Consumer Awareness

from the ABA Education Foundation

Horror stories about victims of predatory lending are everywhere in the media these days:

• The 81 year-old woman with dementia who signed away her house for a loan with an interest rate impossible to repay.
• The family that lost their house because a high-fee, high-interest loan came due in a balloon payment beyond their means to pay or to refinance.

It's a sad fact: Prime targets for predatory lenders are the elderly and people in lower-income groups who are feeling financial pressure. Predatory lenders usually push their services on those who need money for medical bills, property taxes or high-priced home repairs by painting their loans as the answer to financial woes. But instead of providing access to money with reasonable rates and terms, predatory lenders push loans with exorbitant interest rates and through-the-roof fees, and follow-up collection strategies that are nothing less than harassment.

Protect Yourself from Lending Abuse

Abusive or "predatory" lenders target people who are strapped for cash. But the loans they push usually have sky-high interest rates and fees. They're often illegal, too. You need to know how to tell a "good" loan from a bad one. Otherwise, you could end up paying too much, hurting your credit rating-and even losing your home.

Ask yourself:

Do I feel pressured?

• Watch out for harassing phone calls or solicitations from lenders who say they can give you next-day approval.
• The same goes for lenders who offer "guaranteed" low-interest loans-as long as you apply over the phone and pay them money today.

Have I shopped around for the best deal?

• Check with other lenders, including local banks, for their rates and total costs. Compare the interest rates and the total costs for your loan with those of other lenders.
• Beware of high up-front fees and percentage "points." They can turn a loan with low monthly payments into one that actually costs you more in the long run.

Is it too good to be true?

• Watch out for telemarketers, TV ads or door-to-door salespeople who offer easy or quick-approval loans for houses, cars and home repair.
•  Avoid lenders who say bad or no credit is "no problem." Lenders you can trust don't do business this way.

Can I trust the lender?

• Get references and check them out. Don't rely on the lender's word.
• Call your local Better Business Bureau and ask if it has had complaints about any of the lenders you are considering.

Do I understand the loan terms?

• Before borrowing, you should know exactly what you're getting and what you're paying. Never be afraid to ask the lender to explain any fees, terms or conditions you don't understand. And never sign a blank form.

Also:

• Ask yourself if prepaying for credit life insurance is the best way for you to go. It will protect your family by paying off the loan if you get sick or die. But paying it up-front can add to the monthly cost of your loan.Think twice about a loan that has a large amount due at the end of the scheduled payments. This one final, or "balloon," payment could be beyond your ability to repay. Watch out for lenders who tell you not to worry if you find you can't pay your mortgage-they'll help you refinance your loan if you need to. Predatory lenders make money from the high fees and closing costs they'll charge you to refinance the loan they knew you couldn't afford to repay in the first place. Never sign a loan contract until you have all the facts-and understand every part of what you're signing. Ask for advice from someone you trust: a banker, an accountant or a family member or friend who has had experience with getting and paying back loans. Or call a local nonprofit credit counseling agency for free help (you'll find them in the Yellow Pages).
• Remember that you have the legal right to change your mind for any reason within three days of signing most loan contracts that use your home as the security.

Report Abusive Lenders

If you have been a victim of lending abuse, let others know! Your complaint could save others from being victims, too. Call your local office of consumer affairs or your state Attorney General's office-they're listed in the Government section of the phone book.
Report your experience to the Federal Trade Commission. It watches out for predatory lending scams and frauds.

• Call toll-free 1-877-FTC-HELP (382-4357), Write to Federal Trade Commission, CRC-240, Washington, D.C. 20580.
• Or go to www.ftc.gov to file a complaint online.

This consumer information is brought to you by the following sponsors:

• Neighborhood Reinvestment Corporation www.nw.orgMaryland Bankers Association www.mdbankers.comFederal Home Loan Bank of Atlanta www.fhlbatl.comCouncil of Federal Home Loan Banks www.cfhlb.org
• American Bankers Association Education Foundation www.aba.com

Copyright 2004 © American Bankers Association Education Foundation. Reprinted with Permission. All Rights Reserved.

from the ABA Education Foundation

Con artists now use email to try to hijack your personal financial information. In a scam known as "phishing," swindlers claim to be from a reputable company and send out thousands of fake emails in hopes that consumers will respond with the bank account information, credit card numbers, passwords or other sensitive information.

These emails can look quite convincing, with company logos and banners copied from actual Web sites. Often, they will tell you that their security procedure has changed or that they need to update (or validate) your information, and then direct you to a look-alike Web site. If you respond, the thieves use your information to order goods and services or obtain credit.

