How to Fix the Big Things You Hate About Your Credit Cards

reasons-people-hate-credit-cards

Credit cards may be in the wallets of most Americans, but not everyone is happy with their travel companion.

The Consumer Financial Protection Bureau (CFPB) released its monthly snapshot of consumer complaints in the financial services industry this week. The report, which regularly focuses on a different financial product to highlight consumer complaint trends, focused on credit cards and what irks consumers about their plastic friends (or foes, depending on how you view it).

Credit cards represent only about 10% of total complaints to the CFPB, a small amount considering how prevalent the cards are in Americans’ daily routine. That puts them in fourth for the most complained-about financial products, behind debt collection, credit reporting and mortgages.

Here are four of the major credit card complaints that surfaced in the bureau’s review.

1. Disputes Over Fraudulent Charges

Billing disputes were number one on the CFPB’s top credit card complaint list. Of the nearly 100,000 complaints the CFPB analyzed, 17% were over billing disputes. Credit cards often offer purchase protections and chargebacks — tools consumers can use to combat faulty merchandise or high prices — and these tools are rarely offered by debit cards and never offered by cash. But fraud seems to be the source of most complaints, as consumers finding fraudulent charges cite trouble removing or getting re-billed for them.

How to Avoid It: The best way to keep yourself from having to dispute fraudulent charges is to keep your credit card information as safe as possible from fraudsters. Never share your credit card with shady sites that don’t have a “lock” symbol or https:// when taking your data. And even though it’s convenient, avoid letting shopping websites “remember” your credit card info for next time. While some of those sites have excellent security, data breaches are becoming more and more common and credit card info is a literal gold mine for a hacker. (To keep an eye out for signs of identity theft, you can view your free credit report summary on Credit.com.)

2. Rewards Program Murkiness

If you’ve ever owned a rewards credit card, you know that to make the most of your card’s program, you need to read up on all the details (and those details do change). The CFPB found that confusion over how a credit card rewards program works was sometimes attributed to differences between what consumers encountered online and what they were told by customer service representatives over the phone.

How to Avoid It: The CARD Act of 2009 did a lot to make credit cards more consumer-friendly, but little regulation pertained to rewards programs specifically and business credit cards were not included at all in the act’s purview. That means you need to be a careful shopper, as you should be with all financial products — mortgages, business loans, you name it. Before you sign up for a rewards credit card, read the rewards terms carefully — they are often in a separate piece of paperwork from the APR and fee disclosures.

3. Being a Victim of Fraud/Identity Theft

Identity theft/fraud/embezzlement as a category came in third on the CFPB’s list at 10% of all credit card complaints. Many complaints pertained to account activity that the cardholder didn’t initiate, the report said. It points back to that top complaint of fraudulent charges as well — fraud is a problem for consumers as well as credit card issuers too.

How to Avoid It: In addition to keeping your credit card information safe (see tip #1), keep your identifying information safe. To open a new credit card in your name, a fraudster would need to have access to your Social Security number, name, address and other details. Protect that info and you limit your chance of getting got. And because “embezzlement” is included in this category as well, business owners should be sure to have a policy in place if they’re extending a company credit card to an employee. The rules should be clear so you don’t have to go through the painful process of disputing charges with your issuer.

4. Trouble Closing/Canceling an Account

Even though closing a credit card can do some credit score damage, it doesn’t stop consumers who want to avoid the temptation of spending too much or just have too many cards to manage. Roughly 7% of the CFPB’s credit card complaints pertained to consumers struggling to close accounts.

How to Avoid It: Call your issuer directly (you normally have a number on the back of your credit card) and ask to close the account. Be ready though — you’ll most likely be transferred to a department that is specifically going to try to keep you as a customer, perhaps offering a lower APR or a waived annual fee for that year. (Some consumers use this as a tactic to get a better credit card, in fact.) If you’re adamant on closing the card, just stick with your plan and make sure to monitor your email or mail for your last statement. You don’t want to miss the last payment on your card and put a black mark on your credit report just because you thought the card was closed. A credit card with a positive payment history, even though it’s closed, can still help your credit score. But missing a payment will definitely hurt it, and if you have a business credit card, it could impact not just your personal credit, but your business credit scores as well. You can find a full explainer on canceling credit cards right here.

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The post How to Fix the Big Things You Hate About Your Credit Cards appeared first on Credit.com.

Will a Trump Presidency Lead to More Predatory Lending?

Bank regulations, consumer protections and net neutrality all up for debate as the Trump administration takes the reins.

