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Valley News – Consumer Confidential: In credit-repair crackdown, CFPB remembers its job is to protect consumers

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The Consumer Financial Protection Bureau, under the Trump administration, has been a consumer watchdog in name only.

So it’s news that the bureau is once again doing its job.

The CFPB filed a lawsuit last week against a pair of so-called credit-repair firms, alleging they used deceptive tactics to get consumers to sign up for their services. The companies also charged illegal fees, the suit says.

There are a few different things going on here that are interesting.

First, there’s the regulatory crackdown on an industry that preys on people in financial distress with claims that bad credit scores can be “repaired” with a little professional help. This is something consumers need to be very careful about.

Yes, inaccurate credit reports can be cleaned up. But, no, it’s not like anyone can wave a magic wand and make a legitimately bad credit score suddenly sparkle.

“A lot of these companies imply they can do more than they can,” said Linda Sherry, a spokeswoman for the advocacy group Consumer Action. “In most cases, that is absolutely impossible.”

Moreover, you don’t need to pay anyone to address credit-report errors. That’s something you can do yourself, for free. More on that below.

Anytime authorities lower the boom on credit-repair firms that allegedly cross the line into predatory practices, that’s a good thing. Yet that raises the question: Why is the CFPB stepping up?

Rather, why is this CFPB stepping up?

It’s a question that shouldn’t have to be asked, but the bureau’s recent history makes it relevant.

Under President Trump’s appointees to run the watchdog agency — first Mick Mulvaney and now Kathy Kraninger — the CFPB has been decidedly lax in serving as consumers’ Avengers.

Kraninger recently said she would roll back Obama-era rules for payday lenders.

She also said she’s considering cutting off public access to the bureau’s searchable complaint database. The U.S. PIRG Education Fund said in a report last week that a record 257,000 complaints were posted in 2018.

Also last week, the CFPB unveiled a proposed rule change that would allow debt collectors to text and email people.

A recent study by the Consumer Federation of America found that the bureau’s enforcement activity has plunged by 80 percent from 2015, when the CFPB was at the height of its powers. Average compensation to consumers is down by 96% per case.

So what should we make of the bureau’s lawsuit against Salt Lake City-based Lexington Law and CreditRepair.com?

The companies, their owners and various affiliates are accused of tricking people into signing up for their services and violating telemarketing laws by collecting fees from clients before producing results.

The suit says the companies charged clients up to $14.99 up front to begin the credit repair process, followed by monthly fees of as much as $129.95.

The companies “continue to charge monthly fees until consumers affirmatively cancel their Lexington Law or CreditRepair.com contracts,” the suit says.

It seeks compensation for people who did business with the firms, plus unspecified damages.

It often takes years to investigate and bring a case such as this, so it’s likely the probe of Lexington Law and CreditRepair.com began before Trump took office. Nevertheless, it’s Trump’s CFPB filing the lawsuit, so props for that.

I asked the bureau about the timing of the lawsuit, and what message is being sent to the credit repair industry and consumers. A spokeswoman declined to respond.

Eric Kamerath, a Salt Like City lawyer acting as spokesman for Lexington Law and CreditRepair.com, told me the companies are “a bit perplexed” by the CFPB’s action.

“In a system that already is weighted heavily against the consumer in favor of opportunistic debt collectors and opaque processes, why would the Consumer Financial Protection Bureau choose to prevent consumers from getting professional help?” he asked.

Kamerath said the firms deny using deceptive practices and have been cooperating with the bureau for more than four years. Why the CFPB is now going to court, he said, “is a mystery to us.”

Consumer advocates were equally baffled — not by the idea of the bureau enforcing the law but by a resurgent interest in consumer protection under current leadership.

“That’s a fair question,” said Andrew Pizor, a staff attorney with the National Consumer Law Center.

He speculated that the CFPB may be targeting credit repair firms because “there’s less industry pressure for the bureau to back off from companies that are scammier.”

Pizor also noted that “there are still people at the CFPB who have been there for a while and who still care about the mission.”

Sherry at Consumer Action speculated that the agency’s top brass felt some sort of gesture was necessary to counter months of bad press about how industry-friendly the CFPB has become.

“My guess is they want to show they’re doing something for consumers,” she said. “But rather than go after some powerful company like Wells Fargo, they’re only going after bottom feeders.”

Whatever the reason, most credit repair firms could stand more scrutiny.

Their pitch typically is to suggest — or outright claim — that someone with a low credit score can bring in hired guns to clean things up and improve their financial standing.

As I noted earlier, there are indeed ways to remove inaccurate or erroneous information from credit files, but nobody can erase the negative effects of unpaid bills, big debts or a bankruptcy.

Improving a low credit score requires time and effort. It means demonstrating for potential creditors that you’re a safe bet. One way to do that is to apply for a new credit card and pay all your bills on time.

You also can do for free what the credit-repair firms do to deal with any mistakes in your file. First, go to AnnualCreditReport.com to order a free copy of your file from each of the major credit bureaus — Experian, Equifax and TransUnion.

If you see anything amiss — debts that aren’t yours, for example — contact the credit bureau in writing and request a correction. The Federal Trade Commission provides a sample letter on its website to get you started.

By law, the credit bureaus must investigate any disputed info. If they can’t remedy the matter themselves, they will contact the creditor to confirm the obligation.

The credit bureau must inform you in writing about the results of its investigation and send you another free copy of your file showing that any mistakes have been addressed.

Even if the matter remains unresolved, you can request the fact that you disputed the obligation to be included in your file for other creditors to see.

“The whole credit-repair industry is a waste of money,” said Pizor at the National Consumer Law Center. “You’re paying for something you can do yourself.”

The CFPB is on the right track holding such companies accountable.

But nailing a couple of accused bottom feeders doesn’t clean the pond.

David Lazarus, a Los Angeles Times columnist, writes on consumer issues. He can be reached at david.lazarus@latimes.com.



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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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