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It Could Get a Lot Easier to Sue Your Bank Thanks to This New Regulation

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With looming existential threats from both the Trump administration and the federal court system, the Consumer Financial Protection Bureau went ahead on Monday with a controversial rule that will change the way nearly all consumer contracts with financial institutions are written.

The end of forced arbitration?

The rule will ensure that all consumers can join what CFPB Director Richard Cordray called “group” lawsuits — generally known as class-action lawsuits — when they feel financial institutions have committed small-dollar, high-volume frauds. Currently, many contracts contain mandatory arbitration clauses that explicitly force consumers to waive their rights to join class-action lawsuits. Instead, consumers are forced to enter individual arbitration, a step critics say most don’t bother to pursue.

Consumer groups have for years claimed waivers were unjust and even illegal, but in 2011, the U.S. Supreme Court sided with corporate lawyers, paving the way for even more companies to include the prohibition in standard-form contracts for products like credit cards and checking accounts.

How to be sure you’re protected by the new rule

Monday’s rule is slated to take effect in about eight months, meaning most new contracts signed after that date can’t contain the class-action waiver. Prohibitions in current contracts will remain in effect.

Consumers who want to ensure they enjoy their new rights will have to close current accounts and open new ones after the effective date, the CFPB said.

“By blocking group lawsuits, mandatory arbitration clauses force consumers either to give up or to go it alone — usually over relatively small amounts that may not be worth pursuing on one’s own,” Cordray said during the announcement.

“Including these clauses in contracts allows companies to sidestep the judicial system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm large numbers of consumers. … Our common-sense rule applies to the major markets for consumer financial products and services under the Bureau’s jurisdiction, including those in which providers lend money, store money, and move or exchange money.”

A long road ahead for the CFPB

The ruling was several years in the making, initiated by the Dodd-Frank financial reforms of 2010, which called on the CFPB to first study the issue and then write a new rule. But it almost didn’t happen: With the election of Donald Trump and Republican control of the White House, the CFPB faces major changes, including the expiration of Cordray’s term next year.

Also, House Republicans have passed legislation that would drastically change the CFPB’s structure. Either of these could lead to the undoing of Monday’s rule. When I asked the CFPB at Monday’s announcement what the process for such undoing would be, the bureau didn’t respond.

“I can’t comment on what might happen in the future,” said Eric Goldberg, Senior Counsel, Office of Regulations.

Cordray cited the recent Wells Fargo scandal as evidence the arbitration waiver ban was necessary. Before the fake account controversy became widely known, consumers had tried to sue the bank but were turned back by courts citing the contract language.

Under the new rules, consumers would have an easier time finding lawyers willing to sue banks in such situations. No lawyer will take a case involving a single $39 controversy, but plenty will do so if the case potentially involves thousands, or even millions, of clients.

Consumer groups immediately hailed the new rule.

“The CFPB’s rule restores ordinary folks’ day in court for widespread violations of the law,” said Lauren Saunders, association director of the National Consumer Law Center. “Forced arbitration is simply a license to steal when a company like Wells Fargo commits fraud through millions of fake accounts and then tells customers: ‘Too bad, you can’t go to court and can’t team up; you have to fight us one by one behind closed doors and before a private arbitrator of our choice instead of a public court with an impartial judge.’”

The CFPB and Monday’s rule also face an uncertain future because a federal court last fall ruled that part of the bureau’s executive structure was unconstitutional. The CFPB is appealing the ruling, and a decision may come soon. Should the CFPB lose, it will be easier for Trump to fire Cordray immediately, and companies may have legal avenue to challenge CFPB rules.

On the other hand, enacting the rule now may give supporters momentum that will be difficult for the industry to stop — a situation similar to the Labor Department’s fiduciary rule requiring financial advisers to act in their clients’ best interests. While the Trump administration took steps to stop that rule from taking effect, many companies had already begun to comply, and simply continued with that process.

The U.S. Chamber of Commerce was heavily critical of the new rule.

“The CFPB’s brazen finalization of the arbitration rule is a prime example of an agency gone rogue. CFPB’s actions exemplify its complete disregard for the will of Congress, the administration, the American people, and even the courts,” the Chamber said in a statement.

“As we review the rule, we will consider every approach to address our concerns, and we encourage Congress to do the same — including exploring the Congressional Review Act. Additionally, we call upon the administration and Congress to establish the necessary checks and balances on the CFPB before it takes more one-sided, overreaching actions.”

But consumer groups called Monday’s ruling a victory.

“Forced arbitration deprives victims of not only their day in court, but the right to band together with other targets of corporate lawbreaking. It’s a get-out-of-jail-free card for lawbreakers,” said Lisa Donner, executive director of Americans for Financial Reform. “The consumer agency’s rule will stop Wall Street and predatory lenders from ripping people off with impunity, and make markets fairer and safer for ordinary Americans.”

Bob Sullivan
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Bob Sullivan is a writer at MagnifyMoney. You can email Bob here

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Student Debt Relief Could Be Coming to Thousands of Borrowers

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Tens of thousands of students struggling with insurmountable student loan debt are about to get a little breathing room.

The National Collegiate Student Loan Trusts, a creditor that holds billions in private student loans, reached a settlement Sept. 18 with the Consumer Financial Protection Bureau (CFPB) in which the trusts were ordered to refund at least $21.6 million toward refunds and penalty fees for affected borrowers.

As MagnifyMoney’s Kelly Clay reported in August, National Collegiate sued dozens of former students who had defaulted on their private student loans. But in court National Collegiate failed to prove they owned the loans. This happens often when loans are sold to another lender or otherwise handed to another account manager and paperwork gets lost. Ultimately, the courts dismissed the lawsuits, citing the fact that National Collegiate had no way of proving they owned the debts in the first place.

In the settlement with the CFPB, the trusts agreed to set aside $3.5 million for reimbursements to borrowers who had already made payments after being sued for loans unlawfully. If a student loan lender can’t prove it owns a debt — for example, if it lacks the proper documentation to prove ownership — it can’t legally collect on it. Likewise, if the statute of limitations has passed, the lender can continue to try to collect on the debt, but it can no longer take legal action against the borrower.

Although there are usually limited circumstances under which student loans are forgiven, this ruling may result in many borrowers eventually having their debts wiped out. The CFPB ordered National Collegiate to have each of its 800,000 loans reviewed by an independent auditor, and the trusts will not be allowed to go forward with collection actions on any loans that they can’t prove they own.

“The National Collegiate Student Loan Trusts and their debt collector sued consumers for student loans they couldn’t prove were owed and filed false and misleading affidavits in courts across the country,” CFPB Director Richard Cordray said in a statement.

What does this mean for you?

If you borrowed educational funds from a private lender who sold your debt to the National Collegiate Student Loan Trusts, and you were sued between November 2012 and April 2016, it’s possible you’re due a refund. According to The New York Times, Bank of America and JPMorgan Chase are among the private lenders who sold private student loan debt to the trusts.

StudentDebtCrisis.org, a nonprofit dedicated to higher education funding reform, tweeted: “Thousands of Americans with student debt could see their loans cut under a @CFPB agreement with Wall Street trusts.”

If you’re owed restitution, the company will reach out to you. No action is required on your part. However, if you’d like to make a formal complaint, you can contact the CFPB.

What you can do if you’ve fallen behind on your loan

It can be tough to keep up with your student loan payments. If you’re behind, it doesn’t have to be the end of the world. It takes about nine months (270 days) of nonpayment for a federal student loan to go into default.

But many private student loans default when you are only 120 days late. Sometimes missing one or two payments can send you into default.

So make sure you carefully read your loan contract to better understand what constitutes a default and to know your rights, if you happen to default on your loan.

If you default, don’t panic. While it’s your responsibility to pay what you owe, you have rights, and it is against the law for the debt collector to harass you.

The student loan creditor must provide a written “validation notice” indicating how much you owe, the name of the creditor, what rights you have if you think you don’t owe the debt, and how to obtain information about the original creditor.

You may have options for setting up a repayment plan. Familiarize yourself with the terms of your loan and contact the CFPB if you have concerns about the practices of your lender.

‘I defaulted, and I’ve been sued. Now what?’

If you default on your loan and you’ve been sued, it can be stressful, but don’t give up. You’ve not automatically lost just because the creditor has taken legal action.

Here are four steps to take if you receive a summons.

Stick to the deadlines.

If you ignore the summons or don’t show up in court, this may result in a default judgment against you.

Verify your debt.

Is the amount correct? Is the debt valid? If there’s any discrepancy between what your records show and what the credit agency is alleging, you need to document that.

One way to do that is to send your lender or debt collector a debt verification letter. This is a formal way to ask them to verify the amount, that you are the owner of the debt, and that it’s valid. If they don’t respond to the letter within 30 to 60 days, they must cease attempting to collect the debt.

Know your rights.

