On the Road to Retirement

You may have heard great stories from friends and co-workers who have borrowed money from their 401(k) to pay for things like weddings, cars and vacations. You are not alone. According to the Employee Benefits Research Institute, about one in six people who are eligible to take out a loan from their 401(k) plan has done just that. Before deciding to do the same, take a minute to think through the pros and cons. As you drive along that scenic highway toward a happy retirement, one of the surest ways to undermine the trip is to end up having (metaphorical) car trouble.

Pros

As with other ways you might be tempted to borrow against the future, like high-interest credit card debt, a 401(k) loan is quick and easy. Most employers make it very easy to take out a loan against a 401(k), with little or no paperwork and a quick turnaround. When you pay it back, your principal and interest payments will be automatically deducted from your paycheck and put into your 401(k) account. It is practically like pulling into a rest stop along the highway.

In addition to being easy to do, a 401(k) loan is also relatively easy to understand. The terms are straightforward, so you won’t have that feeling of being intimidated or “getting in over your head.” You can usually borrow up to $50,000 or one-half of your contributions and vested employer contributions, whichever is less. You then have a relatively short repayment period, five years being a typical example.

Of course, this also brings up the fact that you will be caught up again so soon. This is even more tempting if you are younger, because when you look 30 or 40 years down the road to retirement, taking a little time off now doesn’t seem so bad. I mean, this is a big road trip, right? What’s one extra rest stop along the way?

The last thing to mention in the “pros” category is that you will probably be offered a very appealing interest rate. Rates are quite competitive, usually prime rate plus 1 percent.

Of course, all of these are appealing features, but don’t run out and sign any paperwork yet. This is one of those places where life doesn’t always match up to the road map, and you need to make sure you allow for detours, construction, etc.

Cons

By focusing on the fact that five years in the context of 30 or 40 seems no worse than a short time out, you are making an important mistake in relation to the compounding value of money. Not all years are created equal. What that means is that losing out on five years at the beginning of your financial road trip costs a lot more than losing out on five years later on. Compounding returns are like the octane in your gas, helping to fuel the growth of your retirement fund, and you lose compounding when you take your money out for the loan. In addition to losing out on the compounding from the loan amount itself, if you stop making contributions while you’re paying back the loan, you’ll lose out even more. Do you really want to be, figuratively, in the middle of nowhere when you realize that the really cheap gas you put in the car at the last rest stop is causing engine trouble?

Because the average person does not tend to think in relation to taxes whenever they are faced with the lure of a new car or a vacation, it is easy to overlook the fact that you will end up paying more taxes. You make your loan payments with after-tax money, but when you take distributions from your 401(k) upon retirement, you’ll still owe taxes on all that money. This means that you’ll end up paying taxes twice on the money used to pay back your loan.

And then, of course, there is always the possibility of detours, construction delays, and rock slides that could get in your way. In this case, if you leave your job, the loan term comes due. That means if you quit or are fired, you’ll have to pay the loan back in full immediately, which is usually not a great situation when you’ve just left a job.

Result

On the road to a healthy, happy retirement, borrowing from your 401(k) should be a strategy of last resort. Like one of those small emergency tires that come with a lot of cars, this financial gadget will work, but not great, so only use it if you really don’t have an alternative.

This article by Erik Richardson first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.


FTC Details on Student Loan Assistance Companies Sweeps and Raids

Operation Game of LoansThe Federal Trade Commission, along with 11 states and the District of Columbia, announced “Operation Game of Loans,” the first coordinated federal-state law enforcement initiative targeting deceptive student loan debt relief scams. This nationwide crackdown encompasses 36 actions by the FTC and state attorneys general against scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.

Student loan debt affects more than 42 million Americans and, with outstanding balances of more than $1.4 trillion, student loans are the second largest segment of U.S. debt, after mortgages.

Operation Game of Loans includes seven FTC actions: five new cases, one new judgment in favor of the FTC, and a preliminary injunction entered in a case filed earlier this year. The agency alleges that the defendants in these actions charged consumers illegal upfront fees, falsely promised to help reduce or forgive student loan debt burdens, and pretended to be affiliated with the government or loan servicers, in violation of the FTC’s Telemarketing Sales Rule and the FTC Act. Operation Game of Loans also includes law enforcement actions by Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Washington, and the District of Columbia.

