In 2013 the U.S. Government brought charges against individuals associated with a credit counseling operation.
At that time the U.S. District Attorney of Kansas said, “Two people have been charged with laundering cash from marijuana trafficking through a non-profit credit counseling agency in Kansas City, U.S. Attorney Barry Grissom said today.
Mendy Read-Forbes, 37, Platte City, Mo., and Laura Shoop, 46, Platte City, Mo., are charged in a superseding indictment with one count of conspiracy to commit money laundering, one count of conspiracy to possess with intent to distribute marijuana and one count of possession with intent to distribute marijuana. In addition, Read-Forbes is charged with 16 counts of money laundering and Shoop is charged with eight counts of money laundering.
The indictment alleges that Forbes and Newhard Credit Solutions was registered as a nonprofit organization that provided credit counseling services to people who were in bankruptcy proceedings. Forbes held herself out as the owner and operator of the agency. Shoop was an acquaintance of Forbes who worked at various times for the agency.
In March and April 2012, Forbes was introduced to an undercover officer posing as a marijuana dealer. Forbes offered to devise a scheme to launder the dealer’s drug proceeds. As part of the scheme, Forbes offered to deposit money given to her by the drug dealer into the bank accounts of Forbes and Newhard Credit Solutions or related companies and then to return the money to the dealer via checks, money orders or wire transfers. The bank accounts were in Kansas.
To make the transactions appear legitimate, Forbes gave the drug dealer a contract titled “Purchase and Sale of Business Agreement.” The contract, bearing the signature of the drug dealer and another person known to the grand jury, made it appear that the marijuana dealer was purchasing assets of FCP, Inc., a corporation controlled by Forbes and another person.
To make it appear that the drug dealer was engaged in business as a certified credit counselor with Forbes and Newhard Credit Solutions, Forbes gave the drug dealer a certificate saying he had completed training as a bankruptcy specialist.
In addition, Forbes created a company called Maximum Lawn Care, LLC, and opened bank accounts where cash from the drug dealer was deposited.
Forbes agreed not to charge a fee for laundering the drug dealer’s money until she had laundered $170,000 so that the dealer could use the funds to purchase more marijuana. Forbes also agreed to let the drug dealer store 40 pounds of marijuana at her house.” – Source
Last week Mendy Read-Forbes was sentenced to 20 years in federal prison and agrees to be responsible for restitution in an amount more than $370,000 and agrees not to contest any forfeiture proceeding concerning $40,000 currently in possession of the Kansas Bureau of Investigation. – Source
As you begin exploring ideas for savedincome, retirement, and estate planning, you may be wondering about trusts as an option. But what exactly is a trust? And how does it work with family members, retirement income, etc.? If you’ve been pondering questions like these, we interviewed Renee Linares Chin, Esq., an Estate Planning Lawyer who is keen on finances too. She gave us some great information on trust basics for retirees looking for options in their own estate planning. Here’s her thoughts:
Q: Why would a retiree want to set up a trust?
Renee: Most retirees would benefit from having a trust set up which funds their medical expenses, provides retirement income, and funds funeral expenses in the future. In this instance, the retiree would be considered the beneficiary of a living trust as discussed below.
Q: What is the difference between a revocable and an irrevocable trust?
Renee: A revocable trust is also called a revocable living trust, a living trust or an inter vivos trust. A revocable trust is a type of trust that can be changed anytime during the trustor’s lifetime. (A person who creates the trust is called a “trustor.”)
An irrevocable trust is also called a testamentary trust, a type of trust that can’t be changed after the agreement is signed, or becomes irrevocable after the trustor dies or after a specific time as stated in the trust.
The largest difference between a revocable trust and an irrevocable trust is the flexibility to modify the terms. You can change a revocable trust as much as you’d like during your lifetime. However, an irrevocable trust cannot be modified except under specific circumstances.
Another difference between a revocable trust and an irrevocable trust is that the irrevocable trust functions to protect the trustor’s property from creditors. In an irrevocable trust, the property no longer belongs to the trustor; it now belongs to the trust. Therefore, if the trustor incurs personal liability and is subject to creditor claims and judgments, the funds in the trust are protected as they are not his or her personal property. In contrast, all the property included in a revocable trust is considered the personal property of the trustor. Since the trustor’s assets are still considered personal property, they are subject to creditor claims and lawsuits.
You will have to pay estate taxes on revocable trusts because no taxes are paid when the property is transferred into the trust. In contrast, you do not need to pay estate taxes for irrevocable trusts because income taxes are paid when the property is transferred into the trust.
Both revocable and irrevocable function differently to avoid probate court. Probate is a legal proceeding where the court determines the validity of a will and administers the estate of the deceased person. It’s advisable to have a trust for the purpose of avoiding probate as the process is expensive, lengthy, and will diminish estate assets. If a person transfers all of their assets into a revocable trust, they own no assets at the time of death and there is no need for probate.
