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?
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.
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.
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.
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.
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:
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.
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:
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.
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.
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
“Do you feel as if you’ll be in debt forever? You’re not alone.”
According to a CreditCards.com survey, 13 percent of Americans say they’ll never pay off all their loans, and another 8 percent say they won’t pay off what they owe until they’re 71 years old. While the results of the survey are discouraging, this Kiplinger article describes the following 10 reasons people can’t get out of debt and also provides suggestions for getting out of debt.