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Friday, September 30th, 2011

FTC Halts Fraudulent Mortgage, Debt Relief Scammer

The Federal Trade Commission filed a complaint with U.S. District Court alleging that Christopher Mallett has engaged in deceptive practices online, targeting debt-ridden consumers. The complaint outlines Mallett’s alleged misdeeds, which include violations of the Federal Trade Commission Act.

According to the FTC, Mallett:

  • Impersonated federal consumer protection agencies on multiple websites.
  • Falsely claimed that he and his websites were affiliated with federal consumer protection agencies.
  • Invented a consumer protection agency that does not actually exist (the Department of Consumer Services Protection Commission).

The FTC claims that Mallett attempted to attract debt-ridden consumers to his site and redirect them to affiliate sites that provided relief for mortgages, debts, and taxes. None of these sites had any actual affiliation with the federal government, and all reportedly charged customers for their services.

If proven, these actions would violate the Telemarketing Sales Rule and the Mortgage Assistance Relief Services Rule, which outline how online services and mortgage assistance can be advertised and sold.

Plagiarism of FTC Words & Symbols

In addition to Mallett’s alleged fraudulent affiliation claims, the FTC charges that he improperly used the FTC’s official seal and closely copied language from the FTC’s web site on his own web pages. Mallett’s companies and web sites reportedly include:

  • U.S. Debt Care
  • World Law Debt
  • U.S. Mortgage Relief Counsel
  • gov-usdebtreform.net
  • worldlawdebt.org
  • FHA-homeloan.info

Because of the close matches between official government logos and language and that on Mallett’s sites, he may also face charges of impersonating government agencies.

Unsubstantiated Debt Settlement Claims

In addition to his false claims of government affiliation, Mallett reportedly made unsubstantiated claims about how his services could benefit consumers. The FTC notes that Mallett promised substantial reduction in consumer debts, even going so far as to publish charts showing previous customers’ “success” in lowering their debts.

Mortgage & Debt Relief Scams

The FTC is bringing the complaint as part of its efforts to eliminate scams that prey on consumers who are struggling with mortgage-related debt and other types of consumer debt. These types of scams can be particularly malicious because unsuspecting consumers may spend money they can barely afford for what they believe is a service that will help them turn their finances around.

When they learn that the service was nothing more than a scam, they often suffer a double blow of having lost money and having lost a chance at getting significant help toward improving their financial situation.

In some cases, consumers turn to such services to avoid filing for bankruptcy; ironically, spending money on such scams may push these consumers over the edge financially, leaving them with few choices besides personal bankruptcy.

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Posted in Predatory Lending | No Comments »

Tuesday, September 13th, 2011

FTC Shuts Down Illegal Payday Lender Wage Garnishment

The Federal Trade commission reported this week that it has halted a payday lender from attempting to garnish consumers’ wages without the necessary court order. The company, Payday Financial, LLC, reportedly did business under the names Big Sky Cash and Lakota Cash.

Sources note that, in order to garnish its customers’ wages, Payday Financial divulged information about alleged payday loan debts to their employers, which is illegal. The attempt to garnish wages also prevented customers from disputing the debts in court or working out a payment plan with the lender.

Wage Garnishment Rules

Federal law permits government entities to request wage garnishment for unpaid debts owed to the government; however, the law requires that private creditors (i.e. anyone other than the government) go through the court system if they want to pursue wage garnishment.

According to the FTC, Payday Financial sent customers’ employers paperwork designed to look like documents from the federal government requesting wage garnishment to repay debts. That move has led the FTC to charge Payday Financial with:

  • Misrepresenting their legal wage garnishment status to employers (in other words, lying about their legal ability to garnish the employees’ wages);
  • Lying about their communication with consumers (specifically, by indicating that they had already given the employees an opportunity to contest or pay the debt);
  • Illegally revealing the existence and amount of alleged debts without consumers’ consent or knowledge;
  • Violating the FTC’s Credit Practices Rule, which does not permit lenders to require that consumers consent to wage garnishment in the event of default; and
  • Violating the Electronic Funds Transfer Act, which prohibits payday lenders from requiring borrowers to authorize direct debit payment of loans.

Payday Financial has agreed to stop garnishing its customers’ wages until a court decides on the case.

Halting Wage Garnishment through Bankruptcy

Consumers who are dealing with legal wage garnishment have the option of filing for bankruptcy to prevent further withdrawal of funds from their wages. Personal bankruptcy includes a legal protection called the automatic stay, which prevents collection actions of all kinds for the duration of the bankruptcy case.

The automatic stay can halt:

  • Wage garnishment;
  • Debt lawsuits;
  • Foreclosure;
  • Repossession; and
  • Phone calls and mailings from creditors.

