NFCC Certification Book 5 CONSUMER RIGHTS AND RESPONSIBILITIES

Transcription

1 NFCC Certification Book 5 CONSUMER RIGHTS AND RESPONSIBILITIES This document remains the sole property of the National Foundation for Credit Counseling (NFCC). By accepting this document and participating in the NFCC Certification Program, you agree not to share this document, nor any of the information contained therein, with any person or organizations beyond your member agency without express written consent of the NFCC.

2 Table of Contents Purpose... 1 The Counselor Role... 1 Overview of the Legal Process... 3 Federal Consumer Legislation and Regulations... 4 The Consumer Credit Protection Act and the Dodd-Rank Wall Street Reform... 5 The Fair Credit and Charge Card Disclosure Act... 7 Credit Card Accountability, Responsibility, and Disclosure Act... 8 Fair Credit Billing Act and the Billing Dispute Process The Fair Credit Reporting Act Fair and Accurate Credit Transaction Act The Servicemembers Civil Relief Act Equal Credit Opportunity Act Check Clearing for the 21 st Century Act (Check 21) Electronic Funds Transfer Act Expedited Funds Availability Act Gramm Leach Bliley Act Regulations Specific to Housing Fair Housing Act Protections for Disabled Persons Housing Opportunities for Families Housing for Older Persons Act Filing a Fair Housing Discrimination Complaint Real Estate Settlement Procedures Act The Federal Trade Commission Federal Trade Commission Act Consumer Protection Investigative Authority under the FTC Deceptive Trade Practices FTC Consumer Facts and Alerts Debt Negotiation or Debt Settlement Programs... 33

3 Credit Repair Free Credit Reports Debt Relief Scams Payday Loans Protections for Military Consumers Advance Fee Loan Scams Foreclosure Rescue Scams Home Based Employment Offers Help Wanted Employment Scams Education Schemes Unordered Merchandise and Phony Invoices Insurance Schemes Chain Letters Donations to Charities Prize Offers Discount Travel Offers Vehicle Purchases Door-to-Door Sales and the Cooling-Off Rule Mail, Telephone, and Internet Sales Internet Scams and Shopping Telemarketing and Common Schemes Numbers National Do Not Call Registry Telemarketing and Consumer Fraud and Abuse Prevention Act The Consumer Financial Protection Bureau State Legal and Regulatory Protection for Consumers Additional Consumer Protection Acts Recap of Consumer Rights & Complaint Avenues Better Business Bureau Attorney General Contacts for Equal Credit Opportunity Violations Federal Trade Commission Divisions (comprehensive overview)... 59

4 Exercises Answer Key Acknowledgement, References, and Resources... 75

5 PURPOSE In your role as a certified credit counselor, you will often work with clients who are unfamiliar with their rights as consumers. Through your sessions and interactions you may find they have been victims of discriminatory practices, been lured into scams, or are unaware of resources available to remedy obstacles, issues, and violations of their rights. Having a comprehensive knowledge of consumer rights and responsibilities will assist you in: Recognizing when a client s rights may have been violated Effectively advising clients of possible options Assessing resources available to clients Identifying suspicious or false threats made to consumers Educating clients regarding their rights and responsibilities Book 5 Consumer Rights and Responsibilities will provide an overview and/or discuss: The Consumer Bill of Rights The legal process The Federal Consumer Protection Act Privacy rights of the consumer The Federal Trade Commission The Consumer Financial Protection Bureau THE COUNSELOR ROLE When consumers seek counseling for financial or credit problems, they have specific rights as consumers and clients. The NFCC Client Bill of Rights serve as parameters regarding their rights as clients and state that counseling will serve all members of the community without regard to: Social or economic status Physical or mental disability Gender Sexual orientation Age Ethnic ancestry Race Religious affiliation The NFCC Client Bill of Rights govern the NFCC s mission and the work you do. It pledges that every client has the right to: Prompt counseling services for managing their money based on their financial situation Treatment with dignity and respect in confidential, professional counseling sessions Revised: April 7,

6 A comprehensive assessment of their financial situation including an appropriate action plan Express dissatisfaction through a complaint resolution process Discontinue their relationship with the Agency at any time As you observe the rights of your clients and provide a thorough analysis of their situation, providing education regarding their consumer rights and responsibilities will be a significant component of your sessions. While the education you provide regarding federal, state, and local legislation can assist in protecting a client s consumer rights, you cannot: Give legal advice as a counselor Fill out legal forms Represent a client in legal action The below table will assist you in identifying areas you can assist a client (Counselor s Role) with versus the areas that require assistance from legal aid or an attorney (Attorney s Role): Financial statements Legal proceedings and/or court cases Counselor s Role Assist in preparing financial statements to include: debts, income, budget, and assets, & liabilities Provide an overview of how the court system operates Provide possible next steps that may follow if the client is involved in a court case Debt collection Discuss and educate the client on the statute of limitations for certain legal actions Housing issues Work with clients to prevent foreclosure or eviction by discussing alternatives, resources, Attorney s Role Refer individuals to credit counseling or other providers of financial services Evaluate the merits of an individual s dispute with a creditor, reporting agency, or other party Explain the process of filing and resolving a dispute NOTE: Legal counsel should clarify their fee structure before engaging in work beyond an initial consultation Evaluate if a debt collection harassment claim is valid (e.g. is the collector making threats or calling at times not allowed) When appropriate, prepare notice of collectability letters to put creditors on notice of debts that may be deemed not eligible for collection (e.g. statute of limitations has passed, client s income sources are exempt from garnishment, etc.) Formally dispute eviction or foreclosure activities if those actions are seen as not following the required legal processes Revised: April 7,

7 Unsecured debt repayment Legal representation or workout options Discuss options to avoid utility shutoffs Arrange a DMP to help resolve debt and credit issues and possibly avoid court proceedings Discuss debt repayment options Discuss the possible expenses involved & identify community resources for low-cost or free legal services with clients who may be considering legal action Outline the operation of the court system and the use of small claims court Represent individuals during foreclosure proceeding settlement conferences Discuss an individual s contractual obligations to repay debt Explore the pros and cons of debt settlement Refer individuals to a counselor to discuss their financial concerns Provide representation during legal proceedings Provide legal advice REMINDER: a counselor should never provide legal advice Exercise 5.1: Counselor versus Attorney Role please click here to proceed to the exercise, or if you have downloaded the materials go to Exercise 5.1 in the Exercise section. OVERVIEW OF THE LEGAL PROCESS Although you cannot give legal counsel or advice, you can provide clients considering or involved in a legal dispute a general overview of the legal process. When a dispute between a consumer and a business/creditor cannot be resolved through direct negotiation, mediation, intervention by the Better Business Bureau, or action by the Attorney General, the consumer may choose to pursue other legal options. In disputes involving larger amounts, an individual or business seeking the return of money or property may hire an attorney and initiate a lawsuit through the court system. Each court has rules and procedures that govern court operations and outline lawsuit steps. A lawsuit begins with a compliant, which explains the factual and legal ground for the lawsuit. The parties involved include a plaintiff, the party who files the complaint with the court and initiates the lawsuit, and a defendant, the party against whom the plaintiff files the complaint. Either party can be a creditor, landlord, company, or individual; both are referred to as parties to a suit. Conversely, small claims court is specifically designed to handle simple dispute proceedings involving smaller amounts of money or property; the merits of the case can be presented to a judge without the involvement of attorneys. The allowable claim amount varies from state to state and a party typically cannot seek punitive damages or restitution for an injury. In most cases, a lawyer is not needed, since this is a very informal court proceeding. However lawyers are often available Revised: April 7,

8 to assist parties in filing a complaint. The small claims court process may offer the following advantages: The small claims court process is typically less expensive than many other legal processes The claim is often heard more quickly than with other legal forums The judge will rule immediately upon the presentation of the dispute The process can avoid lengthy court delays that are often experienced with other legal options Remember, as a counselor you should never offer legal advice. If a client has received a court summons, foreclosure notice, or any other notice of legal action, urge the client to seek profession counsel immediately. Although you may not provide a direct referral to an attorney, you can refer them to the Legal Aid Society, a local non-profit legal assistance agency, or the state bar association. Knowledge Check 5.1: What avenues are available to resolve a dispute between a consumer and a business/creditor? What advantages are there to disputing through small claims court versus other legal actions? FEDERAL CONSUMER LEGISLATION AND REGULATIONS Consumer protection laws are a form of government regulation which protects the interest of consumers. Your knowledge of consumer legislation and regulations will be a valuable source of information to clients trying to understand how legislation and regulations affect them and what their rights are. In the United States, a variety of federal and state laws regulate consumer affairs. At the federal level, these laws include, the: Dodd-Frank Wall Street Reform and Consumer Protection Act Servicemembers Civil Relief Act (SCRA) Credit Card Accountability, Responsibility, and Disclosure Act (Card Act) Truth-in-Lending Act Fair Credit Billing Act Fair Credit Reporting Act Equal Credit Opportunity Act Fair Debt Collection Practices Act Gramm Leach Bliley Act Fair Housing Act Fair and Accurate Credit Transactions Act Revised: April 7,

9 Although other federal agencies may have the responsibility of enforcing federal consumer protection laws, these laws are mainly enforced by the: Consumer Financial Protection Bureau Federal Trade Commission Securities Exchange Commission At the state level, many states have a Department of Consumer Affairs devoted to regulating certain industries and protecting consumers who use goods and services from those industries. THE CONSUMER CREDIT PROTECTION ACT AND THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT The Consumer Credit Protection Act (CCPA) was designed to protect borrowers by mandating: Complete disclosure of terms and conditions of a transaction s finance charges Limitations on the garnishment of wages Regulations for the use of charge accounts Portions of the CCPA and other laws were amended with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Among its many amendments, the Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) whose responsibility it is to set and enforce rules for financial institutions. The CFPB performs a variety of duties, including: Governs consumer lending Creates rules Investigates unfair business practices Enforces the law Receives consumer complaints Educates the public about finances Monitors the marketplace for new risks to consumers The CCPA, as amended, includes sections covering several areas of consumer protections as follows: Title I Consumer Credit Cost Disclosure Requirements/Provisions Creditors dealing with consumers are required to make certain written disclosures concerning all finance charges and related aspects of credit transactions (including disclosing finance charges expressed as an annual percentage rate) Establishes a three-day right of rescission allowing consumers to cancel certain transactions that involve a security interest in the consumer s residence (like a mortgage refinance) however there are certain Revised: April 7,

10 II Restriction on Garnishment IIA Credit Repair Organizations III Credit Reporting Agencies exclusions to the three-day rescission period Establishes certain credit terms requirements for advertisers Protects employees from discharge by their employers because their wages have been garnished for any one debt Limits the amount of an employee s earnings that may be garnished in any one week Applies to all employers and individuals who receive personal services Allows for a greater amount of an employee s wages to be garnished for child support, bankruptcy, or state tax payment NOTE: enforced by the Department of Labor s Wage and Hour Division Prohibits credit repair organizations from: o Making a variety of false and misleading statements and from committing fraud o Receiving payments before any promised service is fully performed Requires credit repair organizations to provide a: o Written contract, including a detailed description of services and contract performance time, for services o Separate written disclosure statement describing the consumer s rights before entering into the contract and that consumers can sue to recover the greater of the amount paid or actual damages, punitive damages, costs, and attorney s fees for violations of the Act Protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services Provides that a consumer report cannot be provided to anyone who does not have a purpose specified in the Act Provides that companies who provide information to consumer reporting agencies also have specific legal obligations, including the duty to investigate disputed information Requires that users of the information for credit, insurance, or employment purposes must notify the consumer when an adverse action is taken on the basis of such reports Requires the company that provided the report be identified so the accuracy and completeness of the report may be verified or contested by the consumer Gives consumers the right to one free credit report a year, and for a reasonable fee, may purchase a credit score (including information about how the credit score is calculated) Includes provisions designed to prevent and mitigate identity theft including a section that enables consumers to place fraud alerts in their credit files Grants consumers additional rights with respect to how their information is used Revised: April 7,

