National Mortgage Servicing Company Will Pay $63 Million to Settle FTC, CFPB Charges

Green Tree Servicing Allegedly Deceived Homeowners, Many of Whom Were Already in Financial Distress

A national mortgage servicing company will pay $63 million to resolve Federal Trade Commission and Consumer Financial Protection Bureau charges that it harmed homeowners with illegal loan servicing and debt collection practices.

The FTC and CFPB allege that Green Tree Servicing LLC made illegal and abusive debt collection calls to consumers, misrepresented the amounts people owed, and failed to honor loan modification agreements between consumers and their prior servicers, among other charges.

Under the proposed settlement, Green Tree will pay $48 million to affected consumers and a $15 million civil penalty. The company also will stop its alleged illegal practices, create a home preservation plan for some distressed homeowners, and take rigorous steps to ensure that it collects the correct amounts from consumers.

“It’s against the law for a loan servicer to lie about the debts people owe, or threaten and harass people about their debts,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working together, the FTC and CFPB are holding Green Tree responsible for mistreating homeowners, including people in financial distress.”

Green Tree has become the servicer for a substantial number of consumers who were behind on their mortgage payments at the time their loans were transferred to Green Tree. Because homeowners cannot choose their servicer, they are locked into a relationship with the company for as long as it services their loans.

Illegal Debt Collection Practices

According to the FTC and the CFPB, Green Tree’s collectors called consumers who were late on mortgage payments many times per day, including at 5 a.m. or 11 p.m., or at their workplace, every day, week after week, and left many voicemails on the same day. They also unlawfully threatened consumers with arrest or imprisonment, seizure of property, garnishment of wages, and foreclosure, and used loud and abusive language, including calling consumers “deadbeats,” mocking their illnesses and other struggles, and yelling and cursing at them. The company also allegedly revealed debts to consumers’ employers, co-workers, neighbors, and family members, and encouraged them to tell the consumers to pay the debt or help them pay it. The complaint also alleges that Green Tree took payments from some consumers’ bank accounts without their consent.

The agencies also allege that Green Tree pressured consumers to make payments via Speedpay, a third-party service that charges a $12 “convenience” fee per transaction, claiming it was the only way to pay, or that consumers had to use the service to avoid a late fee. 

Mishandled Loan Modifications and Delayed Short Sale Requests

According to the complaint, in many instances, Green Tree failed to honor loan modifications that were in the process of being finalized when consumers’ loans were transferred from other servicers to Green Tree. This resulted in consumers making higher monthly payments, receiving collection calls, and even losing their homes to foreclosure.  Green Tree also allegedly misled consumers about their loss mitigation options. The company told some consumers who were behind on their mortgages that they needed to make a payment to be considered for a loan modification, even for programs that prohibited the company from requiring up-front payments. In addition, Green Tree took up to six months to respond to consumers’ short sale requests despite telling them it would respond much more quickly. These delays caused consumers to lose potential buyers, miss other loss mitigation options, and face foreclosures they could have avoided.

Misrepresented Account Status to Consumers and Credit Reporting Agencies

According to the complaint, Green Tree misrepresented the amounts consumers owed or the terms of their loans. This included telling consumers they owed fees they did not owe, or that they had to make higher monthly payments than their mortgage contracts required. The company often knew or had reason to believe that specific portfolios of loans it acquired from other servicers contained unreliable or missing information. In many instances, it should have known that consumers had loan modifications from prior servicers and therefore owed lower amounts. And when consumers disputed the amounts owed or terms of their loans, Green Tree failed to investigate the disputes before continuing collections.

Green Tree also allegedly furnished consumers’ credit information to consumer reporting agencies when it knew, or had reasonable cause to believe, that the information was inaccurate, and failed to correct the information after determining that it was incomplete or inaccurate – often when consumers told Green Tree about it.

