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Singletary: What you should know before you take out a reverse mortgage

When you have most of your wealth tied up in your home, it’s referred to as being “house rich, cash poor.”

Many seniors who find themselves in this position may be enticed by the commercials offering salvation. They are wooed by a chance to tap into their home’s equity with a reverse mortgage. Smooth television ads make it appear to be a no-brainer. It’s actually much more complicated.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”

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The most appealing quality of this type of loan is that, unlike a traditional mortgage, you don’t have to make monthly payments. The lender doesn’t collect until the homeowner moves, sells or dies. Once the home is sold, any equity that remains after the loan is repaid is distributed to the person’s estate.

To qualify, you have to be 62 or older. The reverse-mortgage market isn’t huge — about 1 percent of all mortgages — but reverse-mortgage lenders are likely to pump up the volume in coming years as more seniors retire. For a lot of people, the only source of big money for them is the equity in their homes, the Consumer Financial Protection Bureau says.

In 2013, a typical household had only $111,000 in 401(k) or IRA savings, according to the Center for Retirement Research at Boston College. The center found that too many people are dipping into their retirement accounts during their working years, causing what is called a “leakage.”

But a lot of seniors have equity in their homes — about $3.84 trillion, according to one mortgage-industry survey. They can tap into that equity by selling or taking out a home equity loan or line of credit. But selling isn’t an option if they want to stay put, and they would have to make payments on the line of credit or loan. Given those options, it’s no wonder a reverse mortgage can be appealing.

The CFPB, in a report analyzing 1,200 reverse-mortgage complaints received from 2011 to the end of last year, found that many people are confused about this type of loan.

The fact that counseling is required from a government-approved agency for loans made through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program is an indication of the complexity of this financial product. Still, many seniors don’t understand what they are getting into.

People complained to the CFPB about their loan terms, the loan servicing companies and not being able to add a borrower. Adult children complained that lenders refused to add them as an additional borrower or allow them to “assume” the loan for an aging or deceased parent, the report said.

To help, the CFPB has issued some tips about reverse mortgages. Here are the three important things the agency says you or your relatives should know:

?Double check that your loan records accurately reflect who is on the mortgage.

?Be sure to understand the risks of not including a spouse on the loan. Often an older spouse will take out a reverse mortgage in his or her name only, because older homeowners are able to borrow against a greater percentage of the home’s equity.

“Non-borrowing spouses submit complaints distraught that they are facing foreclosure and about to lose their home after their husband or wife dies,” the report said. “Other non-borrowing spouses submit complaints worried about their ability to remain in their home should the older spouse die first.”

If you decide it’s financially better for just one spouse to take out a reverse mortgage, be sure to have a plan for the non-borrowing spouse. Can a surviving spouse stay in the home? The Department of Housing and Urban Development has attempted to address the issue of non-borrowing spouses. Under certain conditions, some spouses may be able to stay, but others may not get that protection.

The CFPB recommends that if only one spouse is on the mortgage, you should find out whether the loan servicer will permit the non-borrowing spouse to qualify for a repayment deferral allowing him or her to remain in the home.

?Talk to your heirs. If you have adult children or other relatives living in the house, be sure they understand what could happen if the reverse mortgage becomes due.

Go to the CFPB Web site at and click the link for the agency’s consumer advisory on reverse mortgages.

There are some pros to a reverse mortgage. But the complexity of the product means you better be just as aware of the cons.

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or To read previous Color of Money columns, go to


4Ps beneficiaries pawn cash cards

BACOLOD CITY—The Department of Social Welfare and Development (DSWD) is conducting an inventory of its propoor cash transfer scheme program after 259 beneficiaries in Negros Occidental province were found to have pawned their cash cards.

Dionela Flores-Madrona, head of provincial operations of the Pantawid Pamilyang Pilipino Program (4Ps), or the conditional cash transfer scheme, said the move would ensure that the cards are still with beneficiaries and not with loan sharks.

