and the team leaders, and create a standard set of project management forms that would be used by the entire department.

I began the project by compiling a list of open-ended questions which sought to gain clearer understanding of the department manager’s requirements for the project management forms. As he was the intended audience, it was important that I accurately capture the information that he wanted to see. I revised my questions to reflect the department manager’s requirements and began talking to the team leaders, seeking cues to design the project management forms for ease of use among their respective teams. But during my interviews I noticed apprehensiveness about the project from several team leaders, and was unsure with how to continue. I met with my team leader who explained that while I had accurately portrayed the concerns of the department manager, my revised questions failed to capture the concerns of the team leaders and their direct reports. He explained further that the success of this project lies in the hands of the direct reports who would be using the project management forms, and their adoption would be critical. Refocused on the users, I revised my questions and was able to receive constructive feedback from the team leaders and was able to create a draft of the project management forms. The project culminated with me presenting the project management forms to the department manager and team leaders in a board room setting, and answering any questions that they had.

My co-operative education experience with Wyeth Pharmaceuticals unfortunately ended shortly after my final presentation, and I was unable to ascertain the long-term success of the project management forms that I created. But the confidence that my team leader placed on me to complete this project has stuck with me through two additional co-operative education experiences, a number of student leadership roles, and my post collegiate career.

Customer Service in the Information Age

In his post, Why I say I’m a Blogger, Dave Winer follows up his Comcast diatribe from a few days earlier, with a subdued explanation of how he expects blogs to change how corporations interact with their customers. In the former post Winer states:

One of the reasons I believe in blogging is that it can reform business, giving power to the users, where we were powerless before. If I didn’t have a blog what could I have done to get Comcast to pay attention? Tell my friends and relatives? Sure, they know that isn’t very powerful. But when any customer could also be a publisher, well that does change things. This new power to publish can help us all get a better deal.

Most companies have left the sheltered view that business needs to be done on their terms, and will adapt certain policies and procedures to ease customers’ concerns. Companies whose framework depends on customer feedback to alter their future strategies will certainly take into account what is being discussed on the blogs, but they will also scour other online sources known for their customer feedback including but not limited to feedback forms at their official website, discussion threads within the webforum community, and product reviews at online retailing giant Amazon.com. Additionally, these companies will continue to take advantage of offline sources of feedback such as letters, phone calls, and faxes. Regardless of the medium that the feedback is generated, customers should understand that the process can be reversed when Companies feel that the limits of their product(s) and/or service(s) are intentionally being challenged.

When Winer’s original complaint about Comcast was circulating throughout twitter, I asked him if bandwidth could possibly be a scarce resource and his response alluded to him not necessarily knowing the answer. But Winer is not alone. Over the past six (6) months I have discussed the subject of bandwidth limitations with a number of my undergraduate colleagues from Drexel University, a Philadelphia University that favors science, technology, and innovation. My colleagues; whose concentrations varied from computer science to information systems, could explain in great detail the technicalities of how the internet works but were unable to provide me with a concrete answer on whether or not bandwidth is a scarce resource. According to Green Living Online’s article Greening the Internet, bandwidth is a scarce resource due to the sheer energy usage required to keep it running. The article states:

The Internet keeps us connected, helps us share information and reduces travel time. But it also has a big carbon footprint. It is estimated that globally it takes about 868 billion kWh of electricity per year to power. That’s a whopping 14 power plants worth of energy and about three percent of all the energy consumption in the USA, which adds up to a lot of energy and a lot of CO2 emissions.

Winer’s topic is just one conversation in this tangled web of how customers and companies are interacting with each other. On what feels to be a separate planet from the blogs and twitter, are the automotive webforums which is where I was introduced to the concept of blogging nearly ten (10) years ago. One of the hot topics from when I owned a car that is still discussed today, is automotive dealerships and insurance companies going to drag strips to catch pictures of their customers’ cars being used for non-street purposes. In a recent post at automotive webforum Myspecv.com, Moderator Kevin (RedDragonV09) puts out a WARNING To Warranty and Insurance Policy Holders Going to the Track!

A few weeks went by and my friend calls me all pissed off. He says to me, “Dude, you were right! The [CENSORED] dealership sent me a letter telling my that they are voiding my entire drivetrain’s [CENSORED] warranty! And they got [CENSORED] pictures too man! My car is going down the track in this one!” I know that this happens, but honestly I was surprised that it actually happened. I was kind of sickened to hear this news. But no where near as sickened as my friend was. He was so [CENSORED] furious.

And to think that was the end of it. 2 days later, he got another letter from his insurance company, which was Geico, the same insurance company I used back then. They canceled his policy. He had to go to another company and get another policy almost immediatly because the next day his bank that financed his car called him and said that they were notified that the car did not currently have insurance and that they needed him to insure it and to have a copy of the policy faxed to them as soon as its insured or they will repossess the car if he doesnt comply in 30 days.

So, as a warning to all of you that go to the drag strip. If you have a warranty and would like to keep it, or if you just have an insurance policy and dont want to be caught on the track, take the 5 minutes to remove them before you go down the track and the 5 minutes to put them back on. And cover your VIN while youre at it.