11 IV V VI Equal Credit Opportunity Debt Collection Practices Electronic Fund Transfers Prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or any rights under the CCPA Requires creditors to provide applicants, upon request, with underlying reasons for a credit denial Applies to any person who, in the ordinary course of business, regularly participates in a credit decision (includes banks, retailers, bankcard companies, finance companies, and credit unions) Prohibits third party collectors from employing deceptive or abusive conduct in the collection of consumer debts incurred for personal, family, or household purposes (e.g. contacting debtors at odd hours, subjecting debtors to repeated calls, threatening legal action that is not actually contemplated, or revealing to other persons the existence of debts) Establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems Requires financial institutions to adopt certain practices respecting such matters as transaction accounting, preauthorized transfers, and error resolution Sets liability limits for losses caused by unauthorized transfers Knowledge Check 5.2: What duties does the CFPB perform? The Fair Credit and Charge Card Disclosure Act This Act is designed to help consumers become informed as to the cost and terms of credit. It requires credit and charge card issuers to reveal important information in a clear, easy-to-read, and easy-to-compare manner so that consumers can shop for credit terms that work best for them. Furthermore, they must either provide specific information in an easy-to-read table with headings, or they must alert the consumer of any costs associated with a card and provide an address and a toll-free number for consumers to contact to find out card details. Additionally, it mandates that consumers have a right to know what credit will cost them before they are charged any fees. If a card issuer takes a card application over the telephone and there is a fee for the card issuance or availability (including any fee based on account activity or inactivity), they must verbally disclose this information to the consumer during the call. If there are no card fees or if card fees are not required until a card is actually used, the card issuer can mail the fee information instead of verbally delivering it. However, the information must be received by the consumer within 30 days but prior to the delivery of the card. The following information must be included in disclosures: The annual percentage rate (APR) for purchases made on credit How the APR is determined (if it is a variable rate) The method the issuer uses to compute the balance for purchases against which the finance Revised: April 7,

12 charge is assessed e.g. calculating an average daily balance or using the outstanding balance at the beginning of the billing cycle The amount of any minimum finance charges Any transaction fee for purchases which can be a specific dollar amount and percentage Transaction fees for cash advances and fees for paying late or exceeding the credit limit The amount of any annual fees assessed When charges made to a charge card are due and payable If there is an annual renewal fee for a card and if there is cancellation period if a consumer does not wish to pay the fee Exercise 5.2: Disclosure requirements please click here to proceed to the exercise, or if you have downloaded the materials go to Exercise 5.2 in the Exercise section. Credit Card Accountability, Responsibility, and Disclosure Act Sometimes referred to as the Credit Cardholders Bill of Rights or the CARD Act, this Act which is administered by the CFPB, includes several provisions aimed at limiting how credit card companies can charge consumers. Although the Act does not include rules for price controls, rate caps or fee setting, it does include for the following provisions: Cardholders deserve protections against arbitrary interest rate increases Cardholders must be given a 45 day notice of any rate increases and the right to pay off their existing balance at the existing interest rate and repayment schedule if the interest rate increases and are allowed up to three billing cycles after the rate increase to refuse the new terms Credit card companies are prohibited from retroactively increasing interest rates on the existing balance of an account, in good standing, for reasons unrelated to the cardholder s history with that card Credit card companies are prohibited from arbitrarily changing their terms of their contract with a cardholder Cardholders who pay on time should not be penalized Credit card companies are prohibited from charging interest on debt that is paid on time within a grace period this requirement prevents: o Double-cycle billing which takes into account the average daily balance of the current billing cycle AND the average daily balance of the previous period o Prohibits assessing fees on the remaining interest-only balance of an account which has been paid on time Requires credit card companies to return the interest rate to what it was when customers who have been subject to a rate increase pay on time for six consecutive months Requires creditors to review a customer s payment history every six months to determine if a rate decrease should be applied Cardholders should be protected from arbitrary due date changes Requires credit card companies to mail billing statements 21 calendar days before the due date Revised: April 7,

13 Requires credit card companies to consider all payments made before 5pm EST on the due date to be on time Requires payment due dates to fall on the same day each month and prohibits due dates from falling on a weekend or a holiday Prohibits card companies from charging late fees when a cardholder presents proof of mailing payment not less than 7 days before the due date Card companies must provide a phone number and internet address on every statement that provides customers access to payoff balances Cardholders should be protected from misleading terms Credit card companies are required to establish single, set definitions of terms such as fixed rate and prime rate Customers pre-approved for a credit card have the right to reject the card without having their credit adversely impacted up until the moment they activate it Statements are required to have a minimum size font Consumers must be offered the option of having a fixed credit limit that cannot be exceeded Credit card companies are prohibited from charging over-the-limit fees to a cardholder with a fixed credit limit Credit card companies should fairly credit and allocate payments Requires payments be applied first to debt with the highest interest rate although the dollar amount of the minimum payment applies to pay off the lowest interest; any dollar amount more the minimum payment will be applied to the highest interest debt Credit card companies should not impose excessive fees on cardholders Requires credit card companies to decline transactions that take the consumer over their limit unless the consumer has opted-in to over-limit fees Creditors who charge annual fees, account protection plans, or finance charges which then result in an exceeded balance are not allowed to charge an over-the-limit fee, and if the balance goes over the limit due to reasons other than an extension of credit (such as a purchase), creditors are only authorized to charge over-the-limit fees if a late fee is charged. Vulnerable consumers should be protected from fee-heavy subprime credit cards Mandates credit card companies to require all fees for subprime cards be paid up front before the card is issued, if total fixed fees over the course of a year exceed 25% of the credit limit Minimum payment explanation Requires statements include how long it will take to pay the debt and how much the customer would pay in interest if only the minimum payment is made with no additional charges made by the customer Requires statements to include the payment amount it would take to repay the entire debt within three years, how much the customer would pay in interest, and the difference in that amount if the customer only pays the minimum payment Limits granting credit cards to underage persons and curtails college campus promotions Prohibits issuing a credit card to someone under 21, unless they have a co-signer or can provide proof of ability to repay the debt Prohibits banks from giving gifts or promotional items in an effort to entice consumers to apply for credit cards Other requirements Requires card issuer to have accessible methods for cardholders to request a copy of the Revised: April 7,

14 cardholder agreement o Access should be either clicking on a website link or 800 number o Agreement must be delivered within 30 days of credit approval Prohibits retailers from setting expiration dates less than 5 years after a gift cars is purchased Prohibits charges for dormancy, inactivity, or service fees unless a gift card has not been used in at least 12 months o Details of such fees must be clearly indicated on the card and retailers cannot assess more than one fee a month Knowledge Check 5.3: What are the provisions of the CARD Act? Fair Credit Billing Act and the Billing Dispute Process The Fair Credit Billing Act (FCBA) is designed to protect against unfair credit billing practices and, in most cases, is enforced by the Federal Trade Commission (FTC). Note: FTC does not provide enforcement of banks. As part of the Act, the FCBA provides guidelines for consumers and creditors regarding the management of billing errors and billing statement disputes. Billing error examples covered under this ACT include: Unauthorized charges Federal law limits a consumer s responsibility for unauthorized charges to $50 Charges that list the wrong date or amount Charges for goods and services the consumer didn t accept or weren t delivered as agreed Charges for goods that were damaged on delivery Failures to properly reflect payment credits to an account Calculation errors Charges that consumer seeks clarification or proof of Statements mailed to the wrong address In order to dispute billing errors, consumer must: Write to the creditor at the address given for billing inquiries and include a description of the perceived billing error and their name, address, and account number Mail the letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to the consumer o The letter should be sent certified mail, return receipt request o Copies of receipts or other supporting documents should be attached o The consumer should retain copies of the dispute letter and all supporting documents While the dispute in under review the consumer may withhold payment on the disputed amount, plus related charges; they must pay any part of the bill not in question, including finance charges on the undisputed amount Revised: April 7,

15 Upon receiving billing error complaints, the creditor: Must acknowledge, in writing, their receipt of receiving the complaint within 30 days of receiving it if the problem has not already been resolved Must resolve the dispute within two billing cycles and not more than 90 days after receiving the letter May not take legal or other action to collect the disputed amount and related charges during the investigation o The account cannot be closed or restricted, but the disputed amount may be applied against the account s credit limit May not threaten the consumer s credit rating or report the consumer as delinquent while the bill is in dispute; however, they may report that the consumer is challenging the bill If the consumer disagrees with the results of the investigation, they may write to the creditor. Correspondence must be within 10 days after receiving the investigation explanation and may indicate, if the bill is found to be correct in whole or part that they refuse to pay the disputed amount. If the consumer refuses payment, the creditor may begin collection procedures; if the creditor reports the consumer to the credit bureau as delinquent the report also must state that the consumer doesn t think they owe the money. The creditor must also tell the consumer which credit bureaus are receiving these reports. Investigation of billing error complaints may have any one of the following results: Bill contains errors Creditor is required to explain in writing how corrections will be made Account is credited with amount disputed Finance charges, late charges, and any other charges related to the dispute must be removed Consumer owes a portion of disputed amount Creditor is required to provide a written explanation to the consumer The creditor must credit the portion of the disputed amount found to be in error(plus related fees) - customer owes the difference The consumer has the right to request proof the money is owed Bill is correct Creditor must provide, in writing, how much is owed and why The consumer has a right to request proof the money is owed The consumer owes the disputed amount, plus any accumulated finance charges and may have to pay any minimum payment amount missed because of the dispute Creditors who fail to follow procedures may not collect the amount of the dispute, or any related finance charges. For example, if the creditor acknowledges the complaint in 45 days, the penalty applies since the acknowledgement is 15 days later than the required 30 day acknowledgement. If a creditor threatens to report or improperly reports a consumer s non-payment during a dispute Revised: April 7,

16 period, the penalty would apply. In addition to billing error disputes, the FCBA covers disputes about the quality of goods or services with a credit or charge card. Since these are not billing error disputes, the process for disputing allows consumers to take the same actions against the card issuer as they could take against the merchant or seller under state law. To dispute the quality of goods or services purchased with a credit or charge card, the consumer must: Have made the purchase in their home state or within 100 miles of their current billing address and the purchase must be for more than $50 o The dollar and distance limitations don t apply if the seller also is the card issuer, or if a special business relationship exists between the seller and the card issuer Make a good faith effort to resolve the dispute with the seller first Other rights and provisions under the Fair Credit Billing Act include that the creditor must: Give the consumer a written notice that describes the right to dispute billing errors when a new account is opened, as well as, periodically throughout the life of an open account Provide a statement for each billing period in which a balance or a credit is due over the amount of one dollar Apply all payments to the account on the date they re received, unless no extra charges would result if they fail to do so Promptly credit or refund any overpayments and other amount owed to the accountholder where they accountholder is owed more than one dollar Exercise 5.3: Billing error dispute process please click here to proceed to the exercise, or if you have downloaded the materials go to Exercise 5.3 in the Exercise section. The Fair Credit Reporting Act The Fair Credit Reporting Act is designed to promote accuracy and ensure the privacy of information used in consumer credit reports. The information below may have been, in whole or in part, discussed in Book 3 Credit; however the importance of the information warrants additional overview and, in some cases expansion. Consumer rights provided under the Fair Credit Report Act include that a consumer: Must be told if information in their credit file has been used against them the consumer must be given the name, address, and phone number of the agency that provided the information Has the right to know what is in their file and are entitled to a free report if: o Adverse action has been taken against the consumer because of information in the credit report o The consumer is the victim of identity theft and a fraud alert has been placed in the Revised: April 7,

17 file o The consumer file contains inaccurate information as a result of fraud o The consumer is on public assistance o The consumer is unemployed and expects to apply for employment within 60 days May request a credit score from consumer credit reporting agencies that create scores or distribute scores used in residential real estate loans however, in most circumstances there is a charge for a credit score Has the right to dispute incomplete or inaccurate information May limit prescreened offers of credit and insurance received based on information in the credit report o Unsolicited prescreened offers for credit and insurance must include a toll-free number the consumer can call to have their name and address removed from lists on which these offers are based o Consumers may opt-out with nationwide credit bureaus by calling (1-888-OPT-OUT) May seek damages from consumer reporting agencies, users of consumer reports, or furnishers of information to consumer reporting agency who violate the FCRA they may be able to sue in state or federal court Under the Fair Credit Report Act consumer reporting agencies: Must correct or delete inaccurate, incomplete, or unverifiable information within 30 days May not report outdated negative information May only provide information about the consumer to people with a valid need (as specified by the FCRA) such as the consideration of an application with a creditor, insurer, employer, landlord, or other business o A consumer reporting agency may not give out information about an individual to employers, or a potential employer, without the individual s written consent given to the employer While the CFPB assumed most of the FTC s rulemaking authority under the Act, the FTC retained its enforcement authority. And, although the Consumer Financial Protection Bureau (CFPB) provides enforcement of the FCRA, individual states may enforce the ACT and many have their own consumer reporting laws. And, consumers can contact their state or local consumer protection agency or their state Attorney General for state specific laws. NOTE: In addition to the three main consumer reporting agencies, the Fair Credit Reporting Act also classifies other information technology companies as "nationwide specialty consumer reporting agencies" that produce individual consumer reports used to make credit determinations. Some of the information collected may include information on medical records or payments, residential or tenant history, check writing history, employment history, and insurance claims. Because these nationwide specialty consumer reporting agencies sell consumer credit report files, they are also required to provide disclosures of their report files to any consumer who requests disclosure. Revised: April 7,

