Author: hbosen

Protect Your Plastic

December 13, 2013

As new technologies change the way we pay for things, criminals are managing to keep pace as they devise ways to separate you from your money. Doing what you can to protect yourself is one part understanding the technology and at least equal portions of vigilance and common sense. Still, we can all benefit from some reminders.

“Phishing” refers to out-of-the-blue e-mails, text messages, or phone calls from superficially legitimate sources, often couched in urgent tones, asking for your credit card or debit card information. The thieves then set up counterfeit cards and run up charges on your accounts. Don’t take the bait. You might think that these appeals are too brazen to work, but obviously they work often enough to be a tool in the con artists’ toolbox. Follow this rule: Never give out your payment card information in response to an unsolicited communication, no matter its apparent source.

Be careful and attentive when using payment cards at ATMs, shops, and gas stations, and not just because of suspicious-looking characters. The bad guys sometimes steal account information by attaching their own devices over legitimate card readers. Beware of plastic sleeves inside the slot where you swipe a card. Another sign of potential trouble arises when the person you are paying swipes your card on two different devices. One of those swipes may be taking your account information for later fraudulent use.

Don’t stick your account statements in the pile of bills to be paid without scanning them closely for discrepancies or suspicious items, such as unauthorized withdrawals. Today you can usually do this online, or even on a mobile phone. Even small bogus transactions are worth reporting to your bank, as thieves sometimes hope to escape the consumer’s notice with many small transactions.

Recently, thieves allegedly racked up over $25 million in charges, all in small individual amounts, from hundreds of thousands of cardholders. Let your financial institution know right away if a statement or bill is unusually late. That can signify theft of your information that may be used to commit fraud.

Periodically review your credit reports from the three major credit bureaus. If an unfamiliar card or transaction shows up, you may already be a victim of identity theft. You get one free report from each of the credit bureaus in a year, so, to maximize your monitoring, get one free report from one of the bureaus every four months.

If, despite your best efforts, you fall prey to the thieves, all is not lost, but neither should you be complacent. As a rule, the federal Truth in Lending Act puts a $50 cap on the consumer’s liability for unauthorized charges on a credit card. However, for lost or stolen debit cards and ATM cards, or unauthorized transactions in your checking or savings accounts, the $50 cap is imposed by law (the federal Electronic Fund Transfer Act) only if you notify the institution within two business days. Wait longer than that, and the ceiling rises to $500, or even more in some cases. The policies of individual institutions may further limit losses beyond those imposed by statute, so it is a good idea to ask your card issuer about any such limits it uses.

Identity Theft Policies for Businesses

November 13, 2013

The Federal Trade Commission (FTC) has revised and clarified its “Red Flags Rule” to help covered businesses comply with requirements for preventing and responding to identity theft directed at their customers. The Rule requires many businesses and organizations to implement a written Identity Theft Prevention Program designed to detect the warning signs (or “red flags”) of identity theft in their day-to-day operations.

The ultimate goal is to make businesses better able to spot suspicious patterns that may arise and to thwart identity theft. Obviously this is good for customer relations, but it also may avoid the necessity for the stressful and costly process of cleaning up the mess once thieves have struck.

The FTC describes an Identity Theft Prevention Program as a “playbook” that must include reasonable policies and procedures for detecting, preventing, and mitigating identity theft. With such a program in place, an organization should be able to (1) identify relevant patterns, practices, and specific forms of activity–the “red flags”–that signal possible identity theft; (2) incorporate business practices to detect red flags; (3) detail appropriate responses to any uncovered red flags, to prevent and mitigate identity theft; and (4) update the program periodically to reflect changes in risks from identity theft.

The Red Flags Rule includes guidelines to help financial institutions and creditors develop and implement a program, including a supplement that offers examples of red flags.

Some general categories of red flags are notifications or warnings from a consumer reporting agency or from the customer himself; suspicious-looking documents or personal identifying information; and unusual use of, or suspicious activity related to, a covered account. The FTC and the federal financial agencies also have issued Frequently Asked Questions and answers to help businesses comply with the Rule.

The Rule requires “financial institutions” and “creditors” that hold consumer accounts designed to permit multiple payments or transactions–or any other account for which there is a reasonably foreseeable risk of identity theft–to develop and implement an Identity Theft Prevention Program for new and existing accounts. The definition of “financial institution” includes all banks, savings associations, and credit unions, regardless of whether they hold a transaction account belonging to a consumer; and anyone else who directly or indirectly holds a transaction account belonging to a consumer.