Proposed Settlement Order

In addition to the $63 million in monetary payments, the proposed settlement order includes provisions that require Green Tree to:

  • establish and maintain a comprehensive data integrity program to ensure the accuracy and completeness of data and other information about consumers’ accounts, before servicing them; 
  • cease collection of amounts disputed by consumers until Green Tree investigates the dispute and provides consumers with verification of the amounts owed;
  • meet certain loan servicing requirements to ensure that whenever Green Tree is involved in the sale or transfer of servicing rights, the buyer or transferee will honor loss mitigation agreements and properly review outstanding loss mitigation requests;
  • ensure that it has enough personnel and the technical capacity to handle loss mitigation requests and respond to consumer inquiries in a timely fashion, and make its loss mitigation application available to consumers at no cost and on its website;
  • implement a “Home Preservation Requirement” to provide loss mitigation options to consumers whose loans were transferred to Green Tree during the time period covered by the complaint; and
  • obtain substantiation for any amounts collected when consumers have in-process loan modifications, and for purported amounts due when there is reason to believe a newly transferred loan portfolio is seriously flawed.

The proposed order also prohibits Green Tree from making material misrepresentations about loans, processing procedures, payment methods, and fees, from taking unauthorized withdrawals from consumer accounts, and from violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act.

The Commission vote authorizing the staff to file the complaint and proposed stipulated order was 5-0. The FTC filed the complaint and proposed stipulated order in the U.S. District Court for the District of Minnesota.

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. Stipulated orders have the force of law when approved and signed by the District Court judge.

This article by the Federal Trade Commission was distributed by the Personal Finance Syndication Network.


Millions of consumers will now have access to credit scores and reports through nonprofit counselors


By

Millions of consumers will now be able to receive the credit scores and credit reports that nonprofit credit counselors purchase on their behalf.

Nonprofit organizations that offer credit counseling, housing counseling, and other financial counseling services buy credit reports and scores for the consumers they serve. These reports and scores help counselors engage in constructive conversations with their clients about steps the clients can take to improve their financial situation.

Until now, counseling organizations have generally been prohibited by their contracts with the credit reporting agencies from giving the consumer the credit report or score that they have purchased on that consumer’s behalf. For example, a nonprofit organization that purchases a credit report with a FICO credit score has typically signed a three-way agreement with one of the three large credit reporting agencies (TransUnion, Equifax, or Experian) and FICO, agreeing not to provide the report or score to any entity, including the consumer.

This no-sharing policy is common in contracts signed by business users of credit reports and scores. But when applied to consumer counseling, it limits a client’s ability to review the credit history provided by the counselor on their own and may make the consumer more dependent on the counselor to take steps to manage or improve her credit standing. We’ve heard concerns about this issue from counselors and consumers across the country.

A policy change that will affect millions of consumers

FICO’s announcement today signals a change in this policy. FICO has reached new agreements with the three credit reporting agencies that will allow millions of consumers who receive nonprofit credit counseling, housing counseling, and other services to obtain a copy of the FICO score that these organizations have purchased. We’ve been working with industry to make progress on these issues and we are encouraged by this positive step. FICO has taken the additional step to create content to help these consumers understand the key factors that influence their credit scores.

A step in the right direction

These efforts build on our open credit score initiative, which is helping to increase consumers’ access to credit scores and credit reports and empower consumers to improve their financial lives. Last year, we launched this initiative by calling on more of the nation’s top credit card companies to make credit scores freely available to their customers. Today, more than more than a dozen major credit card issuers are providing credit scores directly and freely to consumers, and they are increasingly being joined by other types of consumer lenders as well.

As part of this ongoing effort, we brought counseling organizations’ concerns about restrictions on their clients’ access to credit information to the attention of the credit reporting companies and FICO and urged that these restrictions be removed. However, even with the policy change on FICO credit scores, individual contracts between the credit reporting agencies and counseling organizations still prohibit the organizations from sharing the credit reports with their clients. This restriction makes it harder for counselors to do their job. And it keeps the consumers they serve from benefiting fully from the credit information that the counseling service organizations have paid for.