18 Fair and Accurate Credit Transactions Act The Fair and Accurate Credit Transactions Act amends the Fair Credit Reporting Act and allows consumers to request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies. The Act also contains provisions to help reduce identity theft such the ability for individuals to place alerts on their credit histories if they suspect identity theft or if deploying overseas with the military. Further, it requires secure disposal of consumer information. The Blue Diamond Gallery The Act also made permanent the uniform national standards of credit markets, and instituted new, stronger consumer protections and accomplished key provisions. The key provisions are directed to help ensure that all individuals, of every income level and background, are able to build good credit and confront the problem of identity theft. Key provisions of the Act include: Every consumer has the right to receive one free credit report every twelve months and be able to review the report, including activity that might be the result of identity theft Merchants are required to leave all but the last five digits of a credit card number off store receipts Consumer reporting agencies must create a national system of fraud detection to make identity thieves more likely to be caught and allow consumers to make only one call to receive advice, set off a nationwide fraud alert, and protect their credit standing o Consumer reporting agencies receiving alerts are obligated to follow procedures to ensure any future credit requests are being made by the true consumer o The law enables active duty military personnel to place special alerts on their files when deployed overseas o Regulators are required to devise a list of red flag indicators of identity theft, drawn from the patterns and practices of identity thieves They are required to evaluate the use of these indicators in their compliance examinations of financial institutions, and impose fines where disregard of red flags has resulted in losses to customers Lenders and credit agencies are required to take action before a victim may even know that a crime has occurred o Credit agencies, with oversight of bank regulators, must create a set of guidelines to identify patterns common to identity theft, and develop methods to stop identity theft before it can cause major damage Knowledge Check 5.4: What are key provisions under the Fair and Accurate Credit Transactions Act? Revised: April 7,

19 The Servicemembers Civil Relief Act The Servicemembers Civil Relief Act (SCRA) expanded and improved the former Soldiers and Sailors Relief Act. This Act provides Active Duty servicemen and servicewomen protections in varying areas related to financial management. Provisions include, but are not limited to, the below: Most creditors may only charge 6% interest on debts incurred before Active Duty commenced o Applies to mortgage debts for one year after duty ends o Does not apply to debts incurred while on Active Duty, federally guaranteed student loans, and some other obligations o Creditors may challenge this provision Creditors cannot sell, foreclose, or seize property for pre-service mortgage defaults during a servicemember s Active Duty or for nine months thereafter without a valid court order Servicemembers cannot be evicted for nonpayment of rent without a court order so long as the monthly rent does not exceed an amount adjusted based on the Consumer Price Index Property, such as a vehicle, cannot be repossessed for nonpayment, or a contract terminated or rescinded for a servicemember s breach prior to or during Active Duty without a court order Servicemembers, under certain circumstances, are permitted to terminate residential leases, vehicular leases, and telephone services written termination may be required NOTE: Servicemembers may waive these protections, as long as waiver is done in writing and signed during or after service (not before). Equal Credit Opportunity Act The Equal Credit Opportunity Act (ECOA), which falls under the authority of the CFPB, provides protections when consumers deal with organizations or people who regularly extend credit including, but not limited to: Banks Small loan and finance companies Retail and department stores Credit card companies Credit unions The Act prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, or because a consumer receives public assistance. Although creditors may ask a consumer most of this information in certain circumstances, they may not use it when deciding whether to extend credit or when setting terms of credit. Everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing, must comply with this Act. Revised: April 7,

20 Under the ECOA creditors cannot: Impose different terms or conditions (e.g. a higher interest rate or fees) based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance; or discourage a consumer for applying or reject an application based on these factors Ask if a consumer is widowed or divorced, or ask about marital status if the consumer is applying for a separate, unsecured account Ask if a consumer receives alimony, child support, or separate maintenance payments, unless they explain first that the consumer doesn t have to provide this information if they are not relying on these payments to get credit Consider a consumer s age, unless the consumer is too young to sign contracts (generally under 18), or the consumer is at least 62 and the creditor will grant favorable considerations because they are 62 or older Consider the racial composition of the neighborhood where the consumer wants to buy, refinance or improve a house with borrowed money Under the ECOA creditors can: Ask a consumer to provide information about their marital status if the consumer lives in a community property state like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin Ask a consumer to provide information about their marital status in any state, if the consumer applies for a joint account or one secured by property Ask if a consumer has to pay alimony, child support, or separate maintenance payments Consider the consumer s immigration status and whether the consumer has the right to stay in the country long enough to repay the debt Under the Equal Credit Opportunity Act, consumers have specific rights, which include the right to: Know why an application for credit is rejected o The creditor must provide the consumer with a specific reason for the rejection, if the consumer requests the reason within 60 days of a rejection notification o Information as to why credit has been rejected must be specific Know the specific reason they were offered less favorable terms than applied for, but only if these terms are rejected by the consumer Find out why an account was closed or why the terms of the account were made less favorable, unless the account was inactive or the consumer failed to make payments as agreed If a consumer believes they have been discriminated against, they can take the following steps: Contact the creditor o This should be the first step Revised: April 7,

21 o Creditors may be persuaded to reconsider the application Contact their state s Attorney General Office to see if the creditor violated any State equal credit opportunity laws Seek legal counsel who may suggest suing the creditor in federal district court REMINDER you are not an attorney nor are you authorized to give legal advice o If the consumer wins, it is possible they may recover: Actual damages the amount necessary to compensate for loss or injuries Punitive damages, if the creditor s conduct is found to be willful an amount used to punish wrongdoing Reasonable lawyers fees and court costs A number of federal agencies share enforcement responsibility for the Equal Credit Opportunity Act and violations must be reported to the appropriate government agency. If a consumer has been denied credit, the creditor must provide the name and address of the correct agency to contact. For a listing of agencies, click here. Exercise 5.4: What creditors can and cannot do under the ECOA please click here to proceed to the exercise, or if you have downloaded the materials go to Exercise 5.4 in the Exercise section. Check Clearing for the 21 st Century Act (Check 21) The Check Clearing for the 21 st Century Act, also called the Check 21, allows paper checks to be replaced with copies called substitute checks. Consumers have certain rights related to these check payments. For example, consumers are protected against wrong and unauthorized check payments, whether they get back a paper check, a substitute check, an electronic image of the check, or a line-item description of the check. Check 21 also includes a special refund procedure if a consumer suffers a loss related to a substitute check they receive. Electronic Funds Transfer Act The Electronic Funds Transfer Act (EFTA) provides protections to consumers using electronic fund transfers, such as: Automatic Teller Machines (ATMs) Debit cards Gift cards General purpose prepaid cards Direct deposits such as payroll checks Point of sales transactions payment for goods and services Telephone and internet monetary transfers Pre-authorized withdrawals from checking and savings accounts Electronic check conversion conversion of a paper check into an electronic payment; once the check is scanned, it becomes null and void Revised: April 7,

22 Not all electronic fund transfers are covered by the Electronic Funds Transfer Act. For example, some financial institutions and merchants issue cards with cash value stored electronically on the card itself. Examples include prepaid telephone cards, mass transit passes, and some gift cards. These "stored-value" cards, as well as transactions using them, are not usually covered by this Act, and consumers may not be covered for the loss or misuse of the card. The EFTA specifically addresses practices in connection with a bank s payment of overdrafts on a deposit account whether the overdraft is a result of a check, ATM withdrawal, debit card purchase, or other transactions. The Act requires institutions to provide consumers with a notice and an opportunity to opt-in to any overdraft program, before any overdraft fees or charges may be imposed on a consumer s account. This CompareRemit provision applies to all banks, savings associations, and federally chartered credit unions. Under this Act, financial institutions may only charge overdraft fees if the institution: Provides the consumer with a written notice describing the overdraft protection program Allows reasonable opportunity for the consumer to affirmatively consent, or opt-in, to the program for ATM and one-time debit card transactions Retains written confirmation of the consumer's consent and includes a statement informing the consumer of the right to revoke such consent The consumer must also affirmatively consent, or opt-in, to the payment of ATM and one time debit card transactions The EFTA further requires financial institutions to: Send consumers a detailed monthly statement Establish and implement procedures to resolve erroneous transfers Limit consumer liability for unauthorized transfers and provide the consumer with a summary o Liability for theft or card loss is limited to $50 if the bank is notified within two business days o Liability is limited to $500, if notification occurs after two business days but within sixty calendar days of the statement showing the first unauthorized transfer Liability is unlimited if notification occurs after sixty calendar days of the statement showing the first unauthorized transfer Promptly re-credit a consumer s account if funds are withdrawn from a consumer s account without their permission o Upon notification, the financial institution has ten days to investigate o The financial institution must notify the consumer of the investigation results within three days of concluding the investigation o If an error was made, the financial institution must correct it within one day Display all transaction fees on ATMs and provide a notice that the consumer may be charged a fee by ATMs where they don t have an account Revised: April 7,

23 Provide the address and telephone numbers for consumers to contact if they believe there has been an unauthorized electronic fund transfer from their account Establish limits regarding how much can be withdrawn electronically during a defined period of time Allow consumers to stop payments on recurring payments from their account e.g. Gym memberships, car insurance, etc. o The consumer must notify the company at least three days prior to the scheduled transfer o Verbal notification must be followed by written notification within fourteen days Provide consumers with details regarding the type of transfer they can make, fees for transfers, and any limits on the frequency and dollar amount of transfers Knowledge Check 5.5: What disclosures are financial institutions required to provide consumers under the EFTA and what are the consumer liability limits under the ACT for unauthorized transfers? Expedited Funds Availability Act The Expedited Funds Availability Act require all banks, savings and loan associations, savings banks, and credit unions to make funds deposited into checking, share draft, and NOW accounts available according to specified time schedules. Financial institutions must disclose their hold policies to all account holders, and make the policy available in written form upon request by any customer. It must also be provided at the time of opening of all new accounts. The law does not require an institution to delay the customer's use of deposited funds but instead limits how long any delay may last. The regulation also establishes rules designed to speed the return of unpaid checks. The Federal Reserve Board and the Consumer Financial Protection Bureau are responsible for implementing the Act. GRAMM LEACH BLILEY ACT SIMSnippets The Gramm Leach Bliley Act, also known as the Financial Services Modernization Act, applies to financial institutions. The term financial institutions refers to any company that offers financial products or services to individuals, such as: Loans Financial or investment advice Insurance Consumer counseling services (such as NFCC member agencies) This Act requires the Federal Trade Commission, along with several other agencies, to issue regulations ensuring the privacy of consumers personal financial information and limits the sharing of account number information for marketing purposes. However, Dodd-Frank transferred Revised: April 7,

24 much of the rulemaking authority under the Act to the CFPB. Regulations include requiring financial institutions to: Develop and give notice of their privacy policies to their own customers; delivery of the privacy policy must be given: o To customers (consumers/clients) on an annual basis o Prior to disclosing any consumer s personal financial information to an unaffiliated third party Give notice of and an opportunity for that consumer to opt out from such disclosures Not obtain customer information from a financial institution by false pretenses The National Foundation for Credit Counseling is committed to assuring the privacy of individuals and/or families who have contacted their member agencies for assistance. The NFCC has very specific requirements for agencies to follow as outlined in the NFCC Member Quality Standard number 18. As a counselor you will need to be familiar with the privacy and disclosure notification that is used by your agency and will be required to provide this notification to every client. Reminder: Your Agency s privacy policy should be delivered prior to conducting a counseling session. Verbal delivery of the privacy notice to telephone clients is acceptable as long as the client s file is properly documented illustrating its delivery (however, your Agency s internal policies may require a signed privacy notice by all parties prior to counseling check with your supervisor to determine your Agency s policy). If two parties are involved the notation should reflect who was present in the session and in receipt of the privacy policy. For example, Mr. and Mrs. Smith are seeking counseling, Mrs. Smith was not in the session. The file note may read: Privacy policy delivered and acknowledged by Mr. Smith; Mrs. Smith not in session. REGULATIONS SPECIFIC TO HOUSING As a Certified Credit Counselor, you will assist clients who may be in one of the many housing life cycles such as home purchase, rental, or foreclosure. Dependent on your Agency s needs, you may be required to progress to the NFCC Certified Housing Counselor certification and complete Book 7 Housing. However, if you are not a housing counselor, becoming familiar with regulations specific to housing will allow you to provide education to your clients regarding their housing rights and responsibilities. If you will be delivering housing counseling and your Agency elects the NFCC Certified Housing Counselor certification to fulfill required housing certifications, you may see areas of the housing information to follow expanded upon in Book 7. FAIR HOUSING ACT Families Forward While the Equal Credit Opportunity Act prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you get public assistance, Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act, prohibits discrimination in all aspects of residential real-estate related transactions, including: Revised: April 7,

25 Making loans to buy, build, repair, or improve a dwelling Selling, brokering, or appraising residential real estate Selling or renting a dwelling The Fair Housing Act has been further strengthened by the Fair Housing Amendment Act, which added new protected classes and defined enforcement mechanisms. The Act is enforced by the U.S. Department of Housing and Urban Development (HUD) and covers most housing. In some circumstances, the Act exempts owner-occupied buildings with no more than four units, singlefamily housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members. Within HUD, the Office of Fair Housing and Equal Opportunity administers federal laws and establishes national policies that make sure all Americans have equal access to the housing of their choice. The Fair Housing Act prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on: race, color, national origin, religion, sex, handicap and disability, or family status, including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18. Protections include, but are not limited to those displayed in the chart below. When: Buying, selling, or renting Mortgage Lending Decisions cannot not be based on race, color, national origin, religion, sex, disability, or familial status and includes: Refusing to rent, sell, or negotiate for housing Denying housing Establishing terms or conditions that vary from individual to individual Falsely denying housing is available Denying access to facilities normally available to homeowners or renters Denying access to services related to the sale or rental of housing Refusing Homeowner s or Renter s insurance Maintaining property condition differently Refusing lending opportunities or information Applying different terms or conditions on a loan Applying different terms or condition when purchasing a loan or refusing to purchase a loan Discriminating when appraising property It is also illegal for anyone to: Threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right or assisting others who exercise that right Advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap; this prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act Revised: April 7,

26 Protections for Disabled Persons The Fair Housing Act has specific considerations for individuals with disabilities. Federal laws define a person with a disability as "any person who has a physical or mental impairment that substantially limits one or more major life activities; has a record of such impairment; or is regarded as having such impairment." A physical or mental impairment includes hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex, and mental retardation that substantially limit one or more major life activities. Major life activities include walking, talking, and hearing, seeing, breathing, learning, performing manual tasks, and caring for oneself. For individuals with a disability, a landlord may not: Refuse to rent or sell to a person simply because of a disability Impose different application or qualification criteria, rental fees or sales prices, and rental or sales terms or conditions than those required of or provided to persons who are not disabled Refuse reasonable accommodation, such as a change in rules, policies, practices, or services, so that a person with a disability will have an equal opportunity to use and enjoy a dwelling unit or common space Refuse reasonable modifications to the dwelling or common use areas, at the tenant's expense, if necessary for the disabled person to use the housing; where reasonable, the landlord may permit changes only if the tenant agrees to restore the property to its original condition when they move Housing does not have to be made available to a person who is a direct threat to the health or safety of others, whose tenancy would substantially damage the property of others, or who currently uses illegal drugs, but landlords are not allowed to make presumptions that any disabled person's tenancy would actually threaten health or safety, or cause property damage. A landlord may request a description of the proposed modification and, obtain assurances that the construction will be done properly and that any necessary building permits will be obtained. In addition, a landlord may require that the tenant make escrow deposits to ensure that money will be available to pay for reversing any modifications and restoring the property to its original condition at the end of the lease. The Fair Housing Act also has specific requirements to meet the needs of disabled persons for buildings that were ready for first occupancy after March 31, The Act requires buildings and/or owners to: Have an elevator Make any public or common areas accessible for persons with disabilities applies to buildings with four or more units Ensure doors and hallways are wide enough for wheelchairs to pass Revised: April 7,

27 Have an accessible route into and throughout the unit Ensure light switches, electrical outlets, thermostats, and other environmental controls are accessible Have reinforced bathroom walls to allow a later installation of grab bars Ensure kitchens and bathrooms can accommodate wheelchairs If a building has four or more units and does not have an elevator, then the above standards apply only to ground floor units. Note: Many states and localities have fair housing laws that are substantially equivalent to the Federal Fair Housing Act. Some of these laws may impose more stringent design and construction standards for new multifamily housing. Knowledge Check 5.6: Regarding individuals with a disability, what specific actions is a landlord prohibited from doing under the Fair Housing Act? Housing Opportunities for Families dcf.wisconsin.gov Under the Fair Housing Act, unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. Therefore it may not discriminate against families in which one or more children under the age of 18 live with: A parent A person who has legal custody of the child or children The designee of the parent or legal custodian, with the parent or custodian's written permission Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18. Housing for older persons is exempt from the prohibition against familial status discrimination if: The HUD Secretary has determined that it is specifically designed for and occupied by elderly persons under a Federal, State, or local government program It is occupied solely by persons who are 62 or older It houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates intent to house persons who are 55 or older Housing for Older Persons Act The Housing for Older Persons Act makes several changes to the Fair Housing Act s 55 and older exemption. The Housing for Older Persons Act: Revised: April 7,

28 Eliminates the requirement that 55 and older housing have "significant facilities and services" designed for the elderly Establishes "good faith reliance" immunity from damages for persons who in good faith believe that the 55 and older exemption applies to a particular property, if they do not actually know that the property is not eligible for the exemption and if the property has formally stated in writing that it qualifies for the exemption Retains the requirement that senior housing must have one person who is 55 years of age or older living in at least 80 percent of its occupied units Retains the requirement that senior housing publish and follow policies and procedures that demonstrate intent to be housing for persons 55 and older An exempt property does not violate the Fair Housing Act if it includes families with children, but it does not have to do so. The property must meet the Act's requirements that at least 80 percent of its occupied units have at least one occupant who is 55 or older, and that it publish and follow policies and procedures that demonstrate intent to be 55 and older housing. Filing a Fair Housing Discrimination Complaint Better Business Bureau Although you cannot give legal advice, you can direct an individual who feels their rights have been violated under the Fair Housing Act to report it to HUD. The individual (complainant) has up to one year after a suspected violation to file a complaint with HUD. To report an incident to HUD, an individual can visit the HUD website and complete the Housing Discrimination Complaint Form found at: The Housing Discrimination Complaint Form can be completed online, or printed and mailed to HUD. A complaint can also be submitted by: Writing a letter or ing HUD Telephoning the nearest HUD Office Information provided to HUD must include: The complainant s name and address Name and address of the person the complaint is issued against Date or dates of the possible violation The address or other identification of the housing involved Description of the event that caused them to believe their rights were violated HUD will notify the complainant when it receives the complaint and will normally: Notify the alleged violator of the complaint and permit that person to submit an answer Investigate the complaint and determine whether there is reasonable cause to believe the Revised: April 7,

29 Fair Housing Act has been violated Notify the consumer if it cannot complete an investigation within 100 days of receiving the complaint HUD will try to reach an agreement with the person the complaint is against (the respondent) and have a conciliation agreement signed. If the agreement, protecting both the consumer and the public interest, is signed, HUD will take no further action on the complaint. However, if HUD has reasonable cause to believe that a conciliation agreement has been breached, HUD will recommend that the Attorney General file suit. Hypebot If HUD proceeds with an investigation and it reveals reasonable cause to believe discrimination occurred, HUD will notify the consumer and hold an administrative hearing within 120 days, unless the consumer or the respondent ask that the case be heard in federal district court. The consumer does not incur any cost for an administrative or federal district court hearing. If the case goes to an administrative hearing: HUD attorneys will litigate the case on the consumer s behalf, however the consumer may intervene in the case and be represented by their own attorney An Administrative Law Judge will consider evidence from the consumer and the respondent If the Administrative Law Judge decides that discrimination occurred, the respondent can be ordered to: o Compensate the consumer for actual damages, including humiliation, pain and suffering o Provide injunctive or other equitable relief such as making the housing available to the consumer o Pay the Federal Government a civil penalty to vindicate the public interest; the maximum penalties range from $16,000 for a first violation up to $65,000 for a third violation within seven years o Pay reasonable attorney's fees and costs If the consumer or the respondent chooses to have the case decided by a federal district court hearing: The Attorney General will file a suit and litigate it on behalf of the consumer. The Federal District Court can order relief, and award actual damages, attorney's fees and costs; the court can also award punitive damages If a consumer wishes, they may file suit, at their expense, in Federal District Court or State Court within two years of an alleged violation. If the consumer cannot afford an attorney, the Court may appoint one for them. The consumer may bring suit even after filing a complaint, if they have not signed a conciliation agreement and an Administrative Law Judge has not started a hearing. A court may award actual and punitive damages and attorney's fees and costs. Revised: April 7,

30 If there is noncompliance with the order of an Administrative Law Judge, HUD may seek temporary relief, enforcement of the order, or a restraining order in a United States Court of Appeals. The Attorney General may file a suit in a Federal District Court if there is reasonable cause to believe a pattern or practice of housing discrimination is occurring. Sometimes state or local agencies are equipped with the same fair housing powers as HUD. In such cases, the HUD staff will refer a client's complaint to the appropriate agency for investigation (notifying the client of the referral). If that agency does not begin working on the complaint within 30 days, HUD may take it back and proceed with further action. If a consumer needs immediate help to stop a serious problem that is being caused by a Fair Housing Act violation, HUD may be able to assist them as soon as a complaint is filed. HUD may authorize the Attorney General to go to court to seek temporary or preliminary relief, pending the outcome of the complaint if: Irreparable harm is likely to occur without HUD's intervention There is substantial evidence that a violation of the Fair Housing Act occurred For example, if a builder agrees to sell a house but, after learning the buyer is disabled, fails to keep the agreement and the buyer files a complaint with HUD, HUD may authorize the Attorney General to go to court to prevent a sale to any other buyer until HUD investigates the complaint. How to contact HUD: Website to find the nearest HUD Office: utfheo/fhhubs Call toll-free: TTY phone for hearing impaired: Knowledge Check 5.7: What are the differences between an administrative and a federal district court hearing in relation to a complaint submitted to HUD regarding potential housing discrimination? Real Estate Settlement Procedures Act The Real Estate Settlement Procedure Act (RESPA) requires lenders to provide borrowers with standardized disclosures regarding key terms, closing costs, and a HUD settlement statement. Lenders must give all federally insured mortgage applicants a HUD-prepared booklet with information about real estate transactions, settlement services, cost comparisons, and relevant consumer protection laws. The purpose of this consumer protection statute is to: Revised: April 7,

31 Help consumers become better shoppers for settlement costs Eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services Protects homebuyers by: Requiring lenders of most close-ended loans after 10/3/15 to provide a Loan Estimate document; for closed-ended loans prior to 10/3/15 it required borrowers be provided, by the lender, a good faith estimate(gfe) in advance of loan closing with estimates of settlement costs Requiring the lender to provide a servicing disclosure statement Limiting escrow account amounts Prohibiting referral fees and kickbacks Prohibiting sellers from designating the borrowers title insurance company THE FEDERAL TRADE COMMISSION The Federal Trade Commission deals with issues that touch the economic life of every American. Similar to the CFPB, the FTC has both consumer protection and competition jurisdiction in broad sectors of the economy. The FTC pursues vigorous and effective law enforcement; advances consumers' interests by sharing its expertise with federal and state legislatures and U.S. and international government agencies; develops Target Marketing policy and research tools through hearings, workshops, and conferences; and creates practical and plain-language educational programs for consumers and businesses in a global marketplace with constantly changing technologies. The Dodd-Frank Act transferred most rulemaking authority from the FTC to the Consumer Financial Protection Bureau, but the FTC retains certain shared and individual responsibilities. Federal Trade Commission Act Under the Federal Trade Commission Act, the Commission is empowered, among other things, to: Prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce Seek monetary redress and other relief for conduct injurious to consumers Prescribe trade regulation rules defining specific acts or practices that are unfair or deceptive, and establish requirements designed to prevent such acts or practices Conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce Make reports and legislative recommendations to Congress Revised: April 7,

32 Consumer Protection The Federal Trade Commission's Bureau of Consumer Protection was established to protect consumers from unfair, deceptive, or fraudulent business practices through law enforcement and oversight activities. The goal is to ensure consumer access to free and informed choice among purchase options in the marketplace. The Bureau of Consumer Protection works to protect consumers against unfair, deceptive, or fraudulent practices in the marketplace. The Bureau conducts investigations, sues companies and people who violate the law, develops rules to protect consumers, and educates consumers and businesses regarding their rights and responsibilities. The Bureau also collects complaints about consumer fraud and identity theft and makes them available to law enforcement agencies across the country. The Bureau has seven divisions, each with its own area of expertise (for a thorough overview of these divisions, click here): Area of Expertise Coverage/Activities Advertising practices Enforces the nation s truth-in-advertising laws, with particular emphasis on claims for: cure-all claims for dietary supplements and weight loss products, alcohol, tobacco, violence in video games, music and games, and the impact of these on children Consumer and business education Plans, develops, and implements creative national campaigns to alert consumers as to their rights and to explain compliance to the industry Enforcement Litigates civil contempt and civil penalty actions to enforce all FTC federal court injunctions and administrative orders that address consumer protection issues, including: advertising and financial practices, data security, high-tech fraud, and telemarketing and other scams Coordinates with criminal law enforcement through its Criminal Liaison Unit Litigates civil actions against those who defraud consumers Reviews and enforces a variety of consumer protection rules Financial practices Protects consumers from deceptive and unfair practices in the financial industry, including protecting them from predatory or discriminatory lending practices, as well as deceptive or unfair loan servicing, debt collection, and credit counseling or other debt assistance practices Marketing practices Leads the Commission s response to Internet, direct mail fraud, and telecommunications Areas include: deceptive spam, fraudulent business, investment, work-at-home schemes, and violations of the Do Not Call Revised: April 7,

33 Planning and information Privacy and identity protection provisions of the Telemarketing Sales Rule Collects, analyzes, and makes available to law enforcement consumer fraud, identity theft, and National Do Not Call Registry complaints Assists in the distribution of redress to consumers Provides technological investigative and litigation support Safeguards consumers financial privacy Investigates breaches of data security Works to prevent identity theft and aids consumers whose identities have been stolen Implements laws and regulations for the credit reporting industry, including the Fair Credit Reporting Act Knowledge Check 5.8: What are the activities and coverages that fall within the seven division areas of expertise under the Bureau of Consumer Protection? Investigative Authority under the FTC The FTC may begin an investigation as a result of 1) letters from consumers or businesses, 2) Congressional inquiries, or 3) articles on consumer or economic subjects. Although investigations can be public or nonpublic, FTC investigations are generally nonpublic in order to protect both the investigation and the company. If the FTC believes a violation of the law occurred, it may attempt to obtain voluntary compliance by entering into a consent order with the company. By signing the order, a company need not admit that it violated the law, but agrees to stop the disputed practices outlined in the complaint. The FTC may issue an administrative complaint if a consent agreement cannot be reached. Once the complaint is issued, a formal proceeding (which is much like a court trial) begins before an administrative law judge: evidence is submitted, testimony is heard, and witnesses are examined and cross-examined. If a law violation is found, a cease and desist order or other appropriate relief may be issued. Initial decisions by administrative law judges may be appealed to the full Commission. Final decisions issued by the Commission may be appealed to the U.S. Court of Appeals and, ultimately, to the U.S. Supreme Court. If the Commission's position is upheld, the FTC, in certain circumstances, may then seek consumer redress in court. If the company ever violates the order, the Commission also may seek civil penalties or an injunction. In some circumstances, the FTC can go directly to court to obtain an injunction, civil penalties, or consumer redress. This usually happens in cases of ongoing consumer fraud. By going directly to court, the FTC can stop the fraud before too many consumers are injured. Revised: April 7,

34 FTC process when a violation may have incurred (overview of steps outlined above): Suspected violation Consent order signed? Yes No Company agrees to stop disputed practices Administrative complaint issued Formal proceeding held Violation found? No Yes Cease and desist/relief order issued Revised: April 7,

35 The Commission can also issue Trade Regulation Rules. If the FTC staff finds evidence of unfair or deceptive practices in an entire industry, it can recommend that the Commission begin a rulemaking proceeding. Throughout the rulemaking proceeding, the public will have opportunities to attend hearings and file written comments. The Commission will consider these comments along with the entire rulemaking record--the hearing testimony, the staff reports, and the Presiding Officer's report -- before making a final decision on the proposed rule. An FTC rule may be challenged in any of the U.S. Courts of Appeal. Consumers can file complaints by contacting the Federal Trade Commission s Consumer Response Center: Phone: (877-FTC-HELP); 9AM 5PM EST; Monday Friday Mail: Consumer Response Center Federal Trade Commission 600 Pennsylvania Ave., NW Washington, DC Internet: Knowledge Check 5.9: What steps are taken by the FTC when a complaint is received regarding a possible violation of consumer protection regulations? Deceptive Trade Practices In your role as a counselor, you may assist clients who may have been victims of fraud or deceptive practices. Fraud is a deliberate action on the part of a seller to intentionally mislead a consumer in order to secure an unfair or unlawful gain or advantage: fraud, therefore, occurs when the seller purposely deceives the consumer, who enters a transaction and consequently suffers a financial loss. The five elements that must be proven to show fraud include: False representations Knowledge that facts stated were untrue Intention to deceive the victim Belief by the victim that the false representations are true Damages are suffered because of the victim s reliance on the untruths Under the FTC definition, a deception is a material representation, omission, or practice that is likely to mislead the consumer, who acts reasonably under the circumstances, to the consumer's detriment. Material information is information that is important to the consumer's consideration of a purchase and that is likely to affect the consumer's choice of a product. Revised: April 7,

36 A consumer who enters into a sales transaction because of deceptive trade practices has the choice of either suing for money damages or rescinding the contract (getting out of the transaction by repealing or annulling the contract and making it void). In contrast to fraud, a misrepresentation is the reporting of something (such as a performance claim) by words or behavior in a mistaken or false manner that does not fit the actual facts. This includes relevant omissions as well. Most misrepresentations, even outright lies, are not considered fraudulent by the courts. There are two types of misrepresentations: Misrepresentation with innocent, mistaken, and unintentional false statements Misrepresentation with intentional false statements Conversely, puffing is generally not legally considered fraud, since consumers are expected to know the sellers tend to exaggerate. Puffing involves exaggerated statements and opinions by a seller as to the quality or value of an item offered for sale, when the statements and opinions are not made as a representation of fact. For example, XYZ pillows are as fluffy as a cloud." and "ABC coffee is the best in the world." Knowledge Check 5.10: What five elements must be proven in order to demonstrate fraud? FTC CONSUMER FACTS AND ALERTS Education regarding potentially fraudulent business practices can prevent clients from entering into services or purchasing goods that will negatively impact them. You can refer clients preparing to do business with an individual or company to the Federal Trade Commission who offers practical information on a variety of consumer topics which can help consumers avoid rip-offs and exercise their consumer rights. You can also encourage clients to check with their: State Attorney General Local consumer protection agency Better Business Bureau These entities can tell the client if any consumer complaints are on file about the company they're considering doing business with. The client can also ask the state Attorney General if the company is required to be licensed to work in their state and, if the company is licensed in their state. You can further educate clients by providing information on known scams and practices that may negatively impact them. The following pages will cover a number of practices and scams to be aware of. Revised: April 7,

37 Debt Negotiation or Debt Settlement Programs Debt negotiation differs greatly from credit counseling and Debt Management Programs. It can be very risky, and have a long term negative impact on a consumer's credit report and their ability to obtain credit. Due to the possible risks to consumers, many states have laws regulating debt negotiation companies and the services they offer. Debt negotiation companies make a number of claims that attract consumers, including that they are nonprofit and that they can arrange for unsecured credit card debt to be paid off for less than the balance owed. They may also state they are an alternative to bankruptcy and that using their services 1) will have little or no negative impact on a consumer s ability to get credit in the future, or 2) negative information can be removed from their credit report when the debt negotiation program is complete. Companies may also tell consumers to stop making payments to their creditors, and instead, send payments to the debt negotiation company. The company may promise to hold funds in a special account and pay the consumer's creditors on their behalf. Grace Baptist Church Clients should be aware that just because a debt negotiation company describes itself as a "nonprofit" organization, there's no guarantee that the services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt. In fact, if a consumer stops making payments on a credit card, late fees and interest usually are added to the debt each month. If they exceed the credit limit, additional fees and charges also can be added: causing the original debt to double or triple. Most debt negotiation companies charge consumers substantial fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee of a percentage of the money the consumer supposedly saved. And finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income. Credit Repair Credit problems? No Problem! We can erase your bad credit 100% guaranteed. Companies offering credit repair services all make similar claims but they're very likely signs of a scam. There are no quick credit fixes, and attorneys at the nation's consumer protection agency say they've never seen a legitimate credit repair operation making those claims. Credit repair companies target consumers who have poor credit histories with promises to clean up their credit report. But these companies can't deliver an improved credit report using the tactics they promote because they re illegal; no one can remove accurate negative information from a credit report. Signs that a company or individual is operating a credit repair scam include that the company: Revised: April 7,

38 Wants payment before they provide services (under the Credit Repair Organizations Act, a consumer cannot be required to pay until they have completed promised services) Fails to tell the consumer their rights and what they can do for themselves for free Recommends the consumer not to contact any of the three major national credit reporting companies directly Tells the consumer they (the company) can get rid of most or all the negative credit information in their credit report, even if that information is accurate and current Suggests that the consumer can try to invent a "new" credit identity -and then, a new credit report -by applying for an Employer Identification Number to use instead of their Social Security number Advises the consumer to dispute all the information in their credit report, regardless of its accuracy or timeliness If a consumer follows illegal advice and commits fraud, they may face legal consequences - it's a federal crime to lie on a loan or credit application, to misrepresent their Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. Consumers could be charged and prosecuted for mail or wire fraud if they use the mail, telephone, or internet to apply for credit and provide false information. Free Credit Reports Many websites claim to offer "free credit reports," "free credit scores," or "free credit monitoring" and in some cases, the "free" product comes with strings attached. For example, some sites sign consumers up for a supposedly "free" service that converts to a "fee" after a trial period ends. And, if consumer doesn't cancel during the trial period, they could be agreeing to let the company start charging fees to a credit card. These sites often look like the official site at annualcreditreport.com. Some use terms like "free report" in their names; others have website names that purposely misspell annualcreditreport.com in the hope that consumers will mistype the name of the official site. Some of these "imposter" sites direct consumers to other sites that try to sell them something or collect their personal information. Per the Federal Trade Commission (FTC), if a consumer wants to order their free annual credit report online, they should utilize which is the only authorized website part of the official annual free credit report program. Consumers should not reply, click on any link in an or pop-up ad claiming it's from annualcreditreport.com or any of the three nationwide consumer reporting companies. Consumer reporting companies and annualcreditreport.com will never send out an solicitation or use pop-up ads for free annual credit reports, and will never call consumers to ask for personal information. These s or ads are an example of "phishing." Phishing is a high-tech scam that uses spam or fraudulent web sites to deceive consumers into disclosing their credit card numbers, bank account information, Social Security numbers, passwords, and other sensitive information. Consumers should forward any that claims to be from annualcreditreport.com or any of three consumer reporting companies to the FTC's database for deceptive spam at spam@uce.gov. Revised: April 7,

39 Debt Relief Scams Your clients typically come to you with debt problems, whether due to an illness, unemployment, or overspending. Their sense of being overwhelmed may tempt them to find quick relief, but you will need to educate them as to the dangers surrounding advertisements that offer quick fixes. While these ads provide the promise of debt relief, they often are selling bankruptcy. While bankruptcy is one option to deal with financial problems, it's generally considered the option of last resort because of its long-term negative impact on a consumer's creditworthiness. The Federal Trade Commission cautions consumers to investigate offers of quick fixes and debt relief carefully and avoid offers to: "Consolidate your bills into one monthly payment without borrowing" "STOP credit harassment, foreclosures, repossessions, tax levies, and garnishments" "Keep Your Property" Consumers find out later that such phrases often involve filing for relief under Federal bankruptcy protection laws, which can hurt their credit and cost attorneys' fees.. Payday Loans These loans are advertised using a variety of different names: payday loans, cash advance loans, check advance loans, post-dated check loans, or deferred deposit loans. The Federal Trade Commission warns that regardless of their name, these small, short-term, high-rate loans issued by check cashing companies, finance companies and others all come at a very high price. Google+ With payday loans, a consumer writes a personal check payable to the lender for the amount they want to borrow, plus the fee they must pay for borrowing. The company gives the borrower the amount of the check less the fee, and agrees to hold the check until the loan is due - usually the borrower's next payday. Fees on these loans can vary greatly and be 1) a percentage of the face value of the check, or 2) based on increments of money borrowed. If the borrower cannot afford to pay back the loan on time, they may be offered the opportunity to extend or "roll over" the loan. Each time the same loan is extended or rolled over the borrower is charged new fees. The Federal Truth in Lending Act treats payday loans like other types of credit. Payday lenders must disclose the following to the consumer before they sign the loan: Cost of the loan Dollar amount of the finance charge Annual percentage rate Cost of credit on a yearly basis NOTE: payday loans are illegal in some states Revised: April 7,

40 Protections for Military Consumers Payday loans (and certain other financing) offered to service members and their dependents must include certain protections, under Federal law and a Department of Defense rule. For example, for payday loans the military annual percentage rate cannot exceed 36%. Most fees and charges, with few exceptions, are included in the rate. Creditors also may not require use of a check or access to a bank account for the loan, mandatory arbitration, and unreasonable legal notices. Military consumers also must be given certain disclosures about the loan costs and their rights. Military consumers with concerns can contact the Department of Defense, toll-free 24 hours a day, 7 days a week, at or at Advance Fee Loan Scams Even though banks and financial institutions may legitimately request a processing fee when a consumer applies for a mortgage and certain other loans, consumers should be very cautious if approached by an organization that claims to make loans but requires an upfront processing fee. Remind clients never to sign documents under such circumstances and to thoroughly investigate the company and what they offer before making a decision. One common variation on the Advanced Fee scam involves offers from an individual in another country promising big profits in exchange for help moving large sums of money out of their country. Claiming to be a bank or government official, businessperson, or even the surviving spouse, the con-artists offer to transfer millions of dollars into a consumer's bank account in exchange for a small fee. If the consumer responds to the initial offer, they may receive "official looking" documents. The victim in this scam is usually asked to provide blank letterhead and their bank account numbers, as well as money to cover transaction and transfer costs and attorney's fees. Often, emergencies or other "difficulties" come up, requiring more money from the victim and delaying the "transfer" of the funds. In the end, there aren't any actual profits to share, and before the victim realizes what has happened, the scam artist has vanished with their money. Consumers should also be aware of the risks involved with loans obtained over the internet. The borrower may be required to provide financial information and pay application fees even if the loan is not approved. The borrower also may not have the consumer rights of their state as this transaction may be treated as an out-of-state transaction in the state of origination. The Federal Trade Commission warns consumers to be cautious of: Lenders who aren't interested in the borrower's credit history Fees that are not disclosed clearly or prominently Loans that are offered by phone Revised: April 7,