Q: What are some examples of some different kinds of trusts and their purposes?
Renee: An Inter Vivos Guardianship Trust is created by parents for the purpose of providing financially for their children, in the event that both parents die. This trust typically contains provisions stating that the use of trust funds are to be used for housing, health, welfare, and education of the children.
An Inter Vivos Conservatorship Trust is created for the purpose of providing care for a person that becomes incapacitated. This trust typically has a third party trustee. A trustee is a third party who is responsible for managing assets, expenditures, insurance, and government aid (if applicable).
An Inter Vivos Spendthrift Trust is created for the purpose of preventing a beneficiary who is not responsible with money from spending all of the estate assets. This gives an independent third party trustee the authority to make decisions on how to spend the trust funds. The Trustee’s authority is limited by guidelines for spending trust assets, which are outlined in the trust document.
An Inter Vivos Charitable Trust is created with the purpose of supporting a charity over a specified period of time. There are no estate taxes to be paid. This type of trust is commonly used to provide income to schools, churches, and non-profit organizations.
A Testamentary Trust is created by a will after the trustor dies. A Testamentary Trust can be created for a variety of purposes. The most common purposes of these are to avoid probate,provide income to the surviving spouse, and protect estate assets for children.
An Irrevocable Life Insurance Trust is funded with alife insurance policy, which should be taken out three years prior to the deathof the trustor. The purpose is to reduce estate taxes for wealthy individuals who would be subject to higher estate taxes.
Q: Are there any tax consequences regarding putting money in a trust or receiving money as a beneficiary?
Renee: Yes. You will have to pay income taxes on money earned by assets placed in the trust and on money received as a beneficiary. Depending on the type of trust you have elected, estate taxes may be reduced. The tax liability varies greatlydepending on the amount of assets and the type of trust.
Q: What are some basic things a retiree might plan for if they are considering setting up a trust?
Renee: If you are considering setting up a trust, you need to get a comprehensive list of your assets and liabilitiesalong with listing people who have access to your assets. Knowing yourportfolio of assets should help you put together an estate plan regardless if atrust is part of that plan. Any attorney or financial advisor will be betterable to assist you if you have comprehensive records of the following: trust deeds to all real property owned along with ownership records for cars, boatsand planes; list of valuable personal property items such as furs, jewelry,sports equipment and electronics; list of all bank accounts, CDs, 401K, RothIRA, retirement savings accounts and safe deposit boxes where valuables are stored and the names of individuals who have access to these assets. Additionally, if you have minor children, you and your partner should have a list of guardians for your children in the event of your incapacity.
Q: What are common misconceptions many people have regarding trusts?
Renee: The largest misconception is that if you have a trust, you will have to pay nothing in taxes. This is untrue. A trust can assist you to reduce estate taxes. However, merely having a trust is not sufficient to make your tax liability disappear.
If you’ve been wondering about different options regarding trusts in your estate plan, hopefully these tips from Renee Linares Chin, Esq. can give you some ideas. If you have additional questions, definitely consult with your own attorney or financial advisor.
Renee Linares Chin Esq. is an attorney who regularly blogs about personal finances and estate planning topics. Visit her at @renelinareschin and her website ReneeLinaresChin.com.
I’m standing on the last leg of my 20s and have yet to make any of the following major milestone purchases – a car, a home, a baby (not the baby itself obviously, but the significant investment that goes into having and raising it). The media might label my reluctance to adapt these traditional life stage expenses prior to thirty as some kind of “perma-childhood” characterized by the helplessness, selfishness, and entitlement that have largely (however limitedly) come to define my generation – millennials.
For my part, I find the idea of an “appropriate” schedule for life events ludicrous, but perhaps more importantly, a perfect illustration of the pervasive misunderstanding of millennial reality. To understand millennial behavior is to appreciate the context in which millennial choices are made- or deferred.
Understanding Millennials: Unemployment and Underemployment
In 2014, six years after the recession and several years into the would be working lives of many millennials, the percentage of unemployed young adults was approximately twice the national average. In addition to the high numbers of young people out of work, a 2012 report from the Federal Reserve Bank of New York found that about 44 percent of young, working college grads were underemployed. I still remember how relieved I was to find that I wasn’t the only 2008 grad working a babysitting gig that could’ve just easily been done by a high school junior.
It turns out graduating into a weak labor market has implications that last for years. I’ve certainly seen the effects of long-term financial insecurity manifest among my peers and a 2009 study out of Yale showed that my anecdotal experiences and observations were not singular. Researchers found that students who graduate during a recession earn up to 10 percent less after a decade of work than they might have otherwise.