We are encouraged that, as part of this ongoing effort to press forward on these issues, Experian is now updating its policy and nonprofit counselors that purchase credit reports on behalf of their consumer clients will soon be able to share that those reports, as well as the scores, with the consumer. We urge the other credit reporting agencies to take steps to make this credit information available as well.

Ending restrictions on sharing credit scores and reports by consumer financial counseling organizations will empower consumers to take more control of managing their credit and help counselors to do their jobs more effectively.

Learn more about credit reports and credit scores on Ask CFPB. Also, remember that consumers can always obtain a free annual copy of their credit reports.

This article by Daniel Dodd-Ramirez was distributed by the Personal Finance Syndication Network.


What Does My Debt Cost Me?

Have you ever asked yourself the question, “What does my debt cost me?” Borrowing money does cost you. You may be paying all your bills on time and have a good credit score. But, don’t kid yourself; you pay a price for being in debt.

One source puts average consumer debt at these levels:

  • Average credit card debt: $15,611
  • Average mortgage debt: $155,192
  • Average student loan debt: $32,264

Source

How much do those loans cost us? We went to industry sources to get some typical rates.

  • mortgage using a 15 year fixed is 3%.
  • low interest cards 11%
  • new direct student loans 4.6%

If we apply those interest rates to the average balances, we get:

  • Credit card annual interest: $1717
  • Mortgage annual interest: $4655
  • Student Loan annual interest: $1484
  • total: $7856

Don’t worry about how accurate the debt totals or interest rates are. That’s not important. We’re just illustrating how much being in debt can cost you.

You may owe more or less. You’ll need to do your own calculation. You’ll probably want to add in any auto, boat, or home equity loans.

To calculate your own cost of debt, you’ll need current statements from your accounts. There should be a line telling you how much interest accrued during the statement period or what your balance and interest rate is. (Multiplying the amount owed by the interest rate tells you the annual amount of interest. i.e. a balance of $1,000 times a rate of 12% = $120)

You’ll probably need to convert some interest costs, so they’re all either monthly or annual.

Let’s take a look at our test family. The cost of their debt is $7,856 per year or $655 per month.

Most people are surprised at how much their debt is costing them, especially if they have more than one account. How much is your debt costing you? And what would you do with it if that money were available to you each month?

You probably have some good ideas. I’d be surprised if you didn’t. So what’s your cost of debt? And what are you willing to do about it?

Do you need to get out of debt? Would a step-by-step course help you? We want to help. The Dollar Stretcher’s Get Out of Debt Course is designed to help you determine whether you have a debt problem. And, if you do, we’ll show you how to get out of debt. We’ll provide you with the proper tools and resources to dig out of your debt problem.

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


Why Your Gadgets Don’t Last

I should have known it was a bad sign when I called the customer service line for a tech gadget I was thinking of buying, and the CEO answered.

It can be a good sign when a CEO answers customers’ calls — it could mean he’s highly involved in the company. But looking back on it now, I see it as a possible sign that the company doesn’t have enough workers and that its gadgets aren’t worth hiring people to promote it. I wish I would have figured that out before I bought one of the devices at Ambient, only to see the company stop offering support for it less than three years later.

It was 2011 and I was doing research for a story I was writing about energy saving gadgets when I saw the wireless devices Ambient was selling. One was called an Energy Orb that changed color when your household energy use changed.

gadgetsI called because I had some questions about its products, and was surprised when the CEO and co-founder answered. We talked for a bit, and I moved on with my story, eventually buying the Ambient Baseball ScoreCast for $43.82 on Amazon. About 2-1/2 years later, Ambient stopped supporting the device.

The ScoreCast was introduced in 2008 for $125, providing baseball scores through radio signals. A wireless plan isn’t needed.