The program is aimed at helping the poorest of the poor by giving them monthly stipends, provided they bring their children to health centers, send them to school, and attend family development sessions.

Madrona said the 259 had pawned their cards to usurers for P500 to P1,000 each. The most common reason given by the beneficiaries is that they needed money urgently for the hospital expenses of relatives.

At least 96 were found to have pawned their cash cards in Bacolod, 66 in Cadiz City, 51 in Escalante City, 19 in San Carlos City, 10 in Talisay City, 14 in Hinigaran town, two in Silay City, and one in Toboso town.

The irregularity was discovered in December last year after the DSWD verified a tip that several beneficiaries had pawned their cards—actually, automated teller machine cards of Land Bank of the Philippines—through which 4Ps beneficiaries get their cash allocations.

Loan sharks collect payment by withdrawing the money meant for the beneficiaries.

Cash assistance to 4Ps beneficiaries is released every two months. The amount per family ranges from P600 to P2,800, depending on the number of children a beneficiary has.

In Negros Occidental, including Bacolod, there are 126,667 4Ps beneficiaries.

Those caught misusing their cards are made to sign a notice of warning from the DSWD and given counseling by a social worker.

They would not also receive their cash assistance for the month, but would not yet be removed from the program. Those committing the offense for the third time would be permanently delisted.

Madrona said the DSWD could not sue the loan sharks in the absence of a law penalizing them.

But the agency could confiscate the cash cards, which are government property, she said.


Avoid reverse mortgage regrets

Lots of people don’t fully understand how reverse mortgages work, and the resulting confusion can leave them with a lot of regrets.

Reverse mortgages were largely created for seniors who are cash-poor but house-rich – they have a lot of equity in their homes. The idea was to allow seniors to remain in their homes by borrowing a portion of their equity to supplement their incomes.

To qualify for a reverse mortgage, you have to be 62 or older. But unlike traditional home loan products, there is no monthly payment. The loan isn’t due until the borrower moves, sells or dies.

The overwhelming majority of borrowers get a reverse mortgage through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program.

I recently wrote about the loan product and many readers had questions and concerns.

One wrote: “It is recommended that the prospective borrower seek the guidance of a counselor. How independent are these counselors? My late cousin had obtained a reverse mortgage to supplement her limited pension. My impression was that the ‘counselor’ essentially presented my cousin with the different options of receiving the reverse mortgage (lump sum, monthly, etc.) rather than the associated costs, requirements and risks.”

Counseling is not recommended, it’s required by the Department of Housing and Urban Development. Borrowers have to use HUD-approved housing counselors, who must discuss not just how a reverse mortgage works and its eligibility requirements but the financial implications of getting this type of loan. They also are supposed to talk about alternatives. Their job is to help guide people to make their own decisions about whether the product is right for them.

Counselors are allowed to charge for counseling, but the agency must tell you about the fee before charging it. Fees are typically about $125, but some agencies charge less. Agencies are also required to waive the counseling fee if a borrower can’t afford it. You can pay the fee directly to the agency or out of your loan proceeds.

Another reader wrote: “A home equity line of credit can serve the same function as a reverse mortgage at much lower costs, and with the potential of being able to withdraw a larger percentage of equity than with a reverse mortgage. Am I missing something?”

The problem with a line of credit for cash-strapped seniors is that they may not qualify for the loan and they have to make monthly payments. The appeal of a reverse mortgage is that no monthly payment is required.

I also received a heart-wrenching note from one senior in Florida whose husband had taken out a reverse mortgage. She had signed over her rights to their home to her husband so that he could get a higher mortgage amount. She was 57 at the time. He was 62.

Some people, who married later in life, never add the spouse to the deed to a home that one spouse owned previously, said Jean Constantine-Davis, senior attorney with AARP Foundation Litigation. “More commonly, the younger spouses are talked into quit-claiming their interest in the home by mortgage brokers to generate higher draw on equity,” she said. “The couples virtually never understand that under the terms of the mortgage, when the borrowing spouse dies, the surviving spouse will be foreclosed on and evicted.”

