A shocking article out of China is bizarre enough but this comment on it takes the cake.
A commenter says, “This is amazingly awesome, if we had that here in the US it would reduce crime and prevent all issues of excessive personal debt we have now in the US.”
So what is the amazingly awesome thing the person is enthusiastic about and wishes we had in the U.S.?
It’s a smartphone app in China that can identify delinquent debtors nearby and report them to the court system.
The Laolai Map app means “Deadbeat Debtor Map” and allegedly “pinpoints the user’s location and scans a radius of 500 meters (550 yards) for any laolai, including individuals, company employees and other organisations. The public can share the information as WeChat moments or with friends.” – Source
The court in China is quoted as saying, “The development and application of the map can further realise the connection and sharing of information on debtors and create a social honesty framework that limits those who lose their credibility in many ways.”
People who are found to be struggling with financial issues and reported to the court can wind up on a list of people banned from flying or purchasing high-speed rail tickets. Currently, 18 million people are banned from flying and 5.5 million from riding on a fast train.
But this isn’t the first wild hack at dealing with debt in China. We can’t forget the nude selfie as collateral. Or the freelance gig jobs as local debt collectors.
And then you’ve got the court-sponsored billboard of delinquent debtors. “The Shushan District Court in Hefei broadcast the photograph, name, identity number, amount owed and other information for each culprit on giant screens for 11 hours a day at public squares during peak travel times, Hefei Evening News reported on Wednesday.” – Source
Another court worked with a telecommunications company to provide a recorded message when you called someone behind on bills. It said, “The subscriber you are calling has been put on a blacklist by the Guanyun County Court for failing to repay their debts. Please urge the person to fulfill his legal obligations. The Guanyun County People’s Court appreciates your support. Thank you!” – Source
Or how about learning of people who are behind on bills when you go to the movies?
All of this just proves the old expression, “No matter how bad it is, it can always be worse.”
Next time someone is all stressed out that a collection letter arrived or a collector called, at least you are not in China and being hunted down with a smartphone app, banned from travel, shamed during a movie preview, or have your picture on a local billboard in a train station.
Are you equipped to handle a sudden change of income? Most people aren’t prepared for any sort of drastic change that could happen today, tomorrow, or a week from now. And it almost certainly will at some point. You could get a better job offer or a raise in the next week, or your income could be slashed in half for the next six months due to an injury. Here’s how to prepare for sudden income change and handle it when it hits.
Change Can Go Both Ways
Change can be good or bad, both are usually unexpected. Good changes are unexpected rises in income like a raise, an “employee of the month” bonus, or a policy cashing out that you might’ve forgotten about. Bad changes in income are sudden drops, such as unexpected and unpaid leave, being retrenched or demoted, or having to change your job for whatever reason.
Where You Are At Now
It’s vital for both your financial future and well-being that you always know what state your finances are in currently. Know how much money you have coming in versus what you should have going out. Also, be sure of what you (and your partner) owe and how much money is put away in the bank.
Money Going Up
Income rising even a little creates the illusion that you have more money available to spend. Your standards will likely rise as well. You might be more likely to spend an extra $10 on that coffee, or you might choose to move to a more expensive place because you can afford it now. It’s called “Sudden Wealth Syndrome,” and you are wise to avoid it. It’s commonly associated with lottery winners, but it is also commonly seen when someone’s salary goes up or they inherit money. Don’t be too quick to change your living expenses just because your income has gone up.
Handling the Increase
People who are truly “rich” on their bank statements are more often the ones who don’t flash it. When you get access to more money, don’t increase your standards immediately. Beyond fixing the most urgent, treat your budget as if it were the same. Some of the extra money (whether salary change or inheritance) should ideally go into diversified investments, or it should be put into an account and ignored entirely.
Or Money Going Down
We’ve already mentioned why your income could suddenly drop. For these occasions, having money put away can take the edge off a sudden drop in income or being entirely unable to work. Your liquidity ratio tells you how long your assets (what you have) will cover your expenses should your income stop completely. To calculate it, add your assets and divide them by your liabilities. That, in months, is your answer. Are you prepared enough?
