Bankruptcy Questions Answered

Study: More Drug Manufacturers Cutting Deals to Keep Prices High

The Federal Trade Commission announced this week that according to a recent study, there has been an increase in the number of drug companies engaging in pay-to-delay deals with generic drug producers.

The FTC has denounced the actions, and with good reason: medical costs are one major contributor to many personal bankruptcy filings of U.S. citizens. So how might these types of deals affect you and your family?

• Background information: Once a drug company patents a certain drug, generic producers of drugs of similar chemical composition may file a challenge to the patent, with the goal of being able to produce a chemically similar (or identical) version to sell more cheaply.
• How the deals work: If these challenges went to court, it’s possible that they would result in judges ruling in favor of the generic producers. In order to avoid that outcome (and thus secure the market for themselves for a longer period of time), some brand-name drug manufacturers settle out of court with generic drug producers.
• Who makes money: Most settlements include an agreement that the generic manufacturer will not produce the generic version of the drug until a certain date; some settlements include a financial incentive from the brand-name manufacturer to lengthen the delay period (i.e. the brand-name manufacturer pays the generic manufacturer to delay its release of its cheaper product). The FTC found that in cases involving a payment, generic drug release waiting periods increased by an average of 17 months.
• Who loses money: The FTC notes that in 2010, 22 name-brand drugs were targeted in pay-to-delay deals. The total number of such deals reportedly jumped from 19 in 2009 to 31 in 2010 (an increase of more than 60 percent).
• What it costs us: The total dollar toll these deals have taken on Americans comes to $3.5 billion per year, according to FTC estimates. The difference comes from the fact that generic drugs can cost anywhere from 20 to 90 percent less than their name-brand counterparts. That’s a lot of money people could be putting toward paying down mortgages or credit card debt.

Are Generic Drug-Delay Deals Legal?

Anyone familiar with antitrust laws may wonder whether deals to delay competitive drugs are even legal in the U.S. The answer is a little murky. It seems that the FTC has filed a number of lawsuits against pay-to-delay agreements and has demonstrated its support of bills in Congress designed to eliminate such activity among drug manufacturers.

How can you take action? While there may not be much you can do about the problem of pay-for-delay agreements, if you’re worried about paying your medical bills, you can (and should) ask your physician whether generic versions are available any time you need medicine.

Posted in Consumer Protection, FTC, Financial Literacy, Legal Info, Medical Bills, medical bankruptcy, medical debt | Comments Off

Mortgage Scammers on the Loose

Despite the best efforts of groups like the Better Business Bureau and the Federal Trade Commission, scammers manage to find new ways to take money from unsuspecting consumers on a regular basis. Here’s a look at one of the latest warnings that’s been posted by consumer advocates.

A New Mortgage Scam Afoot

The latest in a long line of mortgage and foreclosure “rescue” scams seems to be one that involves attempting to trick homeowners into thinking they qualify for money from a lawsuit against their lenders. According to the BBB, the scam works like this:

• An official-looking letter arrives: Victims have reportedly noted that they received a letter indicating that they were eligible to join a “joinder action suit” against certain mortgage lenders and banks. The letters noted the potential for winning significant financial compensation in the suit.
• Unrealistic promises: Victims who called the number listed on the letter were apparently directed to employees of the scammer, who falsely suggested that, by joining the suit, victims might win thousands of dollars, have their interest rates slashed to two percent or have their mortgage principal reduced by 80 percent.
• Request for upfront payment: In classic scam fashion, victims were then told that they must pay a $5,000 retainer fee to ensure their spot in the lawsuit.

Unsurprisingly, none of the information presented in the letters or during follow-up phone calls was true. But what many victims found disturbing was that the scammer had access to their personal information, including name, address, loan information and even loan amount. In other words, this particular scam may have seemed frighteningly legitimate.

How to Spot a Scam

If you’re among the millions of Americans currently struggling with your mortgage, be sure to follow these safety tips (from the BBB) if and when you decide to seek mortgage assistance.

