CFPB Sues Participants in Robo-Call Phantom Debt Collection Operation

Bureau Also Obtains a Temporary Restraining Order to Halt Illegal Operation and Freeze Assets of Operation’s Leaders

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) announced today that it has filed a lawsuit against the ringleaders of a robo-call phantom debt collection operation, their companies, and their service providers. The debt collectors, using various aliases, allegedly deployed automated calls to threaten, harass, and deceive consumers in attempts to collect debt the consumers did not owe to them, and in most instances, to anyone else. The complaint alleges that the debt collectors’ scheme depended on the participation of the telemarketing company that sent the robo-calls and payment processors that allowed the collectors to access consumers’ bank accounts.

“Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray. “We are taking action against the many parties that allegedly contributed to this phantom debt collection operation. The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers.”

The CFPB alleges that Marcus Brown and Mohan Bagga led a group of individuals and entities that threatened, harassed, and deceived consumers in order to collect phantom debt. Phantom debt is debt consumers do not actually owe or debt that is not payable to those attempting to collect it. According to the complaint, Brown and Bagga and those working with them used many fictitious names as they threatened consumers with arrest, wage garnishment, and “financial restraining orders.” The CFPB’s claims against these defendants are based on the Consumer Financial Protection Act and the Fair Debt Collection Practices Act.

The CFPB’s complaint alleges that consumers were tricked into believing that the collectors were legitimate because the collectors verified consumers’ personal information, such as date of birth, social security number, the names of family members, and employment information. According to the complaint, Brown and Bagga purchased consumers’ personal information from debt brokers and lead generators. They then used a telemarketing firm, Global Connect, to automatically broadcast robo-calls to millions of consumers. The calls alleged that the consumer had engaged in check fraud and threatened to contact the consumer’s employer.

In response to the debt collectors’ threats and false statements, consumers provided credit or debit card payment information. The complaint alleges that once the debt collectors got consumers’ payment information, they would submit it to the payment processors, who enabled the collectors to access consumers’ bank accounts to withdraw money, despite the many indications of misconduct.

On March 26, 2015, the Bureau filed its complaint under seal, which has since been lifted. The Bureau obtained a temporary restraining order on that same date. After a public hearing held on April 7, 2015, a preliminary injunction was entered halting the misconduct and freezing the assets of the individual defendants and their businesses.

Brown and Bagga’s Alleged Scheme

Marcus Brown is a New York resident while Mohan Bagga resides in Georgia, and they based the operation in those two states. The complaint contends that Brown and Bagga did not operate alone. According to the CFPB’s complaint, Brown’s wife, Tasha Pratcher; his sister, Sarita Brown; Bagga’s ex-wife, Varinderjit Bagga; and another individual, Sumant Khan, also helped carry out the alleged scheme.

All of these individuals are named in the CFPB’s suit. Also named in the suit are debt collection companies Brown and Bagga formed to run these alleged operations: Universal Debt and Payment Solutions, LLC; Universal Debt Solutions, LLC; WNY Account Solutions, LLC; WNY Solutions Group, LLC; Check & Credit Recovery, LLC; Credit Power, LLC; and S Payment Processing & Solutions, LLC.

The CFPB’s lawsuit alleges that the debt collectors violated the law by attempting to collect debts that were not owed to them and by harassing and lying to consumers in that process. Federal law prohibits the use of abusive conduct or any false, deceptive, or misleading representation or means in connection with the collection of any debt. The debt collectors are alleged to have violated the law in the following ways, among others:

  • Harassed consumers with threatening robo-calls: Many consumers received multiple robo-calls about the alleged debt that they owed. The debt collectors set a call-back number in the messages that consumers received. The call-back number has been traced to Brown and Bagga. When consumers called back, they were told that they had committed crimes by failing to pay certain debts, and that if they did not agree to pay the caller, they would be served with papers or arrested for fraud.
  • Collecting or attempting to collect phantom debt: The Bureau alleges that the collectors falsely represented the status of the debt when they sought to collect debts that were not owed, or, at least, that were not owed to the debt collectors themselves.
  • Threatening legal action against consumers: The Bureau alleges that the collectors implied that if consumers did not pay the debt, they would be arrested or have their wages garnished. In reality, the Bureau alleges that the collectors had no intent to do so, nor the ability to take such action. The collectors also allegedly threatened to take action that they could not legally take or did not intend to take, when they threatened to “issue paperwork for you to appear in court.”
  • Deceiving consumers to collect debts: The Bureau alleges that the collectors accused consumers of check fraud and sought to disgrace and threaten the consumers. The collectors also used fake business names such as “LRS Litigations,” “IRS Equity,” “Worldwide Requisitions,” and “Arbitration Resolution.” Such names gave consumers the false impression that they would be subject to litigation if they did not pay the debt.

Holding Service Providers Accountable

As described in the complaint, Brown and Bagga’s debt collection scheme depended upon the participation of a telemarketing company and payment processors. The Bureau alleges that Global Connect, the telemarketing company, sent millions of automated messages to consumers as part of the scheme. Global Connect is alleged to have broadcast these messages even though the company knew they contained unlawful content.