36 FTC and State enforcement actions, 11 States and the District of Columbia, Scammers collected over $95 million in illegal fees.

“Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” said Maureen K. Ohlhausen, FTC Acting Chairman. “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”

In addition to its state partners, the FTC has been working closely with the U.S. Department of Education’s office of Federal Student Aid to raise awareness about student loan debt relief schemes, and ensure that borrowers know to visit StudentAid.gov/repay for information about existing repayment and forgiveness programs available to them at no cost.

Screenshot of sample deceptive student debt relief ad.
(Screenshot of sample deceptive student debt relief ad)

Five New FTC Actions Halt Scams

The FTC recently filed five new cases against 30 defendants as part of Operation Game of Loans. In each action, the FTC obtained temporary restraining orders (TROs) that halted the scams and froze defendants’ assets. The Commission vote authorizing staff to file the complaint in each action was 2-0.

  • A1 DocPrep, Inc.: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based A1 DocPrep took at least $6 million from consumers through unlawful student loan debt relief and mortgage assistance relief schemes. According to the complaint, the defendants claimed to be from the Department of Education, and promised to reduce borrowers’ monthly payments or forgive their loans. The FTC also alleges the defendants targeted distressed homeowners, making false promises to consumers that they would provide mortgage relief and prevent foreclosure. Rather than helping consumers, A1 DocPrep’s CEO, defendant Homan Ardalan, spent hundreds of thousands of consumers’ dollars on cars, jewelry, nightclubs, and restaurants, according to the FTC. The Court entered a TRO on September 28, 2017. Additional defendants named in the complaint are Stream Lined Marketing, d/b/a Project Uplift Students and Project Uplift America, and Bloom Law Group PC, d/b/a/ Home Shield Network and Keep Your Home USA.
  • American Student Loan Consolidators (ASLC): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that ASLC, d/b/a ASLC Processing, and BBND Marketing, LLC, d/b/a United Processing Center, United SL Processing, and United Student Loan Processing, and principals Daniel Upbin and Patrick O’Deady bilked student loan borrowers out of at least $11 million by falsely promising loan forgiveness, lowered monthly payments, and reduced interest rates. The FTC alleges that the Deerfield Beach, Florida operation pretended to be affiliated with the Department of Education and loan servicers. The defendants also tricked consumers into believing that illegal upfront fees, typically up to $799, were being used to pay off student loans. The court entered a TRO on September 26, 2017.
  • Alliance Document Preparation: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based Alliance Document Preparation, d/b/a EZ Doc Preps, Grads Aid, and First Document Aid, took more than $20 million from consumers by charging illegal upfront fees of up to $1,000. The defendants deceptively marketed their purported services primarily on social media platforms like Facebook. The court entered a TRO on September 28, 2017. Other named defendants include: SBS Capital Group, Inc.; SBB Holdings, LLC; First Student Aid, LLC; United Legal Center, LLC; United Legal Center, Inc.; Elite Consulting Service, LLC; Grads Doc Prep, LLC; Elite Doc Prep, LLC; Benjamin Naderi; Shawn Gabbaie; Avinadav Rubeni; Michael Ratliff; Ramiar Reuveni; and Farzan Azinkhan. Defendants also used the fictitious names Grads United Discharge, Allied Doc Prep, Post Grad Services, Post Grad Aid, Alumni Aid Assistance, United Legal Discharge, First Grad Aid, Academic Aid Center, Academic Protection, Academy Doc Prep, Academic Discharge, and Premier Student Aid.
  • Student Debt Doctor (SDD): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that Fort Lauderdale-based SDD and its owner, Gary Brent White, Jr., collected at least $7 million from consumers struggling to pay student loan debt. According to the complaint, the defendants charged illegal upfront fees of $750 or more. Using social media, e-mail, and telemarketing, SDD promoted its services across the United States, in English and Spanish. SDD falsely promised consumers loan forgiveness often in as little as five years or less, and told consumers not to communicate with their loan servicers. The defendants also fabricated income, unemployment status, and family size information on relief applications in order to qualify borrowers for eliminated or reduced monthly payments. The court entered a TRO on October 3, 2017.
  • Student Debt Relief Group (SDRG): In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based M&T Financial Group and American Counseling Center Corp., d/b/a Student Debt Relief Group, SDRG, StuDebt, Student Loan Relief Counselors, SLRC, and Capital Advocates, and principal Salar Tahour bilked at least $7.3 million from consumers struggling to repay their student loans. According to the complaint, the defendants falsely claimed to be affiliated with the Department of Education, deceived consumers into paying up to $1,000 in illegal upfront fees to enter them into free government programs, and charged consumers monthly fees they claimed would be credited toward their student loans. In reality, the FTC alleged, defendants pocketed consumers’ money and responded to mounting consumer complaints by changing their name rather than their business practices. The FTC also asserts that the defendants deceived consumers into providing them with Social Security numbers and Federal Student Aid identification information, allowing the defendants to hijack consumers’ accounts while cutting them off from their loan servicers and the Department of Education. The court entered a TRO on September 19, 2017, and a stipulated preliminary injunction on October 10, 2017.

