Managing and Understanding Debt

This living topic covers the various aspects of debt management, including the challenges and strategies of dealing with different types of debt such as credit card debt, student loans, and medical bills. It highlights the stress and financial burden debt can cause, the illegal practices by some debt collectors and companies, and the legal protections available to consumers. The topic also provides insights into debt settlement options, federal and state interventions to protect consumers, and practical advice for managing and reducing debt. Additionally, it discusses the implications of national debt on individual finances and the economy, and includes personal stories and expert advice to help consumers navigate their financial challenges.

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ACRO Services customers getting $5 million in refunds

The Federal Trade Commission sued the "debt relief" company

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The Federal Trade Commission (FTC) is sending over $5 million in refunds to people who were affected by a deceptive credit card debt relief scam run by ACRO Services.

The company, which also used names like American Consumer Rights Organization and Tri Star Consumer Group, falsely promised to reduce or eliminate consumers' credit card debt in 12 to 18 months. They charged illegal upfront fees and monthly fees for services like credit monitoring.

The company and its owners ...

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How to deal with an aggressive debt collector

Consumers are taking on an increasing amount of debt, and in some cases it's more than they can handle. The total consumer debt balance increased to $16.38 trillion in 2022, up from $15.31 trillion in 2021, according to credit reporting company Experian.

And as we recently found out, there are debt collection agencies that are more than happy to make sure consumers pay -- sometimes even if the debt has been discharged.

Because debt collectors can buy “bad debt” for pennies on the dollar, every dollar they can collect in return is pure gravy. 

“We’ll hunt you down and make you pay…”

Out of the more than three million complaints the Consumer Financial Protection Bureau (CFPB) has received in the last five years, nearly 150,000 were about attempts to collect debt not owed either because the consumer didn’t owe anyone anything or the debt had been resolved by the court or paid off

When ConsumerAffairs lifted the rug on those grievances, there was some nasty stuff going on – being screamed at, leaving intimiating messages/robocalls threatening to sue someone, and calling the children of one consumer asking for banking information while she was in the hospital.

That’s some pretty heavy-handed stuff no matter who you are. The federal government’s Fair Debt Collection Practices Act and several states protect consumers from being harassed, but debt collectors sometimes don't mind their manners. 

A debt collection pro shares their magic

ConsumerAffairs wanted to know if there’s anything someone in a debt collection situation could do, especially if they aren’t in default on a debt or they’re not even the exact person who owes the money.

We reached out to someone who has studied and dealt with unpleasant debt collectors on those two fronts. Megan Hanna, DBA, CFE, who’s worn hats as a finance expert, professor, and a former banker, gave us her best advice for consumers caught in those traps.

Offer proof. “You can start by talking to the debt collector about the situation and sharing details about when and how the debt was paid (or any other details about why it's not owed). You should follow up on this conversation by sending a written notification to the debt collector to formally dispute the debt,” Hanna said. 

“Restate what you discussed in the phone conversation and include factual details, including such things as proof of payment or any correspondence you received from the original creditor or other parties about the debt.”

Go back to the original creditor and see if they can help. Another tact you can take is to contact the original creditor to talk about the situation. “Sometimes, the original creditor might not want to speak with you if they sold your debt to a debt collector. However, if you can provide proof that it was sold to the debt collector in error (e.g., a copy of a canceled check you sent to the original creditor, a payoff statement, or confirmation numbers from prior phone calls), they may realize they made an error and help you resolve the situation.”

She said that if you’re still not getting anywhere, you can ask to have your call escalated to a supervisor or manager or send a written dispute to the original creditor, just like you did with the debt collector. But, she warns that manners count. “Be calm and present factual information while being persistent when discussing the situation with the debt collector or creditor.”

If all else fails… “If you cannot resolve the situation with the debt collector or creditor, you can also file a complaint with the credit reporting agencies (if it's on your credit report), the CFPB, or both,” she suggested. When filing a complaint with those agencies, she said you should make sure you have all your facts – including supporting documentation – ready to present. “The more thorough you are in presenting your case, the easier it will be for everyone to look into the situation and, hopefully, help you resolve it.”

If you want to dig deeper into all the options you need to outsmart a sinister debt collector, just visit this special CFPB website. It lays out everything you need to know--  plus the agency offers a toll-free helpline if you want to speak to a real person.

Consumers are taking on an increasing amount of debt, and in some cases it's more than they can handle. The total consumer debt balance increased to $16.38...