According to the complaint, Brown and Bagga could not have run a successful operation without the assistance of the payment processors Global Payments, Pathfinder, Frontline, and Electronic Merchant Systems. Without payment processing capability, the collectors could not accept debit and credit card payments. The payment processors are alleged to have ignored numerous red flags of the debt collectors’ illegal conduct, including consumer disputes that described the scheme and communication problems with the debt collectors. The CFPB contends that by enabling the debt collectors to accept payment by credit and debit card, the payment processors helped to legitimize the collectors’ business and facilitated millions of dollars in ill-gotten profits.

The CFPB’s complaint was filed in the United States District Court for the Northern District of Georgia. The complaint is not a finding or ruling that the defendants have actually violated the law.

A copy of the complaint is available at: http://files.consumerfinance.gov/f/201504_cfpb_complaint-universal-debt.pdf

This article by the CFPB first appeared on Consumer Financial Protection Bureau and was distributed by the Personal Finance Syndication Network.


Lady Antebellum Will Pay Fans’ Mortgages

If your taste in music doesn’t include country, you might want to reconsider and give Lady Antebellum a listen — the country music trio recently announced a sweepstakes with an unconventional grand prize: mortgage payments.

Lady Antebellum has partnered with QuickenLoans to give seven fans a year’s worth of mortgage payments, between $12,000 and $24,000. The payments will go toward interest and principal of the loan. That’s more than enough needed to make monthly payments on a median-priced home in the U.S. (assuming a 30-year mortgage, 20% down payment and 3.92% interest rate). They’re calling the sweepstakes 7FOR7, a reference the band’s latest album “747.”

All you have to do to enter the drawing is write an, um, “essay” no longer than 50 words saying “What would meeting Lady Antebellum and getting one year’s worth of mortgage payments on behalf of Quicken Loans mean to you?” (The prompt itself is 21 words.) Winners are selected based on three equally weighted criteria: most deserving, creativity/originality and clarity. There are seven drawings between April 10 and Aug. 21, but you can only enter once throughout that time period. Winners need to show proof of a monthly mortgage payment to receive the appropriate amount.

Not a homeowner? You might be able to get rent payments, because the sweepstakes rules state that “Non-mortgage holding winners’ prizes will be determined by a random drawing of all eligible mortgage amounts starting from $12,000 to $24,000, and the selected yearly mortgage amount (up to $24,000) will be awarded to that corresponding winner.”

Additionally, you could score some Lady Antebellum swag, including VIP concert passes, hotel and airfare for that concert, an autographed album and selections from their Heartland Bedding collection. There will be two first-prize winners and 20 second-prize winners, who get some variation of the goodie bag (sans mortgage payments).

Even after paying taxes on the prize, the grand prize winners may be able to make a significant dent in their debts. (This can have a positive impact on your credit scores, which you can get for free on Credit.com.) You might even be able to use the money to pay extra on your mortgage and save money on interest in the long run. However it works out, the additional cash flow could be quite helpful — as long as you like country music.

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This article originally appeared on Credit.com.

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


Millennials Are Confident About Their Credit. Should They Be?

Millennials are more comfortable sharing their credit score with others than Americans in older generations, according to the Chase Slate Credit Survey, but such confidence might be misleading — millennials are also the least likely to have looked at their credit scores, and they have lower standards for what they consider a “good” credit score.

The Chase Slate Credit Survey includes responses collected Feb. 27 through March 11 from a nationally representative sample of 1,000 adults and has a margin of error of plus or minus 3.6%. The margin of error is larger (and not specified) for the generation subgroups.

More than half of millennials (59%) said they’d be comfortable telling their parents their credit scores, compared to 35% of Gen Xers and 27% of boomers. The willingness to share could be a social difference among generations, but it could reflect the differences in understanding credit scores and what’s considered good credit.

People who have previously checked their credit scores gave a higher number for what they think a good score is — consumers who check their scores think 719 is a good score, while those who haven’t think 668 is good. To be clear, there’s no standard “good” number, and there are different ranges of excellent, good, bad, etc., based on the credit scoring model (of which there are hundreds). The scale used for the free FICO score Chase Slate cardholders receive is 300-900.

On average, boomers consider 726 a good score. Gen Xers say 712 is good, and millennials say 695 is good. They’re all in the right range, but being on the high end of “good” gives you better odds of credit approval and favorable rates, which is something boomers and Gen Xers may know from years of experience with the credit system.

The only way to know if you have a good score is to check it and see how it falls on the scale of whatever model you’re looking at. You can get two of your scores for free on Credit.com every 30 days, with comparisons to your state and national averages.

Most Gen Xers have checked their credit scores (only 4% haven’t), but 19% of millennials haven’t, neither have 13% of boomers. Given all the resources out there on credit scores and the opportunities to see your scores for free, there’s no good reason to not check. Reviewing your credit and requesting a credit score doesn’t hurt your credit. In fact, once you start paying attention to your credit and gain a better understanding of what impacts it, you may improve your credit behaviors and see your scores improve over time as a result.

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This article originally appeared on Credit.com.

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


Is Your Tax Refund Too Big?

