Archive for March, 2011

As you may already know, consumers in the United States are protected by a number of consumer protection laws designed to make sure merchants and service providers do not take more than a reasonable amount of consumers’ money.

One consumer protection law, the Fair Debt Collection Practices Act, outlines how debt collectors are permitted to do their job and puts certain restrictions on them. Each year, the Federal Trade Commission issues a report on the state of various consumer protection laws and its recommendations for modifications and changes in rules and enforcement.

Here’s a look at what the FTC had to say about 2010.

Debt Collection Complaints in 2010

Last year, consumer debt collection complaints topped the list, at 140,036 individual filings (an increase from 119,609 in 2009). Specifically, people identified these debt collection issues:

  • Repeated or continuous phone calls: Debt collectors are explicitly restricted from calling debtors repeatedly or with the intent to harass or annoy. Further, the FDCPA mandates that debt collectors can call only between the hours of 8 am and 9 pm local time.
  • Misrepresentation of a debt: Consumer complaints cited debt collectors who misrepresented the character, amount or status of debts owed, and in some cases demanded payments in amounts greater than those permitted by law. All such actions are prohibited by the FDCPA: debt collectors cannot lie about any aspect of a debt or about their legal authority to collect it.
  • Failure to provide adequate written documentation: The FDCPA requires that debt collectors send debtors written documents outlining the specifics of a debt and detailing the consumer’s rights regarding the debt and its collection. According to consumer complaints, though, many debt collectors are not adhering to these requirements.

Changes to Enforcement and Consumer Protection

Thanks to the implementation of the Consumer Protection Act in 2010, a new consumer rights bureau (the Consumer Financial Protection Bureau) will have authority to create and enforce (with help from the FTC) rules governing how debt collectors must operate. In future years, reports about the status of the FDCPA will be developed and issued by the new consumer protection bureau.

How to Take Action against Dishonest Debt Collectors

So what can you do if you’re plagued by debt collectors who don’t play by the rules? Take the following steps.

  • Learn your rights: Check out a summary of the rules debt collectors must follow so you know when your rights have been violated.
  • File a complaint: Visit the FTC’s complaint page to file a complaint electronically.
  • Get legal help: If a debt collector is harassing you during or after a bankruptcy filing (especially for a debt that was discharged in bankruptcy), you may want to enlist a lawyer to help.

New reports highlight some interesting information about two topics near and dear to those who have filed or are considering filing for bankruptcy: underwater mortgages and student loan debt. Here’s a look at what kind of picture the latest numbers paint.

Students Don’t Need to Default to Be Behind on Loans

The Institute for Higher Education Policy released a report last week showing that two-fifths of those who borrowed money for educational purposes fell behind on their payments at some point in their first five years of repayment. So what does this mean?

  • Widespread repayment difficulties: These numbers may not even reflect the current rates of repayment difficulty, given that graduates in the last few years have faced a much tougher job market than those who graduated five years ago.
  • Old measures may be inadequate: Traditionally, studies on student debt have focused on the rate of default rather than delinquency. Looking at delinquent loans offers a clearer picture of how many people are struggling to repay their loans, even if they manage to get back on track at some point.
  • Bankruptcy not an option: Student loans are typically not dischargeable in bankruptcy court, which means that those with unmanageable student debt have few options for easing their debt burden. This is scary, considering that some estimates put the country’s total student debt at $896 billion, which is greater than our national credit card debt total.

Reports note that these numbers may affect the current debate in Congress over whether for-profit colleges and universities should be eligible for federally backed financial aid.

More Underwater Homes

Recent numbers released by a company called CoreLogic show that the number of underwater homes in the U.S. (that is, homes with a current value less than the amount of the mortgage on the house) has climbed since last quarter. Here’s a look at the numbers.

  • A reported 11.1 million U.S. homes were underwater in 2011’s first quarter, a jump from 10.8 million in the last quarter of 2010.
  • Nevada has a 65 percent rate of underwater mortgages, and is apparently the only state in which the average homeowner is underwater.
  • Besides the more than 11 million underwater homeowners in the U.S., 2.4 million Americans have less than five percent equity in their houses, according to sources.
  • Collectively, we reportedly owe about $751 billion more on mortgages than our homes are worth.
  • Analysts predict that home prices could fall by another five to 10 percent in 2011, meaning that those with little equity could soon find themselves underwater.

Unfortunately, mortgage loans for primary residences cannot be modified in bankruptcy court, but in some cases homeowners may find a Chapter 13 or Chapter 7 filing useful for eliminating other debts to help improve their odds of staying on track with their mortgages.