My wife and I are big baseball fans, so I thought it would be fun to have the gadget on the fireplace mantle so we could see updated scores. Believe it or not, we didn’t have smartphones in 2011, so we didn’t have the immediate access that we now do on many devices in our home.

Just for the fun of it, I decided in early April to put four new AA batteries to see if it still worked. It didn’t. While $43 wasn’t much of a loss on something that worked for two baseball seasons, I wondered why it didn’t work and I again contacted customer service. Guess who got back to me? The same guy I talked to in 2011:

“On March 1, 2014, Ambient discontinued support for the Ambient Baseball, Ambient Football & Ambient Centerfield products. As of that date, customers with these devices in their homes stopped receiving game and standings data. The Ambient ScoreCast products were introduced in 2006 and manufacturing ceased in 2009. Sincerely, Pritesh Gandhi CEO | Ambient Devices”

I emailed him back, asking him what a consumer’s expectation should be when buying a tech device. I haven’t heard back yet.

How long should a gadget last?

Ambient’s pulling the plug got me wondering what consumers should expect when buying a tech gadget. Will the startup company that you were so fond of be around seven years from now when your device dies or needs tech support?

Is it just part of the expectation of a disposable society that when a relatively inexpensive gadget stops working, you’ll trade it in for a new one, recycle it, or worst-case, throw it away? Continue reading Why Your Gadgets Don’t Last

How Many FICO Scores Are There?

There are hundreds of algorithms companies use to score consumers, and even the most common credit scoring company has dozens of models. Fair Isaac Corp., more commonly known as FICO, has about 50 scores (a 2012 report from the Consumer Financial Protection Bureau puts that number at 49).

How can there be so many variations on a single score? It’s a confusing issue to consumers, particularly because “the FICO score” sounds like a single score. For starters, the information on each of your credit reports from the three major credit reporting agencies — Equifax, Experian and TransUnion — may vary, so that alone can give you three different numbers from one credit score model.

However, one of the biggest reasons there are multiple FICO scores is because lenders assess borrowers differently, depending on the loan product. For example, a lender considering you for an auto loan will be much more interested in your history of auto loan payments than a lender considering you for a personal loan.

FICO has different models tailored to the loan product the consumer applies for. On top of that, FICO creates custom scores for its clients, and FICO has updated its general formulas over the years. In 2014, the company announced FICO 9, its newest version of the basic algorithm, which does not include paid collection accounts in its scoring system and counts medical debt differently than other debts, because medical debt is often an unplanned expense beyond the consumer’s control.

Perhaps the most puzzling part when it comes to understanding FICO scores (or any credit score, really) is not knowing which model your potential lender uses. You might check one of your FICO scores religiously, but you still might not know exactly what a future creditor sees when it processes your application. While it’s important to check your credit scores — you should do so regularly, and there are many ways you can see your scores for free — keep in mind that scores fluctuate and you also can’t be certain what your lenders look at. The best thing you can do is focus on the fundamentals of good credit: Make payments on time, keep your debt levels low, avoid closing old accounts if possible, maintain a good mix of accounts and apply sparingly for new credit.

FICO has a program called FICO Open Access that allows customers of some partner institutions — like Discover and Barclaycard — to see their FICO scores for free. You can also get two free credit scores from Credit.com every 30 days, with a progress report of how your credit has changed over time.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.


Woman Allegedly Lived Under 74 Aliases, Targeted Hollywood

Living a double life seems like it would be challenging enough, but that’s child’s play compared to what one California identity theft suspect is believed to have accomplished. Cathryn Parker, 72, was arrested in March when she was stopped for a traffic violation and gave a law enforcement officer a fake name. Turns out, Parker is under investigation for stealing multiple identities and living under at least 74 aliases, according to the Associated Press.

Parker is accused of stealing seven identities, most of whom are Hollywood film production staffers. Investigators discovered that Parker’s home and utilities services were registered under false names, and Parker had also opened fraudulent credit card accounts with victims’ information. Investigators say she is suspected of committing crimes dating back to 2010.

