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Posts Tagged ‘consumer rights’

Wednesday, August 3rd, 2011

Payday Lender Pays Big for Misdeeds

The Federal Trade Commission has scored another win for consumers. Last week, it convinced a federal court to rule that payday lending company Swish Marketing must pay $4.8 million as a penalty for tricking consumers into buying expensive debit cards they didn’t want.

The case highlights abuses that consumer advocates continue to fight against, including deceptive online advertising and negative-option marketing. Here’s a look at the case and what the FTC’s action might mean.

  • Online payday lending: The company’s web site reportedly claimed that it matched online consumers with payday lenders to meet their needs.
  • Hidden products attached: When consumers completed the online loan application, they were apparently directed to a screen that included four additional offers. Of these, three offers had a “no” box checked and one had the “yes” box checked. In some cases the additional offers were presented as a “bonus.”
  • Automatic charges: Customers who didn’t notice the “yes” box or who didn’t read the fine print ended up with a debit card that automatically connected to their bank account and charged them $54.95.

Expensive Products, Debt-Ridden Buyers

In addition to being illegal, deceptive marketing practices like the ones Swish Marketing engaged in tend to prey on those who can least afford them. In many Chapter 7 cases, for example, some of the unsecured debt that filers discharge comes from payday loans.

Payday loans are short-term, high-interest loans that often lead to serious debt for those unable to make ends meet. They provide an immediate source of cash but come with a high price tag in the long run.

Penalties for the Payday Lender

Thanks to the FTC’s action, Swish Marketing and its owners are now prohibited from:

  • Misrepresenting relevant facts about a product or service. Its improper sale of debit cards failed to explain how customers would be charged and how much the product would cost.
  • Improperly identifying a product as a “bonus.” The previous offer didn’t provide sufficient information about the “bonus” debit card, which left consumers unable to make an informed decision about whether or not they wanted such a “bonus.”
  • Charging consumers without disclosing privacy plans. Related charges against the company addressed the fact that it reportedly sold or shared customer information without warning that it would do so.
  • Failing to make sure affiliates follow the rules. From now on, Swish will be held responsible for the actions of any company it works in tandem with.

The FTC did not report how the $4.8 million will be distributed. In many similar cases, funds are used to refund money consumers lost as part of the scam.

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Posted in Predatory Lending | 1 Comment »

Wednesday, July 6th, 2011

When Debt Collectors Have the Wrong Guy (or Gal)

Dealing with debt collectors can be stressful enough when you know you actually owe them money. But with cases of identity theft and mistaken identity, some people have the unpleasant experience of debt collector harassment when they don’t owe anything at all.

Here’s a look at how debt collectors might get the wrong person and what you can do if you’re on the wrong end of the phone.

Identity Theft or Mistaken Identity?

Generally speaking, there are a few reasons a person would get collection calls intended for someone else. These include:

  • Identity theft: When someone uses another person’s identifying information (Social Security Number, credit card numbers, bank account numbers, etc.), that’s identity theft. Some thieves apply for jobs with stolen SSNs, some open new credit accounts and some simply use existing accounts. To check whether someone besides you has been using your information, log on to AnnualCreditReport.com for a free check of your credit report. If debt collectors are calling because of identity theft, you might have a lot of work ahead of you straightening things out. The sooner you check your reports, the better.
  • Mistaken identity: In this situation, a debt collector simply mistakes you for someone with a similar (or identical) name. Those with common names are naturally more susceptible to this than those with unusual names, but it could happen to anyone. In some cases, third-party identity checkers will contact you before you receive debt collection calls to verify your name and phone number. If you get a call like this, insist on learning as much as you can.
  • A combination: It’s possible that a credit reporting company accidentally combined two credit reports (i.e. merged information from the reports of two people with similar or identical names). If this has happened to you, you need to take action to get your credit situation sorted out. It will require a little effort, but it’s essential to avoid future confusion and to maintain your individual credit.

Dealing with Debts that Aren’t Yours

So what can you do if debt collectors won’t leave you alone about someone else’s debt? Thanks to the Fair Debt Collection Practices Act, you can take action:

  • Review your credit report. Make sure your identity isn’t being used by anyone other than yourself.
  • Send the collectors a letter explaining why you are not responsible for these debts and asking them to stop contacting you.
  • Request written proof that you are the one who owes these debts. Because the debt collector is unlikely to be able to do this, you may never hear from them again.

If you are unable to convince collectors of your identity, you may want to consider enlisting legal help.

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Posted in Identity Theft, Your Credit Score | No Comments »

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.

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

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.