Taxpayers getting back money from the government this year have received an average refund of $2,893 so far, according to March 26 data from the Internal Revenue Service. That’s a nice bump up in cash flow, and a lot of people look forward to it as a chance to splurge, pay down debt or add to their savings.

But those people could have had that money all year, had they withheld less of their paycheck. Getting a big refund means you essentially gave the government an interest-free loan, when you could have put the money in a savings or retirement account to earn interest. You may see that money as a windfall, but you should really see it as the government making good on a year-long IOU.

There’s no right or wrong answer to how much of a refund you should aim to get, because it’s very much a matter of personal preference, and it can also be tricky to estimate. No matter how you choose to deal with your taxes, it’s worthwhile to regularly evaluate your withholdings. Here’s why.

Your Life Changes

About 82% of taxpayers receive refunds, but even if you’ve consistently gotten one, a significant life change may affect how much you receive or if you get one at all. Marriage, divorce, the birth or adoption of a child, or a drastic income change should trigger a review of how much you have withheld from your paycheck.

You Should Look for Patterns

Beyond re-evaluating your tax situation in the wake of a noteworthy life event, your tax-filing history will give you a good idea of when you should consider changing how much is withheld from your paycheck. It can be a difficult thing to estimate, because as much as you want may want to avoid owing the Internal Revenue Service in April, getting too much in return may not be the best for your long-term financial health.

“A good place to be is owing a little bit or getting a little bit back,” said Elliott Freirich, a certified public accountant in Chicago. But where exactly is that “good place”? “There’s no right answer. It’s a gray area, but I would tell people if they could kind of keep (their refund) under $1,000. … It’s not like it would go away and they would never have it if they reduce their withholding.”

Know Your Own Saving/Spending Habits

Some people feel that way — that they wouldn’t be disciplined enough to set aside the money they would otherwise get from a large refund.

“It’s sort of like forced savings,” said Jorie Johnson, a certified financial planner in New Jersey. She said she suggests her clients re-evaluate their withholding if their refund exceeds $5,000. “I encourage them to use half of their refund toward their IRA, if they haven’t already maxed it out, and the other half on themselves, as a reward — that’s assuming they don’t have any debt.”

Consider the big picture: Do you look forward to a large tax refund but struggle to meet your savings goals on a monthly basis? If you’re trying to work your way out of debt or regularly find yourself financing your lifestyle while also getting a large refund check every tax season, that’s a sign you need to revisit your withholding (you might need to re-evaluate your spending habits, too).

Remember that withholding is just an estimate of what you’ll owe, and it may take you a few years of consistent tax outcomes to confidently adjust that estimate to meet your tax needs without owing or receiving a large sum come tax 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.


A Brief Guide to Never Doing Your Own Taxes Again

Maybe you wasted this past beautiful holiday weekend working on your taxes. Or perhaps, despite warnings about taxpayer ID theft, you still have midnight oil to burn between now and the April 15 deadline. Either way, you have probably mused, for at least a moment, that this will be the last time you do your own taxes. After all, by plenty of measures, tax prep is getting more and more complicated.

So if you are ready to delegate tax work, now is the time to plan for the 2015 filing season. Here’s some help about the choices you face — specifically, on the kinds of tax preparers you might hire to help you.

First off, you should know that hiring someone else to do your taxes might not be the Shangri-La you imagine. Whoever that person is will still require you to provide a lot of paperwork and do a lot of legwork. You might wonder if you are really saving time at all. Sure, it’s a relief to know a professional is doing the math, and that might result in greater accuracy, but even that isn’t certain. In fact, when Congress’ General Accountability Office studied the issue, it found higher error rates on “pro” returns than self-prepared returns.

Of course, that only means not all tax prep work is the same. In fact, in most places in America, anyone can become a professional tax preparer.

“Anyone can hang out a shingle as a tax return preparer, with no knowledge, no skill and no experience required,” lamented Taxpayer Advocate Nina Olson in congressional testimony during last year’s tax season.

The Internal Revenue Service has tried to require some kind of license for retail tax preparation firms, but so far, that hasn’t happened. Voluntarily certification is available, and you might ask a retail prep agent if he or she has completed the necessary coursework for that. But only four states — California, Maryland, New York and Oregon — require formal certification for tax preparers. That’s why you might consider moving up the value chain for tax help. That leaves you with three other popular options: Certified Public Accountants, Enrolled Agents, and tax attorneys. Never heard of an “enrolled agent?” You’re not alone. Read on to find out what each designation means.

CPAs

First, the most common choice for people who need help with various money issues, including taxes. If you’ve spent hours pulling your hair out while trying to do your taxes — particularly if you are part of the growing list of Americans who earn self-employment income — now is the time to start interviewing potential CPAs. Well, not “right” now. Give them a few days to sleep after April 15. Then spend some time getting to know a couple.

Tax prep help is only one of the services that CPAs offer, and it’s probably not the most important one. CPAs can offer yearlong money advice, such as how to set up an accounting system for your small business, or how to do some basic estate planning. If things work as they should, tax time will be (relatively) easy because your CPA will already have a good understanding of your financial picture. Of course, that kind of handholding isn’t cheap. But if you go easy on the financial advice and use a CPA primarily for tax purposes, the costs shouldn’t be too bad. Back in 2013, the National Society of Accountants did a survey and found the average cost for filing an itemized tax return and one state return was $261 for roughly five hours or work. Costs vary wildly based on region and complexity, of course.

How do you find a CPA? It’s always useful to talk with friends, but never forget the lesson of Bernie Madoff, who got nearly all his new clients via friends — never rely wholly on someone else’s judgment of character. You should always do your own background check, verify current licensing, etc. The American Institute of CPAs is a good places to start your search.

When picking a CPA mainly because of taxes, make sure your CPA specializes in taxes. CPAs can have a variety of specialties — from small business advice to estate planning. Pick yours because they enjoy doing the work you need done.

One critical factor: CPAs are certified by states, as opposed to “Enrolled Agents.” We’ll see why that’s important in a moment.

Enrolled Agents

If you have never heard of this designation, it probably means you’ve never had serious tax trouble, so consider yourself lucky. But enrolled agents are making a push into the mainstream lately — they even have a new branding effort called “Enrolled Agents — America’s Tax Experts.”

Here’s why you should consider hiring one: Thanks to their low name recognition and their sole focus on taxes, they can be less expensive than CPAs, and are almost always cheaper than tax attorneys. Also, because they are federally certified, they are a good choice for taxpayers who might need to file returns in multiple states.

It’s an exclusive group — there are only about 50,000 enrolled agents nationwide. Among the chief benefits of an enrolled agent: If you are audited, you can be represented by an EA. Taxpayers with complex returns might also consider enrolled agents. They are tax specialists, and they are required to take 72 hours of continuing education every three years.

How do you find an enrolled agent? The National Association of Enrolled Agents website is the best place to start. You can also verify enrolled agents at the IRS website.

Tax Attorney

Tax lawyers aren’t only for trouble. Individuals with high net worth or small businesses might consider involving a tax lawyer early on. A tax lawyer can help set up business structures and help you make sensible, defensible tax choices during the year. With this high level of service comes a high price tag — bank on at least $200 to $400 an hour to start. If you need help resolving a tax issue, count on at least $1,500 to $2,000 for even the simplest case, according to TrustedTaxAttorney.net. This cost is the single most important reason you should get to know enrolled agents; they can represent you in an audit, or before the IRS for any tax issue, for a lot less.

Whatever choice you make, it’s important to recognize this critical fact: Even if you get bad advice, and even if you pay someone a lot of money and that someone makes a mistake, you are the one responsible for paying the IRS what you owe. If you underpaid your taxes, you’ll owe the IRS and will have to pay Uncle Sam back with interest. So choose your help wisely. And however painful it is, always double-check the work that’s done.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.


5 Things We Can Do Now to Solve the Student Loan Problem

The U.S. Department of Education recently unveiled a new and improved methodology for calculating student-loan payment delinquencies. Where it once figured the late-payment rate of student loans as a whole to be 17%, the department has now determined that when the same data is expressed in terms of individual borrowers, it’s as high as 38%.

However, the new calculations don’t even take into account the borrowers who are currently in default or have had their payment plans modified by loan servicers so that their accounts no longer appear to be past due – even though many technically are. Taking all that into consideration, the number of distressed borrowers approaches 50%.

There are two problems with the ED’s latest effort to convince a skeptical world that it really does know how to manage the more than $1 trillion of directly-originated and government-guaranteed student loans that are on its books.

The first problem is, frighteningly, the ED has demonstrated that it really doesn’t know what it is doing — not with all its restated metrics and loan-administration mishaps. The second is that even this latest parsing of payment-performance data has yet to inspire anything more than a frustratingly incremental approach to solving what is clearly a rapidly deteriorating situation.

Starting with the manner in which performance is evaluated, there are three categories of loans: those that are not in default, those that are and those that are someplace in between because the contracts have been temporarily restructured (granted forbearance) or permanently modified (via the government’s Income-Based Repayment and Pay As You Earn plans).

True, the above three categories combine to make up the aggregate value of student loans currently in repayment, but each of these types must be separately tracked and analyzed, for two reasons: first, so that migrations between delinquency statuses (30-, 60-, 90-days past due, for example) can be monitored and corrective actions (with regard to servicing) taken; second, so that the activities of the loan servicers can be more closely scrutinized than they currently are.

These private-sector companies are compensated for managing payment performances to within predetermined standards. So it’s reasonable to be concerned about the temptation to improve upon the results, such as by temporarily accommodating delinquent borrowers so their loans no longer appear as past due.

These dreadful metrics should inspire lenders and servicers to find a comprehensive solution, but don’t. The plain truth is that the plans to help student loan borrowers — those currently in place (income-based repayment programs) and proposed (such as Sen. Elizabeth Warren’s reintroduction of the Bank on Students Emergency Loan Refinancing Act) — don’t do enough.

Here’s why: PAYE and IBR are helpful but cumbersome. Not only must borrowers re-qualify for the relief they need every year, but as their incomes grow, so will the value of their monthly payments. That makes it harder for households already under pressure to set budgets, let alone plan for the future.

