Debt

Phantom Debt Collectors

Consumers across the country report that they’re getting telephone calls from people trying to collect loans the consumers never received or on loans they did receive for amounts they do not owe.  Others are receiving calls from people seeking to recover on loans consumers received but where the creditors never authorized the callers to collect them.

The FTC is warning consumers to be alert for scam artists posing as debt collectors.  It may be hard to tell the difference between a legitimate debt collector and a fake one.

A caller may be a fake debt collector if he/she:

  • is seeking payment on a debt for a loan you do not recognize;
  • refuses to give you a mailing address or phone number;
  • asks for personal financial or sensitive information; or
  • exerts high pressure to try to scare you into paying, such as threatening to have you arrested or to report you to a law enforcement agency.

For more information, click here.

Teaching Suggestions

  1. Ask students to make a list of protections provided by the Fair Collection Practices Act.
  2. Ask students to prepare a list of steps they should take if the harassment continues.

Discussion Questions

  • If you think that a caller may be a fake debt collector, why is it important to ask the caller for his name, company, street address, or telephone number?
  • If you think that a caller may be a fake debt collector, should you stop speaking with the caller? Why or why not?
Categories: Chapter 5, Debt, Frauds and Scams | Tags: , , | Leave a comment

Overhauling Debt Collection Market

New Protections Would Limit Collector Contact and Help Ensure the Correct Debt is collected

The Consumer Financial Protection Bureau (CFPB) is considering to overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt.  Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect.  As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt.  When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence.  These requirements and restrictions would follow the debt if it were sold or transferred.

For more information about the proposals under consideration, click here.

Teaching Suggestions

  • Ask students what federal laws already prohibit debt collectors from harassing, oppressing, or abusing consumers.
  • Ask students if they, their friends or relatives, have ever been harassed by creditors. If so, what were their experiences?

Discussion Questions

  1. Debt collection market generates more complaints to the Consumer Financial Protection Bureau than any other financial product or service. Why?
  2. What might be some common complaints against debt collectors seeking to collect debt from consumers?
Categories: Chapter 5, Debt, Financial Planning | Tags: , | Leave a comment

BAM banned from debt collection

In late July 2016, filed as part of Operation Collection Protection, the Federal Trade Commission (FTC) charged that BAM Financial used lies, threats, intimidation, and other illegal practices to extract payments from consumers.  When obscene language, incessant calls, and harassment of family members didn’t get the results they wanted, the defendants got personal.  For instance, the defendants told the parent of one purported debtor “No wonder your daughter is in such predicament with a mother like you.”  The FTC alleges that they falsely stated to another consumer’s 84-year-old mother that they had a warrant for her daughter’s arrest and later told the consumer they were bounty hunters.

The FTC says BAM’s letters and phone calls were riddled with false threats of litigation.  The complaint also charged that in numerous instances, the defendants didn’t follow up within five days of their initial communications with proper validation notices as the law requires.

The settlement with BAM Financial, Everton Financial, Legal Financial Consulting, Luis O. Carrera, and Robert Llaury bans them for life from debt collection agency industry.

For more information, click here.

Teaching Suggestions

  • Ask students what consumer rights they have when dealing with debt collection agencies.
  • Ask students to list important provisions of the Fair Debt Collection Practices Act.

Discussion Questions

  1. Nearly 30 million Americans have their accounts in collection, and debt collectors make as many as one billion contacts with people every year. Are these contacts legal?
  2. What types of debts are covered under the Fair Debt Collection Practices Act?
  3. How can you stop a debt collector from contacting you?
Categories: Chapter 5, Consumer Complaints, Debt, Frauds and Scams | Tags: , | Leave a comment

Paying for College

It’s more important than ever for students and former students to make smart decisions about financing their college education.  Whether you are attending college soon, are a current student, or already have student loans, Consumer Financial Protection Bureau has put together some tools and resources to help you make the best decisions for you.

If you are considering student loans to help pay for school, you not alone—many students need loans to cover their full cost of attendance.  If you have to take out student loans, comparing your options can help you find the student loan best suited for your needs.

Consumer financial Protection Bureau has prepared student financial guides, financial aid shopping sheet adopted by more than 500 colleges and universities, and other helpful information on its website.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog and the original sources to

  • Help students appreciate that the Consumer Financial Protection Bureau overseas private lenders, debt collectors, and loan services that manage borrowers’ payments and billings.
  • Describe why one-in-four student loan borrowers are past due or in default on a student loan.

Discussion Questions

  1. When borrowers default on a student loan, what might be some adverse consequences on their credit?
  2. Do you believe the student loan market lacks consistent standards that cover the servicing of all private and federal student loans?
  3. What can the federal and state governments to protect consumers in this market?
Categories: Debt, Wise Shopping, _Appendix A | Tags: , , | Leave a comment

Fraudulent Debt Relief Operation

The Federal Trade Commission (FTC) has charged a debt relief company with falsely representing to financially distressed homeowners and student loan borrowers that it would help get their mortgages and student loans modified.  At the FTC’s request, a federal court has temporarily halted the operation.  The FTC seeks to permanently stop the alleged illegal practices and obtain refunds for affected consumers.

According to the FTC’s complaint, Good EBusiness LLC deceptively marketed home loan modification services and illegally charged an advance fee of 1,000 to $5,000.  The agency alleges that the company falsely claims that it can lower monthly mortgage payments, reduce mortgage interest rates usually within a few months, and falsely promise full refunds if they fail.  The FTC’s complaint also alleges that Good EBusiness, using the names Student Loan Help Direct and Select Student Loan; Select Student Loan Help LLC; Select Document Preparation Inc.; illegally charged a fee of $500 to $800 for student loan relief services.

For more information, click here.

Teaching Suggestions

  • Ask students to make a list of sources they may rely on for help when they are overburdened with debt problems.
  • What questions should you ask in finding the best credit or debt counselor?

Discussion Questions

  1. Which federal consumer credit law regulates debt collection practices and what are its major provisions?
  2. What options of solving credit and debt problems are available to individuals?
Categories: Chapter 5, Debt, Frauds and Scams | Tags: , | Leave a comment

Beware of Illegal Student Debt Relief Schemes

In March 2016, the Consumer Financial Protection Bureau requested a federal court to shut down a student debt relief company that charged borrowers millions of dollars in illegal upfront fees and for federal student loan services.  The court order would also require the company, Student Loan Processing.US, to pay refunds to thousands of harmed consumers and civil money penalty.  If the proposed judgement is entered by the court, the company must:

  • Shut down illegal operations: Student Loan Processing.US must shut down all operations within 45 days of the entry of the court’s judgement.
  • Cancel all contracts with consumers and stop charging them.
  • Pay consumer refunds.
  • Stop participating in the debt relief and student loan industries.
  • Ensure student loan borrowers do not miss important repayment benefits.
  • Pay a civil penalty.

For more information, click here.

Teaching Suggestions

Discussion Questions

  1. How can you protect yourself from companies engaged in deceptive marketing practices, or otherwise violate federal consumer protection laws?
  2. Is it possible for government agencies to permanently shut down companies that defraud consumers?
Categories: Debt, _Appendix A | Tags: | Leave a comment

Newcomer Money Guides

While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions.  These guides offer brief suggestions to those who are new to the U.S. banking system.  The guides also include guidance for submitting and resolving problems with a financial product or service.

The Newcomer Guides include these topics:

  • Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
  • Checklist for opening an account, to assist with starting a bank or credit union account.
  • Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
  • Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.

Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.

For additional information on money guides for newcomers:

Article #1
Article #2
Article #3

Teaching Suggestions

  • Have students ask people to create a list of financial planning terms that people find confusing.
  • Have students suggest methods to have people learn about confusing financial planning terms.

Discussion Questions 

  1. What financial problems might be encountered by people with limited English-language skills?
  2. What actions might be taken to assist various groups to better understand banking services and money management activities?
Categories: Bank Fees, Budget, Chapter 2, Chapter 4, Credit Cards, Debit Cards, Debt, Financial Services, Savings | Tags: , , | Leave a comment

Investor Alert: Securities-Backed Lines of Credit (SBLOC)

SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities.  They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact have to sell your holdings, which could have a significant impact on your long-term investment goals.

Set up as a revolving line of credit, an SBLOC allows you to borrow money using securities held in your investment accounts as collateral.  You can continue to trade and buy and sell securities in your pledged accounts.  An SBLOC requires you to make monthly interest-only payments, and the loan remains outstanding until you repay it.  You can repay some (or all) of the outstanding principal at any time, then borrow again later.  Some investors like the flexibility of an SBLOC as compared to a term loan, which has a stated maturity date and a fixed repayment schedule.  In some ways, SBLOC are reminiscent of home equity lines of credit, except of course that, among other things, they involve the use of your securities rather than your home as collateral.

The Financial Industry Regulatory Authority (FINRA) and the SEC’s Office of Investor Education and Advocacy (OIEA) have issued an investor alert to provide information about the basics of SBLOC, how they may be marketed to you, and what risks you should consider before posting your investment portfolio as collateral.  SBLOCs may seem like an attractive way to access extra capital when markets are producing positive returns, but market volatility can magnify you potential losses, placing your financial future at greater risks.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of possible advantages and disadvantages of securities-based loans.
  • How might market volatility magnify potential losses placing your financial future at a greater risk?

Discussion Questions

  1. How are securities-backed lines of credit different from home-equity lines of credit?
  2. Why some investors prefer SBLOC to a traditional short term loan?
Categories: Chapter 5, Debt, Investments, Savings | Tags: , | Leave a comment

Attention College Students: Student Loans, Debit and Prepaid Cards

College students often make financial decisions that can have consequences for years.  Getting a student loan or credit cards can influence long-term financial success.  Here are the ways to strengthen your decision-making skills:

  1. Do your research before applying for a student loan. If you have to borrow to pay for some or all of a college education, review the different types of student loans.  Choose one that’s low-cost and has a flexible repayment terms, which will generally be a federal student loan.
  2. Understand the pros, cons and costs of debit and prepaid cards. Debit cards enable you to withdraw money from your checking accounts for purchases or cash.  Prepaid cards are used to access money that has been loaded (added) onto the card, which is not connected to a bank account.
  3. Use credit cards responsibly: While credit cards are a convenient way to establish a credit history, they can make it easier to spend money. Purchases that cannot be paid in full by the due date will incur interest

For more information, click here.

Teaching Suggestions

  • Ask students if they have an outstanding student loan. Was the process of financing an education daunting and time consuming?
  • Ask students to visit the College Affordability and Transparency Center website (collegecost.ed.gov) for choosing the financial aid package that best suits their needs.

Discussion Questions

  1. Why is it important that you find the most affordable education that fits your budget, future career, and long-term financial goals?
  2. What might be the benefits of understanding the pros, cons, and costs of debit and prepaid cards?
  3. Are school-affiliated cards the best deal for all students? Why or why not?
Categories: Chapter 5, Credit Cards, Debt, _Appendix A | Tags: , | Leave a comment

Fake Payday Loan Debts

In September 2015, the Federal Trade Commission banned Kirit Patel and his company, Broadway Global Masters, from the debt collection business. Patel and his company illegally collected more than $5.2 million in fake payday loan debts.  He also pleaded guilty to the Department of Justice on charges of criminal mail and wire fraud.  Specifically, Patel’s company:

  • Called people and pushed them to pay debts they didn’t really owed,
  • Posed as law enforcement and fake government agencies like the “Federal Crime Unit of the Department of Justice”,
  • Threatened to sue or arrest people—or tell their family and employers about a debt, and
  • Recited people’s Social Security and bank account numbers to seem legit.

So how can you tell if you’re being targeted by a fake debt collector?  A caller may be a fake debt collector if:

  • You don’t recognize the debt,
  • You can’t get a mailing address or phone number for the collector,
  • You’re asked for personal financial or sensitive information, and
  • You’re threatened with arrest or told you’ll be reported to a law enforcement agency.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of steps they should take if they receive a call from a debt collection agency.
  • Encourage students to visit a local office of the Consumer Credit Counseling Service. What assistance is available if the debt is legitimate, but the debt collector is not?

Discussion Questions

  1. What can governmental agencies do to stop scammers from bilking honest and innocent people?
  2. Why is it important to obtain and review your free credit reports at least once a year?
Categories: Chapter 5, Debt, Frauds and Scams, Uncategorized | Tags: , | Leave a comment

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