Category: Uncategorized

A Scammer DM’d a Consumer Lawyer

Posted on by Dawn Kennedy

So, a Scammer DM’d a Consumer Law Attorney. Stop me if you’ve heard this one. It’s actually not funny at all, but it was for me, because I got the last laugh. Why? I immediately reported the attempted scammer to the Federal Trade Commission. I’m not alone, 1.4 Million people reported fraud to the FTC last year. Unfortunately, people also LOST $1.48 BILLION to fraud as well. People in their 20s made up of 43% of reporters, while people in their 70s made up only 15%. The median amount of loss to fraud last year was $400.00 for people in their 20s, and $751.00 for people in their 70s.

The amount of fraud is staggering. As is the underreporting of fraud. If you do the math- an average of let’s say, $600.00 per person multiplied by 1.4M reporters comes nowhere near the $1.43B lost. People who are victims of fraud are often ashamed to admit it to family or friends or report it. Other reasons people don’t report are; the amounts are often low, under $1000.00, so it’s not worth the hassle, or they don’t know how to report fraud, or, for some people, including older Americans, they don’t feel comfortable reporting via online app.

The fact is, fraudsters can take even the savviest among us, there is easy reporting available online, and reporting helps protect our friends and neighbors because the FTC can track the frequency, source and types of scams from reports. So, let’s change the conversation. If you send money or a gift card or reloadable card to a scammer, take the 5 minutes to report it. If your family or friends have been victims, encourage them or assist them in reporting. Here’s how:

1. Go to the Federal Trade Commission website: www.ftc.gov and find the “report a scam” link. This brings you to the “FTC Complaint Assistant.”

2. Select the type of scam you want to report- yes, there are a lot of categories! Yes, there are a lot of predatory, nasty people out there.

3. Fill out the form as completely as possible. If you receive a number, email, or even a social media conversation, please include that info. I took a screen shot of mine, so I had it to report.

4. Keep the record of your report. There is a report number and a phone number to call in case you get more info later.

It literally took me 5 minutes. And I received a sense of satisfaction as well. I’m not going to lie, it is empowering to, “have something to do about it,” and I do it every time. Remember this the next time someone tries to “advice” you on how to apply for YOUR $150,000.00 grant. You can’t say he wasn’t warned!

Student Loan Deferment for Cancer Treatment Snag

Posted on by Dawn Kennedy

There have been comments on one of my email Listservs regarding the Department of Education Act, 2019 provision allowing federal student loans to be put into deferment during a borrower’s active cancer treatment. President trump signed this bill in September of 2018, and it was supposed to be effective “immediately.” Unfortunately, borrowers hoping to receive this relief have faced obstacles.

The primary problem is that the Department of Education still has not provided the application for borrowers to apply and to be given a deferment. If granted the forbearance, the student loans are on “hold” during active treatment, and then for an additional six months after treatment has ended. Instead, many borrowers have received “forbearance” from their servicers. The loan status of “deferment” is incredibly important (as opposed to forbearance) because in some instances the interest on the loans won’t continue to accrue on the balance. The Department of Ed has a webpage for the loan typeswithout interest accrual.

The most important thing, from my perch anyway, is that under many circumstances, an adjustment to an Income Driven Repayment Plan (IDR) may be a better long-term option for borrowers going through treatment. Putting loans in deferment, versus adjusting to a lower or “zero” payment, may be much more expensive in the long run, and the non-dischargeable status of these loans in bankruptcy has been confirmed over and over recently by the courts. For Parent Plus Loans, which do not receive an interest free deferment unless the parent also has other student loan where they are the student, placing them in Income Contingent Repayment(ICR) may be the better option for the future.

Of course, if you or a loved one are going through a cancer treatment plan, the LAST thing to worry about is student loan garnishment or tax intercept- so make sure you get them handled quickly. You can download my free eBook on Federal Student Loans, “Do You Have the Right Student Loan Payment” for step-by-step guidance on getting your options.

Guest Blog: To Pay or Not to Pay? That is the Student Loan Question Facing Thousands in PSLF

Posted on by Dawn Kennedy

By Mitch and Cheryl Ekstrom

There’s a great deal of conversation swirling around the possibility of creating a big-government loan forgiveness program to end the student loan crisis. Call us cynical, but the current student loan crisis originated as a big-government program. But is it cynicism or is it experience? You decide – because there just already happens to be a big-government Public Service Loan Forgiveness (PSLF) program.
“Great!” you say. “How’s that working out?” you say.

Here’s where the experience part kicks in: “Terrible!” we say! Less than one-half of one-percent (0.005%) of all PSLF program applications have been approved. By the way, there have been over 41,000 applications and only 206 have had their loans forgiven!.

We’ve seen it in our coaching practice. One of our clients is an attorney for a non-profit who is 6 years into her 10 year loan forgiveness program. She has been hearing from peers who are a few years ahead of her that many of them are being rejected on technicalities. So big-government doesn’t mind messing with lawyers. Hmmm… that’s what we call a telling sign.

Between articles like the one above and our client’s experience, we generally recommend that people in PSLF programs be exceptionally attentive to meeting every detail of the repayment requirements. Servicers have misapplied payments or put people in forbearance “for a month or two”, meaning the borrowers do not have the required 120 “on time” payments”. But based on the actual numbers (the first PSLF borrowers were eligible for forgiveness in 2017!) people are taking a big risk in PSLF and they’d better have a plan B for paying it off – over years beyond the 10 years it takes to get to that supposed forgiveness point. However, that is a general recommendation for everyone in the program, the specifics must be personal to the circumstances surround the debt, the income, future increases in earnings, and other existing debts.

To get to a specific recommendation, we must assess the client’s overall financial situation, risk tolerance and goals. Below is a recent, real-world scenario in which we walked a client through two options for paying off their $106,000 of student loans, with the first payments starting this coming December. Everyone has a different scenario, and not everyone has this much student debt, but this illustrates HOW someone can reduce the risk of having student loans follow them around for the rest of their lives if the PSLF program goes away (and it could at any time).

Option 1:Starting in December, make 10 years of minimum monthly payments totaling $654 per month on each of 10 or 12 different student loans (they didn’t know exactly how many or what kind of loans, but they did know the minimum total payment) then hope against hope the remaining balance will be forgiven under the PSLF program. This is the option many people are counting on.

Option 2: Based on current income, projected income and all debt; pay off all non-mortgage debt, including their student loans, in 60 months and invest like they mean it the other 60.This is the option people in PSLF have a hard time with, but you’ll see the math- it’s the better option for long term finances!

Unpacking Option 1:
The 2018-2019 federal student loan interest rates are currently 5.05% for undergraduate loans, 6.60% for unsubsidized graduate loans and 7.60% for direct PLUS loans (2). Based on this, we used an average of 6.5% across their loans and derived the below calculations from this amortization schedule.

Using the June loan balance of $105,969 provided by the client, by the time they start paying on their loan 6.5% in December, it will have grown to $109,839.
In ten years of $654/mo. payments, they will pay $78,480 on the loan. And remember, Congress sets interest rates so it could easily change over 10 years. But let’s say it stays the same, and they pay the 120 payments at $654/mo. After all those payments, the balance on the loan will be $100,009. That’s right, people! $78,480 of payments over 10 years only reduced the loan amount by $9,830. But, they could have the $100,009 loan balance forgiven. THEY PAID $78,480! They just have to be one of the less than 0.005% who are approved. What could possibly go wrong!?

After all, let’s face it: $100,009 is a big windfall for the lender. So, one can see why they would be looking for ways to disqualify people. Might this contribute to why the terms and conditions of compliance with the numerous student loan agreements are really hard to understand and follow? But that’s probably just being cynical! So let’s just go ahead and assume they will have the loan balance forgiven without a hitch.

Unpacking Option 2:
Using this calculatorif they paid off the student loan in 5 years and invested the $654 per month at 12% (1); they would earn $53,946 over and above their student loan payoff. The faster you pay off those loans and the balances are reduces the loans are less subject to the interest they add.

However, there is another important piece of this client’s puzzle. They make a good salary and can pay off to pay off almost all of their other non-mortgage debt quickly, before the student loan payments start in December. The payments on that other debt alone is $1280 per month! Once those debts are gone, they free up that $1280 to add to the $654 minimum student loan payment. Their four wall budget won’t change, because the they’ve been paying debts every month with that money. Added together, they would throw $1934 per month at the student loans and pay them off in less than 65 months. And all of this math is before ANY of their soon-to-be-received significant pay raises this year (over $30K total); let alone any future pay raises over the five years (2).

Hypothetically, in the ten years they would make the large student loan payments, but only enough to pay it off in 60 months, but then invest their $1,934 for the next 60 months. They would have $159,529. In cash. In the same ten year span as someone waiting for the PSLF program to approve them.

So making minimum payments for 10 years while gambling on the long-shot of having the loan balance forgiven — instead of getting focused on paying off all debt in 5 years and investing the income they weren’t living on anyway because they were servicing all sorts of debt — while being exposed to multiple years of risk with way less cash reserves – is at least a $59,520 mistake.

Inevitable Math – 1
Servicing Debt – 0

But there’s one more factor which makes this early debt retirement and accelerated investment scenario even better: They have cut 5 years of financial risk out of their lives from a $100K+ loan hanging over their heads; a loan that can’t even be cleared by a bankruptcy! And, as frequently cited by one of America’s most trusted sources of financial wisdom, the nationally syndicated radio talk show host and multiple New York Times best-selling author, Dave Ramsey: In any 10-year period you have an 80% chance of experiencing a financial setback. So this risk factor is real and that makes it a big deal!
So, as you assess your own total debt load and options for getting your money back to work for you instead of the lenders, we hope this real-world scenarios helps. And if you want help assessing all the myriad details of your situation, consider contacting a Ramsey Preferred Coach. They are professionals with a mission to help you win with money.