And just because youve been to the track many times and youve never gotten the letter, doesnt mean it cant happen to you. I found this out on a local Nissan forum in Washington where a guy had went to Pacific Raceways in his new 350Z and they voided his warranty this way. His insurance didnt get canceled, but he warranty was GONE!

Personally, I feel that drag strips provide a regulated environment for drivers to test their vehicles off of public roads, but understand that it is the right of the automotive dealerships to cancel warranty coverage on vehicles that have been used outside of the scope of normal use. Tying back to Dave Winer’s issue with Comcast, it can be debated that he was using Comcast outside of its intended use. As he states in this post, Winer uses more bandwidth than the average internet user:

I figured out why I use so much more bandwidth than the average Internet user. I have five computers, all Macs, all sucking down FlickrFan pictures once an hour. That adds up to quite a few gigs. It would be easy to cut back. Not sure I will though, cause I hate to be lectured and threatened by companies I pay $180 per month to.

which is further backed up by this photo:

In one corner, you have a customer knowingly using a great amount of bandwidth and in the other corner a company that is sensitive about how customers use its bandwidth due to the regulatory and environmental risks they face from such usage. I will digress the question of who is “right” in this case to the myriad of conversations floating around on twitter. But to those individuals that are looking for more open and honest communication with companies, caveat emptor.

Avoiding Unproductive Conversations

On this morning’s HBR IdeaCast(85) Podcast, the featured guest was Marshall Goldsmith, who writes the Ask the Coach Blog at HarvardBusiness.org. Goldsmith and Paul Michaelman, the IdeaCast’s discussion leader, talked about counterproductive communication in corporate America and how sixty (60%) percent of workplace conversations involve employees discussing their self-importance or harshly criticizing their coworkers. It is in management’s best interest to mitigate these conversations because of the reputation risk associated with the disclosure of sensitive information. For example, a boastful or inflammatory employee may exercise poor judgment outside of the workplace and disclose private data to unrelated third party. To help my manager mitigate this risk, I have adopted a process of asking myself several questions before I speak.

Why would I want to say this?
This question forces you to think at a very high level.
Personally, if I am unable to ascertain a reason as to why I am going to say something, I tend not to say anything at all. Additionally, if the reason is anger, jealousy, fear, or any other emotion that is best kept out of the work place, I will also tend not to say anything at all.

Am I right?
This question forces you to make a decision.
In prior experiences, when I felt that I was right about an issue or a situation, I would speak my opinion at will. And my colleagues were not pleased. This behavior lead to a series of humbling experiences while I was in college, and I have learned that being right all the time quickly loses its novelty.

Is it worth the risk of being wrong?
This question forces you to think about the consequences of your actions.
In college, my free expression of my opinions were both self-gratifying and inflammatory of my peers. I cringe at the memories of what I said when I was an undergraduate, but use those experiences to help me avoid making the same mistakes as a professional. It has been my experience that most of the time, it isn’t worth the risk of being wrong.

Overall, this process has lead me to sublimate my ego so that I may have honest and productive conversations with my colleagues.

Why I work for America’s Most Convenient Bank

I have been seeking my dare-to-be great situation since I decided to leave a two-hundred (200) employee community bank last year in search of the Manhattan financial dream. It was promising; I had lined up four (4) interviews with international banks of varying size. The positions ranged from corporate finance, specialty financial vehicles, and shipping finance. But I failed to land a position after poor follow through demonstrated inexperience on my behalf. In hindsight it was for the best, because I was in a financial position which would make transitioning to a New York City resident difficult. I set out again to find a new position, expanding my search to Chicago, Atlanta, and any other city that would have me. I called in all of my connections including family, past companies that I had interviewed with, and my credit training instructor. I lined myself up with a barrage of interviews many of which were similar to my last position.

Headstrong not to make a horizontal move, I trudged on looking for the right opportunity. It came from Lisa Hall, a Human Resources recruiter for Commerce Bank who spoke with me for twenty-five (25) minutes on the phone, immediately following an unsuccessful interview. I went through a rigorous yet expedient interview process including a one (1) hour face-to-face interview with Lisa Hall, a three (3) hour interview with my soon-to-be manager Jim Nixon, and a quick meeting with his boss Roger Bomgardner. Even with Bank of America in New York City and Merrill Lynch in Chicago knocking on my door, I chose Commerce Bank because they made their decision to hire me within two (2) weeks of first contact.

Over the past year I have learned the importance of detail-oriented underwriting, seeing potential deals in the eyes of a risk manager, a salesman, and a customer, and how hard you must work when you are in a larger pond of employees. On Monday, my company Commerce Bank was acquired by TD Banknorth, a subsidiary of TD Bank Financial Group. For me and my colleagues, this is a tumultuous time because we must expediently adapt to new policies from a multinational corporation that avoided sub-prime mortgage exposure and enjoys helping the environment. With unemployment at 5.1% and growing, I am up for the challenge and feel fortunate to be working for a company in a position to weather this economic uncertainty.