• Go directly to your lender first. Third-party “relief” providers, especially those that approach you unsolicited, are much less trustworthy and much more likely to take your money and offer you nothing in return.
• Be suspicious of mailings from strangers. If you receive a letter about any class action or mass joinder lawsuit, be sure to check online to learn about the latest scams. Then, contact your bank or connect with a lawyer to assess the nature and legitimacy of the letter.
• Shy away from advance fees. Thanks to new consumer protection rules that took effect this year, advance fees are only permitted in rare cases. In many cases, those that ask for money upfront are interested only in your money and may not stick around long enough to provide the help they promised.
• Beware of forensic loan audits. These are hot scamming ground and often have no effect on a person’s mortgage payments.

Posted in Financial Literacy, Foreclosure, Mortgage, Mortgage Foreclosure, mortgage rescue scams, scam | Comments Off

Financial Literacy Survey Shows Our Weaknesses

The National Foundation for Credit Counseling reported results from its annual survey of consumer financial literacy recently, and the findings suggest that, as a nation, we’re still not as well equipped to deal with financial stumbling blocks as we need to be.

Specifically, the survey revealed the following about American consumers:

• 26 percent of survey respondents reported spending more than they did last year, a percentage higher than it has been for two years. While this could be good for the nation’s economic recovery, it’s only one part of the puzzle.
• More than 40 percent of respondents graded themselves as earning a C or lower in their personal finance know-how. This is alarming but not surprising: in more official tests of financial literacy (often given to high school students), it’s often common for the majority of students to fail.
• While more than two-thirds of Americans reported paying for most purchases with cash or debit cards, 40 percent still reportedly carry revolving debt on their credit cards from month to month. This sort of behavior can be dangerous and debilitating, especially if a consumer is hit with unexpected job loss or income reduction. In fact, one of the most commonly cited factors for bankruptcy filings is overextension on credit.
• More than 80 percent of the those polled apparently voiced the opinion that walking away from a mortgage can be justified in certain circumstances, particularly if the borrower was misled at the time of the loan or if the borrower can no longer afford mortgage payments. If many people get a chance to act on these beliefs, the effect on the housing market could be seriously detrimental, especially during a period of recovery.

Why Does Financial Literacy Matter?

The issue of financial literacy education has been a hot one in recent years, ever since the bubble in the housing market burst and the abuses (by lenders and borrowers alike) came to light.

Since the beginning of the Great Recession, we’ve seen legislation like the Credit CARD Act to improve the transparency of credit products for consumers, the creation of the Consumer Financial Protection Bureau, and proposals to change debit card fees and other consumer credit products.

When the Bankruptcy Abuse Prevention and Consumer Protection Act took effect in 2005, one of its provisions was the introduction of a Debtor Education (also called a Financial Management) course for all bankruptcy filers – the idea was that those who filed for bankruptcy could certainly benefit from a little guidance on financial matters. And the idea seems to be a good one.

But what about those who aren’t ready to file for bankruptcy? Luckily, the U.S. Government has set up a financial literacy destination, MyMoney.gov, for people who have never set foot in the bankruptcy court.

Posted in Bankruptcy, Financial Literacy, Links, Mortgage, consumer rights | Comments Off

Celebrate Financial Literacy Month

The Federal Trade Commission has announced that April is National Financial Literacy Month and, as such, a great opportunity for Americans of all ages to brush up their financial smarts to make the most of their money, credit and financial future.

So what kinds of things can you do to celebrate financial literacy month? The FTC recommends checking out these services.

• Money Matters: This web site has information in both English and Spanish about essential financial literacy topics including debt collection, credit repair scams, vehicle repossession, job hunting, job offer scams, foreclosure rescue scams, budgeting for mortgage payments and more. Whether you prefer quick tips or more in-depth videos, this site has information to help you.
• Free Annual Credit Reports: Here, the FTC explains how and why Americans are entitled to a free credit report from each of the three major reporting bureaus once each year. This site also provides information about why it’s important to check your credit report regularly and where you can get your no-strings attached, truly free credit report (www.annualcreditreport.com).
• You Are Here: This site is geared toward children and provides them interactive online games that teach them about advertising, competition and steps they can take to protect their privacy and prevent identity theft.