Unlike federal student loans, private loans are bound to a statute of limitations. Once that statute of limitations has run out, the lender can no longer take legal action. But that doesn’t mean they’ll stop trying to collect on that debt. And that’s where you should be careful. If you pay even $1 toward an old debt after the statute of limitations is up, it automatically restarts the clock, and the lender can once again take legal action. Find out what the statute of limitations is in your state.

You have a legal right to tell debt collectors to stop contacting you entirely.

If all else fails, hire an attorney.

Hopefully you won’t need one, but every situation is different. If you don’t have the money to pay your student loans, chances are you don’t have the money to pay a lawyer.

But if you find yourself in a situation where you really need someone to simplify the complexity of your case and speak to a creditor on your behalf, you may consider consulting a student loan attorney. Private loans are subject to state law, and a licensed attorney may be the best person to help you navigate those waters. The CFPB has a tool that can help you find an affordable lawyer in your state.

KaToya Fleming
KaToya Fleming |

KaToya Fleming is a writer at MagnifyMoney. You can email KaToya here

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Identity Theft Protection, News

No, Equifax Is Not Calling You. Watch Out for Scam Phone Calls After the Data Breach

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Source: iStock

Less than a week after the Equifax data breach was made public, it seems scammers are already looking for opportunities to prey on concerned consumers.

The Federal Trade Commission posted a scam alert Thursday warning consumers to not give their personal information to anyone who calls and claims to be an Equifax representative. Over the summer, hackers breached the Atlanta-based credit bureau’s database and accessed the personal information of about 143 million consumers, including sensitive information like Social Security numbers.

But Equifax is not calling those affected by the breach, so if you get a phone call from someone saying they represent Equifax and want to verify your account information, the FTC advises you hang up. It’s ironic, in a way, to target victims by posing as a concerned Equifax representative. The company has been criticized widely for its sluggish response to the breach, which occurred sometime between mid-May and July but wasn’t discovered until July 29 and wasn’t announced until more than a month later.

In response to the security failure, the House Committee on Energy and Commerce has demanded Equifax answer several questions about the breach, including why the company put off announcing the breach for so long. Equifax has until Sept. 22 to respond to the committee’s questions, and the committee plans to hold hearings on the breach in September or October.

In a company statement, Equifax CEO Richard Smith said the breach was a “disappointing event.”

“Confronting cybersecurity risks is a daily fight,” he added. “While we’ve made significant investments in data security, we recognize we must do more. And we will.”

In the breach, people’s Social Security numbers, dates of birth, addresses, and other personally identifiable information (PII) were compromised, so it’s understandable you’d be worried and are looking for help.

Here’s what you can do to take control of protecting your identity.

Assume you’re affected

While you can go to Equifax’s website and go through a multistep process to see if your information has been compromised, you can also just assume someone has their hands on your personal information. (It’s also worth noting the Equifax site reportedly isn’t reliable for telling you if you’re affected, and many consumers have reported the site is slow to load or doesn’t load at all.) Even if you weren’t among the 143 million whose personal information was compromised in this breach (and the odds aren’t in your favor), chances are it has been or will be in a breach at a different company or organization. With that in mind, you’ll want to focus on how to detect signs of identity theft and how to respond to them.

Monitor your credit

Equifax responded to the breach by offering free credit and identity monitoring to everyone — not just those affected — for a year through TrustedID Premier. You must go to equifaxsecurity2017.com to enroll, which requires entering your last name and the last six digits of your Social Security number. You’ll then be given an enrollment date, which may be several days after you start the enrollment process, at which point you can return to the site to continue enrollment. You’ll need to set a reminder to continue the process, as Equifax won’t send you a notification when it’s time.

You have many other ways to find out if someone has misused your personal information. Several companies offer free credit scores — Credit Karma, Discover, Capital One, Mint, LendingTree (our parent company), etc. — either to everyone or to their customers. To help you choose, we put together this guide to getting your free credit score. Credit Karma also offers a free credit monitoring service, and Discover cardmembers can sign up for alerts when their Social Security numbers are detected on suspicious websites. You can also pay for credit monitoring services from a number of providers, including the three major credit bureaus Equifax, Experian and TransUnion, as well as credit scoring giant FICO.

Consider a credit freeze

You can also freeze your credit so no one, not even you, can apply for new credit using your information. If you do this, you have to initiate a freeze with each of three major credit bureaus, as well as “thaw” each report when you want to apply for a new credit account. Every time you freeze and thaw your credit you may be charged a fee, which varies by state. This only protects you from credit fraud and does not prevent things like taxpayer identity theft, criminal identity theft, medical identity theft, and insurance identity theft.

On Sept. 15, Equifax announced it is waiving the fee for removing and placing credit freezes on Equifax credit reports through Nov. 21, 2017. Anyone who paid for an Equifax freeze at or after 5 p.m. EDT on Sept. 7 will receive a refund, the company said.

Have a plan for responding to identity theft

One of the best ways you can prepare for identity theft is to detect it early. After that, you need to know how to resolve it. You can do this yourself by filing a police report, disputing fraudulent accounts on your credit reports, and making the phone calls necessary to correct any problems stemming from the fraud. Or you could pay someone to help you with this time-consuming task. Check with your employer to see if they offer identity theft insurance or identity theft resolution services as an employee benefit, and if not, consider paying for it.

We’ve rounded up the best identity theft resolution services here.

More than anything, remain calm as you sort through the fallout of this breach. Focus on making a plan for protecting yourself from and responding to identity theft and making sure you only deal with trustworthy service providers.

Christine DiGangi
Christine DiGangi |

Christine DiGangi is a writer at MagnifyMoney. You can email Christine at christine@magnifymoney.com

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America’s Super Saving Cities: The Regional Forces Shaping America’s Saving Landscape

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Where do America’s biggest savers live? Using IRS and U.S. Census data, MagnifyMoney created a City Saving Score for over 2,000 U.S. cities to explore which cities have the most savers and which cities have the biggest savings accounts.

On average, 29 percent of Americans who filed tax returns in 2016 earned interest income on their savings. Average interest income was $530 per return, representing 0.8 percent of total reported income. But regional, demographic and economic forces drive some cities to become super savers while others languish behind. Residents of Greenwich, Conn., earned an average of more than $25,000 in interest income per resident, while in Camden, N.J., just 4 percent of the residents had enough savings to require reporting to the IRS.

Why is there so much variation?

In this report, MagnifyMoney reveals America’s super saving cities, and the forces driving their success as savers.

Key Findings

  • Scarsdale and Garden City, N.Y., are tied for #1 as the cities with the biggest savers overall, with a City Saving Score of 99.6 out of 100.
  • Los Altos, Calif., has the highest concentration of savers — 71 percent of residents reported interest income on their tax returns.
  • Greenwich, Conn., residents earned the most from interest on savings — over $25,000 per filer.
  • Among cities with incomes under $150,000 a year, The Villages, Fla., had the biggest savers with a City Saving Score of 98.5.
  • Camden, N.J., had the lowest activity among savers — only 4 percent of residents reported interest income and an average $8 a year in interest.
  • Communities in the New York, Washington, D.C., Los Angeles, San Francisco and Chicago metros represented over 75 percent of the top 5 percent of city saving rankings.

Behind the rankings: The ‘City Saving Score’

There is no comprehensive data that shows the average amount Americans are saving at a metro or city level, so we had to get a bit creative to determine where the biggest savers live.

To rank cities, MagnifyMoney created a “City Saving Score.” Using data for over 2,000 cities, MagnifyMoney ranked cities based on three factors:

  • Breadth of community savings (measured by the percentage of all tax returns that declared interest income, ranked by percentile).
  • Dedication to savings relative to income levels (measured by the percentage of total income that came from interest, ranked by percentile).
  • Magnitude of savings in the community (measured by the average interest income per tax return, ranked by percentile).

Top cities for big savers: Scarsdale and Garden City, New York

Scarsdale, N.Y., and Garden City, N.Y., scored the highest marks on our City Saving Score, with scores of 99.6 out of a possible 100.

They have an obvious advantage on the savings front — Scarsdale residents report an average income of more than $450,000 per tax return, putting them in the top 1 percent of earners in the U.S. today.

On average, savers in Scarsdale declared $9,258 in interest income — 17.5 times as much as the average American saver, who declared $530 in 2016.

Scarsdale savers are also enjoying a higher savings rate than many others. According to the IRS data, 2 percent of their income came from interest earned from savings accounts, which is 2.5 times the national rate of 0.8 percent.

It’s not just the savings volume driving Scarsdale’s place at the top. Two-thirds of Scarsdale residents reported interest income on their tax returns in 2016. That’s more than twice the national rate of 29 percent.

In Garden City, N.Y., residents earned just over $247,000 on average, putting the average household in the top 5 percent of American earners. Just under two-thirds (64 percent) of Garden City residents report income from interest.

However, with the average Garden City resident declaring $5,520 in interest, that represents 2.2 percent of overall income (10 percent more than their peers in Scarsdale, and almost three times the national rate).