Free markets mean corporations and consumers are engaged in a constant arm-wrestling match over prices and rules governing marketplaces. When President-elect Donald Trump takes office, will the rules of this engagement change substantially?

Already, Republicans are fighting hard to dismantle, or at least disempower, the nation’s newest federal consumer protection agency, the Consumer Financial Protection Bureau (CFPB). But that’s just one of several steps being weighed that could dramatically impact the balance of power between consumers and corporations during the next several years. Trump and his appointees will soon be dealing with everything from net neutrality to robocalls to late fees. Like so much with Trump, it’s hard to know if he stands with traditional Republican positions on these issues, or if he has his own ideas. But clearly, the future of issues ranging from payday-loan regulation and binding arbitration rules to debit card swipe fees are at stake.

Consumer Protections On the Line

The power of federal consumer protection agencies like the Federal Trade Commission (FTC), which fields things like consumer identity theft complaints, tends to ebb and flow based on which political party holds power in Washington, and on the state of the American economy. The economic collapse last decade, combined with the rise of Democratic power in Washington, led to a host of steps taken to reign in what supporters say were abusive practices that hurt consumers, particularly by the financial industry. Financial reform saw passage of the CARD Act, which banned several credit card issuer practices that consumers found frustrating, such as double-cycle billing or seemingly random late fees and interest-rate hikes.

More importantly, the Obama years also saw creation of the first new federal consumer protection office in decades. As Trump takes office on Friday, a battle royale has already developed between consumer groups and conservatives who want to gut America’s youngest consumer-oriented agency. The war of words escalated last week, with opponents of the bureau calling for Trump to immediately remove bureau chief Richard Cordray, calling him “King Richard,” while supporters have promised they have “gone to Defcon One” to protect it.

The CFPB is the brainchild of Elizabeth Warren — then a bankruptcy expert, now a Democratic Senator from Massachusetts. The bureau was designed to pick up where other banking regulatory agencies, like the Office of the Comptroller of the Currency (OCC), left off. Bank regulators like the OCC have the difficult job of serving two masters — both the safety and soundness of the banking industry and the fairness with which consumers are treated. Critics said the abuses apparent during the housing bubble, such as unclear mortgage documents, demonstrated that regulators sided too often with banks and neglected consumer protection. So the CFPB was designed as a consumer-first agency. It was also designed to enjoy independence from industry pressure — it is not subject to Congressional purse string requirements, and its director not subject to removal for political reasons. At least, that was the intention of Warren and Democrats who wrote the legislation creating the CFPB.

A lawsuit that went in the favor of CFPB opponents last fall has, at least for now, paved the way for removal of CFPB director Cordray. The bureau and its supporters plan to appeal the ruling, but Republicans aren’t waiting around for that. They are urging Trump to remove Cordray as soon as he takes office.

“It’s time to fire King Richard,” Senate Banking Committee member Ben Sasse, R-Nebraska, wrote in a January 9 letter to Trump. “Underneath the CFPB’s Orwellian acronym is an attack on the American idea that the people who write our laws are accountable to the American people. President-elect Trump has the authority to remove Mr. Cordray and that’s exactly what the American people deserve.”

Bureau opponents say the CFPB should operate more like the FTC, with a slate of politically-appointed commissioners running things.

Last week, the Trump administration signaled it was leaning toward removing Cordray and reigning in CFPB power by revealing it had interviewed retired Texas Republican Congressman Randy Neugebauer as a potential CFPB chief. In Congress, Neugebauer was a leading CFPB critic, calling its efforts to regulate payday loans “paternalistic erosion of consumer product choices.”

Meanwhile, Rep. Jeb Hensarling, R-Texas, indicated he will move immediately to pass legislation he proposed last term named the Financial Choice Act, which is largely designed to roll back provisions of the Dodd-Frank Financial reform bill. It would eliminate the Volcker Rule, designed to prevent banks from taking some kinds of risks with their own money; it would also remove the Durbin Amendment that limited fees on debit card transactions.

“We were told [Dodd Frank] would lift our economy, but instead we are stuck in the slowest, weakest, most tepid recovery in the history of the Republic,” Hensarling said while supporting the bill last fall.

Bureau supporters are fighting back. Warren held a conference call on January 13 with 3,000 consumer advocates where she rang the alarm about the future of the CFPB and financial reform.

“It’s time to send a message to big banks, payday loan lobbyists and their Republican friends in Congress: The American people are watching,” Warren said, according to a press release from Americans for Financial Reform, an advocacy group. ”We’re going to fight back against any efforts to gut financial reform and to allow big banks and shady financial institutions to once again cheat consumers and put our economy at risk.”