That’s what happened to the reader.

“They assured me there would be no problem in adding my name back when I turned 62,” she wrote. “They failed to tell us that would require qualifying for a refinance.”

Now they can’t afford to refinance.


State moves ahead with payday loan database

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Circuit court ruling a defeat for payday loans and the days of 456 percent interest.

Photo by David Garrett.

Critics of payday loans say that, even though Alabama state law limits individual borrowers to having $500 in loans at one time, many people who use the high-interest loans owe several payday loan businesses simultaneously.

That all could be changing in early 2015, thanks to a Montgomery County Circuit Court ruling. On Aug. 6, Judge Truman M. Hobbs dismissed a suit filed by payday loan companies against the Alabama State Department of Banking, which was preparing to require lenders to use a common database to track borrowers’ debts to payday lenders.

Elizabeth Bressler, general counsel for the Department of Banking, said the state now is making plans to begin the database by about Jan. 1. Unless the Alabama Supreme Court issues a stay on Hobbs’ ruling, the department will select a company to set up and operate the database, she said.

A court document filed by the Department of Banking says the state had allowed payday lenders to utilize different databases since the legislature legalized payday loans in 2003. But, the document says, the different databases used by lenders do not communicate, which means a borrower can get separate loans from businesses using different databases.

In 2013, the Department of Banking issued a new regulation that required payday lenders to use a common third-party database. Several lenders, including Cash Mart Inc. and Rapid Cash of Alabama, filed suit against the state. Hobbs’ ruling dismissed the lenders’ case.

Payday loans are short-term, no credit check loans that are accessible to people who have jobs and checking accounts. Typically, borrowers promise to repay the loans on their next payday and are charged 17.5 percent interest for that period, which generally is two weeks to 30 days. Borrowers give lenders checks dated for their payday.

Thus, a $300 loan carries $52.50 in interest. A $500 loan costs $587.50 to repay. That equals up to 456 percent interest per year.

Many payday lenders require borrowers to return on payday with cash to cover the loan and interest. They are given their checks back at that point. If the borrower does not come, the lender cashes the check. Some lenders simply cash the checks on the borrowers’ payday instead of asking borrowers to pay in cash.

In his ruling, Hobbs wrote that the lenders argued that the Department of Banking regulation would conflict with the state law requiring use of a database because it would eliminate lenders’ ability to choose a database vendor and negotiate a more favorable fee. If a state-approved database is used, lenders will pay a standard fee.

“The statute does not guarantee a choice of vendors for lenders. … The only requirement in the statute is that the vendor must be a private sector entity, an obligation honored by the regulation. There is no conflict between the statute and the regulation,” the ruling said.

Hobbs also ruled against the lenders’ claim that the fee charged by the database vendor would amount to a tax. “It would be a strange tax indeed which found its way to private, as opposed to public coffers,” he wrote.

Supporters of efforts to control payday loans are happy with the ruling. “This ruling is the first win for Alabama consumers since payday loans crept into Alabama and were legalized in 2003. A common database ensures that the state Banking Department can adequately monitor payday lenders and enforce the law,” said Shay M. Farley, legal director of the Alabama Appleseed Center for Law and Justice.

“Holding these lenders accountable is only the first step,” she said in a statement. “We need the legislature to act to put an end to their abusive practices. It is time to take a stand against the debt trap. Information gathered from other states’ payday lending databases and independent research shows the extensive amount of household assets that are syphoned by this industry. The legislature must end triple-digit interest rates and require lenders to examine a borrower’s ability to repay before knowingly saddling them with insurmountable debt.”

The Alabama Appleseed Center is one of several organizations that have banded together to drum up grassroots support and lobby legislators to make changes that would include limiting the amount of interest payday lenders charge. A bill introduced by State Rep. Patricia Todd (D-Birmingham) in the 2014 legislative session would have limited the interest rate to 36 percent. That bill died without coming to a vote, but Todd has said she plans to try again in 2015.

“I’ve been working with several people in the department and we are soon going to issue a request for proposals,” said Anne Gunter, associate counsel for the Department of Banking.

Bressler said the Department of Banking will give bidders a month to submit their bids after the request for proposals is issued. She expects to have bids by October.

Asked how long the process will take, Gunter said, “It really depends on the bids we receive. The more bids we receive, the longer it’s going to take. … We’re just going to see what happens.”

Bressler said the payday lenders have filed a notice of appeal with the Supreme Court but the state can move ahead if the higher court does not grant a stay.

“Obviously, we are pleased with the circuit court ruling and we will wait to hear from the Supreme Court,” Gunter said.


Local payday loan store violates law

MORRIS – Payday loan providers owned by the company Cottonwood Financial Illinois have violated state law more than 90 times since March, and the Morris Cash Store was one of them.

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The Morris store racked up $7,000 in fines within three months for committing a handful of violations to the Consumer Installment Loan Act and Payday Loan Reform Act. These acts establish rules and regulations meant to protect borrowers from high interest rates that can create a cycle of debt.

The Cash Store, on Route 6, provides various cash loans for those who need to finance unexpected, emergency expenses.

The store was issued four separate violations: scheduling a monthly payment exceeding 50 percent of a borrower’s monthly income; failing to accurately determine if a borrower was eligible for a loan; issuing a payday loan exceeding 22.5 percent of a borrower’s monthly income; and failing to properly enter a loan into the database on the day it was made.

The infractions were issued by the Illinois Department of Financial and Professional Regulation and were listed in the department’s monthly disciplinary reports.

Managers of the Cash Store in Morris referred requests for comment to Cottonwood Financial Illinois headquarters, which did not return phone calls.

Sue Hofer, spokeswoman for IDFPR, said the department handles these violations on a case by case basis. Ultimately, they want to help a business correct its issues, not force owners to close the doors.

“Our goal is to get businesses into compliance, not shut them down,” Hofer said.

She said the flood of cash store violations comes after the CILA and PLRA were reinforced with tighter regulations.

The new rules are meant to further protect consumers from issues like unlimited loan rollovers, which involves taking out a new loan to cover expenses from a previous loan.

According to information from the Attorney General’s office, certain payday loans can legally reach an annual interest rate of 400 percent.

“What was happening is people would take out loans, then go back in and renegotiate to take out more money to pay back the first loan – and so all of the interest kept adding on and on and on,” Hofer said. “What we tried to do is rewrite [the acts], so there was a realistic opportunity for the loan to be repaid.”

But the laws don’t always protect consumers who are already trapped in a bad loan.

When places like the Cash Store and other payday loan services violate the law – issuing loans that are difficult to repay on time – the lender is fined, but the borrower “unfortunately has no recourse,” Hofer said.

Payday loan borrowers are eligible for an interest-free repayment program, upon request, but other cash installment loans are not eligible for the program, according to the Attorney General’s office.

Because of this, IDFPR encourages consumers to treat payday loans as an absolute last resort, after exhausting all other options.

Locally, nonprofits like We Care of Grundy County offer rent and food assistance to those with financial emergencies.

We Care Executive Director Denise Gaska said the organization has helped individuals who have become bogged down by payday loans, and typically encourage all of their clients to avoid the loans, even as a last resort.

“We always counsel people away from them, because they are really dangerous,” Gaska said.

However, in some instances, cash advance services can be useful for those with nowhere else to turn.

Gaska commended the Morris Cash Store for being the only place locally that will process electric and gas bills for clients in danger of having their utilities shut off.

“We recognize that emergencies happen,” Hofer said. “But before they take out a loan from a consumer installment store or payday lending store, they should try every other option.”

