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Consumer advisory: Three steps you should take if you have a reverse mortgage

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Infographic on reverse mortgages
Reverse mortgages are a type of loan that allows homeowners, 62 and older, to borrow against the accrued equity in their homes. Reverse mortgages can help some older homeowners meet financial needs in retirement. Most reverse mortgages today are federally insured through the Federal Housing Authority’s (FHA) Home Equity Conversion Mortgage (HECM) program.

We’ve heard many complaints from consumers who have experienced problems with reverse mortgages. The most common reverse mortgage complaint is about difficulty with changing the loan terms and problems communicating with loan servicers. Some consumers, for example, express frustration about slow, inconsistent communication from their reverse mortgage loan servicer.

We’ve also heard from consumers regarding non-borrowing spouses who are facing the loss of their home after the borrowing spouse has died. Recent changes to the federal program that insures most reverse mortgages allows some non-borrowing spouses to remain in the home after the death of the borrower spouse for HECM loans originated after August 4, 2014. Since this change is not retroactive, spouses of reverse mortgage borrowers who took out their loan prior to August 4, 2014 could be more likely to face losing the home when the borrower dies.

Here are 3 things you or your loved ones should do if you have a reverse mortgage:

1. Verify who is on the loan

If you took out a reverse mortgage with two borrowers, check with your reverse mortgage servicer to make sure its loan records are accurate. Call your servicer to find out what names are listed on your loan. They may be able to help you over the phone. See your reverse mortgage statement for the phone number, and ask them to send you this information in writing for your records. You can also write a letter requesting information.

2. If your reverse mortgage is in the name of only one spouse, make a plan for the non-borrowing spouse

If your reverse mortgage is in the name of only one spouse, contact your loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral. A repayment deferral allows a non-borrowing spouse to remain living in the home after the death of the borrowing spouse. If not, make a plan in the event the borrowing spouse dies first and the loan becomes due. If you or your spouse are not on the loan but believe that you should be, promptly seek legal advice.

If you have enough remaining equity in your home, you could consider taking out a new reverse mortgage with both spouses. You’ll have to pay loan fees again, however, for the new loan. If the non-borrowing spouse can’t pay off the reverse mortgage when the borrowing spouse passes away, he or she might consider a new traditional mortgage if they have the income and credit to qualify. Also consider other family members that would be willing to cosign on such a loan. Some surviving spouses may need to sell the home and make plans for where they will live after the home is sold. Contact a HUD-approved housing counselor near you to explore your options.

3. Talk to your children and heirs – make a plan for any non-borrower family members living in the home

Make sure your adult children or any family members living in the home know what to expect when your reverse mortgage comes due. If they wish to keep the home, contact your reverse mortgage company for written information that explains their options. Discuss this information with your family and follow up with the reverse mortgage company for anything you don’t understand.

If you have a problem with your reverse mortgage

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.

For more information about how reverse mortgages works and questions to ask, read our guide to reverse mortgages for older consumers and their families.

Check out Ask CFPB to learn more about reverse mortgages.

Save the date: Join us for the Winter 2015 Consumer Advisory Board meeting in Washington, DC

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Join us for a Consumer Advisory Board meeting with Director Cordray on Thursday, February 19 from 10 a.m. to 4 p.m. EDT. During this meeting we will discuss trends and themes related to consumer financial well being and medical debt.

Consumer Financial Protection Bureau
Auditorium
1275 First Street NE
Washington, D.C. 2002 Washington, DC

This event requires an RSVP. All of our Advisory Board and Council meetings are open to the public. A recording will be available after the event.

Please send us an email to RSVP.

You can check out the meeting agenda and event flyer. See you there!

Consumer Advisory: 7 ways to keep medical debt in check

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Debt collection is the top complaint we’ve received since September 2013. Out of all debt types, medical collections make up 52 percent of collection accounts on credit reports, far outpacing all other types of debt.

Medical collections are so widespread, that an estimated 43 million consumers with an account in collection have medical debt. We analyzed medical collections in our latest report, to explain why medical debt is affecting so many more credit reports than any other type of debt. You can read more about how medical debt hurts your credit report.

Here are steps you can take to keep medical debt in check:

1. Review medical bills carefully

If you don’t recognize the provider, check the date of service to see if you had a medical treatment on that day. For more complicated procedures, ask for an itemized bill from the provider in order to check how much you were charged for each service. Some providers who bill you directly may have been associated with a hospital where you were treated, so you may not have known you were receiving services from them at the time you were being treated.

2. Get documentation

Prepare an organized record of all bills. If you need to dispute a bill, send a written notice to the provider and include a copy of all relevant documents, such as records from doctors’ offices or credit card statements. Do not send original documents.