While the economy may be improving in time to save younger millennials from that same fate, my experience and those of my older millennial contemporaries have largely reflected those findings. Even those who pursued more “traditional” and marketable career prospects are just starting to find their financial footing and get a grasp on their lives. Not necessarily because of entitlement (though I won’t dismiss it entirely), but because they’ve had to channel far more of their resources to achieve some semblance of stable and sufficient income, let alone success.
Understanding Millennials: Retirement
An often-overlooked implication of the millennial unemployment and underemployment debacle is the effect on retirement planning. Prior to full time employment and without access to employer sponsored retirement plans and an HR department to walk individuals through the steps of enrollment, the onus of retirement planning rests largely on the individual. That means in between job interviews, unpaid internships, and part-time shifts at Starbucks, millennials need to set up their own retirement accounts or do without- an option many seem to have favored, if only for the sake of simplicity.
By the time many young professionals are able to secure employment that comes with retirement benefits (if they ever do), they’ve already missed out on valuable years of investment growth as well as foundational financial literacy that comes through the practice of implementing a long term financial strategy.
The millennial reluctance to invest towards retirement (or anything for that matter) has its own contextual causes. Having experienced extreme job volatility as a result of the floundering economy and seen the effects of poor market conditions on their parents’ employment, portfolios, and retirement prospects, a fiscally conservative, depression era mindset has taken hold among gen Y workers.
According to a study by the Brookings Institution, more than half of people between the ages of 21 and 36 have their savings parked in cash. Instead of growing their money through aggressive investments like stocks, millennials favor traditional bank savings accounts and CDs. While these latter accounts carry minimal risk, they also pay little to no interest- which can actually leave millennials more vulnerable, with the value of their savings eroding due to inflation.
Understanding Millennials: Debt
Let’s not forget the debt! The average student loan debt for graduates of public universities doubled between 1996 and 2006. Those who took out student loans as eager 18 years olds did so anticipating finding a job upon graduation that would help them pay off; instead, they found themselves in the worst economy since the Great Depression, struggling to find any employment.
With opportunities minimal and wages stagnant, just keeping up with five and six figure student loan payments is enough to create serious financial strain – forget retirement planning or buying a home.
Understanding Millennials: Opportunity
While it’s important to understand how these contextual factors shape millennial behavior, I don’t advocate using them as a way to justify or play victim.
Yes, millennials face real financial and economic challenges that have been largely misunderstood and underappreciated, but they also have unprecedented access to information, resources, and low cost opportunity.
You can answer just about any question in the ten seconds it takes to type it into Google search.
Hardship is the birthplace of innovation, but only for those who are willing to carve their own way and try new approaches.
The old formula for success and all its’ “accepted” timelines is outdated. So go ahead, delay traditional “adulthood”, but not out of helplessness, do it consciously as you propel yourself forward, finding new, innovative ways to create your own powerful future- financial and otherwise.
While the overall job market has improved over the past few years since the Great Recession, not everyone has been able to return to the workforce. At the same time, others are without employment because they are in school, transitioning to a new career, are stay-at-home parents, or have simply retired. In these situations, is it still possible to be approved for a credit card?
First of all, a job is not required to be approved for a credit card, but applicants should be able to show some form of income. For several years, the Credit CARD Act of 2009 was interpreted to allow card issuers to consider only the applicant’s individual ability to repay a loan. This had the effect of shutting out many applicants, especially stay-at-home spouses. Fortunately, the Consumer Financial Protection Bureau revised its rules in 2013 to allow card issuers to consider the household income of applicants 21 years of age or older, so long as they had a reasonable expectation of access to the income they reported.
For example, an at-home parent could include his or her spouse or domestic partner’s income when their household finances were managed jointly. The same could also be true of extended family living together, or perhaps even roommates. However, the Credit CARD Act still requires applicants under 21 to show their own independent income, rather than rely on their parent’s income. In addition, credit card issuers can consider other forms of income other than employment including investments, child support and alimony payments.
How to Get a Credit Card Without a Job
Once they have included household income, as well as other forms of income that are not related to employment, most applicants with good credit should be able to qualify for at least a minimal line of credit. But in some situations, it’s possible that many card issuers may still be unwilling to grant a line of credit to some applicants. In these cases, it may help to apply for a secured credit card.
Secured credit cards require applicants to submit a refundable deposit first, before being granted a line of credit that is equal to the amount of the deposit. But at the same time, secured credit cards can be used much like any other credit card. Cardholders can use them to easily rent cars or reserve hotel rooms, which can be very difficult to do without a credit card. In addition, many secured credit cards even offer auto rental insurance, which can be expensive if purchased from the rental car agency.