Consumer advocacy groups universally support the CFPB, which says it has returned $12 billion to 27 million wronged consumers since its inception. One group held a “One of 17 Million” event in Washington, D.C. earlier this month.

“We’ve gone to DefCon One on protecting the CFPB because the predatory lending industry and the big Wall Street banks are all demanding the President-elect illegally fire the extraordinary CFPB director Richard Cordray and replace him with one of several industry henchmen who will help Congress eviscerate the successful bureau,” Ed Mierzwinski, program director at the Public Interest Research Group, an advocacy organization, said. “But how do you fire an effective official who has protected consumers and families from financial predators exactly as Congress asked him to do? You ignore the law and you ignore the voters’ demand for an unrigged financial system. We hope Mr. Trump has better judgment than that.”

Some Consumer-Friendly Officials Departing D.C.

Already, some noted consumer-friendly officials have started to leave Washington.

At the FTC, Chairwoman Edith Ramirez announced she would resign on Friday. Ramirez focused on emerging internet of things technologies during her six years at the FTC.

“Ramirez cast a spotlight on emerging privacy issues, involving ‘smart TV’s,’ cross-device tracking and other technologies,” the Center for Democracy and Technology said, praising Ramirez’s time at the agency. “Through a series of cutting-edge cases — Snapchat, D-Link, inMobi and Turn, for example — the commission made it clear that tech companies that deceived consumers or failed to protect their security would be punished and publicly shamed.”

In addition to consumer issues like privacy, the FTC’s main charge is to enforce antitrust law. During his candidacy, Trump signaled a break with traditional Republicans over anti-trust law, suggesting, for example, that he would have blocked the Time Warner-AT&T merger. But Trump picked former FTC commissioner Joshua D. Wright to run his FTC transition team. Wright, a traditional conservative who, in an op-ed penned days after Trump’s election victory, criticized “anti-merger mania.” He said evidence shows big mergers often help consumers, and cautioned against a return to the days of trust-busting.

Wright is widely believed to be the leading candidate to head the commission after Trump takes office.

The Trump transition team did not immediately respond to Credit.com’s request for comment.

So Long Net Neutrality?

Even bigger changes might be coming to the Federal Communications Commission (FCC), however Multichannel.com reported this weekend that Trump’s picks to head that agency — several veterans of the conservative American Enterprise Institute — have plans to eliminate the FCC’s consumer protection tasks altogether. Currently, the FCC helps consumers in dispute with telecommunications providers and sets policies, like net neutrality.

FCC Chairman Tom Wheeler, who led the charge for net neutrality and new privacy rules for broadband consumers, will vacate his spot on Inauguration Day. While Trump picked FCC transition team members with anti-net neutrality track records — one a Verizon economist, the other a former Sprint lobbyist — Wheeler said in a speech last week that overturning the commission’s rule is not a foregone conclusion. Changes would require a new rule making process, he said — and that would be a mistake.

“Tampering with the rules means taking away protections that consumers in the online world enjoy today,” Wheeler said in his speech.

While Trump transition team members Ajit Pai and Michael O’Rielly advocated for a streamlined FCC before, backtracking on issues like net neutrality seems less a sure thing after Trump added Republic Wireless co-founder David Morken to that transition team. As head of a small telecom company, Morken has said he is against changes that help entrenched competitors, and has a populist bent to his rhetoric.

“Traditional Republican telecom policy has favored incumbents who are heavily engaged in regulatory capture over innovators like us,” Morken told The Wall Street Journal in December.

His lack of opposition to net neutrality, in addition to that open challenge of established Republican thinking, has led some to think he might provide balance on a Trump FCC. But as with the many critical consumer issues the Trump administration will take on in the coming months, only time will tell whether populist positions or conservative leadership will win that arm-wrestling match — and how consumers will fare in their own wrestling match with corporations.

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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5 Ways the CFPB is Changing the Rules on Prepaid Debit Cards

happy girl at ATMThe Consumer Financial Protection Bureau on Wednesday finalized long-awaited regulations that will add federal protections for millions of Americans who use prepaid debit accounts. The agency’s new rule has been more than four years in the making and will equip prepaid card accounts with federal protections similar to those of credit card accounts. The rule officially goes into effect in October 2017.

Consumer advocate groups largely supported the agency’s rules. “The CFPB’s rule on prepaid cards is a big win for consumers,” said Nick Bourke, director of consumer finance for the Pew Charitable Trusts. “First and foremost, it keeps the cards free from overdraft penalties — which aligns with consumers’ preferences. Research shows many consumers turn to prepaid cards to control spending and to avoid overdraft fees.”