Monday, March 21st, 2011

Protect Your Money: Avoid Charity Scams

The recent earthquake and tsunami in Japan have left many people in the United States eager to offer financial aid to the country and its citizens. But, as the Federal Trade Commission warns, it’s easy to get duped by unscrupulous scammers posing as charitable organizations.

Here’s a look at some of the FTC’s tips for making sure your money actually goes to people in need.

What to Look for in a Charity

According to the FTC, it’s important to take these steps before donating to any charity online, in person, over the phone or via postal mail:

  • Ask for the name of the charity, particularly if the solicitor does not immediately provide it. Check online to see whether the charity has a legitimate web site, Better Business Bureau accreditation and/or any consumer complaints posted on discussion forums.
  • Ask what percentage of your money will go towards charitable causes. If the solicitor cannot answer the question or is cagey, this is a warning sign. You have a right to know where your money is going, and if you think too little is slated for the actual cause, simply refuse a donation and find another charity with better donation policies (web sites like the BBB’s Wise Giving page and Charity Navigator can offer you alternatives).
  • Check with the charity that the solicitor is legitimate. In some cases, scam artists might pose as charity workers with a legitimate organization. If you’re uncomfortable giving money or a check to a person you don’t know, call the charity to verify any information you’ve been given. You can also choose to donate directly to the charity online or through the mail.
  • Don’t part with your sensitive information. Nobody should pressure you into revealing your credit card or bank account information. Wait until you’ve made a decision in your own time and only provide such information on secure web sites. This can help you avoid raising your risk of identity theft.
  • Ask for a receipt. Any time you make a donation to a legitimate charity, you should get a receipt indicating that the donation is tax-deductible.
  • Be wary of pushiness. Any person or group that urges you to donate immediately should be viewed with suspicion. Legitimate organizations will still be around tomorrow, after you’ve had time to consider your finances and determine how much money you can afford to donate.
  • Don’t use cash. For a number of reasons, cash donations tend to be the riskiest in the case of charity groups. Instead, write a check to the charitable organization (not to the person collecting donations).

Remember: nobody should use guilt or threats to convince you to donate money. If you don’t like the way a solicitor is making you feel, simply cut off communication with that person and (if necessary) file a complaint with the FTC. You can then donate as much or as little money as you choose to the charity of your choice.

Wednesday, March 16th, 2011

New Consumer Protection at the Bank?

A recent press release from the National Consumer Law Center highlights a new federal rule that, if not modified in the next two months, will take effect May 1st and should better protect the bank accounts of people receiving government benefits. Here’s what you need to know.

When Creditors Can’t Garnish Your Money

If you’ve ever filed for bankruptcy or been in serious debt, you may be familiar with the practice of garnishment, which occurs when a creditor collects money directly from your wages or bank account to cover a debt you owe.

  • Current law protects certain funds: As federal laws now stand, creditors are prohibited from garnishing certain payments from the accounts of debtors (that is, people who owe them money). These funds include Social Security payments, disability payments, veterans’ benefits and other benefits for low-income and disabled people.
  • Current practice permits the garnishment: Despite the prohibition against garnishing such funds from bank accounts, it seems that many banks regularly freeze the accounts of customers whose creditors request a garnishment from the bank. While customers can have these funds unfrozen, doing so generally requires hiring a lawyer and can take time. During that time, these customers may not have access to the funds in their account that they need to make basic purchases.
  • High monthly toll on the poor: Reports note that every month, as many as 100,000 Americans are victimized by this improper garnishment.
  • Immediate action is essential: A recent New York Times Op-Ed piece notes that if customers do not act quickly enough to unfreeze their accounts, creditors may end up garnishing the funds regardless of the federal laws prohibiting such action.
  • “Uncertainty of origins of funds”: Apparently, banks have justified their freezing of accounts legally protected from garnishment by claiming that they have no way of tracking the origins of funds in any given account, and that if they were to ignore orders of garnishment, they could face legal repercussions.

The New Rule: Electronic Tags for Special Funds

The new rule, then (if it is not modified or struck down before May 1), will allow the government to electronically mark the money it deposits into beneficiaries’ bank accounts. With such tags in place, banks should be able to easily identify which funds are eligible for garnishment and which funds are protected.

The National Consumer Law Center noted in a press release that the new rule is especially good news for retirees, veterans and Americans with disabilities, as their accounts tend to most often be the ones with the types of money in question.

Stay posted to the Total Bankruptcy blog to find out the latest updates and changes to this rule as the public comment period comes to a close.