Like all other credit card users, secured card holders must make monthly minimum payments, and will incur charges unless they pay their statement balances in full and on time. Most secured card issuers will report cardholders’ payments to the three major consumer credit bureaus, so these cards can help people to rebuild their damaged credit as well. In addition, secured credit cardholders are protected by the Fair Credit Billing Act, the same law that applies to standard credit cards. Unfortunately, secured cards will generally have higher annual fees and interest rates than a similar non-secured card. As you work to build your credit, it’s a good idea to keep an eye on your credit scores to track your progress. You can get your credit scores for free from several sources, including Credit.com.
Alternatives to Credit Cards
Prepaid debit cards are rapidly becoming popular among those who are not able to qualify for a credit card, as well as those who want to avoid the possibility of incurring debt. Prepaid cards differ from credit cards in that funds must first be added before the card can be used, so they are not a line of credit and have no significant qualifications for approval. On the other hand, prepaid debit cards typically have more fees (check carefully — a few have minimal fees) and less robust legal protections than standard credit cards.
Although many people do not have jobs, we can all have access to a secure and convenient method of payment. By examining the strengths and weaknesses of standard credit cards, secured cards and prepaid cards, you can choose the product that best meets your needs.
Opening a credit card with a 0% financing offer or low fees when you transfer the balance from a different card can help you save money when working to pay down credit card debt, particularly if you have a lot of it. Getting a balance transfer card and using it wisely requires careful thought, and if you don’t exercise discipline, you may end up hurting your finances instead of helping them.
Here are some common mistakes you want to avoid when using a balance transfer credit card:
1. Mixing Balances
You may have received offers from your credit card issuer about transferring a balance from another card to the one you have with them. If you use the card that’s offering the balance transfer, keep in mind that the promotional financing will only apply to the transferred balance — the interest rate on your existing balance still applies.
“Now you have balances at two different interest rates, which can get confusing fast,” said Gerri Detweiler, Credit.com’s director of consumer education, in an email.
If you pay more than the minimum payment, credit card issuers are required to apply the excess payment to the balance with the higher interest rate, meaning you may not be paying off that transferred balance. There’s an exception: If you made a purchase under promotional financing, you can ask the issuer to apply payment to that balance before applying money to a balance with a higher interest rate. Keep in mind that if you don’t pay off the balance with promotional financing — whether it was a transferred balance or a new purchase — within the timeframe of the promotion, you’ll end up paying interest on it.
Like Detweiler said, it can be very confusing.
“It’s best to use a card exclusively for a balance transfer if possible,” she said.
2. Overlooking the Cost
Transferring a balance from one card to another usually carries a 2% to 4% transfer fee, Detweiler said, so you have to do some math before committing to the transfer.
“It may still be a better deal than the interest you were paying, but you have to take it into account,” she said.
Jason Steele, an expert on credit cards and frequent contributor to Credit.com on the topic, said a common mistake people make is transferring a balance they could pay off in the next billing cycle. Part of the problem there is that people aren’t paying close enough attention to the terms of the card, but these cards aren’t always easy to understand.
“There’s not much information that the card issuers give on these subjects,” he said. “They’re just marketed as a 0% balance transfer.” You have to understand exactly what that means and how much it might cost you.
3. Failing to Plan
Steele said another common mistake he sees is people failing to use the card as an instrument for repaying debt. That’s the point of a balance transfer in the first place: Put the balance on a card with a lower interest rate so you can save money while paying it down. Because the interest rate will expire, you have incentive to pay the balance off faster. If you’re not doing that, what was the point of paying a fee to transfer that balance to the card in the first place?
Additionally, Steele said a lot of people think they can just get another balance transfer card if they don’t pay off the first one in time, but that’s not necessarily a reliable (or affordable) strategy. Getting a new credit card requires a credit check, and if you’ve opened a lot of credit cards recently or carry high balances, your credit may not be in good enough shape for another card approval.
Perhaps you’re sensing a theme: It’s really important to pay attention to the details with these products. You also need to watch the transition very closely, because it can get confusing to have been paying one issuer and now have to pay another, and you definitely don’t want to miss a payment during the switch. Late payments can knock a lot of points off your credit score and can hurt your credit for years. (You can see how your credit history affects your credit scores by checking them regularly — which you can do for free through numerous sources, including Credit.com.)
Both Detweiler and Steele stressed the importance of the financing timeline.
“Either [they] don’t keep track of when the transfer period ends or they are overly optimistic that they can pay it back before it does. Then they can’t, and the real interest rate — which is much higher — kicks in,” Detweiler said.
Getting a balance transfer is just the first step of a months-long process of paying down debt and, ultimately, improving your credit. (This calculator can show you how long it will take to pay off your credit card debt.) As long as you don’t continue to rack up charges, are realistic about what you can accomplish and commit to your plan, you could see a drastic improvement in your debt and credit situation after using a balance transfer.
