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Debt Issues

October 10, 2017 by Todd Murphy

New Rules on Payday Loans – Lenders Must Determine Borrower Ability To Repay

cfpb time for changeLenders Must Determine If Consumers Have the Ability to Repay Payday Loans That Require All or Most of the Debt to be Paid Back at Once

“The CFPB’s new rule puts a stop to the payday loans debt traps that have plagued communities across the country,” said CFPB Director Richard Cordray. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”

Payday loans are typically for small-dollar amounts and are due in full by the borrower’s next paycheck, usually two or four weeks. They are expensive, with annual percentage rates of over 300 percent or even higher. As a condition of the loan, the borrower writes a post-dated check for the full balance, including fees, or allows the lender to electronically debit funds from their checking account. Single-payment auto title loans also have expensive charges and short terms usually of 30 days or less. But for these loans, borrowers are required to put up their car or truck title for collateral. Some lenders also offer longer-term loans of more than 45 days where the borrower makes a series of smaller payments before the remaining balance comes due. These longer-term loans – often referred to as balloon-payment loans – often require access to the borrower’s bank account or auto title.

These loans are heavily marketed to financially vulnerable consumers who often cannot afford to pay back the full balance when it is due. Faced with unaffordable payments, cash-strapped consumers must choose between defaulting, re-borrowing, or skipping other financial obligations like rent or basic living expenses such as buying food or obtaining medical care. Many borrowers end up repeatedly rolling over or refinancing their loans, each time racking up expensive new charges. More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter. And nearly one-in-four initial payday loans are re-borrowed nine times or more, with the borrower paying far more in fees than they received in credit. As with payday loans, the CFPB found that the vast majority of auto title loans are re-borrowed on their due date or shortly thereafter.

The cycle of taking on new debt to pay back old debt can turn a single, unaffordable loan into a long-term debt trap. The consequences of a debt trap can be severe. Even when the loan is repeatedly re-borrowed, many borrowers wind up in default and getting chased by a debt collector or having their car or truck seized by their lender. Lenders’ repeated attempts to debit payments can add significant penalties, as overdue borrowers get hit with insufficient funds fees and may even have their bank account closed.

Rule to Stop Debt Traps

The CFPB rule aims to stop debt traps by putting in place strong ability-to-repay protections. These protections apply to loans that require consumers to repay all or most of the debt at once. Under the new rule, lenders must conduct a “full-payment test” to determine upfront that borrowers can afford to repay their loans without re-borrowing. For certain short-term loans, lenders can skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually. The rule requires lenders to use credit reporting systems registered by the Bureau to report and obtain information on certain loans covered by the proposal. The rule allows less risky loan options, including certain loans typically offered by community banks and credit unions, to forgo the full-payment test. The new rule also includes a “debit attempt cutoff” for any short-term loan, balloon-payment loan, or longer-term loan with an annual percentage rate higher than 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. The specific protections under the rule include:

  • Full-payment test: Lenders are required to determine whether the borrower can afford the loan payments and still meet basic living expenses and major financial obligations. For payday and auto title loans that are due in one lump sum, full payment means being able to afford to pay the total loan amount, plus fees and finance charges within two weeks or a month. For longer-term loans with a balloon payment, full payment means being able to afford the payments in the month with the highest total payments on the loan. The rule also caps the number of loans that can be made in quick succession at three.
  • Principal-payoff option for certain short-term loans: Consumers may take out a short-term loan of up to $500 without the full-payment test if it is structured to allow the borrower to get out of debt more gradually. Under this option, consumers may take out one loan that meets the restrictions and pay it off in full. For those needing more time to repay, lenders may offer up to two extensions, but only if the borrower pays off at least one-third of the original principal each time. To prevent debt traps, these loans cannot be offered to borrowers with recent or outstanding short-term or balloon-payment loans. Further, lenders cannot make more than three such loans in quick succession, and they cannot make loans under this option if the consumer has already had more than six short-term loans or been in debt on short-term loans for more than 90 days over a rolling 12-month period. The principal-payoff option is not available for loans for which the lender takes an auto title as collateral.
  • Less risky loan options: Loans that pose less risk to consumers do not require the full-payment test or the principal-payoff option. This includes loans made by a lender who makes 2,500 or fewer covered short-term or balloon-payment loans per year and derives no more than 10 percent of its revenue from such loans. These are usually small personal loans made by community banks or credit unions to existing customers or members. In addition, the rule does not cover loans that generally meet the parameters of “payday alternative loans” authorized by the National Credit Union Administration. These are low-cost loans which cannot have a balloon payment with strict limitations on the number of loans that can be made over six months. The rule also excludes from coverage certain no-cost advances and advances of earned wages made under wage-advance programs offered by employers or their business partners.
  • Debit attempt cutoff: The rule also includes a debit attempt cutoff that applies to short-term loans, balloon-payment loans, and longer-term loans with an annual percentage rate over 36 percent that includes authorization for the lender to access the borrower’s checking or prepaid account. After two straight unsuccessful attempts, the lender cannot debit the account again unless the lender gets a new authorization from the borrower. The lender must give consumers written notice before making a debit attempt at an irregular interval or amount. These protections will give consumers a chance to dispute any unauthorized or erroneous debit attempts, and to arrange to cover unanticipated payments that are due. This should mean fewer consumers being debited for payments they did not authorize or anticipate, or charged multiplying fees for returned payments and insufficient funds.

The CFPB developed the payday rule over five years of research, outreach, and a review of more than one million comments on the proposed rule from payday borrowers, consumer advocates, faith leaders,  payday and auto title lenders, tribal leaders, state regulators and attorneys general, and others. The final rule does not apply ability-to-repay protections to all of the longer-term loans that would have been covered under the proposal. The CFPB is conducting further study to consider how the market for longer-term loans is evolving and the best ways to address concerns about existing and potential practices. The CFPB also made other changes in the rule in response to the comments received. These changes include adding the new provisions for the less risky options. The Bureau also streamlined components of the full-payment test and refined the approach to the principal-payoff option.

The rule takes effect 21 months after it is published in the Federal Register, although the provisions that allow for registration of information systems take effect earlier. All lenders who regularly extend credit are subject to the CFPB’s requirements for any loan they make that is covered by the rule. This includes banks, credit unions, nonbanks, and their service providers. Lenders are required to comply regardless of whether they operate online or out of storefronts and regardless of the types of state licenses they may hold. These protections are in addition to existing requirements under state or tribal law.

For more info on Payday loans see: https://toddmurphylaw.com/payday-loans-the-most-despicable-loans/

 

A factsheet summarizing the CFPB rule on payday loans is available at: http://files.consumerfinance.gov/f/documents/201710_cfpb_fact-sheet_payday-loans.pdf

 

Text of the CFPB rule on payday loans is available at:  http://files.consumerfinance.gov/f/documents/201710_cfpb_final-rule_payday-loans-rule.pdf

Filed Under: Bankruptcy as an Option, Bankruptcy FAQ, Debt Collection FAQ, Debt Issues Tagged With: Bankruptcy Lawyer, cfpb, New Jersey, payday loans

May 15, 2015 by Todd Murphy

Resources to help after bankruptcy

jumping-for-joyWhat you do after bankruptcy is as, or possibly more, important than the bankruptcy itself.  Bankruptcy may have gotten you out of debt or resolved a foreclosure but there are other things you should do after bankruptcy to get back on your feet like rebuilding your credit and perhaps resolve other issues in your life that may have gotten you into a tough financial situation.  Below are some resource sites you might find helpful.

 

Debt

Money Matters

The Federal Trade Commission’s Money Matters site contains advice and resources for those facing credit card debt.

www.ftc.gov/bcp/edu/microsites/moneymatters/dealing-with-debt.shtml

MyMoney.gov

MyMoney.gov is the U.S. government’s website dedicated to teaching all Americans the basics about financial education. MyMoney.gov provides links and resources regarding a wide range of financial issues, including managing debt and credit.

www.mymoney.gov

Federal Trade Commission

The FTC is the federal agency responsible for administering consumer protection laws. The FTC site offers consumers information about their rights with regard to debt collection and how to avoid scams related to debt and credit.

www.ftc.gov/bcp/menus/consumer/credit.shtm

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau was founded to improve financial products and services for consumers. Their site provides easy-to-understand information about credit cards, home loans, student loans and banking.

www.consumerfinance.gov

Federal Student Aid on the Web

Federal Student Aid is an office of the U.S. Department of Education. This site provides information about repayment options for federal student loan borrowers, including Income Based Repayment, forbearance and deferment.

studentaid.ed.gov

Internal Revenue Service

If you owe back taxes, it is a good idea to contact the IRS in order to discuss your options. The following links can help you locate your local IRS office or contact a Taxpayer Advocate. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. It helps taxpayers who are experiencing economic hardship; taxpayers who are seeking help in resolving problems with the IRS; and those who believe an IRS system or procedure is not working as it should.

www.irs.gov/localcontacts/index.html

U.S. Department of Housing and Urban Development

This U.S. Department of Housing and Urban Development site provides information about renter/homebuyer rights, housing assistance programs, and assistance with home improvements.

www.hud.gov

Federal Trade Commission Mortgage Publications

The Federal Trade Commission has published two resources that are available for free online with advice to homeowners:

Defaulting on Your Mortgage Has Costly Consequences and Mortgage Servicing:
Making Sure Your Payments Count:
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea17.pdf
Mortgage Servicing: Making Sure Your Payments Count:
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.pdf

Making Home Affordable

The Making Home Affordable program assists homeowners in financial distress.

www.makinghomeaffordable.gov

Consumer Financial Protection Bureau

If you need to discuss your mortgage payment options, the Consumer Financial Protection Bureau can help you connect with a HUD-certified housing counselor.

www.consumerfinance.gov/mortgagehelp

Federal Trade Commission Money Matters

The Money Matters site contains useful information about the options available to homeowners facing foreclosure.

www.ftc.gov/bcp/edu/microsites/moneymatters/your-home.shtml

Health

Insure Kids Now

InsureKidsNow.gov provides information about Medicaid and CHIP services for families who need health insurance coverage.

www.insurekidsnow.gov

U.S. Department of Health and Human Services

The U.S. Department of Health and Human Services maintains HealthCare.gov, where you can learn about insurance, government health programs, prevention and wellness, and how health care reforms affect you.

www.healthcare.gov

Medicare

Learn more about Medicare, the federal health insurance program for people 65 and over, and people of any age who are permanently disabled and cannot work.

www.medicare.gov

Medicaid

Medicaid is health coverage available to certain people and families who have limited income and resources, such as pregnant women, children under the age of 19, people 65 and over, people who are blind, people who are disabled, and people who need nursing home care.

www.medicaid.gov

Utilities

Energy Star

The Environmental Protection Agency’s Energy Star site provides information about how to save money by making energy-efficient choices.

www.energystar.gov

U.S. Department of Energy

The Energy Saver site provides information about how to cut electricity, gas and water costs at your home.

www.energysavers.gov

Transportation

U.S. Department of Energy

The U.S. Department of Energy’s Fuel Economy site offers advice about how to cut down on gas costs, find a fuel-efficient car, and calculate your MPG.

www.fueleconomy.gov

GasBuddy.com

This website provides up-to-date information about where to find the cheapest gas prices in your neighborhood.

www.gasbuddy.com

Shopping

Federal Trade Commission

The FTC site provides tips and hints about smart shopping and how to avoid fraud and scams.

www.ftc.gov

Consumer Action Handbook

This handbook, published by the Federal Citizen Information Center, can be ordered for free and provides advice about how to make the best purchases when shopping for a car, home accessory, etc. In addition, it provides information about where to file a consumer complaint.

www.consumeraction.gov

Consumer Reports Magazine

Consumers Union, an independent, non-profit organization that tests consumer products and reports on their characteristics to consumers, publishes Consumer Reports Magazine and maintains the consumerreports.org website. This magazine and website provide useful product information to potential buyers, including product prices, usability ratings, safety ratings, and product characteristics. Consumer Reports covers practically all products, from cars to sewing machines.

www.consumerreports.org

USA.gov

This site consolidates useful consumer information from a wide range of federal agencies. Find their tips for saving money here.

http://www.usa.gov/topics/consumer/smart-shopping.shtml

Child Care

Childcare.gov

This site provides useful information for parents about finding child care in your area, choosing the right child care, and dealing with the cost of child care.

www.childcare.gov

U.S. Department of Education

The Department of Education’s site can guide parents to educational and child care resources in their state.

www2.ed.gov/about/contacts/state/index.html

Internal Revenue Service

The following link provides useful information about the Child and Dependent Care Credit, which can help to defray the cost of child care for working parents.

www.irs.gov/newsroom/article/0,,id=106189,00.html

Smoking/Gambling/Drinking

National Institutes of Health

Cutting back on activities like smoking, drinking and gambling can save a great deal of money over time. NIH offers advice and resources regarding alcohol use, nicotine use, and excessive gambling.

http://www.nlm.nih.gov/medlineplus/alcoholism.html

http://www.nlm.nih.gov/medlineplus/smoking.html

http://www.nlm.nih.gov/medlineplus/compulsivegambling.html

12-Step Programs

12-Step Programs like Nicotine Anonymous, Alcoholics Anonymous, and Gamblers Anonymous provide support and guidance for those who wish to control these habits.

www.aa.org

www.nicotine-anonymous.org

www.gamblersanonymous.org

 

Filed Under: Bankruptcy FAQ, Debt Issues, Financial Healing

January 15, 2014 by Todd Murphy

Capitol One: Not In My Wallet

credit card fraud risk high in new jerseyA report published by NJPIRG says Capitol One is one of the worst credit cards for New Jersey according to consumer complaints.

The report from NJPIRG stated Consumers were most likely to complain about billing disputes (16 percent of complaints), followed by difficulties with APR or interest rates (10 percent) and trouble with identity theft, fraud, and embezzlement (7 percent).

Spokesman Peter Skopec says the report analyzed data from the Consumer Financial Protection Bureau, a federal agency that monitors complaints to ensure banks are not ripping off consumers.

“Something that’s really key is the CFPB should make sure to really aggressively publicize the database and also the resources that it has for consumers cause really the more people take advantage of those resources the more effective the CFPB is going to be and the more likely the banks are going to be to actually improve their practices and be more consumer friendly.”

Skopec says there is some good news, nearly 40 percent of complaints result in some tangible or monetary relief, nearly $800 million nationwide. According to the report Capital One got the most complaints of any bank statewide.

Samuel L. Jackson appears in the latest Capitol One credit card commercial.  Perhaps we should let him know that he should choose who he works for a little more carefully.  Get in touch with SLJ here:

Samuel L. Jackson @SamuelLJackson

http://samuelljackson.com

Filed Under: Collection Defense, Debt Issues, Featured Tagged With: Capitol One, Credit Card, Samuel L Jackson

January 15, 2014 by Todd Murphy

How To Protect Your Financial Information From Credit Card Hacks

TargetBy now many of you I’m sure have heard about the breach of credit card information by hackers who infiltrated the information data-bases of Target and Neiman Marcus (or Needless Markup as my wife likes to call them) and may be wondering just how to protect your financial information.

What is interesting about these data thefts is not so much that yet another one or two occurred but that these types of information breaches are happening regularly and many times the companies either don’t tell us about them or wait until a better time to tell us so we don’t stop shopping at a their stores.

For example, Stacey Vanek Smith of Market Place Business reported that Neiman Marcus knew about the data breach in mid-December but only announced it after the Holiday shopping season was over.  And Target didn’t tell the entire story until several days later and even then seemed to manage the information it did release.  Often such announcements are made on slow news days in order to minimize the impact.

Use of credit cards and debit cards is so common, we rarely use cash at all. So, what should you do to protect your date from these on-going breaches that are happening on a regular basis?  Pay with cash only?  Probably not.

How to protect your financial information.

You simply cannot control the data once you provide it to a retailer but what you can do is make your data un-useable if it is stolen.  Perhaps one good idea might be to regularly change your credit card numbers by calling your credit card provider and telling them you lost your card.  They will take immediate action to in-activate the old number and provide you with a new one right away.  At the same time, any charges that come on that card will not be charged to you since you reported the card as lost.

This can be a bit of an inconvenience but it will be effective.

Let me know if you have any good ideas to protect your financial information.

 

Filed Under: Collection Defense, Debt Issues, Featured, News Tagged With: Credit Cards, hackers, identity theft

August 21, 2013 by Todd Murphy

Fight Collection Abuse

The Fair Debt Collection Practices Act helps protect consumers and fight collection abuse.  New Jersey bankruptcy firm Todd Murphy Law can help protect you from questionable or harassing debt collection practices.

The Fair Debt Collection Practices Act (FDCPA) prohibits the debt collector from contacting a third party (someone who has information about you) if they know that you are represented by a lawyer.  If you do not have a bankruptcy lawyer, the debt collector can only contact third parties to locate you.  Your New Jersey bankruptcy lawyer will inform your debt collectors that he/she is representing you.

A debt collector must inform you in every communication they have with you that the communication is from a debt collector.  The debt collector is required to send you a dispute/verification invitation within five days of their first contact with you.  If you submit a dispute within 30 days, the debt collector must stop trying to collect until the debt is verified.

Telephone calls from a debt collector to you must only occur between 8:00am and 9:00pm.  They cannot call you at work if there is an employer policy against such types of calls.

A debt collector must not harass, oppress, or abuse a consumer.  This is not well defined in the law, however, and is left to the courts to decide.  If there is abuse, try to record abusive collection language when you hear it, and keep a record of the calls in writing what took place and how it made you feel.  The more proof of the abuse you have the better, as it can be difficult to convince a judge or jury that abuse took place.

Debt collectors are not permitted to use false or misleading information to collect a debt, and may not collect more than what is owed.

If a debt collector violates any part of the FDCPA, you may be able to recover actual damages, $1000 in statutory penalties, and attorney fees.

We’re here to help protect against collection abuse practices. If you’re abused by a collector, contact an attorney immediately.

Call Todd Murphy Law today for a free consultation.

Filed Under: Collection Defense, Debt Issues, Featured, Know your rights, Unscrupulous Collectors Tagged With: Abusive Lenders, debt collection

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