Monday, March 14th, 2011

Top Consumer Complaints of 2010

The Federal Trade Commission has released a report on the consumer complaints it received from Americans in 2010, and the list illuminates many of the financial and privacy concerns important to the American people.

Here’s a look at the top ten issues that sparked the most consumer outrage, as well as some tips for dealing with a problem new this year.

  • Identity theft: For the 11th year in a row, identity theft earned the top spot for number of consumer complaints, with 19 percent of all complaints filed (a whopping 250,854).
  • Debt collection: If you’ve ever dealt with abusive debt collectors, it may not surprise you to learn that issues with this group caused the second greatest number of complaints among consumers (144,159, or 11 percent of all complaints).
  • Internet services: Whether for fraudulent offers or subpar service, Internet providers landed third for most consumer complaints, five percent of all complaints (65,565).
  • Prizes, sweepstakes and lotteries: In fourth place came this type of scam, which often offers phony rewards after the victim pays a bogus entry fee. A total of 64,085 complaints were filed about this type of issue, or about five percent of all complaints.
  • Shop-at-home and catalog sales: Whether for defective goods, unwieldy return policies or some other act of non-consumer-friendliness, this type of transaction accounted for about four percent of consumer complaints last year (60,205).
  • Imposter scams: A new category this year, this type of scam jumped to sixth place, prompting the FTC to issue warnings about how to spot imposter scams to avoid sending money to strangers (details below).
  • Internet auctions: Perhaps because of the Internet’s vast scope and inability to fit neatly into regulatory areas, online auctions prompted 56,107 people to file complaints with the FTC.
  • Foreign money/counterfeit check scams: Getting blasted when you intended to invest or travel can be especially traumatizing, so it’s no wonder 43,866complaints concerning this category were filed last year.
  • Telephone and mobile services: Varying definitions of service options and quality of service provided prompted 37,388 people to file complaints about their communication tools.
  • Credit cards: This old classic is still causing us plenty of trouble. Despite the new protections instituted by the Credit CARD Act, 33,258 complaints were still filed about credit cards.

Avoiding Imposter Scams

The FTC’s consumer complaints about imposter scams (that is, scams in which someone pretends to be a government agency or loved one in order to convince a victim to part with money or sensitive information) prompted the release of a report on how to spot and avoid such scams.

In general, avoid wiring money to anyone you don’t know, be wary if someone pushes you to act quickly to make a transaction, don’t transmit sensitive information by text message and always confirm a person’s identity before making a major financial move.

Thursday, March 10th, 2011

The Latest Consumer Protection from the FTC

The Federal Trade Commission’s annual National Consumer Protection Week is upon us (March 6 – 12, 2011) and that means it’s a great time to brush up on information about money, credit and the consumer protections available to you – just because you happen to live in the United States.

You can get handy tips for personal finance and money management at the NCPW blog, which is updated regularly with tips for topics including these (and more!):

  • Avoiding foreclosure rescue and other mortgage-related scams;
  • Knowing how to spot employment opportunity scams;
  • Making the most of your money in the early stages of your career;
  • Building and maintaining a budget to improve financial stability;
  • Avoiding time-share and credit-card scams offered via text messages; and
  • Learning what steps to take to save your home from foreclosure.

In short, whether you’re rebuilding from a bankruptcy filing or just starting to establish yourself in the world of credit and wealth, there are excellent, free resources available for your enjoyment and education.

FTC Targets Scammers Preying on the Cash-Strapped

In other FTC news, the commission announced this week new efforts to halt scams that target people in need of work – in other words, those who can least afford to lose money to dishonest schemes.

According to the FTC’s web site, Operation Empty Promises has taken legal action against the following scammers:

  • Ivy Capital Inc., a company that allegedly bilked consumers out of more than $40 million with promises of helping them to establish lucrative, Internet-based businesses from their homes. The scam reportedly worked by first asking victims about their available credit and then pushing them to use that credit to buy worthless products and services.
  • National Sales Group, Executive Sales Network and Certified Sales Jobs, three names of the same company that allegedly posted fake sales jobs on job-search web sties including CareerBuilder.com. The group, it seems, falsely promised sales positions with Fortune 1000 companies and charged victims money for what they claimed were costs related to background checks – often, this company reportedly overcharged and charged unapproved recurring fees to victims’ credit cards.
  • Business Recovery Services LLC, a company that the FTC claims misrepresented the potential effectiveness of its work-at-home wealth recovery “kits,” which sold for $499 each. All told, the FTC reports that this group managed to snag $1.5 million from victims.

Take Advantage of FTC Protections!