A reader, Anthony, wrote to me to share the success he had in dealing with the debt collection issues he faced earlier this year. He started off with the goal of settling an old unpaid credit card, and ended up winning in court and getting his costs covered. He wrote:
“Hi Michael, I contacted you several months ago as I was being sued by a debt collection law firm for a [credit card] account that I had in 2008. I tried to negotiate the charge, which they calculated at $900, but original balance was only $600. I ended up hiring an attorney after they failed to negotiate. To make a long story short, they dismissed the case because they had no witness at which time my attorney objected and asked the court to pass on court fees and attorney fees to the collection agency. The judge ruled in my favor on the spot for the court fees, and instructed my attorney to file a separate complaint for attorney fees. By objecting, he stated that the collection law firm couldn’t come after me again. Thanks for your help and motivation to fight their efforts to sue!”
The majority of debt collection lawsuits are ignored, never contested, or not challenged effectively (some reports suggest more than 90% of lawsuits end in default or summary judgment).
From what I have seen in my many years of helping people resolve their debts — debt collectors are more likely to not challenge smaller balance lawsuits like Anthony’s, even if they’d previously refused to negotiate a fair settlement. Meanwhile, it is cost-prohibitive for a consumer to challenge the debt collector’s claims with one’s own attorney, when the cost of hiring an experienced debt defense attorney may end up costing more than paying the debt in full. And there are no guarantees that you will win. Having the judge pass the court and attorney fees along to the debt collector, like in Anthony’s case, then, is ideal for the consumer.
If your goal is simply to negotiate an affordable lump sum settlement, there are resources you can consult to help you through that process.
If you are looking for an attorney to help you defend against a collection lawsuit, you need to know that the vast majority of attorneys are likely unable to effectively assist you with your defense. Most attorneys just do not practice in this area, and over the years I have found that talking to the wrong attorney about your issues can do more harm than good. But there are some attorneys who focus on collection defense.
Look for an experienced debt defense attorney with the National Association of Consumer Advocates (NACA). Distance is not always an issue with these cases. Some debt collection defense attorney offices cover multiple states.
Contact a low-income legal aid office nearest you. Some of these offices do offer debt collection defense to people who qualify for low- to no-cost legal assistance.
There are additional things you can do to resolve debts with collectors, including picking up the phone to talk to collection attorneys and their staff. Anthony may not have had success with his efforts, but he did try that first. And countless others are able to get a result they can live with by simply opening up the lines of communication.
Everyone is welcome to post in the comments below for feedback. Please consider sharing your successes, failures, and other outcomes. It is important for people to hear about how others make out with late-stage collections when they are trying to decide what to do in their own situation.
With the cost of college steadily increasing, paying for school can be seriously daunting to prospective students. Student loans may seem like the only option, but there are ways to get money for school that don’t have to be paid back … ever. Check out the following tips to help secure scholarships that can help pay for college.
Get Involved & Maintain Your GPA
One of the best ways to get help paying for college is by trying your best academically in high school and maintaining a high GPA. Joining a sports team, club or participating in community service will also help increase your chances. When you are involved or doing well in school, you are likely to get better letters of recommendation, which almost every scholarship requires. It’s important to select people who can provide specific details about your skills and positive traits. Be sure to give your references plenty of notice and time to complete these letters.
File a FAFSA
The Free Application for Federal Student Aid can go a long way when it comes to scholarships. The application opens each January and can help both you and review committees figure out which need-based scholarships you qualify for.
Start Early & Search Often
These are not just for high school seniors, you can start racking up scholarships as early as kindergarten and can even qualify once already enrolled in college. Plus, new scholarships are created regularly, so it’s a good idea to start researching scholarships early and revisit it often.
It’s a good idea to apply to every scholarship that you qualify for. In addition to searching online, check with your school librarian, guidance counselor and teachers. Plus it can be worth it to ask the leadership of any organization that you or a family member are involved with to see if they know of any scholarships. There are all sorts of unique opportunities out there and don’t be dissuaded to pursue less-known scholarships because these can be easier to win. And every penny counts when it comes to funding your college tuition.
Read Instructions & Qualifications Carefully
While you want to apply to as many scholarships as possible, it’s important to review the eligibility requirements of each one before you begin. This will help ensure you aren’t wasting your time on an opportunity you don’t qualify for. Once you are sure it could be a good fit, follow the directions carefully and avoid missing a necessary document.
Create a Calendar
Staying organized is really important when you are applying to multiple scholarships. Keep track of application deadlines with a calendar that marks important dates so you don’t miss any. Don’t forget that you will need letters of recommendation, transcripts and financial documents ready as well. Once you put the deadlines on your calendar, you can work backward so that you are asking for recommendations and documents early enough.
Personalize With Passion
When it comes to answering questions or crafting an essay, it’s important to tailor your application to the sponsor’s goals while personalizing your answers and showing your passion. Give examples and be specific. This is your chance to stand out from the crowd and really prove why you should be selected. Proofread and share with another person to eliminate spelling and grammar issues.