Tips for borrowing and dealing with debt

Before borrowing:

• Approach local churches, nonprofits and family members for financial aid before pursuing a payday loan

• Beware of installment loans and title loans which can have excessive hidden fees and high interest rates

• Research the lender through the Better Business Bureau and state disciplinary reports

• Know your rights as a borrower. Visit to learn more about what to ask and what to look for in your contract

Dealing with debt:

• Request to enroll interest-free repayment program to manage payday loan debts

• Visit or call the Department of Financial and Professional Regulation at 1-888-473-4858 to learn more about loan debt management.

Sources: Illinois Attorney General’s Office, Illinois Department of Financial and Professional Regulation


Student debt companies are charging vulnerable borrowers for services they should get for free

This week, Illinois became the first state to sue companies that allegedly duped indebted college graduates into paying for student loan services they could have easily gotten for free.

It most certainly won’t be the last.

The business of bogus student debt relief services has been booming for years. With more than 40 million Americans collectively shouldering a $1.2 trillion student debt load, there is no shortage of customers willing to try anything to ease their burden. Capitalizing on borrower anxiety, these companies promise to either consolidate their loans or have their debt forgiven. They charge unknowing borrowers a hefty fee, and make off with the cash without ever doing anything. The phenomenon is much like the wave of predatory mortgage loan servicers that preyed on underwater homeowners in the wake of the 2008 housing crisis.

‘I knew I shouldn’t have listened’

Jenny Yee, 31, was desperate enough to believe such a claim earlier this month. After eight years of diligently paying down her $60,000 student debt bill, the Boston teacher is still $29,000 in the red. With the birth of her daughter three months ago, continuing to make $800 payments each month — even with help from her husband’s income — seemed nearly impossible.

Yee had previously looked into a federal student loan forgiveness program specifically targeting public service workers, but she was told she didn’t qualify. So when she saw an ad for a new student loan forgiveness program on Facebook two weeks ago, she couldn’t help but hope.

The ad was posted by a company called Nationwide Student Loan Center. According to its website, NSLC is a California-based “document preparation” firm that helps students find ways to lower their student loan payments.

When Yee contacted them, a company representative “said there was a new program called the Obama Forgiveness Loan that came out recently because the government wanted to help students get out of debt,” Yee says. “He asked me a bunch of questions about my income, my budget, my spending, everything. He plugged everything in and told me I definitely qualified.”

There was just one catch — in order to fill out the paperwork needed to apply for the program, Yee would have to pay a $588 processing fee. When she balked, the representative urged her to reconsider.

“He was very aggressive and kept shooting numbers at me as to why this was the best option and said I could make payments in three installments,” she says. “I knew I shouldn’t have listened but my baby had just woken up and I was in a rush. I thought if it was true, I didn’t want to pass up an opportunity to get my loans taken care of.”

So Yee handed over her credit card information and the rep emailed her a contract to sign online. Before she hung up, the representative gave her one last piece of advice: “If any of my lenders or debt collectors tried to contact me, he said I shouldn’t talk to them and I should only call him,” Yee says. That’s when she started to grow suspicious.

The next day, she called the Department of Education to see whether there really was a new loan forgiveness program. Indeed, there was a loan forgiveness program for public service workers, she was told — the same program she had already inquired about and didn’t qualify for. For good measure, the representative ran Yee’s information through the system and confirmed that she still didn’t qualify. Luckily, Yee was able to cancel her credit card before she was ever charged for NSLC’s services.

We reached out to Nationwide Student Loan Center for comment, but so far they have not returned our messages.

How to know you’ve been duped

Persis Yu, a staff attorney for the National Consumer Law Center (NCLC), says cases like Yee’s aren’t uncommon.

“Because borrowers are struggling, they are constantly looking for a solution,” Yu says. “But they don’t realize they’re paying for paperwork they could do for free.”

