The Importance of Computer Education For Teachers

The world of today is run by computers and it is time that teachers understand this. The idea of going to a library and reading a book is not ideal to the students of today. Students would rather go online and read into a subject on a webpage rather than go and have to read an entire book or have to skim for the part they are looking for. So, if your a teacher what are you to do? Computer education for teachers is what every school needs to do.

Teachers, and for that matter all school districts, need to begin to integrate technology into all classrooms and this article will tell you how.

Computer education for teachers should not be that big of a deal because all teachers who have just began probably already know how to integrate technology into the classrooms, so you should only have to teach those who have been teaching for awhile.

How do you integrate technology into your classrooms though? That is the question all teachers are asking and here is the answer. Research is the number one thing students use the internet for. Many school libraries and even some public libraries do not provide students with the information they need on certain topics but the internet will almost always have the information they need. The only problem with this is the quality of the information but teachers are able to check on that by looking at the foot notes of the article to see where the information came from.

Many schools are now having students take tests on a sheet called a Scantron or other forms of it. A Scantron is a sheet where you have 50 questions on each side, a total of 100 questions, and are given multiple choice questions A-E. The teacher will hand you a Scantron which is where you answer the questions and a test sheet, the Scantron is only a sheet where you bubble in either A-E. The teacher then puts the answers in a computer and a special machine reads the Scantron and automatically grades the test off of the answers the teacher put into the computer.

Besides research and test taking there are many other ways to integrate computers into your teaching. There are now projection screens that allow you to write on them turning them basically into a white board. You are able to watch movies on the white board, stop the movie, and draw over the movie. This is very helpful for History teachers as it allows them to teach the battles and etc.

Royal Entrepreneurship – The Case of Royal Bank Zimbabwe Ltd Formation

The deregulation of the financial services in the late 1990s resulted in an explosion of entrepreneurial activity leading to the formation of banking institutions. This chapter presents a case study of Royal Bank Zimbabwe, tracing its origins, establishment, and the challenges that the founders faced on the journey. The Bank was established in 2002 but compulsorily amalgamated into another financial institution at the behest of the Reserve Bank of Zimbabwe in January 2005.

Entrepreneurial Origins

Any entrepreneurial venture originates in the mind of the entrepreneur. As Stephen Covey states in The 7 Habits of Highly Effective People, all things are created twice. Royal Bank was created first in the mind of Jeffrey Mzwimbi, the founder, and was thus shaped by his experiences and philosophy.

Jeff Mzwimbi grew up in the high density suburb of Highfield, Harare. On completion of his Advanced Level he secured a place at the University of Botswana. However he decided against the academic route at that time since his family faced financial challenges in terms of his tuition. He therefore opted to join the work force. In 1977 he was offered a job in Barclays Bank as one of the first blacks to penetrate that industry. At that time the banking industry, which had been the preserve of whites, was opening up to blacks. Barclays had a new General Manager, John Mudd, who had been involved in the Africanisation of Barclays Bank Nigeria. On his secondment to Zimbabwe he embarked on the inclusion of blacks into the bank. Mzwimbi’s first placement with Barclays was in the small farming town of Chegutu.

In 1981, a year after Independence, Jeff moved to Syfrets Merchant Bank. Mzwimbi, together with Simba Durajadi and Rindai Jaravaza, were the first black bankers to break into merchant banking department. He rose through the ranks until he was transferred to the head office of Zimbank – the principal shareholder of Syfrets – where he headed the international division until 1989.

The United Nations co-opted him as an advisor to the Reserve Bank in Burundi and thereafter, having been pleased by his performance, appointed him a consultant in 1990. In this capacity he advised on the launch of the PTA Bank travellers’ cheques. After the consultancy project the bank appointed him to head the implementation of the programme. He once again excelled and rose to become the Director of Trade Finance with a mandate of advising the bank on ways to improve trade among member states. The member states were considering issues of a common currency and common market in line with the European model. Because the IFC and World Bank had unsuccessfully sunk gigantic sums of funds into development in the region, they were advocating a move from development finance to trade finance. Consequently PTA Bank, though predominantly a development bank, created a trade finance department. To craft a strategy for trade finance at a regional level, Mzwimbi and his team visited Panama where the Central Americans had created a trade finance institution. They studied its models and used it as a basis to craft the PTA’s own strategy.

Mzwimbi returned to Zimbabwe at the conclusion of his contract. He weighed his options. He could rejoin Barclays Bank, but recent developments presented another option. At that time Nick Vingirai had just returned home after successfully launching a discount house in Ghana. Vingirai, inspired by his Ghanaian experience, established Intermarket Discount House as the first indigenous financial institution. A few years later NMB was set up with William Nyemba, Francis Zimuto and James Mushore being on the ground while one of the major forces behind the bank, Julias Makoni, was still outside the country. Makoni had just moved from IFC to Bankers’ Trust, to facilitate his ownership of a financial institution. Inspired by fellow bankers, a dream took shape in Mzwimbi’s mind. Why become an employee when he could become a bank owner? After all by this time he had valuable international experience.

The above experience shows how the entrepreneurial dream can originate from viewing the successes of others like you. The valuable experiences acquired by Mzwimbi would be critical on the entrepreneurial journey. An entrepreneurial idea builds on the experiences of the entrepreneur.

First Attempts

In 1990 Jeff Mzwimbi was approached by Nick Vingirai, who was then Chairman of the newly resuscitated CBZ, for the CEO position. Mzwimbi turned down the offer since he still had some contractual obligations. The post was later offered to Gideon Gono, the current RBZ governor.

Around 1994, Julias Makoni (then with IFC), who was a close friend of Roger Boka, encouraged Boka to start a merchant bank. At this time Makoni was working at setting up his own NMB. It is possible that, by encouraging Boka to start, he was trying to test the waters. Then Mzwimbi was seeing out the last of his contract at PTA. Boka approached him at the recommendation of Julias Makoni and asked him to help set up United Merchant Bank (UMB). On careful consideration, the banker in Mzwimbi accepted the offer. He reasoned that it would be an interesting option and at the same time he did not want to turn down another opportunity. He worked on the project with a view to its licensing but quit three months down the line. Some of the methods used by the promoter of UMB were deemed less than ethical for the banking executive, which led to disagreement. He left and accepted an offer from Econet to help restructure its debt portfolio.

