Report: Student loan firms still mistreating military members

CONSUMER FORUM 

Posted July 19, 2015, at 10:09 p.m.
In May of last year, the U.S. Department of Justice and Federal Deposit Insurance Corporation entered an order that provided $60 million to compensate more than 77,000 military service members.

The action was against Sallie Mae and Navient — which formerly were one company — and followed numerous complaints about the educational loan benefits the service people should have received.

Now, 14 months later, the Consumer Financial Protection Bureau, or CFPB, published a report saying problems with educational loans persist.

The report, titled “Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform,” cites ongoing mistakes in the ways loan payments by service members are handled and the denial of legal benefits, negative credit reporting and sloppy legal remedies that often follow.

Congress passed the Servicemembers Civil Relief Act, or SCRA, to help ease financial burdens on men and women in the military.

The law includes a ceiling on interest rates for military people who assumed student loan debts before going on active duty. Federal student loans include deferment and forgiveness provisions for military service. Some private student lenders say they offer loan discharge, military deferment and other ways to ease the burden on families in the military.

The CFPB wrote a report in October 2012 citing many of the same problems. Since that report was issued, the bureau said it received another 1,300 complaints.

The report cites four major problem areas:

— Military deferments are denied with inadequate explanation, applied haphazardly and sometimes approved verbally but never applied, resulting in late fees, defaults and debt collection.

— Service members still struggle unnecessarily for SCRA protections, and loan servicers still appear not to understand the law.

— Military families continue to have problems with the disability discharge, and negative credit reporting can follow. Families also are unsure whether that benefit applies to private student loans as well as to federal loans. The uncertainty extends to co-signers looking for the same protections following the disability or death of a primary borrower.

— On top of loss of protections specific to military borrowers, complaints also show that servicing breakdowns can affect their financial and military readiness.

Language in the CFPB report makes it clear lenders need to understand and apply military deferment, discharge because of disability and SCRA interest rate reductions.

“Servicers must make the requirements, application process and communications regarding these programs clear, concise and free of unnecessary roadblocks,” the report states. In its conclusion, it recognizes that “no comprehensive statutory or regulatory framework exists” to ensure uniform servicing of all student loans.

At the Finance Authority of Maine, or FAME, Governmental Affairs and Communications Manager William Norbert said Maine service members have not reported any problems. He advises ongoing communication with lenders, especially when service people leave for or return from active duty.

If problems do arise, FAME has an ombudsman, or problem-solver, who can help, online at famemaine.com or by calling the agency at 207-623-3263 or 1-800-228-3734.

The U.S. Department of Education also has an ombudsman who can help military and non-military borrowers with student loan issues. For information, visit the DOE site at https://studentaid.ed.gov/sa/ or call toll free at 1-877-557-2575.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

Payday loan firm’s departure won’t end predatory lending

CONSUMER FORUM

Posted July 12, 2015, at 1:15 p.m.

Click image to file a complaint

When Ace Cash Express announced it would stop doing business in Maine on July 11, reactions were mixed.

Consumers who depended on payday loans from the firm wondered where else they might get needed cash. The Maine People’s Alliance cheered, charging Ace was just like all other payday lenders, keeping needy people in a circle of debt. Regulators were unsure whether the unknown that lies ahead might be more troubling than the present we know.

Ace, which had stores in Portland and Brunswick, is shrinking its presence nationwide. This follows a $10 million settlement last July with the federal Consumer Financial Protection Bureau, or CFPB. The bureau had found evidence the company used harassment and false threats of prosecution or imprisonment, among other illegal tactics, to pressure overdue borrowers to take out more loans.

When they’re approved for the loan, borrowers usually hand over a check for the loan plus interest; the lender holds it until the borrower’s next payday. If the borrower can’t repay, the loan can be rolled over with another interest charge tacked on.

In Maine, Ace was charging $15 to borrow $150 and $25 to borrow $250 for up to one month. The average annual interest rate of payday lending in Maine is 217 percent, according to a study by the Pew Charitable Trust. Rates in other states can go much higher, so Maine is not a prime target for payday lenders.

William Lund, superintendent of Maine’s Bureau of Consumer Credit Protection or BCCP, said Ace operated within the law. He said the company is allowing consumers with outstanding loans to set up installment payments to settle their debts. Lund says, when the state had questions, Ace was reachable and responsive.

In 2014, the CFPB did a study of the payday loan industry. Among its findings: the majority of borrowers renew their loans so many times that they end up paying more in interest than the amount of the original loan.

CFPB plans to release new rules this fall affecting payday lenders, regulation that has until now been left largely to the states. The Maine People’s Alliance, which organized a small rally last Thursday in Portland, wants CFPB to pass strong rules covering car title loans, installment payday loans and online loans as well as traditional payday loans.