The idea of paying a professional to prepare an application for a debt consolidation or loan forgiveness program isn’t entirely off the wall. We pay tax attorneys and CPAs to handle our taxes every year even though we can do it on our own. Some students who find themselves tangled up in a mess of different types of student loans may actually benefit from seeking professional help from an expert, Yu says.

But the problem with some student debt relief services is that they aren’t offering one-on-one debt counseling and they don’t make it clear to borrowers that the service they do offer — federal loan consolidation — is easily available for free elsewhere. Buried in the four-page customer agreement Yee was asked to fill out was a line acknowledging that she could apply for the loan forgiveness program on her own. She claims the representative she spoke with, however, made no mention of it and urged her to sign the form without reading it.

In a 2013 report, the NCLC investigated 10 student debt relief firms in the U.S. None of them publicized their processing fees on their websites, it found. Initial fees went as high as $1,600 and included monthly service fees of $20 to $50. In January, New York Gov. Andrew Cuomo formed a special Student Protection Unit in response to complaints about bogus debt relief firms. The group issued subpoenas for information to more than a dozen debt relief firms and are currently conducting an investigation into potential fraud.

Fees aside, the biggest red flag that borrowers are dealing with a fraudulent firm is when they caution them against communicating with their lenders directly. By urging borrowers to ignore calls from their lenders or debt collectors, these firms are suggesting that borrowers can’t apply for loan forgiveness or debt consolidation programs on their own, which, of course, isn’t true.

There is only one federal loan consolidation program. Any federal student lender will be able to help you apply for free. A business that attempts to convince you otherwise — and makes big promises as to what it can do for you — doesn’t have your best interests at heart. The government doesn’t sanction debt relief firms, either, so don’t trust a business that claims they’ve been approved by the government.

Although the government doesn’t exactly make it easy for students to understand their options when it comes to loan repayment, there is information out there. You can visit the Consumer Financial Protection Bureau’s “Repay Student Debt” tool, which helps narrow down your options for both private and federal loan repayment. There is also an exhaustive list of student loan repayment options on the Office of Federal Student Aid website.

The bottom line: If you’re having trouble paying off your student loans, there is really only one place you should be calling for help — your lender.

“Borrowers need to be in communication with their loan servicers about their options if they’re struggling,” says Yu. “Unfortunately, a lot of borrowers have paid [for debt relief services] and don’t even realize they’ve been scammed.”

If you suspect you’ve been a victim of fraud, Yu suggests asking the company for a refund and requesting that any contracts you’ve signed be canceled. Sometimes firms will have borrowers sign a contract giving them limited power of attorney, which allows the firm to communicate with lenders on the borrower’s behalf. Contact your student loan servicer to explain the situation and revoke the firm’s power of attorney. If you’ve supplied your Social Security number, then keep an eye on your credit reports through to ensure your information has not been used to open any accounts. Finally, you can report suspected fraud activity to the CFPB (855-411-CFPB) or to the Federal Trade Commission’s online Complaint Assistant.

Have you fallen for one of these student debt relief scams? Let us know:

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Suit: Companies Duped Victims Struggling With Student Loan Debt


Two companies that promised to help Americans struggling with student loan debt instead allegedly pocketed their money and did little or nothing to help them, in a scheme that one state regulator warned is an emerging area of fraud nationwide.

Illinois Attorney General Lisa Madigan filed lawsuits Monday against the companies, First American Tax Defense LLC of Chicago and Broadsword Student Advantage LLC of Frisco, Texas, alleging they charged large upfront fees for bogus services or for government programs that consumers could have obtained for free. The suits are the first of their kind aimed at an industry that has drawn scrutiny from federal and state authorities.

The lawsuits contend that the companies preyed upon people who were desperate to lighten their student loan burdens. The companies allegedly charged consumers illegal upfront fees as high as $1,200 or tacked on monthly recurring fees, claiming they could reduce or eliminate their student loan debt or consolidate their loans. Representatives of the companies could not be reached for comment Monday.