Why Does Financial Literacy Matter?

So why does our country need a financial literacy month in the first place? In recent years, tests administered to high school students yielded almost no passing scores and, as we are still collectively learning, ignorance about financial matters (such as how mortgages work) on a grand scale can lead to devastating financial fallout for the entire economy.

In addition to those resources provided by the FTC, consider visiting these sites as part of your financial literacy month celebration:

• Fair Debt Collection Practices Act: This page explains who is protected by the FDCPA and what the law prohibits from debt collectors. Understanding your consumer rights is one powerful way to make sure you aren’t victimized by scammers or dishonest debt collectors.
• The Bankruptcy Glossary: Thinking of filing for bankruptcy protection? You may want to start here as you consider what bankruptcy might mean for you. This page offers plain-English definitions for many terms commonly used in bankruptcy cases.
• Consumer Financial Protection Bureau: The government’s new consumer protection body is still growing, but already offers a number of interactive options for people interested in staying up-to-date about consumer protection rules, laws and debates.

Remember: the only one responsible for your money, retirement fund, loan payments and other financial obligations is you. If you aren’t sure how your money is working (or not working) for you, it’s a good idea to take the time to educate yourself about basic financial literacy matters – the resources are out there and they’re free.

Posted in FTC, Financial Literacy, Identity Theft, Mortgage Foreclosure | Comments Off

Protect Your Money: Avoid Charity Scams

The recent earthquake and tsunami in Japan have left many people in the United States eager to offer financial aid to the country and its citizens. But, as the Federal Trade Commission warns, it’s easy to get duped by unscrupulous scammers posing as charitable organizations.

Here’s a look at some of the FTC’s tips for making sure your money actually goes to people in need.

What to Look for in a Charity

According to the FTC, it’s important to take these steps before donating to any charity online, in person, over the phone or via postal mail:

• Ask for the name of the charity, particularly if the solicitor does not immediately provide it. Check online to see whether the charity has a legitimate web site, Better Business Bureau accreditation and/or any consumer complaints posted on discussion forums.
• Ask what percentage of your money will go towards charitable causes. If the solicitor cannot answer the question or is cagey, this is a warning sign. You have a right to know where your money is going, and if you think too little is slated for the actual cause, simply refuse a donation and find another charity with better donation policies (web sites like the BBB’s Wise Giving page and Charity Navigator can offer you alternatives).
• Check with the charity that the solicitor is legitimate. In some cases, scam artists might pose as charity workers with a legitimate organization. If you’re uncomfortable giving money or a check to a person you don’t know, call the charity to verify any information you’ve been given. You can also choose to donate directly to the charity online or through the mail.
• Don’t part with your sensitive information. Nobody should pressure you into revealing your credit card or bank account information. Wait until you’ve made a decision in your own time and only provide such information on secure web sites. This can help you avoid raising your risk of identity theft.
• Ask for a receipt. Any time you make a donation to a legitimate charity, you should get a receipt indicating that the donation is tax-deductible.
• Be wary of pushiness. Any person or group that urges you to donate immediately should be viewed with suspicion. Legitimate organizations will still be around tomorrow, after you’ve had time to consider your finances and determine how much money you can afford to donate.
• Don’t use cash. For a number of reasons, cash donations tend to be the riskiest in the case of charity groups. Instead, write a check to the charitable organization (not to the person collecting donations).

Remember: nobody should use guilt or threats to convince you to donate money. If you don’t like the way a solicitor is making you feel, simply cut off communication with that person and (if necessary) file a complaint with the FTC. You can then donate as much or as little money as you choose to the charity of your choice.