While still at Econet, he teamed up with the late minister Dr Swithun Mombeshora and others with the intent of setting up a commercial bank. The only commercial banks in the country at that point were Standard Chartered, Barclays Bank, Zimbank, Stanbic and an ailing CBZ. The project was audited by KPMG and had gained the interest of institutional investors like Zimnat and Mining Industry Pension Fund. However, the Registrar of Banks in the Ministry of Finance, made impossible demands. The timing of their application for a licence was unfortunate because it coincided with a saga at Prime Bank in which some politicians had been involved, leading to accusations of influence peddling. Mombeshora, after unsuccessfully trying to influence the Registrar, asked that they slow down on the project as he felt that he might be construed as putting unnecessary political pressure on her. Mzwimbi argues that the impossible stance of the Registrar was the reason for backing off that project.

However other sources indicate that when the project was about to be licensed, the late minister

demanded that his shareholding be increased to a point where he would be the majority shareholder. It is alleged that he contended this was due to his ability to leverage his political muscle for the issuance of the licence.

Entrepreneurs do not give up at the first sign of resistance but they view obstacles in starting up as learning experiences. Entrepreneurs develop a “don’t quit” mind-set. These experiences increase their self -efficacy. Perseverance is critical, as failure can occur at any time.

Econet Wireless

The aspiring banker was approached, in 1994 by a budding telecommunication entrepreneur, Strive Masiyiwa of Econet Wireless, to advise on financial matters and help restructure the company’s debt. At that time Mzwimbi thought that he would be with Econet probably for only four months and then return to his banking passion. While at Econet it became apparent that, once licensed, the major drawback for the telecommunication company’s growth would be the cost of cell phone handsets. This presented an opportunity for the banker, as he saw a strategic option of setting up a leasing finance division within Econet that would lease out handsets to subscribers. The anticipated four months to licensing of Econet dragged into four years, which encompassed a bruising legal struggle that finally enabled the licensing against the State’s will. Mzwimbi’s experience with merchant banking proved useful for his role in Econet’s formation. With the explosive growth of Econet after an IPO, Mzwimbi assisted in the launch of the Botswana operations in 1999. After that, Econet pursued the Morocco licence. At this stage, the dream of owning a bank proved stronger than the appeal of telecoms. The banker faced some tough decisions, as financially he was well covered in Econet with an assured executive position that would expand with the expansion of the network. However the dream prevailed and he resigned from Econet and headed back home from RSA, where he was then domiciled.

His Econet days bestowed on him a substantial shareholding in the company, expanded his worldview and taught him vital lessons in creating an entrepreneurial venture. The persistence of Masiyiwa against severe government resistance taught Mzwimbi critical lessons in pursuing his dream in spite of obstacles. No doubt he learnt a lot from the enterprising founder of Econet.

Debut Royal Bank

On his return in March 2000, Mzwimbi regrouped with some of his friends, Chakanyuka Karase and Simba Durajadi, with whom he had worked on the last attempt at launching a bank. In 1998 the Banking Act was updated and a new statutory instrument called the Banking Regulations had been enacted in the light of the UMB and Prime Bank failures.

These required that one should have the shareholders, the premises and equipment all in place before licensing. Previously one needed only to set up an office and hire a secretary to acquire a banking license. The licence would be the basis for approaching potential investors. In other words it was now required that one should incur the risk of setting up and purchasing the IT infrastructure, hire personnel and lease premises without any assurance that one would acquire the licence. Consequently it was virtually impossible to invite outside investors into the project at this stage.

Without recourse to outside shareholders injecting funds, and with minimal financial capacity on the part of his partners, Mzwimbi fortuitously benefited from his substantial Econet shares. He used them as collateral to access funds from Intermarket Discount House to finance the start up – acquired equipment like ATMs, hired staff, and leased premises. Mzwimbi recalls pleading with the Central Bank and the Registrar of Banks about the oddity of having to apply for a licence only when he had spent significant amounts on capital expenditure – but the Registrar was adamant.

Finally, Royal Bank was licensed in March 2002 and, after the prerequisite pre-opening inspections by the Central Bank, opened its doors to the public four months later.

Entrepreneurial Challenges

The challenges of financing the new venture and the earlier disappointments did not deter Mzwimbi. The risk of using his own resources, whereas in other places one would fund a significant venture using institutional shareholders’ capital, has already been discussed. This section discusses other challenges that the entrepreneurial banker had to overcome.

Regulatory Challenges and Capital Structure

The new banking regulations placed shareholding restrictions on banks as follows:

*Individuals could hold a maximum of 25% of a financial institution’s equity

*Non-financial institutions could hold a maximum of 10% only

*A financial institution however could hold up to a maximum of 100%.

This posed a problem for the Royal Bank sponsors because they had envisaged Royal Financial Holdings (a non-financial corporate) as the major shareholder for the bank. Under the new regulations this could hold only 10% maximum. The sponsors argued with the Registrar of Banks about these regulations to no avail. If they needed to hold the shares as corporate bodies it meant that they needed at least ten companies, each holding 10% each. The argument for having financial institutions holding up to 100% was shocking as it meant that an asset manager with a required capitalisation of $1 million would be allowed by the new law to hold 100% shareholding in a bank which had a $100 million capitalisation yet a non-banking institution, which may have had a higher capitalisation, could not control more than 10%. Mzwimbi and team were advised by the Registrar of Banks to invest in their personal capacities. At this point the Reserve Bank (RBZ) was simply involved in the registration process on an advisory basis with the main responsibility resting with the Registrar of Banks. Although the RBZ agreed with Mzwimbi’s team on the need to have corporations as major shareholders due to the long term existence of a corporation as compared to individuals, the Registrar insisted on her terms. Finally, Royal Bank promoters chose the path of satisficing- and hence opted to invest as individuals, resulting in the following shareholding structure:

*Jeff Mzwimbi – 25%

*Victor Chando – 25%

*Simba Durajadi- 20%

*Hardwork Pemhiwa- 20%

*Intermarket Unit Trust – 2% (the only institutional investor)

*Other individuals – less than 2% each.

The challenge to acquire institutional investors was due to the restrictions cited above and the requirement to pump money into the project before the licence was issued. They negotiated with TA Holdings, which was prepared to take equity holding in Royal Bank.

So tentatively the sponsors had allocated 25% equity for Zimnat, a subsidiary to TA Holdings. Close to the registration date, the Zimnat negotiators were changed. The incoming negotiators changed the terms and conditions for their investment as follows:

*They wanted at least a 35% stake

*The Board chairmanship and chairmanship of key committees – in perpetuity.

The promoters read this to mean their project was being usurped and so turned TA Holdings down. However, in retrospect Mzwimbi feels that the decision to release the TA investment was emotional and believes that they should have compromised and found a way to accommodate them as institutional investors. This could have strengthened the capital base of Royal Bank.

