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Report: Massive Uptick in Consumer Finance Complaints During Coronavirus Pandemic

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The role of the Consumer Financial Protection Bureau (CFPB) has come under scrutiny, but as of the time of this writing, it’s still a place for consumers to log complaints against financial institutions.

And during the coronavirus pandemic, the number of financial complaints filed in the CFPB’s database is surging according to a new analysis by LendEDU.

Massive unemployment and reduced business capacities brought on by the pandemic have triggered a recession and made it tough for everyday people to meet monthly financial obligations like mortgage payments.

Financial institutions have shown a willingness to be flexible with customers, but it appears this unprecedented situation has made a mess of the relationship between consumers, financial institutions, and credit bureaus…and consumers are suffering the most as a result.

LendEDU’s analysis saw a 44% year-over-year (YOY) increase in the number of consumer finance complaints from March 13, when President Trump declared a national emergency, to July 17.

There was also a 38% increase in complaints from March 13 to July 17 compared to the previous 127-day period ending on March 12, 2020.

Note: If you would like a raw file of any data found below, or if you would like to see if LendEDU has more data than what was included in this report, please email me at [email protected]

In 2020, 140,042 CFPB Complaints Were Filed From March 13 to July 17 Compared to 97,008 Filed Over Same Time Last Year

The CFPB consumer complaint database gives aggrieved consumers a portal to file complaints against specific financial institutions, who are then given notice of the complaint and a window to respond.

The first part of our analysis involved gathering the raw number of CFPB complaints filed from March 13, 2020, to July 17, 2020, a 127-day period. We also tallied complaints filed from March 13, 2019, to July 17, 2020, to find YOY differences, and from November 7, 2019, to March 12, 2020, to find differences from the previous 127-day period.

While both the YOY and 127-day differences jump out at you right away, the percent increases in the number of complaints really exemplify just how many consumers are dealing with financial mishaps during the coronavirus pandemic.

Where Have the Increases Taken Place?

For both the YOY and prior 127-day periods, there were notable percent increases in the number of CFPB complaints in the “credit card or prepaid card,” “credit reporting, credit repair services, or other personal consumer reports,” and “money transfer, virtual currency, or money service” categories.

Biggest Riser: Credit-Related Complaints

There was an 84% YOY increase in the number of “credit reporting, credit repair services, or other personal consumer reports” complaints, and there may be a good explanation for that.

As the coronavirus pandemic constricted budgets and depleted savings accounts, many consumers began finding it difficult to meet monthly payments. An earlier LendEDU survey found 54% of Americans were worried about making their credit card payments due to the pandemic, while 57% had the same concern over their mortgage payments.

Because of this, many financial institutions were flexible with borrowers and agreed to things like a reduced minimum payment or even a deferment period.

However, it appears that many of these agreements were never really confirmed or finalized because many consumers saw their credit scores negatively impacted for missed or insufficient payments.

Adem Selita, co-founder of The Debt Relief Company in Manhattan, saw this with many of his clients:

We have had numerous clients with erroneous markings on their credit report and negatively impacted credit scores due to the pandemic and the relief programs set in place by many banking institutions and credit card companies. I would say this is most likely occurring with about 20% to 25% of all credit reports we’ve viewed in the month of June.

Most of our clients or prospective clients have proactively called their credit card companies to let them know they will not be able to make payments and requested deferment and they were still marked as delinquent to the credit bureaus. Although, there have been instances when clients haven’t actively reached out and assumed they would be reported as current due to new federal guidelines, most of the errors in reporting actually come from instances in which the creditor was made aware of hardship and deferment.

Adem Selita, co-founder of The Debt Relief Company

In addition to this recurring credit reporting issue, Selita has been seeing something else with his clients that is resulting in damaged credit health.

Many consumers have seen their limit cut down to the utilized amount of credit. We’ve had a client with a $5,382 balance (prior to the pandemic the credit limit was $10,000), and as of June, the credit limit was slashed to $5,450. Essentially, this put the individual at a near 100% utilization on that particular line of credit and significantly decreased their total credit availability, so the hit to their credit score was two-fold.

This particular individual has never missed a payment and did not actually have to put any payments into deferral during the pandemic.

Adem Selita, co-founder of The Debt Relief Company

Selita went on to explain how another client had three separate credit card companies place his respective accounts in deferral, only to find that one marked his account 30 days late and the other two marked 60 days late.

