Vulnerable Australians may soon have better protection against so-called ‘debt vultures’ after other big four banks hinted they may follow NAB’s lead and abandon working with them.
NAB last week announced a crackdown on unlicensed fee-charging debt management providers (DMPs) that coincides with a rise in the number of customers accessing hardship measures, including loan deferrals.
According to NAB, 98,189 home loan customers and 39,528 businesses had deferred loans through the pandemic – with up to 20 per cent now resuming payments.
“As more Australians seek help it is important that we no longer deal with unlicensed, fee-charging debt management providers,” NAB group executive Rachel Slade said in a statement last week.
Unlicensed DMPs charge upfront fees to customers in financial strife on the understanding they can help negotiate payment plans, restructure debts and repair their credit rating.
Many do not hold a financial services licence or credit license issued by corporate regulator ASIC, despite appearing to provide such services.
However, similar services can be accessed through free, licensed financial counselling services, including the National Debt Helpline.
A NAB spokesperson on Friday confirmed to The New Daily that any new arrangements from August 17 would be subject to the crackdown.
But those who have already signed a contract with an unlicensed DMP could still seek an exit.
They may soon be joined by Commonwealth Bank, after a spokesperson confirmed to The New Daily it is reassessing how it engages with unlicensed DMPs.
“CBA is reviewing its relationship with credit repair and debt management firms,” he said on Friday.
“We are taking steps to terminate arrangements with firms we reasonably believe do not act in the best interests of our customers.”
‘Debt vultures’ prey on vulnerable Australians in debt
Melbourne woman Anger Ageur knows all too well about the predatory nature of unlicensed DMPs.
After being stood down from her job because of a work-related injury, she built up $5000 in mortgage arrears, before receiving a letter from a firm called J Daniels & Associates telling her she would soon be taken to court by ANZ (her lender).
However, she had not been contacted regarding any legal proceedings.
“I really didn’t give the letter any attention,” Ms Ageur told The New Daily.
“But less than five days later, a man came to my house and served the same letter to me directly – he told me he had been waiting there for two hours, wanted to help me through my problems, and being vulnerable at the time, it sounded too good to be true.”
Ms Ageur said after getting confirmation they would stall the legal pursuit, she signed online paperwork (with difficulty) – and that’s when the problems started.
“I went to Good Shepherd and the financial advisor told me to see a lawyer, and when I mentioned J Daniels’ name, he told me to get a copy of the contract, as they’re not a law firm,” Ms Ageur said.
“On the phone they said the first monthly payments would be $240, which was affordable to me, but the contract said they would be $1004.”
After receiving support through community lawyers, she sold her property – and a month out from settlement, her conveyancer told her there was a $7000 caveat.
“When we looked to find the source, we found it actually came from J Daniels, and they wouldn’t take it off – and the sale wouldn’t go ahead – unless we paid them that money,” Ms Ageur said.
Stronger regulation urged amid pandemic crisis
NAB’s move comes two years after a parliamentary economics enquiry found unlicensed DMPs rarely benefit a customer’s financial standing, urging the federal government to introduce a licensing system.
An ANZ spokesperson declined to comment directly on whether the bank would alter its stance on engaging with unlicensed DMPs.
However, it is understood the bank operates with such providers on a case-by-case basis, and any firms that ring significant alarm bells are escalated up to senior management for potential exclusion.
Consumer Action Law Centre senior policy officer Cat Newton told The New Daily that banks and governments must work together to introduce industry-wide regulation that diminishes the influence of ‘debt vultures’.
“With very high and hidden fees, poor-quality advice, and no requirement to meet even basic professional standards, too often these unregulated, fee-driven companies can’t be trusted to help,” Ms Newton said.
“With growing financial difficulty due to COVID-19, business will be booming for debt vultures unless the other banks, and the Federal Government, act quickly.”
Ms Ageur said she hoped banks would follow NAB to quash “sneaky” unlicensed DMPs.
“They’re fishing for vulnerable people and it’s fraud,” Ms Ageur said.
“This is stuff you would expect to happen where I’ve come from in Africa, the Middle East, but not in Australia, and that’s what p***ed me off more.”
When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.
However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.
What is Sallie Mae?
Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.
In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.
However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.
In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).
At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.
What is the difference between private and federal student loans?
With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.
On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.
Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.
As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.
Are Sallie Mae loans better than federal student loans?
In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.
However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.
If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.
With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.
The bottom line
Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.
Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.
PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have.
1. Analyze Your Finances Quarterly or Biannually
You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.
With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.
The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.
4. Savings and Retirement Accounts
The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.
A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies.
Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan.
Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito.