The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they’ve performed their services. The CROA is enforced by the Federal Trade Commission and requires credit repair companies to explain:
your legal rights in a written contract that also details the services they’ll perform,
your three day right to cancel without with any charge,
how long will it take to get results,
the total cost you will pay, and
What if a credit repair company you hired doesn’t live up to its promises? You have some options. You can:
sue them in federal court for your actual losses or for what you paid them, whichever is more,
seek punitive damages—money to punish the company for violating the law,
join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney’s fees.
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.
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?
Debt collection market generates more complaints to the Consumer Financial Protection Bureau than any other financial product or service. Why?
What might be some common complaints against debt collectors seeking to collect debt from consumers?
How many people are scammed into sending money or giving personal information each year? Answer: Millions!!
Types of Internet Fraud
Internet auction fraud—involves the misrepresentation of a product advertised for sale on an Internet auction site, or non-delivery of merchandise.
Credit card fraud—the unauthorized use of credit/debit card, or card number, scammers fraudulently obtain money or property.
Investment fraud—an offer using false claims to solicit investments or loans, or providing purchase, use, or trade of forged or counterfeit securities.
Nigerian letter or “419” fraud—named for the violation of Section 419 of the Nigerian Criminal Code, it combines the threat of impersonation fraud with a variation of an advance fee scheme in which a letter, e-mail, or fax is received by a victim.
Tips for Avoiding Internet Fraud
Know your seller – If you don’t know who you are buying from online, do some research.
Protect your personal information – Don’t provide it in response to an e-mail, a pop-up, or website you’ve linked to from an e-mail or web page.
Pension advance lenders offer retirees and veterans a loan or cash advances in exchange for all or part of their pension payments. Paying back the advance or loan, plus the high interest and fees that such loans typically include, could threaten older Americans’ retirement security.
If you are considering a pension advance, follow these do’s and don’ts:
If you are asked to sign up for life insurance with the pension advance, you could end up paying the insurance premium.
If you are resorting to pension advances due to financial difficulties, consider getting financial coaching or counseling from a professional.
Don’t be fooled by patriotic-sounding names, logos, or claims of government backing.
Don’t give anyone access or control over your monthly pension payments.
For additional information, and learn more, click here.
Ask students to research local non-profit credit counseling agencies and what services they provide.
Why is it important not to give anyone access or control over your monthly pension payment?
Why do people resort to pension advance loans?
What are other alternatives to pension advance loans?
What recommendation should you take to protect your retirement pension when considering an advance?
Have you seen a sign offering a car title loan—also known as a pink-slip loan, title pledge or title pawn? These loans are use your paid-off car as collateral, and you get a small, short-term loan with a high interest rate. You usually have to repay the loan in 15 or 30 days, and the annual percentage rate (APR) is often more than 100 percent. If you don’t pay back the loan, the company can repossess your car—and then you’re worse off than you were before. It’s a very expensive way to get money.
Before you decide to take out a car title loan, weigh some options.
Can you get a small loan from your bank, credit union or a small loan company? Even a cash advance on a credit card might cost less than a car title loan.
Shop for the offer with the lowest cost. Compare the APR and the finance charges, and borrow only what you can repay in time.
In January 2015, the U.S. Department of Justice sued a Texas-based Commercial Recovery System, Inc., a debt collection company that allegedly impersonated attorneys, law firm staff, judicial employees and mediators. The company threatened people with lawsuits, seizure of their property, or wage garnishment. All these practices are against the law. Under federal law, debt collectors–including collection agencies, lawyers who collect debts, and companies that buy delinquent debts and then try to collect them–can’t use abusive, deceptive or unfair practices to collect from you.
“Get out of debt the same way you learned to walk–one step at a time.”
This article describes Dave Ramsey’s seven steps that anyone can take to get out of debt and begin to manage their personal finances. These seven basic principles have been taught by Mr. Ramsey via radio, books, Financial Peace University, live events, and online. Listed below are the seven steps discussed in this article. Note: You can get more information about each step by clicking on the “Learn More” tab.
Begin by creating a $1,000 emergency fund.
Pay off all debt using the debt snowball .
Save 3 to 6 months of expenses in a savings account.
Invest 15 percent of household income into Roth IRAs and pre-tax retirement accounts.
My Wife and I Never Discussed Money Before Getting Married–and Ended Up with $52,000 of Debt
Prior to tallying up our debt, we’d talked about traveling internationally, starting a family, and, some day retiring comfortably. There was so much we wanted out of life, but . . .”
This is an excellent article that describes what can happen when a soon-to-be-married couple doesn’t talk about finances. Fortunately, the two people in this article–Deacon and Kim Hayes–realized they had a problem and then took steps to get their finances back on track.
Specific steps this couple took can make a big difference over time. Among the suggestions included in this article are:
Writing down all your assets, debts, income, and expenses.
Prepare a budget and review each item for opportunities to save money.
Replacing a newer, expensive car with an older car.
Selling unwanted or unneeded items online.
Using any extra money to repay debt.
Establishing an emergency fund.
Saving and investing a specific amount each month.
Consider This: Deacon Hayes–the author of this article–became a financial planner and now shares his story with his clients.
Most people know they can refinance a mortgage—that is, replace an existing loan with a new one that may offer better terms. But did you know you can also refinance personal loans, including auto loans, credit cards and student loans?
“Refinancing a personal loan may save you money, especially if you get a lower interest rate, a lower monthly payment or other benefits,” notes Susan Boenau, Chief of the FDIC’s Consumer Affairs Section. “However, refinancing does not always equate to saving money or better terms.”
Understand potential pitfalls in refinancing a personal loan. For example:
You may have a higher APR than what you were originally paying when the promotional rate ends.
Closing a credit card account also reduces your available credit and may adversely affect your credit score.
A balance transfer may result in your account having multiple interest rates.
You may be assessed a prepayment penalty if you refinance a loan before it matures.
If your credit score is low, wait to refinance until you can raise it.