The city where (almost) everyone saves: Los Altos, California

In addition to focusing on the amount people earn from their savings, we wanted to look at the share of savers in each city, which gives us an idea of a community’s total commitment to saving. The IRS requires anyone who earns more than $10 in interest income to declare interest income on their tax return. Even in the current low-interest environment, many middle-income savers could have qualified to declare interest income in 2016.

Among the top 10 cities with the most savers, two (The Villages, Fla., and Sun City West, Ariz.) had average incomes below $100,000 in 2016. Both cities feature large retirement communities, and these residents may have a higher propensity to keep their investments liquid compared with younger residents.

However the city with the most savers was Los Altos, Calif., where the average reported income is $476,000 annually. In Los Altos, nearly three-quarters (71 percent) of residents were savers. This is more than double the national average of 29 percent. The average interest income in Los Altos, Calif., was $5,299 — 10 times the national average.

Sky-high interest income in Greenwich, Connecticut

Greenwich, Conn., may not have the highest share of savers in the country (just over half (52 percent) of the city’s residents declared interest income on their tax returns in 2016). But their savers are making a bundle on earned interest.

Average interest income per return for the 2016 tax year was $25,451 — more than 48 times the national average of $530. If savers in Greenwich earned an average of 2% interest on their savings, the average saver would have held nearly $1.3 million in savings. The more than $25,000 in interest income constitutes 3.8 percent of the average reported Greenwich income, which is $664,000 annually thanks to a large number of hedge fund managers and other finance executives living in the area.

In terms of absolute interest income, Greenwich savers lead the pack by a wide margin. Second place Beverly Hills earns $16,638 in interest, just two-thirds of the Greenwich rate. In third place, Scarsdale earns $9,258.

Where do the biggest savers live?

Over three-quarters (77 percent) of the cities with scores of 95 or above came from just five major metro areas. These include the New York Tri-State area, the Washington, D.C., metropolitan area, San Francisco Bay Area, Southern California, and Chicago. Retirement communities in Arizona and Florida also feature prominently in the top saving communities, while just 15 percent of all major savings hubs are outside one of the areas mentioned above.

High saving doesn’t require high income

All cities with average incomes in excess of $250,000 earned a savings score of 90. However, some cities with lower incomes made surprise appearances near the top of the savings ranking.

In fact, 14 cities with incomes under $150,000 a year had scores of 95 or above in our study. Many of these “thrifty cities” have large retiree populations like The Villages, Fla., and Sun City West, Ariz. However, other thrifty cities included family-oriented suburbs where average households earned an upper-middle-class income.

  • Agoura Hills, Calif. (96.6 score), a Los Angeles suburb where a quarter of all residents are under the age of 19. Average income among tax filers in the city is $137,000, 60 percent of the average income of other top saving cities. Despite having more children and lower incomes than most other big saving cities, half of Agoura Hills households reported interest income. The average saver in Agoura Hills earned $1,913 per year in interest, 3.6 times the national average of $530.
  • Arcadia, Calif. (95.7 score) is another Los Angeles suburb with an average reported income of $101,000. In addition to modest average incomes (by Southern California standards), nearly 1 in 4 residents in Arcadia is under the age of 19. This means that plenty of households have to pay the high costs of raising kids. In spite of this, 48 percent of taxpayers report interest income, with the average return boasting $1,420 in interest income.
  • Towson, Md. (95.1 score), home of Towson University. In the Baltimore suburb, half (49 percent) of filers report interest income from savings. Despite an average reported income of $125,558, savers earned an average of $1,464 in interest income in 2014.

Where saving isn’t happening

Although rising interest rates are a boon for savers, plenty of communities will struggle as consumer debt rates rise, and income prospects remain middling. The cities with the lowest savings scores are spread throughout the country, but they have a few things in common. The average reported income in the bottom 5 percent was $35,000. That’s 41 percent less than the median income household in the United States today.

Most of the worst saving cities lost job-heavy industries over the course of the last 20 to 50 years. Rust Belt cities like Detroit, Mich., and East St. Louis, Ill., over-represent the bottom 5 percent in savings ranks. Likewise, former industrial towns in the Northeast like Camden, N.J., and Chester, Pa., also fell into the bottom 5 percent of saving cities. Many of the worst saving cities suffer from declining populations as younger generations seek economic opportunities elsewhere.

METHODOLOGY: How we ranked cities with the biggest savers

To rank cities, MagnifyMoney created a “City Saving Score” on a scale of 0 to 100 that included three equally weighted components:

  • How broadly members of the community saved (measured by the percentage of all tax returns that declared interest income, ranked by percentile).
  • The community’s dedication to saving regardless of their income (measured by the percentage of total income that came from interest, ranked by percentile).
  • The absolute magnitude of savings in the community (measured by the average interest income per tax return, ranked by percentile).

MagnifyMoney measured these factors using anonymized data from tax returns filed with the IRS from January 1 to December 31, 2016. ZIP code level data was translated to a city level using the primary city assigned to each ZIP code. The study was limited to cities with a combined primary ZIP code population of 25,000 or more.

To be counted as a saving household, the taxpayer must declare interest income using a form 1099 on their 2016 tax returns. Any filers who earned over $10 on investments, including a high-yield checking or savings account, a CD, a money market account or certain types of taxable bonds, would have reported this income to the IRS.

Interest income is an imperfect way to measure a particular community’s dedication to saving. Many people keep their cash in low-yield checking accounts, and some savers will not use financial instruments declared on Form 1099. In many parts of the country, savers and investors may prefer to build wealth using stocks, real estate or other forms of investments while keeping lower cash reserves.

Despite these drawbacks, interest income from the 1099 form represents a useful proxy for overall savings. The financial instruments that require 1099 reporting include many types of liquid savings that are easily accessible with negligible risk. Most people use interest-bearing accounts to hold funds for use in the case of job loss or a related emergency, or to mitigate consumer debt by paying for larger purchases in cash.

 

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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Credit Cards, Featured, News

Average Household Credit Card Debt in America: 2017 Statistics

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Even as household income and employment rates are ticking up in the U.S., credit card balances are approaching all-time highs. What’s behind the growth of credit card spending among consumers? In a new report on credit card debt in America, MagnifyMoney analyzed credit debt trends in the U.S. to find out exactly how much credit debt consumers are really taking on and, crucially, how they are managing their growing reliance on plastic.

Key Insights:

  • While credit balances are increasing, the amount of debt that households are carrying from month to month is actually much lower than it was leading up to the 2008 financial crisis. As of December 2016, households with credit card debt owed an average of $8,158, down 22.9 percent compared to October 2008, when household credit card debt peaked at $10,588.
  • Credit card balances and credit card debt are not the same thing. The 73 million Americans who pay their bill in full each month have credit card balances reported to the major credit reporting bureaus.
  • Assessing financial health means focusing on credit card debt trends rather than credit card use trends.

Credit Card Debt in the U.S. by the Numbers

Credit Card Use

Number of Americans who use credit cards: 201 million1

Average number of credit cards per consumer: 2.32

Number of Americans who carry credit card debt: 125 million3

Credit Card Debt

The following figures only include the credit card balances of those who carry credit card debt from month to month.

Total credit card debt in the U.S.: $527 billion4

Average credit card debt per person: $4,2055

Average credit card debt per household: $8,1586

Credit Card Balances

The following figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

Total credit card balances: $784 billion as of January 2017, an increase of 7.4 percent from the previous year.7

Average balance per person: $3,9058

Who Pays Off Their Credit Card Bills?

42 percent of households pay off their credit card bills in full each month

31 percent of households carry a balance all year

27 percent of households sometimes carry a balance10

Understanding Household Credit Card Balances vs. Household Debt

At first glance, it may seem that Americans are taking on near record levels of credit debt. Forty-two percent of American households11 carry credit card debt from month to month, and, if you look at the total credit card balances among U.S. households, the figure appears astronomical — $784 billion. But that figure includes households that are paying their credit debt in full each month as well as those that are carrying a balance from month to month.

While credit balances are increasing, the amount of debt that households are carrying from month to month is actually much lower than it was leading up to the 2008 financial crisis. The total of credit card balances for households that actually carry debt from month to month is $527 billion.

As of the second quarter of 2017, households with credit card debt owed an average of $8,158.3 That is a decrease of 22.9 percent compared to October 2008, when household credit card debt peaked at $10,588.12b

And as household incomes have risen in recent years, this has helped to lower the ratio of credit card debt to income. Today, indebted households with average debt and median household incomes have a credit card debt to income ratio of 14.4 percent.13 Back in 2008, the ratio was 19.1 percent.

Per Person Credit Card Debt

Once we adjust for these effects, we see that an estimated 125 million Americans carry $527 billion of credit card debt from month to month. Back in 2008, 5 million fewer Americans carried debt, but total credit card debt in late 2008 hovered around $631 billion.16 That means people with credit card debt in 2008 had more debt than people with credit card debt today.