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

Wednesday, February 23rd, 2011

Checking in on the Credit CARD Act

A recent report from the Center for Responsible Lending suggests that the reforms introduced by the Credit CARD Act of 2009 are working to improve transparency in the marketing of credit cards to consumers.

In case you need a refresher course, the Credit Card Accountability Responsibility and Disclosure Act was designed to improve transparency from banks and other credit card issuers so that consumers could navigate the world of credit with greater ease and less financial distress. Here’s a look at just how much this consumer protection legislation has changed.

  • Advertised credit card interest rates: Before the passage of the Credit CARD Act, the CRL reports, the discrepancy between the rates advertised by credit card offers and those that consumers actually paid had reached unprecedented highs. In fact, according to the report, between 2004 and 2008, the difference between promoted rates and real rates was at its greatest ever.
  • Higher advertised rates means more honesty: Since the passage of the CARD Act, it seems, credit card offers have come branded with higher (and closer to actual) advertised interest rates.
  • More transparency in pricing: According to the CRL, new rules governing the way credit cards can advertise their interest rates has led to the exposure of as much as $12.1 billion in annual fees. In other words, credit card companies are now presenting more honest pictures of how much their products cost consumers.
  • Interest rates on credit cards constant: Despite the increases in advertised interest rates, the report shows, consumers have not actually paid more in interest since the passage of the CARD Act. This suggests that, rather than increasing the cost of credit card products, the new laws simply made those costs more readily apparent to consumers.
  • Credit card offers constant: The CRL notes in its report that direct-mail offers of credit products have been extended at a volume “consistent with economic conditions,” suggesting that, while the overall total may have fallen since boom times, the drop-off can be attributed to the tight economy and not to restrictions imposed by the new law.

What Does Better Transparency Mean for You?

As a consumer, how can you expect to benefit from the changes that have been spurred by the passage of the Credit CARD Act? The CRL lists a few ways:

  • Better transparency means more competition: According to the CRL, improved transparency among credit card issuers will spur positive competition – as banks abandon the trends of hidden fees and deceptive pricing, more banks and lenders should follow suit, which should eventually translate to lower consumer costs.
  • Tighter rules do not mean less available credit: Though some critics of the CARD Act suggested that the restrictions on lending and increased disclosure requirements would mean a decrease in overall credit availability, numbers from actual research have not borne out those predictions.

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Posted in Economic News: How Are We Doing?, Finance 101: Secure Your Future | No Comments »

Saturday, July 3rd, 2010

What Financial Reform Might Mean for You

There’s been a lot in the news about the financial regulatory overhaul bill currently working itself out in Congress and, with the bill expected to be signed into law by the Fourth of July, it’s a good time to look at how you’re likely to benefit from the bill’s passage. Here’s a look at how various aspects of the legislation are likely to play out when the financial reform hits the books.

Outlook Good for Consumers

One of the major changes the bill will make is the creation of the Consumer Financial Protection Agency, which would be a unit dedicated to regulating financial products with consumer rights in mind. The necessity for such an organization was made clear when millions of Americans fell victim to the terrors of subprime mortgages during the real estate boom.

In addition to the creation of the CFPA, the bill could benefit ordinary Americans for the following reasons.

  • Because the CFPA would be part of the Federal Reserve, it will get funding from the Fed and be able to ask Congress for additional funds, if needed.
  • The protections introduced to shield consumers from predatory and/or dangerous financial products can be lifted (by bankers’ petitions) only if such protections can be shown to threaten the larger financial system.
  • The CFPA would have the ability to create and enforce rules for various consumer financial products, including mortgages and credit cards.
  • One potential downside to watch out for is that auto dealerships likely will not be regulated by the CFPA, which means that consumers can probably not expect any amped-up protections for vehicle-related loans.

Credit Rating Agencies Face New Restrictions

Credit rating agencies were partly responsible for deceptively high credit labels on risky investment products like the securitized pools of subprime mortgages that led to the housing market’s crash in 2007 and touched off the Great Recession. The financial regulation bill would attempt to eliminate such deceptive ratings:

  • These agencies will have greater liability for the ratings they give and will be subject to lawsuits if it can be proved that they recklessly ignored or failed to review important information when evaluating a product.
  • The Securities and Exchange Commission (SEC) will develop a solution for the conflicts of interest that currently exist and are partly responsible for the incorrect and deceptive ratings of the past.

Essentially, the new regulations should make investments safer for investors by eliminating some of the guesswork and conflicted interests that led to past problems. Such improvements could lead to greater stability overall in financial markets and thus the entire economy.

