Bad Credit Loan Articles and Blog Posts

Payday Scams Use Harassment to Coerce Payment - Breach of Consumer Rights

From 2010 to 2012, a payday loan scam extorted millions of dollars from U.S. residents by threatening them with arrests or job loss. The calls came from India and over 2 million calls were made during this two-year period.

Those involved in the payday loan scam obtained information from payday loan websites and then used the information to call borrowers and relatives of the borrowers. This is why it is extremely important to make sure that you provide your information on a secure site that is encrypted to protect your private information.

The callers would claim they were with the government and demanded repayment for delinquent payday loans. Sometimes the fraudulent callers would contact relatives of payday loan borrowers and demand repayment to avoid arrest. The payday loan scam was so convincing - or, more likely, so intimidating - that many agreed to pay even if they knew they did not owe a payday loan.

It is easy to fall into a payday loan scam if you don’t know your rights and what a debt collector can legally do. Learn your consumer rights and avoid payday loan scams.

You Have Consumer Rights (Even if You Have Bad Credit and Owe Money)

According to the Federal Trade Commission’s Fair Debt Collection Practices Act, a debt collector (such as a payday loan lender):

  • Cannot call the consumer (you) at any unusual place or time that would be inconvenient to you. Unless you let the debt collector know otherwise, they can only contact you between 8 am and 9 pm (your time).
  • Cannot call you if you are being represented by an attorney (unless the attorney doesn’t respond to their calls after a reasonable amount of time).
  • Cannot contact you at your work if they know that your employer would not approve of such communication.
  • Cannot communicate with a third party (such as a credit counseling agency, attorney, creditor, etc.) without your consent, or the express permission of a valid court.
  • Cannot communicate with you if you notify the debt collector in writing that you will not pay the debt or that you do not wish to be contacted any further. The notice will be considered complete upon receipt of the written notice. At this point, the lender can only contact you further to tell you they will no longer contact you and/or they will be taking other steps to obtain the debt.
  • And a debt collector has no right, whatsoever, to partake in consumer harassment.

Consumer Harassment includes:

  • The use of, or threat to use, violence to harm you, your reputation or your property.
  • The use of obscene language, or language that is used to abuse you.
  • Printing a list of consumers that refuse to pay debts (assuming you’re on the list, this could be embarrassing)
  • Advertising the sale of your debt to encourage payment.
  • Calling you repeatedly in an attempt to annoy, abuse or harass consumers (you).
  • Calling without informing you which company the debt collector is with. (They can only evade this question if they are talking to someone other than you - to protect your privacy).

When a debt collector is trying to gather your information from a third party (someone other than you) they:

  • Should not state the name of the employer, unless it is expressly requested.
  • Cannot state that you owe money or are in debt.
  • Cannot call the third party repeatedly, unless they believe the information the third party provided was incorrect and they believe the third party has the correct information.
  • Cannot use postcards to contact you. (This would make personal information, such as being indebted, visible to the public).
  • Cannot use any symbols or language on the mail sent to you that would suggest you are in debt or owe money. (So the mail cannot visibly be from a debt collector or debt collection company).
  • If you are represented by an attorney, the debt collector cannot contact any third party other than the attorney.

These payday loan scams demonstrate the amount of abuse a consumer is willing to put up with. Perhaps it is because debt collectors are known for using abusive tactics, perhaps it is because consumers do not know their rights as a consumer.

If you believe you are being harassed for a debt you do not owe and you are in immediate danger, contact your local law enforcement agency.

If you believe you are being harassed for a debt you do owe, report it to your state Attorney General’s Office  (www.ftc.gov).

The Federal Trade Commission also set up a webpage called, "Who's Calling? That Debt Collector Could be a Fake."

Learn more about your consumer rights on the Federal Trade Commission’s FAQ page.

So after receiving all the scholarships, grants and federal funding that I possibly can, I still need a bit more to cover the full cost of my education. I think I'll take out a private student loan.

There are a few things to consider when searching for a private student loan:

1. What interest rate will they charge me?
2. When will the interest start accruing?
3. What are the repayment options?
4. What are my options for repayment if I cannot find work right away?

Considering these factors will help you compare private student loan options.

If one lender offers a lower interest rate than another, the lower interest rate will save you money in the long-run and will be a less expensive student loan than a loan at a higher interest rate - even if the loan is for the same amount. This is because interest accrues (or interest charges are added to the loan balance) over time.

This is also why it is important to know when the interest starts adding up. Some Federal Student Loans, such as “Subsidized” Stafford Loans, do not start accruing interest until you graduate (or until you are no longer a full-time student), saving you money. But most private student loan lenders start charging interest as soon as the loan is given to you. Find out when they start charging you.

Federal loans do not require students to start repaying student loans until they have graduated or are no longer attending school full-time. Some private lenders do not require repayment of the student loan until you graduate, while others may require you to make minimum payments while in school or interest-only payments. Learn what the student loan repayment options are and decide what is best for you.

As we have learned in this economy, sometimes getting a job can be difficult. Many federal student loans offer forbearance and deferment benefits, allowing you to postpone payments until you have recovered from a financial hardship. Private student loan lenders may offer forbearance and deferment benefits and some may not. Ask your lender what you can do if you are struggling financially and cannot repay a student loan right away.

You may have to decide between a private student loan that offers low interest rates but requires repayment while you’re in school and loans that offer higher rates but allow you to wait to repay until you graduate. You have to weigh the costs and benefits of each scenario and decide what is ultimately best for you.

Paying for school can get tricky, and options vary depending on whether you are going back for graduate school, an undergraduate degree or a certification program.

Options to finance your education include:

Scholarships

Scholarships are monetary awards given to students to help finance their education. Scholarships do not have to be repaid. There are many different types of scholarships for varying amounts. Some scholarships are given to students if they are the first in their family to attend college, while others may be based solely on grades and test scores. It’s best to do a thorough search of all the scholarships that you might be eligible for and apply for all of them.

Grants

Grants, unlike loans, do not have to be repaid, so this option is ideal for students. There are a number of grants available. One example is a  Pell Grant - a Federal Grant available to students in need. The maximum amount a student can receive each year for a Pell Grant is $5,500. You can use this grant in addition to other funding options.

Work

Sometimes working while you’re in school can help pay for your expenses and prevent you from taking on too much student loan debt. You want to make sure that work does not inhibit you from your studies. There are also Federal Work-Study programs available which may be more considerate of your student needs.

Federal Student Loans

Federal Student Loans are loans backed by the government which are closely regulated to ensure lower interest rates and more flexible repayment options for students. Federal loans include Stafford Loans, Perkins Loans and Direct Plus Loans.

In order to encourage people to work full-time in public service jobs, Congress created the Public Service Loan Forgiveness Program. Under this program, you may be eligible to have the remaining balances of your student loans forgiven after working in a public service job for ten years.

Only William D. Ford Federal Direct Loans (Direct Loans) are eligible for this program, so if you are interested, make sure that you obtain a Direct Loan. You might also be able to consolidate your loans into a Direct Consolidation Loan to take advantage of this program.

I have recently learned that some schools have programs that will pay for your student loans for ten years - before the Public Service Loan Forgiveness Program kicks in to pay off the balance. Some schools offer this financial aid to encourage their students to work in public service jobs.

My friend recently went to the University of Chicago for law school. Since most of the students usually work in corporate law firms upon completion of law school, the University of Chicago offers to pay the student loan payments of students that choose to work for the government or qualifying non-profit organizations. This financial encouragement is intended to boost the school’s public service involvement and image.

Private Student Loans

Private student loans should be used to pay the remaining costs of education that have not been covered by other educational funding options. Comparing private student loan options will ensure you get the best rates and terms.

It is best to do a thorough investigation of all types of funding available for what you want to study. Take advantage of as many scholarships and grants as possible before you begin to take out student loans.

Then you want to exhaust all possible options of federal educational funding prior to taking out any private student loans, since private student loans can have higher interest rates and less flexible terms - meaning they’re more expensive loans.

If you do decide to take out private student loans, make sure that you are not taking more than you need and that you have a realistic plan for repaying the student loan when you graduate.

For example, consider what type of work you would like to do and what that line of work usually pays. Is it difficult to find work in this field? Are these positions competitive and hard to get? Will you have the qualifications to get this job? Will you need work experience (that you may be able to obtain while going to school)?

I'm thinking about going back to school, but I am very aware of how expensive an education can be. Rising tuition costs have deterred me from jumping right into a college program. Recognizing the costs of education and how I will manage the impending student loan debt is what I will do before deciding on a student loan.

Having worked at a nonprofit that provided financial education, I came across a number of people that returned to school for various trades and degrees, only to find themselves unsatisfied upon graduating with a lot of student loan debt.

Even worse, I met many people that decided - mid-way through school - that what they were studying wasn’t for them and quit, incurring a good amount of debt without receiving a certification or degree.

It is important to assess your goals and interests before taking on student loan debt. School is expensive, and student loan debt is difficult to escape (you cannot file bankruptcy on student loan debt). Researching what types of degrees and certifications align with your interests and goals can help ensure that you will be able to use your education to pay off the debt you took out for it.

The New York Times goes into detail regarding the plight of young lawyers, many of whom returned to law school for prestige and money, only to find pay lower than expected, legal work being outsourced and law schools exaggerating their graduates' employment rates.

While funding your education can result in inescapable debt, it is important to note that higher education still opens doors. Many have compared today’s bachelor’s degree to yesterday’s high school diploma - emphasizing the importance of furthering your education.

If you know what you are passionate about and want to become more knowledgeable in a particular field of interest, going back to school can help you get there. So now you have to determine how you’re going to pay for school.