Average credit card debt among those who carry a balance today is $4,205 per person2 or $8,158 per household.3 Back in 2008, credit card debtors owed an average of 23.7 percent more than they do today. In late 2008, the 115 million17 Americans with credit card debt owed an average of $5,567 per person12a or $10,689 per household.12b

Delinquency Rates

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

In the second quarter of 2010, serious delinquency rates on credit cards were 13.74 percent of all balances owed, nearly twice as what they are today. Today, credit card delinquency rates are down to 7.38 percent.14

Our Method of Calculating Household Credit Card Debt

Credit card debt doesn’t appear on the precipice of disaster, but the recent growth in balances is cause for some concern. Still, our estimates for household credit card debt remain modest.

In fact, MagnifyMoney’s estimates of household credit card debt is two-thirds that of other leading financial journals. Why are our estimates comparatively low?

A common estimate of household credit card debt is:

This method overstates credit card debt. The Federal Reserve Bank of New York/Equifax Consumer Credit Panel (CCP) does not release a figure called credit card indebtedness. Instead, they release a figure on national credit card balances. Representatives of the Federal Reserve Bank of New York and the Philadelphia Federal Reserve Bank both confirmed that the CCP includes the statement balances of people who go on to pay their bill in full each month.

To find a better estimate of credit card debt, we found methods to exclude the statement balances of full paying households from our credit card debt estimates. Statement balances are the balances owed to a credit card company at the end of a billing cycle. Even though full payers pay off their statement balance each month, their balances are included in the CCP’s figures on credit card balances.

To exclude full payer balances, we turned to academic research outside of the Federal Reserve Banks. The paper, Minimum Payments and Debt Paydown in Consumer Credit Cards, by Benjamin J. Keys and Jialan Wang, found full payers had mean statement balances of $3,412. We used this figure, multiplied by the estimated number of full payers to find the statement balances of full payers.

Our credit card debt estimate is:3

Credit Card Debt: Do We Know What We Owe?

Academic papers, consumer finance surveys, and the CCP each use different methods to measure average credit card debt among credit card revolvers. Since methodologies vary, credit card debt statistics vary based on the source consulted.

MagnifyMoney surveyed these sources to present a range of credit card debt statistics.

Are We Paying Down Credit Card Debt?

A Pew Research Center study25 showed that Americans have an uneasy relationship with credit card debt. More than two-thirds (68 percent) of Americans believe that loans and credit card debt expanded their opportunities. And 85 percent believe that Americans use debt to live beyond their means.

Academic research shows the conflicting attitude is justified. Some credit card users aggressively pay off debt. Others pay off their bill in full each month.

However, a substantial minority (44 percent)26 of revolvers pay within $50 of their minimum payment. Minimum payers are at a high risk of carrying unsustainable credit card balances with high interest.

In fact, 14 percent of consumers have credit card balances above $10,000.27 At current rates, consumers with balances of $10,000 will spend more than $1,400 per year on interest charges alone.28

Even an average revolver will spend between $58130 and $59731 on credit card interest each year.

Credit Debt Burden by Income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the Survey of Consumer Finances, the top 10 percent of income earners who carried credit card debt had nearly twice as much debt as average.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $3,000. However, their debt-to-income ratio was 21.7 percent. On the high end, earners in the top decile had an average of $11,200 in credit card debt. But debt-to-income ratio was just 4.9 percent.

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower income debt carriers. In fact, high-income earners are as likely to pay the minimum as those with below average incomes.32 If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational Differences in Credit Card Use

  • Boomer consumers carry an average credit card balance of $6,889.
  • That is 24.1 percent higher than the national average consumer credit card balance.34
  • Millennial consumers carry an average credit card balance of $3,542.
  • That is 36.1 percent lower than the median consumer credit card balance.35

With average credit card balances of $6,889, baby boomers have the highest average credit card balance of any generation. Generation X follows close behind with average balances of $6,866.

At the other end of the spectrum, millennials, who are often characterized as frivolous spenders who are too quick to take on debt, have the lowest credit card balances. Their median balance clocks in at $3,542, 36.1 percent less than the national median.

Better Consumer Behavior Driving Bank Profitability

You may think that lower balances spell bad news for banks, but that isn’t the case. Credit card lending is more profitable than ever thanks to steadily declining credit card delinquency. Credit card delinquency is near an all-time low 2.34 percent.14

Despite better borrowing behavior, banks have held interest on credit cards steady between 13% and 14%37 since 2010. Today, interest rates on credit accounts (assessed interest) is 14%. This means bank profits on credit cards are at all-time highs. In 2015, banks earned over $102 billion dollars from credit card interest and fees.38 This is 15 percent more than banks earned in 2010.

How Does Your State Compare?

Using data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare median credit card balances and credit card delinquency. You can even see how each generation in your state compares to the national median.

Median Credit Card Balance by Age (All Consumers) by State

Footnotes:

  1. Source: Survey of Consumer Expectations, © 2013-2015 Federal Reserve Bank of New York (FRBNY). “The SCE data are available without charge at www.newyorkfed.org and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.”The October 2016 Survey of Consumer Expectations shows 75.02 percent of people with credit reports had balances on credit cards. The August 2017 Report on Household Debt and Credit showed 268 million adults with credit reports. For a total of 201 million credit card users.
  2. August 2017 Report on Household Debt and Credit , Page 4, Q1 2017, 453 million credit card accounts. 459 million credit card accounts / 201 million credit card users1 = 2.3 credit cards per person.
  3. The 2015 Report on the Economic Well-Being of U.S. Households reports 58 percent of credit card users carried a balance in 2015. 201 million1 * 58% = 116 million people with credit card debt.Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang shows that 67 percent of credit card users were not “full payers.” This results in a high estimate of 135 million people with credit card debt.

    Average estimate is 125 million with credit card debt.

  4. Using data from the 2015 Report on the Economic Well-Being of U.S. Households, 201 million credit card users * (58 percent not full payers) * $4,262 per individual5 = $496 billion in credit card debt.Using data from Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we calculate 201 million credit card users * (67 percent not full payers) * $4,148 per individual5 = $558 billion in credit card debt.

    Average estimated total credit card debt is $527 billion.

  5. The August 2017 Report on Household Debt and Credit shows $784 billion in outstanding credit card debt. Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang shows an average balance of $3,412 for “full payers.” Using their estimate of 33 percent full payers, we calculate:[$784 billion – ($3,412 (full payer balance) * 33% full payer * 201 million credit card users1)] / (201 million credit card users * (100% – 33% not full payers)) = $4,148

    Using their estimate of 42 percent full payers, from the 2015 Report on the Economic Well-Being of U.S. Households and the $3,412 full payer balance from Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we calculate:

    [$784 billion – ($3,412 (full payer balance) * 42% full payer * 201 million credit card users1)] / (201 million credit card users * (100% – 42% not full payers)) = $4,262

    Average estimated credit card debt per person is $4,205.

  6. Average per person credit card is $4,2055 and the average household contains 1.94 adults over the age of 18. $4,205 * 1.94 = $8,158.
  7. August 2017 Report on Household Debt and Credit, Compare Q2 2016 to Q2 2017, outstanding credit card debt (Page 3).
  8. August 2017 Report on Household Debt and Credit, Page 3, Q2 2017, credit card debt $784 billion / 201 million1 = $3,905.
  9. 2016 State of Credit Report” National 2016 Average Balances on Credit Cards, Experian, Accessed May 24, 2017. National Balance on Bankcards — average of $5,551.
  10. Page 30, 2015 Report on the Economic Well-Being of U.S. Households.
  11. 2013 Survey of Consumer Finances reports 37.1 percent of U.S. households carry credit card debt. There are 125.82 million U.S. households.Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw reported that 46.1 percent of U.S. households carried a balance the month prior to the Survey of Consumer Finances.

    Between 48 million14 and 58 million15 households carry credit card debt. Using the average of the two estimates, we believe 53 million households out of 125.82 million households carry credit card debt.

  12. a. CCP data shows 76.6 percent of people with credit reports had balances on credit cards in September 2008. The May 2017 Report on Household Debt and Credit showed 240 million adults with credit reports in Q3 2008. For a total of 183 million credit card users.The August 2017 Report on Household Debt and Credit shows $866 billion in outstanding credit card debt in Q3 2008. Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang shows an average balance of $3,412 for “full payers.” Using their estimate of 33 percent full payers, we calculate:

    [$866 billion – ($3,412 (full payer balance) * 33% full payer * 183 million credit card users)] / (183 million credit card users * (100% – 33% not full payers)) = $5,365

    U.S. Census Bureau, Survey of Income and Program Participation, 2008 Panel, Wave 4shows 44.5 percent of all households with a credit report have credit card debt. Using this along with the $3,412 full payer balance from Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we calculate:

    [$866 billion – ($3,412 (full payer balance) * (100% – 44.5%) full payer * 240 million people with credit reports)] / (240 million people with credit reports * (44.5% not full payers)) = $5,769

    Average estimated credit card debt per person is $5,567.

    b. Average per person credit card is $5,56712a and in 2008, the average household contained 1.92 adults over the age of 18. $5,567 * 1.92 = $10,689.

