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

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

Payday Lender Forks Over Cash to Settle with FTC

The Federal Trade Commission announced this month that it has settled charges with two men who allegedly bilked consumers out of hundreds of thousands of dollars by using an online payday loan “matching” scam. Here’s what the FTC says happened:

• The web site offered to match consumers with payday lenders in their areas.
• As part of the online application process, consumers were reportedly sent to a page that had an offer for a debit card. The “yes” box to order the debit card was pre-checked on this page.
• Consumers who clicked through to the “finish” page without realizing they’d agreed to the embedded debit card offer were automatically signed up for the debit card. Clicking through reportedly also meant consumers granted authorization for their bank accounts to be charged for the funds.
• Victims of the scam were apparently charged up to $54.95 extra for the debit card they did not intend to apply for.

Terms of the Settlement

The newest settlement, which reflects an amended charge filed in April 2010, means that the men charged with the offenses, Matthew Patterson and Mark Benning, will be prohibited from doing the following:

• Presenting false or misleading information about any product or service, including information about how customers will be charged or billed;
• Misrepresenting the cost or status of a product or service (e.g. incorrectly suggesting that something is free or a “bonus”) for any of its terms and conditions;
• Charging consumers without complete disclosure of how much will be charged to them, all terms and conditions of the transaction, what billing information will be used and to what account the payment will be charged; and
• Failing to keep track of affiliates to make sure that they comply with all the above terms (and those laid out in the court order).

In addition to these restrictions, the FTC settlement imposes a $5.2 million judgment on the two men, which will reportedly be suspended for Patterson once he pays $800,000 over a period of 10 years and for Benning when he provides the court with money raised from the sale of his house.

Protecting Your Finances from Predatory Lenders

While a number of consumer protection groups and government organizations exist to police the market and keep scammers from finding new victims, perhaps your best defense against predatory lenders is knowledge.

Take a look at this predatory lending glossary to get an idea of what kinds of loans and offers qualify as “predatory” and how you can keep your money from falling into the wrong hands (and keep yourself from falling into bankruptcy).

Posted in Bankruptcy and Predatory Lending, FTC, Legal Info, payday loans, predatory lending, scams | Comments Off

The Latest on Debt Collection Laws & Rules

As you may already know, consumers in the United States are protected by a number of consumer protection laws designed to make sure merchants and service providers do not take more than a reasonable amount of consumers’ money.

One consumer protection law, the Fair Debt Collection Practices Act, outlines how debt collectors are permitted to do their job and puts certain restrictions on them. Each year, the Federal Trade Commission issues a report on the state of various consumer protection laws and its recommendations for modifications and changes in rules and enforcement.

Here’s a look at what the FTC had to say about 2010.

Debt Collection Complaints in 2010

Last year, consumer debt collection complaints topped the list, at 140,036 individual filings (an increase from 119,609 in 2009). Specifically, people identified these debt collection issues:

• Repeated or continuous phone calls: Debt collectors are explicitly restricted from calling debtors repeatedly or with the intent to harass or annoy. Further, the FDCPA mandates that debt collectors can call only between the hours of 8 am and 9 pm local time.
• Misrepresentation of a debt: Consumer complaints cited debt collectors who misrepresented the character, amount or status of debts owed, and in some cases demanded payments in amounts greater than those permitted by law. All such actions are prohibited by the FDCPA: debt collectors cannot lie about any aspect of a debt or about their legal authority to collect it.
• Failure to provide adequate written documentation: The FDCPA requires that debt collectors send debtors written documents outlining the specifics of a debt and detailing the consumer’s rights regarding the debt and its collection. According to consumer complaints, though, many debt collectors are not adhering to these requirements.

Changes to Enforcement and Consumer Protection

Thanks to the implementation of the Consumer Protection Act in 2010, a new consumer rights bureau (the Consumer Financial Protection Bureau) will have authority to create and enforce (with help from the FTC) rules governing how debt collectors must operate. In future years, reports about the status of the FDCPA will be developed and issued by the new consumer protection bureau.

How to Take Action against Dishonest Debt Collectors

So what can you do if you’re plagued by debt collectors who don’t play by the rules? Take the following steps.

• Learn your rights: Check out a summary of the rules debt collectors must follow so you know when your rights have been violated.
• File a complaint: Visit the FTC’s complaint page to file a complaint electronically.
• Get legal help: If a debt collector is harassing you during or after a bankruptcy filing (especially for a debt that was discharged in bankruptcy), you may want to enlist a lawyer to help.