Consumer Tips

To avoid becoming a victim of a phishing scam, the American Bankers Association offers these tips:

• Never give out your personal financial information in response to an unsolicited phone call, fax or email, no matter how official it may seem. Do not respond to email that may warn of dire consequences unless you validate your information immediately. Contact the company to confirm the email's validity using a telephone number or Web address you know to be genuine. Check your credit card and bank account statements regularly and look for unauthorized transactions, even small ones. Some thieves hope small transactions will go unnoticed. Report discrepancies immediately. When submitting financial information to a Web site, look for the padlock or key icon at the bottom of your browser, and make sure the Internet address begins with "https." This signals that your information is secure during transmission. Report suspicious activity to the Internet Crime Complaint Center, a partnership between the FBI and the National White Collar Crime Center. If you have responded to an email, contact your bank immediately so they can protect your account and your identity.
• For more information on phishing, visit the Federal Deposit Insurance Corporation, Federal Trade Commission, the Anti-Phishing Working Group, or the OCC Consumer Protection News.

Copyright 2004 © American Bankers Association Education Foundation. Reprinted with Permission. All Rights Reserved.

from the ABA Education Foundation

Over the past several years, banks, insurance companies and other financial institutions have been sending disclosures to customers explaining how the institutions manage their information. If any institution shares information with outside companies, the notices must explain why and provide customers with the choice to opt out.

It is very important for consumers to read these notices. If you don't recall seeing a notice, contact your bank and ask for a copy. And remember, YOU CAN OPT OUT AT ANY TIME. There is no deadline for you to act. If you did not receive a privacy notice in the mail, or if you accidentally threw it away, contact your bank about their privacy policy.

If you have questions about your bank's practices or need any reassurance on this issue, please call your bank. The bottom line is your bank will want to do what it takes to retain your trust, because that is their most valuable asset.

Additional "Opt-out" Tips

If you do not wish to receive offers of pre-approved financing or credit from other institutions, you can "opt out" of receiving such offers by calling 888.5.OPT.OUT. This service is offered jointly by the three credit bureaus.

The Direct Marketing Association offers services to help reduce the number of unwanted mail and telephone solicitations. To join their mail preference service, mail your name, home address and signature to: Mail Preference Service, Direct Marketing Association, P. O. Box 9008, Farmingdale, NY 11735-9008. To reduce unsolicited telephone solicitations, send your name, home address, and home telephone number and signature to: Telephone Preference Service, Direct Marketing Association, P. O. Box 9014, Farmingdale, NY 11735-9014.

Copyright 2004 © American Bankers Association Education Foundation. Reprinted with Permission. All Rights Reserved.

from the ABA Education Foundation

Online auction sites are a popular way to buy and sell collectibles, jewelry, even cars; however, internet auction transactions are not always safe. A new fraud, the cashier's check or "advance fee" fraud has become more prevalent as online auction sites and classified ads have gained popularity. In many cases, large ticket items lure this type of fraud artist to a victim. The typical fraud scenario is somewhat confusing, which is probably one of the reasons why the fraud artist is successful.

Let's say you post an ad for your car on an online auction Website for $3,000. A foreign buyer bids on the car for the full asking price.

When payment is arranged the buyer says there is someone in the United States who owes him money. The person who owes the buyer money offers to send you a cashier's check for $5,000 and asks that you wire back the difference to the buyer. You agree because they offer you a small commission for brokering the deal. You receive the cashier's check, deposit it, and because cashier's checks are mistakenly thought to be as good as cash, wire the leftover sum to the buyer. Ten days later your bank informs you that the cashier's check was fraudulent and that you're responsible for any money you've drawn against it. Unfortunately, you've lost your money and merchandise to a scam.

There are variations on the scheme as well. A seller could just as easily attempt to scam you, and not all scammers are from outside the U.S. Cashier's Check fraud is growing as auction and classifieds Web sites become more popular.

Online auction fraud registers the largest number of complaints to the FTC's Consumer Sentinel database. But don't give up your addiction to online auctioning yet. If you safeguard your identity, take your time transferring funds, and keep alert for possible scams, your risk of becoming a victim will be going, going, gone.

Consumer Tips

The American Bankers Association offers the following tips to protect consumers from cashier's check and "advance fee" fraud schemes:

• Use caution when dealing with foreign buyers and sellers.Beware if the buyer or seller asks you to send money quickly. Banks often take 10 days or more to determine if a cashier's check is counterfeit. Do not ship the goods or spend any of the funds sent to you until 10 days to two weeks after you deposit the cashier's check.Insist on a cashier's check drawn on a local bank, or a bank that has a local branch. Insist on a cashier's check for the exact amount.Check the FDIC's Institution Directory to make sure the bank is legitimate.These fraud artists tend to target vulnerable people, senior citizens and young adults. Alert any family members who may be at risk.No legitimate company will offer to pay you by arranging to send you a check and asking you to wire some of the money back. If that's the pitch, it's a scam.Become familiar with any auction site you visit online. Find out what protections the auction site offers buyers and sellers. Don't assume the rules are standard for all auction sites.Find out as much as you can about the other party you're dealing with on an online auction site. Be wary of those who try to lure you away from the Web site with promises of a better deal.Save all transaction information.Protect your privacy. Never provide your Social Security number, driver's license number, credit card number or bank account information.
• Never agree to travel to meet your buyer or seller.

