Home » 2011 » April

Archive for April, 2011

Wednesday, April 27th, 2011

Mortgage Scammers on the Loose

Despite the best efforts of groups like the Better Business Bureau and the Federal Trade Commission, scammers manage to find new ways to take money from unsuspecting consumers on a regular basis. Here’s a look at one of the latest warnings that’s been posted by consumer advocates.

A New Mortgage Scam Afoot

The latest in a long line of mortgage and foreclosure “rescue” scams seems to be one that involves attempting to trick homeowners into thinking they qualify for money from a lawsuit against their lenders. According to the BBB, the scam works like this:

  • An official-looking letter arrives: Victims have reportedly noted that they received a letter indicating that they were eligible to join a “joinder action suit” against certain mortgage lenders and banks. The letters noted the potential for winning significant financial compensation in the suit.
  • Unrealistic promises: Victims who called the number listed on the letter were apparently directed to employees of the scammer, who falsely suggested that, by joining the suit, victims might win thousands of dollars, have their interest rates slashed to two percent or have their mortgage principal reduced by 80 percent.
  • Request for upfront payment: In classic scam fashion, victims were then told that they must pay a $5,000 retainer fee to ensure their spot in the lawsuit.

Unsurprisingly, none of the information presented in the letters or during follow-up phone calls was true. But what many victims found disturbing was that the scammer had access to their personal information, including name, address, loan information and even loan amount. In other words, this particular scam may have seemed frighteningly legitimate.

How to Spot a Scam

If you’re among the millions of Americans currently struggling with your mortgage, be sure to follow these safety tips (from the BBB) if and when you decide to seek mortgage assistance.

  • Go directly to your lender first. Third-party “relief” providers, especially those that approach you unsolicited, are much less trustworthy and much more likely to take your money and offer you nothing in return.
  • Be suspicious of mailings from strangers. If you receive a letter about any class action or mass joinder lawsuit, be sure to check online to learn about the latest scams. Then, contact your bank or connect with a lawyer to assess the nature and legitimacy of the letter.
  • Shy away from advance fees. Thanks to new consumer protection rules that took effect this year, advance fees are only permitted in rare cases. In many cases, those that ask for money upfront are interested only in your money and may not stick around long enough to provide the help they promised.
  • Beware of forensic loan audits. These are hot scamming ground and often have no effect on a person’s mortgage payments.
Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Home Foreclosure | Comments Off

Monday, April 25th, 2011

Understanding the Changed U.S. Debt Outlook Rating

The credit rating agency Standard & Poor’s made waves last week when it announced that it had downgraded the outlook on U.S. debt from “stable” to “negative,” leaving many ordinary Americans wondering what the change means for the economy and how debt rating works in the first place.

Here’s a look at what our country’s debt rating might mean in future months and how that rating is like an individual credit score.

Rating the U.S. Debt

Currently, the United States has a credit rating of AAA, which is the highest rating possible. This rating indicates that the U.S. is a stable country and is likely to repay any loans it takes out. But there’s more to the story.

  • Outlook on U.S. debt: While the other two major credit rating agencies (Moody’s and Fitch Ratings) have not announced any changes to their ratings on the outlook for U.S. debt, Standard & Poor’s downgraded that rating last week, citing as one reason the continued inability of Congress to make a decision regarding the long-term future of spending policies.
  • A warning move: While the change in the outlook rating does not officially alter the country’s credit rating, it serves as a warning and reminder to legislators and others in positions of power that the country’s financial stability and credibility on the world stage are at stake.
  • Potential for positive impact: Some commentators have mentioned that the changed credit rating could actually prove beneficial to the country, as it may push Congress to act swiftly (and without unnecessary political posturing) in taking steps toward changing financial policy.

The Parallel with Individual Credit Ratings

As anyone who has ever file for bankruptcy, applied for a mortgage or thought about borrowing money for a car knows, individuals have credit ratings too. And, as with the credit rating for the United States, credit ratings for individuals are used to help lenders and investors determine whether or not to lend money to a person and on what terms.

If Standard & Poor’s actually downgraded the country’s credit rating, it would have a similar effect on the nation as seeing a drop in a credit score would for an individual. In other words, the U.S. would have more difficulty borrowing money and could suffer a variety of financial consequences.