Posted in FTC, Financial Literacy, Identity Theft, avoid scams, charity | Comments Off

Top Consumer Complaints of 2010

The Federal Trade Commission has released a report on the consumer complaints it received from Americans in 2010, and the list illuminates many of the financial and privacy concerns important to the American people.

Here’s a look at the top ten issues that sparked the most consumer outrage, as well as some tips for dealing with a problem new this year.

• Identity theft: For the 11th year in a row, identity theft earned the top spot for number of consumer complaints, with 19 percent of all complaints filed (a whopping 250,854).
• Debt collection: If you’ve ever dealt with abusive debt collectors, it may not surprise you to learn that issues with this group caused the second greatest number of complaints among consumers (144,159, or 11 percent of all complaints).
• Internet services: Whether for fraudulent offers or subpar service, Internet providers landed third for most consumer complaints, five percent of all complaints (65,565).
• Prizes, sweepstakes and lotteries: In fourth place came this type of scam, which often offers phony rewards after the victim pays a bogus entry fee. A total of 64,085 complaints were filed about this type of issue, or about five percent of all complaints.
• Shop-at-home and catalog sales: Whether for defective goods, unwieldy return policies or some other act of non-consumer-friendliness, this type of transaction accounted for about four percent of consumer complaints last year (60,205).
• Imposter scams: A new category this year, this type of scam jumped to sixth place, prompting the FTC to issue warnings about how to spot imposter scams to avoid sending money to strangers (details below).
• Internet auctions: Perhaps because of the Internet’s vast scope and inability to fit neatly into regulatory areas, online auctions prompted 56,107 people to file complaints with the FTC.
• Foreign money/counterfeit check scams: Getting blasted when you intended to invest or travel can be especially traumatizing, so it’s no wonder 43,866complaints concerning this category were filed last year.
• Telephone and mobile services: Varying definitions of service options and quality of service provided prompted 37,388 people to file complaints about their communication tools.
• Credit cards: This old classic is still causing us plenty of trouble. Despite the new protections instituted by the Credit CARD Act, 33,258 complaints were still filed about credit cards.

Avoiding Imposter Scams

The FTC’s consumer complaints about imposter scams (that is, scams in which someone pretends to be a government agency or loved one in order to convince a victim to part with money or sensitive information) prompted the release of a report on how to spot and avoid such scams.

In general, avoid wiring money to anyone you don’t know, be wary if someone pushes you to act quickly to make a transaction, don’t transmit sensitive information by text message and always confirm a person’s identity before making a major financial move.

Posted in Consumer Protection, FTC, Financial Literacy, Identity Theft, consumer rights | Comments Off

The Latest Consumer Protection from the FTC

The Federal Trade Commission’s annual National Consumer Protection Week is upon us (March 6 – 12, 2011) and that means it’s a great time to brush up on information about money, credit and the consumer protections available to you – just because you happen to live in the United States.

You can get handy tips for personal finance and money management at the NCPW blog, which is updated regularly with tips for topics including these (and more!):

• Avoiding foreclosure rescue and other mortgage-related scams;
• Knowing how to spot employment opportunity scams;
• Making the most of your money in the early stages of your career;
• Building and maintaining a budget to improve financial stability;
• Avoiding time-share and credit-card scams offered via text messages; and
• Learning what steps to take to save your home from foreclosure.

In short, whether you’re rebuilding from a bankruptcy filing or just starting to establish yourself in the world of credit and wealth, there are excellent, free resources available for your enjoyment and education.

FTC Targets Scammers Preying on the Cash-Strapped

In other FTC news, the commission announced this week new efforts to halt scams that target people in need of work – in other words, those who can least afford to lose money to dishonest schemes.

According to the FTC’s web site, Operation Empty Promises has taken legal action against the following scammers:

• Ivy Capital Inc., a company that allegedly bilked consumers out of more than $40 million with promises of helping them to establish lucrative, Internet-based businesses from their homes. The scam reportedly worked by first asking victims about their available credit and then pushing them to use that credit to buy worthless products and services.
• National Sales Group, Executive Sales Network and Certified Sales Jobs, three names of the same company that allegedly posted fake sales jobs on job-search web sties including CareerBuilder.com. The group, it seems, falsely promised sales positions with Fortune 1000 companies and charged victims money for what they claimed were costs related to background checks – often, this company reportedly overcharged and charged unapproved recurring fees to victims’ credit cards.
• Business Recovery Services LLC, a company that the FTC claims misrepresented the potential effectiveness of its work-at-home wealth recovery “kits,” which sold for $499 each. All told, the FTC reports that this group managed to snag $1.5 million from victims.

Take Advantage of FTC Protections!

The FTC is constantly patrolling for scammers and those violating existing consumer protection rules. If you’ve caught wind of a scam or have been victimized by a scammer, you may want to file a complaint with the FTC as well as consult with an attorney to see whether you might be entitled to any compensation.

Posted in Bankruptcy News and Events, Consumer Credit, Consumer Protection, Financial Literacy, Life After Bankruptcy, Mortgage Foreclosure | Comments Off

Checking in on the Credit CARD Act

A recent report from the Center for Responsible Lending suggests that the reforms introduced by the Credit CARD Act of 2009 are working to improve transparency in the marketing of credit cards to consumers.

In case you need a refresher course, the Credit Card Accountability Responsibility and Disclosure Act was designed to improve transparency from banks and other credit card issuers so that consumers could navigate the world of credit with greater ease and less financial distress. Here’s a look at just how much this consumer protection legislation has changed.

• Advertised credit card interest rates: Before the passage of the Credit CARD Act, the CRL reports, the discrepancy between the rates advertised by credit card offers and those that consumers actually paid had reached unprecedented highs. In fact, according to the report, between 2004 and 2008, the difference between promoted rates and real rates was at its greatest ever.
• Higher advertised rates means more honesty: Since the passage of the CARD Act, it seems, credit card offers have come branded with higher (and closer to actual) advertised interest rates.
• More transparency in pricing: According to the CRL, new rules governing the way credit cards can advertise their interest rates has led to the exposure of as much as $12.1 billion in annual fees. In other words, credit card companies are now presenting more honest pictures of how much their products cost consumers.
• Interest rates on credit cards constant: Despite the increases in advertised interest rates, the report shows, consumers have not actually paid more in interest since the passage of the CARD Act. This suggests that, rather than increasing the cost of credit card products, the new laws simply made those costs more readily apparent to consumers.
• Credit card offers constant: The CRL notes in its report that direct-mail offers of credit products have been extended at a volume “consistent with economic conditions,” suggesting that, while the overall total may have fallen since boom times, the drop-off can be attributed to the tight economy and not to restrictions imposed by the new law.

What Does Better Transparency Mean for You?

As a consumer, how can you expect to benefit from the changes that have been spurred by the passage of the Credit CARD Act? The CRL lists a few ways:

• Better transparency means more competition: According to the CRL, improved transparency among credit card issuers will spur positive competition – as banks abandon the trends of hidden fees and deceptive pricing, more banks and lenders should follow suit, which should eventually translate to lower consumer costs.
• Tighter rules do not mean less available credit: Though some critics of the CARD Act suggested that the restrictions on lending and increased disclosure requirements would mean a decrease in overall credit availability, numbers from actual research have not borne out those predictions.

Posted in Bankruptcy and the Economy, Credit Cards, Financial Literacy, consumer rights, legislation | Comments Off

Nothing Says ‘I Love You’ Like Avoiding Identity Theft

With Valentine’s Day around the corner, many Americans are likely thinking about ways to treat their loved ones, or considering their options for meeting a romantic partner. And in the age of online dating and connections, the Federal Trade Commission has issued a guide for keeping your personal information (and money) safe from identity thieves while you enjoy all Cupid has to offer.

Here’s a look at some of the FTC’s Valentine-specific warnings.

