Automated calls promising lower rates or to repair your credit? Hang up now
Consumers facing a cash crunch are once again warned to avoid paying upfront fees and falling into foolproof guarantees when it comes to solving their credit problems.
The Federal Trade Commission has announced in recent months a series of actions related to student loan debt relief programs, mortgage debt relief programs and credit card repair scams.
In late July, for example, the FTC announced it would mail out 7,786 reimbursement checks averaging about $ 293 each from a robotic call and bogus reduction services settlement. credit card rates. Reimbursement checks will total nearly $ 2.3 million nationally.
In Michigan, 262 people received reimbursement checks in the Educare Center Services case, totaling nearly $ 80,000.
While the refund money is welcome, it simply amounts to recouping 39% of the money consumers lost because of this program, according to FTC data.
Refund checks must be deposited or cashed within 90 days. The FTC refund line can be reached at 833-916-3597. The FTC noted that it never forces people to pay money or provide account information to cash a refund check.
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How have consumers been deceived?
Consumers often received a pitch via a robocall. The FTC warned in March 2020 that numerous robocalls were exploiting financial fears during the pandemic to “perpetrate scams or spread disinformation.”
The FTC and the Ohio Attorney General alleged that Educare Center and Tripletel Inc. made false and unfounded promises that they would significantly reduce interest rates on credit cards.
On top of that, the pitch included a 100% money back guarantee if the promised rate cut did not materialize or if consumers were not satisfied with the results.
Two companies worked in tandem. Canadian telecommunications provider Globex Telecom Inc., according to the complaint, made illegal robocalls to U.S. consumers to promote Educare’s bogus rate reduction services. Both companies, according to the FTC, were run by Mohammed Souheil, a Canadian citizen.
In 2010, the FTC changed its telemarketing sales rule to protect consumers seeking debt relief services, such as debt settlement or credit counseling.
For-profit businesses that sell these services over the phone are prohibited from charging a fee before actually settling or reducing a consumer’s debt. It also prohibits debt relief providers from making false claims and requires them to disclose key information consumers need to evaluate these services.
The economy has recovered but not the budgets
The U.S. economy has officially recovered from the shortest recession on record, which ran from March 2020 to April 2020, according to the National Bureau of Economic Research’s Business Cycle Dating Committee.
But many people haven’t seen their finances turn around after losing their jobs and trying to deal with their debts. When people don’t have a lot of emergency savings, they’re more likely to take on more debt when unforeseen expenses arise, such as needing new tires for a car.
If you’re stressed out about too much debt, however, it can be too tempting to jump to the first cold call or TV commercial suggesting a way out.
Complaints about debt relief services and credit repair programs rank 4th among top 10 pandemic-related issues disclosed to state and local consumer protection agencies in 2020, according to an annual survey by the Consumer Federation of America. This category also included questions relating to mortgages, debt collection tactics and predatory lending.
Consumer watchdogs suggest that you contact your creditor directly first, if you are having financial problems. You may be able to arrange a no-cost payment plan yourself.
Or you can contact a nonprofit credit counseling service through the National Foundation for Credit Counseling at www.nfcc.org or by calling 800-388-2227.
GreenPath Financial Wellness, based in Farmington Hills, is a member and is listed on the site.
In general, consumer watchdogs say you should avoid any debt relief company that charges upfront fees before you settle your debt or get you into a debt management plan.
You should also avoid having a debt relief organization – be it credit counseling, debt settlement, or any other service – that requires you to make “voluntary contributions”, which may really be a way to cover the actual costs, according to the FTC.
Red flags include mention of a so-called “new government program” that can save you from personal credit card debt or collateral so your unsecured debt is simply gone.
You shouldn’t take the advice of someone who says you should stop communicating with your creditors, but fails to explain the serious consequences.
No one should, according to the FTC, promise that they can stop all debt collection calls and lawsuits.
People burdened by student loans need to be careful
The FTC also warns that scammers are targeting people overloaded with student loans, as well as credit cards.
“There is nothing a student debt relief company can do for you that you cannot do yourself for free. And some of the companies that promise relief are scams,” according to an alert from the FTC.
Scammers use official-looking names, seals and logos to impersonate the Department of Education. Some even go so far as to promise special access to repayment plans, new federal loan consolidations, or loan cancellation programs. But, again, the FTC warns that this is a lie. If you have federal loans, contact the Department of Education directly at StudentAid.gov.
Before consolidating your student loans, find out what consolidation could mean for your situation. If you have private loans, the FTC says, talk to your lender. For federal loans, call the Department of Education’s Student Loan Support Center at 800-557-7394.
Another word of warning: Do not divulge important information about yourself, such as sharing your Federal Student Aid ID card with anyone. Dishonest people could use this information to gain access to your account and steal your identity.
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