So how can a country (or an individual) keep its credit rating as strong as possible?

  • Pay bills on time.
  • Pay down as much debt as possible.
  • Try to keep credit usage low (that is, stay well below the limit).
  • Keep old accounts active (but not maxed out).
  • Contact creditors before bill due dates if there is ever reason to expect inability to make timely payments.
Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Economic News: How Are We Doing?, Your Credit Score | 1 Comment »

Tuesday, April 19th, 2011

Financial Literacy Survey Shows Our Weaknesses

The National Foundation for Credit Counseling reported results from its annual survey of consumer financial literacy recently, and the findings suggest that, as a nation, we’re still not as well equipped to deal with financial stumbling blocks as we need to be.

Specifically, the survey revealed the following about American consumers:

  • 26 percent of survey respondents reported spending more than they did last year, a percentage higher than it has been for two years. While this could be good for the nation’s economic recovery, it’s only one part of the puzzle.
  • More than 40 percent of respondents graded themselves as earning a C or lower in their personal finance know-how. This is alarming but not surprising: in more official tests of financial literacy (often given to high school students), it’s often common for the majority of students to fail.
  • While more than two-thirds of Americans reported paying for most purchases with cash or debit cards, 40 percent still reportedly carry revolving debt on their credit cards from month to month. This sort of behavior can be dangerous and debilitating, especially if a consumer is hit with unexpected job loss or income reduction. In fact, one of the most commonly cited factors for bankruptcy filings is overextension on credit.
  • More than 80 percent of the those polled apparently voiced the opinion that walking away from a mortgage can be justified in certain circumstances, particularly if the borrower was misled at the time of the loan or if the borrower can no longer afford mortgage payments. If many people get a chance to act on these beliefs, the effect on the housing market could be seriously detrimental, especially during a period of recovery.

Why Does Financial Literacy Matter?

The issue of financial literacy education has been a hot one in recent years, ever since the bubble in the housing market burst and the abuses (by lenders and borrowers alike) came to light.

Since the beginning of the Great Recession, we’ve seen legislation like the Credit CARD Act to improve the transparency of credit products for consumers, the creation of the Consumer Financial Protection Bureau, and proposals to change debit card fees and other consumer credit products.

When the Bankruptcy Abuse Prevention and Consumer Protection Act took effect in 2005, one of its provisions was the introduction of a Debtor Education (also called a Financial Management) course for all bankruptcy filers – the idea was that those who filed for bankruptcy could certainly benefit from a little guidance on financial matters. And the idea seems to be a good one.

But what about those who aren’t ready to file for bankruptcy? Luckily, the U.S. Government has set up a financial literacy destination, MyMoney.gov, for people who have never set foot in the bankruptcy court.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Finance 101: Secure Your Future | 1 Comment »

Monday, April 18th, 2011

Identity Theft & Taxes: What the IRS Recommends

In the wake of tax season, the Internal Revenue Service has issued a statement warning Americans about how to spot and rectify identity theft that may affect their taxes. Identity theft can be a difficult crime to deal with, and can cost victims hours of time and even money to repair.

Here’s a look at what you need to know about identity theft and your taxes.

  • The IRS does not initiate contact by email. If you receive an email from someone claiming to be the IRS, report it as spam and do not click on any links or provide any of your personal information.
  • Pay attention to any snail mail contact. If the IRS contacts you by postal mail and indicates that multiple tax forms were filed in your name or that records show you received wages from an employer you don’t know, you should suspect possible identity theft.
  • Contact the IRS. If and when you receive a notice from the IRS by mail that indicates unusual or suspicious activity, you should contact the IRS by responding to the address or number provided on the form you received.
  • Check your credit report. If you’re interested in knowing more about whether your identity might be at risk, visit www.AnnualCeditReport.com to check your credit report for any suspicious activity. You are entitled to view a credit report from each of the three major reporting bureaus for free once per year.

It’s best to act quickly if you suspect identity theft related to your taxes, because if someone else filed a tax return in your name (or using your Social Security Number), that person could be eligible for a return – and you might not get one.