However, the Network Branded Prepaid Card Association criticized the final rule, saying it will create onerous restrictions on prepaid debit card issuers and ultimately lead to fewer options for consumers.

“Instead of fostering financial innovation and inclusion, the CFPB’s rule will ultimately limit access to an essential mainstream consumer product that helps millions of Americans participate in the digital economy, affordably manage funds, and safely hold money,” Brad Fauss, NBPCA president and CEO said in a statement.

According to a report from Pew Charitable Trusts, use of general purpose reloadable prepaid accounts among U.S. adults jumped more than 50% between 2012 and 2014. The accounts are widely used as budgeting tool or an alternative to traditional bank accounts for people who have poor banking histories. But they can also be used to issue federal benefits like Social Security, student loan refunds, tax refunds, and even paychecks.

5 ways the New Rule Will Affect Prepaid Account Customers:

Easy Access to Information

The final rule grants prepaid accounts similar protections to credit card accounts. It requires financial institutions to make account information such as account balances, transaction history, and charged fees, easily accessible and free to consumers. Consumers also will have access to the information over the phone, online, and in writing upon request, unless the institution issues periodic statements.

A Standardized Dispute Process

The new rule also means that financial institutions will have to cooperate with customers to fix errors such unauthorized or fraudulent charges in a timely manner. If you’ve registered your card and the financial institution can’t complete the investigation within 10 business days, it will have to credit the disputed amount to your account while it completes the investigation. Investigations are usually required to be completed within 45 days.

Limited Liability

Under the new rule, a customer’s losses are limited in the event that funds are stolen, similarly to debit accounts. So as long as you report the loss within two business days of finding out about it, your losses are limited to $50. If the institution is notified after two business days, then the loss is limited to $500. The rule limits liability for unauthorized charges and creates a way for consumers to get their money back as long as they notify the financial institution in a certain amount of time.

Know Before You Owe”

There’s a disclosure included in the new rule, coined “Know Before You Owe.” It requires institutions to give customers more information about the prepaid accounts available upfront, before someone elects to sign up to make comparison shopping easier.

The information has to be presented to you in two forms before you sign up: long and short. The short form would be a more concise overview of the account’s terms and fees that can fit on store packaging, while the long form would have more detailed list of fees and information. Card agreements also have to be publicly available, and posted on card issuers’ websites.  Institutions must also submit all of their agreements to the CFPB, which will post them in the future on a public site maintained by the bureau in the future.

Credit Protections

Some prepaid accounts can be paired with credit lines that provide funds for purchases if a customer doesn’t have sufficient funds in their prepaid account. The accounts are laden with hidden fees and considered a potential debt trap by some critics.

Prepaid companies now have to wait at least 30 days and make sure the consumer has the ability to pay back the debt before they offer a line of credit to a prepaid debit card user. The rule also requires prepaid companies to give consumers regular statements and at least 21 days after the statement is issued to make a payment before charging a late fee. Late fees have to be “reasonable and proportional” to the corresponding violation and can’t total more than 20% of the consumer’s credit limit during the first year the credit account is open.

The rule also puts a wall between the cardholder’s prepaid funds and their credit debt so that companies can no longer take funds from the prepaid account to repay the credit bill without the consumer’s consent.

Which Accounts Are Impacted by the New Rule?

The rule applies to general purpose reloadable cards as well as a growing number of electronic prepaid accounts. That includes mobile wallets such as Apple Pay or Google Wallet, person-to-person payment products like PayPal or Venmo, and other electronic prepaid accounts that can store funds. Other prepaid accounts like payroll cards, student financial aid disbursement cards, tax refund cards, and certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance and child support are included under the rule.

Until the rule goes into effect next fall, consumers should make sure they are informed of the financial institution’s policies regarding fees, errors, and possible fraud because how they will be handled will depend on the card, company, and circumstances.

The post 5 Ways the CFPB is Changing the Rules on Prepaid Debit Cards appeared first on MagnifyMoney.

Wells Fargo Execs to Give Back Some of Their Millions Following Fake Account Scandal

Wells-Fargo-execs

The Wells Fargo sales scandal will cost chairman and chief executive John Stumpf $41 million and former community banking supervisor Carrie Tolstedt $19 million, as per a decision made by the bank’s board announced on Tuesday. The money will come from the executives’ unvested equity awards through a clawback process.

For Stumpf, the $41 million is about 25% of the compensation he received during his 35 years at the bank, the Wall Street Journal said; he earned a total compensation of $19.3 million in 2015, according to an Equilar data analysis. Stumpf will also forego his salary during an independent internal investigation mandated by the bank’s board. He will not receive a bonus for 2016.

