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Regulators Crack Down On Credit Repair Companies



Regulators are keeping a close eye on credit repair companies as evidenced by a pair of new lawsuits filed by the Illinois attorney general and a separate action brought by the Federal Trade Commission (FTC).

What happened

In Illinois, the attorney general filed a pair of lawsuits. The first alleged that a company purporting to offer credit repair services and its owner engaged in fraudulent and deceptive business practices.

The first action claims that, since at least 2014, defendant failed to register as a credit services organization, charged unlawful upfront fees, misrepresented the cost of its purported services to consumers, and then failed to perform the promised credit repair services or provide refunds to affected consumers, according to the complaint.

The defendants, say the AG, charged consumers between $1,000 and $2,200 for their alleged services, requiring full payment (up front or via installment payments) before they performed any work. But after pulling consumers’ credit reports, the defendants then failed, says the AG, “to achieve the results promised and [did] not improve consumers’ credit.”

In another complaint, the Illinois AG has sued both the company and key individuals on similar claims of deceptive credit repair services and collection of illegal upfront fees. Ads for the company stated, “TIRED OF BEING A SLAVE TO DEBT. Come get out of bondage with [the company]” and offered a list of services including “credit restoration, trade lines, debt settlement, bankruptcy, guaranteed funding, business start-up and grant writing.”

The AG claims that despite marketing such services, the defendants have never registered with the state as a credit services organization and failed to secure the required $100,000 surety bond.

In addition, the defendants operated as a debt collection agency, according to the AG, engaging in “harassing and threatening debt collection practices” such as calling consumers multiple times a week claiming that they owed money on delinquent loans and threatening wage garnishment, the attachment of liens, and the freezing of bank and credit card accounts.

Both of the complaints seek payment of full restitution to affected consumers, a court order declaring the contracts between the defendants and consumers unlawful and rescinded, a permanent injunction halting the defendants from engaging in the alleged deceptive acts and practices, and penalties of $50,000 per act under state law.

In the FTC case, the agency has now resolved a complaint filed in June 2019 against seven credit repair-related entities and two individuals, alleging violations of the FTC Act and the Telemarketing Sales Rule (TSR).

The defendants made false promises of substantially improving consumers’ credit scores, the agency asserted, claiming that they could remove all negative items and “hard” credit inquiries from consumers’ credit reports. The defendants also illegally charged upfront fees for their services, instructed consumers to mislead lenders and credit bureaus, and threatened consumers with lawsuits when they complained or disputed charges, according to the complaint.

To settle the charges, the defendants agreed to total monetary judgments of more than $13 million, largely suspended based on inability to pay, as well as a permanent ban on operating or promoting any credit repair service.

In addition, they are prohibited from misleading consumers about financial services (such as credit offerings or debt relief); using threats, intimidation, confessions of judgment and other unfair practices to prevent consumers from exercising their rights to dispute charges; and future violations of the FTC Act and the TSR.

“These companies promised to clean up people’s credit, but failed to deliver,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said in a statement.

To read the Illinois AG complaint, click here.

To read the second Illinois AG complaint, click here.

To read the FTC stipulated judgments, click here, here and here.

Why it matters

Credit repair services will continue to be an area closely scrutinized by both state and federal regulators. Those engaged in such services need to take care not to run afoul of licensing issues, but likewise need to ensure that they are providing true value to the consumers they have contracted to serve. Companies offering credit repair services are facing regulatory oversight at both the state and federal levels.

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Are Sallie Mae Student Loans Federal or Private?



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?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

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.

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Tips to do some fall cleaning on your finances



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.

RELATED: Financial lessons learned through the pandemic

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. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



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. 

For more finance tips, visit Moneymax.



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