(1) Based on the average return of the S&P 500 since its inception in 1926 of 11.69%.
(2) Given projected income increase, they could easily pay it off much faster than 60 months. But for the purposes of the illustration, we kept it to the more conservative 60 months of growth.

About the Authors:
Mitch and Cheryl Ekstrom celebrated their 41st anniversary in December and their first great-grandbaby is on the way; due July 7th. Mitch spent more than 30 years of active duty in the U.S. Coast Guard and is now an IT professional on the largest financial system of its kind in the world. Cheryl manages money for the Physics Department at the University of Maryland. Prior to that, she managed multiple bank branches. As a young couple, they made babies faster than money; so they borrowed — a ton of it — which led to real-world money struggles. But they have been living out, teaching and coaching the Financial Peace University (FPU) principles since Sep of 2009 and it has changed everything!

They have led 70 of Dave Ramsey’s classes — not just Financial Peace University — and have taught and coached over 850 couples, singles, teens, co-workers and family members. They’ve held classes in churches, at companies, on military installations, in Mitch’s office and in their home; sometimes three at a time. In addition, they have run numerous financial wellness seminars and budgeting workshops, given talks on money and relationship issues at marriage conferences, and delivered corporate training to reduce financial drama in the lives of the workforce — all by word of mouth. They’re happily so busy; they haven’t bothered to create a web-presence.

Closer to home, they’ve been blessed to see five generations of both their families achieve dramatic improvements in their finances and most every relationship in their lives. So no one can tell them this doesn’t work. It’s not a theory. They are multi-generational practitioners who are passionate about helping others experience the same strength and hope.

They can be reached at:

Mitch and Cheryl Ekstrom
Ramsey Preferred Coaches
Dollar$ense, LLC
301-466-7194
mecaekstrom@aim.com

DOLLAR$ENSE
Eliminate debt. Build wealth.
Gain financial speed going uphill.

Guest Blog: A 4-Step Plan for Boomers (and Gen Xers) to Catch Up Retirement Savings

Posted on by Dawn Kennedy

By, Mitch and Cheryl Ekstrom

Half of all Boomers (and the upcoming Gen Xers) have done little-to-nothing to prepare for retirement. Many have given up on the hope of a reasonably comfortable retirement. Currently, around half of them begin taking Social Security at age 62. The current maximum Social Security benefit at age 62 is $2,209 (1) – or $26,508 per year. As an hourly wage, it would be $13.25.  Nationally, boomers estimate their average annual cost of living in retirement at about $46,000 a year (2). If they have the Social Security benefit listed above, where will they get the $19,492 needed to close the gap to $46,000? Working? Maybe.  But there are other steps you can take NOW for those who haven’t yet reached retirement age, and some ideas for everyone, even if they have.

Imagine if a few small changes, just different choices immediately, could add $175,000.00 to the nest egg. Let’s take the example of a 50 year old couple who decide to get a plan to remove all debt and start saving the money they could by making just a few different decisions until they are 67. What if they invested the money for those 17 years, with a good portfolio of mutual funds. They would:

1. Stop Eating Out all the Time. The average person will save about $37.00 per week by eating in. Our couple has saved $295 per month. If they invest this at a very reasonable 7% annual growth until age 67, they will have built $116,239.00!

2. Buy Nice Used Cars instead of New Cars. Let’s have them stop buying new cars every three years. The average new car loses at least 20% of its value in the first year and 10%-15% per year over the next four years. (3) Let’s also say our couple was only buying inexpensive new cars at $25,000. Applying the lowest loss rate on inexpensive new cars, their car would lose $10,000 in value in three years. If they cut that depreciation in half, with a gently used car 2-3 year old car, they could save $5,000 every three years. The resulting $1,667 per year, if invested at 7% until age 67, would produce another $60,311.

Just these two changes, eating in more and driving used cars, would add $176,550.00 in savings to their nest egg.

Next, Paying Off Debt is the biggest step Boomers and Gen Xers need to take to save for retirement.

3. Lose the Credit Cards. The interest charged by credit cards averages 19.24%. (4) The average boomer carries $7,041 in credit card debt (5) So let’s get a solid plan to pay them off and invest the annual $1,354 saved on interest payments at 7% until age 67 — adding another $48,971. That is just the interest! Think of the monthly payments that are no longer owed!

Three steps, and they’re at $225,521.