Online Resources to Protect Yourself

One of the best ways to combat identity theft is to prevent it. And, seeing as identity theft can cost serious money (and even triggers bankruptcy filings for some victims), it’s never too soon to start protecting yourself, your sensitive information and your money.

The Federal Trade Commission, the IRS and a number of other government organizations have teamed up to create the web site OnGuardOnline.gov, which offers information, tools and tips for staying safe in the digital world.

The site’s online resources include:

  • Detailed instructions for dealing with identity theft (tax-related or otherwise);
  • Pointers for keeping your information, accounts and passwords safe at WiFi hotspots;
  • A number of games designed to educate users about various digital risks and how to protect against them;
  • Informative videos that include expert interviews and how-tos designed to help people stay on top of digital and cyber safety; and
  • Tools to use to protect yourself in your everyday life.
Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Identity Theft, The Law and Your Money | 4 Comments »

Wednesday, April 13th, 2011

New Solutions for Those with Mortgage Woes?

These days, many Americans are desperate to stay on top of mortgage payments, and are considering unorthodox ways to pay the bills. apparently, when a company called Adzookie offered to pay people’s mortgages for up to a year if those people would display large advertisements on their homes, applications flooded in by the thousands, as a recent report from Credit.com details.

The deal reportedly works like this: if you apply and are accepted into the program, Adzookie will paint advertisements on your home and pay your mortgage for three months (with a chance to renew for another nine if the ads remain in place).

While that may sound like heaven to some struggling homeowners, only a handful of people will be selected for this deal. So what can the rest of us do?

Finding Affordable Housing

Because of the tight standards of many refinancing programs, few homeowners are able to qualify. So that might mean a few things, one of which could be giving up a mortgage (whether with the help of personal bankruptcy or not) and renting for a while.

So how can you find affordable rent? By following these steps for negotiating:

  • Know the area: Figure out what people are paying for apartments in the neighborhood you want. In addition, try to determine whether there are more apartments than tenants or vice versa. If there are lots of vacancies, you have a better chance of negotiating a deal. You can do this by scouring local postings and asking people who rent nearby.
  • Consider amenities: Determine whether your potential apartment is bare-bones or all-inclusive. The former may provide you better negotiation opportunities, but make sure you’re able to find necessary services nearby—if you have to haul your laundry across town every time you’ve got dirty clothes, a small rent savings might not seem worthwhile in the long run.
  • Prove yourself: Offer to show to a potential landlord a strong credit report, a reference from a previous landlord or proof of steady income. A landlord who views you as a good credit risk is more likely to cut you a deal because she’ll be less likely to have to chase you down for rent or lose money on you.
  • Think outside the box: Offering to sign a lease longer than one year (which saves a landlord the work of finding new tenants), pay ahead of the due date (which saves a landlord worry and possibly money loss) or move in whenever works best for a landlord can all give you leverage in negotiations, as all these circumstances tend to ease a landlord’s financial (and worry) load.
Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Economic News: How Are We Doing?, Home Foreclosure | Comments Off

Monday, April 11th, 2011

Celebrate Financial Literacy Month

The Federal Trade Commission has announced that April is National Financial Literacy Month and, as such, a great opportunity for Americans of all ages to brush up their financial smarts to make the most of their money, credit and financial future.

So what kinds of things can you do to celebrate financial literacy month? The FTC recommends checking out these services.

  • Money Matters: This web site has information in both English and Spanish about essential financial literacy topics including debt collection, credit repair scams, vehicle repossession, job hunting, job offer scams, foreclosure rescue scams, budgeting for mortgage payments and more. Whether you prefer quick tips or more in-depth videos, this site has information to help you.
  • Free Annual Credit Reports: Here, the FTC explains how and why Americans are entitled to a free credit report from each of the three major reporting bureaus once each year. This site also provides information about why it’s important to check your credit report regularly and where you can get your no-strings attached, truly free credit report (www.annualcreditreport.com).
  • You Are Here: This site is geared toward children and provides them interactive online games that teach them about advertising, competition and steps they can take to protect their privacy and prevent identity theft.

Why Does Financial Literacy Matter?