As of April 17, Parker was in federal custody in Northern California, where she was wanted for violating probation, the AP reported. She had been convicted of mail fraud in 2000.

While Parker’s high number of identities is uncommon, her alleged crime is not. Identity theft affects millions of Americans each year. Victims of identity theft often suffer damage to their credit standings and finances, and the longer it goes undetected, the more costly and time-consuming the recovery can become.

Preventing identity theft is a huge part of this problem — it’s practically impossible to do. Even consumers who take the best preventative measures, like never storing sensitive data online and rarely sharing personally identifiable information, may still have their data stolen in a cyberattack on a company that rightfully has that information (for example, the Anthem data breach).

Credit monitoring can be extremely helpful in stopping a situation like a thief opening a fraudulent credit card account in your name. You can get your credit report summary for free, updated every month on Credit.com, to watch for changes that you didn’t authorize. In addition to that, the most effective form of protection is monitoring your identity from as many angles as possible, including public records and information on the Internet. Whether you do it yourself or pay for an identity theft protection service, the most important thing is to act quickly when you notice something is wrong, in order to prevent extensive damage to your credit and financial well-being.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.


The 5 Biggest Reasons My Clients Fall Into Debt

In the more than 15 years of experience working in the debt industry, I’ve heard every story under the sun about how someone fell into debt. While there are times when people fall into debt for unavoidable reasons, I do notice a lot of people fall into debt for the same reasons. So in order to help keep you from making the same mistakes, here are the five biggest reasons I’ve seen people fall into debt.

1. Treating Credit Like Cash

Many of my clients have a tendency to treat their credit cards like an extension of their bank account. They max out their credit cards without taking into consideration the impact it’s having on their credit scores and how much more they’re paying over time in interest. This sort of behavior could really put you in a jam!

My solution? Stick to a debit card or keep yourself honest with only one or two low-limit credit cards. I also advise them to assign specific “jobs” to their cards, to keep them from overspending. Budgeting for “fun” purchases that you pay for with cash or a debit card could help keep you from overspending, while reserving your credit cards to handle recurring bills and online subscriptions — in amounts you can pay in full each month — is a better way to manage them. Keep in mind, carrying a balance that is more than 30% of your credit limit can have a negative impact on your credit scores. If you want to see how your debt levels are influencing your credit, you can get two free credit scores on Credit.com, plus an overview of what factors are affecting them.

2. Trying to Keep Up With the Joneses

True wealth is having a high net worth, not having a lot of stuff. A lot of my clients fall into debt because they believe in order to seem financially successful they need to SPEND their money on elaborate, luxurious and unnecessary things to simply keep up with neighbors. Trying to keep up with appearances and maintain a lifestyle you can’t afford is one of the quickest ways to fall into debt.

So what do I tell my clients? I explain to them that the neighbors they’re so concerned with, the ones with the fancy cars, are most likely in debt themselves! You can never know who owes money and how much, so it’s important to not judge by appearances. Spend only on things you can afford, put money away and you’ll be the one people want to keep up with.

3. Not Separating Needs From Wants

You want to have your priorities straight, especially when it comes to money. Not having a clear understanding of the things you need as opposed to the things you want could result in a lot of unnecessary spending and, in turn, debt.

Whenever my clients seem to be having difficulty understanding the difference between needs and wants, I tell them to write everything down. Making a simple list of needs, wants and even a category for both can help you identify and prioritize your spending goals. Keeping a tight list can help you attend to the things you need while also setting aside enough money to get the things you want.

4. Financial Illiteracy

Some people just don’t know how money works, how to budget or how to manage personal finances. Whether it’s because they were never properly educated or simply hated economics in school, financial illiteracy can lead anyone into debt.