Jamie Fulmer is a spokesman for Advance America, the largest U.S. payday lender. He wrote in a recent op-ed that federal officials “do little to understand why millions of Americans choose these loans over other similar products, or what would happen if that choice was taken away.” Fulmer argued that if the new rule affects only payday lenders and ignores other sources of short-term credit, “people will be forced into higher-priced and lower-quality services.”

Lund says his staff would much sooner deal with the storefront lenders who have a brick-and-mortar presence; the online lenders who offer contact only by email are much tougher to regulate.

“Every single day we hear from Maine consumers who are being threatened with illegal collection tactics,” Lund told me.

Since neither consumers nor regulators can readily locate the tough talkers, many of them keep gouging the people they had promised to help.

The CFPB says its rules will require lenders to take steps to make sure consumers can pay back their loans. CFPB Director Richard Cordray said, “These common-sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”

After a review panel looks over the rules, they could take effect sometime this fall. In Maine the maximum fee for a payday loan of $500 or more is $25. Unlicensed, unscrupulous lenders may charge much more. Find a list of licensed lenders at the BCCP website at Credit.Maine.gov, click “list of license types” and select the payday lender list, or call 1-800-332-DEBT-LAW (1-800-332-8529).

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

Deposit checks electronically? Here are some mobile banking cautions

CONSUMER FORUM

By Russ Van Arsdale, executive director Northeast CONTACT
Posted July 05, 2015, at 12:08 p.m.

Today we’ll learn about the term “remote deposit capture.”

You might hear it also called mobile remote deposit capture. In a nutshell, it’s the ability to deposit a check electronically.

Convenient, right? Yes, until something goes wrong. When it does, you have the major role in spotting the problem and getting it corrected.

What could go wrong is that a check can be deposited more than once, either by error or with the intent to defraud. Credit Union Times wrote in June 2013 that a man from Louisville, Kentucky, managed to deposit 32 Western Union money orders, which he also cashed out at a Kroger. Police reports say the man doubled his money in the process, getting away with more than $12,000.

In traditional deposits, the financial institution retains the “deposit instrument.” In remote deposit capture transactions, it stays with the depositor, making a second deposit possible. Crooks may feel safer in trying this kind of fraud; instead of walking into a bank or credit union with evidence in hand, they’re pulling their scam remotely.

It’s estimated that two-thirds of all financial institutions in Maine offer customers the option of remote deposit capture; snap a picture of the check with your cellphone and deposit it.

People at Maine’s Bureau of Financial Institutions say they have not received complaints or questions about remote deposit capture via its consumer complaint line (800-965-5235). Consumers also may write to the Bureau’s Consumer Outreach Program, 36 State House Station, Augusta ME 04333-0036.

An interagency body called the Federal Financial Institutions Examination Council has written what it calls a guidance document for financial institutions. It says duplicate presentment at a bank or credit union is a double-edged sword: a business process and a fraud risk. The Federal Financial Institutions Examination Council says insider fraud is a greater risk “because the financial institution typically does not perform background checks on its customers’ employees who may have access to physical deposit items or electronic files.” It also says customer and staff access to nonpublic personal information embedded in deposit items could also increase the risk of identity theft.

The Federal Financial Institutions Examination Council says management of financial institutions and customers need to be diligent to prevent abuse of remote deposit capture. Managers and customers should be on the same page as their computer technologies evolve. To reduce the risk of double deposits, deposit items should be “endorsed, franked or otherwise noted as already processed.” It says institutions also might want to buy insurance against such happenings, if coverage is available and affordable.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

A few tips for safe, fun fireworks use

CONSUMER FORUM
Posted June 28, 2015, at 3:15 p.m.
Each Independence Day safety officials renew their advice regarding consumers who buy and use fireworks: Make sure everyone involved knows the items are not toys and are not to be used by children.

“I want to make sure people are aware that fireworks are for people 21 years of age and older,” Joseph Thomas, the state fire marshal, told me last week. Thomas noted young people suffer far too many hand and eye injuries because they are victims of fireworks-related accidents or because they have inappropriate access to fireworks.

Don’ let fun with fireworks turn tragic

 

The attraction is clear: They’re bright, colorful and noisy. Adults use them to celebrate, and children want to be part of the fun. The sad fact is that, in the month surrounding each Fourth of July, people make more trips to hospital emergency rooms because of fireworks mishaps. The Consumer Product Safety Commission estimated the total in 2013 at 11,400 injuries; the safety commission said one in four children hurt in fireworks-related incidents were bystanders at backyard fireworks displays.

The commission further states 240 people on average suffer fireworks-related injuries each day in the month surrounding July Fourth. Even sparklers — legal in most states where other fireworks can’t be sold — burn at 2,000 degrees and can cause serious burns.