So why does our country need a financial literacy month in the first place? In recent years, tests administered to high school students yielded almost no passing scores and, as we are still collectively learning, ignorance about financial matters (such as how mortgages work) on a grand scale can lead to devastating financial fallout for the entire economy.

In addition to those resources provided by the FTC, consider visiting these sites as part of your financial literacy month celebration:

  • Fair Debt Collection Practices Act: This page explains who is protected by the FDCPA and what the law prohibits from debt collectors. Understanding your consumer rights is one powerful way to make sure you aren’t victimized by scammers or dishonest debt collectors.
  • The Bankruptcy Glossary: Thinking of filing for bankruptcy protection? You may want to start here as you consider what bankruptcy might mean for you. This page offers plain-English definitions for many terms commonly used in bankruptcy cases.
  • Consumer Financial Protection Bureau: The government’s new consumer protection body is still growing, but already offers a number of interactive options for people interested in staying up-to-date about consumer protection rules, laws and debates.

Remember: the only one responsible for your money, retirement fund, loan payments and other financial obligations is you. If you aren’t sure how your money is working (or not working) for you, it’s a good idea to take the time to educate yourself about basic financial literacy matters – the resources are out there and they’re free.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Finance 101: Secure Your Future, Home Foreclosure, Identity Theft | 1 Comment »

Wednesday, April 6th, 2011

The Truth About Bankruptcy: Report Shows Many Wages Unlivable

A recent press release from a group called Wider Opportunities for Women reveals what many families struggling to make ends meet already know: many families with breadwinners employed full-time are unable to earn enough money to ensure a basic standard of living.

The study (discussed more below) highlights the troubling economic reality that many Americans face and could potentially help to de-mythologize the reasons people are pushed to file for bankruptcyprotection.

The Basic Economic Security Test

Here’s some background about the study and its findings.

  • Data collected since 1995: Over the past fifteen years, WOW has gathered data from state and federal pools (including census reports) to attempt to determine how much income is required to establish economic security across the country. The study attempts to determine not what people can survive on minimally, but how much they need to earn in order to achieve stability without help from public assistance.
  • Economic security numbers: The study found that a single person would need to earn $30,012 per year (about $14 per hour), a single person with two children $57,756 annually (about $27 per hour), and a family of four $67,920 per year ($16 per hour for two workers) to establish economic stability.
  • Minimum wage not enough: Compare the above numbers to the federal minimum wage ($7.25 per hour) and to the income identified as poverty-level for those groups ($10,830 for an individual and $22,050 for a family of four) and it’s easy to see that current diagnostic standards for “poverty” are somewhat misleading. Sources report that more than 14 percent of Americans lived below the poverty line in 2009.

Financial Stability, Emergencies and Bankruptcy

Given these numbers, it’s no wonder that millions of Americans require help from the bankruptcy court each year. One essential part of economic stability, as the report highlights, is being able to save money for emergencies. And, on bankruptcy filing surveys, filers commonly cite as reasons they filed financial emergencies such as:

  • Illness or injury that led to high medical costs and/or job loss;
  • Job loss, layoff, or reduction;
  • Family events such as divorce, the death of a family member and the birth or adoption of a child;
  • Over-extension on credit (which can result from relying on credit to buy necessities); and
  • Unexpected expenses (like a car or home repair).

Recession Hurting Many Families

The study also showed that Americans with less education have the most difficulties finding jobs with livable wages, and that more low-income families than ever have reported not being able to afford basics like food within three months of losing their income.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in The Truth about Bankruptcy | Comments Off

Tuesday, April 5th, 2011

Debt Collectors & New Media: What Rules Apply?

Debt collectors using new media to contact debtors, raising an issue that Consumer Financial Protection Bureau head Elizabeth Warren has indicated should be a top priority for lawmakers and attorneys general in every state.

A recent post from WalletPop.com highlights the issue, which has become more prominent and consumers - and marketers - embrace the latest technology.

Here’s a look at why this issue needs attention and how it might affect you.

Debt Collection Rules

Thanks to the Fair Debt Collection Practices Act, originally passed in 1978, debt collectors have to follow certain rules when contacting consumers about debts they owe. Generally, these rules are designed to make sure debtors are treated respectfully.