Credibility Challenges

The main sponsors and senior managers of the bank were well known players in the industry. This reduced the credibility gap. However some corporate customers were concerned about the shareholding of the bank being entirely in the hands of individuals. They preferred the bank risk to be reduced by having institutional investors. The new licensing process adversely affected access to institutional investors. Consequently the bank had institutional shareholders in mind for the long term. They claim that even the then head of supervision and licensing at RBZ, agreed with the promoters’ concern about the need for institutional investors but the Registrar of Banks overruled her.

Challenges of Explosive Growth

The strategic plan of Royal Bank was to open ten branch offices within five years. They planned to open three branches in Harare in the first year, followed by branches in Bulawayo, Masvingo, Mutare and Gweru within the next year. This would have been followed by an increase in the number of Harare branches.

From their analysis they believed that there was room for at least four more commercial banks in Zimbabwe. A competitor analysis of the industry indicated that the government controlled Zimbank was the major competitor, CBZ was struggling and Stanbic was not likely to grow rapidly. The bigger banks, Barclays and Standard Chartered, were likely to scale down operations. The promoters of the bank project had observed in their extensive international experie nce that whenever the economy was indigenised in Africa, these multinational banks would dispose of their rural branches. They were therefore positioning themselves to exploit this scenario once it presented itself.

The anticipated opportunity presented itself earlier than expected. On an international flight with the Standard Chartered Bank CEO, Mzwimbi, confirmed his interest in a stake of the bank’s disinvestments which was making rounds on the rumour mill. Although surprised, the multinational banker agreed to give the two month old entrepreneurial bank the right of first refusal on the fifteen branches that were being disposed of.

The deal was negotiated on a lock, stock and barrel basis. When the announcement of the deal was made internally, some employees resisted and politicised the issue. The Standard Chartered CEO then offered to proceed on a phased basis with the first seven banks going through, followed by the others later. Due to Mzwimbi’s savvy negotiating skills and the determination by Standard Chartered to dispose of the branches, the deal was successfully concluded, resulting in Royal Bank growing from one branch to seven outlets within the first year of operation. It had exceeded their projected growth plan.

Due to what Mzwimbi calls divine favour, the deal included the real estate belonging to the bank. Interestingly, Standard Chartered had failed to get bank buildings on lease and so in all small towns they had built their own buildings. These were thus transferred within the deal to Royal Bank. Inherent in the deal was an inbuilt equity from the properties since the purchase price of $400 million was heavily discounted.

Shortly after that, Alex Jongwe, the CEO of Barclays Bank, approached Royal Bank to offer a similar deal to the Standard Chartered acquisition of rural branches. Barclays offered eight branches, of which Royal initially accepted six. Chegutu and Chipinge were excluded, since Royal already had a presence there.

However after failing to dispose of those two branches, Barclays came back and asked Royal “to take them for a song”. Mzwimbi accepted these for two strategic reasons, namely the acquisitions gave him physical assets (the buildings) that he could lease out to anyone who decided to expand into those areas and secondly, that created a monopoly in those towns. With time, the fortuitous inclusion of real estate into the deal increased the wealth of Royal Bank as the prices of properties skyrocketed with hyperinflation.

One of the major key drivers of the Zimbabwean economy is agriculture. After the failed Land Donors Conference in 1998 and the subsequent land reform programme, it was evident to the established banks that commercial farming would be significantly affected.

They sought to quit the small towns since their major clients were commercial farmers. Strategically to acquire these branches when the major source of their revenue was under threat would have required that Royal Bank should have put in place an alternative source of revenue from farming. It is not clear whether this had been considered during these acquisitions.

The acquisition increased Royal’s branch network to 20 and the staff complement by 50. Incidentally, the growth created problems of managing the system as well as cultural issues. The highly unionised Standard Chartered employees were antagonistic to management as compared to the trusting Royal culture. This acquisition resulted in potential culture challenges. Management controlled this by introducing Norton and Kaplan’s Balanced Scorecard system in an effort to manage the cultural clashes of the three systems.

The Challenge of Financing Acquisition

A major challenge in acquisitions is the financing structure. During licensing the Registrar of Banks refused to accept the nearly $200 million that had been spent by the promoters of Royal Bank as capital. She insisted that this be recognised as pre-operating expenses and therefore wanted to see fresh capital amounting to $100 million. The change of rules posed a challenge for Mzwimbi’s team. However, being an astute deal maker he strategically conceptualised an arrangement whereby the $170 million worth of equipment purchased be accounted for as belonging to Royal Financial Holdings and made available to Royal Bank on a lease basis. This would then be sold to the bank as it grew. The RBZ was appraised of this decision and accepted it, and even noted in the inspection report the amount of expenditure spent pre-operatively by the promoters. The remainder of the pre-operative expenses were converted into nonvoting non-convertible preference shares of Royal Bank.

In January 2003 commercial bank capitalisation was increased to $500 million by the regulator and hence there was a need for recapitalisation. This coincided with the branch acquisition deals. At this stage the Royal Bank team decided to partially fund the acquisition through a conversion of the preference shares into ordinary shares and partially from fresh capital injected by the shareholders. Since the bank was now performing well, it purchased the capital equipment, owned by Royal Financial Holdings, which it had been leasing. This deal included the redistribution and balancing of shareholdings in Royal Bank to conform to the statutory requirements. Retrospectively it may be viewed as a strategic blunder to have moved the equipment into the bank ownership. Considering the “sale” of Royal Bank assets to ZABG, if these and the real estate had been warehoused into RFH the take-over may have been difficult. This highlights the failure sometimes by entrepreneurs to appreciate the importance of asset protection mechanisms while still small.

However the RBZ accused the shareholders of using depositors’ funds for the recapitalisation of the bank. Partly this is due to a misunderstanding that RFH is the holding company of Royal Bank and so sometimes accounts flowing from Royal Financial Holdings were accounted by RBZ investigators as Royal Bank funds. These allegations formed part of the allegations of fraud against Mzwimbi and Durajadi when they were arrested in September 2004. Subsequently the courts cleared them of any fraudulent activities in January 2007.

Managerial Challenges

Retrospectively, Mzwimbi views his managerial team as being excellent apart from some “weaknesses in the finance department”. He assembled a solid team from various banking backgrounds. The most significant ones became founding shareholders like Durajadi Simba at treasury, the late Sibanda in charge of the lending department. Faith Ngwabi-Bhebhe, then with Kingdom, helped lay a solid foundation of human resource systems for the bank.

However, they had a challenge finding a financial director. The new statutory instrument required that CVs of all corporate officers be made available for vetting when the licence was applied for. Without a licence one could not promise someone in current employment a job and submit his CV as this would reflect badly on the promoters. Eventually they hired a chartered accountant without banking experience. Initially they thought this was a stop-gap measure.

With the unanticipated growth, they forgot to revisit this department to strengthen it. Because of these weaknesses the bank continued to face challenges in the treasury department, despite the gallant efforts of the financial director. Strangely, when other executive directors were arrested the FD was left untouched and yet all the issues at stake arose from treasury activities. It would appear in retrospect that the FD was intimidated into providing incriminating evidence for the others. She too was threatened with arrest.

Successful entrepreneurial ventures in a growth phase need both strong leaders and strong managers. It’s not enough to have strong leadership skills. As Ed Cole said, “It’s easier to obtain than to maintain.” The role of strong managers is to create the capacity to maintain what strong entrepreneurial leaders acquire. Interestingly a new field of research, Strategic Entrepreneurship now recognises the need for both entrepreneurial and strategic management competences for successful ventures.

Strategic Growth Plans

Royal Bank’s strategic intent was to create a full house of financial services. The plan included a commercial bank, a discount house, an insurance company, a building society and an asset management service. However the vision was later refined and the plans for a discount house were dropped, since a strong commercial bank with a powerful dealing room would serve the same purpose. A strong asset manager would also relieve the need for a discount house.

With the significant branch network, the commercial bank was solid but needed a presence in a few major centres e.g. Masvingo and Gweru. In Gweru they could not locate suitable premises.

In Masvingo, after a struggle they were offered premises which had previously been earmarked for Trust Bank. With Trust Bank facing challenges, it abandoned Masvingo. However, Royal was placed under a curator when it was about to move in.

Royal Bank courted Finsreal Asset Managers for a potential acquisition since there were synergies and shared beliefs. It had a solid corporate customer base and very good growth prospects since an astute entrepreneur led it. Unfortunately the deal was aborted at the last minute when the owner opted out. After the Finsreal flop, Mzwimbi and his team pursued the asset manager through organic growth. They developed their own company -Regal Asset Managers – during the last quarter of 2003. At this stage the capital requirements and licensing process of asset managers was fairly easy. Asset managers were quite profitable, with minimal regulatory controls. Regal Asset Managers completed two good deals, namely: a management buyout of Screen Litho, a printing concern, and a big deal for First Mutual at its demutualisation.

The Screen Litho deal had been offered to venture capitalists but their demands were excessive. That is when Regal Asset Managers was set up and concluded a funding deal through Royal Financial Holdings (RFH), resulting in RFH holding 99% of Screen Litho which was to be off- loaded once management was in a solid financial position. Screen Litho is performing very well and hence this investment has proven successful. The entrepreneurial Mzwimbi thus diversified his financial portfolio through this deal.

For the building society, Royal eyed First National Building Society (FNBS) and almost signed a memorandum of agreement. Royal Bank was almost ready to transfer its staff mortgage facility to FNBS, when a close friend with a powerful position in the Society discouraged it from committing to the deal without divulging the reasons. A short while later FNBS was placed under a curator, with the RBZ citing cases of fraud by the top executives. The increasingly acquisitive Royal Bank entrepreneurs shifted and trained their guns at Beverly Building Society. Intermarket had already failed to consummate a deal with Beverley. Royal Bank was now competing with African Banking Corporation (ABC), which beat it to an agreement but was denied shareholder authority to complete the deal. Royal Bank then went back to wooing Shingai Mutasa of TA Holdings in an effort to increase its institutional shareholder base. He was keen on the deal.

Mutasa was acquainted with the two British owners of Beverley and one of his board members sat on the Beverley Building Society board. His support would have been crucial in the deal. However this process was overtaken by events, as the incoming RBZ governor superintended a monetary policy which led the financial sector into a tailspin.

Some young entrepreneurs approached Royal Bank seeking for support to establish an insurance company. Since this was in line with Royal’s strategic plan it consented and helped start Regal Insurance Company. Royal Bank originated the name Regal Insurance.

Once the licence was acquired there were some shareholder disputes and Royal Bank distanced itself from the deal. The young entrepreneurs who had been supported by Royal Bank lost the company to the other shareholders.

The final thrust in the strategic plan was establishing a stock broking firm. An idiosyncrasy with stock broking licences is that they are not issued to an institution but to a person. Intermarket had the highest number of stock broking licences. Mzwimbi approached the Intermarket stock broking CEO, who was a friend, about the prospects of acquiring one of the stockbrokers and he did not seem to have a problem with that. At the same time Victor Chando, a major shareholder in Royal Bank, brought to the table his interest in acquiring Barnfords Securities. He was encouraged to pursue the deal with the help of Royal Bank with the plan of bringing it in-house as soon as possible. All Royal Bank deals would now be channelled through Barnfords.

It appears that Royal bank developed a strong appetite for deals. One wonders what it would have been like if it had taken time to develop strong systems and capacity before attempting so many deals. What could have been avoided if the appetite for deals had been controlled? Entrepreneurs may need to exercise restrain in their expansion in order to create capacities to absorb and consolidate the growth.

A Four Legged Paper Stool?

My last article talked about the natural stability of the triangle, both as a structural element and as the basis for a stable, three legged stool. Clearly chopping off a leg or two will make a three legged stool unstable; but adding an extra leg, making it into a four legged stool, also undermines the stool’s natural stability.

If the floor is uneven, or if one leg is longer or shorter than the other three, a four legged stool will rock. This is a pretty good analogy for how the ‘Classical Gold Standard’ worked. ‘Rocking’ is seen in recurring ‘booms’, ‘panics’ and ‘recoveries’ experienced throughout the nineteenth and early twentieth centuries. This ‘rocking’ of the economy between overheat and collapse is generally called the ‘business cycle’.

This name is highly misleading; what correlation is there between cycles of widely disparate businesses making up the economy? What correlation is there between an apple orchard and a hair comb manufacturer… or between a shoemaking business and a ship line? In fact, there is only one; money, or more precisely credit.

Credit is the only factor that affects all businesses; thus the so called ‘business cycle’ is actually a credit cycle. If we take a look at how credit influences all business, we can see that there is not only correlation but causality between the availability of credit, or rather excess credit, and the boom/bust credit cycle.

The roots of the credit cycle can be traced back to seventeenth century England. At this time, English common law set the noxious precedent that if anyone deposits money in a bank, that money is no longer the property of the depositor, but is deemed to have become the property of the Bank! Remember, the depositor does not sell or trade his money to the bank, merely deposits it. This precedent was confirmed by further British jurisprudence in 1811; Google “cobdencentre carr 1811” for a report on this court decision.

This legal decision is staggering. Consider what happens to your furniture if you deposit it in a warehouse… does it become the property of the warehouseman, to do with as he sees fit? Suppose he sells your furniture, or lends it out while it is in his warehouse…? I think if you showed up to reclaim your furniture, and were told that it had been sold, but he has other furniture ‘just as good’, you would not be a happy camper. Or suppose it was lent out, and will not be available to you till next month… why you may call the police and have the warehouseman arrested.

Furthermore, the law sides with you. If the warehouse company went bankrupt, the bankruptcy trustee would separate the furniture being warehoused from the warehouse and its equipment, like the fork lift truck or the building… and after returning all the deposited furniture to the rightful owners, would sell the warehouse property to settle with creditors. As a depositor of furniture in a warehouse, you are not considered a creditor but a customer… and any property being warehoused belongs to you and to other depositors… not to the warehouse. So why is Money different?

Oh, you say Money is fungible, and any coin of the same weight and fineness (we are talking real Money here, Gold or Silver) is as good as any other… thus you have no claim to a specific coin or coins… and this is true. Just like a grain elevator in fact; if a farmer were to deposit 100 bushels of hard red winter wheat with a grain warehousing operation, then he will clearly not get the very same grains back; but he will get back 100 bushels of hard red winter wheat… not corn or oats, and certainly not an excuse that the grain has been sold or LEASED!

So why is Money different?

Is it just a simple coincidence that the Bank of England was franchised at about the same time this legal precedent was set? Indeed, this invasion of property rights goes quite against the times. England was leading the way in the recognition of property rights… an Englishman’s home was his Castle, and even the King of England had no rights there. The Magna Carta was written in England not long before this time. Even more tellingly, the Industrial Revolution took off in England, not elsewhere.

Sure, England had coal… but so did France and the rest of Europe. England had scientists… but so did the Continent. The fundamental reason that the Industrial Revolution started in England is that property rights in England were extended to intellectual property rights as well as physical property rights. James Watt had a flash of genius in understanding how to radically improve the efficiency of Newcomen’s steam engine; but the years of effort it took to develop and manufacture the Watts condensing engine that kick started the industrial revolution took much capital and much perseverance.

This capital only became available through the newly written patent laws. Profits for inventors… who are not tenured academics or government supported bureaucrats but entrepreneurs competing in a free, capitalist marketplace… only became available through the recognition of the inventor’s intellectual rights. The enormous burst of energy devoted to improving the machinery of the industrial revolution sprang from this new recognition and respect for intellectual property rights.

Why on Earth then were property rights to Money invaded… in the very same country and about the same time?

It is no coincidence that his was also the time the bank of England was chartered; had this invasion of property rights not been legalized, then fractional reserve banking as we know it could not have arisen, the classical Gold Standard would have remained a three legged, fully stable system… and the current catastrophic collapse of the world financial system would have been preempted. This is how critical the legal precedent regarding money, property rights and banking is.

With the unethical transfer of property rights to the banks, the banks could legally do what they pleased with the money, with the depositor having only a claim against the bank… but no control over what the bank does with the deposited money. Banks inevitably lend the short term cash deposits out for long term rates; the notorious and illicit practice of borrowing short to lend long is thus legalized… instead of being outlawed and punished. This practice leads to creation of excess credit, leads to the credit cycle and leads to runs on banks. A run takes place when depositors ask for their money back, but the deposit money is no longer there; it has been lent out for the long term.

The so called inverted yield curve, whereby short term credit commands higher interest rates than long term… a very unnatural event if you recognize that longer terms involve greater risk and should and naturally do command higher rates to compensate for this, is a direct result of the illicit practice of borrowing short to lend long.

Had property rights stayed where they belong, with the depositor, then the banks would be obliged to ask each depositor exactly what the depositor wishes be done with HIS money; the choices are simple, but critical. The banks could offer a vault service, like the warehouseman does. This service would incur storage costs for the depositor, but his money would be fully guaranteed, segregated, insured, etc… as safe as possible, perhaps safer than home storage; after all, banks have serious vaults, and guards, alarm systems etc. to protect your wealth.

Alternatively, they could offer a fully liquid demand deposit account. This account would offer a small but non zero return to the depositor. Money so deposited would be available in the form of demand notes drawn against the bank, and offset in the bank portfolio by only truly liquid current assets. The assets behind demand notes could be only cash Gold, Silver, or Real Bills that mature into Gold in not more than 91 days. In fact, German banks before WWI were expected to hold 1/3 Gold and 2/3 Bills against their demand notes. Real Bills are an earning asset… the face value or maturity value is higher than the current or discounted value… thus the depositor would receive a modest but worthwhile return.

Finally, if the depositor agreed to tie up his money for a more extended period of time, then the bank could offer interest, based on prevailing rates, which is always higher than the discount rate. The amount of money available to lend long is thus determined by the individual depositor’s time preference.

There cannot be a run on the bank, as all notes are backed by liquid real assets, and only long term time deposits are available for longer term loans. The term structures match perfectly, automatically. A simple example of how this works is to assume 10 depositors show up at the bank, each with 100 monetary units they wish to deposit.

The first depositor decides that he wants to keep 20 units in his demand account, the rest in a time deposit. Further, to keep the numbers simple we assume that all ten depositors decide to do the same thing; 20 units of demand deposit, 80 units long term. The result is that the bank will end up with 200 monetary units in its demand account, and 800 in its term account.

Now it is perfectly legitimate and proper for the bank to lend out the 800 units; after all, that is what the owners of the money want. Thus, 800 units of money are available to be lent into circulation… and the borrowers of this 800 units will also decide what they want with their newly borrowed funds; put some into demand deposit, some into term deposits.

If the ratio that new depositors use happens to be the same, that is 20% demand and 80% time, then the next cycle of this iterative process will allow another 640 units to be lent out… 80% of the 800 is 640. Then another round, 80% of the 640 etc… This is the famous ‘fractional reserve’ process… but done with no ‘printing money from thin air’, with no arbitrary ‘reserve ratios’ and no central bank needed to try and ameliorate bank runs.

Deposits come and go, and money owners decide on their split between demand and time deposits all the time. If we simply add up all the time deposits and demand deposits in the whole banking system, then we can come up with a single number: the ratio between demand and time deposits, as determined by the myriad bank customer.

Today this number is called the Reserve Ratio! But there is an enormous difference between a naturally occurring number as determined by market participants, and an artificial number set by interested parties such as greedy bankers and power seeking politicians. The difference is polar, as is the difference between debt and money; the two numbers are 180 degrees apart.

The power to influence the whole economy now rests with one authority; the central banker. The credit cycle is controlled by one party, the central banker. No longer does the reserve ratio reflect the wishes of the populace. Think about this for a minute; the economy is solid, jobs are plentiful, the future looks peaceful and rosy. As a result, most depositors would be willing to keep a modest sum in their demand deposit, and more in the time deposit, happy to collect the higher interest available. Thus the reserve ratio would remain low. Perhaps only 15% of all deposits would be in the demand account.

But suppose the economy is showing stress, the job markets look less positive, the future looks more risky; depositors would naturally want to keep more money on hand, ‘just in case’; and the ratio would automatically grow to reflect this concern. No need for anyone in ‘power’ to ‘set’ or adjust this ratio; all economic numbers like prices, interest rates, discount rates etc… in a truly free market… are self-regulating. The ‘reserve ratio’ is optimized by simple but vital market feedback mechanisms.

Today these natural feedback mechanisms have been cut, and replaced by ‘authority’. In effect, the ‘numbers’ are set at the whim of the powerful, in the interest of the powerful… and the whole economy suffers the consequences. Instability of the four legged Gold standard was caused by exactly this; the ‘reserve ratio’ was set at the whim of the central banker… and the banker’s interest is to create more credit than the market needs or can support; in order to collect more interest.

The Government backs this policy, because the Government needs ever more cash… to gain and keep power. The only place they can get more, virtually limitless cash is from the Central Bank… so the instability and monetary destruction proceeds apace. Excess credit is force fed into the system… and once the debt reaches a level where the ability to repay it debt is surpassed, the artificially induced boom suddenly turns to bust. After the collapse, the destructive cycle starts anew.

To achieve Economic Nirvana, a stable and honest monetary system, we need to first restore property rights; then central banks can close their doors, and market participants can reclaim their legitimate power over reserve ratios, as well as over interest rates, over money supply… over all economic ‘aggregates’. The three legged stool of the Unadulterated Gold Standard has only three legs… Really!

Cash Gold and Silver (Money), Bonds and Real Bills are the necessary three legs. No fundamental need exists for bank note circulation; but if bank notes are to be used, then they must be issued against Money in the issuer’s vault, and Real Bills in the portfolio; not against long term promises… especially not against promises with no intent of being honored. Such false promises backing Notes were the ‘fiduciary’ component of the classical Gold Standard, the forth leg that causes instability. No fiduciary ‘money’, no excess credit; no excess credit, no credit cycle. As simple as that.

The invasion of property rights is a slippery slope; today not only customer’s money, but their futures contracts are being ‘commingled’ with the capital of the depositories. The ‘furniture’ held in the MF Global ‘warehouse’ was used by the criminals in charge to try and save their own bacon. This theft shows what road we are on; the odor of burning sulfur grows stronger every day! If we do not establish an unadulterated, stable Gold standard under the world economy, our civilization is doomed.

Rudy J. Fritsch

Editor in Chief

The Gold Standard Institute

Online Sales Management – 5 Tips on How to Manage Your Sales Online

Putting up an online business is one of the many ways to make money online, and if you already have a business offline, bringing your business online is also a good option. However, it is important that you also have an online sales management system for your business on the internet. This will help you protect your business and earn the trust of your customers as well.


Indeed, in this online world where consumer safety is one of the main concerns, it is important that you also have to make sure that your customers are indeed safe in your website. This is also one of the important things that you need to have to be able to encourage the people online to buy directly on your online store.


Here are 8 tips that you might find useful in helping you with your online sales management and run your online business well.


1. Have a professionally designed website or online store. People want to buy stuff in stores that are properly organized, where you can easily choose the items you want and pay them with ease. The same is true with your online store. Make sure that you have your business website designed professionally and make sure also that it is easy to navigate.


2. Set up a shopping cart. Like shopping on your favorite store, it is indeed convenient for you to have a shopping cart where you can put all the things you want and pay them all at one time. This can also be done online. Especially if your online business is into retail sales or is selling a number of products, then setting up an online shopping cart system is one of the tools that can truly help you make your business easy and convenient for online customers.


3. Accept credit card payments. With online shopping now a trend, you can also take advantage of this trend by allowing them to have a lot of choices in paying online. The use of credit cards is one of the most popular means of paying online. You can also make use of money transfers through PayPal and other money transfer means online. To start accepting credit card payments, you have to sign up for a merchant account but make sure that your payment page on your website is in a secured server and your customers know it, or else, they won’t trust giving out their financial information online.


4. Set up a customer service tool that allows your online customers to contact you in case they have questions about the product or anything about the business. One of the means to do this is through chat support, where they could just type in their queries or chat to a live customer service. You can also set up an email support or phone support for your customer service needs.


5. Setting up a tool for customers to track their orders. Another very useful tool for online businesses is something that allows your customers to check the status of their orders. To also help free up a lot of your time in updating the customers about their orders and delivery status, you can also set up an order tracking tool to make them track their orders themselves.


Having a good online sales management will truly help you get the trust of your customers and allow you to make easy to manage online business.

A Brief History of Checking Accounts

Checking accounts are used everyday by millions of people. However, many people today do not realize that while they are taking this financial instrument for granted, it was not always a part of banking. What we know of as the modern checking account was developed over hundreds of years as a response to consumer demand for a greater access to cash.

The concept of the checking account did not arise until the early part of the 1500’s. It came about in the Netherlands when Amsterdam was an important center for merchant activity. Merchants who were amassing large sums of money needed a place to put their cash.

“Cashiers” arose to meet this demand. Cashiers would hold on to the money in exchange for a small fee. You may not be a merchant, but is this starting to sound familiar yet?

Soon a great demand arose due to a growing competition as more and more people rushed into becoming cashiers. This caused the cost of giving one’s money to a cashier to drop. It also caused the cashiers themselves to begin to seek innovative and new ways to attract customers to choose them.

These new ways of attracting customers took the form of new or additional services grated to a depositor. Much like modern banks, these cashiers had to come up with new services or even gimmicks to try an compete for customers. Today’s gimmicks appear to be quite a bit different than those of the early 1500s. However, it’s important to realize that today we take the modern checking account for granted. Back then it was just being invented because banking was in effect still in its infancy.

The idea that someone could come in with a note from a depositor that would allow them to withdraw money from the depositor’s account was certainly a new and novel idea. This was one of the new services that popped up to meet the demand and to woo customers. Such a note today would be called a “Check.” Much like a cancelled check is kept for a paper trail, the written order from the depositor was kept back then to provide proof of the transfer of funds.

This new development really oiled the gears of the trade industry allowing for the transfer of money to happen much more efficiently. Such an improvement in efficiency helped to improve the profitability of trade and of the merchant profession.