Here is the Consumer Product Safety Commission’s top 10 list of what not to do when it comes to fireworks:

— Never allow young children to play with or light fireworks.

— Don’t buy fireworks wrapped in brown paper, which may be a sign of fireworks made for professional displays that could pose a danger to consumers.

— Always have an adult supervise fireworks in use.

— Don’t stand directly over a device when lighting the fuse; back up to a safe distance after igniting.

— Light fireworks one at a time, then move back quickly.

— Never re-light or pick up fireworks that haven’t gone off.

— Never point or throw fireworks at anyone.

— Keep a bucket of water handy in case of fire.

— Never carry fireworks in a pocket or shoot them off in glass or metal containers.

— Soak spent devices with plenty of water before discarding to prevent trash fires.

If your neighbor’s fireworks malfunction and burn down your house, your homeowner’s insurance likely will cover your loss — your insurer probably would try to recover the payout from your neighbor. If your fireworks burn down your neighbor’s house, you may be responsible for the property damage and suppression costs; however, your policy might only defend but not cover the loss. The Maine Bureau of Insurance can answer detailed questions at 207-624-8475. Types of coverage in typical homeowner’s policies are found on the Bureau’s website .

Check first to make sure fireworks are legal in your community. The state fire marshal’s office website has a map showing 39 Maine communities where fireworks are banned. If in doubt, call the fire marshal at 207-626-3870 or check with your local fire department.

In most Maine communities, fireworks use by consumers is a given. As Fire Marshal Joseph Thomas put it, “if it’s going to happen, let’s make it happen as safely as possible.”

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

How to avoid panic when disaster strikes

CONSUMER FORUM

Posted June 21, 2015, at 2:30 p.m.

Click image for daily tips

Every day we read about some new disaster somewhere in the world. The sidebar stories warn us to prepare, in case a similar calamity strikes near us.

The best piece of advice we’ve heard lately comes from the Maine Emergency Management Agency, or MEMA. That advice is simply this: don’t try to do it all at once.

MEMA advises us to put together those items we have on hand for a basic emergency kit. If we’re list makers, we can start by writing things down. Then, we can gather what we have and decide what’s missing. We can buy a few things at a time when we’re out shopping, and we can wait for sales on things such as batteries and canned goods and stock up.

We like MEMA’s common-sense approach for a couple of reasons. It allows us the luxury of time to prepare in a methodical way. We knew during the middle of last week that a storm named Bill was likely to wash over Maine several days hence; some of us checked our emergency supplies then and put together replacement stocks as necessary.

MEMA’s piecemeal approach treats disaster preparedness as a process, rather than a single task. As such, that process will tend to keep emergency preparations on our radar; keeping those thoughts banging around in our brains allows us to add supplies, make plans, practice drills and do a number of other things that we might otherwise overlook.

Here’s another handy hint from MEMA: write down important phone numbers. Many of us can’t recite those numbers from memory, because our cellphones store them for us; one touch and speed dial does the rest.

When the phone battery dies and the ice storm takes down the cell tower, Grandpa’s old rotary dial phone can look mighty good … if we know what numbers we want to call.

Write down the numbers of family members, close friends, your insurance agent, financial pros and others you may want to reach in case of trouble. Drag out that list every couple of months and update it.

After getting things together and writing down key numbers, you might take the next step and talk this all over with your neighbors. MEMA advises that we get together over coffee and talk about ways we can support one another during an emergency. A neighbor set up a generator when the ice storm of 1998 knocked out one of our relatives’ power; at some point, we’d like to pay that favor forward.

You can read all of MEMA’s preparedness tips online. Visit www.maine.gov/mema and click “To learn more, visit Maine Prepares.” You can sign up to receive a daily tip by email or through social media.

For people who are not comfortable using computers, Kathleen Rusley of MEMA says local emergency management directors are great sources (that person is often the local fire chief).

“They are a fount of information; they’ll go out and talk to groups or contact the county or state offices for speakers,” she said.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

Elder abuse costs $2.9 billion each year

CONSUMER FORUM

Posted June 14, 2015, at 11:44 a.m.

Click image for list of aging and disability services

You may have seen news reports noting that June 15 is Elder Abuse Awareness Day. It’s appropriate to focus this column on elder abuse because it is probably the most under-reported of all abuses of consumers.

So, this is a call to action. People who suspect that our older neighbors or friends are being abused need to speak up.

On top of the huge physical and emotional toll of abuse and neglect are the financial costs, estimated at $2.9 billion per year. Cases of investment fraud targeting seniors are well documented; still, Mainers are victimized almost daily.

“Victims can quickly see their entire life savings depleted with little opportunity to recover financial stability,” said Judith Shaw, Maine’s securities administrator. Shaw, who also co-chairs the Maine Council on Elder Abuse, added that such losses can lead to physical and emotional health problems.

