It’s November! Tis the season for increased identity theft. The increased risk is due to the sheer number of transactions, hacking attempts, and ecommerce fraud attempts, which is staggering. Even more staggering? According to a report by the Identity Theft Resource Center, while most consumers detect identity theft within three months about 16% of consumers won’t detect identity theft for three years. Wow.

One of the more surprising things I read on this topic is that stolen personal information was widely used to purchase very authentic looking “fake” paychecks and other documents online, which thieves used to open accounts and even rent apartments. Since chip cards are making it harder to commit credit card fraud, auto loan fraud is growing. And the thieves are creating “synthetic identities” where the fraudsters steal some of a consumers real information and combine it with fake information, such as using a new address for statements.

The consistent thread in all identity theft schemes is that a fraudster has a consumer’s personal information. Maybe not everything, but enough to convince someone else that the thief is really the identity of the victim. And the credit bureaus have that personal information. They have it all. The three credit reporting bureaus are goldmines for personal information for ID thieves, and these keepers of your info have been hacked by savvy criminals to get it.

The only option is to freeze your credit report. A “credit freeze” restricts access to your credit reports to themselves and currently open accounts. But not everyone took the steps required to freeze accounts, even if they were not looking to open new credit, because those freezes averaged about $30.00 and were only free AFTER they were a victim of ID theft. And there were additional fees to “thaw” the account for access by new lenders for a specified period of time. But now all of those fees are gone. You do not have to pay a fee anymore. New credit law changes, effective September 21, 2018, mean any consumer can freeze and unfreeze their credit file for free. Here’s what you need to know.

1. You have to contact each bureau individually to have the freeze placed on each.
Here are the contact links and numbers to do so. You will have to verify your identity with personal info to freeze your reports, so have that ready.

Equifax or 800-349-9960
Experian or 888-397-3742
TransUnion or 888-909-8872

2. You can get a free freeze for your children who are under 16. And you can also place a free freeze for anyone that you have a valid power of attorney for, when you are a fiduciary, guardian or a conservator.

3. You can still access your own credit reporting records and can order your free annual credit reports from www.annualcreditreport.com. Make sure you only use Annual Credit report, that’s the free one authorized by federal law.

4. Any current creditors or debt collectors will continue to have access after the freeze is placed.

For more information, you can read the Frequently Asked Questions (FAQ’s) directly from the Federal Trade Commission. I encourage every consumer to set aside time before the holidays to put freezes on their credit reports, which will help to protect themselves, their children, and people at risk, from identity theft.

 

Continue reading “Great News- We Now Get FREE Credit Freezes”

The Fair Issacs Corporation, the creators of the mysteriously calculated FICO Credit Score, are changing the scoring method using new criteria, again. In early 2019, a new scoring method will allow consumers to contribute their banking information to a third party, Finicity, which, “allows Americans to benefit from positive financial behaviors.” The idea is that if you are newer to credit, or have a lower score, the credit bureau can have a look at your checking, savings, and money market accounts to check your credit worthiness. One argument in support of this new approach is that consumers do not currently have any input into their credit scores, because the FICO is calculated only on debt account data submitted by creditors and lenders.

Fair enough. What could possibly go wrong?

From my lowly perch, a lot. First of all, while the consumer will have a choice of accounts to include, they will not have any control over how it is collected, and whether the information is kept by the credit bureau. The process, as published in the Wall Street Journal, is as follows,“Experian will compile consumers’ banking information with help from financial-technology firm Finicity and will distribute the new score to lenders.” Yeah, read that again, Experian will send a summary of consumer bank accounts to lenders. FICO won’t keep any of that information after the score is calculated, but the credit bureau will have your banking Information.

Anyone hear about the hack on Equifax? Anyone? Of course, you have. Well, have you heard about the Experian hack? 15 Million T-Mobile customers personal data was hacked via Experian, including social security and passport numbers. Lovely. Since I don’t use T-Mobile, I am already standing in line to provide my banking info. Eyeroll. It’s already happened once, and they will not be less of a target if they are the bureau with your bank accounts.

Cybersecurity aside, who here believes that when the UltraFICO is available, creditors will accept the FICO? Lenders know the consumer can opt in banking information, so why not rely on the UltraFICO for lending decisions? This is the plot from the classic children’s book by Laura Joffe Numeroff, If You Give a Mouse a Cookie. The lesson? If you give a mouse a cookie, he will want a glass of milk, then a straw, then a napkin, and on and on.