What Can Be Done?

A loan portfolio in which roughly half the borrowers are either in trouble or treading water is one that is in obvious need of restructuring. So let’s stop wasting time pointing fingers about how these loans were first approved or structured, or why borrowers are still struggling as the economy improves, and solve the problem. Here’s how.

  1. Restructure every loan—without regard for origination channel and payment status—for terms of up to 20 years. Longer repayment durations will do more for affordability than monkeying around with interest rates, although these, too, should be reconfigured because the consumer-unfriendly rate-setting mechanism that Congress put into place in 2013 has more to do with politics than it does finance.
  2. Permit partial and full prepayments—without penalty. Just because a loan has a lengthy duration shouldn’t mean that it can’t be settled ahead of time. Penalty-free prepayments—where the additionally remitted amounts are appropriately applied against the principal—will help borrowers to limit the amount of interest they pay overall.
  3. Expunge previous credit histories for loans that are subsequently refinanced. The standard 10-year repayment plan that was originally put into place is to a large extent responsible for the problems many borrowers have had. Creditors should therefore be more concerned about repayment performance after the contracts have been restructured.
  4. Offer student-loan borrowers the same tax relief that has benefitted homeowners. Waive taxation on the value of the debt forgiveness that may be granted on an exception basis, just as it has been for distressed home mortgages that were permanently modified after the crash.
  5. Permit student loan debts to be discharged in bankruptcy. This will motivate recalcitrant owners and servicers of government-guaranteed loans to come to the bargaining table with tangible, sustainable solutions.

The money exists to pay for all this.

It’s no secret that the ED rakes in enormous profits from its student loan programs. Much of that is a result of the risky manner in which the government has chosen to finance this activity (low-rate, short-term borrowing is used to support its high-rate, long-term lending at a time when the Federal Reserve is contemplating raising rates). But even if the ED were to “match fund” its portfolio as lenders often do, it would still earn substantial profits from the combination of fees and interest that are charged.

What’s not so well-known is how these profits end up appropriated by Congress to offset the national debt. Said differently, lawmakers are, in effect, taxing the very same constituents it should be helping.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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This article originally appeared on Credit.com.

This article by Mitchell D. Weiss was distributed by the Personal Finance Syndication Network.


How to Compare Free Credit Monitoring Offers

Given the frequency and scale of cyberattacks affecting U.S. companies, it’s likely your information has been or will be caught up in a data breach. And as we’ve seen in the past, companies that have experienced breaches usually offer their customers some sort of free credit monitoring or identity theft protection plan to help deal with the aftermath. If you’ve been involved in multiple breaches, then you may have received multiple offers for free credit monitoring from different companies which provide the service. But which ones should you sign up for, and how do the different plans compare to one another?

“You need to read what you’re actually being offered,” said Adam Levin, identity theft expert and chairman and co-founder of Credit.com. “In some of these offers, they’re kind of vague, so you need to say, ‘What am I actually getting, and how do I sign up for whatever it is?’”

Some people opt into all of the plans they are offered — they may have different coverage periods, and different services are offered by different plans. Others may prefer to keep things simple and choose only one. Regardless of your choice, here are a few things to consider when reviewing your options.

What Data Does the Service Monitor?

Most consumer credit data (in addition to public records and other consumer information) are reported to the three major credit reporting agencies: Equifax, Experian and TransUnion. Some credit monitoring services review what’s happening on all three credit reports, and some offer only single-bureau monitoring. Because data varies among agencies, three-bureau monitoring is more valuable.

Monitoring services have several levels of detail, and the more closely your data is analyzed, the more helpful it is likely to be to you.

Some monitoring services review summaries of your credit report, which are known in the industry as “header files.”

“It would be the same as looking through the table of contents instead of reading the book,” said Michael Bruemmer, vice president of consumer protection for Experian. Experian’s ProtectMyID products have been offered by some companies that experienced data breaches, including Target and Premera.

Header file monitoring means a consumer would be notified if there was a change in the number of accounts on the person’s credit report, if there have been new inquiries or if debt levels have increased. A credit monitoring service may or may not include checking for changes in all aspects of a report.

“In some cases the monitoring is only looking for maybe new credit openings,” Bruemmer said. “It may not look at inquiries, it may not look at public records, it may not look at account takeover actions.”

Who Does It Serve?

A more complicated aspect of credit monitoring has come into play in the wake of the data breaches of health insurers Premera and Anthem — child identity theft. Millions of minors’ personally identifying information was exposed in the breaches, which can be used to open fraudulent credit accounts, among other things.

“The process that we use, which is a patented process, looks for the creation of a credit file,” Bruemmer said. “When we sign up and we protect a child, we’re looking for the creation of a file, and then we’ll notify the guardian or the parent. … In most cases it’s a sure sign of identity theft.”

Child credit monitoring processes vary, just like they do for adults. Find out what fraud indicators a product looks for and how you will be alerted to them. Additionally, some monitoring services go beyond the credit report and check public records databases. Some regularly scan the Internet for signs that your personal information has been abused. There are so many possibilities, so you want to look at the details of your offer and find out exactly what you’re getting for free, and for how long. When you’re comparing your options, it probably makes sense to focus on the service that gives you more.