Two New FTC Law Enforcement Developments

Operation Game of Loans also includes two pending FTC actions against 11 additional student loan debt relief scammers, in which federal courts recently entered significant orders.

  • Student Aid Center: On August 31, 2017, the U.S. District Court for the Southern District of Florida granted summary judgment against defendant Ramiro Fernandez-Moris in a joint action filed by the FTC and the State of Florida. The Court found that defendants’ unlawful student loan debt relief enterprise took more than $35 million from student loan borrowers by enticing consumers to sign up for services using misleading and false claims. In particular, Student Aid Center misled consumers to believe that they could receive loan forgiveness or modification if they paid unlawful upfront fees, and tricked consumers into thinking the operation was involved in the approval process. Motions for default judgment against two other defendants are pending before the Court, and the proposed final orders against all three defendants are subject to final Court approval.
  • Strategic Student Solutions: On May 26, 2017, the U.S. District Court for the Southern District of Florida entered a stipulated preliminary injunction in the FTC’s case against Strategic Student Solutions, freezing defendants’ assets, halting the organization’s student loan debt relief operation, and appointing a receiver to control the business for the remainder of the litigation. The FTC alleged that the defendants took more than $11 million from consumers by falsely promising to reduce or eliminate their student loan debt and offering them non-existent credit repair services.

How to Avoid Student Loan Debt Relief Scams

To help consumers avoid falling victim to such fraud, the FTC has updated its consumer education related to student loan debt relief scams at ftc.gov/StudentLoans. As a follow-up to the sweep of law enforcement actions, the FTC later this month will be holding a Twitter chat with state attorneys general and a Facebook Live session with staff attorney experts on ways to avoid student loan debt relief scams.

Consumers should remember that only scammers promise fast loan forgiveness, and that scammers often pretend to be affiliated with the government. And consumers should never pay an upfront fee for help, and should not share their FSA ID—a username and password used to log in to U.S. Department of Education websites—with anyone.

Consumers can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost; these programs do not require the assistance of a third-party company or payment of application fees. For federal student loan repayment options, visit StudentAid.gov/repay. For private student loans, contact the loan servicer directly.

Repaying student loans? Avoid scams. Only scammers promise fast loan forgiveness. Never pay a fee up front for help. Scammers can fake a government seal. Don't share your FSA ID with anyone. Report scams to ftc.gov/complaint. Looking for free help? Start with studentaid.gov.

The FTC thanks all of those who helped with this operation, including state attorneys general participating in this initiative and the U.S. Department of Education’s office of Federal Student Aid, with particular help on FTC law enforcement actions from the U.S. Postal Inspection Service; the Florida Attorney General; the Georgia Attorney General; the New York Attorney General; the California Department of Justice; the Florida Office of Financial Regulation; the Florida Department of Agriculture & Consumer Services; the Broward County (FL) Sheriff’s Department; the Boca Raton Police Department; the Los Angeles Police Department; and the Better Business Bureaus of Southeast Florida & the Caribbean and Los Angeles & Silicon Valley.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The cases will be decided by the court.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Millennial Money Regrets

What spending did you regret today? Going to the movie theater to see a new first-run flick? Buying plane tickets for an upcoming vacation? Splurging on a latte? Buying day-old sushi at the convenience store?

We’re pretty sure that everyone would regret the sushi – but given the other choices, if you are a millennial you are likely to regret the coffee more than the plane tickets or the movie. That’s the inference of a new survey from Common Cents Lab, Duke University’s financial research laboratory, in partnership with financial app Qapital.