So, why the change? Benevolent Credit Bureaus? Hardly. Since the housing melt down, the pool of traditionally “highly qualified” borrowers shrunk. The change is due to lenders requesting, “credit-reporting firms and FICO to figure out a way to help them boost lending without taking on significantly more risk.” Oh.

As a consumer law advocate, I see danger ahead. Who would be “at fault” if banking information is compromised? Any hack could mean consumer’s accounts are cleaned out until the necessary fraud investigations are completed, and the money is returned by the bank. Missed or late mortgage, car payments, or utility bills can have consequences and mean financial insecurity for the most basic needs of a family. Will your mortgage company waive the late fee if it isn’t your fault? Will the electric company leave the lights on? If not, late fees on every bill owed by the American family could add up to hundreds of dollars. And over 75% of families already live paycheck to paycheck. In my humble opinion, a “free” 12-month credit monitoring product is not going to repair that mess. Or, maybe I am just a cynic and Fair Isaacs is looking out for consumers.

 

photo:credit.org

 

Around this time last year, the three credit reporting agencies had to change their rules (due to an agreement with several state’s attorney generals in 2015) surrounding reporting of a consumer’s medical debt in collections. Now, they basically have to give consumers a standard 180 day “grace period” before reporting medical collections on the consumer credit report. Another reporting change requires the bureaus to remove a past due medical bill that is later paid by insurance.

For many Americans, the increase in medical debt is due to higher deductibles and out of pocket costs for healthcare, timely payment by insurance to providers, and the decision by insurers that a provider was “out of network” resulting in a lower reimbursement and the outstanding costs passed on to the consumer. A fun little statistic related to the rules change is that up to 80% of bills submitted by providers to insurers are incorrect the first time. So insurance doesn’t pay them, the bills must be corrected and resubmitted for payment. This results in delays in settling medical bills. Sometimes for months.

The 180-day reporting delay is good for consumers with medical debt because these bills are often passed to collections quickly, within 30-60 days after the payment was due. Faster than many creditors will pass off non-medical debt accounts. This allows time for consumers to deal with insurance, pay their medical bills, and work on billing disputes even if the account is with collectors.

It is important to note that, while it is true that it will no longer have as big an impact on the “FICO” and VantageScore credit scoring models for 180 days, other credit scoring models that lenders use have not adopted this approach. So, you still need to watch your credit report if you are facing medical debts in collections.

Here are a few other things to consider if you or someone you know is facing medical debt:

• You are not alone. Around 43 million Americans had medical debt on their credit reports last year. The average amount of medical debt in collections was $579.00 last year. With 78% of Americans living paycheck to paycheck, this is a large enough number to cause financial hardship.

• While medical debt should NOT be ignored, if you are struggling with debt, it should be given a lower priority than other consumer debt, such as credit cards and personal loans. To do this, the medical debt must remain a “medical-debt,” meaning do not borrow or pay these debts with a credit card.

• Collectors will often try to push you to pay the bill, even suggesting you just put the balance on a card. But if you pay the medical debt with a credit card, you can limit your ability to settle the debt, or seek financial assistance from the hospital or other agency. You can stop collectors from calling by making your request in writing. You just need to send a letter.

• There are statutes that protect consumers who owe medical debt from being turned away from the emergency room for medical care. And, according to the National Consumer Law Center:

“If you request financial assistance from a nonprofit hospital, the hospital cannot deny you care in any part of the hospital because of an old bill until it determines whether you are eligible for financial assistance. You usually have about eight months (240 days) from when you first received the old bill to request such financial assistance.”

• Medical debt is a big reason for bankruptcy, but not why you think. When people are too ill to work, income plummets, savings can be exhausted and often medical debt was transferred to credit cards.

Remember, you now have 180 days to get medical bills handled before they hit your Equifax, Experian, or TransUnion credit report. You can dispute anything erroneously reported and have the records of medical bills that were paid by insurance removed.