41 FORECLOSURE Lenders who use a copy-cat name Lenders who are not registered or licensed in the borrower's state Lenders who ask the borrower to wire money or pay an individual Foreclosure Rescue Scams As a counselor, you may need to help clients recognize foreclosure rescue scams. Even if a foreclosure process has already begun, you can warn clients of possible scams and that there are legitimate options available to help consumer s save their home. Fraudulent foreclosure "rescue" professionals use half-truths and outright lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit through fees or mortgage payments they collect from desperate homeowners and sometimes these scammers assume ownership of the property by deceiving the homeowner. Foreclosure rescue firms use a variety of tactics to find homeowners in distress: some sift through public foreclosure notices in newspapers and on the internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach placing ads on the internet or television, in the newspaper, or place posters on telephone poles, median strips and at bus stops, or leave flyers or business cards a homeowner s door. The scam artists use simple and straight-forward messages, like: "Stop Foreclosure Now!" "We guarantee to stop your foreclosure" "We Can Save Your Home. Guaranteed. Free Consultation" Scams specific to housing include the following: Phony Counseling or Phantom Help o The scam artist tells the consumer that they can negotiate a deal with the lender to save the house if the consumer pays a fee first o The homeowner may be told not to contact their lender, lawyer, or credit counselor, and to let the scam artist handle all the details o Once the fee is paid, the scam artist takes off Bait-and-Switch o The consumer is told to sign documents for a new loan to make the existing mortgage current o The signed documents actually surrender the title of the house to the scam artist in exchange for a rescue loan Rent-to-buy Scheme o The homeowner is told to surrender the title as part of a deal that allows them to remain in the home as a renter, and to buy it back during the next few years; however one the following typically results: Terms of these deals are usually so burdensome that buying back the home is impossible resulting in the consumer losing the home and the scam artist Revised: April 7,

42 walking away with all or most of the home s equity The scam artist raises the rent over time to the point that the former homeowner can t afford it; after missing several rent payments, the former homeowner is evicted leaving the rescuer free to sell the house o In a similar equity-skimming situation, the scam artist offers to find a buyer for the home, but only if the homeowner signs over the deed and moves out The scam artist promises to pay a portion of the profits when the home sells Once the deed is transferred the scam artist simply rents out the home and pockets the proceeds while the lender proceeds with the foreclosure In the end, the consumer loses the home and is still responsible for the unpaid mortgage - transferring a deed does nothing to transfer the mortgage obligation Bankruptcy Foreclosure o A scam artist promises to negotiate with the lender or to get refinancing on behalf of the homeowner if they pay a fee up front o Instead of contacting the lender or refinancing the loan, the scam artist pockets the fee and files a bankruptcy case in the name of the homeowner - sometimes without their knowledge If you are working with a client who is delinquent with their mortgage or in the foreclosure process, encourage them to: Work with a Certified Housing Counselor to discuss possible options and alternatives if your Agency does not offer housing counseling, refer them to an NFCC member agency who does Contact and stay in touch with their lender Consider free legal counsel Remind clients looking for foreclosure prevention help to avoid any business that: Guarantees to stop the foreclosure process Instructs the homeowner not to contact the lender, lawyer, or credit or housing counselor Collects a fee before providing any services Accepts payment only by cashier's check or wire transfer Encourages the consumer to lease the home in order to buy it back over time Tells the homeowner to make mortgage payments directly to the scam artist, rather than the lender Tells the homeowner to transfer the property deed or title Offers to buy the house for cash at a fixed price that is not set by the housing market at the time of sale Offers to fill out paperwork for the homeowner Pressures the consumer to sign paperwork before reading it thoroughly or that the consumer doesn't understand If a client suspects they ve been a victim of foreclosure fraud, suggest they contact the Federal Trade Commission, their state Attorney General, and/or their local Better Business Bureau. Revised: April 7,

43 Knowledge Check 5.11: What are possible scams specific to homeownership that a consumer might fall victim to? Home Based Employment Offers The thought of home based employment is attractive with promises of the potential to earn hundreds or thousands of dollars for tasks such as: Envelope Stuffing ads normally offer, for a small fee, to teach workers how to earn money stuffing envelopes at home but once the fee is paid the consumer finds the promoter never had work to offer Assembly or Craft Work ads offer workers money assembling crafts or other products at home; however, consumers may have to invest hundreds of dollars for equipment Rebate Processing ads offer work processing rebates, but there are fees for training, certification, or registration Online Searches - ads claim workers can earn $500 to $1,000 a week, or even $7,000 a month, running Internet searches on prominent search engines and filling out forms Medical Billing - ads lure prospective workers with promises of a substantial income for full or part-time work processing medical claims; when a consumer calls the toll-free number to inquire about the opportunity, a sales rep tells them they are eager for help - in exchange for the consumer s investment of hundreds of dollars in fees for software, client lists and technical support ementors.org Consumers should be very suspicious if they are asked to send money to obtain employment opportunity details or to receive work materials. Consumers should thoroughly research any opportunities, especially those that sound too good to be true, and the companies that offer them. Questions they can ask include: What tasks will need to be performed including a step by step list? How is compensation paid? Is it salary or commission based? Who pays the compensation? When is compensation made? What is the basis for claims about likely earnings? What documents provide proof claims are true? What is the total cost of the work-at-home program, including supplies, equipment, and membership fees? Help Wanted Employment Scams Job hunters should be cautious of businesses that advertise employment openings and guarantee job placement. Consumers who respond to these ads are often led to believe they are contacting a legitimate job placement service seeking candidates to fill specific jobs. But instead, they may be reaching a business that charges advance fees for their "services," or falsely promises that most or all of the fees ultimately will be refunded. Revised: April 7,

44 Before a consumer spends any money responding to job ads or completing job placement contracts, the Federal Trade Commission suggests: Be suspicious of any employment-service firm that promises a job Be skeptical of any employment-service firm that charges up-front fees, even if it guarantees refunds "if not satisfied" Don't give out credit card or bank account information on the phone unless familiar with the company and don t agree to pay for something unless familiar with the company Get a copy of the company's contract and review it carefully before paying any money Understand the terms and conditions of the company's refund policy Understand what services will be provided by the company and if promises are made that don't also appear in the contract, think twice about doing business with the company Take time reviewing the contract: don't be rushed into paying for services; avoid highpressure sales pitches that require a payment right now or risk losing out on the opportunity Be cautious about purchasing from a company that's reluctant to answer questions or gives evasive answers Be aware that some listing services and "consultants" may place ads that seem to offer jobs when, in fact, they're selling employment information Follow up with the offices of any company or organization listed in an ad by an employment service, to find out if the company's really hiring Be wary of firms promoting "previously undisclosed" federal government jobs. All federal positions are announced to the public Check with the local consumer protection agency, state Attorney General's Office, and the Better Business Bureau to see if any complaints have been filed about a company before deciding to pay for their services Knowledge Check 5.12: What warning signs should a consumer be aware of regarding home based and help wanted scams? Education Schemes From scholarships to diploma mills, trade schools to modeling schools, an unsuspecting consumer can be lured by costly education scams that return very little. Schemes such as paying a fee for "guaranteed scholarships" are typically little more than a computer listing of scholarships, frequently outdated or something a consumer can readily find online. Consumers may Essay Wow! also be tempted to spend hundreds or even thousands of dollars to buy an impressive-looking college or graduate school diploma by mail only to find them useless because the schools do not meet accrediting standards of reputable educational institutions. Trade school schemes also attract consumers, using a high-pressure sales approach that make unrealistic promises about teaching skills such as computer programming and helping students find jobs. Although many trade schools are legitimate and teach skills that are needed in the workplace, others are poorly equipped, have few or poorly trained faculty, and make little effort Revised: April 7,

45 to place their graduates. Finally, many modeling and art schools use high-pressure tactics to get consumers to sign contracts, promising the opportunity to earn high fees while taking lessons. Unfortunately, these schools are more interested in selling photographs, art work, and endless lessons than in helping students find employment. Consumers should avoid relationships with entities that lack requirements, have questionable sales tactics, or make promises such as: No Studies, No Exams -Get a Degree for Your Experience offering degrees for "work or life experience" alone No attendance needed Charge flat fees Advertise through spam or pop-ups Consumers can protect themselves by: Asking if the company/school is licensed or bonded and verify the information is true Asking the local Better Business Bureau, consumer protection agency and state Attorney General if there are any unresolved consumer complaints on file about the schools or company Getting everything in writing, including any promises that have been made verbally Keeping copies of all important papers, such as the contract and school or company literature, in a safe place Knowledge Check 5.13: What can consumers do to protect themselves from education scams? Unordered Merchandise and Phony Invoices The unordered merchandise scheme works because people tend to pay for merchandise that arrives by mail, thinking that they are receiving something they have ordered. If a consumer receives merchandise that they didn't order, they actually have a legal right to keep it as a free gift. Although the consumer has no legal obligation to notify the seller, they should be encouraged to send letter by certified mail notifying the seller of the error and keep the return receipt and a copy of the letter. If the unordered merchandise was received as the result of an honest shipping error, the consumer should write the seller and offer to return the merchandise, provided the seller pays for postage and handling. The letter should include 1) a specific and reasonable amount of time to pick up the merchandise or arrange to have it returned, and 2) notice that the merchandise will be kept for free or disposed of after the specified time has passed. Federal law makes it illegal to use the U.S. mail to send invoices for unordered merchandise. Phony bills, a related scam, can be a particular problem for bereaved families who may mistakenly Revised: April 7,

46 pay after receiving invoices addressed to the deceased person. Encourage clients to fully investigate any bill or package that arrives from an unfamiliar source before accepting the package or paying the invoice. Insurance Schemes Most reputable insurance providers offer legitimate and reliable coverages. However there are insurance schemes advertising policies with coverages for specific diseases, accidental death, burial, and other health problems that often leave the consumer poorly protected while charging above normal prices. These less than reputable entities target consumers who are elderly or poorly educated and/or those that have lower incomes and creditworthiness. Consumers should avoid limited insurance policies that make exaggerated claims about the need for protection or that restrict the conditions for paying claims, pay limited benefits, or provide duplicate coverage in standard policies that the consumer already has. When in doubt about an insurer, consumers can check with the state's insurance commissioner and with the Better Business Bureau. Chain Letters The Partnering Group Chain letters and s typically promise unprecedented good luck or huge financial rewards for sending as little as $5 to someone on a list or making a telephone call. The simplest chain letters contain a list of names and addresses, with instructions to send something, usually a small sum of money, to the person at the top of the list, add their name to the list, and forward the letter to a certain number of other people to continue the chain. Consumers considering participating in chain letters should be aware of the following: Starting or sending a chain letter that involves money or valuable items is illegal Chances are no one will receive any money back on their "investment" Some chain letters claim they're legal and that they're endorsed by the government; no Federal or government agency uses or sends out chain letters If a consumer has been a target of a chain scam, they should contact their internet service provider and forward the to the FTC at spam@uce.gov. Donations to Charities Consumers are encouraged to be cautious when approached for donations and contributions as some organizations or individuals may misrepresent an affiliation with a charitable or environmental organization; and requests for donations by or on social networking should Revised: April 7,

47 invite stringent scrutiny. Activities that raise suspicion include: Organizations using copy-cat names to cash in on the reputations of older, more established charities Pressure tactics Requirements of wire transfers as the only payment method Volunteer opportunities that require a fee be paid before an individual can volunteer Consumers can protect themselves by: Verifying the organization s legitimacy by using internet search engines to confirm the group s existence, history, mission, and nonprofit status and, not clicking a link provided by the solicitor Contribute directly to known organizations rather than through a third party Avoid donating in cash use a method that allows for tracking Verify the organization through the Better Business Bureau at Note: Most legitimate charity websites end in org rather than com or net Prize Offers Consumers should avoid any situations in which they are asked to pay to receive a prize or free trip, since the cost invariably turns out to be higher than the value of what is received. Encourage clients to be suspicious of prize offers that are tied to attendance at sales seminars or one-on-one meetings with sales representatives selling land, fire or home protection systems, time-share vacations, or other high-priced products. Many of these sales situations involve heavy persuasion and questionable sales tactics. Instead of attending such sales events, consumers should determine on their own if they actually need to buy the product being offered. If so, they should research the purchase and identify several reputable sellers to contact directly for more information. Legitimate sweepstakes companies will never call to ask "winners" to send money. Consumers should also be cautious of promoter who lie about an affiliation or make statements that they have been endorsed by a government agency or other well-known organizations. Disreputable companies sometimes use a variation of an official or nationally recognized name or use technology to disguise their area code to make it appear they are calling from a local number. Knowledge Check 5.14: What can a consumer do to protect themselves from donation or prize offer scams? Discount Travel Offers Consumers may be lured to take advantage of attractive offers for free travel or accommodation, but should be cautious of such offers. Generally offers to buy one ticket and get one free or offers Revised: April 7,

48 of discounted stays and travel, may actually result in the consumer paying more. Often the first ticket or accommodation is overpriced and more expensive than costs would have been through a travel agent or working directly with the provider. Or, there may be cancellation policies and limitations that make the offer overly-restrictive. Consumers can limit frustration and spending more than necessary by: Buying vacation packages only from a legitimate business; they can contact the state Attorney General, consumer protection agency and Better Business Bureau to see if there is a history of complaints on file Avoiding responding to unsolicited faxes or s for deeply discounted travel packages Calling to verify reservations, arrangements, and obtain the names, addresses and telephone numbers of the airlines, car rental companies, and hotels to confirm all arrangements Getting the details of the vacation in writing Using a payment method that allows for tracking and a method for disputing charges Asking questions before joining a travel club - find out exactly what is being provided and how to cancel Note: Scam artists may tell consumers they've won a "free" vacation, but then claim to need a credit card number for "verification." Legitimate promotions will never require the "winner" to pay for a prize. Vehicle Purchases Nearly every state has a "Lemon Law" to protect consumers who have unknowingly and through no fault of their own purchased new vehicles with substantial defects that are not able to be fixed after a number of attempts. These laws specify that the consumer is entitled to a refund or a replacement either after a certain number of unsuccessful repair attempts or when the vehicle has been out of service for a certain number of days within the first year. To exercise rights PngImg.com under these laws, consumers must be able to produce all sales contracts, warranties, and other documents relating to the vehicle's purchase and repair record. Consumers who have problem vehicles should contact the state or local consumer protection office for details on how the Lemon Law operates. At the first sign of defects in the vehicles they should notify the dealer and take the vehicle in for repair. Each time the consumer takes in the vehicle for repair, they should give the dealer a written list of issues, keep a copy for themselves, and maintain a log of each repair attempt. When the vehicle is returned by the dealer, the consumer should obtain and keep a copy of every repair order, showing the dates the vehicle was in the shop and any repairs made. Some states require that the manufacturer as well as the dealer be allowed to try to fix the problem before the Lemon Law can be invoked. Consumers trying to resolve disputes over problems with a new car can contact the: Revised: April 7,

49 Manufacturer's customer service and complaint departments to report and attempt resolution of product and performance issues Automotive Consumer Action Program, administered through the national Automobile Dealers Association, to seek assistance in settling disputes with dealers Local Better Business Bureau to enlist their aid through their arbitration program Door-to-Door Sales and the Cooling-Off Rule Home solicitation, or door-to-door sales, frequently involves high-pressure sales tactics in attempts to trigger impulse buying. The sale itself is generally not deceptive, but consumers should not have to feel pressured into signing a contract or $25 buying something without having time to think about the purchase. The Federal Trade Commission's Cooling-Off Rule gives consumers three days to cancel purchases of $25 or more. Under the Cooling-Off Rule, the right to cancel for a full refund extends until midnight of the third business day after the sale. The Rule applies to sales at the buyer's home, workplace or college dorm, or at facilities rented by the seller on a temporary or short-term basis, such as hotel or motel rooms, convention centers, fairgrounds, and restaurants. Under the Cooling-Off Rule, the salesperson must tell consumers about their cancellation rights at the time of sale and give the buyer: Two copies of a cancellation form - one to keep and one to send to the seller if the consumer employs their right to cancel A copy of the contract or receipt, which should: o Reflect the date signed o Show the name and address of the seller o Explain the buyer's right to cancel o Be in the same language that's used in the sales presentation The Cooling-Off Rule does not cover sales that are: Under $25 For goods or services not primarily intended for personal, family or household purposes, (however the Rule does apply to courses of instruction or training) Made entirely by mail or telephone The result of prior negotiations at the seller's permanent business location where the goods are sold regularly Needed to meet an emergency Made as part of the consumer s request for the seller to do repairs or maintenance on their personal property (however, purchases made beyond the maintenance or repair request are covered) Real estate, insurance, or securities Automobiles, vans, trucks, or other motor vehicles sold at temporary locations, provided Revised: April 7,

50 the seller has at least one permanent place of business Arts or crafts sold at fairs or locations such as shopping malls, civic centers, and schools To cancel a sale, the buyer will need to sign and date one copy of the cancellation form and mail it to the address given for cancellation. The envelope must be post-marked before midnight of the third business day after the contract date and consumers should consider sending the cancellation form by certified mail in order to get a return receipt. Note: consumers do not have to give a reason for canceling the purchase. Consumers have a right to change their mind. Goods must be made available to the seller in the same condition as when they were received. If the consumer does not make the items available to the seller or if the consumer agrees to return the items but fails to do so, the consumer could remain obligated under the sales contract. Some state laws give consumers even more rights than the FTC's Cooling-Off Rule, and some local consumer offices can help resolve complaints. If the purchase was paid for with a credit card and a billing dispute arises about the purchase, a consumer can notify the credit card company that they want to dispute the purchase under the Fair Credit Billing Act. Knowledge Check 5.15: What is and is not covered under the Cooling-Off Rule? Mail, Telephone, and Internet Sales Federal laws give consumers specific rights when they shop by mail. Under the FTC's Mail or Telephone Order Rule, the buyer can cancel a mail order if the item ordered does not arrive within a reasonable time (usually 30 days), unless the seller has specified a different time period. The seller must notify the buyer of any shipping delays and provide a free means for the buyer to cancel, change the order, or agree to continue waiting for the merchandise. If no specific delivery time is promised and the buyer paid by credit card, the seller is allowed 50 days after the order is received to ship it to the buyer. When a consumer cancels, the seller must make a refund within 7 business days. If the consumer has paid by credit card, the seller is allowed one billing cycle to post the credit to the account. If a consumer experiences problems with mail-order purchases and cannot get satisfaction from complaint letters and phone calls, they can sue to enforce any of these rights against a seller. As a counselor, remind clients that, depending on the cost of the merchandise, suing the seller may cost more than the amount that would be recovered. They should report major problems to the Better Business Bureau, the Federal Trade Commission, and the state Attorney General's office. The Fair Credit Billing Act does not allow a credit card company to collect for items that were ordered but never received if the consumer uses a credit card when buying by mail, telephone or internet. To be protected under this law, the consumer must send a separate, written billing error notice to the credit card company as notification that the merchandise was never received. This notice must reach the company within 60 days after the first bill containing the error was mailed to the buyer. Revised: April 7,

51 Although the Fair Credit Billing Act allows the buyer to keep unordered merchandise without paying for it, this law does not apply to merchandise purchased via C.O.D. or negative option programs such as monthly delivery of goods (magazines, books, etc.). Internet Scams and Shopping Con artists use sophisticated technology to peddle traditional business opportunity scams, using to reach vast numbers of people with false promises about earnings through day trading, hijacking consumers' modems and cramming hefty long-distance charges onto their phone bills, or hack online activity to obtain personally identifiable information. Using complaints to Consumer Sentinel (a consumer fraud database) as their guide, law enforcement officials have identified the top 10 cons facing consumers who surf the internet, as well as many of the fraudsters behind them. Your clients may have already fallen victim to or should be educated on the top cons, which are: Con Internet auctions Internet access services Credit card fraud International modem dialing Web cramming Multilevel marketing plans or pyramids Travel/vacation Business opportunities Investments Health care products or services Activity Consumers pay for a higher valued item than they receive or receive nothing Consumers become trapped in long-term contracts for internet access or web services with high cancellation/termination fees A third party uses a consumer s credit card to run up unauthorized charges Consumer s modem is disconnected and then reconnected to the internet through an international long-distance number Consumers are charged for services they have not agreed to; fraudulent charges are assessed to a consumer s telephone/internet account; e.g. a consumer signs up for a free web design program and then starts getting billed a monthly fee Consumers buy into plans and programs but find their customers are other distributors and not the general public; some are actually illegal pyramid schemes Consumers receive lower-quality accommodations and services than advertised; or, are hit with hidden charges and requirements Consumers invest in business opportunities that give no opportunity for them to recoup their investment Consumers invest in stock or investment markets with no opportunity to have financial gain Consumers are lured to purchase miracle cures and products that have little if any benefits Although there are a number of scams associated with online shopping, consumers (your clients) are attracted to the benefits it offers. It s quick, easy, and available 24 hours a day. The Federal Trade Commission offers consumers the following advice when using the internet: Know who the seller or merchant is and never reply or click on a link in an or pop- Revised: April 7,

52 up message while browsing that asks for financial information Know exactly what is being purchased Know what it will cost and comparison shop; factor shipping and handling into the total cost Pay by credit or charge card never send cash; if the purchase is paid by credit or charge card online, the transaction is protected by the Fair Credit Billing Act Check out terms like refund policies and delivery dates Keep a paper/electronic trail - save records of all online transactions, including the product description and price, the online receipt, and copies of every sent or received from the seller; review credit card statements for unauthorized charges Don't financial information Check the privacy policy - it should let the buyer know what personal information website operators are collecting, why, and how they're going to use the information Telemarketing and Common Schemes My Storybook Telemarketing is the sale of goods or services over the telephone and although most phone sales are made on behalf of legitimate organizations many sales calls are frauds. With the high risk for fraud, the Federal Trade Commission encourages consumers to be cautious of phone solicitation and to be aware of the Telemarketing Sales Rule, which protects them from abusive or deceptive telemarketers. Methods such as those that follow are often used for fraudulent purposes: Cold Calls - scammers obtain the consumer's information from lists comprised of consumers who have responded to previous telemarketing solicitations o List include information such as the consumer s name, phone number, and how much money they previously spent o Lists are bought and sold by promoters Direct Mail - consumers respond to a letter or postcard that says they've won a prize or a contest o They are instructed to call and provide the promoter with information o Once they call, a fraudster will use persuasive sales pitches, scare tactics, and false claims to deceive the consumer in order to obtain their personal information and/or money Broadcast and Print Advertisements - consumers respond to advertisements that offer false hope or claims such as miracle cures, get rich quick, get out debt, limited offer, etc. Fraudulent telemarketers often use phrases like: "You've been specially selected to hear this offer" "You've won one of five valuable prizes" "You must send money right away" Revised: April 7,

53 "This investment is low risk and provides a higher return than you can get anywhere else" "You have to make up your mind right away" Common telemarketing schemes Prize offers Travel packages Investments Charities Recovery scams Involves The consumer usually has to do something to get a free prize like buy something, pay a fee, or give out a credit card number Free or low cost vacations offered to consumers but actually have hidden fees that will cost the consumer two to three times more than the consumer expects Consumers are lured into get rich quick schemes that have little to no real return on investment opportunity Con artist push the consumer to make an immediate gift and often use names that sound like well-known entities Previous victims of scams are put on a list as potential targets; the list is sold and the consumer is contacted by another scammer who promises to recover their money To avoid telemarketing fraud, consumers should not give out credit card numbers and bank account numbers unless they initiated the telephone call or are familiar with the company from which they are buying. If a consumer receives a call about an offer that sounds too good to be true, they should take the telemarketer's phone number and offer to call back after considering the offer. A fraudulent telemarketer will not leave a call-back number; instead, they may continue using highpressure sales tactics to try and get the consumer to buy right away. Although most types of telemarketing calls are covered by the Telemarketing Sales Rule, there are several exceptions. The Rule does not cover the following situations: Calls placed by consumers in response to general media advertising, like television or newspaper advertisements Calls placed by consumers in response to direct mail advertising that discloses all the material information required by the Rule Catalog sales Calls that are initiated by the consumer that are not made in response to any solicitation Sales that are not completed, and payment or authorization for payment is not required, until there is a face-to-face sales presentation Business-to-business calls; however, calls offering nondurable office or cleaning supplies are covered Sales of pay-per-call services and sales of franchises - these are covered by other FTC rules Calls responding to ads for investment opportunities, business opportunities other than those covered by the FTC's Franchise Rule, credit card loss protection, credit repair services, recovery room services, or advance-fee loans are covered under the Rule. Knowledge Check 5.16: What is and is not covered under the Telemarketing Sales Rule? Revised: April 7,