What’s the Timeline?

Fraud can happen at any time, which is why constant monitoring is best. Find out how often the credit monitoring reviews your information for changes — whether it’s constant, daily, weekly, monthly or quarterly — and as soon as you’re notified of credit activity, follow up on the alert. That may involve you calling a hotline for more details or logging into your credit monitoring account online.

On average, it takes consumers 222 days from the time fraud has occurred for a consumer to notice it, Bruemmer said, so the sooner you can find and address suspicious activity, the better. Credit fraud and identity theft can damage your credit score and be costly to reverse, both in terms of your finances and your time.

Is There a Support System?

Credit monitoring often comes with fraud resolution services, but not always. At the same time, fraud resolution may be offered without credit monitoring — it usually comes in the form of a hotline you can call if you detect unauthorized use of your credit or identity.

Trying to resolve identity theft or credit fraud on your own can be daunting, so it’s nice to know there’s someone to help you navigate the process after you’ve found something fishy. Some companies offer identity theft insurance, as well, which can ease the financial burden that sometimes comes after a fraud incident.

Choosing a free credit monitoring or identity theft protection service comes down to being informed and doing what ultimately makes you feel comfortable. A free product, even if it doesn’t provide broad coverage, may be worth taking as an added security measure, but you still need to pay close attention to activity across all your financial and online accounts. You can check your free annual credit reports at AnnualCreditReport.com and you can get two of your credit scores for free every month on Credit.com.

Levin noted that, as helpful as free monitoring may be, it’s mostly something companies offer as part of their public relations strategy after a breach. The freebies expire, but the threat of fraud will not.

“You have to have something that continues on beyond the breach, because no one is going to give you lifetime credit and identity monitoring,” Levin said. “Unfortunately, you have to engage in a lifetime of credit and identity monitoring if your Social Security number was compromised.”

There’s no monitoring system that will catch any and all fraud someone may commit using your identity or accounts, but in general, when comparing credit monitoring or identity theft protection services, look for something that reviews multiple data sources, provides details on detected changes and offers guidance for resolving problems.

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This article originally appeared on Credit.com.

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


Is an SAT Prep Course Worth the Cost?

Only one thing was stopping Justis Slattery from playing soccer in college: his SAT scores. He found a school he wanted to attend, and soccer coach he really wanted to play for, says his mother, Stacy. He earned a coveted spot on the team, and an admissions counselor told him he shouldn’t have any problem getting in.

But then he learned his highest SAT score was exactly 100 points below where it needed to be in order to get accepted. “It’s kind of heartbreaking,” said Stacy. “Nothing matters to him unless it’s soccer.”

Like many students, Justis had tried studying for the test on his own. He bought the Official SAT Study Guide. (Known as the “Blue Book,” it costs about $22, depending on where it is purchased.) But with a full schedule of classes, along with soccer practices and games, he didn’t spend a lot of time going through it.

But when he learned 100 points was the only thing standing between him and his dream, his priorities changed. His mom hired his middle school math tutor, who also tutors students preparing for the SAT, and they went to work. Before and during spring break they spent seven hours working together.

And it worked. Justis took the test again and scored exactly 100 points higher. He was in.

Is It Worth It? Maybe

Stacy says the key was having someone sit down and go over it with him. And that’s often the case, says his tutor, Linsea Mohr. “As a tutor, I see myself more as a puzzle decoder. I just show students how to arrive at the answer the most expediently and then they fly solo.”

Parents often agonize over whether to pay for test prep classes or tutors, but ultimately many do spring for it; the tutoring and test prep industry makes billions of dollars a year. Often, when they do pay for it, they wonder if it’s worth it.

“It’s absolutely worth it,” says Debbie Stier, a single mom with two teenagers who wrote the book The Perfect Score Project about her experience taking the SAT multiple times in an attempt to earn a perfect score. She didn’t get one, but she did raise her score by 330 points — and she helped her son raise his score 590 points (of a possible 2,400 composite for all three portions of the test).

Overall, though, the track record isn’t so hot: a 2009 paper published by the National Association for College Admission Counseling says research has found the average gains from test prep to be “more in the neighborhood of 30 points.”

Stier has since created an online course in critical reading and tutors students one-on-one as well, but she emphasizes that parents don’t have to spend a lot of money on prep. She recommends students rely primarily on the official College Board material to study but can also “use non-official material to build the muscle. Any nonfiction college-level material works.”

For example, she recommends teens read one article a day from The New York Times, The Economist or the The Wall Street Journal. The parents get homework too: Together, you “talk about the main point,” she suggests. “Research shows that studying out loud leads to deeper, more meaningful learning,” she adds.

My daughter recently took her first official SAT as a sophomore. She was invited to be a beta tester for truePrep, a company that is blending technology and the personal touch. She started by taking a practice SAT (using an official College Board test), which was then used to assess her strengths and weaknesses. The company says it uses a proprietary algorithm to hone in on the specific areas students need help with, and to help pinpoint areas where students have the greatest potential for raising their scores. Her tutor worked with her on those key areas via sessions on Skype. She took additional practice tests and, again, her plan was fine-tuned. When she finally took the actual test, she scored 160 points higher than her initial score.