Handling the Decrease
When your income goes down or stops, your first step is to go back to the beginning of this article. Where are you at now? Take a look at what you have been spending and see where you could be cutting or omitting. Take a look at what you have been saving, investing, or have in salable assets or marketable skills. This is what gets you through these changes. Some insurance companies offer income protection insurance, and this is highly recommended. You won’t need it until you do.
Change Can Change Again
Up or down, one should never get too used to any kind of change. Remember that the change itself was sudden, and it can change back to something else just as quickly. Once you get too comfortable in a higher income bracket, the drop down is often much, much harder to deal with. Why? This is because your standards have gone too high up, which is where most people have been spending instead of saving. If you hit a low patch, keep in mind that it is temporary as well and you will get a chance to go back up.
Remember that prevention is better than cure. It applies to your finances as much as anything else. In the case of an income raise, you should have a clear investment plan, so you know not to go overboard. This is something you can discuss with a financial adviser at your bank, often for free. During a time when you have a raise in your overall income, it’s a good time to prepare for the income drops, which are inevitable. Put the money away now and take the sting out of what might happen later.
Improving your credit is possible, but it’s hard to know where to start. There’s a lot of misleading information out there, and these credit myths can get in the way of improving your credit score. Your credit score is important for determining things like whether you’ll be able to qualify for a loan or credit card offers and the interest rate you’ll pay. A good credit score gives you more options for your financial journey.
It’s important to be confident when managing your credit, so here are some of the most popular credit myths debunked:
Myth: Checking my credit report will hurt my credit score.
Fact: Getting your free annual credit reports will not hurt your credit scores, and can be an important tool to make sure your information is accurate and up-to-date.
Requesting your free annual credit reports or purchasing your credit report will not affect your credit score. You can – and should – get your free credit reports from AnnualCreditReport.com every 12 months. Reviewing your credit reports regularly gives you an opportunity to quickly identify and fix any inaccurate information.
Myth: I only have one credit score.
Fact: You have multiple credit scores.
Many credit scores are available to you and lenders. Often, the score you see isn’t the exact same as the one the lender sees. Your score depends on which credit reporting company provided the information used to calculate the score, the scoring model, the type of loan you’re seeking, and even the day when it’s calculated. Because of this, it’s also normal to see slightly different numbers throughout the year and from different sources.
Many credit card and other companies have begun to offer people free access to their credit scores. This list shows companies that offer free credit scores to existing credit card customers.
Myth: Getting loan estimates from multiple lenders will hurt my score.
Fact: Shopping around for credit and comparing loan offers can help you find the best terms and for some kinds of credit, won’t impact your score much if done in a short period of time.
Comparing offers before getting loans and credit cards can help you find the right offer for your needs. Shopping around for credit cards, auto loans, and home mortgage loans could mean paying less in the long run because you’re taking time to find the best rates and terms. For most people, any negative effect on your score from multiple requests or inquiries for you credit score or report will be small, while the benefits of shopping around could be significant. You can also minimize any negative impact by doing all your rate shopping in a short amount of time.
For some types of credit, like auto and mortgage loans, when lenders offering the same type of loan request your credit score(s) within a time span ranging from 14 to 45 days, it will only count as a single inquiry. The timeframe depends on the type of loan you’re shopping for. When this timeframe is in effect, the benefits of shopping around for the best offers will greatly outweigh the impact on your credit score.
Myth: Carrying a balance on my credit cards will improve my credit score.
Fact: Paying off your credit cards in full every month is the best way to improve a credit score or maintain a good one.
Part of your credit score depends on the amount of credit you have versus the amount you’ve used – known as the credit utilization ratio. You can get your ratio by dividing your total credit card balances by your credit limits. Keeping a low credit utilization ratio—under 30 percent—shows lenders you’re responsible and have available credit. Paying off your entire balance is best and keeps the ratio low, strengthening your credit scores. Keeping a balance on your credit card could also mean that you’re spending more on the things you buy because you’re also paying interest.
Closing a credit card account can help you manage your spending and protect from identify theft if you’re not using the account. It may make sense for your financial situation, but don’t assume it will improve your credit scores. Remember, part of your credit score depends on your credit utilization ratio. You want to keep your credit utilization under 30 percent. If you close some credit card accounts, but hold the same balance, you’ll be using a higher percentage of your total credit limit, which could lower your scores.
If you plan on closing an account, make sure to adjust your spending (or pay down your existing balances faster) so you don’t increase your credit utilization ratio. If you decide to keep an unused credit account open, be sure to watch your statements to protect against identity theft and to check for unexpected fees.
Myth: You can pay companies to quickly fix your credit.
Fact: Only the passage of time, and good credit management, will make accurate negative information disappear from your credit reports. You cannot speed up the process, and neither can a credit repair company.
Any person or company that advertises a quick fix for a price may be scamming you. There’s no quick way to boost a credit score when all the information on a credit report is correct. If you want to improve your credit, check out our guidelines to build a strong credit score.
To improve your credit standing:
Consistently pay your loans on time
Keep your credit balance low
Fact check your credit reports and dispute any errors
Only apply for credit that you need
If you’re looking for some outside help, consider getting in touch with a credit counselor.
Myth: There are only three companies that create the credit reports lenders use to decide my loans options.
Other kinds of consumer reporting companies may use information such as your employment history, transaction history with a business, or repayment history for a particular product to create a credit or consumer report about you. Generally these reports are used for purposes other than lending, like employment, tenant screening, insurance etc. Many consumer reporting companies in addition to the three nationwide credit bureaus also offer a free copy of your report every 12 months. But, some do charge a fee for you to get your report. The Bureau has put together a list of some consumer reporting companies along with information about how you can get copies of your reports.
Looking for more information about credit reports and scores? Whether you have questions about what to look for on your credit report, common credit issues, or how you can get and keep a good credit score, The Bureau has resources that can help.
Know of any other credit score myths? Let us know on Twitter @CFPB.
This time my friend Damon Day and I talk quickly about several topics that made us scratch our heads this week. Here are the posts on my site that correspond with some of the stories we stumble through.
My husband and I both went to school about ten years ago. He has federal student loans ($30k-ish) and I have both federal student loans (40k-ish) and private student loans (30k-ish).
We are both currently enrolled in school again, full time online. So all of his and my federal student loans are in deferment. However, my private student loans recently “ran out” of deferment time. (Didn’t know about that when I started taking the loans out at age 18!!!!)
My student loan company put me in a special repayment program to lower the private student loan payments, which I was paying, but that only lasted 3 months. Now they’re saying I don’t qualify for the program anymore and want full payment. It’s not possible.
Most of my private student loans are co-signed by one of my parents. Neither one is able to help out much. They actually went through bankruptcy about 6-7 years ago around the time that they got a divorce.
We also have credit card debt (20k) that is currently in a consolidation program. It’s not a settlement program- these are paid every month but the monthly payment and interest rate have been lowered.
To top it off, we do have a car payment. We use to have two cars that had a lot of negative equity, and we couldn’t afford them. And we couldn’t just sell them because of the negative equity. So we traded the two in for one and put the negative equity on the new car loan.
We both work two jobs, are full time in school, and we have a toddler that we can’t afford childcare for, so we have magically balanced our schedules to keep her at home. (We don’t qualify for any government help in that area because we make too much money from having multiple incomes, which is mostly going to debt). Needless to say, we are busy, tired, and stressed. We can’t take on another job. We’re pushed to the max.
How can we handle all of this?
-we can’t let go of the car because of the negative equity. Also, we need a car.
-I can’t default on any student loans because then I’ll have to drop out of my current program, which my employer is counting on me to get. I’ll get a raise when I graduate. I’m almost done with this degree!
-we’re finally making headway with our credit card debt, and those will be paid off in about 3.5 years.
Should we consider bankruptcy? Should we get a lawyer? If we didn’t have all of this debt, I could pay for my current degree monthly with cash. I don’t care about our credit. We won’t be able to buy a house with our debt, anyway.
What is clear is something has to change.
My friend Damon Day and I talk about your situation, in general, at the end of this podcast.
There is no magic solution to getting out of the situation unless you come into a financial windfall.
Otherwise, your options are to make the best of the least traumatic choice in dealing with the debt.