Almost 1,000 millennials aged 20-26 were asked about the types of purchases that they regretted making. In general, millennials had few regrets and were satisfied with most of their purchases. Over 80% were satisfied with healthcare spending or spending to support their community. Rent and utility payments, entertainment expenses, educational expenses, groceries, and paying down debt all generated satisfaction ratings between 65% and 80%.

What do millennials regret the most? Bank fees were the overwhelming choice at a 97% dissatisfaction rating. You may not be able to avoid interest charges every month, but you can always avoid late fees with simple diligence. Millennials seem to be annoyed at paying a completely avoidable fee (as most people should be).

The next four items on the millennial purchase regret list were all related to impulse buys. Half or nearly half of survey respondents regretted purchases at coffee shops, restaurants, and convenience stores, while 62% regretted fast food purchases.

Millennials don’t seem to mind larger purchases or recurring purchases. According to the survey, millennials were 9% more satisfied with large purchases than with smaller ones, and on average, they regret recurring expenses 10% less than direct, non-regular expenses. It’s the simple buys that seem to bother millennials the most. Perhaps that’s because, like bank fees, these purchases require simple willpower to avoid.

It’s possible that millennials look at many of the larger spending categories as types of investment, more fulfilling with respect to either finances or sense of well-being. They are either investing in others (community purchases), themselves (entertainment, travel, gym/fitness, educational expenses), or are dealing with basic costs of living (rent, bills, groceries). Coffee shops, restaurants, convenience stores, and fast food places may not provide value in the eyes of millennials compared to the money spent there.

Millennials may regret making impulse purchases and inherently know they don’t receive value from them, but they don’t regret impulse purchases enough to stop making them – at least not yet.

A recent Bankrate survey found that with respect to five key purchases – gas, groceries, cell phone bills, coffee, and restaurants – millennials average $2,300 more per year as compared to older generations. A significant amount of that $2,300 falls into the categories that millennials regret, perhaps because they know that could be put to higher value uses (such as paying down debt).

It’s a positive sign that millennials tend to regret smaller impulse buys because these purchases are habits they can ultimately control – and the first step to controlling a bad habit is recognizing that you have one. As millennials mature and take on more financial responsibilities, they are more likely to reject impulse purchases and set the savings aside for various funds (such as emergency funds, retirement, and down payments toward larger purchases).

On the other hand, if your lack of impulse control made you think that convenience store sushi was a good idea, you may have more work to do to achieve your goal – and you probably should assess your judgment skills.

This article by Moneytips first appeared on www.moneytips.com and was distributed by the Personal Finance Syndication Network.


FTC Obtains Court Order Against Scheme that Sold Fake Payday Loan Debt Portfolios

The Federal Trade Commission has obtained a $4.1 million judgment and a ban on handling certain sensitive financial information about consumer debts against an operation that sold lists of fake payday loan debts to debt collectors.

A federal court issued a default judgment granting what the FTC sought in a complaint filed in 2016. The complaint alleged that Joel Jerome Tucker, SQ Capital LLC, JT Holdings Inc. and HPD LLC sold lists of fake payday loan debts naming millions of consumers, which debt collectors then used to demand payment. The lists had extensive personal information, including social security and bank account numbers. As a result, many people were harassed for debts they did not owe, and some were persuaded to pay the fake debts.

Several of the sold lists claimed that the phony loans came from a made-up lender, “Castle Peak,” or from an online loan provider known as “500FastCash.” To add credibility to the fake 500FastCash payday loans, Joel Tucker invoked the name of his brother, Scott A. Tucker, a payday loan vendor who marketed loans under the 500FastCash brand. In a previous FTC case, in October 2016, Scott Tucker was ordered to pay $1.3 billion for deceiving consumers and illegally charging them undisclosed and inflated fees. He was recently found guilty of related criminal charges in the Southern District of New York.

The judgment announced today directs the defendants to pay more than $4.1 million they received from selling phony debt portfolios. It also bans them from handling sensitive debt information, including bank account numbers, credit or debit card numbers, or social security numbers. The order requires the defendants to destroy the personal information they used, and prohibits them from misrepresenting material facts about debts and any product or service.