3. Check your health insurance policy and make sure your provider has your correct insurance info

You should know what your insurance covers, and what it doesn’t – but first your insurance information needs to be up-to-date and accurate! A small mix up can lead to big bills for expenses that your insurance should have covered.

4. Act quickly to resolve or dispute the medical bills that you receive

If you have verified you owe the bill, try to resolve it right away. Verify whether an insurer is paying for all or part of a bill. If you delay the bill and let it end up in collections, it can have a significant impact on your credit score. If you don’t owe the bill, act quickly to dispute it.

5. Negotiate your bill

Hospitals may negotiate the amount of the bill with you. The tab may be reduced if you pay the whole amount up front. You can also try asking for the rate that people who have insurance get. The hospital might also offer a plan that enables you to pay off the debt in installments at no interest. It doesn’t hurt to ask.

6. Get financial assistance or support

Many hospitals have financial assistance programs, which may be called “charity care,” if you are unable to pay your bill. Check the deadlines, which can vary.

7. Don’t put medical bills on your credit card, if you can’t pay it

If you can’t immediately pay off a high debt on your credit card bill, you will be charged high interest, and it will look like regular debt to other creditors. Instead, ask your medical provider for a payment plan with little or no interest.

Related information about debt collection

Check out Ask CFPB to learn more about your debt collection rights and to learn about medical credit cards.

If you’re dealing with debt in general, you can consider finding a reputable credit counseling agency.

Consumer advisory: Virtual currencies and what you should know about them

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You may have heard about virtual currencies like Bitcoin, XRP, and Dogecoin. But what are virtual currencies? What’s this “to the moon!” business on the internet about? And, as a consumer, what risks should you be aware of?

While virtual currencies offer the potential for innovation, a lot of big issues have yet to be resolved – some of which are critical, including:

  • Virtual currencies are targets for hackers who have been able to breach sophisticated security systems in order to steal funds
  • Virtual currencies can cost consumers more to use than credit cards or even regular cash once you take exchange rate issues into consideration
  • Fraudsters are taking advantage of the hype surrounding virtual currencies to cheat people with fake opportunities
  • If you trust a company to hold your virtual currencies and something goes wrong, that company may not offer you the kind of help you expect from your bank or debit or credit card provider

Check out our consumer advisory for more things that you should think about if you’re considering using virtual currencies and links to other useful resources.

Submit a complaint

You can also submit a complaint if you have a problem with a virtual currency product or service. We’ll forward the complaint, along with any documents you provide, to the relevant company and work to get a response from them.

Complaint data helps us understand what business practices may pose risks to consumers. We’ll use the information to enforce federal consumer financial laws and, if appropriate, take policy steps.

Four steps you can take if you think your credit or debit card data was hacked

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Lately, we’ve received a lot of questions about what to do in light of the recent data breach at Target retail stores. This theft of credit and debit card information could impact tens of millions of consumers and we want to let you know what you can do to protect yourself if you spot fraudulent charges.
Protect your credit and debit card information
If your information was part of a breach, the most immediate risk is that the thieves may make unauthorized charges or debits to your accounts. Keep a close eye on your account activity and report suspicious transactions immediately to your bank or credit card provider. The sooner you tell your provider about any unauthorized debits or charges, the better off you’ll be.

1. Check your accounts for unauthorized charges or debits and continue monitoring your accounts

If you have online or mobile access to your accounts, check your transactions as frequently as possible. If you receive paper statements, be sure to open them and review them closely. If your provider offers it, consider signing up for email or text alerts.

Report even small problems right away. Sometimes thieves will process a small debit or charge against your account and return to take more from your bank account or add more charges to your credit card if the first smaller debit or charge goes through. And keep paying attention—fraudulent charges to your card or fraudulent debits to your bank account might occur many months after the theft of your information during a data breach.

2. Report a suspicious charge or debit immediately

Contact your bank or card provider immediately if you suspect an unauthorized debit or charge. If a thief charges items to your account, you should cancel the card and have it replaced before more transactions come through. Even if you’re not sure that PIN information was taken, consider changing your PIN just to be on the safe side.

If your physical credit card has not been lost or stolen, you’re not responsible for unauthorized charges. You can protect yourself from being liable for unauthorized debit card charges by reporting those charges immediately after you find out about them or they show up on your bank statement.

If you spot a fraudulent transaction, call the card provider’s toll-free customer service number immediately. Follow up with a written letter. Your monthly statement or error resolution notice will tell you how and where to report fraudulent charges or billing disputes.