You have options. But what you don’t want to do is decide what you want to do based on your perception of each option.
For example, a consumer bankruptcy may be a perfectly good solution to eliminate your consumer debt and give you room to make the student loan more affordable while you put the federal loans on an income-driven repayment plan.
You asked if you should consider bankruptcy and you absolutely should, along with your other options. You can get a sense for your general options by using my online calculator.
I would strongly suggest that you find an independent debt coach to talk to, like my friend Damon Day, who can listen to what you want to achieve, explain the pros and cons of each approach, and create a custom plan that is best for you.
Hasty decisions and shooting from the hip here can cost you millions in lost future retirement savings. Find a trusted professional who can guide you down the dark path you are currently on to help you towards a brighter future.
Trust me, good options exist but you may not be ready to accept them just yet until they are part of an overall plan.
Me and my husband owe federal and state taxes. We have not filed in about five years, My husband owes money for a loan he took out for my son when he was in college.
Do I need hire a tax attorney or can I work directly with the IRS to get this taken care of? There are several tax relief companies but I don’t know who to trust.
Getting competent professional advice is always a smart thing to do. But I’m not sure an advertised “tax relief” company is always the best choice.
If you want to find someone who will be able to craft a unique plan based on your situation then a tax professional is a good choice.
But it is quite possible that an Enrolled Agent is a more cost-effective solution.
“Enrolled Agents (EAs) are federally-licensed tax practitioners who may represent taxpayers before the IRS when it comes to collections, audits and appeals.” They are not a heavily marketed single solution relief company. You should be able to find a local Enrolled Agent to meet with. Here is one place to look.
But your situation may require help from two professionals. One may be a bankruptcy attorney. Depending on the specific issues surrounding your old tax debt, some of it may be able to be discharged in bankruptcy.
And depending on the type of loan your husband took out, that may also be able to be included in bankruptcy if it was a personal loan.
I would suggest you first tax to the tax professional you select, get your back taxes filed, and before you make any payment promises you meet with a state licensed bankruptcy attorney to see what back taxes may be able to be discharged.
In this show, I share some critical information and advice with you on how not to become a victim or get scammed when you are searching for debt relief help.
Having financial problems can be scary enough but who can you trust and who should you turn to when you are looking for good options for bad debt? This show will tell you what you can easily do to find and investigate the most appropriate solution for you when you run into money troubles.
Hi, this is Steve Rhode, your Get Out of Debt Guy from Get Out of Debt dot org.
Here’s the latest practical money, credit and debt advice to help you enjoy life more.
You know what scammers call people with money worries or problems? Suckers.
This show is going to be devoted towards helping you avoid being scammed when you are down and out financially. If you know someone who is living through money troubles, forward this show to them as an act of kindness and concern.
Being stressed out and worried about money troubles is completely natural. It’s a typical emotional reaction to an unfortunate part of your life. People who find themselves at just such a crossroad frequently make unwise choices on how to deal with their financial problems.
Rather than get an outside opinion about what is the best thing to do, they instead start calling some debt relief companies and asking how they can help. Surprise, they will most all offer some easy solution.
The problem is that the panic of the financial situation clouds the otherwise clearer vision the person in trouble naturally has.
You would no more think that it was wise to go into the first car dealership you pass and ask if they have any car they can sell you, and then buy it. But that’s exactly what people do when they are facing money troubles. They call the first company that promises help and then blindly believe the sales pitch they hear.
I suppose part of this is a desire to believe the claims the salesperson is saying in hopes of making the pain of the situation go away as fast as possible. It does seem like a logical reaction to want to latch onto the first solution that seems magical, in hopes of quickly putting your fear and angst behind you about your debt.
During this show I’m going to give you a number of actionable tips to help protect you from scam artists and crooks.
The first is to make it a point to promise me you will evaluate all of the possible options to dealing with problem debt before you lock on to any option.
If you want to know what the typical solutions and options are, come visit me at GetOutOfDebt.org and use the free get out of debt calculator to help identify the more appropriate options for your situation.
Coming up I’m going to tell what the next thing you should do is after you learn what your best options are and how to avoid making a key and critical mistake many do.
This is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org, Stand by.