Posted in Bankruptcy and Predatory Lending, Consumer Protection, FTC, Legal Info, debt collection | 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

Protect Your Money & Car with Auto Warranty Tips

The Federal Trade Commission recently published tips to help Americans get the most out of their vehicle warranties. The guidelines are fairly simple, but could make a huge difference to your car (and your wallet) should your car need repairs.

And for anyone recovering from bankruptcy or otherwise trying to maintain healthy finances and eliminate debt, these tips should be welcome.

Know What the Warranty Protects

Here’s something that many consumers don’t know about auto warranties:

• Federal law protects consumers: In fact, it’s illegal for an auto dealer to deny service outlined in a warranty simply because a you had your car serviced by an independent mechanic.
• The dealer has to offer proof: In order to deny warranty-covered services, a dealer must be able to prove that specific work done on the car caused the damage that you want repaired. And then, only the part damaged by the independent mechanic can be denied warranty services – the rest of the car is still protected.

Make the Most of Your Car’s Warranty

The FTC recommends taking the following steps to make sure your car can get the service and attention it needs and is legally granted by its warranty.

• Read your warranty or your car’s owner’s manual: In order to take advantage of the terms of service, you have to know what they are, right? So make sure to take the time to look over what is guaranteed in your vehicle – you may even be pleasantly surprised.
• Keep a note of the end of the warranty period: It’s not “cheating” to have any problems or issues looked at by your dealer right before the end of your warranty. In fact, that’s a smart move: why not get any updates or repairs done for free while you still can?
• Take regular care of your car: Make sure to follow the guidelines listed in the owner’s manual for maintaining your car. This means changing the oil and air filters, having tires rotated, and getting any strange noises checked out as they occur. This may cost more in the short term than ignoring your car or letting things slide, but better maintenance will mean better longevity (which means you won’t have to pay for a whole new car for longer).
• Keep your receipts: It’s a good idea to have a file (whether digital or hard) of all the maintenance and repair work you get done. That way, you can use the receipts as evidence that you maintained your car properly if and when you need to take it in to the dealer to have it repaired under warranty.
• Make some noise: If a dealer refuses warranty-guaranteed service on your car, speak to a manager or another dealership. Consider filing a complaint with your state’s attorney general. The federal government outlines certain rights for consumers regarding their cars and auto warranties, so why not take advantage of those?

Posted in FTC, Financial Literacy, Personal Finance, your car | Comments Off

Scam Watch: Avoid Dating & Social Networking Money Scams

The Federal Trade Commission recently published a warning about scams that have been reported on dating and social networking web sites. Here’s what you need to know to identify and avoid these potential money-suckers (and identity thieves).

It’s Probably Not True Love

According to the FTC's OnGuard Online site, a typical online networking or dating scam works something like this:

• The scammer creates a fake profile.
• The scammer develops a relationship with someone he’s never met face to face and convinces that person that they’re in love.
• The scammer asks his “love” to wire money for one reason or another – usually to a location outside the United States.

So how can you distinguish between someone who is honestly interested in friendship or a relationship and someone who only wants to drain your bank account or steal your identity? The FTC provides a list of warning signs that your digital romance might be less than ideal.

• The scammer expresses a desire to move away from the dating or social networking site and use instead a personal email or instant messaging account. This suggests that the person wants to fly under the radar of whatever body governs the site, or wants to use a less-secure (and perhaps less traceable) method of communication.
• The scammer begins to claim feelings of love early on in the relationship. This should raise a red flag, particularly if you’ve never met the person face to face – claiming to be in love sets the stage a little too neatly for asking for favors from that loved one.
• The scammer indicates that she is from the U.S. but is currently living overseas. This provides a handy explanation for why she would want a victim to send funds outside of the country (presumably to an account regulated by less stringent laws than those in the U.S.).
• The scammer insists that he wants to visit the victim, but is unable to do so because of some unfortunate life event (such as the death of a loved one, job loss, or similar).
• The scammer offers seemingly “valid” reasons why she needs money, such as a relative’s sickness, a minor financial setback, or similar – and, after the victim sends money, the scammer continues to ask for more.

Watch Out for Requests from Friends and Family

Of course, not every scam involves establishing a new relationship. Another popular scam involves requests from close friends or family members for money to be wired overseas - usually the story involves an international vacation gone bad, and the friend needs money wired to pay for an emergency. In reality, the friend's account has been compromised by a scammer.

The Dangers of Identity Theft

So why are scams such as these so treacherous? The obvious answer is that a scammer could take in an unsuspecting victim and drain his or her bank account. But the risk of identity theft might put a victim at even greater risk.

Identity theft can cause long-term damage to your finances and credit, which can make it difficult to get loans, apartment rentals, credit cards and more. In general, be wary any time a person you’ve never met asks for money – particularly if you’re being asked to send it outside the U.S.