When you communicate in writing, be sure to keep a copy for your records. Write down the dates you make follow-up calls and keep this information together in a file.

If your card or PIN was lost or stolen, different rules may apply. Your timeline for reporting after your card, PIN, or other access device is lost or stolen is tied to when you discover the loss or theft or when unauthorized transactions show up on your bank statement. Therefore, you should make the report as soon as you know that there is a problem

3. Submit a complaint if you have an issue with your bank or card provider’s response

Debit card issuers should investigate the charges (generally within 10 business days) and take action quickly (generally within 3 business days). For your credit card, it can take longer, but you don’t have to pay the charge while it’s under investigation. You also have a right to see the results of their investigations.

If you have an issue with their response, you can submit a complaint online or by calling (855) 411-2372. For TTY/TDD, call (855) 729-2372.

If you have other questions about billing disputes and your debit and credit card protections, you can Ask CFPB.

4. Know when to ignore anyone contacting you to “verify” your account information by phone or email

This could be a common scam, often referred to as “phishing,” to steal your account information. Banks and credit unions never ask for account information through phone or email that they initiate. If you receive this type of contact, you should immediately call your card provider (using a customer service number that you get from a different source than the initial call or email) and report it.

For more information on phishing scams, check out the FTC’s consumer alerts.

For more information, check out the consumer advisory.

Consumer advisory: Stop getting sidetracked by your student loan servicer

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Over the last several years, many Americans have been able to save on monthly payments on their mortgages and other loans by refinancing to the low interest rates available in the market.

Unfortunately, with few refinancing options, many student loan borrowers tell us they feel stuck in loans with high rates, well after they’ve graduated and landed a job.

Since many borrowers can’t refinance, one of the only ways to avoid paying unnecessary interest is to pay their high-rate loans off more quickly. According to the Truth in Lending Act, your lender or servicer cannot assess any penalties or fees if you prepay your private student loan.

Recently, we released a report that describes how the payment processing policies of private student lenders and loan servicers may be sidetracking responsible borrowers looking to pay off their loans more quickly. If you have several loans associated with the same loan servicer (the company that sends you a bill each month) and you don’t provide instructions, your servicer will generally decide how to allocate your payments in excess of the amount due.

Leaving this decision up to them isn’t always the best choice.

Your student loan servicer should listen to your instructions about which loan your additional payment goes toward when you submit your payment.

Here’s why providing instructions to your servicer can be a good idea:

  • If you direct any extra money to your highest interest rate loan first, you may save hundreds of dollars or more in extra interest payments and you may be able to get out of debt faster.
  • If you don’t tell them what to do, your servicer will apply extra payments as they see fit, in most cases spreading your money out across all of the loans on your account.
  • This means that you’ll pay down your debt slowly, and you’ll pay more money in interest over the life of your loan.

To help you explain to your servicer what it should do with your money, we’ve put together some sample instructions you can send to your servicer to ask them that they direct any extra payments toward your highest-rate loan. Helpful servicers will generally accommodate your request. You’ll want to be sure your servicer responds to your request so you know if you need to send additional instructions.

You can download a sample letter to mail to your servicer, or you can use the text below to provide instructions using the “Send a Message” or “Contact Us” feature when you log into your account on the servicer’s website:

I am writing to provide you instructions on how to apply payments when I send an amount greater than the minimum amount due. Please apply payments as follows:

  1. After applying the minimum amount due for each loan, any additional amount should be applied to the loan that is accruing the highest interest rate.
  2. If there are multiple loans with the same interest rate, please apply the additional amount to the loan with the lowest outstanding principal balance.
  3. If any additional amount above the minimum amount due ends up paying off an individual loan, please then apply any remaining part of my payment to the loan with the next highest interest rate.

It is possible that I may find an option to refinance my loans to a lower rate with another lender. If this lender or any third party makes payments to my account on my behalf, you should use the instructions outlined above.

Retain these instructions. Please apply these instructions to all future overpayments. Please confirm that these payments will be processed as specified or please provide an explanation as to why you are unable to follow these instructions.

Thank you for your cooperation.

You’ll want to save the message you sent for your records.

For most borrowers, it makes sense to direct any extra payment toward your loan with the highest interest rate – this is the fastest way to save the most money over the long term. For other borrowers, saving the most money might not be their main goal. You may be interested in paying extra each month on certain loans in order to improve your credit profile, qualify for a mortgage, or eliminate a monthly bill. You should weigh all of your options.

You can also submit a complaint online.

If you have questions about repaying student loans, check out our Repay Student Debt tool to find out how you can tackle your student loan debt.

For more information on private student loans and other consumer financial products or services, visit Ask CFPB.