First American touted its expertise in enrolling consumers in a so-called “Obama Forgiveness Program” and charged consumers for borrowers’ assistance applications that are free of charge through the U.S. Department of Education, the suit alleges. Some consumers said First American employees claimed to be affiliated with the federal education department and charged people $700 to $1,199 in illegal upfront fees, according to the suit.

Got a consumer problem? The ABC News Fixer may be able to help. Click here to submit your problem online. Letters are edited for length and clarity.

U.S. student loan debt has hit a whopping $1.2 trillion, making it an area ripe for fraud, consumer advocates say. Many of the 40 million Americans who have student loans have low-paying jobs and are having a tough time making their monthly loan payments.

In some cases, teachers, nurses, police officers, fire fighters or other public service workers were specifically targeted. Broadsword’s radio ads told public sector workers that “your entire student loan can be forgiven – you heard correctly.” Other consumers, the ads said, could “potentially cut their payments in half” or get other relief, the lawsuit alleges. Some consumers were steered into agreements requiring $499.99 upfront and a recurring monthly fee of $49.99 — money that actually went to a related financial planning company, not a debt relief organization, the suit says.

Alleged potential victims included Sharone Brown, a Chicago police officer who contacted Broadsword while struggling to pay her mortgage and student loan debts. Brown said a Broadsword rep told her he could reduce her payments to $49 a month, down from about $450 – but she’d have to pay about $600 in fees.

“He said, ‘We can definitely help you, Mrs. Brown – that’s what this program is all about,’” Brown told ABC News. “He was so excited … he said, ‘You do not know how happy I am that I’m going to be able to help you.’”

Brown, who has a master’s degree in professional counseling, thought it sounded too good to be true, however, so she called the U.S. Department of Education. That’s when she learned that the federal program the rep had pitched wasn’t going to be active until 2017, she said.

Brown said she has since negotiated her payments down to about $308 a month and has made them all on time.

As for the debt relief companies, the police officer who works with at-risk youths said, “I think it’s a shame. … Sometimes people tend to prey on those who are the most vulnerable.”


Oklahomans Are Using Fewer Payday Loans

The payday lending business has declined in the state since surging in 2011, the Oklahoma Department of Consumer Credit has found. Last year, residents there took out 803,675 deferred-deposit loans that totaled more than $383.9 million, compared to 975,970 payday loans that totaled $399.1 million in 2012. The number of payday lenders, meanwhile, fell from 356 in 2010 to 290 in 2013.

The state’s decline reflects a national trend, according to Diane Standaert, an attorney for the Center for Responsible Lending. “The shrinking storefronts and decline of loan volume in Oklahoma is consistent with what we’ve seen in other states,” she noted. However, payday lenders are still raking in plenty of profit, earning $53 million in finance charges in the state last year compared to $54 million in 2012 — a decline of only 1 percent. “Payday lenders have sought to make up for a lack of growth by either making larger loans or charging more fees to try and squeeze more out of financially stressed consumers,” Standaert explained. “They are draining $50 million in fees and finance charges every year despite the fact there are a fewer number of consumers and a fewer number of loans.”


WJTV INVESTIGATES: Payday Loan Company Allegedly Trapping Customers In Debt

Payday loans and cash advances may sound like a good idea when you’re strapped for cash, but if you’re not careful, they could land you in a world financial trouble. It’s no secret that payday loans are known for their extraordinarily high interest rates.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” /?>

It’s become such a problem that payday loan businesses have been outlawed in 18 states. Currently, the Consumer Federation of America lists the 32 other states, including Mississippi, where high cost payday lending is legal.

According to Mississippi code, payday Lenders can loan up to $500.00 per check, with a term of 30 days, at $20.00-$22.00 in finance charges per $100.00 borrowed.

The finance charge is the same for short-term, 14-day loans, however the APR on those loans is 500 times the original amount of the loan.

Jerry Wilson, Commissioner of the Mississippi Department of Banking and Consumer Finance says that the Payday industry is quote “pretty good about following the law.”