Many consumers have become wise to the ways of internet scammers, no longer falling for phishing attacks or clicking fraudulent links to their accounts. Many hackers and scammers are going after companies that hold the consumer data “secure.” With all of the recent data breaches on financial institutions,credit bureaus,and email companies everywhere, it’s natural to be a little wary of identity theft. The Equifax breach was particularly awful for consumers because particularly sensitive personal data was stolen such as where you grew up and your mother’s maiden name, the info for those two layer “security questions.”

To make matters worse, in my humble opinion, the guardians of your credit report (and mysteriously calculated “score”) actually charge consumers hard earned dollars for access to their OWN information. The nerve! But my feelings aside, checking your credit report is an important part of taking control of your money. The Fair Credit Reporting Act, FCRA, authorizes one free credit report each year from each of the three credit reporting bureaus. There is only one link that is “federally certified” so do not click into any of the 34 ads on the way to annualcreditreport.com

I do not generally recommend anyone order all of them at once. You get one a year from each bureau, so ordering one from one of the three bureaus every four months provides a continuous look throughout the year. You can look for unauthorized accounts, errors in reporting, suspicious activity and even addresses that are not yours. If you find something that shouldn’t be there, or there are balance issues, or additional addresses, you can file a “dispute” with the credit bureau so the issue can be investigated.

CAUTION: you can only file a dispute if something on your report is incorrect. There are a ton of “cure your credit report” scams out there, so beware. If your credit report has taken a hit due to debt issues, bankruptcy, or just poor money management, such as forgetting to mail the payment on time, it will take time to rebuild. It’s a marathon, not a sprint.

If you are a victim of identity theft, you MUST take action as soon as you detect it. This includes filing a police report, contacting the lenders (who are also victims of the thief), putting a fraud alert or freezing your credit report. A step-by-step process is available from the Federal Trade Commission’s identity theft website. Yup, sadly that’s a thing.

When a debt is in default to a federal agency, notably student loans for many Americans, a debtor’s wages can be garnished without a lawsuit through a process known as “Administrative Wage Garnishment” (AWG). This process is different from garnishments based on having a judgment against someone after a lawsuit, because the Treasury does not need to obtain a court order to have an employer withhold up to15% of an employee’s “disposable income.”

Now, there are specific rules surrounding these processes to get you to pay back the debt. For example, an employee must be at the current job for at least 12 months, and the employee left the previous job involuntarily through something like a layoff. But generally, they can take your money, right out of your paycheck, without taking you to court. And it can be frustrating and scary because the agency is in control of the money, and you are short and have other bills to pay.

The Debt Management Service

The Debt Management Service and their Office of Debt Management (ODM) is basically the Treasury’s collection agency. In addition to AWG, there are other processes that can be used to collect on debts owed to the government, such as taking tax refunds to apply to debts, called an “offset.” If you are a Veteran receiving disability compensation, or a retiree, your money can be garnished to satisfy an ODM debt. In fact, your entire monthly disability compensation benefit can be taken. If you receive a Social Security check, and are, or your student borrower is, in default, they can garnish your social security check. Not kidding here.

This post is meant to be a strong reminder that nobody should ignore federal debts. Again, getting a letter from a government agency can be frightening. Period. The Internal Revenue Service (IRS) is the best known, and there are a ton of ads on tv for help with “tax debt.” But these other types of federal debt? Many people are surprised at the power these other agencies have. Not unlike the IRS.

If you are being garnished, and you do not owe a debt to the agency, my suggestion is to contact a lawyer immediately. You may be a victim of identity theft, or the treasury may have wrong information about the debtor, and you are unfortunately targeted. There are stories of two “John Smiths” with a single digit off on the Social Security or account number. Make sure you do not ignore the notices that you may think are just mistakes, you may end up with a paycheck surprise. Not in a good way.

Steps You Can (and should) Take

Student Loans- if you are more than a few months behind in payments, know that after 270 days they CAN intercept your tax return and garnish your wages. If you take steps, such as contacting the servicer, there are steps to take. If you are already in garnishment, get some legal or financial help to see what you need to do to “rehab” your account and stop the garnishment.

Other Federal Debts- similar advice, contact the Treasury Department in charge of collecting your debt, or get legal or financial help in dealing with the agency. For Veterans there may be an option for a waiver, or a payment plan so you receive a portion of your compensation while paying back principal debt.