Posted in FTC, Identity Theft, scams | Comments Off

Protection from Mortgage Relief Scams from the FTC

The Federal Trade Commission announced this week that it has published new rules for companies that advertise themselves as mortgage foreclosure relief outfits. The rules, it seems, are designed to eliminate scammers from taking money from struggling homeowners.

Here’s a look at the details.

FTC: No Advance Fees, More Disclosures

The FTC’s rules include a number of provisions designed to bring more transparency to the world of foreclosure relief companies. These include:

• A ban on upfront fees: This rule will prevent companies from taking homeowners’ money without actually offering any help. When the new rules take effect on December 13, foreclosure relief firms will be required to present consumers with a written agreement from the lender or servicer indicating that the proposed changes are acceptable and approved, as well as a written document detailing the changes.
• Increased disclosures: In addition to the ban on advance fees, the new rules will require foreclosure rescuers to disclose more information and in a clearer format. Specifically, firms must explain that they are not affiliated with the government, that a customer’s lender might not agree to the proposed mortgage modification and that if a customer stops making regular mortgage payments it could adversely affect her credit rating and/or cause her to lose her home. Further, these companies have to disclose that customers have the right to stop doing business with the firms whenever they choose and that they have the right to reject an offer made by these firms.
• Prohibited claims: Besides being required to disclose certain information, foreclosure rescue firms will be forbidden from making any kinds of false or misleading claims, which might include claims about their likelihood of helping a client, government affiliation, a client’s obligation to pay, refund and cancellation policies and how much the company’s services cost.
• Attorney exemption: It should be noted that the FTC rules provide an exemption for lawyers who are properly licensed and actively practicing law in the state where the client or the client’s home is located.

More Hope for Struggling Homeowners?

The new rules come as welcome news to a nation gripped by a flailing housing market, where millions of citizens are in some phase of the foreclosure process. Hopefully, when the new rules take effect, they’ll decrease the prevalence of foreclosure rescue scams, which would in turn mean that American families would stand a better chance of finding workable solutions to keeping and staying in their homes.

It should be noted that these rules are in a similar vein to those passed earlier this year for the debt settlement industry, which, like the foreclosure rescue industry, has historically been plagued by fraudsters and scammers who wreak financial havoc on cash-strapped customers.

Posted in FTC, Mortgage Foreclosure, scams | Comments Off

Take Advantage of Free ID Theft Protection & Education Materials

The Federal Trade Commission has announced that, in honor of National Protect Your Identity Week, it will provide consumers with a wealth of free information and materials about how to fight, avoid and protect themselves against identity theft.

Where to Learn about Identity Theft Prevention

Though federal laws exist to protect the finances of people who are victimized by identity theft, it’s still fairly common for bankruptcy filers to indicate that identity theft contributed to the financial distress that led them to file for bankruptcy. Here’s a look at what the FTC has to offer:

• Basic information: This “one-stop national resource” provides consumers with information about what identity theft is, how to recognize it, how to prevent it and what to do if they’ve been victimized by identity theft. Additionally, the site has information for businesses and law enforcement groups to help prevent and fight identity theft cases from happening.
• Informative videos: The FTC has posted some educational videos for consumers interested in learning how to reduce their online risk of identity theft and how to protect their digital lives from exposure to identity threats.
• Online application of skills: At their game portal, the FTC offers consumers a chance to test their knowledge about the risk factors of identity thefts, basic precautions to take to avoid being victimized by identity thieves and apply identity theft prevention skills by playing online games. This site might prove especially helpful for younger computer users who might be resistant to more traditional information sources.
• Reminder of your rights: Finally, the FTC has posted a reminder about every American consumer’s right to obtain and view copies of her credit report and why staying abreast of what appears in your credit is important to financial health.

Legal Help for Identity Theft Woes

To top off its bevy of useful information about fighting and preventing identity theft, the FTC has also announced that it will offer legal guidelines for identity theft victims. This web page is designed to help victims and their advocates (whether lawyers, credit counselors or other activists) determine how to proceed to maximize the benefit of fighting identity thieves.

As many people who have unfortunately felt the sting of identity theft already know, the crime can lead to hours of headaches as consumers try to sort out their financial situation and reclaim their private information. Generally, there are a few practices can help you avoid identity theft:

• Shred all sensitive documents before disposing of them;
• Don’t click on unfamiliar links online and definitely don’t enter your personal information unless you’re sure what web site you’re on;
• Don’t share your passwords with anyone;
• Check your free credit report every year for suspicious activity; and
• Make sure your email has a good spam filter. Be wary of emails from unknown sources.

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