  13. U.S. Bureau of the Census, Real Median Household Income in the United States [MEHOINUSA672N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MEHOINUSA672N, September 6, 2017.
  14. August 2017 Report on Household Debt and Credit , Page 12, % of Total Balance 90+ Days Delinquent, Credit Cards
  15. Statement balances are the balances owed to a credit card company at the end of a billing cycle. Full payers will pay off the entirety of their statement balance each month. Finding an estimate of full payers” statement balances was not an easy task. The Federal Reserve Bank of New York does not provide estimates of full payers compared to people who carry a balance.In order to get our estimates, we turned to academic research outside of the Federal Reserve Banks. In the paper, Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we found robust estimates of the statement balances of “full payers.” According to their analysis (see Table 1-A), full payers had mean statement balances of $3,412 (when summarized across all credit cards) before they went on to pay off the debt.

    We multiplied $3,412 by the estimated number of full payers to get the estimated balances of full payers.

  16. CCP data shows 76.6 percent of people with credit reports had balances on credit cards in September 2008. The May 2017 Report on Household Debt and Credit shows 240 million adults with credit reports in Q3 2008. For a total of 183 million credit card users.The May 2017 Report on Household Debt and Credit shows $866 billion in outstanding credit card debt in Q3 2008. Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang shows an average balance of $3,412 for “full payers.” Using their estimate of 33 percent full payers, we calculate:

    $866 billion – ($3,412 (full payer balance) * 33% full payer * 183 million credit card users) = $659 billion

    U.S. Census Bureau, Survey of Income and Program Participation, 2008 Panel, Wave 4shows 44.5 percent of all households with a credit report have credit card debt. Using this along with the $3,412 full payer balance from Table A-1 in Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we calculate:

    $866 billion – ($3,412 (full payer balance) * (100% – 44.5%) full payer * 240 million people with credit reports) = $587 billion

    Estimated credit card debt is $623 billion.

  17. Source: Survey of Consumer Expectations, © 2013-2015 Federal Reserve Bank of New York (FRBNY). “The SCE data are available without charge at www.newyorkfed.org and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.”The October 2016 Survey of Consumer Expectations Shows 75.02 percent of the adult population uses credit cards. The August 2017 Report on Household Debt and Credit shows 267 million adults with credit reports. For a total of 201 million credit card users. Page 30, 2015 Report on the Economic Well-Being of U.S. Households shows that 58 percent of households with credit cards sometimes or always carry a balance.

    201 million * 58% = 116 million people with credit card debt

  18. Source: Survey of Consumer Expectations, © 2013-2015 Federal Reserve Bank of New York (FRBNY). “The SCE data are available without charge at www.newyorkfed.org and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.”The October 2016 Survey of Consumer Expectations Shows 75.02 percent of the adult population uses credit cards. The August 2017 Report on Household Debt and Credit shows 267 million adults with credit reports. For a total of 201 million credit card users. Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang shows that 67 percent of credit card users were not “full payers.”

    201 million * 67% = 135 million people with credit card debt

  19. The 2013 Survey of Consumer Finances reports 37.1 percent of U.S. households carry credit card debt. There are 125.82 million U.S. households.
  20. Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw reported that 46.1 percent of U.S. households carried a balance the month prior to the Survey of Consumer Finances.
  21. The 2013 Survey of Consumer Finances reports a median credit card debt of $2,300 per household with credit card debt.
  22. Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw used CCP data and determined a more realistic median credit card debt of $3,500 per household. Two-person households systematically underreported their debt.
  23. The 2013 Survey of Consumer Finances reports a median credit card debt of $5,700 per household with credit card debt.
  24. Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw used CCP data and determined a more realistic average credit card debt of $9,600 per household.
  25. The Complex Story of American Debt, Page 9.
  26. Table 1 in Minimum Payments and Debt Paydown in Consumer Credit Cards.
  27. Recent Developments in Consumer Credit Card Borrowing.
  28. Board of Governors of the Federal Reserve System (US), Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest [TERMCBCCINTNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TERMCBCCINTNS, September 7, 2017.May 2017 interest rate on accounts assessed interest 14%: $10,000 * 14% = $1,400.
  29. Table 1 in Minimum Payments and Debt Paydown in Consumer Credit Cards.
  30. $4,1482 * 14%28 = $581
  31. $4,2622 * 14%28 = $597
  32. Minimum Payments and Debt Paydown in Consumer Credit Cards.
  33. 2013 Survey of Consumer Finances.
  34. 2016 State of Credit Report” National 2016 Average Balances on Credit Cards, Experian, Accessed May 24, 2017. Average credit card balance for baby boomers is $6,889 compared to a national average of $5,551.
  35. 2016 State of Credit Report” National 2016 Average Balances on Credit Cards, Experian, Accessed May 24, 2017. Average credit card balance for millennials is $3,542 compared to a national average of $5,551.
  36. Board of Governors of the Federal Reserve System (US), Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest [TERMCBCCINTNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TERMCBCCINTNS, September 7, 2017.
  37. U.S. Bureau of the Census, Sources of Revenue: Credit Card Income from Consumers for Credit Intermediation and Related Activities, All Establishments, Employer Firms [REVCICEF522ALLEST], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/REVCICEF522ALLEST, September 7, 2017.
  38. CCP data shows 76.6 percent of people with credit reports had balances on credit cards in September 2008. The May 2017 Report on Household Debt and Credit shows 240 million adults with credit reports in Q3 2008. For a total of 183 million credit card users.The May 2017 Report on Household Debt and Credit, Page 3, Q3 2008, credit card debt $886 billion / 183 million = $4,720
  39. State Level Household Debt Statistics 1999-2016, Federal Reserve Bank of New York, May, 2017. All average credit card debt balances are calculated using the following formula:(Total Credit Card Balancea – Balance of Population Not Carrying Debtb) / Population Carrying Credit Card Debtc
    1. Total Credit Card Balance = (Average Credit Card Debt Per Capita * Population)
    2. Balance of Population Not Carrying Debt = Average Credit Card Debt Per Capita * Population * % of Population Using a Credit Card
    3. Population * % of Population Using a Credit Card * (1 – .375)
  40. State Level Household Debt Statistics 1999-2016, Federal Reserve Bank of New York, May, 2017.
  41. Data from Consumer Credit Explorer.
Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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43 Million Americans Could Get a Big Credit Score Boost Soon — Here’s Why

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Some 43 million Americans might see their credit report improve soon, thanks to new policies put into effect by the “Big Three” credit reporting agencies — Equifax, Experian, and TransUnion.

As of Sept. 15, credit reports will no longer include medical debts that are less than six months past due.

This is a big deal. At least one unpaid medical collection appears on one in every five credit reports, and these medical debts negatively affect the credit scores of as many as 43 million Americans, according to a 2014 study of collection data by the Consumer Financial Protection Bureau (CFPB).

This is the second major change to credit reporting this year that could help boost millions of Americans’ credit scores. As of July 1, the major credit reporting agencies agreed to remove from consumer credit reports any tax lien and civil judgment data that doesn’t include all of a consumer’s information.

This new medical debt reporting change, however, will have a far greater impact. Research has shown that many consumers’ medical debts aren’t all that representative of their creditworthiness, which helped drive the bureaus to make the change. In fact, around 50 percent of Americans with medical collections on their credit report had no other significant blemishes on their credit report, according to the CFPB.

And even though the cost to your credit can be dire, most Americans don’t actually even owe that much for their medical expenses — the average unpaid medical collection tradeline is only $579, according to the CFPB’s 2014 study. This means many consumers are taking major credit hits for a relatively low bill.

Additionally, the agencies have promised that if your insurance company ultimately pays off a medical collection, this debt will be removed from your credit report altogether. Both of these changes will provide more time for insurance claims to process, says John Ulzheimer, a consumer credit expert based in Atlanta.

Expect to see an impact soon

The changes officially take effect on Sept. 15, and their influence will be felt fairly immediately. These new policies are both immediate and retroactive, meaning no medical debt from within the last six months should show up on your credit report after that time.

Jenifer Bosco, a Boston-based staff attorney with the National Consumer Law Center (NCLC) who specializes in medical debt, recommends using these changes as an opportunity to check your report now. That way, you can see if there are any collections that need to be altered because of the new debt practices.

Bosco suggests viewing your credit report for free by filling out an online request with Annualcreditreport.com. You can check out MagnifyMoney.com’s online guide for a bank-by-bank breakdown of how to easily receive your FICO Score.

The immediacy of this agreement is important, because medical collections can be a long and arduous process. Bosco says the new 180-day window is especially helpful because it provides a cushion for consumers who are trying to work through expenses with their insurance provider.

“It’s definitely helpful for people who might actually just have a debt and owe the money, but also people who are going through a lengthy process with their insurance company to get something covered under their policy,” Bosco says.

How much will credit scores improve?