Carrie Tolstedt, who was head of community banking, has left the company ahead of her planned December retirement and will forfeit all of her outstanding unvested equity awards, valued at approximately $19 million, based on Tuesday’s closing share price. She also won’t receive a bonus for 2016 or be paid severance or receive any retirement enhancements in connection with her separation from the company, according to a statement from Wells Fargo. “She has also agreed that she will not exercise her outstanding options during the pendency of the investigation,” according to the statement.

Wells Fargo faced a $185 million penalty fine by the Consumer Financial Protection Bureau and a thrashing by the U.S. Senate Committee on Banking earlier this month over some two million accounts that were opened using fictitious or unauthorized information without customers’ consent. The actions were the result of a cross-selling incentive that gave employees bonuses if they met quotas. Former employees have claimed they were fired or demoted for not meeting the impossible quotas set by the bank, and have filed a $2.6 billion class action lawsuit. The bank fired 5,300 employees over the fraud but took no action against the supervising executives, which drew further criticism from the Senate Committee last week.

In Stumpf’s prepared testimony to the Senate, he said he was “deeply sorry” and takes full responsibility for “all unethical sales practices in our retail banking business, and I am fully committed to doing everything possible to fix this issue.” He said the fraudulent accounts were not done through an orchestrated effort by the company and employees were never directed to provide products and services that customers did not want or need.

The Independent Directors of the Board of Directors of Wells Fargo & Company have launched an independent investigation into the company’s retail banking sales practices and related matters, and a special committee of independent directors will lead the investigation, working with the board’s Human Resources committee and independent counsel. Stumpf has recused himself from all matters related to the Independent Directors’ investigation and deliberations.

“We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the Company’s business are conducted with integrity, transparency, and oversight,” Stephen Sanger, lead independent director, said in a press release. He noted, the bank may take other employee related actions “so there can be no repetition of similar conduct.”

This moment in history may produce repercussions: Earlier this month, regulators proposed tighter restrictions on how Wall Street bankers are paid.

Wells Fargo had not responded to requests for follow-up comment by press time.

Remember, it’s always a good idea in general to monitor your credit report for any unauthorized accounts in your name. You can pull your credit reports for free each year at AnnualCreditReport.com and get a free snapshot of your credit report, updated every two weeks, at Credit.com.

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LendUp to Refund $1.83 Million to Customers for Allegedly Falling Short of Payday Loan Promises

Lendup-refund

If you’ve gotten a loan from LendUp, you might be entitled to a refund. Today, the San Francisco-based online lender Flurish, Inc., doing business as LendUp, was ordered to pay $3.6 million in refunds and civil penalties by the Consumer Financial Protection Bureau for failing to deliver the promised benefits of its products.

The CFPB said LendUp did not give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed it would. The bureau has ordered the company to provide more than 50,000 consumers with approximately $1.83 million in refunds and pay a civil penalty of $1.8 million.

LendUp’s 50,000 consumers don’t need to take action to collect their $1.83 in refunds. LendUp is required to contact them individually in the coming months.

“LendUp pitched itself as a consumer-friendly, tech-savvy alternative to traditional payday loans, but it did not pay enough attention to the consumer financial laws,” said CFPB director Richard Cordray in a written statement.

According to the CFPB, despite billing itself as an opportunity to build credit, LendUp did not always report payments to credit bureaus. (That type of reporting is essential for people who want to build their credit —you can see where your credit stands by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your free credit report summary, updated every 14 days, on Credit.com).

LendUp also allegedly misled consumers by advertising across the country that they’d eventually have the ability move up the lending ladder to loans with more favorable terms, such as lower rates and longer repayment periods, though the more favorable loans were not available outside of California for most of the company’s existence. It also didn’t disclose the annual percentage rate of the loans, as required by law, thereby hiding the true cost of the loan, according to the CFPB, which attests LendUp also reversed consumer pricing without knowledge and inaccurately understated finance charges.

In addition to the fines and refunds, the company must stop misrepresenting the benefits of the loans, review all of its marketing materials so it doesn’t mislead consumers and must regularly test the annual percentage rate in its disclosures to verify that it is correct. The $1.8 million in fines will go to CFPB’s Civil Penalty Fund.

Through a statement issued on its website, LendUp said the problems mostly stemmed from its earlier startup stages. “These regulatory actions address legacy issues that mostly date back to our early days as a company, when we were a seed-stage startup with limited resources and as few as five employees. In those days we didn’t have a fully built-out compliance department. We should have,” according to the LendUp statement.