Shaw attended last Thursday’s Scam Jam, an awareness event that drew more than 300 people in Augusta. Shaw was among the speakers, and she came away with a renewed conviction about fighting elder abuse: We are all in the fight together, and collaboration among groups seeking to end abuse is critical.

Shaw said part of the natural aging process is a decreasing ability to understand complex financial concepts. Scam artists prey on this fact and use sophisticated social engineering tricks to try to separate seniors from their funds.

In marking this day of awareness, Maine officials listed warning signs of possible abuse or exploitation:

— Social isolation, depression and/or recent loss of spouse or partner.

— Declining health and ability to provide one’s own care.

— Inability to deal with complicated finances.

— Dependence on others for basic care and services.

— Willingness to listen to telemarketers or respond to solicitations from unverified charities or businesses.

In proclaiming Elder Abuse Awareness Day, Gov. Paul LePage urged Mainers to report suspected abuse of older Mainers. The governor noted in his proclamation that abusers are often family members or caregivers.

“Each of us has a responsibility to speak up and report concerns about potential abuse,” LePage said.

That’s especially true when seniors may be too embarrassed or afraid to speak up for themselves.

Suspected abuse can be reported to Adult Protective Services (maine.gov/dhhs/oads/aging/aps) by calling 800-624-8404

Another key agency is the Maine Office of Aging and Disability Services (maine.gov/dhhs/oads), reachable by phone at 800-262-2232.

Legal Services for the Elderly (mainelse.org) can offer free legal help to socially and economically needy Mainers age 60 and over. Call the helpline at 800-750-5353. You can find links to Maine’s area agencies on aging at maine.gov/dhhs/oes/resource/aaa.htm.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

 

Home equity loan payback crunch looms as next housing crisis

CONSUMER FORUM

Posted June 07, 2015, at 12:18 p.m.

Click image for Federal Reserve publication

Home equity loans offer homeowners a line of credit based on the value of their dwellings. A lot of homeowners opened home equity lines of credit, or HELOC, between 2005 and 2008, when the housing market crashed.

Today, HELOCs from that period total about $265 billion. Those loans are about to enter what’s called the drawdown period, when they have to be paid back. And while many of those loan arrangements allowed borrowing for interest-only payments over a 10-year period, borrowers will face principal-plus-interest payments that could be sharply higher.

Experian, one of the big three credit reporting agencies in the U.S., released a report not long ago citing concern over the end-of-draw issue.

“Between 2013 and 2014, there was a 307 percent increase in the number of 90-day delinquencies on HELOC loans for borrowers that were end of draw, compared to just 29 percent that were not end of draw,” Experian said in its report.

The report noted that the percentage of HELOCs that are 90 to 180 days past due, termed “late stage delinquent,” has dropped 0.5 percent from its peak of 1.81 percent in 2009. Meanwhile, more homeowners have been using HELOCs; new loans in the fourth quarter of last year were up 81 percent from the fourth quarter of 2010.

Experian’s report doesn’t predict either good or bad results of this increased borrowing, but its study does caution consumers to do their homework.

Michele Raneri, Experian’s vice president of analytics and business development, put it this way: “This analysis is critical, as we want to not only help lenders prepare and understand the payment stress of their borrowers but also give consumers an opportunity to understand what the impact may be to their financial status and how to be better prepared for it.”

The Office of the Comptroller of the Currency, or OCC, sounded the alarm back in 2012, when about $11 billion in HELOCs reached the end-of-draw period. At that time, OCC predicted the figure would be $29 billion in 2014, $53 billion in 2015 and as much as $111 billion in 2018.

The crunch for borrowers could come when the Fed loosens its grip on interest rates.

The Experian study concludes that, if there is a significant balance on a consumer’s HELOC and that consumer must start repaying, those new payments could put the borrower in a financial squeeze.

Banks that finance the HELOCs generally reach out to consumers six to 12 months before the end of the draw period. They remind consumers of the approaching change in payments and offer to discuss options. Many of those consumers likely will turn to refinancing. Such programs usually operate on a variable interest rate; as an official of TD Bank recently was quoted as saying, “Nobody knows what rates will do a year from now.”

Consumers may want to talk with their loan officers or a financial adviser before deciding. You can read more about HELOCs in the Downeaster Common Sense Guide to Finding, Buying and Keeping Your Maine Home, published by Maine’s Bureau of Consumer Credit Protection. Read it online at maine.gov/pfr/consumercredit/documents/MortgageGuide.rtf. Help also is available from the Bureau by calling 1-800-332-8529.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

Follow

Get every new post delivered to your Inbox.

Join 84 other followers

%d bloggers like this: