Volume 6 Number 8 February 20, 2009
This week was the final round of committee meetings for the Florida House and Senate before the regular session begins on March 3. The meetings have been a preview of what to expect for the Legislature’s upcoming session: faced with a potential $5 billion budget shortfall and a continual decline in state revenues, the state’s economy is the top priority.
In these tough economic times, legislators have become accustomed to belt-tightening and making cuts. CFO Sink will continue to advocate that lawmakers make government more efficient, as well as preserve the funding of mission-critical services like law enforcement, which is especially important now because historically, crime levels go up during a recession.
When session convenes, legislators are also expected to review a number of issues including property insurance, workers’ compensation, gaming compacts and the housing crisis. We will continue to keep you informed as these issues develop in the weeks ahead.
In 2006, Bonnie Madden, 81, from Port Richey, purchased two annuities from insurance agent Randolph Kahl-Winter. A year later, her agent engaged in a practice known as “twisting” when he falsely inflated Madden’s net worth and converted her annuities into one annuity policy with a different company in order to generate a $52,000 commission for himself. The agent’s action would have cost Madden nearly $300,000 of her life savings if the Department of Financial Services had not intervened.
Chief Financial Officer Alex Sink said it is because of Madden, and others like her, that she has teamed up with key lawmakers to push for tougher penalties for unscrupulous agents who defraud senior investors and establish better disclosures and protections upfront for seniors who invest in these products.
Sink said her department has heard from hundreds of seniors and their families who say they were convinced to liquidate annuities, CDs, stocks and savings accounts to fund new annuities only to discover these actions robbed them of their savings.
Left to right, Bonnie Madden and CFO Sink
“The number of complaints from Florida seniors about annuities has nearly quadrupled in the last three years,” said Sink, whose department has opened 474 investigations on financial fraud involving seniors, with approximately 70 percent of cases related to annuity and life insurance transactions. “Better financial protections for our growing population of senior residents and tougher consequences for those who defraud our seniors demand our immediate attention.”
Florida is currently home to more than 2.9 million Floridians over the age of 65. The state’s senior population is projected to grow by as much as 30 percent, and many of these seniors will look into investing in annuities. An annuity is an insurance contract that offers a guaranteed series of payments over a period of time. Seniors may consider purchasing an “immediate” annuity, where payments begin right away, or “deferred” annuities, which accumulate savings over a period of time before payments begin.
Joining Sink at a press conference in Tallahassee to announce legislation was State Senator Mike Bennett (SB 1372) and State Representative Keith Fitzgerald. Sink was also joined by Jack McRay from AARP and several members of the Safeguard our Seniors (SOS) Task Force. Sink created the SOS Task Force last fall to examine and recommend solutions to better protect Florida seniors against financial fraud, with a specific focus on annuity fraud.
“This legislation is so important as more seniors move to Florida and seek to invest their hard-earned savings,” said Senator Bennett. “We will not tolerate any agent who steals from, misleads or lies to our state’s senior investors.”
“Annuities can be an effective investment tool for many Floridians wanting a steady stream of income for retirement,” Fitzgerald said. “But agents must be held accountable for the financial harm they inflict when they steer our state’s seniors into inappropriate annuity products.”
Rep. Keith Fitzgerald addresses the Safeguard Our Seniors press conference in Tallahassee.
Under the legislation, the act of “twisting” an annuity to a senior consumer would be a third degree felony, bringing this violation in line with the penalty currently applied to a securities broker-dealer under Florida law. Other protections under the proposed legislation also:
The Safeguard Our Seniors Task Force includes representatives from AARP Florida, the Department of Veterans’ Affairs, Insurance Consumer Advocate, Offices of Insurance Regulation and Financial Regulation, NAACP, Florida Bar, American Council of Life Insurers, insurance agents and securities broker-dealers.
To learn more about the SOS Task Force or what to consider when purchasing annuities, visit www.FLSeniors.net. Senior Floridians who believe they may have been the victim of annuity fraud should call 1-877-My-FL-CFO or log on to www.MyFloridaCFO.com to file a complaint.
With the goal of helping more Florida families stay in their homes, Florida Chief Financial Officer Alex Sink urged each of Florida’s largest mortgage lenders to appoint an ombudsman to facilitate interaction between lenders, attorneys, and Florida homeowners. Details of the proposal were outlined in a letter sent today to 11 major mortgage lending institutions.
The proposal stems from the Florida Attorneys Saving Homes (FASH) program, which was created last year by the Florida Bar after CFO Sink urged bar lawyers to dedicate more pro bono casework to helping homeowners avoid the mortgage foreclosure crisis. More than 1,000 attorneys have volunteered to respond to more than 10,000 requests from at-risk homeowners; however, the success of the program has been hindered from a lack of available lender representatives.
“Florida has the third-highest number of properties with foreclosure filings in the country, and it’s commendable that these attorneys have volunteered to represent the homeowners who find themselves in this unfortunate situation,” said CFO Sink, who oversees the Department of Financial Services. “These attorneys can better negotiate modifications and more Floridians will be able to stay in their homes if attorneys have dedicated ombudsmen to contact.”
“More than 1,000 members of the Florida Bar responded to CFO Sink’s request to assist homeowners,” said Jennifer Newton, Director of Florida Attorneys Saving Homes. “We are delighted to have CFO Sink further support our efforts by urging lenders to appoint an ombudsman with the authority to renegotiate mortgage loans.”
Even though foreclosure activity in Florida was down 20 percent for the month of January (compared to December), foreclosures in the state are still 18 percent higher than they were last year and third in the nation. Approximately one in every 186 households in Florida is in foreclosure.