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Concerns about buy now, pay later plans mount -- along with consumer debt

After scams and privacy issues, ConsumerAffairs probably wrote about Buy Now Pay Later (BNPL) more than anything else last year. Prompting our coverage was the Consumer Financial Protection Bureau’s (CFPB) ongoing concerns about a borrower’s attraction to the bright, shiny, and new financing option and the parade of states that are sounding their own alarm.

The CFPB was at it again last week when it issued a report on its analysis of who’s signing up for BNPL. The conclusion? People who use BNPL probably shouldn’t be taking on any more debt than they already have. 

The report called them “consumers in distress” and said those borrowers were “more likely to be highly indebted, revolve on their credit cards, have delinquencies in traditional credit products and use high-interest financial services such as payday, pawn, and overdraft compared to non-BNPL borrowers.”

What a BNPL expert wants consumers to know

ConsumerAffairs asked Howard Dvorkin, CPA and chairman of Debt.com, for the ugly truth anyone considering BNPL needs to know.

“All BNPL providers are not the same. They offer very different terms, and you need to closely review the agreement,” Dvorkin said, noting that like credit cards, BNPL arrangements have varying terms on payback, interest rates, and fees. “This definitely isn't like paper towels, where both Bounty and Brawny will wipe up a spill.” 

Those "terms and conditions" can be loaded with gotchas -- boring minutiae that may be glossed over by someone who bought into a social media influencer's pitch about a BNPL product. One big gotcha is the interest rate -- as much as 36% interest, almost double the average -- that kicks in if someone is late on a payment. 

These concerns have snowballed into a mountain of complaints for the CFPB. According to its database, the number of BNPL-related complaints doubled in the last year.

Issues vary greatly, ranging from discrimination brought about by one company's automated "soft credit check" system, to attempts to collect debt not owed, problems when making payments, and 197 complaints about identity theft.

Heads, you lose – tails and no one cares

Part of Dvorkin’s truth serum is if you don’t pay off the BNPL balance in full, you’ll face a financial nightmare down the road.

“Even if you just miss a payment, the Big Three credit bureaus – Equifax, Experian, and TransUnion – will hear about it,” he said, bluntly adding that those missteps get added to your credit report, dragging down your credit score. 

“While that also happens with credit cards, at least you can build credit by making timely payments. Not so with BNPLs. If you make all the payments on time, that doesn't go on your credit score. It's quite literally, ‘Heads you lose, tails no one cares.’"

A gateway to impulse purchases and overspending?

BNPL doesn’t exactly qualify as a drug, but it can be a gateway to someone spending more than they have the ability to pay for, suggests Jana Lynch, who heads ConsumerAffairs' research team and oversees our guide on Buy Now, Pay Later.

“Short-term installment loans like buy now, pay later apps seem quick and easy to finance a purchase, particularly if you can afford the payments and meet the terms,"  Lynch said. "However, there’s enormous potential to overspend, the deferred interest can add up and you can do some serious damage to your credit if you miss a payment.”

After scams and privacy issues, ConsumerAffairs probably wrote about Buy Now Pay Later (BNPL) more than anything else last year. Prompting our coverage was...

2022
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More than half of Americans have owed medical debt in last five years, study finds

With inflation on the rise, any kind of debt may prove to be a hardship. Medical debt appears to be especially burdensome, as the National Consumer Law Center reported last year that health-related debt was the leading cause of bankruptcy.

A recent study from the Kaiser Family Foundation (KFF) found that 57% of adults reported owing medical debt during the last five years. Even people with health insurance often discovered that they owed large amounts of money for an uncovered expense.

Among insured adults under age 65, 61% were reportedly hit with a large, surprise medical bill. Among that group, 53% said they received a medical or dental bill they thought contained an error.

Some two-thirds of these patients said the error involved something that should have been covered by their health insurance. Other provider errors were also reported, including being billed for services never received or for bills that had already been paid.

The KFF study found that just over half – 51% – of people who were wrongly billed for medical services could not resolve the matter to their satisfaction.

Erroneous bills often end up in collections

Making matters worse, 32% of people with disputed health care debt have had that bill sent to collections, damaging their credit score and limiting their future access to credit, loans, and financing.

The KFF researchers say state Consumer Assistance Programs (CAPs), established in 2010, have helped patients resolve disputed medical bills. Under the establishing law, CAPs not only help consumers file appeals and resolve billing disputes, but they also report data to regulators on consumer experiences to inform oversight.  

“However, Congress has not provided funding for CAPs since the initial appropriation of $30 million in 2010,” the researcher wrote. “As a result, a few programs have since closed their doors.”

With inflation on the rise, any kind of debt may prove to be a hardship. Medical debt appears to be especially burdensome, as the National Consumer Law Cen...