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While it’s difficult to measure exactly how much unpaid medical bills can affect your credit, Ulzheimer says these debts are typically just as detrimental as other collection types. “For example, the impact can range from severe, if you don’t have other unpaid bills on your credit report, to nominal, if medical bills are just one of many outstanding collections,” he told MagnifyMoney.

Having good credit often makes the cost even higher. According to the CFPB’s collection data research, an unpaid medical bill of $100 or more can drop a credit score of 680 by more than 40 points, but the same bill could drop a score of 780 by more than 100 points.

Consumers who notice incorrect medical debt after Sept. 15 should send a dispute to the credit agency that falsely reported it, the NCLC recommends in a press release. If this doesn’t work, you can reach out to the CFPB. If your state’s attorney general was one of the offices involved in the agreement, you can direct your issue to them.

The CFPB research also found that the lack of price transparency and complex insurance coverage systems make medical bills often a source of confusion for consumers. People can often incur debts simply because they aren’t sure exactly what they owe or who they need to pay. Having more time to figure out what you owe, pay your debts, and work through collections with your insurance company can be a major financial benefit, Bosco says.

Bosco also says the changes go beyond specific circumstances and that these protections will be helpful regardless of your situation.

“It benefits all consumers who have medical debt,” she says.

Better credit for all?

The changes are the result of two separate settlements — one with the Attorney General of the State of New York and one with the attorneys general in 31 other U.S. states — but Ulzheimer says the changes are universal.

This means that regardless of what state you live in, credit agencies can’t fault you for medical debts that are less than 180 days old, or for collections that are ultimately handled by your medical insurance.

Hopefully, these changes mean there will be less medical debt bogging down Americans’ credit overall.

The agreement was reached voluntarily, which means there is no sweeping federal or state law or regulation guiding these changes but shows the credit agencies are on board.

“We have never hesitated to go beyond the letter of the law to voluntarily improve the existing credit reporting environment,” Stuart Pratt, the president and CEO of the Consumer Data Industry Association (CDIA) said in a press release announcing the changes. The CDIA represents the country’s consumer data industry, which includes the three major national credit agencies.

Still, this decision is incredibly important considering how instrumental the “Big Three” are in determining credit scores.

The federal government considers Equifax, Experian and TransUnion to be the country’s major credit agencies, and you’re entitled to a free report from all three companies each year. The information that shows up on reports from the “Big Three” carry major weight, so having a chance to improve your score with these groups can go a long way.

To aid this process, the NCLC has created guidelines — called the Model Medical Debt Protection Act — to help protect consumers from unfair medical collection procedures. The guidelines can be used as a standard for improving their medical debt practices even further.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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3 Smart Ways to Finance the New iPhone 8 or iPhone X

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The new iPhone X (Source: Apple)

The new iPhone 8 and iPhone X are drool-worthy devices, especially if your smartphone has taken a beating, no longer stays charged, or shoots crummy video. With new features like facial recognition and an all-glass design, they’ll be hard to resist.

The iPhone 8’s standout features are an all-glass design, wireless charging, and a retina HD display and technology that’s expected to make images crisper and more colorful. Camera improvements include a new color filter, a faster and larger sensor, and new technology that helps to keep your photos and videos from being shaky.

The iPhone X comes with two cameras and sensors with Face ID and a 5.8-inch “super retina” display, in addition to an all-glass front and back, wireless charging, and other new features available in the iPhone 8.
But, of course, these new editions come with a hefty price tag.

The iPhone 8 will start at $699 for a 4.7-inch display and $799 for a 5.5-inch iPhone 8 Plus. You can pre-order the iPhone 8 starting at 12 a.m. PST on Sept. 15.

You’ll have to wait until Oct. 27 at 12 a.m. PST to pre-order its fancier big brother, the iPhone X, which comes in at a staggering $999 base price.

Before you get sticker shock, here’s what you need to know to purchase and finance these souped-up smartphones, and to possibly carve out extra funds for new accessories.

Siri: How Do I Finance a New iPhone?

There’s no better way to pay for a large purchase than cash. You don’t take on new debt and the item is all yours free and clear. But if you don’t have the funds handy and you’re determined to get your hands on the newest iPhone, there are several ways to finance.

Just be sure you’re careful to pick the best choice for your finances. We’ll cover all your options below.

1. Finance directly with your carrier

The new iPhone X (Source: Apple)

The major carriers offering the new iPhones mostly have their own version of a financing deal, allowing you to break up payments over a set period of time. We’ll cover the highlights of a few major carriers below.

What to watch out for when you finance through a carrier:

  • If you cancel your plan before your phone is paid off, you may have to pay off the full balance immediately. Read your terms carefully.
  • Ask if the carrier will be doing a hard pull on your credit report, which could be a ding that you don’t want to take. Some carriers, like AT&T, say credit approval is required, but the fine print doesn’t provide a credit score minimum.

AT&T: AT&T has two financing programs — AT&T Next and AT&T Every Year. AT&T Next requires mostly no money down (but you will have to pay for sales tax), has no finance charges, and divvies up the monthly payments over 24 or 30 months. You can trade in your phone and get a new upgrade every two years. AT&T Every Year offers the same basic financing deal but with the ability to get a new upgrade every year with trade-in.

T-Mobile: Customers can finance a new iPhone through T-Mobile’s installment plan, which breaks up payments over 24 months. As an incentive, the carrier is offering a $300 credit for people who trade up from an iPhone 6 or newer, but that credit is spread across the term of your installment plan.

Sprint: Sprint is offering half off the iPhone 8, with a trade-in if you finance with their monthly Sprint Flex plan starting at $14.58 a month.

2. Sign up for special financing through Barclaycard

The new iPhone X (Source: Apple)

Through a partnership with Barclays, consumers can receive up to 18 months of 0% promotional financing if they purchase the new iPhone ($999 to $1,149, depending on the model you choose) on the Barclaycard Visa with Apple Rewards card. They also can receive special financing on other qualifying Apple purchases — except for iTunes purchases — made within the account’s first 30 days.

You’ll also earn points on purchases at Apple, specifically three points for every $1 spent at store.apple.com, the Apple Store, the iTunes Store, or 1-800-MY-APPLE. To be eligible for the credit card, you also have to be 18 years and older.

The length of the promotional 0% financing offer depends on how much you spend.

  • 6 months: less than $499
  • 12 months: $499 to less than $999
  • 18 months: $999 to less than $1,499
  • 24 months: $1,499 and over

But before you apply for this card, there are some caveats that are important to note.

Deferred interest. If you don’t pay off your card before your promotional period ends, you’ll get hit with deferred interest charges. That means they’ll act as if you’d been paying interest all along and add the entire total to your credit card bill.

Interest will be charged to your account from the purchase date if the balance isn’t paid off by the end of the promotional period or if you make a late payment. The variable annual percentage rate (APR) on your purchase will be 14.99%, 20.99% or 27.99%, based on your credit history when you open the account.

If you purchase the lowest cost version of the iPhone 8 ($699), at best you could qualify for the 12-month 0% promotional APR offer. That would require monthly payments of at least $58.25 per month if you want to pay it in full and avoid getting slapped with deferred interest.

You won’t have to worry about interest if you pay the balance for your new iPhone in full by the end of your promotional period. Know your deadline, since it may be different from a friend’s deadline if they spent more or less than you.

3. Use a no-interest, no-fee credit card

If you can’t fork out the full amount, look for other credit cards with 0% intro interest offers and zero fees. Pay attention to the length of the 0% intro offer because you will need to pay off the purchase before it expires or you might be hit with interest.

The Citi Simplicity® card is MagnifyMoney’s top pick for credit cards with a 0% intro APR offer right now. The card gives you 0% intro APR for 21 months after you open the card, and there’s no annual fee.

The best part? There’s no sneaky deferred interest clause, which means if you don’t pay the card off in full after that 21 months are up, you won’t get back-charged for interest.

Just make sure you purchase the phone after you open the card because the 21-month time limit starts ticking from the moment you’re approved, not from when you make a purchase.

How to get a discount on your new iPhone

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If you’re savvy, you can try these ways to shave some money off the total cost of a new iPhone.

Switch carriers to score discounts

Check out the offers from your current phone carrier or a competitor if you’re interested in switching carriers and can do so without penalty. Some promotions include a discount on the purchase of a new iPhone if you trade in your old phone, or discounts on other Apple products.

Most promotions have caveats, such as required enrollment in a monthly installment plan or credits divided into a series of lower payments.

Trade in to trim the cost

Verizon is offering $300 off an iPhone 8 if you trade in phones from a list that includes iPhone 7, iPhone 6s, Galaxy S8 and Moto Z2 Force.

T-Mobile’s $300 credit will be broken up over a 24-month installment plan for consumers who turn in a paid-off iPhone 6 or newer version, according to its @TMobileHelp Twitter account.

Sprint is offering half off the iPhone 8, with a trade-in and the monthly Sprint Flex plan starting at $14.58 a month.