Final tip. Remain calm and respectful. If you receive a letter, call the numbers on the letter. If not, here is the general contact site for the Treasury Collections Department. You can take back control of your money, even if you are being garnished by a government agency. Get a plan, get help if you need it, and you can get through it.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from The Law Office of Dawn K. Kennedy or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

 

 

Fun fact! The first speeding law in the U.S. was passed in 1652 in the Colony of New Amsterdam which is New York today. Thou shalt not gallop thine horse or wagon. The fine back then would be equivalent to $150.00 in 2016 dollars. Yikes! Not much has changed.

The average speeding ticket still runs around $150 nationwide, but based on the infraction, fines can range wildly from $50.00 to $2,500.00 and from state to state. Americans shell out about $6 billion annually on our “need to speed.”

For the 8 out of 10 families living paycheck to paycheck an unexpected bill like this is a big deal. The startling reality is that 28% of us cannot handle a financial emergency of even $10.00. We are strapped as a nation and are not prepared for even the most mundane of surprises. And traffic tickets are really sort of a mundane surprise. Most people (ok, not YOU) receive a ticket or two in their lifetime. Between 2010 and 2015 about 1 in 5 drivers did.

Putting it together, most of us can’t afford a ticket, any ticket. And many Americans will reach for the credit card or borrow the money from friends, family, or a lender. Even a payday lender. Because, the consequences of ignoring a citation can be devastating. Let’s face it, fines can continue to grow and in the worst case, you lose your license or car and then how do you get to work? But borrowing the money can mean interest on top of fines. And if you already struggle to make your minimum payments? Danger, Will Robinson, danger.

So, what to do? My recommendation is to get a “baby” emergency fund, set aside in a bank account, as quickly as possible. Aim for $500 to $1,000.00. Another option is to utilize the “grace period” that time between the ticket and the court date, which is approximately 4-6 weeks or a few paydays, to pick up an extra shift, make some side money, or take another part-time job to earn all or part of the cost. If you do use part of your baby emergency fund, make sure you replenish it as soon as possible after you pay your fine.

For higher traffic and criminal justice fees and fines, this can be very difficult and create a huge hardship. So, you need a meticulous plan which requires a written budget, and cutting back on expenses, which may include cancelling unnecessary services such as cable or fancy ring tones, or a monthly subscription service for the short term. But you CAN do it.

Time to think about those dings to the budget that are unexpected, but really very likely to happen at some point. Take the smart step to put some money away “just in case” and get your monthly cash flow under control by knowing where your money is going with a written budget. Be the boss of your money.

 

 

The federal government stopped mailing annual Social Security statements to everyone back in 2011. They are still available, but you have to use the internet.  I don’t mention this earnings statement because I believe the Social Security program is solvent, or have a prediction whether it will be fixed, or even necessarily believe any “projected benefits” will ever be received by the time I am ready to retire. What the statement will tell you is how much you have earned each year, as reported to the Social Security Administration, since you started working and reporting income to the SSA.

We can go back (waaaay back) to 1990 and look at the average net income earned by average Americans over the last 26 years. The SSA reports $20,172.11 in 1990 and $46,640.94 in 2016. Meaning that for average Americans, we take home more than double each year now than we did in 1990. On the bottom of the SSA statement there is a number- your total earnings to date. In other words what you have earned over your working life.

If you worked and earned an average income from 1990-1999 you would have brought home about $209,056.00. From 2000-2009 about $351,192.00. And from 2010-2016 about $304,037.00.  So, if we added the average net income earned and taken home by average Americans from 1990-2016, we get a mind blowing $864,289.00.  Well over three quarters of a million dollars. And many people earn well above that annual average.

So, what do we KEEP? According to the latest statistics? Not much. Some of us have a 401k with auto withdrawal and a match at work. But, around 20% of those with a 401k have loans against the accounts taken to cover financial emergencies!  Savings accounts are in bad shape as well, in 2017 about 57% of Americans have less than $1,000.00 in savings.

Where is it all going? To service debt. At various interest rates, for various reasons. Average Americans are paying their dollars to cars, homes, student loans, credit cards and personal loans. Excluding a mortgage payment, we send creditors a whopping $1181.00 per MONTH or $14,172.00 a year. Many Americans send much more than that to others.