That said, it’s never too late to learn! I always suggest that my clients take some time and educate themselves on basic personal finance. With the vast number of great books, blogs, podcasts and websites out there dedicated to personal finance and financial literacy, you’re sure to find a way to learn about money and, subsequently, keep yourself out of debt.

5. Hoping for the Best, But Not Preparing for the Worst

Without an emergency fund, you’re leaving yourself exposed to all sorts of financial woes. I understand that you cannot prepare for every situation, but having a safety net of funds in the bank can help you sleep better and keep you from getting into debt when the unexpected happens.

A lot of my clients find themselves falling into debt when disaster strikes because they simply didn’t save enough. I suggest they build a budget so they can see how to save to their maximum potential. Once they’ve set aside enough money, they start to understand the benefits of keeping money in the bank. I constantly have clients telling me that budgeting has given them financial peace of mind.

When it comes to staying out of debt, it really boils down to paying attention. More often than not, people find themselves up to their ears in debt because they ignore their statements, are overspending because they don’t budget, and getting caught with unmanageable expenses because they didn’t save. Take the time to sit down and review your finances. Learn how much you need to save for emergencies and long-term goals and make it a habit of continually setting money aside. The more frequently you do a checkup on your finances, and the more frequently you hold yourself accountable, the less chance you’ll have of falling into debt.

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This article originally appeared on Credit.com.

This article by Leslie Tayne was distributed by the Personal Finance Syndication Network.


Beth’s Story: Is Debt Settlement the Answer?

This is the third part in a four-part series about Beth, who’s struggling to make monthly payments on her debt. I encourage people struggling with unaffordable debt to use this as a debt relief information guide. The focus of this series assumes your situation is past being able to apply conventional wisdom, like lowering monthly expenses and paying extra toward high-interest credit card debts.

In the first two parts of my email exchanges with Beth (a reader who submitted her questions to me offline, and who has given permission for me to publish our exchange as a learning tool, but with her name changed; we have also removed the names of her creditors), I focused more on eliminating options to manage her debt based on her lower income, which is also unstable because her current employment is temporary. If you are just starting out with researching your own path to manage problem debt, you may benefit from reading this series from the beginning.

In this part, her questions for me are keenly focused on negotiating lower payoff settlements with her credit card lenders.

Beth wrote:

Tomorrow I’m going to look for a bankruptcy attorney, however I’m more inclined to do a settlement at this point, that being said I have these questions:

  1. I have a checking acct with [one bank] where I currently have 2k [saved] and will have a little over 3k in 2 weeks; do I have to withdraw the money before trying a settlement with them? (I’m afraid they would freeze my checking and keep the money), if so should I open a checking acct with another bank? I’m assuming [a different bank] wouldn’t touch my money.
  2. If I’m successful, the settlement would save me $20k, will that be taxed? If so can you estimate the amount (roughly).
  3. What is the best way to negotiate the settlement with [one bank] and the others? For instance: I would offer 25% and they counteroffer 40% then I give my last offer 30% and if they don’t take it, I would then not make the payment for the first time ever and hopefully they will call  me and take my 30% offer, would they call my bluff? And if they divide it into 3 payments can I try and negotiate 4-5?
  4. Can I be honest and tell them my plan to pay them: what I already have saved, plus what I’m going to make/or borrow from my parents?
  5. This may sound very dumb, but I have a $20k in my 401k, what if I withdraw about $5k, I know it would be heavily taxed, but is it something possible? I understand I’m not supposed to touch my 401k ever but in my situation it would save me interest and would be debt-free. What do you think?

If you could please take the time once again and I think I will be all set.

My Response to Beth

Those were really targeted questions Beth sent back. Here is how I responded:

1. I typically encourage moving to another bank if you have a checking or savings account with a bank that you will also be negotiating a credit card settlement with.