A 2010 change in the law amended the definition of “creditor” and limits the circumstances under which creditors are covered. The previous definition of “creditor” was so broad in its language and interpretation that it swept too many within the Rule’s reach.

The new law covers creditors who regularly, and in the ordinary course of business, meet one of three general criteria. They must (1) obtain or use consumer reports in connection with a credit transaction; (2) furnish information to consumer reporting agencies in connection with a credit transaction; or (3) advance funds to, or on behalf of, someone, except for funds for expenses incidental to a service provided by the creditor to that person.

Homeowner’s Associations Can Regulate Common Areas

October 13, 2013

Kirk owned a home in a residential community that was overseen by a homeowners association. His property abutted one of a handful of lakes in the community. Legally, the lakes were regarded as common areas controlled by the association. When Kirk bought his home many years ago, the only recorded document imposing restrictions on his use of the property was a two-page document with general restrictions for all homeowners in the community. The only mention of the lakes was an irrelevant limit on how far a boat pier could extend into a lake.

The association amended its rules to prohibit the use of pontoon boats having more than two pontoons on the lake next to Kirk’s property. As it happened, Kirk had planned to use just such a vessel, called a “tritoon boat,” on that lake. When the association expressed its determination to enforce its regulation, litigation ensued.

Kirk’s strategy, which, with the benefit of hindsight, may have been flawed, was to argue that the association did not have the power to impose the ban on tritoon boats, because there was nothing in the recorded covenants that referred to or authorized such a restriction. The court that ruled against him at least intimated that his lawsuit may have gained more traction had he challenged the regulation as unreasonable, even if it was within the association’s powers.

It is a legal truism that restrictive covenants should be strictly construed in favor of full and unlimited use of property by the property owner and that restrictions against the free use of property are generally not favored. However, these brakes on the power of homeowners associations usually are applied to restrictions that are imposed on a homeowner’s use of his own property.

In this case, the lake was common property for the benefit of all in the community and subject to management by the association; it was not Kirk’s property. The absence of any explicit references to pontoon or tritoon boats in the recorded covenants was not fatal to the association’s position. The homeowners association had the responsibility of administering the lakes for the common good of the members, and with that responsibility came the implicit power to make reasonable regulations regarding the use of that common property. Kirk would have to settle for the usual two pontoons on his boat.

Employees Are Responsible For Beneficiary Designations

September 25, 2013

The Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA) establishes an $824 billion program providing low-cost life insurance for hundreds of thousands of federal employees. FEGLIA allows an employee to name a beneficiary of life insurance proceeds, and specifies an “order of precedence” providing that the employee’s death benefits accrue first to that beneficiary ahead of other potential recipients.

In 1996, when he was one of those federal employees who could participate in the FEGLIA program, Warren named Judy, his wife at the time, as the named beneficiary on his life insurance policy. In 1998, the couple divorced. In 2002, Warren married Jacqueline. Warren died suddenly in 2008, without ever having changed the named beneficiary from Judy to Jacqueline. As a result, the ex-wife Judy filed a claim for the $125,000 in life insurance proceeds, and was paid them.

Jacqueline sued Judy in a state court to recover the life insurance proceeds, and she had more to support her claim than just a supposition that Warren would have wanted it that way. In short, she claimed with some justification to have state law on her side.

A state statute revokes a beneficiary designation in any contract that provides a death benefit to a former spouse where there has been a change in the decedent’s marital status. In addition, in the event that this provision is pre-empted by federal law, a separate provision of the state law provides a cause of action making the former spouse liable for the principal amount of the proceeds to the party who would have received them if the first provision was not preempted.

The U.S. Supreme Court sided with Judy, the former wife, notwithstanding that there was a certain logic to the position that Warren most likely would have preferred that the proceeds go to his wife at the time of his death. The unassailable fact was that, though he had ten years after his divorce from Judy and six years after his remarriage to Jacqueline to do so, Warren never changed the named beneficiary on his policy.

Most importantly from a legal standpoint, his selection of a named beneficiary could not be overridden by operation of any state law. Such a result was foreclosed by the doctrine that federal law preempts state law where the two conflict. Thus, even the state statute that sought to foresee the possibility of federal preemption and accomplish an end-run around it could not do so.

Simply put, if a beneficiary, Judy in this case, is properly named for a FEGLIA policy, the insurance proceeds owed to that person cannot be allocated to another person, in this case Jacqueline, by operation of state law. Apart from the legal precedent it set, the case is an object lesson in the importance of keeping one’s estate plans, including beneficiary designations, current. Had Warren taken the simple step of filling out the form to change beneficiaries on his policy sometime before he died, assuming that was his wish, the protracted litigation that ensued after his death could have been avoided.