LendUp went on to say it has been working to provide refunds to all affected customers, and graduated more than 20,000 customers to more favorable loans. Its current compliance team (of 10) and separate in-house legal team (of six) now routinely weigh in when each new product is introduced, said the company’s statement.

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This For-Profit School Is Forgiving $23.5 Million in Student Loan Debt

A for-profit school that allegedly told students their loans would only cost $25 per month to repay must now forgive those loans, federal regulators announced Monday. The firm, publicly-traded Bridgepoint Education Inc., has agreed to discharge all outstanding private loans and refund some students after allegations that it engaged in unfair or deceptive practices, the Consumer Financial Protection Bureau announced Monday.

San Diego-based Bridgepoint currently has nearly 50,000 students, mostly enrolled online in schools it owns named Ashford University or the University of the Rockies. From 2009 to the present, the CFPB says students were encouraged to borrow money directly from the school to attend classes, and were told in some cases their loan payments would be as little as $25 per month.

“Bridgepoint deceived its students into taking out loans that cost more than advertised, and so we are ordering full relief of all loans made by the school,” said CFPB Director Richard Cordray. “Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space.”

The settlement requires Bridgepoint forgive $18.5 million in outstanding loans and refund more than $5 million in loan payments that students have already made. The loans cover students enrolled from 2009 to 2015. Bridgepoint will also pay an $8 million penalty.

The CFPB has been more aggressive in its focus on for-profit colleges lately. It sued ITT Tech’s parent in February; ITT Education Services announced it was shutting down last week after the Department of Education said it could no longer enroll students receiving federal aid.

The CFPB also sued Corinthian Colleges in 2014, eventually winning a $530 million default judgment against the firm.

The CFPB’s Bridgepoint announcement focuses specifically on the school’s sales tactics.

“The Bureau found that the school deceived its students about the total cost of the loans by telling students the wrong monthly repayment amount. As a result, students at Bridgepoint were deceived into taking out loans without knowing the true cost, and were obligated to make payments greater than what they were promised,” the agency said in a press release. “Specifically, the CFPB found that Bridgepoint told students that borrowers normally paid off loans made by the school with monthly payments of as little as $25, an amount that was not realistic.”

Bridgepoint pointed reporters to a statement about the consent order posted on its website. In it, the firm said the refunds and forgiveness impact 1,277 students. The statement notes that the CFPB identified “only one area of concern with the loan program,” and that the CFPB did not raise questions about the firm’s educational credibility. The firm says the associated loan programs have been discontinued.

“This agreement simply allows us to return our full and undivided focus to our students and their success. We believe in the high quality of education our institutions provide and we will continue helping students achieve their goals of a quality and affordable college education,” said Andrew Clark, president and chief executive officer of Bridgepoint Education, in the statement.

The CFPB has also ordered Bridgepoint to remove negative information about its loans from borrowers’ credit reports, and to create a new financial and disclosure tool that makes it easier for students to understand their obligations when they borrow to attend the school. Students will be required to use the tool before enrolling.

Remember, student loan debt — and any associated missed payments — can hurt your credit. You can see how your students loans may be affecting you by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores, updated every 14 days, for free on Credit.com.

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This For-Profit School Is Forgiving $23.5 Million in Student Loan Debt

A for-profit school that allegedly told students their loans would only cost $25 per month to repay must now forgive those loans, federal regulators announced Monday. The firm, publicly-traded Bridgepoint Education Inc., has agreed to discharge all outstanding private loans and refund some students after allegations that it engaged in unfair or deceptive practices, the Consumer Financial Protection Bureau announced Monday.

San Diego-based Bridgepoint currently has nearly 50,000 students, mostly enrolled online in schools it owns named Ashford University or the University of the Rockies. From 2009 to the present, the CFPB says students were encouraged to borrow money directly from the school to attend classes, and were told in some cases their loan payments would be as little as $25 per month.

“Bridgepoint deceived its students into taking out loans that cost more than advertised, and so we are ordering full relief of all loans made by the school,” said CFPB Director Richard Cordray. “Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space.”

The settlement requires Bridgepoint forgive $18.5 million in outstanding loans and refund more than $5 million in loan payments that students have already made. The loans cover students enrolled from 2009 to 2015. Bridgepoint will also pay an $8 million penalty.

The CFPB has been more aggressive in its focus on for-profit colleges lately. It sued ITT Tech’s parent in February; ITT Education Services announced it was shutting down last week after the Department of Education said it could no longer enroll students receiving federal aid.