Because of the mobility of the merchants, the concept of what we now know of as the checking account soon spread to other countries beyond the Netherlands. These countries included England, a major world power, and her many colonies upon which the sun would ‘never set.’ Included in the colonies were those in what would become America.

The influence spread to the original American colonies in 1681. Massachusetts land barons began mortgaging their plots of land to the cashiers who then in turn began providing accounts that the landlords could then use to write notes or checks.

The modernization of the checking account didn’t come until later. It wasn’t until the 1700s that checks in the sense that we understand them today began to appear. In England, banks began to print checks on behalf of their customers. These checks featured serial numbers to help with tracking them. In fact, it wasn’t until this time that the term “check” actually started being used to refer to these financial notes.

The eighteenth century really marked the period in which these once novel new services began to be standardized and widespread. This is the period when enough banks began to standardize their checks that there arose the problem of getting checks cleared. This precipitated the creation of the very first clearing houses devoted to streamlining the processing of checks.

Role of Customs House Agent

Customs house agent is a very important person whenever you are importing or exporting any goods. By definition he is a person who has acquired a license to acts as an agent for transaction of any business related to departure or entry of transportations or the export or import of goods at any customs station. Generally the businesses that imports or exports goods don’t have knowledge about the rules and regulations of the government and neither do they have any time to look into these matters. Hence, they appoint a agent to act on their behalf. However, all the duties performed by the customs house agent are administered by a government body known as “Customs House Agents Licensing Regulations.”

Nowadays, almost all the metros have customs house agents. There is Ahmedabad customs house agents, Mumbai customs house agent, Delhi customs house agents, and many more. However, to become an agent the applicant must possess some qualifications. Below are few requisites to become an agent.

1. Applicant must be graduate from recognized university
2. Applicant must hold Form G pass
3. Should have three years work experience in customs clearing
4. Should have property of Rs. 1 lac or Rs 50,000 cash verified by a scheduled bank
5. Faithfulness of the applicant and their financial status are also considered

Apart from this, if there are too many applications for the licenses, then the commissioner selects the applicants by seniority. Once deemed as a licensed agent they have to perform certain duties and obligations specified by the licensing regulation. Some of the duties and responsibilities of an agent are:

• An agent can only clear the imported or exported goods against the approval from the principal and is also required to produce the authorization letter when asked by commissioner.
• An agent has to personally clear the goods and all the documents prepared by him to clear the goods must bear his name on top of the document.
• An agent is obligated to advice the client to follow all the provisions of the government act and other regulations.
• The agent is supposed to promptly pay the government all the duties and taxes money that he has received from the client.
• The agents should maintain all the financial transactions up-to-date. Furthermore, he must also maintain all the documents like bill of entry, shipping bills, etc. for at least five years.

Ahmedabad customs house agents and other agents nowadays use computer software for creating and filing various bills online. This made their work much easier and faster. However, the software is free but it requires registration of the agent’s website to ICEGATE.

Identity Guard Versus MyFICO Comparison – A Review of Free Credit Score Offers

When you are trying to check your credit score for free online, you don’t want to have to jump through a bunch of hoops to access your information. And you would prefer not give out your credit card information and your Social Security number if at all possible. Today, we’ll take a look at Identity Guard and MyFICO and compare their free credit score offerings and see which one offers you a better value.

MyFICO Review

MyFICO is the one company you may have heard of especially if you’re a fan of Suze Orman. She is a big advocate of keeping an eye on your FICO score. Since most major lenders will use your FICO score to evaluate your credit worthiness, this is a good idea.

The MyFICO free FICO score offer is just that – a free score offer. You also get a breakdown of your score and what it means to potential lenders. You do need a credit card and you will also be signed up for a 10 day trial of their Score Watch product which is basically credit monitoring. You can contact them within the 10 days and not be billed, else the fee is $12.95 a month which is about the industry average.

The only downside to the MyFICO offer is that it only comes with one score from one credit bureau. If you want a more complete picture of your credit worthiness then the Identity Guard may be more for you.

Identity Guard Review

Identity Guard offers all three credit scores with information from Transunion, Equifax, and Experian. This allows you to know where you stand with each credit reporting agency. You may find you have 2 good scores and 1 bad score due to inaccurate information.

Identity Guard will monitor all three credit bureaus for you plus provide you with up to $1 million in identity theft insurance which MyFICO does not.

Identity Guard also offers Internet surveillance, lost wallet protection, and online financial tools that will allow you to analyze your credit and get insights into your financial future. This 3 free credit scores offer is more comprehensive than the 1 free credit score offer from MyFICO.

You will also need a credit card to sign up for the free 30 day trial period. This gives you a much longer time to evaluate the service and decide if you want to keep it or not. After the 30 day trial, the monthly fee is $14.95.

Now you have a quick comparison of the MyFICO and Identity Guard free score offers and understand the benefits and costs of each. Your next step is to determine which is a better fit for you and order your free credit scores.

Mezzanine Financing Overview: What It Is, Pros and Cons, and Common Situations

If you’re raising growth capital to expand your business, you may want to consider using mezzanine financing as part of your funding solution.

Mezzanine financing is a form of debt that can be a great tool to fund specific initiatives like plant expansions or launching new product lines, as well as other major strategic initiatives like buying out a business partner, making an acquisition, financing a shareholder dividend payment or completing a financial restructuring to reduce debt payments.

It is commonly used in combination with bank provided term loans, revolving lines of credit and equity financing, or it can be used as a substitute for bank debt and equity financing.

This type of capital is considered “junior” capital in terms of its payment priority to senior secured debt, but it is senior to the equity or common stock of the company. In a capital structure, it sits below the senior bank debt, but above the equity.


  1. Mezzanine Financing Lenders are Cash Flow, Not Collateral Focused: These lenders usually lend based on a company’s cash flow, not collateral (assets), so they will often lend money when banks won’t if a company lacks tangible collateral, so long as the business has enough cash flow available to service the interest and principal payments.
  2. It’s a Cheaper Financing Option than Raising Equity: Pricing is less expensive than raising equity from equity investors like family offices, venture capital firms or private equity firms – meaning owners give up less, if any, additional equity to fund their growth.
  3. Flexible, Non-Amortizing Capital: There are no immediate principal payments – it is usually interest only capital with a balloon payment due upon maturity, which allows the borrower to take the cash that would have gone to making principal payments and reinvest it back into the business.
  4. Long-Term Capital: It typically has a maturity of five years or more, so it’s a long term financing option that won’t need to be paid back in the short term – it’s not usually used as a bridge loan.
  5. Current Owners Maintain Control: It does not require a change in ownership or control – existing owners and shareholders remain in control, a key difference between raising mezzanine financing and raising equity from a private equity firm.


  1. More Expensive than Bank Debt: Since junior capital is often unsecured and subordinate to senior loans provided by banks, and is inherently a riskier loan, it is more expensive than bank debt
  2. Warrants May be Included: For taking greater risk than most secured lenders, mezzanine lenders will often seek to participate in the success of those they lend money to and may include warrants that allow them to increase their return if a borrower performs very well

When to Use It

Common situations include:

  • Funding rapid organic growth or new growth initiatives
  • Financing new acquisitions
  • Buying out a business partner or shareholder
  • Generational transfers: source of capital allowing a family member to provide liquidity to the current business owner
  • Shareholder liquidity: financing a dividend payment to the shareholders
  • Funding new leveraged buyouts and management buyouts.

Great Capital Option for Asset-Light or Service Businesses

Since mezzanine lenders tendency is to lend against the cash flow of a business, not the collateral, mezzanine financing is a great solution for funding service business, like logistics companies, staffing firms and software companies, although it can also be a great solution for manufacturers or distributors, which tend to have a lot of assets.

What These Lenders Look For

While no single business funding option is suited for every situation, here are a few attributes cash flow lenders look for when evaluating new businesses:

  • Limited customer concentration
  • Consistent or growing cash flow profile
  • High free cash flow margins: strong gross margins, low capital expenditure requirements
  • Strong management team
  • Low business cyclicality that might result in volatile cash flows from year to year
  • Plenty of cash flow to support interest and principal payments
  • An enterprise value of the company well in excess of the debt level

Non-Bank Growth Capital Option

As bank lenders face increasing regulation on tangible collateral coverage requirements and leveraged lending limits, the use of alternative financing will likely increase, particularly in the middle market, filling the capital void for business owners seeking funds to grow.

Two Tips for Creating the Best Merchant Services Sales Pitch

No matter how good your credit card processing services are, they won’t sell themselves. To make the sale, you need confidence, poise, and above all, great communication skills. Over the years we’ve had thousands of meetings with potential clients, and we’ve learned a lot about what goes into a successful sales call. So today, we’ll offer you two tips to help you have the best merchant services sales pitches possible.

Keep it Fresh

Usually, the more you do something, the better you get at it. However, there’s a downside to repeating something over and over: staleness. And when your pitch gets stale, it suffers.

Pay attention to your potential customers and you’ll be able to tell when this happens. They’ll shut down and stop listening when you’re giving your usual information about credit card processing services. They’ll become defensive when you—with your focus blunted by giving the same speech over and over–emphasize a word the wrong way.

You can avoid this by not giving the same pitch every time. Don’t memorize. Instead, have a general idea of your talking points and just to try to let the words flow. If you’re not good speaking extemporaneously, at least try to make tiny changes to your routine. Change a word here. Rethink a sentence there. Keep it fresh. Keep it selling.

Get Impartial Feedback

If you really want to have a successful pitch, you should walk yourself through the whole sales call before you actually do it. Think about what needs to be said, how to say it and the order in which it needs to be said. You might start to think that you’ve created the perfect presentation, but chances are you haven’t.

The sheer act of writing a presentation or a sales pitch damages your ability to see it objectively. Therefore, you need impartial feedback. Give your presentation to a friend or colleague. They’ll be able to point out if you’re using the wrong word, if you’re explaining your credit card processing services unclearly, if your tone isn’t quite right. Get that feedback from a friend, or you’ll get it when a potential client says no.

Salesmanship is a skill that can take years to develop, but with those two tips, you’ll be on your way to giving the best merchant services sales pitches out there. Have you come across any other advice on how to make the sale? Tell us in the comments section below.

Legally Remove Any Derogatory Information From Your Credit Report No Matter What It Is About

Legally removing derogatory information from your credit report is just as easy as removing a credit card debt from a card company. Bankruptcies, foreclosures, repossessions, write-offs or anything that can be printed on a credit report can be removed forever. Yes, you would think with of all the hype on the Internet about how to beg the reporting agencies to remove something and increase your FICO score it would be a big deal but nothing is further from the truth!

Even the FTC website warns consumers “don’t turn credit repair into despair” which you can see for yourself using any search engine. It’s true that companies charge big fees stating they can remove all derogatory information by writing letters to get the item removed. They figure if they harass the reporting agencies long enough they’ll finally give in and take the item off.

You can use the search term “FCRA section 609 2(E)” and read the exact law stating “a statement that a consumer reporting agency is not required to remove accurate derogatory information from the file of a consumer, unless the information is outdated under section 605 or cannot be verified.” The key word is verified. Your signature on a contract or even a piece of paper that looks official does not exist.

Since there is no “verification” in existence at any reporting agency why doesn’t everyone immediately demand verification and have the item removed? These reporting agencies have received many hundreds of thousands of written verification demands and you can expect to receive a letter from them telling you they’ll look into it. You may do this many times and receive the same reply.

There is some psychology involved here. Reporting agencies are like debt collectors. They believe they are the saviors of mankind by keeping you honest. But, their sole purpose of existence is to take money from you. Collectors take your money because you don’t know the law or are stating it incorrectly. Reporting agencies take money from financial institutions based on the word of other financial institutions and once again it’s because even if you do know the law its how you’re stating it that is the problem.

You will need a letter writing campaign where you begin telling the reporting agency you are aware of section 609 requiring verification for a particular item on the report. Ask for verification of the disputed item. You will get the first letter from them advising that they are taking your request into consideration. After you receive their response letter you begin your second letter stating this is your second request for removal of the item and their response has been unsatisfactory because no verification has been presented to you.

An additional three letters from you stating your dissatisfaction with their inaction on providing the verification using progressively demanding language on your part will establish beyond a shadow of doubt that you have made demands and no action has been taken. Your sixth letter will do the trick.

Your sixth and final letter should state that you are totally dissatisfied and disgusted with their total failure to remove the item under federal law contained in section 609 of the Fair Credit Reporting Act and you have no choice but to seek legal action against them. This will trip the trigger. Your previous letters establish proof that you have repeatedly sought this legal remedy and your sixth letter tells them you are now ready to take legal action.

The item will be removed because they will face a $1000 fine in addition to paying your attorney fees. The fact that you have spent six months demanding verification when none existed shows you are persistent and knowledgeable of the legal system. They will believe you when you threaten legal action and to save money in a court action which they could not win will force them to remove item.

Legally removing derogatory information from your credit report is a matter of proving to the reporting agency you are knowledgeable, have no fear of them and are going to use your legal rights to have the item removed at their expense. They will never report that item again! The only other thing you need to know is you can only dispute 22 cards at a time by law if you have that many.