Make Copies of Everything
You want to be prepared in case anything goes wrong. It’s a good idea to keep a folder with photocopies of every scholarship application. This way you have a back-up copy that is easily accessible. Also, send the application by certified mail and request delivery confirmation so you know when the application is received.
There are many scholarships out there for students, from the broad to the very specific and the large to the small. The competition for these awards can sometimes be fierce but the benefits are often worth the time and effort of applying. The more you can reduce your need for student loans now, the better off you’ll be in the long run. (If you have student loans, or any kind of debt, you can see how it affects your credit by getting your free credit report summary from Credit.com, which includes an explanation of all the factors behind your score.)
Legislation that would establish new nationwide privacy protections for American consumers was introduced by a group of high-profile Democratic senators on Thursday, including Pat Leahy (Vermont) and Elizabeth Warren (Massachusetts). The Consumer Privacy Protection Act would establish federal standards for notification of consumers when their data is lost or stolen, greatly expand the definition of private information beyond financial data, and allow existing state privacy laws to remain in force. Geolocation data and images would be covered by its data leak disclosure rules, for example.
“Today, data security is not just about protecting our identities and our bank accounts, it is about protecting our privacy. Americans want to know not just that their bank account and credit cards are safe and secure, they want to know that their emails and their private pictures are protected as well,” Sen. Leahy said. “Companies who benefit financially from our personal information should be obligated to take steps to keep it safe, and to notify us when those protections have failed.”
Consumer groups cheered the proposal, saying it offered a fresh approach to consumer privacy.
“This is a step forward. This is the first time you get something new in federal legislation. Usually it scales back (protections) in state law,” said Justin Brookman, director of consumer privacy at the Center for Democracy and Technology. “It’s good to see some new thinking on the issue, something that actually adds new protections for a lot of people.”
“Everyone from the NSA to the local grocer has become a consumer of our data. So many pieces of our data are being collected, stored, shared and sold, either without our knowledge or ability to understand the process,” said Adam Levin, privacy expert and chairman and founder of Credit.com. “It is long overdue that we expand the definition of ‘personally identifying information’ as well as the protections necessary to safeguard our privacy and data security and require quick notification when our PII is exposed.”
The legislation would require social media firms or cloud email providers to notify consumers if their accounts are compromised, Brookman said. Currently, most disclosure rules apply only to financial information such as credit card numbers.
The legislation comes on the heels of a similar White House proposal called “The Consumer Privacy Bill of Rights Act of 2015,” but goes several steps further than the administration’s proposal, said Susan Grant of the Consumer Federation of America. The White House proposal would allow federal law to supersede state laws, potentially diminishing consumer rights. It also requires demonstration of actual harm before requiring notice.
“(We believe) that federal legislation will only be helpful to consumers if it provides them with greater privacy and security protection than they have today. Most of the bills that we have seen in Congress would actually weaken existing consumer rights and the ability of state and federal agencies to enforce them,” Grant said. “(This bill) takes the right approach, requiring reasonable security measures, providing strong consumer protection and enforcement, and only pre-empting state laws to the extent that they provide less stringent protection.”
Most significant: The legislation creates entire new classes of protected information. Private information is divided into seven categories. Compromise of any one of them would require companies to notify consumers. They are:
Leahy has repeatedly proposed legislation since 2005 that would establish a nationwide notification standard called the Personal Data Privacy and Security Act; it has not passed. While co-sponsors of this new bill include Al Franken (Minn.), Richard Blumenthal (Conn.), Ron Wyden (Ore.) and Edward J. Markey (Mass.), there are, notably, no Republican co-sponsors. That probably dooms the bill, says Brookman.
“They didn’t get a GOP co-sponsor, and that’s not a great sign. Still, having the bill out there is good for dialog on the issue,” he said.
Yesterday I published this article about proposed changes to pursing debtors in North Carolina over purchased debt.
That would have been the story, done and dusted. But today I awoke to find InsideARM, an accounts receivable trade publication, leveled some objections at my opinion piece.
InsideARM said, “Rhode calls Lee’s bill, “idiotic,” and “ill-advised, ill-conceived and unwarranted.” Other than potentially calling a state Senator an idiot in his headline, he also characterizes Lee as “ill informed” in the piece.” – Source
They also said, “Rhode also calls another Senator who defended the bill “clueless.” The article’s main contention, that Lee is a “debt collection idiot” is based partly on selective editing.”
InsideARM also stated, “Proponents of the measure argue that North Carolina’s infamous 2009 law targeting debt buyer collection lawsuits went too far, making the collection of legitimate debt onerous in the state. Most in the ARM industry consider the rules to be among the most restrictive in the country.”
But where the objections to the article missed the target was the fact the proposed changes to the law appear to be driven to ease the burden on bad debt documentation and not fairness to both consumers and debt buyers.