The FTC is constantly patrolling for scammers and those violating existing consumer protection rules. If you’ve caught wind of a scam or have been victimized by a scammer, you may want to file a complaint with the FTC as well as consult with an attorney to see whether you might be entitled to any compensation.

Consumer credit use has dropped since the beginning of the Great Recession, which seems like good news for a country plagued by excessive consumer debt (often in the unhealthy, revolving credit-card type), as a recent report from Credit.com notes.

Here’s a look at some potential causes of that dip and how you can resist the urge to spend, even if you’re surrounded by good-time plastic-swipers.

What Do Lowered Credit Card Debt Numbers Really Mean?

The easy assumption is that Americans are purchasing less on credit and/or paying down the debt they currently have. But, according to some insiders, that may account for only part of the decrease in credit card debt we’ve seen lately. Here are some other potential causes:

  • Credit card issuer charge-offs: Credit card companies make a lot of money from fees and interest, but they also end up "charging off" a lot of debt each year. Of course, they can afford to do this because of all the other income they collect, but still. When a customer files for bankruptcy and has her credit card debt forgiven by the court, the company generally writes that off as lost revenue. Similarly, if a consumer simply cannot pay, the issuer may sell the debt to a collection agency and charge off that debt. These numbers may not show up in the report of how much credit card debt Americans are currently holding, so we may have racked up more than we actually have to pay off.
  • Tightened lending standards: Another result of the credit crisis we’ve found ourselves in is that lending standards for ordinary Americans have gotten tighter than ever before. This means that, even if an ordinary consumer may want to take on more debt, he may not be able to because nobody will lend to him. While this reads on a numbers-only report like lowered consumer debt, it can be a bad thing if consumers need access to lines of credit to buy cars or homes.
  • New credit card rules: Finally, some analysts have suggested that the new rules introduced by the Credit CARD Act have given consumers a better idea of what they’re getting themselves into when they sign up for credit cards, and thus acted as a preventative measure against excessive consumer debt.

Climb Aboard the Less-Debt Ship

So how can you take advantage of this trend to help improve your personal financial situation? Check out these tips on avoiding over-spending when you’re out with non-frugal buddies. Suggestions include:

  • Stick with cash so you don’t get caught with other people’s meals or drinks on your card;
  • Pretend you’re coming down with something to avoid being pressured into pricey drinks with dinner;
  • Think up something big you can say you’re saving for to avoid endless purchases… and then really save; and more.

No matter what your reasons for improving your financial profile, these tips should help you get a head start.

Because the current recession was caused in large part by questionable practices in the mortgage market, home sales and foreclosure rates have been particularly interesting to monitor as an overall indicator of the economy’s rate of recovery.

Here’s a look at some of the latest findings and reports about the industry.

Home Sales Up Slightly, Thanks to Foreclosure Sales

The Associated Press reported this week that home sales in the U.S. rose from December 2010 to January of this year:

  • Rate of increase: Reports show that existing home sales (i.e. sales of not-new, previously occupied homes) rose at a rate of 2.7 percent between December and January.
  • Annual rate: The rate of sales in January put the market on pace to sell 5.36 million homes for the year. December’s sales were at a 5.22 million annual rate. A “healthy” economy, sources note, generally includes about six million home sales per year.
  • First time buyers: The latest numbers show that first-time home buyers accounted for 29 percent of all sales, well below the 40 percent that apparently is the hallmark of stronger economic times.
  • Hearty areas: Particularly strong types of home sales reportedly included foreclosure sales, at 37 percent of all transactions, and cash-only sales, which accounted for another 32 percent. Sources indicate that these numbers mark a doubling in such types of sales from two years ago.
  • Median home price: The glut of foreclosures now on the market continues to drive down home prices, and the median price in January was apparently $158,000, down 3.7 percent from this time last year and the lowest median in nearly a decade (since April 2002).
  • Unsold homes: Sources report that 3.38 million unsold homes still clog the nation and hold back the housing market’s recovery. At January’s rate of sales, it would take more than seven months to sell these homes.

New Changes on the Horizon for Mortgage Servicers?

A recent report at Credit.com notes that the federal government may be nearing an announcement of new regulations for the mortgage servicing industry. Here’s why:

  • During the subprime housing boom, mortgage servicers were often rewarded for signing customers up for more expensive loans than they could have qualified for.
  • This led to abusive practices by many mortgage servicers and caused many customers to pay more than they could have for their loans in interest rates and related services.
  • Since the collapse of the housing market, federal investigators have apparently been attempting to determine which practices were most detrimental to borrowers.
  • As the research period draws to a close, insiders are reportedly expecting the announcement of new regulations for the mortgage servicing industry in the coming weeks.