2.You can indeed be taxed on forgiven or canceled debt in excess of $600. Many people I have worked with over the years were able to meet the insolvency test, which meant they were fully or partially able to avoid any tax implications from debt forgiveness. I cannot hazard a guess at what your taxes would be. This is an issue you want to consult with a tax professional about. But if you determine you will owe any tax after settling, be sure that is part of your budget and planning.

3. The way you make calls to your creditors in the early stages of communication is one thing. You will typically not be offering to settle, or perhaps even be bringing up the subject until you are three to five months late with payments (unless they bring it up). I would not call my creditors and ask about settling for less than what I owe when still current, or not yet several months behind. It is a waste of energy, as the person answering the phone in these early stages may not be trained or authorized to even talk about it. In fact, and somewhat amusingly, you can call large credit card banks to talk about settling too early, and hear from the customer service rep that “we do not settle debts.” Read through the entire section about negotiating credit cards in the first stage of collection. You will be ready to talk with your creditors and negotiate your settlements when you finish.

You will typically not get your credit card banks to extend out payments — on the settlement amounts they agree to — for more than 94 days if they have not charged off the debt (taken the loss in their accounting books). Many banks might like to be able to offer their account holders that option (longer payment arrangements on settlements). But federal regulators have set guidance and policy that prevents them from doing that unless the account is charged off. Charge-off is one big determining factor banks use when they send accounts to outside third-party debt collectors and debt buyers, which is why settlements with monthly payments longer than a few months are often going to be achieved with debt collectors. There are often many opportunities to negotiate with debt collectors when your credit cards have just been charged off.

4. I find laying out your entire plan to negotiate and settle your debts with your bank or debt collectors to be counterproductive. They only care about the debt in front of them. Keep your focus to just the account at issue during any communications. If you mention other accounts, it is often just to say you are struggling with more than just paying them. They can see that because they typically have real-time access to your credit reports. When it comes time to have meaningful dialogue about what you can afford to pay as a settlement (which for you is not for many months), that is when you can bring up the fact that you are borrowing money from family to pay the deal if they agree to it.

5. Conventional wisdom says do not touch your 401(k) in this situation. That money is protected from creditors even if they sue you and get a judgment, and is also kept intact if you filed Chapter 7 bankruptcy. I am not all about conventional wisdom at all times. I have worked many cases over the years that were a great fit for borrowing against their 401(k)s. Yours is not one of those situations, in my opinion. That is something I would look closer at when there are complex assets, security clearances (work in finances, military contracting, etc.), or similar circumstances. Your path to successfully settling your credit cards looks straightforward to me.

Over the years of doing these types of consultations with people (primarily on the phone), and when encouraging people to understand they can negotiate settlements with creditors and collectors on their own, I have often repeated this: Debt settlement is not rocket science, but there is a formula to follow. That formula is 90% investing the time to become informed about what debt negotiation is, and how and when to get things accomplished. It took Beth and me three days and several emails to get to this point. But Beth also invested more time into reading up on her options in more detail.

In the next, and final, part of the series, you can see how Beth became more serious about doing something that I teach every person in the midst of a debt triage situation to do. Stay tuned.

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This article originally appeared on Credit.com.

This article by Michael Bovee was distributed by the Personal Finance Syndication Network.


Could Acquired Needs Theory Save You Money?

In one of the Tightwad Gazette books published over 20 years ago, a contributor wrote to author Amy Dacyczyn that she thought baby formula was an "acquired need." Since there was a more natural, and free, way to nurse an infant, this young mother considered commercial baby formula an unnecessary "want."

Often, people are convinced that some convenience, product or service is a necessity when it actually isn’t. Called an "acquired need," it is actually a want and not something we can’t live without. By paying for such conveniences, we waste money for things that are optional.

I recently was reminded of the wants versus needs debate. A friend asked how I can do without a cell phone. I have phones at work and home. The latter is a landline in a special pricing deal; I pay almost nothing for the phone, bundled with my internet. To me, the huge monthly bill with a cellular contract is an "acquired need."

Many high school students can’t read as well as most eight year olds could a generation ago. They rarely crack a book. All their lives, they’ve been given video games and almost-unlimited access to cable TV and smart phones, which are all rather expensive. With such items, is the young person’s education (and his eventual ability to earn a living) helped or hindered? I believe the latter is true. Such items are "acquired needs" and very expensive wants. The cost is not just monetary: Consider what a huge struggle it will be for a poor reader to obtain a higher education or high-paying job.

I pay nothing to view television. With a converter box and rabbit ears antenna, my old TV can pick up six or eight over-the-air stations. (I live in a smaller community, so that number is no doubt much less than what’s available in big cities.) There are enough programs to fill up an hour or two each night. I can check out a free DVD at the library should I want to view a movie. Paying for cable or satellite is an acquired need. My TV entertainment is free!

Acquired needs are not just electronic. When I worked downtown, the landowners charged us all to park. Most employees went along with this, not realizing on-site parking was an "acquired need." There was an unused plot of land a block away, and Leo, an older worker, told me he’d parked there for years. I did likewise, thus saving hundreds of dollars over a decade. Hey, I needed the money a lot more than the parking lot owners did!

Ronnie and Michelle like to go out on date nights. Long ago, they realized that wine with their dinner was an acquired need, one which made the restaurant a huge profit. They pay for many more evenings out by drinking something non-alcoholic. Tea is cheap, and water is free.

A professor required his students to buy an expensive book, studied for a short time. Realizing it was an "acquired need," Anne checked the book out from her hometown library. Before returning it, Anne took good notes and scanned some pages onto her flash drive to study for finals.

Living in the country, Frank and Nell found that they’d have to pay extra to obtain trash pickup outside the city limits. This was an acquired need they could skip. How? They reduced the amount of garbage by recycling and composting most of it. A trash compactor did the rest. They occasionally took filled compactor bags to their other property in the city, where they were required to pay for garbage collection whether or not they regularly used it.

It pays to understand the difference between an "acquired need" and an actual necessity. People don’t need to shell out money for a "want" disguised as a "need." Do you have expensive "acquired needs" that you could easily do without?

Lynn Bulmahn is a frequent contributor to TheDollarStretcher.com. Visit TheDollarStretcher.com today to discover how delayed gratification could make you a millionaire.

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


Will Social Security Numbers Finally Be Taken Off Medicare Cards?

In four years, Medicare cards will no longer have Social Security numbers on them. This change is a provision under the Medicare Access and CHIP Reauthorization Act of 2015, which President Barack Obama signed into law April 16. It’s a noteworthy change: A Social Security number is an identity thief’s holy grail, allowing them to commit numerous kinds of fraud and severely damage the victim’s credit and finances.

The law gives Medicare officials up to four years from the date the law was enacted to issue Medicare cards with a new, randomly generated identification number. Congress allocated $320 million to pay for the change.

About 52.3 million people are enrolled in Medicare, according to July 2013 data from the Centers for Medicare & Medicaid Services, the most recent available. More than 4,500 people enroll in Medicare daily, and enrollment is expected to grow to 74 million by 2025, The New York Times reports. To put that in perspective, that’s 74 million people whose Social Security numbers won’t be displayed on the cards they need to secure health care services under Medicare.

Social Security numbers have been at the center of Americans’ increasing concern over identity theft in the past few years, as numerous databases containing sensitive consumer information are infiltrated by hackers or discovered to have been exposed to the public for a period of time. This leaves people unsure of who has access to their personal data and what they could be doing with it.

Checking your credit reports and credit scores can help you spot credit fraud, but there’s also the potential a thief could be using your identity to access health care or as an alias under which they commit various crimes. Consumer advocates have underscored the importance for organizations to secure this information as best as possible and for consumers to watch out for signs of fraud. You can get your credit report summary, updated every month on Credit.com, to look for any problems that you need to address.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.