Co-signers can cause surprise defaults on private student loans

From the CFPB:

Today, we released a report that describes complaints we received related to the private student loan industry’s practice of placing borrowers in default even when their loans are current and in good standing. We’re also warning consumers that they can avoid surprise defaults by pursuing a co-signer release.

The vast majority of private student loans today have a co-signer (typically a parent or a grandparent). Having a co-signer can often lead to a lower interest rate, which can save you money in the long-term, because the co-signer will have to repay the loan if you don’t.

However, your loan might also contain provisions that allow your student loan servicer to put you in default — even if you’ve been making your payments on time.

That’s because your co-signer is also on the hook for your loan and therefore changes in their behavior can impact your loan, causing your loan to default and making your entire balance due all at once. We’ve received complaints that private student loan servicers are placing borrowers into default when their co-signer dies or files for bankruptcy.

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Data brokers disciplined over consumer protections

It's tough enough landing a job these days.

So imagine if that background check provided to your potential employer wrongly identified you as a possible sex offender. That's what the Federal Trade Commission says happened in a case it's settling with InfoTrack Information Services of Deerfield, Ill. The company provides employment background screening services.

The commission said Wednesday that InfoTrack gave inaccurate information suggesting that job applicants potentially were registered sex offenders.

In many instances, the FTC said, InfoTrack would search the National Sex Offender Registry with a first and last name, say for example "John Smith." But often, there wasn't a birth date — so in its report to the employer, InfoTrack would turn over all John Smiths in the database as "possible matches."

The civil penalty against InfoTrack and its owner, Steve Kaplan, calls for a $1 million payment. But everything except $60,000 is suspended for inability to pay.

A call to the company seeking comment Wednesday was not immediately returned.

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The ‘Credit Scores’ You’ve Never Heard Of

Even some of the most financially savvy consumers find credit scoring confusing — the numbers change all the time, there are dozens of scoring models, and you never know which score a lender will use when reviewing your credit application.

Yet of all the consumer scores out there, credit scores are the most widely known and understood. Reassuring, isn’t it?

Not to harp on depressing realities, but to most industries out there, you’re not a name, you’re a number. Unlike credit scores, a lot of these ratings systems are not accessible to you, and many aren’t subject to regulation. That brings up a slew of questions about privacy and the legality of using these scores in decision-making situations, a topic explored by the World Privacy Forum in an 80-page report on consumer scores called “The Scoring of America: How Secret Consumer Scores Threaten Your Privacy and Your Future.”

About 40 of those pages outline consumer scores that assess the meaning of hundreds of tendencies you may have, and you probably haven’t heard of most of the scores. Some fall under the Fair Credit Reporting Act, which allows consumers access to the reports scores are based on and gives them the right to correct inaccurate information. The Equal Credit Opportunity Act bars credit scoring companies from including race, sex, marital status, religion or national origin in credit scores. But that’s just it — ECOA is limited to credit scoring.

Except for those scores under Fair Credit Reporting Act, most consumer scores are not regulated for privacy or fairness. Here are a few of the most interesting, weirdest and surprising consumer scores out there.

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New Legislation Aims To Ensure Accurate Credit Reports

Even a small inaccuracy on a consumer’s credit report can have long-lasting negative affects. From the most simple computer error to mixing up individual’s data, credit reporting agencies have been known to be hard to work with when trying to fix incorrect data. But that could all change under legislation introduced today that aims to ensure issues like these don’t happen.
Today, Senators Brian Schatz of Hawaii and Sherrod Brown of Ohio introduced the Stop Errors in Credit Use and Reporting (SECURE) Act of 2014, which would require credit bureaus to follow tighter rules for ensuring credit reports are accurate and give consumers free access to reliable credit scores each year.
Credit reports and credit scores are often used by bankers, lenders, and others to determine a consumers’ creditworthiness and the rates they will pay for services. Today, the scores and reports are even used to determine a consumer’s employability.
A Federal Trade Commission study found that nearly one in five, or 40 million consumers, have had an error on one of their credit reports. Of those, nearly 5% or 10 million consumers had errors that would likely lead them to paying more for interest on a loan.
The problem is compounded by the fact that it’s difficult for consumers to prevent and correct errors on their credit reports. The SECURE Act proposes to revamp the current Fair Credit Reporting Act and make common sense fixes to the credit reporting industry.
SECURE establishes clear procedures for assuring accuracy of all consumer reports furnished by Consumer Reporting Agencies:
• Requires CRAs to pass along documentation sent by consumers to data furnishers and requires data furnishers to consider the documentation in their re-investigation;
• Requires CRAs to gather and report information on disputes and their resolution;
• Directs the Consumer Financial Protection Bureau to establish minimum procedures that a CRA must follow to ensure maximum possible accuracy of consumer reports;
• Prevents CRAs from ignoring new or additional information provided by a consumer that is relevant to an on-going dispute.

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Another Bank Official Pleads Guilty in Collection Agency Bribery Case

A former officer at Washington Mutual Bank late last week waived his right to indictment and entered a guilty plea to receiving kickbacks from a debt collection agency while he was in charge of the bank’s collection agency outsourcing network.

The office of the U.S. Attorney for the District of Connecticut announced that Michael Gesimondo of Farmingdale, N.Y. pleaded guilty to one count of conspiracy to accept money as a reward in connection with a business transaction of a bank.

Gesimondo was employed as Collection Manager of Business Banking at Washington Mutual Bank, and was in charge of outsourcing collection accounts to collection agencies.  Washington Mutual Bank contracted with the Oxford Collection Agency to collect debts owed to it by consumers.  Between May 2008 and May 2009, Gesimondo received kickbacks from Oxford Collection Agency as a reward for providing Oxford with the bank’s debt collection business, often providing Gesimondo with a percentage of the collected debt amount.

 Read more at InsideARM

Target offers free credit monitoring and identity theft insurance

Target's efforts to regain customers’ trust after a massive data breach include an offer of daily credit card monitoring, identity theft insurance and access to a fraud resolution agent.

Any Target customer who shopped in one of its U.S. stores is eligible for a year of free credit monitoring and identity theft protection, Target announced this week. The service is called ProtectMyID from Experian, a credit monitoring company.

Those who sign up before April 23 and enroll with a code by April 30 will receive a free copy of their credit report along with the other services.

Target’s free offer is typical of those offered by most retailers after a security breach, said Dianne Cutter, CEO of Asurency Protection in Chaska, an identity theft and fraud protection company.

“It’s a good idea to take them up on it,” she said. “But consumers should still look at their credit report to look for any changes.”

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Five ways to boost your credit score

Low credit scores result in higher interest charges for all types of debt, including credit cards and home loans. Borrowers with a FICO credit score (the score used for most consumer lending decisions) of 700 save an average of $648 in interest on their credit card, $1,392 on their car loan and $2,340 on their mortgage each year, compared with borrowers who have scores below 620, according to a study by, a credit-card comparison website. Those savings get even larger for borrowers whose credit score is above 700. Separately, lower scores can lead to larger home and car insurance bills and make it harder to rent or buy a home.

Fortunately, there are ways to improve a low credit score and most involve scaling back on credit-card usage. That’s because in the world of credit scores, all debt is not treated equally. FICO scores tend to drop as consumers rack up more credit-card debt but don’t decline as much if someone signs up for a student loan, car loan or mortgage. Here are five steps to improving your credit score.


Consumers Can Check on Data Beyond Their Credit Reports

You most likely know the drill when it comes to the importance of checking the accuracy of your credit report, which lenders review before deciding to make a loan or issue a credit card. Federal law allows you to get a free copy of it once a year.

But there are dozens of other companies that gather consumer data for narrower purposes, and they are also required by the Fair Credit Reporting Act to give you access to your report annually. They might gather information about your employment history, your medical conditions or your track record as a renter.

Two companies may be relevant here. The Work Number, a service of Equifax Workforce Solutions, verifies job and income information for many big employers, lenders and government agencies. MIB Group, formerly known as the Medical Information Bureau, helps insurance companies with underwriting for consumers seeking life, disability or long-term care insurance, and similar types of coverage.


Fallen Foreclosure King David J. Stern Disbarred

The long, legal saga of David J. Stern, the south Florida attorney who made a fortune off the wave of home foreclosures stemming from the housing crisis, has reached its end.

After years of court battles over the practices of Stern's once-mighty, multimillion-dollar law firm, the Florida Supreme Court last week disbarred Stern. As the Palm Beach Post reports, a Palm Beach County judge who refereed Stern's case and who recommended disbarment criticized the 53-year-old lawyer for failing to take responsibility or show "any remorse" for his firm's actions. Mother Jones was one of the first news outlets to expose the shoddy and legally questionable work done by Stern's army of lawyers and paralegals as it foreclosed on hundreds of thousands of Floridians, including backdating crucial documents used to foreclose on homeowners. Nancy Perez, the Palm Beach County judge, said the blame fell on Stern for that shoddy work. "The incidents were not isolated, but rather a representation of the culture of the firm, as to the low level of competence and ethics," Perez wrote. "(Stern) is the lawyer. It was his firm. Mr. Stern is responsible."

Read more at MotherJones

Florida still tops list for foreclosures

While its numbers are going down, Florida once again has a greater percentage of distressed homes than anywhere else in the nation.

The state's foreclosure inventory — properties in some stage of foreclosure — stood at 6.6 percent of all mortgaged homes in November, data provider CoreLogic reported.

While that was down from 10.4 percent a year earlier, Florida continues to have more than three times the U.S. average of such inventory.

Florida had the highest number of completed foreclosures over the past year, with 114,654, which represented 18.5 percent of the national total.

The Tampa-St. Petersburg-Clearwater region posted the highest foreclosure inventory, at 7.6 percent, among the nation's 25 largest metro areas. That was down from 10.5 percent over the year.

Orlando-Kissimmee-Sanford was second, at 6.7 percent.

Nationwide, 2.1 percent of all mortgaged homes were in foreclosure in November, down from 3.0 percent a year earlier.

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Ally Financial sued for illegal debt collection methods

Ally Financial is being sued by a West Virginia resident after allegedly engaging in improper debt collection methods.

Alice M. Toler filed a lawsuit Dec. 23 in Raleigh Circuit Court against Ally Financial Inc., citing violation of the West Virginia Consumer Credit and Protection Act, violation of the telephone harassment statute, intentional infliction of emotional distress and common law invasion of privacy.

The complaint says Toler was contacted by Ally Financial to collect an outstanding debt. The plaintiff states the defendant engaged in numerous statutory violations, including using abusive conduct in attempt to collect a debt, causing the plaintiff’s phone to ring repeatedly, using fraudulent meant to collect a debt and using unfair means to collect a debt.

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Should employers be barred from using credit reports in hiring?

Job-hunters are increasingly being asked to agree to allow potential employers to view their personal credit information, a development that Sen. Elizabeth Warren says is unfairly keeping people out of the job market who've had financial setbacks or have reports that contain inaccurate information.

The Massachusetts Democrat today introduced The Equal Opportunity for All Act in Congress, which would outlaw such credit checks in many cases except in areas such as national security. Warren told reporters in a conference call sponsored by the Demos Foundation, a liberal think-tank, that the legislation was long overdue.

"This is about basic fairness," said the first-term legislator, adding that many people have had their credit records tarnished during the recent economic downturn. "There is little to no evidence of any correlation between job performance and a credit score."


Read more at CBS News