In bankruptcy, filers may have debts discharged or enter a repayment plan to catch up on past-due debts. Once a debt has been discharged or repaid in part through the bankruptcy court, creditors no longer have a legal right to collect on it (meaning they can no longer legally garnish wages to cover that debt).

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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 »

Monday, June 20th, 2011

Sympathy for Debt Collectors?

Anyone who’s been harassed by debt collectors during tough financial times may have a hard time swallowing the latest request from the debt collection industry: give them a break. But the collection industry’s trade association has a fair point to make about its workers – they’re not all bad.

And, as happens too often, the bad apples in the group have given the whole industry a rotten reputation. Consider this troublesome info (reported in the New York Times):

  • Many debt collectors have to use fake names when they work because clients frequently threaten them. An alias protects them from anyone who might actually take action.
  • Most debt collectors have stories of being shouted at, called names and belittled while on the job.
  • In many cases, debt collectors are, in fact, trying to get money that we consumers agreed to pay.

New Consumer Protection on the Horizon?

Right now, the Fair Debt Collection Practices Act outlines what debt collectors can and cannot do. The Federal Trade Commission (FTC) regulates the industry, but has little power to punish offenders or tighten rules.

That could change starting this July, though. The Consumer Financial Protection Bureau will start actively playing the role outlined for it in 2010’s consumer protection law. Part of that role is regulating the debt collection industry, which has some debt collection workers worried.

Activists on both sides of the issue have highlighted problems with the 1977 FDCPA:

  • Since its passage, it hasn’t changed much to acknowledge new technologies like mobile devices or email.
  • The fine for violations has stayed constant at $1,000, which today doesn’t significantly deter debt collectors.
  • Many debt collectors are two or three times removed from the original creditor, which can frustrate and confuse consumers.

What to Do When The Debt Collector Calls You

It’s important to understand your rights and responsibilities as a consumer. Certain debts (like those discharged in bankruptcy and those whose statute of limitations has expired) cannot legally be collected. Other debts are the debtor’s responsibility to pay.

One debt collector interview in the Times commented that it was much easier to work with consumers than to yell at them. In many cases, admitting you don’t have the money to pay a debt can save everyone a lot of hassle. Once you’ve determined the facts, a debt collector might be able (and willing) to work toward an alternate payment schedule or some other debt modification.

And people who are really in over their heads financially may want to start making phone calls themselves – to a bankruptcy lawyer.

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Posted in Economic News: How Are We Doing? | No Comments »

Wednesday, June 15th, 2011

What Do You Know about Taxpayer Identity Theft?

You’ve probably heard of the crime known as identity theft, in which a criminal uses someone’s sensitive information (like Social Security Number, credit card number, or bank account information) to make fraudulent financial transactions.

But have you heard about the newest version of this nefarious crime? It’s called taxpayer identity theft and, according to the Government Accountability Office (GAO), it’s become five times more common in the last two years. It works like this:

  • The identity theft uses someone else’s SSN to get a job: People may do this for a variety of reasons, including criminal records or illegal residential status. Regardless, it can wreak havoc on the victim’s life and finances.
  • The identity thief files his taxes early: Most legitimate taxpayers tend to wait until later in the season to file, so getting the paperwork in early increases a thief’s chances of going undetected.
  • The victim files his tax return: When the victim of taxpayer identity theft submits his forms to the IRS, he finds out his forms have “already” been submitted. That is, forms with his information have been submitted by someone else.
  • The victim has to sort everything out: According to sources, this can mean hours of phone calls to government agencies, credit card issuers and banks in an effort to clear up the confusion. In many cases, victims have to wait up to six months to get any tax returns owed them.
  • The IRS distributes an official form: To help the victim with future confusion the identity theft is likely to cause, the IRS offers victims an official document (the 14039 form, or the IRS Identity Theft Affidavit).

Protecting Yourself from Identity Theft

As identity theft victims know, sorting through the mess left by an identity thief is not for the faint of heart. Identity theft can cause:

  • Credit score damages: Identity thieves can open new credit accounts, max out existing cards, drain bank accounts and more, depending on what information they get. All these can hurt a credit score. (Note: credit reporting bureaus will remove such information, but it takes a lot of legwork on the victim’s part.)
  • Bankruptcy: Even though there are protections in place to prevent identity theft from leading to bankruptcy, many filers indicate that a stolen identity was one factor that led them to file.
  • Criminal troubles: Depending on what kinds of actions an identity thief engages in, a victim can be mistakenly apprehended by law enforcement agencies. Like most identity theft consequences, this can generally be cleared up, but not without effort on the victim’s part.

The bottom line? Identity thieves are constantly thinking of new ways to get their hands on sensitive information. Be careful with yours.

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Posted in Identity Theft | 1 Comment »

Wednesday, June 8th, 2011

How to Avoid Money-Guzzling Scams

One of the most troubling aspects of financial scams is that they prey on people’s best intentions. Nearly every time a natural disaster occurs, the Federal Trade Commission issues a report warning against scammers posing as charity fundraisers offering their funds to the latest victims.

And being victimized by a scam can cost a lot of money, cause serious damage to your credit score and take hours and hours of your time to recover from. Here’s a look at some steps you can take to make sure you and your finances are protected from scam artists.

Protect Your Money

  • Do some research. If you’re offered a questionable deal over the phone or in person, don’t agree right away. Instead, consult with a trusted friend or family member. That way, you’ll have a chance to cool down and get a second opinion.
  • Check your credit. Anyone who has filed for bankruptcy understands the importance of monitoring her credit report, and in addition to giving you a general picture of your financial health, it can show you whether or not anyone besides you has been using your accounts or identifying information. You can see your credit report for free at AnnualCreditReport.com to make sure you’re the only one spending your money.
  • Keep your information private. Most people know now not to write their Social Security Number on checks, but it’s also a good idea to take greater measures to protect yourself. Check out the FTC’s resources for keeping your phone number, email address and other contact information private.
  • Know debit and credit card risks. While most credit card issuers offer excellent protections for scam victims, debit card protections are often scant. If you have the option between debit and credit (and you can trust yourself to pay your bill in full each month), choose credit when making large purchases or ordering products online.
  • Know the risks of email and phone calls. These days, scammers can call themselves whatever they want to trick caller ID into making you think you’re talking with someone trustworthy. And email scammers are getting better and better at sending phony links that look legitimate. Generally speaking, don’t offer personal information unless you’ve typed a URL or dialed a phone number yourself; otherwise, you risk sharing your sensitive facts with the wrong sort of people.
  • Pay attention to your medical information. When you receive mail from your health care provider about services or insurance issues, read through it carefully to make sure nobody but you has been using your information to receive medical treatment. Medical identity theft is a serious concern that can damage you financially and lead to inappropriate medical treatment.

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

Monday, May 9th, 2011

Study: More Drug Manufacturers Cutting Deals to Keep Prices High

The Federal Trade Commission announced this week that according to a recent study, there has been an increase in the number of drug companies engaging in pay-to-delay deals with generic drug producers.

The FTC has denounced the actions, and with good reason: medical costs are one major contributor to many personal bankruptcy filings of U.S. citizens. So how might these types of deals affect you and your family?

  • Background information: Once a drug company patents a certain drug, generic producers of drugs of similar chemical composition may file a challenge to the patent, with the goal of being able to produce a chemically similar (or identical) version to sell more cheaply.
  • How the deals work: If these challenges went to court, it’s possible that they would result in judges ruling in favor of the generic producers. In order to avoid that outcome (and thus secure the market for themselves for a longer period of time), some brand-name drug manufacturers settle out of court with generic drug producers.
  • Who makes money: Most settlements include an agreement that the generic manufacturer will not produce the generic version of the drug until a certain date; some settlements include a financial incentive from the brand-name manufacturer to lengthen the delay period (i.e. the brand-name manufacturer pays the generic manufacturer to delay its release of its cheaper product). The FTC found that in cases involving a payment, generic drug release waiting periods increased by an average of 17 months.
  • Who loses money: The FTC notes that in 2010, 22 name-brand drugs were targeted in pay-to-delay deals. The total number of such deals reportedly jumped from 19 in 2009 to 31 in 2010 (an increase of more than 60 percent).
  • What it costs us: The total dollar toll these deals have taken on Americans comes to $3.5 billion per year, according to FTC estimates. The difference comes from the fact that generic drugs can cost anywhere from 20 to 90 percent less than their name-brand counterparts. That’s a lot of money people could be putting toward paying down mortgages or credit card debt.

Are Generic Drug-Delay Deals Legal?

Anyone familiar with antitrust laws may wonder whether deals to delay competitive drugs are even legal in the U.S. The answer is a little murky. It seems that the FTC has filed a number of lawsuits against pay-to-delay agreements and has demonstrated its support of bills in Congress designed to eliminate such activity among drug manufacturers.

How can you take action? While there may not be much you can do about the problem of pay-for-delay agreements, if you’re worried about paying your medical bills, you can (and should) ask your physician whether generic versions are available any time you need medicine.

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Posted in Finance 101: Secure Your Future, The Law and Your Money | 1 Comment »

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.

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Posted in Finance 101: Secure Your Future, Home Foreclosure, Identity Theft | 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).

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Posted in Predatory Lending, The Law and Your Money | No Comments »

Monday, March 28th, 2011

The Latest on Debt Collection Laws & Rules

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.

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Posted in Predatory Lending, The Law and Your Money | 2 Comments »

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