You can receive up to $260 in credit from Apple if you trade in an eligible smartphone. Estimated trade-in values, according to Apple, include:

  • iPhone 5: $45
  • iPhone 5c: $35
  • iPhone 5s: $70
  • iPhone SE: $135
  • iPhone 6: $135
  • iPhone 6 Plus: $170
  • iPhone 6s: $215
  • iPhone 6s Plus: $260

Of course, you don’t get the credit in cash outright, but here’s what you can do with the trade-in bonus:

  • Apply the credit to the full iPhone cost or the monthly payments to your mobile carrier.
  • Use the credit toward the purchase of any device at the Apple Store.
  • Receive an Apple Store gift card by mail.

Upgrade your old phone through Apple

Apple’s iPhone Upgrade Program is still around. If you have made at least 12 payments for an existing iPhone, you can return your phone to Apple and upgrade to a new version.

For this program, payments start at $34.50 a month, and you will enter into a 24-month, 0% APR agreement with Citizens Bank, also an Apple bank partner. A credit card is required for this program, which also provides AppleCare+ coverage (a $129 value).

You have to activate the phone with AT&T, Sprint or Verizon, or activate with T-Mobile through the Apple Store. There’s no requirement that you remain with a certain carrier, if you want flexibility in switching carriers while paying off the phone.

The perk of this program is that Apple says the new iPhone will be shipped to your house for free or you can pick it up in a store. Then you will either use the Trade-in Kit to return your old iPhone to Apple or bring it to the store.

Lori Johnston
Lori Johnston |

Lori Johnston is a writer at MagnifyMoney. You can email Lori here

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How to Donate to Hurricane Relief Without Getting Scammed

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

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When natural disasters strike, Americans pour in money and support to help the victims.

But while relief efforts are uplifting, they come with a caveat for anyone looking to contribute: How can you give money safely and securely to people who need it most?

Fundraising scams and fake charities often show up after hurricanes and other disasters. These practices aren’t new either — less than six months after Hurricane Katrina hit the Gulf Coast in 2005, the FBI had opened 100 investigations into fraudulent fundraising sites.

“After disasters like this, we do often see more organizations popping up, and it does take some time if there are scams out there to identify what they are,” says Katelynn Rusnock, the advisory system manager for Charity Navigator, an independent charity watchdog organization. Based in Glen Rock, N.J., Rusnock specializes in communicating potential wrongdoing found within charities.

So how can you make sure you’re not donating to a fake organization? Here are five ways to avoid fundraising scams.

Make sure the charity is legitimate with charity tracking sites

Learn about the organization before you give away any of your money, Rusnock recommends. Charity Navigator, and similar sites such as CharityWatch and GuideStar, maintain up-to-date listings of registered nonprofits, which you can use to check whether or not an organization is legitimate.

When in doubt, Rusnock suggests giving to larger nonprofits that have contributed to previous major disasters.

“Larger organizations that often respond to disasters are usually fairly equipped to deal with these types of things,” she says. “They have the teams with the expertise, and they’ve got the experience to do this well.”

Look up their employer identification number on the IRS website

You also can look up charities by checking their employer identification number (EIN), which will show if they’re registered with the Internal Revenue Service. Rusnock says you should be able to find this number on an organization’s website, and recommends asking them directly if it isn’t readily available. To help verify these groups, the IRS has created a tool on its website for searching charities by their EIN.

Check scam alerts from the Federal Trade Commission

Additionally, the Federal Trade Commission frequently updates a list of scam alerts so you can stay aware of recently reported groups.

The FTC reports that a flood insurance scam is already proliferating in the wake of Hurricane Harvey. Homeowners and renters get robocalls telling them their flood premiums are past due and that they need to submit a payment in order to get relief from their insurer.

You can sign up to get scam alerts sent directly to your email.

Beware of fake social media fundraising

While social media can be a helpful source of information about ways to give, and seeing friends talking about donating online can make it seem like an enticing option, it’s also unregulated and can be exploited by scam artists and phony nonprofits.

In times of heightened need, scammers using fake Facebook accounts and Twitter bots to post spam or malware links can be some of the biggest offenders.

Phishing is also a common concern, according to the United States Computer Emergency Readiness Team, a division of the Department of Homeland Security. Fraudulent organizations may send out emails or texts asking for direct donations or personal information, which are often attempts to steal a person’s identity. You should avoid giving out personal information or clicking on links from unknown sources.

Look out for red flags, like requests for payment via wire transfers

It’s also smart to be conscious of how a charity wants you to donate. In the FTC’s guide for avoiding fundraising scams, the organization warns that groups asking for payment in cash or through a wire transfer are more likely to be fake. Additionally, charities that offer to send an overnight courier to collect money, or use other tactics to pressure you to act quickly, are usually worth avoiding.

To combat this, Rusnock says it’s best to give directly to the charity through their own website, as opposed to using outside channels, such as social media or emails, that may or may not be associated with the organization.

Crowdfunding could be deceitful, too. According to the Better Business Bureau, campaigns on sites such as Kickstarter and Indiegogo can be unreliable, as it’s hard to determine whether or not a source is trustworthy or not. Still, there are some reliable ways to use these services, and GoFundMe has even set up an official page specifically for Hurricane Harvey relief and for Hurricane Irma relief. GoFundMe also offers to refund customers if they find out their donations weren’t used as promised.

Once you choose a legitimate charity, Rusnock suggests sticking with the organization. While many people tend to only donate immediately after a disaster strikes, she recommends signing up for recurring payments, or checking back in with the organization months after your first donation to learn about their current needs.

“A lot of people want to go out and donate after this happens, but we encourage donors — if they’re able to — to continue to support that organization even once the crisis is no longer in the news,” Rusnock says. “Oftentimes the charity is still responding long after attention has shifted away.”

 

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Freaked Out by the Equifax Hack? Here’s What You Need to Know

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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About 143 million consumers’ sensitive information has been compromised in what was one of the worst data breaches to date in size and potential impact on consumers. Credit reporting agency Equifax announced the breach Thursday, more than a month after detecting the intrusion.

Equifax is one of the three national credit reporting agencies (the others being TransUnion and Experian) and collects a wide variety of consumers’ sensitive and personally identifiable information (PII). The information on credit reports determines credit scores and is used in lending decisions, among other things.

What happened

The breach exposed the names, Social Security numbers, birth dates, addresses, and, in some instances, driver’s license numbers of about 44 percent of the current American population. Hackers also took the credit card numbers for about 209,000 U.S. consumers and dispute documents for 182,000 U.S. consumers.

In its announcement, Equifax said “criminals exploited a U.S. website application vulnerability to gain access” to the files. In addition to the millions of U.S. consumers affected, the company says the criminals had access to limited personal information of some U.K. and Canadian residents.

The Atlanta-based reporting agency said the thieves had access to the data from mid-May through July 2017, but it didn’t discover the breach until July 29. Equifax announced the breach more than a month after discovering it and hiring a cybersecurity firm to investigate.

The company says it’s also working with law enforcement authorities and that its investigation will be complete soon. Equifax has not said who they believe attacked their database.

What the breach means for consumers

The breach isn’t the largest to date, but it’s close. In 2016, Yahoo announced an attack that affected 500 million users. Another breach, announced just a few months later, involved 1 billion users. In those breaches, hackers stole users’ phone numbers and passwords.

The Equifax breach could be worse in impact, given the sensitive nature of the consumer data the company has on file. In its release, Equifax said it had found “no evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases.” That doesn’t necessarily mean the information hasn’t been misused or that it won’t be misused, as signs of identity theft may not immediately show up on a credit report.

“If you were going to rate this breach from one to 10, this is a 10. The amount of sensitive info that is contained in the Equifax database is staggering,” says Adam Levin, founder of CyberScout and author of “Swiped,” a book on how and why consumers can protect themselves from identity theft.

When this level of information has been compromised, it “opens up the door for thieves to commit many different other types of identity theft. Not just financial, but criminal, government, medical theft as well,” says Eva Velasquez,the president of Identity Theft Resource Center.

Levin adds, when Social Security numbers are part of a database that’s been exposed, all of the individuals who have their numbers in that database will need to be “looking over their shoulders for the rest of their lives.” The Social Security Administration rarely changes someone’s Social Security number.

What to do now

First, don’t panic.

“People really feel violated when things like this happen,” says Velasquez. “Direct your energy from being angry or upset and feeling powerless to actually doing something and taking some steps to feel more empowered.”

Levin says the breach may add to “breach fatigue” — how the drastic rise in security breach causes consumers to believe breaches are inevitable and react to them apathetically instead of with urgency.

“But it shouldn’t,” Levin says. “It should be a clarion call. Unfortunately, as consumers we have to think of this as as if we’re alone. The government has failed us. The financial industry has failed us, and frankly we have failed ourselves. It’s important that we develop a culture of privacy and security.”

Find out if you are one of the impacted
Given the increasing threat and frequency of data breaches, everyone should be proactive in detecting identity theft. For this breach in particular, Equifax set up a website to see if you’re one of the people affected and how to enroll in the free year of credit monitoring it’s offering victims.