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Posted in Finance 101: Secure Your Future | No Comments »

Monday, February 8th, 2010

Debtor Collects from Creditor Harassment

Anyone who has ever been hounded by a debt collector has probably fantasized about giving the collector a taste of his or her own medicine. That fantasy may be much easier to realize than most people imagine, as the story of a Dallas debtor shows.

Background: Your Rights as a Consumer

Laws are in place at both the federal and the state level to protect all Americans from overly aggressive debt collection practices. In fact, between the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act, a lot of behaviors typical of debt collectors are prohibited.

In addition to other things, debt collectors cannot:

  • Lie about their ability to take legal action to collect on a debt
  • Call you repeatedly with intent to annoy or harass
  • Call you outside of 8 am and 9 pm local time
  • Contact you directly when you have indicated that you have legal representation
  • Contact you by any embarrassing media (like postcards)

Unfortunately, many consumers are not aware of their rights and so do not take legal action against collectors who break these laws.

A Man with a Plan

According to the Dallas Observer, a man named Craig Cunningham has taken it upon himself to stand up for his consumer rights.

The Observer reports that Cunningham made some poor investment choices when credit was easy and ended up with more than $100,000 worth of debt. But, when collectors began contacting him and asking him to pay up, he decided to fight back.

Essentially, here’s how Cunningham has managed to make the most out of a bad situation:

  • He hired a lawyer to represent him and help him understand the intricacies of the consumer protection laws that were relevant to his case.
  • He began recording calls from his creditors and saving all forms of contact he received.
  • With the help of his attorney, he filed lawsuits whenever a debt collector violated a national or state consumer protection law.
  • He began receiving court settlements from successful cases.

Most collection agencies, it seems, prefer out-of-court settlements (which often involve a statutory fine) to taking a case to trial, since settlements save them money. The Observer notes that Cunningham has thus far earned $20,000 from suits against law-breaking collectors.

If you think your rights have been violated by a debt collector, consider contacting an attorney to determine whether you could take steps to receive compensation for the violations.

For those who don't have the resources to fight each creditor, there's another option to end harassment: filing bankruptcy. Bankruptcy can give you legal protection from creditors and wipe out your obligation to repay debts.

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

Friday, June 5th, 2009

Expensive Scams & How to Avoid Them

Day-to-day life demands enough of your hard-earned money: between bills, food costs, and unexpected expenses - sickness, injury, Grandma’s 80th blowout bash … - many people like they have a leak in their checking accounts already.

So scams and schemes that drain your funds without giving you anything in return should be avoided at all costs.

Your best bet for doing so? Educate yourself.

Fake Check Scams

A recent report on msnbc.com revealed that scams involving phony checks are on the rise.

Apparently, these scams involve three main elements: you receive a check in the mail, you’re instructed to cash the check and wire money to someone, and you end up losing a few thousand dollars.

Unfortunately, millions of Americans have already been taken in by these scams, which often seem legitimate. Common tricks scammers use include the following:

  • Fake buyer offers: Some checks arrive in response to an ad you’ve placed to sell an item, like a car or a piece of furniture. These may follow an email or letter explaining that the person will send a check for more than your asking amount (RED FLAG!), and ask you to wire the extra money to a third party.
  • Fake lottery wins: Other bad checks come as your “prize money” for a lottery game you never played. After depositing the money, you’ll be asked to pay some taxes and fees to collect. Legitimate organizations would never require you to do this.
  • Mystery shopper tasks: Yet another scheme involves identifying you as a “mystery shopper” who needs to deposit a check and wire most of it (you’ll keep some for your trouble) from a specific location – ostensibly to evaluate that location’s services.

THESE OFFERS ARE SCAMS

As a basic rule of thumb, never agree to wire money to or for someone you don’t know.

This is serious. In fact, one reason some people turn to filing bankruptcy is because they became victims of scammers. Don't be fooled.

And, while many of us consider ourselves fairly savvy about the scams out there, they can be treacherous because they’re often very clever. Sources indicate that:

  • 59 percent of respondents to a poll incorrectly thought that a bank will make sure a check is good before letting you withdraw the money
  • 40 percent thought they couldn’t be liable for transactions made after depositing a bad check

In reality, neither of these is true. In fact, even asking whether a check has “cleared” is not enough to make sure you’re safe: “clearing” only means that you have access to the money involved – it has nothing to do with whether or not a check is valid.

Be an active, informed consumer, and know your consumer rights.

People will continue to develop new scams to trick the unsuspecting. The best thing you can do to protect yourself and your hard-earned cash is to learn as much as you can about what’s out there and how to avoid it.

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Posted in Identity Theft | No Comments »