4. Get Rid of the Mortgage. Today’s Boomers are carrying the greatest amount of mortgage debt into their retirement in the history of our country. (5) We have a few ways to save here. If our sample couple has a 7% rate on an average mortgage and refinance to 4.125%, their payments drop about $6,000 per year. If invested over 17 years at 7% they will add another $216,947 to their nest egg. That is just interest savings. We haven’t discussed paying the mortgage off, and investing that former payment!

So, four steps. Small decision changes that can add $442,468.00 in total!

Let’s assume they did all the investing in a traditional IRA and it didn’t grow from age 67 to age 70 1/2. Their required minimum distribution at age 70 1/2 on that amount is $16,697 ($442,468 / 26.5). (f) This amount added to the maximum Social Security payout at age 62, puts their annual income at $43,205 — just $2,795 away from their estimated $46,000 of annual expenses in retirement.

Imagine how much more they would close the gap if they got serious enough to give up $5 lattes, stops at the local pub, took staycations instead of vacations, eliminated unnecessary drives, did serious meal planning, operated only one car — and any number of other cost cutting measures. And paid off their mortgage.

Of course we haven’t spoken about the increased expenses that come with aging. But we also haven’t addressed the myriad of ways our couple could have increased income over these 17 years. So it seems there is money to be saved, earned and invested; and even if they make only half of the adjustments cited above, they’ll be way ahead of the, “…done little-to nothing- to prepare…”, crowd. The reality is that once you give your money to another person, both it and it’s time value are gone forever.

Difficult? Yes! But not compared to waiting! Each month of delay makes it tougher. And doing these things of their own accord is highly preferable to spending 20 to 30 years living in poverty or relying on children or charity or some combination of the three.

So it’s time to get smart about our spending, saving and investing. Let’s get our money back and put it’s time value to work for us instead of the lenders!

So get after it, Boomers (and the rest of us) and let’s do it now! You don’t have to be broke in retirement. If you need help putting a complete plan together to get started and/or make up for lost time, consider hiring a Ramsey Preferred Financial Coach. These hi-octane professionals are loaded with information, tools, training and strategies to help you.

Eliminate debt. Build wealth. Gain financial speed going uphill.

Mitch and Cheryl Ekstrom are Ramsey Preferred Coaches and Financial Peace University Coordinators. They lead financial wellness courses to help people of all generations get debt free and save for retirement. Mitch and Cheryl turned their own finances around 10 years ago  and have witnessed first hand the financial knowledge now pass to five generations. They celebrated their 41st anniversary in December and their first great-grandbaby is on the way; due July 7th. Mitch spent more than 30 years of active duty in the U.S. Coast Guard and is now an IT professional on the largest financial system of its kind in the world. Cheryl manages money for the Physics Department at the University of Maryland. Prior to that, she managed multiple bank branches. They can be reached at:

Mitch and Cheryl Ekstrom, Dollar$ense, LLC, 301-466-7194, mecaekstrom@aim.com 

(1) https://www.fool.com/retirement/2018/10/21/heres-the-maximum-social-security-benefit-in-2019.aspx

(2) Bureau of Labor Statistics as cited by https://finance.zacks.com/average-cost-retirement-4951.html

(3) https://www.finance101.com/new-cars-lose-value/

(4) https://wallethub.com/edu/cc/average-credit-card-interest-rate/50841/

(5) The Stanford Center on Longevity report, Seeing Our Way to Financial Security in the Age of Increased Longevity, points to an increase in mortgage debt among older homeowners as a concern, noting that in 2012, one-third of homeowners over 65 were still paying off a mortgage – up from less than a quarter of homeowners in 1998. And, the amount owed on a mortgage has nearly doubled from $44,000 to $82,000 (as cited in https://www.housingwire.com/articles/47364-stanford-boomersare-entering-retirement-with-less-savings-greater-mortgage-debt).

(6) https://www.irs.gov/publications/p590b 

Congratulation Grads! What to do About Your Student Loans

Posted on by Dawn Kennedy

 

Anyone who saw the news this weekend saw the incredible act of generosity by billionaire philanthropist Robert F. Smith, the commencement speaker at Morehouse College, in Atlanta. Mr. Smith paid the student loan debt of the 2019 graduating class- a total grant of about $40 million dollars. For most graduates, however, student loans will follow them long after the diploma is received.

Many students are on the “Student Deferment” program for their loans, but after graduation, payments begin in six months. What do they do next?First and foremost, students must have a plan. They must have a budget. Then three steps: 1. get to paying as soon as possible on a repayment plan, 2. get out of the student deferment before it statutorily ends and, 3. stay out of forbearance in the future. Going into and out of forbearance is the fastest way to grow a student loan balance. Why? Because the interest capitalizes every time the loans go into and out of forbearance, and when students change payment plans. Capitalization means that the outstanding interest becomes a part of the principal balance, and you then pay interest on the new principal. This is a reason that student loan balances balloon.