The CFPB also sued Corinthian Colleges in 2014, eventually winning a $530 million default judgment against the firm.

The CFPB’s Bridgepoint announcement focuses specifically on the school’s sales tactics.

“The Bureau found that the school deceived its students about the total cost of the loans by telling students the wrong monthly repayment amount. As a result, students at Bridgepoint were deceived into taking out loans without knowing the true cost, and were obligated to make payments greater than what they were promised,” the agency said in a press release. “Specifically, the CFPB found that Bridgepoint told students that borrowers normally paid off loans made by the school with monthly payments of as little as $25, an amount that was not realistic.”

Bridgepoint pointed reporters to a statement about the consent order posted on its website. In it, the firm said the refunds and forgiveness impact 1,277 students. The statement notes that the CFPB identified “only one area of concern with the loan program,” and that the CFPB did not raise questions about the firm’s educational credibility. The firm says the associated loan programs have been discontinued.

“This agreement simply allows us to return our full and undivided focus to our students and their success. We believe in the high quality of education our institutions provide and we will continue helping students achieve their goals of a quality and affordable college education,” said Andrew Clark, president and chief executive officer of Bridgepoint Education, in the statement.

The CFPB has also ordered Bridgepoint to remove negative information about its loans from borrowers’ credit reports, and to create a new financial and disclosure tool that makes it easier for students to understand their obligations when they borrow to attend the school. Students will be required to use the tool before enrolling.

Remember, student loan debt — and any associated missed payments — can hurt your credit. You can see how your students loans may be affecting you by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores, updated every 14 days, for free on Credit.com.

Image: DeanDrobot

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Wells Fargo Fined $185 Million Over Fake Credit Card & Deposit Accounts

wellsfargo

Thousands of Wells Fargo bank employees seeking sales bonuses participated in a scheme that led to the opening of roughly 2 million unauthorized accounts, federal regulators said Thursday. For failing to monitor an incentive program that spun out of control, leading to “widespread” abuse of consumers’ information, Well Fargo must now pay the biggest-ever penalty levied by the Consumer Financial Protection Bureau (CFPB), the agency said.

At the root of the scheme was a program that gave bonuses to employees who convinced existing customers to give more of their business to Wells Fargo — cross-selling checking account customers on new credit cards, for example.

But back in 2011, Wells employees started opening accounts for consumers — and moving account-holders’ money into them — without their consent or knowledge.

“Thousands of bank employees found ways to game the system by secretly signing up existing clients for new services that were never requested,” CFPB Director Richard Cordray said. “They misused consumer names and personal information to create new checking and credit card accounts to inflate their sales figures to meet their sales targets and claim higher bonuses. Money that belonged to customers was used and moved around without their consent, and in some instances these activities generated new fees and costs.”

Wells workers went so far as to create email addresses that did not belong to their customers and use those new addresses to enroll people in unwanted online-banking services, the CFPB said.

According an analysis conducted by Wells, employees opened roughly 1.5 million deposit accounts, and another roughly 565,000 credit cards, that may not have been authorized by consumers, the CFPB said. Some consumers ended up paying overdraft fees, or facing other financial penalties, because of the unauthorized activity.

Wells has been ordered to pay a $100 million civil penalty, and to refund harmed consumers. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.

“Unchecked incentives can lead to serious consumer harm, and that is what happened here,” Cordray said. “Today’s action should serve notice to the entire industry. If the incentive compensation schemes or sales targets are implemented in ways that threaten harm to consumers and lead to violations of the law, then banks and other financial companies will be held accountable.”

In a statement, the bank said it had terminated managers and team members “who acted counter to our values.”

“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us,” the statement read. “Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.”

John Stumpf, CEO of Wells Fargo, also sent an email to employees today, which the firm made public.

“Our entire culture is centered on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs,” the email read. It told employees to report ethics violations on an anonymous “EthicsLine,” or to their managers or Human Resources adviser.

“As difficult as today’s news is, this is an opportunity to recommit ourselves to our customers, doing all that we can to put their interests first,” Stumpf wrote.

Customers can keep an eye out for unauthorized credit accounts by regularly checking their credit. You can so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your free credit report summary, updated every 14 days, on Credit.com.

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CFPB’s New Rules for Debt Collectors: The 5 Most Exciting Changes

family in debtThere’s good news for the 70 million Americans who are being pursued by debt collectors: The Consumer Financial Protection Bureau rolled out new plans to overhaul the debt collections industry.

The CFPB’s long-awaited plans to tackle the multi-billion-dollar business of debt collection were laid out in a proposal Thursday. The proposal would require debt collectors to gather “more and better information about the debt before they collect.”