Even the North Carolina Attorney General’s office feel S.B. 511 is unnecessary. The Raleigh, NC based newspaper, News & Observer, said, “But Kevin Anderson, who is in charge of the consumer protection division in the state Attorney General’s office, said the 2009 law has been effective in stemming collection abuses. Those abuses included lawsuits against consumers who actually had paid their bills in full or who couldn’t even determine, based on the scanty evidence presented in the complaint, whether they had paid or successfully disputed the bill. The debt at issue can be years old by the time the debt buyers acquire them.” “The rest of the country that hasn’t passed laws like this are still struggling with the problem,” he said. “We would caution against rolling back some of these protections.” – Source
Similar opinions were offered up by the Durham, NC located Center for Responsible Lending, as well. The same N&O article says, “Ellen Harnick, senior policy counsel for the Center for Responsible Lending, complained the debt buyers simply aren’t willing to pay “a little more” for the underlying documentation required by the 2009 law.
That law, she said, was “passed by a unanimous vote in the Senate because, on a bipartisan basis, people were troubled on behalf of taxpayers about what was happening in the courts.”
Harnick also argued that the bill shifts the burden of proof from the debt buyer that brings a lawsuit to the consumer.”
Histrionics aside, I continue to miss the benefit to consumers by removing the current legal requirements bad debt buyers face in North Carolina before going after consumers. The current law requires the debt owner must know the “amount of the original debt” and also have a copy of the “contract, charge-off statement, or other writing evidencing the original debt, which must contain a signature of the defendant. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then copies of documents generated when the credit card was actually used must be attached debt.”
In North Carolina it would be silly to buy a home or car without documentation and evidence the purchase is legitimate or know the identity of the property and have it well documented. So why does it not make logical sense to make sure purchased bad debt can be authoritatively documented as well?
Apparently the current law in place in North Carolina makes bad debt buyers feel the law “went too far, making the collection of legitimate debt onerous in the state,” as InsideARM says. But it is unclear how the law prevents bad debt buyers from charging ahead to sue and win lawsuits over debt owed as long as they have the basic documentation to prove the validity of the debt. And being able to validate the debt is an issue close to the Consumer Financial Protection Bureau as well.
InsideARM said, “Rhode contends that Lee may be a debt buyer himself, because his law firm’s website states, “The firm focuses on…debt acquisition.” What Rhode omits is the fact that Lee’s practice focuses almost entirely on commercial real estate, and the unedited passage from Lee’s site reads, “The firm focuses on complex commercial real estate finance, debt acquisition and development matters as well as complicated entitlement and zoning cases.”
For the record, I make no such argument that Lee or his law firm is a bad debt buyer. They simply felt it was an important enough skill to mention it in their firm description. If it is not something they assist with then why mention it? – Source
In my mind the only reason Lee’s experience as an attorney with purchased debt should be a factor is a hopeful awareness about the lack of proper documentation currently owned by bad debt buyers and the reality most consumers don’t defend themselves against unsupported collection lawsuits.
The debt collection industry might be up-in-arms about my opinion S.B. 511 is ill-advised, ill-conceived, and unwarranted but surely making sure all of the documentation validating the debt is on hand makes for a slam dunk lawsuit by the current debt owner to recover money owed them. NC Senator Harry Brown was quoted as saying, “I think the key point of this is, this is debt that someone has gone out and decided not to pay.”
To which I must humbly disagree. I think the key point to the desired change in the law is to relax a requirement for bad debt buyers to have sufficient documentation and data on hand to prove the debt is valid as the CFPB advises consumers to do when approached over uncertain debt.
Here is what the CFPB advises consumers to ask for from bad debt buyers attempting to collect:
“The name and address of the creditor to whom the debt is currently owed, the account number used by that creditor, and the amount owed.
If this debt started with a different creditor, provide the name and address of the original creditor, the account number used by that creditor, and the amount owed to that creditor at the time it was transferred. When you identify the original creditor, please provide any other name by which I might know them, if that is different from the official name. In addition, tell me when the current creditor obtained the debt and who the current creditor obtained it from.
Provide verification and documentation that there is a valid basis for claiming that I am required to pay the debt to the current creditor. For example, can you provide a copy of the written agreement that created my original requirement to pay?
If you are asking that I pay a debt that somebody else is or was required to pay, identify that person. Provide verification and documentation about why this is a debt that I am required to pay.
The amount and age of the debt, including:
A copy of the last billing statement sent to me by the original creditor.
State the amount of the debt when you obtained it, and when that was.
If there have been any additional interest, fees or charges added since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each added amount. In addition, explain how the added interest, fees or other charges are expressly authorized by the agreement creating the debt or are permitted by law.
If there have been any payments or other reductions since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each of them.
If there have been any other changes or adjustments since the last billing statement from the original creditor, please provide full verification and documentation of the amount you are trying to collect. Explain how that amount was calculated. In addition, explain how the other changes or adjustments are expressly authorized by the agreement creating the debt or permitted by law.
Tell me when the creditor claims this debt became due and when it became delinquent.
Identify the date of the last payment made on this account.
Have you made a determination that this debt is within the statute of limitations applicable to it? Tell me when you think the statute of limitations expires for this debt, and how you determined that.” – Source
And it does not stop here with the CFPB. They’ve also said, “The CFPB is concerned that debt collectors do not always have adequate or accurate paperwork or data to support their claims about a consumer’s indebtedness. This lack of information can make it harder for the debt collector to provide the consumer with information to identify the debt or resolve disputes.” – Source
It seems the CFPB feels consumers are entitled to a lot more information than even the current North Carolina law requires. By rolling back the law using S.B. 511 it seems to me it puts bad debt buyers in a worse position moving forward in the face of tougher debt data requirements to almost certainly come. And for me, that’s idiotic for an industry based on data and documentation.
Some People Lost Their Homes: Paid Defendants Instead of Making Mortgage Payments
At the Federal Trade Commission’s request, a federal court halted a sham operationthat allegedly told financially distressed homeowners it would help get their mortgages modified, but instead effectively stole their mortgage payments, leading some to foreclosure and bankruptcy. The FTC seeks to permanently stop the scheme and its participants’ illegal practices. It also filed a contempt action against one of the scheme’s principals, Brian Pacios, who is under a previous court order that prohibited him from mortgage relief activities.
“These defendants stole mortgage payments from struggling homeowners, and they pretended to be a nonprofit working with the government,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’ll continue to shut down shameful mortgage frauds like this one.”
The defendants called the program “an aggressive update to Obama’s original modification program,” and stated that “[y]our bank is now incentivized by the government to lower your interest rate . . .”
The defendants falsely claimed they had a high success rate, special contacts who would help get loan terms modified, and an ability to succeed even when consumers had failed. After obtaining consumers’ financial information, they told them they were “preliminarily approved” and falsely claimed they would submit consumers’ loan modification applications to the U.S. Department of Housing and Urban Development, the Neighborhood Assistance Corporation of America, and the “Making Home Affordable” (MHA) program. The MHA application form they sent consumers excluded the page that warns, “BEWARE OF FORECLOSURE RESCUE SCAMS,” and “never make your mortgage payments to anyone other than your mortgage company without their approval.”
Later, the defendants falsely told consumers they were approved for a low interest rate and monthly payments significantly lower than their current payment, and that after making three monthly trial payments, and often a fee to reinstate a defaulted loan, they would get a loan modification and be safe from foreclosure. They also told consumers not to speak with their lender or an attorney.
In reality, homeowners who made the payments did not have their mortgages modified, and their lenders never received their trial payments, the FTC alleged. Instead, they were contacted by an “Advocacy Department” run by one of the defendants, Denny Lake, and told that the department would get them an even better loan modification than the one purportedly obtained through MHA, according to the FTC’s complaint.
But the “Advocacy Department” was just another trick designed to make sure consumers continued to make all of the monthly trial payments. When consumers raised concerns about continuing foreclosure warnings, sale date notices, and even court dates, they were told their loan modification was being processed or nearly completed.
By keeping consumers on the hook for months, the defendants doubled, tripled, or quadrupled consumers’ trial payments, the FTC alleged. They told consumers they would put these payments in escrow accounts and eventually pay off consumers’ lenders. In fact, the defendants simply took the money for themselves. As a result, some consumers lost their homes, and most consumers incurred additional penalties and interest as they fell further behind on their mortgages.
The defendants include Chad Caldaronello, also known as Chad Carlson and Chad Johnson; C.C. Enterprises Inc., doing business as HOPE Services, Retention Divisions, and Trust Payment Center; Justin Moreira, a/k/a Justin Mason, Justin King and Justin Smith; Derek Nelson, a/k/a Dereck Wilson; D.N. Marketing Inc., d/b/a HAMP Services and Trial Payment Processing; and Brian Pacios, a/k/a Brian Berry and Brian Kelly. They are charged with violating the FTC Act, the FTC’s Mortgage Assistance Relief Services Rule (MARS), and its Telemarketing Sales Rule (TSR).
Denny Lake, d/b/a JD United, Advocacy Department, Advocacy Division, and Advocacy Agency, is charged with knowing or consciously avoiding knowing the other defendants were violating the MARS and the TSR. A relief defendant, Cortney Gonsalves, is charged with holding money and assets she received from the scam.
To learn how to avoid mortgage and foreclosure rescue scams, see Home Loans.
The Commission vote approving the complaint was 5-0. The U.S. District Court for the Central District of California entered a temporary restraining orderagainst the defendants on April 15, 2015.