The first chapter of the Florida Institute of Chief Financial Officers, the Tampa Bay Chapter, kicked off their inaugural meeting Feb. 13 with an address from Florida’s Chief Financial Officer Alex Sink.
CFO Sink talked with the group of corporate CFOs about the similarities and differences of being the CFO of Florida and the CFO of a company. In her remarks, she also challenged the businesses represented to help Florida reinvent its economy once again through the entrepreneurial spirit that has made Florida an attractive business venue for decades.
“Florida is still a terrific place for outsiders to invest, and for entrepreneurs to make their business dreams come true,” said CFO Sink. ‘With our great weather, lack of personal income tax, public education system, airports and ports, and overall quality of life, why wouldn’t you want to be doing business in Florida? “Now is the time that we really need to sell Florida, and we can because we have a lot to offer.”
CFO Sink said that the passage of the $787 billion economic stimulus plan would help the increasingly tight Florida budget that’s expected to be about $60 billion for the coming year, down from $72 billion two years ago when Sink first took office. Florida like many states is constitutionally required to balance its budget.
In particular, she suggested that Medicaid, transportation, NASA, and potentially education and healthcare could benefit from the available funds, especially at a time when the state is struggling with growing unemployment, soaring Medicaid and food stamp rolls and major education budget shortfalls.
CFO Sink pointed out that there is still plenty of good news in the Florida economy, pointing to bright spots including health care and growing international trade of high-tech components and professional services.
Florida Chief Financial Officer Alex Sink, who oversees the Department of Financial Services’ Division of Rehabilitation and Liquidation, announced that the liquidation of Tampa-based MD Medicare Choice (MDMC) will include two auctions of the company’s personal property, such as furniture and equipment, to help pay for liquidation expenses and claims. The Department was named receiver in September 2008.
Items to be auctioned include company vehicles, a recreational vehicle, office and computer equipment, desks and chairs, cubicles, microwave ovens, furniture and televisions. The Tampa Liquidation Center will be administering the auctions.
“Our priority is to fight for Florida’s insurance consumers, especially in these tough economic times, to do what we can to get money back to pay claims and creditors,” said CFO Sink.
The auctions will take place this Saturday, February 21, and Tuesday, February 24, from 10 a.m. to 4 p.m., at the former offices of MD Medicare Choice, Inc., located at 5501 W. Waters Avenue, Suite 401, Tampa, FL 33634-1229. Click here for a map of the location.
Items for auctions on February 24 may be previewed on Monday, February 23, from 9 a.m. to 5 p.m. For further information, visit www.myfloridacfo.com/Receiver.
As part of ongoing efforts to meet with seniors about her Safeguard Our Seniors (SOS) Task Force, Florida Chief Financial Officer Alex Sink hosted an open forum that included financial and elder issue experts in The Villages.
Just this week, CFO Sink announced legislation aimed at better protecting Florida’s seniors from becoming a victim of financial fraud. Under the proposed legislation, the act of “twisting” an annuity to a senior consumer would be a third-degree felony, bringing this violation in line with the penalty currently applied to a securities broker-dealer under Florida law. The forum also addressed other financial issues that impact seniors.
James Christopher speaks
with CFO Sink at The Villages.
To learn more about the SOS Task Force or what to consider when purchasing annuities, visit www.flseniors.net. Floridians who believe they may have been victims of annuity fraud should call 1-877-MY-FL-CFO or log on to www.MyFloridaCFO.com to file a complaint.
If you have an inactive credit card with has a high credit limit and no balance, use it. Credit card companies are cancelling cards that have not been used recently - without a balance over an extended amount of time - to save maintenance expenses.
Your credit score could be affected in the negative if a high-limit and long-term dormant credit card gets eliminated. If you have made no charges or transfers in a year, the account may get a review and then be terminated due to inactivity, or a maintenance fee may be imposed.
It is useful to save a card for a financial emergency but you should use the card several times per year. Only use the card if you can pay it off immediately. An active card provides more than just an emergency backup, it also adds positive information to your credit history, which affects your credit score directly.
Your credit score is based on the ratio of debt to available credit and the length of your credit history.
When a high limit account is closed, the amount of available credit would be less, affecting the overall debt-to-credit ratio. Carrying debt beyond the 30 percent threshold can decrease your credit score by 100 points or more. An older card being cancelled can impact your score even more as part of your credit score is based on the length of your credit history.
If your card was recently cancelled, contact the company to get the account reopened. If the account cannot be reopened, apply for a new card to keep your debt-to-credit ratio at a healthy level. And pay down your existing credit cards to reduce your debt.
While it is ideal to have an expert from your local utility or city conduct an energy audit at your home, remember that you can also conduct a home energy audit. With a simple but diligent walk-through, you can spot many problems in any type of house. The main thing to do is to create a checklist of things to review in your house. This list will also help you prioritize your energy efficiency upgrades.
Some of the items you will want on your list include:
Showerheads and faucets - Are they low-flow?
Lights – Are all your bulbs compact fluorescent?
Toilets – Have you installed low-flush toilets?
Water heater – Is it insulated? Is the temperature set too high?
Windows and air leaks - Can you hear or feel a draft coming in?
Thermostat – Do you have programmable one?
Refrigerator -- Did you buy your refrigerator before 1991? Next week’s energy tips will provide detailed tips to determine whether it is time to buy a new refrigerator.
Once you’ve finished your own audit, keep your checklist of what you have inspected along with the problems you found. Make a commitment to fix or replace the small items right away and budget for the larger ones. And when you have time, get an expert auditor to review the more difficult items such as wall insulation and attic insulation.