Money Transfer Scams

There was also a 77% YOY increase in complaints categorized as “money transfer, virtual currency, or money service,” and Selita has had recent client experiences that could help explain this trend as well.

We have noticed a serious uptick in customers complaining about phishing scams related to Venmo & Zelle, fake text messages from banks, and calls from individuals trying to collect on debt they do not actually owe, etc.

Adem Selita, co-founder of The Debt Relief Company

Student Loan Complaints Drop

Interestingly, there was a substantial 41% YOY decrease in the number of student loan complaints, which may be due to the Department of Education placing all federal student loans in pandemic forbearance until September 30, 2020.

With no payments required and no student loan interest accruing until that date, borrowers may have put their student loan debt on the back burner.

No Matter the Product, Credit Report Issues Consistently Increased

For starters, it was no surprise to see many of the largest percent increases pertained to credit report issues. For example, there was a 168% YOY increase for the issue “problem with a credit reporting company’s investigation into an existing problem” under the sub-product “general-purpose credit card or charge card.”

There was a 109% YOY increase for the issue “incorrect information on your report” under the sub-product “credit reporting.” And even with many student loan issues experiencing a YOY decrease in complaints, the issue “problem with a credit reporting company’s investigation into an existing problem” under the sub-product “federal student loan servicing” still saw a 104% YOY increase.

From this data and the data from the first section, the biggest consumer finance problems since the beginning of the coronavirus pandemic have pertained to credit report issues. Specifically, a lack of chemistry between consumers, financial institutions, and the credit bureaus to properly manage the added deferments and adjusted payment plans.

Problems With CARES Act Debit Cards?

One particularly noteworthy trend that surfaced after taking a more granular look at the complaint data was the massive 506% YOY increase in complaints regarding the sub-product “government benefit card.”

Moreover, there was a 1790% YOY increase in complaints around the issue “problem getting a card or closing an account” under the aforementioned sub-product.

Why might this be?

As part of the massive government stimulus package in response to the coronavirus, adult Americans making less than $99,000 received a one-time government payment of up to $1,200. Some folks received this money via check or direct deposit, while others have received debit cards.

It’s been widely reported that the distribution of these debit cards has been a mess as some consumers can’t use the cards because the wrong name is printed, while others are mistaking the inconspicuous packaging the card comes in as junk mail and tossing or shredding their one-time payment.

Huge Increases Across-the-Board For Issues Related to “Money Transfer” Product

When it came to issues related to the product “money transfer, virtual currency, or money service,” there were consistently massive YOY increases.

For example, there was a 3067% YOY increase for the issue “problem adding money” under the sub-product “mobile or digital wallet.” There was a 900% YOY increase for the issue “confusing or misleading disclosures” under the sub-product “virtual currency,” and a 777% YOY increase for the issue “other service problem” under that same sub-product.

There was also a 150% YOY increase for the issue “fraud or scam” under the sub-product “check cashing service.”

As reported, the coronavirus pandemic has brought with it a number of phishing scams related to money transfers, in addition to fraudulent texts and calls from scammers impersonating banks trying to collect on debts.

Methodology

All data that can be found within this report derives from the Consumer Financial Protection Bureau’s (CFPB) consumer complaint database, which can be accessed here. The data for this report was pulled from that database on July 17, 2020.

Three separate date ranges were used when pulling the data, including from March 13, 2019, to July 17, 2019; November 7, 2019, to March 12, 2020; and March 13, 2020, to July 17, 2020. The total number of complaints in any of those date ranges might be different if the data was pulled today because the CFPB backdates complaints and adds them to the date ranges after the fact.

LendEDU did not make any edits or corrections to the CFPB database and reported it as is. For example, if a consumer mistakenly filed a complaint under the wrong sub-product, we did not correct this mistake as there was no way of verifying its accuracy. 

All complaints that are filed with the CFPB are sent to the financial institution that is named in the complaint. That institution is then given a period of time to respond to the complaint.

The percent increase calculations were completed by LendEDU with the numbers provided by the CFPB, while everything else is reported as it was pulled from the CFPB. For the final two tables, only the complaint categories that experienced the largest percent increases or decreases for both time periods analyzed were included in the tables.

This article, with additional date tables, was originally published in the LendEDU blog.

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Are Sallie Mae Student Loans Federal or Private?

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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

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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

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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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