However recent complaints have sparked an investigation by the department into one payday company in particular, All American Check Cashing Inc., which has 51 locations statewide.

It’s prompted the DBCF to order a cease and desist order against All American’s Monthly Lending Program for illegal and unethical practice, alleging the program instructs employees to only accept the interest on a delayed deposit check and further telling employees to illegally roll a check during the middle of each month.

The DBCF claims that All American has been holding the checks of customers who could not pay off their loan debt by the deadline, having them sign up to pay an additional fee, only to later cash their original check.

Tameka Fletcher has used payday loans before to get her through a tight spot, and recalls her own experience with payday lending businesses. She said, “I paid the money along with my interest and got back the next day and realized that they had already cashed a check that I wrote them two weeks before, and I had paid them when I came in to pay it.”

According to the cease and desist order, All American’s monthly lending program focuses on customers who “only receive one income payment per month. This includes those customers receiving one payment (on the 1st or 3rd of each month) from a government benefit program such as Social Security, Medicaid, etc.”

So what does All American Check Cashing have to say about this?

Owner Michael Gray could not be reached for comment, but according to Commissioner Jerry Wilson, his examiners were denied access to All American’s customer files and business records for two days when they asked for them- something Wilson says is unheard of and totally against the law.

We also reached out to Dale Danks Jr., The attorney representing All American, who declined to talk to us, but is quoted in the Clarion Ledger saying, “All American has a policy against accepting a fee only, so if the investigation proves that this was occurring in some locations, All American will do whatever it needs to do to correct that issue.”

If All American Check Cashing Inc. is found to be in violation of the Mississippi Check Cashers Act, the company could lose its license or face a fine.

As for consumers, State Attorney General Jim Hood says people should first try taking out a small loan at a bank. However, the problem still remains, most people that use payday loans don’t have good enough credit to qualify for a small bank loan in the first place.

Attorney General Hood says, “Unfortunately, this industry is working on the poor folks that can’t afford to go to those types of institutions.”

So perhaps the message here is to just say no to Payday loans.


From a grant to HECS-style loan

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The 25-year-old from Dulwich Hill will miss out on the last two instalments, worth $1200 and $1500 respectively.

”This is something we have all been working towards and … have all been expecting to get,” she said. ”Just to be told it’s not happening any more is so disappointing.”

The Tools for your Trade payment, worth $915 million over four years, was axed in the federal budget. The government announcing eligible students could apply for the $20,000 loans instead.

But Ms Martin, who is working at Surry Hills restaurant Porteno, questioned how recently qualified apprentices would afford to pay the loan.

”For a chef, when you finish your training you are lucky to get a base salary of about $45,000 a year,” she said. ”It’s not a lot of money to be thinking about taking on $20,000.”

Under the scheme, apprentices have to start repaying the loan once their income reaches $53,345 a year.

The Greens have raised concerns about the loan scheme. Their analysis showed that it would take a carpenter on a starting salary of $40,000 up to 34 years to repay a $20,000 loan.

The estimates take into account the 20 per cent bonus an apprentice receives for completing their training and a 3.9 per cent pay rise.

The findings show an electrician on a starting salary of $62,000 would take seven years to pay off the loan, and a plumber starting on $55,000, eight years. A welder would take up to 13 years and an automotive engineer, 23 years.

Greens higher education spokeswoman Lee Rhiannon said: ”The Abbott government is trying to portray itself as a supporter of apprentices when in reality it is ripping more than $900 million out of apprentice training programs.”

The national secretary of the Construction, Forestry, Mining and Energy Union, Dave Noonan, said the loans scheme would discourage young people from entering into apprenticeships and exacerbate the skills crisis.

A spokesman for the Department of Industry said the Greens’ modelling was flawed and that the loans, which are indexed annually to the consumer price index, would take an average of eight years to repay once an apprenticeship is completed.

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