The first issue, that few borrowers truly understand, is that during student deferment unsubsidized student loan interest already capitalizes quarterly for the length of the deferment. Four years of loans every semester, unsubsidized interest amounts capitalizing every quarter. This is why students graduate with thousands of dollars of student loan debt amounts over what they actually borrowed. So, during school, these loans are growing. After graduation, many students are faced with large payments they cannot afford on the “Standard Repayment Plan” over ten years, so they immediately put the loans into “forbearance” and a payment is no longer due. But once again that unpaid interest will capitalize every time the loan goes into and out of forbearance.

So, what to do? Here are a few first steps.

1. Have a budget and include in the budget the biggest student loan payment you can afford. Things may be “tight” again for a little while but getting right into payments and staying out of forbearance will make loan payoffs faster and less expensive.

2. Download the Student Loan Guide, “Do You Have the Right Student Loan Payment” from my website and follow the steps to retrieve your total federal student loan data from the National Student Loan Database (NSLDS). From there, check your loans CARFEULLY, to make sure they are, in fact, yours. Look at the disbursement dates, and make sure you were attending. Mistakes sometimes happen.

3. Use the Debt Snowball for the individual loans. If you can avoid consolidation, you can stack your loans from lowest total amount to highest, and attack the debt using a “debt snowball.” As each loan is paid, you will have a huge sense of accomplishment, and the motivation to keep going.

4. Avoid Forbearance. If you cannot make any payment at all AFTER your student deferment period ends- call your servicer and get into a payment plan, do NOT go into forbearance. If you graduate this month, you have a few months before the first payment is due. Get moving on these, but if there is an unavoidable reason you just cannot make the payment, get into Income Driven Repayment, or some other plan, and make sure you absolutely re-certify every year. When you go into and come out of IDR, guess what? Your interest capitalizes.

In my humble opinion, it is this interest capitalization that is making student loans hard to pay off. And when people enter into forbearance, it is because there is a short-term issue causing a hardship or some other issue. The servicers will happily put you into forbearance, “so you don’t have a payment due for six months” but in the long run, it actually hurts the borrower financially. We need stronger disclosures.

Best of luck to the class of 2019! May you find your joy and excitement felt during “Pomp and Circumstance” lasts for years as you leave college and embark on the rest of your journey!


image credit: gocollege.com

 

Medical Debt and Payment Plans- The Medical Debt Relief Act

Posted on by Dawn Kennedy

“The hospital is saying that if we need a lower payment, we have to take out a loan.” I wouldn’t have believed it myself, but that statement came from my client. I actually was at a loss for words. “So, if you do not make the minimum payment the hospital has set you up with on the “plan” they won’t accept any payment at all?”  Apparently, that is what the hospital told them. So, what to do if you are faced with this issue? Let’s talk about it.

First of all, the hospital is not required to carry your debt balances. They can decide that they will make payment plans with patients, provided the debt is paid in 12 months, or 6 months, or whatever. To be honest, medial providers of all types, private doctors, hospitals, labs, etc, are often very quick to turn an outstanding medical debt to collections. It is that fear of collections that can cause consumers to make mistakes in handling these debts.

About 18 months ago, on September 15, 2017, the three credit reporting agencies, Equifax, Experian, and Transunion changed the way they report medical collections on the consumer’s credit report. These changes were designed to help consumers who are paying medical bills on a payment plan or are waiting for insurance to pay some or all of the outstanding debt. I wrote about this briefly in an earlier article, it is not unusual for insurance claims to be filed with errors, and payment is delayed.

What to advise my client? Well, if you cannot afford the payment, and it was a very large payment, the bill will probably be sent to collections, but until it is, make your lower payment amounts to the hospital. Do not stop paying because you cannot afford the amount they are asking. And I gave them the same option I am going to share here. These are the things to consider if your hospital is threatening to send you to collections because you cannot afford their plan.

First, DO NOT take out a loan or put the balance of a medical debt on a credit card. It changes the “character of debt” from medical to “personal loan” or “credit card debt.”  The reporting agencies will not report a medical collection on the consumer’s report for 180 days, that’s six months, after the account is sent to collections. This gives consumers six months to pay the debt in full. If you change medical debt to anything else, you are adding interest, and any late payment can be reported.

Second, many medical collection accounts can be removed, once they are paid. In certain scoring models used by creditors, paid medical collection accounts do not factor in at all, even if the paid debt is not removed.

Third, there will be more flexibility to lower your payment each month with a collection agency. Collectors want a payment. Period. If it takes longer than six months, see above.

Fourth, do not make the medical debt payment at the expense of any of the family’s “four walls.” Food, utilities, rent or mortgage, and transportation are the priorities with your income. PLEASE do not put your “FICO” in front of the electric bill or pay the debt before you get food in the pantry.

The last little tidbit of news here is that the credit reporting agencies must remove any medical collection account within 45 days after it is paid in full by insurance. As I said earlier, mistakes in claim filing, not by the consumer, but by the provider, can delay payment beyond the six months.

 

The Consumer Lawsuit Part II- When a Consumer Should Sue

Posted on by Dawn Kennedy

In the first article of this series, I discussed the consumer lawsuit from the perspective of the consumer as defendant, meaning the consumer received a lawsuit from a creditor, debt collector, or debt buyer. In this article, Part II, I want to discuss when a consumer might consider suing a creditor, debt collector, or even credit reporting agency (Equifax, Experian, or Trans Union).  I want to say what I said last article, very few people like lawsuits, they can be time consuming and emotionally draining.  Consumers file suit against collectors at a far lower rate than collectors sue consumers. Unfortunately, there are times where a lawsuit may need to be filed by a consumer to stop abusive practices against them or to correct inaccurate information causing serious consequences. Here are two instances when a lawsuit may be the consumer’s only real option.

1. If after the consumer has tried all of the self-help strategies available and the collector or credit agency is refusing to comply with the law, a lawsuit may be necessary to protect the consumer’s legal rights. There are many, many steps a consumer can take to try and work with a collector or credit reporting agency, whether the debt is owed. Here are some resources for different types of consumer problems that outline what the consumer can do on their own, without legal assistance:

A. Identity Theft. If the consumer is a victim of identity theft there are steps to dispute debts and credit reporting items that do not belong to the victim. If the consumer follows these steps, and the collector or credit reporting agency refuses to comply with the law, a lawsuit may be necessary.

B. Collector Harassment. Even when a consumer owes the money, there are federal laws that protect consumers from misrepresentation and abuse by collectors. A great resource describing the limitations on debt collectors, what they are allowed to say or do, and not allowed to say or do is available on the Consumer Financial Protection Bureau Website. If the collector continues to violate the law, a lawsuit may be necessary.

C. Credit Reporting Errors. If the consumer has already disputed mistakes on their credit reports with Experian, Equifax, and TransUnion. The steps for consumers to order a free report from each of the bureaus and dispute any items on the report is found on this Federal Trade Commission Link. It is important to note that the credit reporting agencies are just that, reporting information provided by the “furnishers” of information- creditors, collectors, debt buyers, the IRS, bankruptcy courts, etc. If there is an issue with the organization that granted credit, the consumer must make sure to address the dispute with the furnisher as well.

2. If the Consumer is sued by a collector, creditor, or debt buyer, violations by these organizations may be grounds for a counter-suit (cross-complaint) at the time the consumer is sued. When the consumer has suffered frustrating months leading up to a lawsuit by a collector who does not follow the law, the consumer may bring a counter claim against the collector. In the last article, I talked about when a consumer receives a lawsuit, but if the consumer has been a victim of abuse, harassment, misrepresentation, etc, these claims can often be brought in court even when the consumer has been served.

 A collector or creditor does not get a pass on following the law just because the consumer is sued to collect a debt.  If a consumer receives a lawsuit, they should speak with an attorney. Look to local legal aid societies or find a “debt defense” or “consumer law” attorney for help. The consumer must respond to any lawsuit quickly, and if counter-claims are available, they must be filed with the answer.  If the consumer is represented by an attorney, the collector can only talk to the attorney, and no longer contact the consumer directly.

State Laws for Consumers and Other Protections for the Military
It is also important to note that most states have consumer protection statutes, many that are similar to the federal statutes. For Example, In California there is a body of law under the Unfair and Deceptive Acts ad Practices (UDAP) that protect consumers.  This means that the collector may have violated state law, and there may be a lawsuit in state court available to the consumer to protect their legal rights.   If the consumer is a military member (or dependent in some cases) there are specific laws such as the Servicemen’s Civil Relief Act (SCRA) and the Military Lending Act (MLA) that may be available to a military consumer. The military consumer can contact the local Judge Advocate General’s (JAG) office for assistance.

The Consumer Must Preserve Their Rights by Keeping all Letters and Starting a Call Log.   First, the consumer should save EVERY piece of correspondence received from a debt collector or creditor. If a law firm sends a letter trying to collect, save it. Start a folder and save everything. Second, start a call log. Texts, calls, and email messages. There are rules about identifying themselves as a collector, and a requirement to let the consumer know they are calling to collect a debt.

Note when a phone call is received or when the consumer makes one, who they talked to, any promises made, and what the outcome of the call was. In this day and age, we have caller ID, and we can note the date and time of calls, voicemail messages, and hang ups. It is critical that the consumer preserve this proof that they are receiving calls in violation of the law. And many collectors call in violation of the law. Either too early in the morning, or too late, or at work, or even after the consumer requests they stop calling.

Also note the outcome of the conversation. Did the collector promise to send something? Promise to remove the consumer form the auto-dialer?  Promise not to call because the consumer made a promise to pay, “next Friday?” Write it down. And as frustrating as it may be, dealing with the collector, the consumer must not BREAK THE LAW themselves. The collector will advise the consumer that the call is being recorded, but depending on state law, the consumer may not record the conversation. Write it down. 

Part III of this series on the Consumer Lawsuit will address what the consumer should expect (in most instances) if they decide to file a lawsuit against a creditor, collector or credit reporting agency.  Unlike the collectors who often have teams of lawyers (or are lawyers), many consumers do not have an advocate, know where to get one, or are afraid of the costs involved. These are all real concerns, particularly if the consumer is already in financial trouble.   

 

 

The Consumer Lawsuit Part I: Consumer as Defendant

Posted on by Dawn Kennedy

Creditors and debt collectors sue consumers on all types of delinquent debt, including credit cards, medical bills and auto loans. Honestly, very few people like to be involved with a lawsuit. Bringing an action in court is time-consuming and can be both frustrating and emotionally exhausting.  If a collector escalates a delinquent debt into a lawsuit many times it is because the consumer fails to respond to attempts to collect or cuts off any collection action with a cease and desist letter. Unfortunately, it is not always possible to avoid a lawsuit. When the consumer is properly served (with notice of) the lawsuit papers, a response to the complaint is the best course of action.

Debt collectors (and creditors) file many more lawsuits each year against the consumer than consumers file against the collector. Statistics compiled by data and analytics firm Web Recon, LLC reveal that consumers filed 15409 lawsuits under three consumer protection statutes nationally for the entire year in 2017. These lawsuits were filed under the Fair Debt Collection Practices Act (9784 times), the Fair Credit Reporting Act (4346 times), and the Telephone Consumer Protection Act (4392 times).

For comparison, during that same timeframe in Texas, and only Texas, creditors and collectors filed over 160,000 lawsuits against consumers. That’s right, in 2017 lawsuits filed against consumers to collect a debt in Texas were ten times the number of lawsuits filed nationally by consumers against collectors. The ugly truth is that a recent Consumer Financial Protection Bureau Debt Collection Survey found about 1 in 15 consumers with a debt in collections was sued in 2017. Scary numbers, but consumers have rights in these suits, and often do not assert them. The purpose of  the rest of this article is to provide the steps a consumer can take to ensure their legal rights are protected. 

First and Foremost Consumers Should NEVER Ignore a Lawsuit

Depending on where a consumer lives, a response to the complaint will be due back to the court quickly, typically within 20-30 days. If the consumer (now the defendant) does not respond, they can lose their right to defend themselves in court. If the debtor ignores the lawsuit the collector can get a “default judgment” against them, meaning the plaintiff collector will get an order from the court saying the consumer owes the money without needing any evidence to prove it. The collector wins automatically because the consumer didn’t show up to the court hearing. With that default judgment in hand, the collector has a legal right to collect the money awarded by the court, often with additional collection and attorney fees. Collectors can take that legal order and attach the consumer’s bank accounts, garnish wages, etc.

Consumers Should Seek Legal Assistance Pronto

Contact an attorney or local legal aid program. It can be a result of a consumer’s shame or fear that will stop them from contacting a lawyer. Most legal aid programs offer legal help either free or for a reduced cost. There may be debt defense options available to the consumer, such as having the creditor prove the amount of the debt owed and even that they have a legal right to collect the debt. With the recent proliferation of “debt buyers” which are debt collectors who buy debt accounts from other companies, often the original creditor, who has already written off the debt. Many times the creditor who sells the account databases with the list of debts does not guarantee the accuracy of the accounts they sell to debt buyers!

Some of the accounts that debt buyers receive are inaccurate, or too old to sue on, or may be already paid off, but weren’t cleared from collections before they were sold. Yet, these debt buyers will aggressively attempt to collect on these mistakes, or file suit. It doesn’t really hurt the collector to file a suit with the anticipation that the consumer won’t show, and they will get a default judgment. If the consumer responds and appears in court, they may even drop the suit right then. If the consumer ignores the suit because they were scared, or believed the suit was a mistake, when they don’t respond the collector wins. Every consumer who receives notice of a lawsuit should at least speak with legal counsel.

If You Find a Judgment by Checking Your Credit Report

Sometimes a consumer will only learn about a lawsuit from their credit report. A default judgment was entered under “public records” and the consumer never even received notice of the lawsuit! This tactic is affectionately known as “sewer service” and is used by some unscrupulous organizations to secretly file suits to get default judgments on debts. And this tactic is illegal. Consumers must be personally served the with the lawsuit. In our system of justice, the party being sued has the absolute right to notice and must have a chance to respond to a lawsuit.

In Part II of this series, I will discuss the steps consumers can take as plaintiffs under a number of consumer protection laws. These statutes cover areas such as debt collection and consumer credit reports. There are instances where the consumer may have to bring a lawsuit under one of these federal statutes to stop illegal and unlawful actions taken against them.

 

More Americans under Financial Stress Than Five Years Ago

Posted on by Dawn Kennedy

Stress due to financial issues is a real concern for Americans. Studies have been done on this topic. It’s actually quite amazing how people can manage this stress over a long period of time. The average person struggles for three years, yup, 36 months, before asking for help or considering bankruptcy. With 78% of American families living paycheck to paycheck, there are a whole lotta people paddling like a duck furiously under the water trying to look like they are smoothly swimming through the waves.

The American Psychological Association (APA) did a study in 2014, just five years ago, that found 72% of Americans felt stress related to finances “occasionally” and 22% felt “extremely stressed” about their finances, that is more than 1 in 5. Fast forward to 2019. The economy is doing better, and the unemployment rate is low, but we are no less stressed about our money. In fact an October 2018 survey revealed that now 52% of respondents reported that they are are “regularly stressed” by finances. We are going the wrong way. And Americans, businesses, and entire communities are suffering.

The obvious effects of financial stress – depression, anxiety, insomnia and headaches- directly affect the physical wellness of each person. It follows that when we are under financial stress, we get sicker. But there is a lot more to this. Americans with financial stress tend to either take action, or “freeze” and don’t take an action, that compounds the financial issues longer into the future. One 2016 study found that 1 in 5 people with financial stress either thought about missing, or actually missed a needed medical appointment because of money concerns. This decision further increases the risk of illness, and potentially the loss of pay from missing days of work. But physical illness isn’t the only effect. People with financial stress are also more prone to skipping work, but not while actually ill. The effects of not sleeping and anxiety can make going to work very difficult. Staying home can mean losing hours, reducing the paycheck and compounding the crisis.

And the effects of financial stress go beyond individuals or families. Businesses are affected by financial stress by both employees, and the business itself. Financial stress can affect productivity and attention at work. Study data, from integration firm Innovu, released in February 2018 reported a, “financially stressed employee” will spend an average of 20 hours a month on financial issues at work. Also, that 70% of workplace accidents are due to distractions caused by stress in the workplace. And a financially stressed business will affect workplace morale due to real concerns about financial insecurity. This insecurity can lead employees to find new jobs, leaving the business short staffed, adding to and perhaps accelerating business reorganization, bankruptcy, or outright failure.

Financial stress also affects whole communities. Neighborhoods that have a large number of residents facing financial insecurity tend to have a higher use of prescription drugs for pain and depression. Financially stressed residents are often in poorer health due to the physical effects of long term stress. Additionally, involvement in community activity tends to decrease in neighborhoods where there is financial distress, and increase where there is a sense of neighborhood financial well being.In fact, financial stress was identified as a top community health concern in an entire midwestern county. Olmsted County, Minnesota is implementing a strategic initiative through 2020 to improve community health.

The impacts to the family, health, work, and community from financial stress are brutal. But there are some steps that anyone can start immediately, these can’t fix anything overnight, but sometimes just knowing where to start can help to reduce stress.

  1. Take a breath. Admit that you are tired of this, in fact you are Dave Ramsey, “sick and tired of being sick and tired.” And you are deciding now that things are going to change. Read those statistics, you are not alone, and you are not “stupid” or “bad” or whatever term you beat yourself up with when you open the mail. Tell yourself, “I may not know how yet, but I know WHY we are no longer living this way.” And then start to make your plan.
  2. Get those four walls secured. The right thing to do is to make sure the “four walls” around you and your family are paid for before anybody else gets a cent. Forget the FICO, forget the credit card. When there is food in the house, the utilities and rent or mortgage gets paid, and you have a ride to work, you can fight the rest of the way. If you are hungry, fearing eviction, and not sure if there is going to be water tomorrow, you honestly cannot think about anything else. If you are a small business, determine your “four walls” that must be addressed first or you are unable to bring income to the company
  3. Get some help. There are a ton of free blogs, articles, and resources online to get you started. You can download my free ebook, “Nine Mistakes to Avoid When You are Having Money Problems” without an email address or any other personal information. Then ask people to help you. Your work may have a wellness program with resources. Your church or local Ramsey Preferred Coach may host Financial Peace University Course. Consider working with a financial coach to help you get organized, get a plan, and walk with you. You don’t have to go it alone, but you must have the courage to share your situation with someone else.
  4. Know Your Rights. Know that nobody, no company, no creditor, no bank, NOBODY, has the right to abuse you, harass you, call you at work, and threaten to sue you if they really aren’t getting ready to file. They can call, yes, but you do not have to be belittled, shamed, or guilted into making payments, even if you owe the money. Call a consumer advocate or lawyer.