Although my daughter is generally an organized and self-disciplined student, she says she appreciated the forced discipline of her tutoring sessions; between homework and extracurricular activities, she’s not sure she would have made the time to prep — at least not during the school year. And she liked the fact that those sessions didn’t waste her time on areas where she wasn’t having trouble.  “We’ve built our program to be super-efficient,” says truePrep cofounder Andrew Finn. “You can really zero in on the student’s weaknesses.”

Of course, motivated learners can always tackle the test themselves. Katherine Long says she earned a perfect score on the SAT using the Blue Book as her only study guide. “It wasn’t hard, just time-consuming — you have to dedicate the hours into it,” she says. “When I started, I wasn’t good at attention to detail so I kept messing up on the math section, but fixed it by just forcing myself to be more attentive. For the verbal section, I didn’t know SAT vocabulary when I started, but just kept learning and used flash cards. For reading comprehension, you have to remember that the answers are already there in the passage, you just have to find them.”

In addition to the College Board materials, there are dozens of free and low-cost tools and apps that can help students learn vocabulary words, take sample test questions and prep at their convenience. (But be sure to read reviews — some have been criticized for giving wrong answers.) One of the most popular? The College Board’s own free Question of the Day. And the Khan Academy has partnered with the College Board to provide free test prep tools, including new ones that will help students prepare for the redesigned test to be launched in 2016.

How to Pay for SAT Prep

If you decide to pay for a class or hire a tutor, here’s what not to do: raid your child’s 529 college savings funds. If you do, you’ll have to pay taxes and a 10% penalty. “It would not be a qualified expense,” warns Jim Ludwick, CFP and founder of Main Street Financial Planning. That means you’ll either have to shell out the money out of your current income or savings, or find another option.

1. Use Interest-Free Financing 

If you must pay for a package deal upfront, you can consider using a 0% credit card offer to pay it off over time while avoiding interest charges. Some card issuers offer 0% for up to 18 months on purchases while others offer similar deals on balance transfers. (Credit.com publishes a list of the Best Balance Transfer Credit Cards in America.) Just make sure you can pay off the balance before the free financing period expires. And if you take advantage of a balance transfer offer, keep in mind most, though not all, issuers charge a balance transfer fee of up to 4% of the amount transferred.

2. Create Your Own Payment Plan

While some programs may charge you upfront, tutors often work on a pay-as-you-go basis. TruePrep, the program my daughter used, for example, charges $75 an hour, and doesn’t require a long-term contract. If you sign a contract for tutoring or test prep, make sure you understand the commitment you are making. The last thing you want is to stop paying and have a debt turned over to collections, where it hurts your credit scores. (You can see if a collections account is affecting your credit scores for free on Credit.com.)

3. Get Creative

Kreigh Knerr says he once bartered his services as an SAT tutor for voice lessons. “My old voice teacher had a high-school-aged child, and we traded voice lessons for SAT prep,” he says. A former teacher who now runs the Knerr Learning Center in Milwaukee, he normally charges $250 per hour-and-a-half tutoring session, and his voice teacher’s rate was $100 an hour, “but we just did a straight exchange of SAT session for voice lessons,” he says.

Charlotte Baker says she found an SAT course her daughter Eva really wanted to attend, but couldn’t afford it. (Eva, who blogs about money at TeensGotCents.com previously shared her SAT experience with Credit.com.) Says Charlotte: “After speaking with the instructor I found out that if I hosted the class by finding a facility, helping advertise the class, and being there that weekend to do anything needed that the class would be free for my children! I did all that was required, lots of other people attended and I didn’t have to pay a dime! It was a great way to get some incredible training for my daughter that wouldn’t have been possible otherwise.”

Ann Logue says she bought an SAT prep book for her child from Amazon using her Chase credit card reward points. But that’s it. “My kid’s school uses Naviance as part of its college counseling, and one of Naviance’s features is online SAT and ACT review,” she says. (Naviance offers a online test prep program called PrepMe.)

Stick to Basics

Finally, keep in mind that throwing money at test prep doesn’t guarantee a better score. Sometimes just taking the test again can raise your score, especially if you feel less stressed and more comfortable the next time around. Also keep in mind that scores on standardized tests are just one factor many schools look at. Grades and extracurricular activities help as well. There are schools that don’t even use those scores, so if all else fails, you may want to try a different school.

“I ended up at Wharton,” says Long, who studied and earned a perfect score. But she says that wasn’t everything. “Outside of academics, I had founded and was running a business (a fashion magazine) on the side. If you’re looking to get into an elite college, after you hit a certain level in SAT scores, it really doesn’t matter — it’s about your passions, extracurriculars, and hook.”

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This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.


You Could Be Risking Your Child’s Online Privacy

By now, you know that even though online crime is under-reported, it’s still a big deal. But do your kids know that?

Whether intentionally or not, you could be exposing your child to online invasions of privacy. According to a study done by TRUSTe, a data privacy management company, lots of parents are worried about their kid’s privacy online, but they may not be handling it the right way.

“While parents are concerned, they don’t always protect their children’s privacy online,” said Chris Bable, CEO of TRUSTe, in a statement. “Companies need to work with parents and their children to ensure transparency and help protect children’s data.”

The big number: 58 percent of parents said they are concerned about their child’s privacy online. Here’s what we learned from the study, and what you can do to minimize your child’s security risk when he or she goes online.

With a good password identity theft is more rare, but we can make you more secure.

When parents do more harm than good

According to the study, a full 24 percent said they do not allow their child to use the Internet. Why? Their reasoning includes:

  • 57 percent said they were worried that their child would be exposed to inappropriate content;
  • 44 percent think their child will share personal information online;
  • 43 percent think their child will share personal information online that they will later regret.

But the irony is that while so many are concerned about kids sharing stuff they’ll regret, parents are sharing photos of their kids all over Facebook and Instagram. Almost 70 percent of parents admitted they’d posted photos of their kids online, and 35 percent post photos once a month or more. In addition, 1 in 5 parents said they helped their kids who were under 13 years old set up social media accounts.

That’s not illegal, thanks to the Children’s Online Privacy Protection Act, which was passed by Congress in 1998. It requires all websites selling services or collecting information to obtain parental consent before collecting information from kids under 13. But just because kids are going online legally doesn’t mean they’re doing it safely.

How to talk to your kid about staying safe online

If you don’t take anything else away from this study, remember this: The best way to protect your kid from scary stuff online is by talking to them about it. TRUSTe says that 74 percent of parents think their child understands “a small amount or nothing at all about the issues surrounding privacy online.” If that’s you and your child, keep these tips in mind:

1. Start early. Your kid born today is a digital native, so don’t think it’s out of the question to broach the topic of internet safety with a kindergartner.

2. Initiate the conversation. Even if your kids are comfortable approaching you, don’t wait for them to start the conversation. Instead, find examples in your everyday life to talk to your child about Internet safety. This can be something as simple as seeing a billboard or ad about cyberbullying, and taking the time to explain to your child what it means and what to do if they experience it.

3. Be honest and supportive. Without a foundation of trust and support, kids aren’t going to be forthcoming about what they experience on the Internet, whether it’s harassment or strangers who make them uncomfortable. Make sure you cultivate an environment of trust and let your kids know they’ll never get in trouble for admitting something serious.

4. Be patient. Especially with younger children, it can take a while for something to sink in. It’s best to broach the topic several successive times; if the information is repetitive and simple, they’ll absorb it better.

The post You Could Be Risking Your Child’s Online Privacy appeared first on Debt.com.

This article by Jess Miller was distributed by the Personal Finance Syndication Network.


More Reasons Why You Shouldn’t Bother With Gas Credit Cards

Last June, I wrote about why you should get rid of your gasoline credit card — because the rewards just aren’t competitive. Since then, the price of gasoline has plummeted, which might seem to help the case for some gas cards. Nevertheless, these cards are still a bad deal…

Low gas prices don’t help gas credit cards

At 10 cents off the price of gas, that equals a 2.5 percent discount off of gas at $4 a gallon, as it was in many places last June when I ran the numbers. But with gas now at around $2 a gallon in many places, that same discount is now equal to 5 percent off per gallon.

But you’re still getting the same absolute savings in dollars that you would have, regardless of the current price of gas. As I detailed last year, that absolute savings works out to be small compared to other reward credit cards, even if you drive a lot.

High APR

Creditcards.com recently conducted a survey of the 20 largest major-brand gas cards — and found that their disadvantages are legion. For example, gas cards had an average APR of 24.14 percent, far above the rest of the market, which is around 15 percent.

Low bonuses and confusing rewards

Creditcards.com also found these cards offered sub-standard sign-up bonuses, and their rewards were filled with confusing terms and limitations such as minimum spending thresholds, maximum limits, qualified purchase requirements, and tiered rewards levels.  And of course, they reached the same conclusion that I did: Rewards offered aren’t competitive with other reward credit cards.

“Gas cards are the dull, boring sedans of the credit card world,” according to Matt Schulz, CreditCards.com’s senior industry analyst. “They’re stuck in the slow lane, destined never to be flashy.”

creditcardad

The wider lesson

So gas cards stink, and you knew that because you read what I wrote last summer. (You do read everything I write, don’t you?)

So why am I beating on the same drum again? The lesson here is not just that gas cards are bad, but that reward-card owners must manage their portfolio strategically. It’s not enough to just apply for a credit card that offers a discount on what you would have paid. You have to compare the discount to what you would have gotten from a competing credit card, since you can apply for every card you are offered.

This is as true for gas cards as it is for a store card, frequent-flier mile card, or any other reward card. Once you understand that, than you will be in a position to evaluate any reward credit card offer.

The post More Reasons Why You Shouldn’t Bother With Gas Credit Cards appeared first on Debt.com.

This article by Jason Steele was distributed by the Personal Finance Syndication Network.