For more tips and information, visit the following:

• The FTC Web site or call toll-free 877-FTC-HELP.
• FDIC Consumer News FRAUDAlert!
• National Consumer's League's National Fraud Information Center

Copyright 2004 © American Bankers Association Education Foundation. Reprinted with Permission. All Rights Reserved.

from the ABA Education Foundation

Identity theft is one of the fastest-growing types of financial fraud. Without stealing your wallet, a crook can steal your financial identity with as little information as your social security number. It is also called "account-takeover fraud" or "true-name fraud," and it involves crooks' assuming your identity by applying for credit, running up huge bills and stiffing creditors - all in your name.

Take these steps to protect yourself:

1. Get a copy of your credit report from each of the three major credit bureaus every year. It lists all of the lines of credit in your name. Check to be sure that everything is accurate, that all of the accounts are yours and that accounts you have requested to be closed are marked closed. Bureau reports cost around $8 each. But, if you've been turned down for credit, you are eligible for a free report.
To order credit bureau reports, call:

• TransUnion Credit Services: 800-888-4213
• Equifax Credit Services: 800-685-1111
• Experian Credit Services: 888-397-3742

2. Keep an eye on your accounts throughout the year by reading your monthly/periodic statements thoroughly. That's an easy way for you to be sure that all of the activity in your accounts was initiated by you.

3. Tear up or shred pre-approved credit offers, receipts and other personal information that link your name to account numbers. Don't leave your ATM or credit card receipt in public trash cans. Crooks (a.k.a dumpster divers) are known to go through trash to get account numbers and other items that will give them just enough information to get credit in your name.

4. If your credit card or other bills are more than two weeks late, you should do three things: First, contact the Postal Service to see if someone has forwarded your mail to another address. Second, contact your bank to ask if the statement or card has been mailed. Third, contact the businesses that send you bills.

5. When you pay bills, don't put them in your mailbox with the red flag up. That's a flashing neon light telling crooks to grab your information. Use a locked mailbox or the post office. 

6. Protect your account information. Don't write your personal identification number (PIN) on your ATM or debit card. Don't write your social security number or credit card account number on a check. Cover your hand when you are entering your PIN number at an ATM.

7. Don't carry your Social Security card, passport or birth certificate unless you need it that day. Take all but one or two credit cards out of your wallet, and keep a list at home of your account information and customer service telephone numbers. That way, if your wallet is lost or stolen, you'll only have to notify a few of your creditors and the information will be handy.

8. Never provide personal or credit card information over the phone, unless you initiated the call. Crooks are known to call with news that you've won a prize and all they need is your credit card number for verification. Don't fall for it. Remember the old saying, "if it sounds too good to be true, it probably is."

Take action if you are a victim:

1. Financial fraud is a crime; call your local police department.

2. Contact the fraud units of all three credit bureaus. Ask them to "flag" your account, which tells creditors that you are a victim of identity fraud. Also, add a victim's statement to each of your credit bureau reports that asks creditors to contact you in person to verify all applications made in your name. Call the fraud units of the credit bureaus at:

• TransUnion Fraud Assistance Department: 800-680-7289
• Equifax Fraud Assistance Department: 800-525-6285
• Experian Fraud Assistance Department: 888-397-3742

3. Call the Federal Trade Commission's ID Theft hotline at 1 (877) IDTHEFT. The hotline is staffed by counselors trained to help ID theft victims. Check out the FTC Web Site, which includes an Identity Theft Affidavit to help simplify the process of clearing up accounts opened by an identity thief. 

4. Notify your banks. They can help you obtain new account numbers for all of your checking, savings and other accounts. Be sure to pick a new PIN number for your ATM and debit cards. Close all of your credit card accounts and open with new account numbers. 

5. Notify the Postal Inspector if you suspect mail theft - a felony.

6. Depending on your situation, you may want to contact the Social Security Administration to get a new Social Security number. Their telephone number is 800-772-1213. You also may want to contact your telephone, long distance, water, gas and electrical companies to alert them that someone may try to open an account in your name.

7. Finally, make sure to maintain a log of all the contacts you make with authorities regarding the matter. Write down each person's name, title, and phone number in case you need to re-contact them or refer to them in future correspondence.

Copyright 2004 © American Bankers Association Education Foundation. Reprinted with Permission. All Rights Reserved.