54 900 Numbers The Federal Trade Commission's 900 Number Rule requires certain information in ads and preambles for 900 number services. Consumers also have protections under the Federal Communication Commission's own 900 Number Rule that governs the practices of telephone companies. All print, radio, and television advertisements for 900 number services must include: Total cost of the call if there's a flat fee Per-minute rate if the call is charged by the minute, as well as any minimum charge If the length of the program is known in advance, the ad also must state the total cost of the complete program Range of fees if there are different rates for different options; the ad must also state the initial cost of the call and any minimum charges Cost of any other 900 number to which a consumer may be transferred; and any other fees the service might charge Information can't be hidden in small print. The cost of the call must be next to the 900 number and printed in a size that's at least half the size of the 900 number. In a television ad, an audio cost disclosure must also be made. Under Federal Communication Commission regulations, pay-per-call services can't make collect calls to consumers if the charge would be more than, or in addition to, the regular long distance charge for the call. Services that don't impose this additional charge can call collect; however consumers can't be charged for the call unless they have clearly indicated that they'll accept the charge. NATIONAL DO NOT CALL REGISTRY The National Do Not Call Registry is managed and enforced by the Federal Trade Commission and state law enforcement officials. Once a consumer registers their phone number, telemarketers covered by the National Do Not Call Registry have up to 31 days to stop calling. The registry was created to offer consumers a choice regarding telemarketing calls. A consumer can register, at no cost, by: Going online at the consumer must have a working address Calling toll free at from the number the consumer wishes to register If registering online, the system will send a confirmation that the consumer will have to open within 72 hours for the online registration to be complete. Consumers can expect fewer calls within 31 days of the date they sign up for the registry. The only identifying information that will be provided to telemarketers and other companies accessing the registry will be the phone number registered. Revised: April 7,

55 TELEMARKETING AND CONSUMER FRAUD AND ABUSE PREVENTION ACT The federal Telemarketing and Consumer Fraud and Abuse Prevention Act is aimed towards providing consumer protection with regard to telemarketing frauds. This Act requires telemarketers to promptly provide consumers with accurate information so they can make informed buying decisions before paying for any goods or services. By law, a telemarketer who initiates calls to consumers is prohibited from making false or misleading statements and must disclose the following information: The identity of the seller The purpose of the call The nature of the goods or services In cases where a prize is being offered, the reassurance that no purchase or payment is needed to participate in the promotion When calling on behalf of charities - the purpose, name, and mailing address of the charity the telemarketer is representing Any limitations or conditions of the offer, refund and cancellation policies, value of prizes and odds of winning, risks of investment opportunities, and affiliations or endorsements that might sway consumers Telemarketers must also maintain "do not call" lists to allow consumers to avoid repeated calls. If consumers prefer not to receive calls from a particular telemarketer, they can state such requests during sales calls and the telemarketer should add the client's name to the do not call" lists. (Note: This law does not cover telemarketing practiced by banks/credit unions/federal savings and loans, long-distance telephone companies, airlines, nonprofit organizations, or insurance companies.) THE CONSUMER FINANCIAL PROTECTION BUREAU In 2010, Dodd-Frank created the Consumer Financial Protection Bureau (the CFPB ) with the responsibility to set and enforce rules for the financial marketplace aimed at benefiting consumers. The CFPB removed responsibilities from a number of other federal agencies and placed them under CFPB Open Tech a single entity. Their mission is to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Among its responsibilities are its work to: Root out unfair, deceptive, or abusive acts or practices by writing rules, supervising companies, and enforcing the law Enforce laws that outlaw discrimination in consumer finance Revised: April 7,

56 Receive consumer complaints Enhance financial education Research the consumer experience of using financial products Monitor financial markets for new risks to consumers The CFPB s Consumer Education and Education division includes six program offices, including Consumer Engagement, Financial Education, Servicemember Affairs, Older Americans, Students and Young Consumers, and Financial Empowerment. The six program offices Focus include, the Office of: Consumer Engagement Provides tools and resources to help consumers make better choices about money to further their financial well-being Invites public input to help the CFPB ensure a fair and transparent financial marketplace Financial Education Strengthens the delivery of financial education throughout the US Creates opportunities for people to obtain the skills needed to build their financial well-being Students and Young Consumers Works to empower students, young people, and their families to make more informed financial decisions about saving and paying for college, accessing safer and more affordable financial products, and repaying student loan debt The Student Loan Ombudsman provides assistance to borrowers and potential borrowers to resolve questions or issues involving student loans Older Americans Works to improve financial protection for older people Supports sound financial decision making that safeguards their later-life economic security Servicemember Affairs Works to improve financial protection for and provide financial education to servicemembers, veterans, and their families Financial Empowerment Works to empower low-income and economically vulnerable people to make informed financial decisions by providing tools and skill building opportunities directly and through community service entities; and, by promoting a more inclusive and fair financial marketplace As part of the CFPB, The Supervision, Enforcement, and Fair Lending Division ensures compliance with federal consumer financial laws by supervising market participants and bringing enforcement actions when appropriate. It includes the Office of Supervision Examinations, the Office of Supervision Policy, the Office of Enforcement, and the Office of Fair Lending and Equal Opportunity. The Office of Supervision Examinations, through four regional offices, supervises and examines financial services companies to protect consumers by ensuring compliance with Revised: April 7,

57 federal consumer financial laws. The Office of Supervision Policy develops supervision strategy and provides subjectmatter expertise to the CFPB s examination staff on legal and policy issues. The Office of Enforcement enforces federal consumer financial laws by investigating cases of potential wrongdoing and takes legal action where appropriate. The Office of Fair Lending and Equal Opportunity works to ensure fair, equitable, and nondiscriminatory access to credit for all consumers. Within the CFPB, The Research, Markets, and Regulations Division is responsible for monitoring consumer financial markets, conducting research, and writing rules. The following seven offices make up the Division: The Office of: Card and Payment Markets Deposits, Liquidity Lending, and Reporting Markets Installment Lending and Collections Markets Focus: Monitors, analyzes, and performs outreach to the credit card, prepaid card, and remittances industries, as well as other emerging forms of payments and technologies, such as mobile payments Provides subject matter expertise and market insights on major rulemakings related to these industries Monitors, analyzes, and performs outreach to liquidity lending, pay day lending, and consumer reporting industries, as well as deposit holding institutions such as community banks and credit unions Provides subject matter expertise and market insights on major rulemakings related to these industries Monitors, analyzes, and performs outreach with the debt collection, student lending, auto lending, and marketplace lending industries Provides subject matter expertise and market insights on major rulemakings related to these industries Mortgage Markets Monitors, analyzes, and performs outreach with many segments of the mortgage industry, including originations, servicing, secondary markets, and trade associations Small Business Lending Markets Provides subject matter expertise and market insights to major rulemakings related to mortgage markets Monitors, analyzes, and engages with providers of credit to small businesses, including traditional lenders, specialty financing, and emerging technologies Advises on major rulemakings, including requiring reporting of race, sex, and ethnicity data as it relates to women- and minorityowned, and small business lending Regulations Supports and provides strategic direction for the Bureau s rulemaking, interpretive guidance & regulatory implementation functions Revised: April 7,

58 Research Supports the design and implementation of consumer protection policies through research, analysis, forecasting, and measurement The CFPB has undertaken significant steps to gather information from consumers, analyze that information, and pursue regulation and enforcement based on that information. For this reason, the CFPB encourages consumers to report complaints related to financial services companies to the CFPB through its website: The CFPB also has prepared numerous tools for purposes of consumer education, including materials on student loans, credit cards, mortgages, pay-day loans, and vehicle loans. Knowledge Check 5.17: What are the six program offices of the CFPB and what are their focuses? What seven offices comprise The Research, Markets, and Regulations Division and what are their focuses? State Legal and Regulatory Protection for Consumers In addition to regulations created by the federal government, states offer consumer protection. However, federal laws governing financial transactions take precedence over state laws if there is a conflict between them. Many state laws provide consumer protection for financial transactions such as obtaining a mortgage and some have usury laws regulating the highest rates of interest that creditors can charge for loans or credit purchases. The maximum rates vary from state to state and depend upon the type of credit transaction involved. In addition, many states have a law establishing a cooling-off period that allows consumers who sign certain contracts to change their minds and cancel the contract if they act within a specified number of days (usually three business days). Under such laws, consumers can get out of some contracts (such as a home equity loan or a health club membership) by officially notifying the seller within 3 business days of signing the contract. Such laws provide a legal exit from deals that may not be in the consumer's best financial interest or that may involve deception or misrepresentation. A cooling-off period is also mandated by federal law in the case of purchases made from door-to-door salespeople, however most consumer purchases (such as purchases of cars) are not subject to cooling-off periods. ADDITIONAL CONSUMER PROTECTION ACTS Consumer Leasing Act Regulates personal property leases that exceed four months in duration and that are made to consumers for personal, family or household purposes Requires that certain lease costs and terms be disclosed Imposes limitations on the size of penalties for Revised: April 7,

59 Home Equity Loan Consumer Protection Act Home Ownership and Equity Protection Act (HOEPA) Bankruptcy Abuse Prevention and Consumer Protection Act delinquency or default and on the size of residual liabilities Requires certain disclosures in lease advertising Requires creditors to provide certain disclosures for openend credit plans secured by the consumer s dwelling and imposes substantive limitations on such plans Allows the consumer to refuse to complete the transaction and must receive a refund of any fees paid with the application, if the disclosed terms change Creditors usually cannot terminate or change the terms of the loan after it is granted and consumers must be informed that taking a home equity loan puts a lien on their home (which could lead to foreclosure if the repayment terms are not met) Provides specific requirements in connection with high-cost mortgages including purchase-money mortgages and openend credit plans (e.g. home equity lines of credit, HELOCs), specifically, to include: Disclosure specifics Prohibits equity stripping and other abusive practices Requires certain creditors to disclose on the front of billing statements a minimum monthly payment warning for consumers and a toll-free telephone number Established and maintained by the FTC The Credit Practice Rule Prohibits lenders from applying certain remedies Prohibits lenders from misrepresenting a consigner s liability Requires lenders to provide cosigners with a notice explaining their credit obligation as a cosigner Prohibits pyramiding of late charges RECAP OF CONSUMER RIGHTS & COMPLAINT AVENUES There are a number of options available to clients who come to you feeling that: Their rights have been violated They have been victims of fraud or scams They have been treated unfairly or unjustly Although you cannot give legal advice, you can educate clients regarding their rights and responsibilities as Book 5 Consumer Rights and Responsibilities has overviewed. Clients should first try to resolve concerns by contacting the service or goods provider directly; keeping all receipts and recording all correspondence attempts. When a consumer wants to complain about a bank or another financial institution, counselors Revised: April 7,

60 should encourage clients to contact an officer of the institution and attempt to resolve the complaint directly. If the consumer is unable to resolve the complaint directly, and a letter to the institution's corporate headquarters does not bring the desired results, they can write to the regulatory agency for assistance and send a copy to the financial institution. As with any complaint, encourage clients to keep records of any letters sent, certified mail receipts, and records of who they speak with, when they speak with them, and a detail of what was said by the provider and themselves (and never send originals of documents in a complaint letter). Regulatory agencies may be able to help resolve the complaint if the financial institution has violated banking laws or regulations. However, they may not be able to help in situations where the client is merely not satisfied with an institution's policy or practice. And, they may also not be able to help resolve a client's factual or contractual dispute with a financial institution. After a client writes to a regulatory agency, the agency will usually acknowledge receipt of the letter within a few days. If the agency who received the initial complaint refers it to another agency, the consumer will be advised of this fact. Consumers may also seek resolution of their concerns through the Better Business Bureau and their state s Attorney General. Better Business Bureau A consumer can contact the Better Business Bureau (BBB) to help resolve problems with goods or services they have purchased. The BBB is a nonprofit organization of local businesses that voluntarily adopt selfregulation to promote ethical practices. More than one million Upstate Business Journal consumers annually seek the BBB s help in resolving complaints. A large number of these complaints are about new car dealers, auto repair shops, and home remodeling contractors. Before the BBB becomes involved, a client first has to make a sincere effort to settle the complaint directly with the company. BBB accepts complaints whereby the complaint: Includes the complainant's name and postal address Includes the company's name and provides sufficient information to determine the company's location Is from a customer, or the customer's authorized representative and relates to a marketplace issue Alleges a problem experienced with the services or products that the company provided or agreed to provide Is not in litigation and has not been resolved by a pervious court action, arbitration, or settlement between the parties Contains no abusive language To file a complaint with the BBB, a consumer can file online at or contact the BBB by phone to request a complaint form. Once a complaint is submitted everything is sent to the business within 1-5 days from the date the complaint was filed. The business has 30 days from Revised: April 7,