The IRS Is Here To Help

September 13, 2011

To help struggling taxpayers who owe back taxes, the Internal Revenue Service (IRS) recently unveiled a series of new steps to help people get a “fresh start,” to use the phrase invoked by the IRS Commissioner, with their tax liabilities. The general idea is to recognize the challenging economic environment the country faces while also keeping the tax revenue flowing in at acceptable levels. The focus is on changes to the tax lien system and other collection tools already used by the IRS that will make paying taxes a little easier on taxpayers.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds for when liens are filed to a new dollar amount that will be in keeping with inflationary changes that have occurred since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

A federal tax lien is no trivial matter. It gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt, and it can establish priority rights against certain other creditors. Since a tax lien can also adversely affect a taxpayer’s credit rating, taxpayers are well advised to arrange for the payment of taxes as quickly as possible.

Tax Lien Withdrawals

The IRS will make it easier for taxpayers to obtain lien withdrawals under certain circumstances, including the IRS’s determination that the lien filing was premature or that the taxpayer has agreed to an installment payment plan. To facilitate the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other important changes to liens when taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals in a few different situations: for a taxpayer entering into a DDIA; for a taxpayer converting a regular Installment Agreement to a DDIA; for a taxpayer already on an existing DDIA, upon the taxpayer’s request; and for a taxpayer demonstrating after a probationary period that direct debit payments will be honored.

Installment Agreements and Small Businesses

The IRS has made streamlined Installment Agreements available to more small businesses by raising the dollar limit to allow more small businesses to participate. Small businesses with $25,000 or less in unpaid taxes can participate. Previously, only small businesses with under $10,000 in tax liabilities could participate. Small businesses will have 24 months to pay.

Small businesses with an unpaid assessment balance greater than $25,000 may qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less. But small businesses will need to enroll in a DDIA in order to participate.

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of taxpayers who can use the help. Taxpayers with annual incomes of up to $100,000 can participate. Participants must have a tax liability of less than $50,000, doubling the previous limit of $25,000 or less.

An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. As you might expect, it is something of a last resort. Generally, an OIC will not be agreed to by the IRS if the IRS believes, given the taxpayer’s income and assets, that the liability can be paid in full as a lump sum or through a payment agreement.

Yet Another Hazard On the Golf Course

August 13, 2011

Hazards to a golfer’s health and safety that come most readily to mind involve swinging clubs and golf balls in flight, usually on unintended flight paths. But the sport also has other dangers lurking, including the garden variety slip and fall. When James, a golfer, sued a golf resort recently over such a mishap, his claim was dismissed, essentially because the particular risk at issue in his case should have been apparent to him and, as such, it was up to him to avoid it.

On an overcast and rainy day, James was playing golf with three friends at a private golf course. It began to drizzle early in the round, and by the 14th hole, the rain was coming down hard. Approaching the 15th hole, James and his friends discussed stopping play but decided to press on.

As James walked toward the green with one of his companions, they used stairs made of bricks and wooden railroad ties. James was familiar with the golf course, having played there on prior occasions. Although he had never before used the stairs leading to the 15th green, he had seen them.

After his friend walked down without incident, James followed and slipped on one of the first steps, breaking his ankle. At the time, it was raining and James was looking down, talking, and holding his putter in his right hand. Without incident, the other two in the foursome had taken an entirely different route on the grass, avoiding the steps.

James’s lawsuit did not fail for lack of effort, in that he enlisted an expert witness to buttress his theory that the resort’s negligence had caused his injury because the stairs had not been made slip resistant in wet conditions. The argument never got off the first tee, as it were, because the expert relied upon building code requirements pertaining to making “floor surfaces” slip resistant and the federal court hearing the case ignored the entire line of reasoning as “irrelevant.”

As the court saw it, it was obvious that such a building code requirement was never meant to apply to an outdoor golf course. For that matter, the stairs embedded in the ground at the 15th hole were not even part of a “building or structure” to which building codes apply.

Because of the court’s dim view of the expert evidence offered, James was left exposed to the resort’s contention, with which the court readily agreed, that James could not blame his unfortunate slip and fall on the resort or anyone else. In legal parlance, James had “assumed the risk” of walking on the wet stairs. The risk was obvious, inherent in the activity, and not so serious as to justify placing a greater precautionary burden on the resort operating the course. The court noted that this legal principle “facilitates free and vigorous participation in athletic activities.”