Visit equifaxsecurity2017.com and click on “Potential Impact.”

You’ll see a page with a large, rectangular button that says “Check Potential Impact” and a few lines of text.

Source: Equifax

The text explains that if you click on the link that says “Check Potential Impact,” you’ll be taken to a form that asks you to provide your last name and the last six digits of your Social Security number.

Based on that information, you’ll then be shown a message that says whether your personal information may have been impacted by the breach.

Source: Equifax

Regardless of the message you see, Equifax will give you the option to enroll in a credit monitoring service from TrustedID Premier. Beware: if you enroll, you’ll have to agree to waive some of your rights to sue Equifax. The arbitration clause is written in all caps in the company’s terms of service, but consumers may miss the language. The Washington Post reported earlier Equifax on Friday updated its terms to incorporate a way out of the arbitration clause.

Equifax cleared up the confusion Friday afternoon by adding the following information to its FAQs section on equifaxsecurity2017.com:

“The arbitration clause and class action wavier included in the TrustedID Premier Terms of Use applies to the free credit file monitoring and identity theft protection products, and not the cybersecurity incident.”

However, New York State Attorney General Eric Schneiderman still found the addition “unacceptable.”

Consumers can be excluded if they let Equifax know within 30 days in writing they would like to be excluded from the arbitration clause, but must first accept the agreement.

If you choose to enroll, you’ll be given an enrollment date. There’s quite a backlog of people enrolling, so you have to take it upon yourself to return to the site on your enrollment date. In short: You have to take your protection into your own hands. Equifax isn’t doing it for you.

Source: Equifax

Sign up for credit monitoring

Equifax is offering one year of free credit monitoring through TrustedID Premier to all U.S. consumers, regardless of whether they were affected by the data breach. There are five services under the program:

  • Get a free copy of your Equifax credit report.
  • Sign up for credit monitoring and automated alerts to be notified of key changes to your credit report on any of the major big three reporting agencies.
  • Put a freeze on your Equifax credit report.
  • Scan suspicious sites for use of your Social Security number.
  • Get up to $1 million of identity theft insurance to help you pay for any costs you may incur if someone commits identity fraud against you.

Even if you don’t want to enroll in Equifax’s service, you should enroll in a credit monitoring service, like free options offered through Credit Karma, Discover, Mint, Wells Fargo, and Capital One® — there are lots of ways to keep tabs on your credit.

Some identity theft protection services like the ones offered through myFICO, charge a monthly fee to monitor your credit year-round and provide identity theft insurance.

Regularly review your credit reports

You’re entitled to a free annual credit report from each of the major credit bureaus, which you can get through annualcreditreport.com. Carefully check your credit report for any accounts or recent activity you don’t recognize.

Make a plan to respond to identity theft

Detecting identity theft as soon as possible is crucial to minimizing the damage and stress it can cause — that’s where credit monitoring and reviewing your credit reports comes in. But the next step is just as important: Know what to do when it happens.

You can dispute errors on your credit report, file a police report documenting the identity theft, and do the legwork of resolving any problems it causes. You can also pay for identity theft insurance or identity theft resolution services (some employers offer this as a benefit, so check with your human resources department). Here’s a guide on identity theft resolution, so you know what to do in case you see anything suspicious. Even if you don’t see anything out of the ordinary, you should continue to remain vigilant in monitoring your credit activity.

Freeze your credit report

Velasquez says a credit security freeze is an option impacted consumers should look at. It prevents any application for new credit without first verifying your identity. If you want to apply for new credit, you’ll have to “thaw” your credit reports. The credit bureaus charge a fee, which varies by state, every time you freeze and thaw your credit report.

“While that does create some added inconvenience, the level of protection is worth it,” says Velasquez.

Be alert for unusual activity

Now is the time to practice what Velasquez calls good “identity hygiene.”

“Being vigilant about your identity is just a part of the world that we live in,” says Velasquez. “ If being involved in a data breach is the catalyst that brings that to the top of your mind, then we can see that as a positive.”

Velasquez recommends consumers act proactively and remain cognizant of anything that may involve using or verifying their identity. For example, if you receive a notice from a government agency about benefits or some weird explanation of benefits, pay attention to it.

Even after you do things like enroll in credit monitoring and freeze your credit, continue to do your best to watch out for signs of abuse. Don’t wait until you start receiving strange calls from government agencies and debt collectors.

When tax season rolls around, file your return as soon as possible. Identity thieves frequently use Social Security numbers to get fraudulent refunds, and if they file before you do, it will further complicate your tax-filing process.

At the least, go through your financial statements regularly (the more often, the better) to look for anything out of the ordinary. While protection is top of mind, sign up for any alerts you can set up on your mobile banking app to receive transaction notifications.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Wells Fargo Discovers 1.4 Million More Fraudulent Accounts

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Wells Fargo’s fraudulent practices have put the company in the public spotlight once again. The bank announced Thursday that employees wrongfully created up to 1.4 million more unauthorized accounts, on top of the discovery last year that employees falsified more than 2 million bank accounts without customer permission. 

According to a company statement released Thursday, an expanded analysis of new accounts opened between January 2009 and September 2016 revealed a total of 3.5 million “potentially unauthorized consumer and small business accounts.” That’s almost 70% more fraudulent accounts than previously thought. 

The company said Thursday it will provide customers with $2.8 million in total refunds—in addition to the $3.3 million the company pledged last September after the initial scandal was unearthed.

How we got here

After the original news broke in September 2016, Wells Fargo revealed it had fired 5,300 employees in recent years for behavior related to the creation of unauthorized bank accounts. Employees who created the accounts did so in order to increase their earnings and boost sales, a motivation that was later attributed to the hypercompetitive corporate culture at one of the worlds largest banks 

So how did Wells Fargo find more fraudulent accounts almost a year later? The bank says it learned about the additional fraud by studying a total of 165 million accounts created since the beginning of 2009, an expansion on the 93.5 million examined last September. The study also found more of these unauthorized accounts incurred fees and charges than originally thought—190,000 versus the 130,000 initially reported last year. 

Unauthorized accounts aren’t the only damaging news the company has dealt with recently. In the past year, the bank has been accused of scamming mom-and-pop shops, admitted to charging up to 570,000 customers for auto insurance they didn’t need, and settled a $108 million lawsuit for concealing loan and mortgage fees from veterans.

What to do if you are a Wells Fargo customer

To determine whether or not you’ve been a victim of these unauthorized accounts, check your credit score and your bank’s website, which will show every account opened in your name.

Those who had accounts opened in their name without their permission should inform Wells Fargo immediately, as filing a complaint will put them in the pool of customers who will all split the bank’s $6.1 million of promised restitution. These customers will also receive a portion of the $142 million the company has agreed to pay as part of a class-action suit finalized in April. 

Wells Fargo’s response

Wells Fargo CEO Tim Sloan apologized Thursday in a press release for the San Francisco-based company’s failings and attempted to reemphasize some of the bank’s key values.   

“Our commitment has never been stronger to build a better bank for our customers, team members, shareholders and communities,” Sloan said in the release. 

Despite expressing remorse, the company has fought privately to avoid dealing with the repercussions of its actions. Currently, Wells Fargo contracts contain a provision that forces customers to settle disputes with the bank through arbitration, as opposed to through class-action or individual lawsuits.   

This essentially means that any customer who believes they have been treated unfairly is forced to settle with the company on its own terms, rather than on a level playing field in court. While the Consumer Financial Protection Bureau (CFPB) recently drafted a bill that would prevent this practice, Congress may vote to overturn this measure before it becomes law, thus allowing Wells Fargo to continue dodging class-action suits, says Amanda Werner, an attorney for the Washington, D.C.-based Americans for Financial Reform and Public Citizen. Werner specializes in combatting forced arbitration rules.

Ways to avoid fraud

In order to prevent your bank from getting away with similar practices, Werner suggests checking your credit score at least a few times each year. The credit score may indicate if any unauthorized accounts have been opened in your name. You can also get a free annual credit report (which contains more detail than a credit score) from each of the major credit reporting agencies at AnnualCreditReport.com.

Additionally, Werner recommends taking any problems you may have with your bank directly to the CFPB, because its complaint process is typically much faster and more efficient.    

“I’ve heard a lot of stories from people who spend hours on the phone with customer service trying to settle something, and then they file a complaint with the CFPB and suddenly the bank is ready to listen to them,” Werner says.  

How will other banks respond?

Beyond negative press, Wells Fargo has suffered few consequences for its recent scandals. While speculators are concerned about the company’s reputation hurting its overall value, the bank’s stock has continued to grow, albeit a bit more slowly than expected

Werner worries this, along with the overall lack of legal action against the company, will send the wrong message to other banks dealing with similar fraudulent practices.

“If I’m another bank and I’m doing something shady—but maybe it’s not as bad as 3.5 million accounts—then I feel like I can get away with it because Wells Fargo got away with something worse,” Werner says.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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