Bankruptcy Questions Answered

FTC Supports Data Security Legislation

Even though federal law protects victims of information crimes, every year some people who file for bankruptcy cite identity theft or another information crime as one of the reasons for their financial distress. And, in an age of increasing online transactions, we’re more exposed than ever to data breaches that could lead to serious privacy risks.

That’s why it’s good news to hear that the FTC recently testified to Congress in favor of data security legislation.

Your Personal Data & Finances

You probably already know that your Social Security Number, your credit card numbers, your bank account numbers and similar information are valuable and should be guarded carefully. But, it seems, some businesses that collect and store our personal information don’t always take the same precautions we might ourselves.

The FTC testimony specifically suggests the passage of laws that require the following:

• Businesses that make claims or promises about data security must know that these claims are accurate and up to date.
• Businesses should take steps to guard against well-known technology threats to data security.
• Businesses must know the recipients, if any, of sensitive consumer information.
• Once they no longer need sensitive information, businesses must not continue to store it.
• When disposing of sensitive information, businesses must do so properly and completely.

If it surprises you that these laws aren’t already in place, take note. This should serve as a wake-up call to remind you to keep careful track of your personal information at all times.

Protecting Your Information and Money

So how can you reduce the threat of identity theft and thus lower your chances of becoming a victim? Here are some pointers from the FTC:

• Shred sensitive documents when you’re finished with them. This includes medical documents, financial papers, and anything else that has identifying information about you or your family.
• Protect your Social Security Number. Keep your Social Security card in a safe spot (not your wallet) and don’t give this number out unless you’re obligated to by law. If you’re asked for your SSN, question why the company needs it, how it will be used and whether you can give an alternate form of identification.
• Keep your personal information safe. Don’t communicate any sensitive info over the phone, through email or over the Internet unless you’re certain who’s on the other end.
• Be suspicious of strange emails. If you get an email from an unknown source with a link or an attachment, avoid clicking on them – they could be viruses.
• Keep your passwords obscure. Using important dates or family names can make it easy for identity thieves to access your accounts.
• Keep your personal information secure. At home, take special precautions if you have roommates or non-family workers coming and going.

If you’re concerned that you may have been the victim of identity theft, speak with a lawyer today to learn about your rights.

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

New Debt Relief Rule Means More Truth in Advertising

If you’re struggling with debt and looking for a way to improve your finances, there’s good news on the horizon: beginning Monday, September 27, new rules issued by the Federal Trade Commission prevent advertisers from deceiving potential customers about their ability to offer financial relief.

Here are some of the new protections the FTC’s latest consumer protection rule outlines.

More Honest Disclosures

While bankruptcy is a well-known debt relief option, many consumers try to avoid filing for bankruptcy by opting for debt settlement or credit counseling. While both options work well in many instances, in some cases, dishonest companies pitch too-good-to-be-true offers and consumers end up with more debt than they had before.

Now, advertisers will have to:

• Announce proposed fees & refund policies No longer will companies be able to get away with advertising how low a price might be (“as little as…”). Now, advertisers will have to base their proposed fees on actual results they can realistically expect to get from a person’s creditors.
• Estimate likely time frame: After consulting with a customer, debt-settlement companies must offer a good-faith estimate about the likely length of time the process will take, based on a debtor’s individual circumstances.
• Estimate savings required to settle debts: As with the other new requirements, companies must make estimate how much money an individual customer must save before he has a realistic chance of settling debts based on that customer’s individual circumstances.
• Disclose potential negative side effects: Rather than glossing over the downsides of debt settlement, companies are now required to review with customers the potential negative impact on their credit reports, the chance that creditors will bring lawsuits against them and any potential tax consequences.

More Honest Advertising

In addition to the above requirements, debt settlement firms are now required to advertise likely savings based on all their clients, not only the most successful ones. Theoretically, this should give potential customers a more realistic picture of how much debt settlement could actually help their finances.

Debt Settlement Vs. Bankruptcy

While there is no one-size-fits-all debt relief option, bankruptcy protection does have some obvious advantages over debt settlement and some other bankruptcy alternatives, which include:

• Legal protection from creditors: Because bankruptcy functions as part of the federal government, those who file for bankruptcy are legally protected from creditor contact once they file their cases.
• Federally and state regulated processes: While anyone can start a debt settlement firm, regardless of qualifications, bankruptcy attorneys and judges must meet very specific requirements, so you won’t have to question the background of the people you’re working with.
• Federally regulated costs: The fees associated with filing for bankruptcy are set by federal laws, so you know you aren’t getting ripped off when you start a case (although fees that lawyers charge may vary). Debt settlement firms, on the other hand, can charge whatever they want – and some unscrupulous firms do, to the detriment of their clients.

Posted in Bankruptcy, Consumer Protection, Credit and Bankruptcy, Debt Relief, Debt Settlement, FTC, Financial Literacy | Comments Off

Learn from Your Fake Financial Mistakes

Unfortunately, one of the best ways to learn what an online scam looks like is to encounter one. And if you've had too much experience with online scams you could still be reeling financially or considering bankruptcy.

The good news: The Federal Trade Commission has announced a new website to help consumers experience a variety of realistic online scam situations without actually losing money. By experiencing these scams in a risk-free environment you'll be better equipped to avoid them in real life.

The latest of these sites, Esteemed Lending Services, mimics advance-fee loan scams that have been known to drain consumers of their money without offering anything in return.

Know Financial Scam Warning Signs

When you click on any link on the Esteemed Lending Services page, you’re brought to a page that explains that, had the site been real, you could have been scammed. Then, in order to arm consumers with the tools necessary for avoiding scams, the FTC explains what to expect from advance-fee scammers:

• Professional-looking web sites: Often, the FTC notes, scam companies will have a legitimate-seeming online presence and a trustworthy-sounding name.
• Guaranteed loans: Any offer that guarantees you’ll be approved, regardless of your credit history, should signal a scam to you. Legitimate lenders need to know your credit history in order to give you reasonable loan terms.
• Unclear fees: Real lenders disclose their fees upfront and do not require you to pay them until your loan has been approved. Scammers often charge fees upfront – and then never follow through with their promises of loans.
• Phone loans: In the U.S., it’s against the law to promise a loan over the phone and ask for payment before the money is issued.
• Slightly off names: One trick some scammers use is to give themselves a name and logo that resemble those of a legitimate company. If you’re not paying attention, you could easily be confused.
• Lack of proper registration: If a company isn’t registered in your state, chances are it’s not legitimate. Back away.
• Money wires: Legitimate lenders will not ask you to pay by wiring money – if someone asks you to do so, decline and walk away.

More Financial Help

The FTC also offers helpful hints for avoiding scams in such areas as diet products, male enhancement, medical supplements and work-at-home offers.

Posted in FTC, Financial Literacy, financial scams | Comments Off

Financial Preparation: Kids and Advertising

The FTC announced this week that it has launched a program to help America’s “tweens” understand how advertising works so they can become critical thinkers and wiser consumers as they begin earning disposable income and saving for the future.

From a financial literacy standpoint, this move could pay big dividends down the road: Teaching kids to understand the promises and claims advertisers may set them up to make well-informed decisions about how to spend their money down the road.

Financial education is a big problem in the U.S. as many consumers struggle to spend within their means. Studies have shown that ads and the method of payment can have an impact on whether someone makes a purchase. Understanding how money works could help keep the next generation out of bankruptcy.

The FTC’s press release highlights some interesting items:

• Ads are everywhere: These days, it’s hard to get away from advertising – video games, TV shows, movies, web sites, phones and even the grocery store checkout line are jam packed with ads. Understanding how they work is crucial.
• Learn through playing: The website admongo.gov hosts an interactive game kids can play for free to develop some of the skills necessary for navigating an ad-laden world.
• Help from the schools: Creators of the Admongo campaign have also developed educational materials that educators can incorporate into classroom lessons to help their students develop a better understanding of the way ads function.

Hot the Financial Game Works

The online Admongo game has several levels that teach children a variety of skills they’ll need to recognize ads and understand how they work. The various mini-games allow kids to create an avatar of themselves and then explore various aspects of advertising, including the following:

• The Atrium: Gamers run around a city and identify the various ads they see – on billboards, buses, flyers, etc.
• The Assemblimator: Here, kids can look at the various pieces of an ad separately to understand how they work individually and collectively to persuade an intended audience.
• The Planadtarium: In this level, kids play to learn about the ways ads are targeted at various audiences and how those audiences are expected to react upon seeing the ads.
• The Adgitator: Here, kids can create their own advertisements to use what they’ve learned

The brilliance of this game is that it presents the problem of advertising as a puzzle kids can figure out. For parents, this can be an invaluable tool – how often have your kids begun asking for a toy, game or type of food they saw advertised during a favorite TV show?

Helping your kids develop these skills early may set them up to hang onto their money in the future – when advertising will likely get even subtler and more pervasive.

Posted in FTC, Financial Literacy, advertising, bankruptcy prevention | Comments Off

LifeLock Fined for Inappropriate Identity Theft Protection Claims

A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.

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

FTC: Identity Theft Top Complaint in 2009; Potential Data Breach

The Federal Trade Commission recently issued its annual report on consumer complaints filed in the last 12 months (summary available here, for the complete report, see below).

Identity theft was by far the largest complaint category, concerning 21 percent of all complaints filed. The top fifteen list looks like this:

• Identity theft (21 percent)
• Third party and creditor debt collection (nine percent)
• Internet services (six percent)
• Shop-at-home and catalog sales (six percent)
• Foreign money offers and counterfeit check scams (five percent)
• Internet auctions (four percent)
• Credit cards (three percent)
• Prizes, sweepstakes and lotteries (three percent)
• Advance-fee loans and credit protection/repair (three percent)
• Banks and Lenders (two percent)
• Credit bureaus, information furnishers and report users (two percent)
• Television and electronic media (two percent)
• Health care (two percent)
• Business opportunities, employment agencies and work-at-home plans (two percent)
• Computer equipment and software (two percent)

The FTC reports that identity theft complaints also constituted the largest single group of consumer worries last year, but have dropped as an overall percentage of the whole. In addition to the release of 2009’s data, the FTC has posted an animated video detailing how and when to file a complaint (available here).

A Potential Data Breach You Should Know About

In another recent news release, the FTC noted that it has warned almost 100 companies that information they store on peer-to-peer websites (used for everything from playing video games to sharing text, audio and video files to conducting online phone calls) may be vulnerable to data breaches.

Specifically, if peer-to-peer (P2P) software is improperly configured, any sensitive data may be accessible to anyone on the network. This presents a huge security risk, and could lead to identity theft or other costly and frustrating scams.

What this could mean for you is that, if you have given your personal information to one of the companies in question, your information could be at risk.

While no companies have necessarily broken the FTC’s regulations regarding storage of sensitive information, some may be at risk for significant future data breaches.

Additional Resources

FTC 2009 Full Report on Consumer Complaints.

Posted in FTC, Identity Theft, data breach | Comments Off

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

• Contacting a debtor before 8:00 am or after 9:00 pm local time
• Contacting a debtor after receiving a written request not to do so
• Contacting a debtor at her place of work after being told not to
• Calling the debtor with the intent to annoy, harass or abuse
• Contacting the debtor directly when he is known to have an attorney
• Misrepresenting a debt or using deceit to collect money
• Threatening arrest or legal action when neither is an option
• Seeking more than a person legally owes
• Publishing a person’s name on a “bad debt” list
• Reporting information incorrectly to a credit reporting bureau
• Contacting a third party about a consumer’s debt
• Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, FTC, Financial Literacy, debt collection | Comments Off