The U.S. District Court for the District of Kansas denied the defendants’ request to excuse their default and, at the FTC’s request, entered the default judgment against them on September 20, 2017.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Business License Scams: A Barrier for Reentrants

It can be hard for a person starting over in life to earn a living — especially if he or she is reentering society from prison. That’s one reason why many reentrants decide to use the trade skills they’ve learned to go into business for themselves.

But local consumer protection agencies have told the FTC about scammers who lie about being able to help people get professional or business licenses to start barbershops, hair salons, auto repair shops and other businesses. These con artists contact people in different ways and some say they issue licenses themselves. Many reentrants don’t believe they will ever get a business license through the usual channels. That makes them vulnerable to scams.

Some reentrants may find themselves frustrated by occupational licensing regulations that don’t make sense. Maybe their trade is licensed in some states, but not others. That’s confusing.

If you’re looking to get a professional or business license, here are three things you should do before you pay anyone money:

  1. Check with your state or local government first to learn how to get a professional or business license. The requirements and fees depend on the type of business you’re starting, where it will be, what services you will offer, and government rules. Also, the Council of State Governments’ Collateral Consequences database provides detailed information on licensing restrictions based on your record and the type of license you’re seeking.
  2. If a company says it can issue you a professional or business license, check it out first. Typically, government agencies issue professional and business licenses. Contact the agency that oversees licensing for your trade to see if the company is legitimate. You also can search online using the company’s name and the term “scam.”
  3. Visit the U.S. Small Business Administration’s website for information on licensing and starting a small business.

If you spot a situation where professional licensing doesn’t make sense, let us know. Sometimes, excessive occupational licensing is an unnecessary barrier to jobs, entrepreneurship, and economic opportunity – and doesn’t really protect public health and safety. The FTC’s Economic Liberty Task Force is studying these issues, and would love to hear your story.

For more information on scams targeting entrepreneurs, go to FTC.gov/SmallBusiness. For more information relevant to reentrants, visit FTC.gov/reentry. And if you know about a business scam, tell the FTC online or at 1-877-FTC-HELP.

This article by the FTC was distributed by the Personal Finance Syndication Network.

Shopping for airfare deals

You want the best deal for your next flight, but the choices can be overwhelming. Will you book directly on an airline’s website, or buy through a site that lets you compare costs across multiple airlines? These tips will help you weigh your options and avoid surprises you didn’t bargain for.

On cost comparison sites, what seem like apples-to-apples comparisons may not be – if baggage or other fees aren’t included. Cost comparison sites can also charge you more than the airline’s fees for services like changing or canceling a flight. When you make a reservation for a flight that is at least a week away, the airline must allow you to cancel for free within the first 24 hours after booking, but you could still be charged if you didn’t book directly with the airline.

Having a reservation is not the same as having a ticket. Normally, you make your reservation and then the airline issues a ticket, but things can go wrong. We’ve heard from people who used unfamiliar booking sites and learned at the airport that they did not have a ticket to fly. People also have told us that small errors like misspelled passenger names caused big headaches. Some people had to pay fees to fix mistakes, and some even missed their flights.

If you’re thinking of using an unfamiliar booking site to reserve tickets, first look for reviews and ratings of the site to make sure it’s reputable. You can search the site’s name with words like “complaint,” “review,” or “scam.”

Also:

  • consider fees as you comparison shop, and take change and cancelation policies into account
  • check cost comparison and airline sites to find the best overall deal, and keep in mind that some airlines only book directly
  • confirm directly with the airline well before the day of your flight that you have a ticket and everything is in order

If you have a complaint about booking a flight, report it to the Department of Transportation and to the FTC.

This article by the FTC was distributed by the Personal Finance Syndication Network.

How Do We Get Someone Off the Mortgage After a Divorce?

Question:

Dear Steve,

Individuals divorced for 10 years but still on the title of the mortgage. Mortgage in default and being resolved.

We are in the process of refinancing and or financial assistance for a mortgage. The parties listed on the mortgage include individuals who have been divorced for 10 years. We now know that a quit claim deed and other paper should have been filed. That is in process at this moment by an attorney.

How do we help the individual listed on the mortgage? This was not the responsibility of the person not living in the house. However, because their name is on the mortgage it will affect their credit. We want to help them. And yes, we are responsible for the debt, not them.