“This is about bringing better accuracy and accountability to a market that desperately needs it,” said CFPB Director Richard Cordray.

Here are the 5 most remarkable changes in the CFPB’s new rules:

Collectors must know that they are collecting the right amount of debt from the right person.  Oftentimes, debt passes through the hands of so many debt buyers and sellers that by the time they reach a consumer, they could have lost important identifying information along the way. This proposed rule would put the onus on collectors to verify the debt they are pursuing before they begin contacting the consumer. Millions of consumers are pursued by collectors for debts they don’t actually owe, or for amounts of debt that are incorrect.

Collectors would only be able to contact consumers six times per week. As it stands, credit card companies allow collectors to call consumers up to 15 times per day.  The new proposed rules would limit all contact — phone, email, snail mail, etc. — to only six times per week.

No more zombie debt collections. The CFPB is proposing a rule that would force debt collectors to tell a consumer when they are contacting them about a debt that is too old to collect. As it stands, debts can only be collected for a certain number of years (this varies by state). But it’s almost impossible for a consumer to know when they no longer have a legal obligation to repay a debt. That makes it easy for collectors to pursue people for debts that are too old. The nastiest part about this tactic is that by enticing consumers to make even the smallest payment, they effectively restart the clock on that old debt, and the consumer is once again legally obligated to pay up. If this passes, this would be a major game changer in the debt collections industry.

Consumers could easily find out more information about their debts. The CFPB would have every debt collector include a “tear-off” sheet that consumers to fill out and return to them to dispute the debt. If they mail the dispute to a collector within 30 days, then the collector would have to send a detailed debt report and could no longer pursue the debt until that report is sent.

No more passing on unverified debts to other debt buyers. Debt is bought and sold at a rapid rate. Important information can easily be lost along the way, making it difficult for consumers to know if a debt actually belongs to them. The CFPB would stop debt collections agencies from selling debts that have not yet been verified.

 

Not everyone was cheering the CFPB’s new rules.

The National Consumer Law Center, a consumer legal advocacy group, is already calling on tougher rules than the CFPB lays out.

“Instead of simply requiring collectors to have full and accurate information, the CFPB proposal sets up a complicated and inadequate system that lets collectors rely on information that may be inaccurate,” said Margot Saunders, an attorney with the National Consumer Law Center.

The rules are also missing a key component, according to the NCLC: Stiffer penalties for bad actors.

“We are also disappointed that the proposal does nothing to increase penalties for abusive collectors,” said April Kuehnhoff, an NCLC attorney who specializes in debt collection.  “Stronger penalties are essential to stop especially abusive collectors from continuing business as usual.”

What’s next?

Settle in for the long haul. This list of proposed rules is just the first step in what could be a year-long (or more) process to implement these new rules. The CFPB has to send this proposal to a panel of industry experts who will no doubt want to weigh in and propose their own changes. You can make your voice heard by submitting a public comment through the CFPB’s website.

Have you been pursued by a debt collector for a debt you don’t owe? File a complaint with the CFPB.

The post CFPB’s New Rules for Debt Collectors: The 5 Most Exciting Changes appeared first on MagnifyMoney.

Watch Elizabeth Warren Grill a Former Regulator About the Financial Crisis

Elizabeth_Warren

Sen. Elizabeth Warren (D-Mass.) hasn’t shied away from take on high-ranking officials for their alleged roles in the financial crisis of 2008 during her tenure in office during the past three years.

The latest target of her ire? Leonard Chanin, a former senior regulator at the Federal Reserve during the George W. Bush administration.

During a Senate banking committee hearing on Tuesday, Warren let Chanin have it after he called data about the increases in mortgage foreclosure rates “anecdotal,” arguing the Fed had nothing concrete to act on to get ahead of the subsequent subprime mortgage crisis — a “failure,” Warren said, which had “devastating consequences” for families across the country.

Chanin, currently an attorney in the financial services practice group of Morrison & Foerster and a former director at the Consumer Financial Protection Bureau, had been asked by Senate Republicans to testify on the costs of current consumer finance regulations.

You can watch the rest of their hair-raising argument below.

Foreclosure rates in the U.S. have fallen in recent years, but families struggling to pay their mortgage could avoid losing their home by refinancing, negotiating with their current mortgage lender or seeking help from Department of Housing and Urban Development-approved counseling agencies. You can find more tips for saving your home from foreclosure here. You can also see how any missed mortgage payments may be affecting your credit by viewing your two free credit scores, updated each month, on Credit.com.

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Image: Ann Heisenfelt

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