Living through money problems is intimate and personal. It makes us feel like we’ve failed or somehow a loser. But just because we feel that way, does not mean that’s factual.
Money troubles happen for a wide variety of reasons and many of those reasons are beyond our control. Sometimes bad debt just happens to good people.
When you are contacting a debt relief company, be it for-profit or a non-profit charity, I need for you to listen to what they have to say with a sales filter on. Even the non-profit credit counselors are trying to sell you something.
All debt relief companies are generally trying to sign you up for their program so they can make money off of you. And trust me, I’m not trying to be cynical here, just dead honest.
All debt relief companies make money by making you their client. Some fudge with the truth a little bit. Some just flat out lie and seem to make up an alternative reality. And nearly all oversell the solutions they provide and do not provide an overall fair and balanced assessment of your situation.
In the world of debt relief there are three major camps. Generally the credit counselors hate the debt settlement providers, The debt settlement providers hate the credit counselors and they both hate bankruptcy attorneys.
What adept debt relief salespeople are really good at is knowing how to emotionally manipulate you to believe their grand promises and magic claims that your debt problem can painlessly go away. They know that to sell you on emotion is going to seal the deal faster than any other approach.
Here is where you need to be strong, smart, and assertive in order to protect yourself from being scammed.
If a debt relief salesperson is trying to persuade you they’ve got a solution for you, listen to their sales pitch. And filter what you hear just as if you were listening to a used car salesperson.
What I mean is it would be smart to listen and verify.
The salesperson is going to listen to clues from you and jump on those. If they hear you say that having good credit is important or avoiding bankruptcy is your number one goal, they will tailor their sales pitch on the fly to target those areas and make their solution sound so grand you’ll be salivating to buy it.
Coming up I want to talk about what to do after you’ve talked to one debt relief salesperson and how to best protect yourself.
This is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org, Stand by.
The best insurance and protection you can have to avoid being scammed by debt relief help is education. The more you investigate and contact people of the different debt relief camps, the more informed and aware you will be so you can make the best decision that’s right for you and your situation.
On your journey to investigate options you should talk to a credit counseling group, a debt settlement company, and a local bankruptcy attorney. Once you do this you’ll be better able to decide what path is right for you.
As part of any examination of options I do always try to strongly suggest that people should speak with a local bankruptcy attorney. While they might want to emotionally avoid bankruptcy, they need to understand what bankruptcy really would do for their specific and particular situation.
Understanding what role bankruptcy might play is critically important since out of all the possible options to dealing with problem debt, bankruptcy is the only one backed up with the power of the law to stop collectors and creditors in their tracks and make the debt go away in just a few months so you can get a second chance and a fresh start.
Here is a wise tidbit of information: You didn’t get in debt overnight, you don’t need to jump at some solution overnight, you’ve got time to investigate your options.
I’ve lived through money problems myself. I know how scary and raw they can feel. I completely understand that you want the situation to get resolved somehow. But in order for you to get the best chance at a great outcome you really need to approach finding a solution as if you are shopping for a car.
Check sites like GetOutOfDebt.org for guides and helpful information, go kick a few tires, learn what real world results are, and take the companies you are considering using for a test drive by calling or visiting them.
And then, feel free to check them out. Make sure they are licensed to operate and research them on the internet. See what other people are saying about them.
Coming up I’m going to give you the most important question you need to ask and answer to best deal with your debt issue.
This is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org, Stand by.
The number one question I want you to answer, alone, and with your spouse or partner is this: In addressing your current financial trouble, do you have a greater responsibility to fix the past, or the future?
Launching into a debt solution where you make payments for the next five years to try to fix past debt is one approach. But if you do that at the detriment of being able to save money and have a financial safety net moving forward, that could just be foolish.
Maybe it’s better to use your financial stumbling and learn from the mistake and take that knowledge to do better moving forward.
Regardless of what answer you come up with, It’s a serious question and a contemplative point to ponder with some introspective effort.
No matter what you decide though, just remember two things.
1. Don’t make any assumptions. investigate your options thoroughly. And,
2. I’m always here to help.
This is Steve Rhode your Get Out of Debt Guy.
If you want more advice or you want some free help, be sure to visit me at GetOutOfDebt.org. And while you’re at the site, don’t forget to subscribe to this podcast for even more practical tips and advice.
A class action suit filed in Wisconsin against North Shore Agency (NSA) alleges the collection notice the agency sends out does not conform to the required notice in the Fair Debt Collection Practices Act (FDCPA).
The consumer was contacted over a $5.53 debt allegedly owed to Publishers Clearing House.
While at face value the claims made against North Shore Agency might seem small, the argument made by the Plaintiff does raise some valid points.
The suit states the debt validation notice on the back of the collection letter creates burdens on consumers that are not part of the notice of debt that must be given consumers under the law.
The allegation made is NSA, with its particular notice, “misleads debtors as to what they actually need to do to dispute a debt.”
While this might seem like a really technical issue, stick with me for a moment. The NSA collection letter tells consumers if they want to dispute the debt they need to “include a copy of North Shore Agency letter or coupon, or your complete account information, with all communications.” However, nothing in 15 U.S.C. § 1692g(a) requires that a copy of the letter or coupon, or the consumer’s complete account information be included in a written dispute.”
Now I completely understand why NSA would want a consumer to include that in their dispute. It makes their job easier and reduces the workload for NSA and the chance of confusion.
One of the issues raised by the Plaintiff is the “unsophisticated consumer would be confused by the language in NSA’s letter. The unsophisticated consumer would interpret the requests for copies of the letter or account information as requirements.”
But here is the key point to ponder for me. The complaint states, “The unsophisticated consumer cannot be expected to own a photocopier, scanner or fax machine, or have free access to one. In order to create a copy of NSA’s letter, the consumer would have to pay for a copy to be made at a commercial location.” That’s not an out of the world concern.
So the position is that by requiring the debtor to include a copy of the collection notice it might be read as a hurdle some consumers would not cross. The collection letter does say communications can just include “complete account information” but I’m not sure exactly what that includes.
A point raised is “The consumer would be misled into believing that a written dispute sent without the “North Shore Agency letter or coupon, or your complete account information” would be disregarded or otherwise not treated as a dispute, even though NSA would actually have to treat such a communication as a dispute. The unsophisticated consumer, however, does not know this.”
Another issue raised has to do with the front of the collection notice. And I admit I was confused by this issue as well.
The products listed on the front of the notice says $5.53 is owed for Southern Living and then lists Country Gardens with no information. The complaint makes a valid point when it says, “Confronted with the confusing itemization provided by Exhibit A, the unsophisticated consumer would be left wondering whether the “TOTAL DUE” listed by the letter actually accounted for the entirety of the alleged debt sought by NSA and/or the creditor or if there may be some additional, unknown amount associated with the “COUNTRY GARDENS” product description.
Exhibit A thus fails to disclose the amount of the debt the letter seeks to collect in a non-confusing manner.”
These technical issues are not going to change the world but they are an opportunity for a human engineer at NSA to review their collection letters and just fix the damn thing.
Every day, people submit complaints to the Bureau of Consumer Financial Protection about a wide variety of consumer financial products and services. Today, we released our Complaint snapshot: Mortgage. It takes a deeper dive into the mortgage complaints we’ve received and highlights some trends we’ve observed.
This report reveals many interesting data points about complaints submitted by consumers:
Between November 1, 2016 and October 31, 2018, approximately 11 percent of complaints were about mortgages.
Most mortgage complaints were about “trouble during payment process” (42 percent) and “struggling to pay mortgage” (36 percent).
Compared to the monthly average during the past 24 months, people submitted 18 percent fewer mortgage complaints in October 2018.
There were 15 percent fewer mortgage complaints from August 2018 to October 2018 compared to August 2017 to October 2017.
Complaints received by the Bureau help its work to regulate consumer financial products or services under existing federal consumer financial laws, enforce those laws judiciously, and educate and empower people to make better-informed financial decisions.
The Bureau offers useful tools and resources for homeowners and homebuyers. Whether you’re thinking about buying a home, have a mortgage, or are having trouble paying, these resources can help you. You can also call us toll-free at (855) 411-2372, with your questions about consumer financial products and services.