Know the Warning Signs for Valentine’s Day Scams

• Online dating & social networking: Online venues for meeting and interacting with people have ballooned in popularity in the last several years, but that doesn’t mean they’re always safe. The FTC suggests proceeding with caution when engaging in any sort of online relationship, especially if you notice any of these identity theft warning signs. The important thing to keep in mind is not to let your guard down even if you’re feeling particularly sentimental around the holiday.
• Flower delivery scams: Another warning the FTC has issued concerns flower delivery services – obviously a classic choice for February 14th. According to the FTC, some flower delivery scams involve telemarketers offering their services over the phone for more money than a local florist’s shop would charge. Naturally, that’s not a good deal for anyone. If you’re thinking of sending blossoms to a loved one this year, make sure you know you’re working with a legitimate company and paying a fair price.
• Financial habit compatibility: While financial matters may not seem like the most romantic topic to broach during a Valentine’s dinner, they are important to any serious relationship. Luckily, the FTC offers a fiscal compatibility quiz for partners interested in seeing how their spending, saving and budgeting habits match up. (Hint: offering to do this quiz together for a Valentine’s Day date might not go over well if it’s the most romantic thing you’ve got planned.)
• Magazine subscription and renewal scams: Thinking of giving a gift that your valentine can enjoy all year long? Be careful if you choose a magazine subscription, because some scammers have begun sending phony renewal notices to subscribers in hopes of tricking these people into sending checks they think are to maintain their subscriptions. Instead, visit the web site of the magazine you want to share with your loved one and make sure that web site is a secure place to enter any financial information.

The Relationship between Love & Money

Americans tend to think of love and money as unrelated subjects, but any serious relationship demands a consideration of financial matters from both partners. After all, the stress of debt problems can wreak havoc on a relationship, so show your partner you care by putting financial matters on the table this Valentine’s Day!

Posted in Consumer Protection, Financial Literacy, Identity Theft, scams | Comments Off

Spend Smarter to Save Time & Money

As anyone recovering from bankruptcy, trying to eliminate debt or otherwise reshaping their finances knows, shopping and buying new things can be a source of stress – after all, we all need stuff now and then (whether it's a new part for a car, a new refrigerator or new shoes for our kids). But we shouldn’t have to worry that our purchase will turn into a nightmare if something goes wrong.

A recent post from WalletPop.com outlines what it calls a “Customer Bill of Rights,” which offers suggestions for what ordinary consumers should look for in their purchasing to make sure they won’t be scammed or led into a labyrinth of red tape should something malfunction.

Know What to Look for in a Company

Here’s a summary of how to better navigate your spending and buying experiences.

• Look for contact information. If a company doesn’t readily display contact information (with email addresses or phone numbers on a web site and actual representatives in a store), you may not want to shop there. After all, if you can’t easily communicate with the company, you’ll probably be in for some serious headaches if you want to ask about a return or repair policy down the road. Before you spend your money, make sure you know how to ask the vendor questions.
• Know your timeframe. If the first person you speak with can’t help you resolve a problem, ask for a manager. It’s easy during customer service calls to get frustrated and give up, but remember that you spent your money on this company’s product, and you need help with it. Customer service reps shouldn’t act like this is a burden; if they do, you’ve learned one company not to buy from in the future.
• Know the policies and ask about changes. Return and warranty policies change frequently at some retailers. Be sure to read such policies and ask how a company handles changes: if, for example, you buy something and the policy changes before you need it fixed, what will your options be?
• Be wary about warranties. Many stores offer expensive warranty deals that are not worth your money. Instead, consider looking at online warranty vendors (like SquareTrade.com) or simply setting aside a fund for all your appliances – that way, you have somewhere to draw money from if you need repairs.
• Do some homework. In an ideal world, we wouldn’t have to worry about whether a retailer would treat us respectfully if we needed to make a return, but in the real world some vendors have better reputations than others. A quick online search should yield lists of companies that have high and low ratings for their customer service. You can also look at forums where customers chat about their experiences.

Posted in Consumer Protection, Financial Literacy, after bankruptcy, saving money | Comments Off