But new communication devices and debt collection practices have raised questions about what should be legal. For example:

  • Pre-recorded messages: Many debt collectors have apparently begun leaving pre-recorded messages on voicemail accounts or home answering machines. While these messages have “disclaimers” that indicate a listener should hang up if the name in question is not their own, it’s easy to ignore that instruction and learn about another person’s debt (information that should be private, according to the FDCPA).
  • Facebook messages: Some debt collectors have reportedly contacted debtors and their friends and families over social networking sites, which is not explicitly prohibited by the FDCPA (because Facebook wasn’t around when it was made law), but which many insiders argue should be considered “embarrassing media.”
  • Text messages and cell phone calls: Other debt collectors are apparently using cell phone contact to reach debtors, a method that has raised the question of usage fees. Regulators are asking whether there should be restrictions on contact that debtors must pay for by the unit.

Proposed Regulations in Some States

As of now, a few states have begun to take action to regulate the new media debt collectors have been using. The Attorney General of New Mexico has reportedly announced that debt collectors must disclose to debtors the expiration dates for debts (that is, when collectors are legally prohibited from attempting to collect them).

In Massachusetts, Attorney General Martha Coakley has released a statement introducing proposed changes to that state’s debt collection rules, which would include:

  • Extension of collection rules to apply to new media, including online, text and recorded messages;
  • Amendment of the definition of a “household” to take into account use of cell phones and email addresses;
  • Extension of rules for primary debt collectors to apply to so-called passive debt collectors (who often buy expired debts cheaply and aggressively attempt to collect on them); and
  • Requirement for debt collectors to make a good faith attempt to determine whether a debt is too old to be legally collected.

Even if you don’t live in New Mexico or Massachusetts, you could see changes to debt collection laws and practices where you live in the near future. And, if you suspect that a debt collector has broken existing rules in attempting to contact you, don’t hesitate to contact a lawyer to learn more about your rights.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in The Law and Your Money | 1 Comment »

Monday, April 4th, 2011

Payday Lender Forks Over Cash to Settle with FTC

The Federal Trade Commission announced this month that it has settled charges with two men who allegedly bilked consumers out of hundreds of thousands of dollars by using an online payday loan “matching” scam. Here’s what the FTC says happened:

  • The web site offered to match consumers with payday lenders in their areas.
  • As part of the online application process, consumers were reportedly sent to a page that had an offer for a debit card. The “yes” box to order the debit card was pre-checked on this page.
  • Consumers who clicked through to the “finish” page without realizing they’d agreed to the embedded debit card offer were automatically signed up for the debit card. Clicking through reportedly also meant consumers granted authorization for their bank accounts to be charged for the funds.
  • Victims of the scam were apparently charged up to $54.95 extra for the debit card they did not intend to apply for.

Terms of the Settlement

The newest settlement, which reflects an amended charge filed in April 2010, means that the men charged with the offenses, Matthew Patterson and Mark Benning, will be prohibited from doing the following:

  • Presenting false or misleading information about any product or service, including information about how customers will be charged or billed;
  • Misrepresenting the cost or status of a product or service (e.g. incorrectly suggesting that something is free or a “bonus”) for any of its terms and conditions;
  • Charging consumers without complete disclosure of how much will be charged to them, all terms and conditions of the transaction, what billing information will be used and to what account the payment will be charged; and
  • Failing to keep track of affiliates to make sure that they comply with all the above terms (and those laid out in the court order).

In addition to these restrictions, the FTC settlement imposes a $5.2 million judgment on the two men, which will reportedly be suspended for Patterson once he pays $800,000 over a period of 10 years and for Benning when he provides the court with money raised from the sale of his house.

Protecting Your Finances from Predatory Lenders

While a number of consumer protection groups and government organizations exist to police the market and keep scammers from finding new victims, perhaps your best defense against predatory lenders is knowledge.

Take a look at this predatory lending glossary to get an idea of what kinds of loans and offers qualify as “predatory” and how you can keep your money from falling into the wrong hands (and keep yourself from falling into bankruptcy).

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google
  • E-mail this story to a friend!

Posted in Predatory Lending, The Law and Your Money | Comments Off