If we send a letter in writing to the credit bureaus stating that this individual is not responsible for our debt, will this help them? I know this may sound strange to some, but we do not want to dump our debt on anyone. We are trying to correct hard times which caused late payments on a mortgage.

Diann

Answer:

Dear Diann,

The only way to remove someone from being liable for a joint mortgage is to refinance it or get the lender to remove the person which never happens.

A quitclaim deed will remove the person from the deed but not the mortgage. So a quitclaim deed isn’t going to clear the cloud on the property as long as the two individuals remain on the mortgage.

“Because of this lack of warranty, quitclaim deeds are most often used to transfer property[5] between family members, as gifts, placing personal property into a business entity (and vice versa) or in other special or unique circumstances.” – Source

“In the event that the grantor has an outstanding mortgage on the property, he or she remains legally responsible for the mortgage even after transferring ownership through a quitclaim deed. This is because a quitclaim merely transfers ownership – not any debts or claims to the property. The new owner will have the title of the property, but the original grantor will still be liable for the outstanding mortgage.” – Source

This situation is quite common in couples who divorce but fail to sell or refinance the property. This leaves both ex-spouses tied through the previous mortgage. It’s important to remember in a mortgage you divorce your spouse, not your creditors.

A letter to the credit bureaus will do nothing because it is not a representation of the fact both parties on the mortgage will remain on the mortgage.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Details on Public Service Loan Forgiveness Class Action Suit Against Great Lakes Higher Education

A class action lawsuit was just filed in Florida to help people who have been allegedly deceived by their federal student loan servicer, Great Lakes Higher Education Corp.

The suit was filed by the firms of Kynes, Markman & Felman and Centrone & Shrader.

The suit filed while Great Lakes was managing a substantial number of loans consumers believed they were repaying for credit under the Public Service Loan Forgiveness program, they actually were not and the servicer knew or should have known the loans were not in a qualified repayment state.

Even though Great Lakes held “itself out as a resource for individuals to use to determine the most financially-beneficial path to student loan repayment,” they did not live up to that promise.

“For example, Great Lakes’s website states to customers, “You should never have to pay for student loan advice or services. Call us, instead. Our representatives have access to your latest student loan information and are trained to understand all of your options.” The website also states, “At times, it may feel like your student loans are an overwhelming burden. Remember, we’re here to serve you.”

But instead of best representing consumers who called their loan servicer for help to make sure they were on track for their federal student loans to be forgiven the suit alleges, “instead of helping borrowers by giving them correct information, Great Lakes customer service representatives routinely gave incorrect information to borrowers who inquired as to their eligibility for the PSLF program.”

In one particular case, Ms. Lawson-Ross had her loans serviced by Great Lakes and “Until July 2017, she was repeatedly and explicitly told by Great Lakes representatives that she was on track to benefit under the PSLF, that her loans qualified under that program, and that she would not need to complete any additional forms until her 10 years of public service was completed.”

But when Ms. Lawson-Ross later pressed Great Lakes to make sure her many payments were being credited to her loan forgiveness “the Great Lakes customer service representative (named Nicole), informed Ms. Lawson-Ross that she was in fact not eligible for the PSLF. The majority of her loans were not Direct Loans and were therefore ineligible under PSLF, and had always been ineligible, despite Great Lakes’ many repeated assurances to the contrary.”

Great Lakes then informed the consumer that not a single payment she had made towards Public Service Loan Forgiveness would count.

The experience of Ms. Lawson-Ross is not unique. The Consumer Financial Protection Bureau issued a report on servicer performance. “In its report, “Staying on track while giving back” (June 2017), the CFPB examined issues that formed the basis of complaints about the PSLF. The first issue highlighted is that “Borrowers report spending years making payments, believing they were making progress towards PSLF, before servicers explain that their loans do not qualify for PSLF.”

The class action lawsuit filed states “Ms. Lawson-Ross, and others in her situation, are damaged by Great Lakes’s actions. Among other things, Ms. Lawson-Ross must now make all of the payments that otherwise would have been forgiven had Great Lakes provided correct information. Those payments include interest, principal, and fees.

Further, Great Lakes has benefited from the extra principal, fees, and interest it would not have otherwise collected had borrowers been given correct information and been given the opportunity to make their loans eligible for the PSLF.”

This case makes a similar argument that the CFPB made when they sued Navient.

The lawsuit points out a weakness in the student loan servicer relationship, nobody is apparently accountable for bad performance and poor information even though Great Lakes and other servicers are hired to perform administrative responsibilities. The suit says, “student loan servicers, including Great Lakes, are contracted to and compensated for helping consumers navigate the process of qualifying for PSLF. Lenders or loan holders, including the Department of Education, generally contract with private companies to administer all aspects of federal student loan repayment, including answering borrowers’ questions about the repayment of federal student loans and about available loan forgiveness programs. Additionally, borrowers who express interest in PSLF rely on their servicers to have the necessary information to help them stay on track with their repayment plans.”

If you would like to read the full lawsuit, click here.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

American Financial Benefits Center Hit by FTC Over Student Loan Assistance

The Federal Trade Commission has charged a student loan debt relief operation with bilking more than $28 million from thousands of consumers throughout the country by falsely promising that consumers’ monthly payments would go towards paying off their student loans.

This is the eighth action the FTC has taken in Operation Game of Loans, the first federal-state law enforcement initiative targeting deceptive student loan debt relief scams.

According to the FTC, the defendants sent personalized mailers to consumers falsely claiming they were eligible for federal programs that would permanently reduce their monthly debt payments to a fixed low amount or result in total loan forgiveness. The FTC’s complaint notes that, although the Department of Education and state government agencies administer loan forgiveness and discharge programs, none of the programs guarantees a fixed, reduced monthly payment for more than one year, and most people do not meet the programs’ strict eligibility requirements.

The defendants allegedly charged up to $800 in illegal up-front fees, purportedly to enroll consumers in a federal loan assistance program. They also charged a $100-$1,300 advance fee for enrollment in a “financial education” program and an additional monthly $49-$99 membership fee for the life of the loan, which typically is 10-25 years. This financial education program purportedly provided the consumers access to various resources unrelated to consumers’ student loans, such as “Key Ring & Luggage Protection,” “Everyday Grocery Savings,” “Auto Buying Service and Maintenance Discounts,” “Financial Calculators,” “medical and wellness discounts,” and “Access to Dozens of Informational & Useful Web links.”

According to the FTC, consumers were tricked into believing their monthly payments were going toward paying down their student loans. Although consumers were sending money to the defendants, none of those payments went toward paying off their student loans, and in some instances, the consumers’ loan balances instead accrued interest. The defendants often refused to provide refunds or returned substantially less than what people paid.

The defendants are American Financial Benefits Center, also doing business as AFB and AF Student Services; AmeriTech Financial; Financial Education Benefits Center; and Brandon Demond Frere. They are charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

The Dark Side of Identity Theft as Told by Victims (Part 2 of 2)

This is part two of a two part identity theft series

As mentioned in part one of this two part series, identity theft is a serious crime that can make anyone its victim. Identity thieves will target anything from your bank accounts to your medical history. Although there are some security measures you can take to help avoid identity theft, there is no way to become 100 percent safe. Even though identity theft has been a threat for years, it just continues to become even a greater threat as it evolves alongside technology. Here’s what two victims have to say about their experiences with identity theft:

Brian Shell, Author of 35 books at PassionHero.com

“It was a Friday when I worked from 3-7 p.m. at the corner store a half mile away. At 2 p.m., I went grocery shopping and came home to put everything away, and all was okay. I went to work at 3 p.m. and decided to stay to 7:30 p.m. because we were busy. When I came home, I found my TV missing and both of my bedrooms ransacked with a broken-out back window (their entryway), and a kicked-open side door (their exit portal). Since my safe was stolen, and since I knew there were spare credit cards inside, I immediately started calling those particular cards to cancel them. One of them was being used on a shopping spree as I spoke with the agent, and a freeze stopped their spree. It also provided the evidence I’d need to convict and evict them. Interesting side note is that if I only worked until 7 p.m., the credit card would have been cancelled before they tried to commit credit fraud, and I may not have been able to get convictions. It was a good work ethic that enabled the perpetrators to start spending before the card was cancelled.
 
Among the items stolen were all of my family’s jewels/heirlooms… but also the Bible my Grandmother gave me for my first communion and my deceased dog’s collar, tags, photos, and 1994 ad in the paper for him to find a good home. I didn’t sleep well for days. The first thing I did after cancelling the cards and having the police document the case was to change every single one of my passwords. I then changed them all again a week later. The police case opened was for the breaking and entering burglary. I also closed my bank account and opened a new one so the banking checks they stole couldn’t be used either.
 
I spoke to the detective who works at Macy’s, told her about the use of my Macy’s AMEX card at their store, and she gathered video evidence that enabled me to convict two of the three perpetrators and get one (the juvenile) of them evicted from our neighborhood. I also opened another police case for credit fraud in the city that it was committed in because that was the only hard evidence I could gather that could and did lead to a conviction for credit fraud. They didn’t leave any evidence behind for the B&E.
 
When they ransacked my home, they opened every dresser drawer, tossed my mattresses, and went for the stuff with handles that were easy to grab and carry. The issue I faced was that two of my windows were without blinds and curtains, so it was easy to look inside. Another issue was that I didn’t keep my lights on while I was away at work for the evening (in a frugal attempt to save pennies on my electric bill), so the place looked dark and broadcast that no one was home. Now, I keep a few lights on and play the stereo while I’m away. I invested in blinds and curtains. I vary my patterns and structure more than I used to do. Also, keep your credit cards and birth certificates and social security info in a non-obvious spot.
 
A few other things I did after the credit fraud was go to the social security office and get the government pamphlet of steps to take to protect your identity. Follow each and every one as much as possible. An ounce of prevention is worth a pound of cure. At first, I called the three credit reporting agencies every 90 days to keep a credit alert in play. However, if you want to get a seven-year extended credit alert with the credit bureau, you will need to mail each credit bureau a copy along with your written request that you need to send via certified mail.”
 

Charles Lee Mudd Jr., Principal and Attorney at Mudd Law

“Someone obtained my credit card information and used it to make purchases of sporting equipment. This occurred perhaps about 15 years ago. A party called to confirm an order had been placed. I believe it was the credit card company. I indicated that I did not place the order. It also appeared that a second order had already been placed and cleared.

I informed the credit card company that the orders were not valid. I obtained as much information about the merchants as I could from the credit card company. I called the merchant at issue and informed them that orders had been placed with my card that were not valid. They stopped one shipment, but a shipment had already been made and was scheduled for delivery. I obtained the shipping company’s name and information. I obtained the tracking number, called the company, and informed it of the facts. They began an investigation while I held on the phone.

As it turns out, the package had just been delivered to the address and a signature had been obtained. They sent me records. In the end, there was no house or property at the address. The signature was not mine. And, although one package had been delivered, I cancelled everything else. I obtained a new card number (you do not want to cancel the whole account as you will lose the longevity of the account and a new account may appear more negative on your credit report).
 
I did not seek professional advice, as I was the professional. This experience provided me the first-hand stress and perspective of our clients. Though, to be honest, many of my clients have much worse situations than I did.
 
You should actively monitor your credit report. I pay for a monitoring service to receive any alerts. I actively manage my scores as well. I work to ensure my scores will be high. So, it’s an active involvement in managing your credit. Use a credit card for purchases for vendors online. Then, pay it off right away. Do not use your debit card. If a fraudulent charge is made on a credit card, the company will usually credit the amount while it investigates the matter. With a debit card, the bank will likely not put the funds back into your account pending the investigation. Try to use one card. Use distinct passwords. Do not use the same password for access to all of your accounts.
 
I wish I had been a bit quicker to stop the one delivery. But, I acted pretty quickly regardless. I wish I would have known how long it would take the police in the city to respond to the complaint I filed. I did not hear anything for months. So, take notes and memorialize everything at the time it happens. If you file a police report, you may need to pull it back up months down the road.”

Identity theft advancements

Since identity theft is constantly evolving, the idea of keeping your information secure can seem overwhelming at times. Instead of worrying about just a wallet or a home safe, people now have to worry about their smart devices, points of Wi-Fi access, passwords, security software, credit reports, etc. The list keeps growing as we become more vulnerable to identity theft. It’s important that you regularly monitor all of your devices and accounts to ensure your security. On top of personal monitoring, you should consider getting help from a professional identity theft protection company.

This article by Alayna Pehrson first appeared on BestCompany.com and was distributed by the Personal Finance Syndication Network.