It’s eye-opening, or at least it was for us. Debt is taking our income, payments that we can do other things with. Like save. Or pay cash for cool things. Or support organizations we feel strongly about. If you are ready to take back your income, you can start anytime. Even if you are still paying oodles of interest and have $1.87 in an IRA right now, its never too late to start. Its never too late to grab a hold of your hard-earned income with a plan to take back your earnings from the current situation.

If your income is flying away the moment after payday, it’s time to make it behave. Make a monthly budget and write down where each dollar goes. Give it a job. Be the smart boss over your hard-working money. Your money likes to have a job. “This month you little dollar, yes YOU, will pay the water bill! YAY!”. If you want an easy to use, free online budgeting tool, I recommend Every Dollar.  Money stress really begins when you run out of dollars before you run out of jobs for them to do. Run out of jobs and reassign your money where you want it to work!

graphic from www.indianapublicmedia.org

 

 

Ahhh, student loans. The loans for higher education that about 44 million borrowers owe at an outstanding balance totaling a staggering $1.48 trillion. That is higher than our total US Credit card debt! But national statistics aside, where student loan debt looms over the average family its personal and distressing. The average student loan debt in 2017: $37,172.00! I know, I know, loans have enabled many people to go to school who couldn’t afford it, but nobody foresaw this mess! College costs exceed the cost of inflation! Lots of people don’t finish…

Many students take the loans without really counting the future price of carrying this type of debt. And for those who do not graduate? Well, your loan for the entire semester was disbursed to the school- and you owe it. Student Loan debt is a huge stressor for new college grads, with the monthly payments making it hard to get a car or save for a home .

And there are pretty scary steps that servicers can take when you owe and don’t pay, including garnishing wages and social security checks without a lawsuit. And getting rid of these obligations is not as easy as some others because these loans are typically not dischargeable in an average bankruptcy (for now). Finally, while there are currently NINE different payment plans for federal student loans, some stretch out the terms of the debt for 25-30 years. That is a mortgage!

The only way to get rid of these loans is to have a plan and pay more than the monthly payments. These guys need to be attacked with a vengeance. I mean, who wants to have an education debt for 10-25 years? Or have a high debt to income ratio on their credit report? Yeah, credit reporting includes the total amount of the loans and any balance increases accruing monthly. There are real dangers in these high balances on reports for people who have security clearances or must have a background check for employment. But where to start?

These steps are for federal student loans. For private loans, contact your lender.

First, get your loan balance, monthly payment, status (for each if you have more than one), and type of loan from the National Student Loan Data System (NSLDS). https://www.nsldsfap.ed.gov/nslds_FAP/ Note that there are several types of loans. Federal Family Education Loan (FFEL) and Direct Loans are two common types taken by students, and Parent PLUS loans by parent borrowers. The type of loan is important because not every loan type is available for all payment plans. It’s complicated.

Second, if you have multiple loans over several years, listed as “Loan 1,” Loan 2,” etc. they will be listed by amounts and dates of disbursement. You may benefit from consolidation of the outstanding loans into one or two. Often Unsubsidized and Subsidized are consolidated separately. Subsidized means Congress pays the interest while you are in deferment or forbearance, so they accrue interest differently and have a different character than unsubsidized, where interest accrues immediately upon disbursement. There is a limit to the number of consolidations you can do, and the credit agencies will report it as a “new loan.” This will likely affect your credit score, if you are worried about your FICO.

Third, check out the federal loan “repayment estimator” to look at the payments that may be available. https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action.  CAUTION some plans are based on your loan balances, some are based on your current income and go up in payment every few years, and some require entrance into a program that you must requalify for each year or your loan converts to the “10 year standard plan” with the highest monthly payment. Also, for some programs, the interest will automatically “collateralize” or transform into “principal” added to the loan… and interest then grows on the new principal. READ THE FINE PRINT.

Again, the best way to get out of the student loan mess is to get serious about kicking student loan debt out of your life. Payments above and beyond the minimum are going to make a dent faster than just treading water with monthly payments. I firmly believe no one should be in debt for 25 years to earn a college degree. Seriously, read that again. In debt for 25 years to earn a college degree. But before you can start to make plan, you need to know your “enemy.

https://studentloanhero.com/student-loan-debt-statistics/

ii  https://www.debt.org/students

iii] https://www.cnbc.com/2017/10/17/student-loans-take-a-mental-toll-on-young-people.html

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from The Law Office of Dawn K. Kennedy or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.