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Guides to help you open and manage your checking account

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Are you thinking about opening a checking account but aren’t sure how to get started? We have resources to help you select a product that’s best suited for your financial needs.

Banks and credit unions provide safe places to keep your money, but it’s important to shop around to find the financial products and services that work for you. If you’re new to banking, struggling to stay on top of your expenses, or simply want to avoid costly or unexpected fees, you may benefit from an account that helps you avoid overdraft and the costs that come with it. Our new account guides have information to help you shop for and manage your checking account.

How to select a lower risk account

The first step is to know your options. A number of banks and credit unions offer checking accounts that are designed to let you only spend the money you have in your account; these accounts are intended to prevent you from overdrawing your account, even for checks and online bill pay. These lower-risk products can prevent unexpected overdrafts and overdraft fees and reduce your risk of losing your account privileges because of unpaid overdrafts. Some banks do not offer “no-overdraft” accounts or do not market them. So it’s important to shop around and ask whether the bank or credit union offers an account that allows you to avoid overdrafts and minimize fees. Learn more in our guide to selecting a lower-risk account.

If you’ve been denied a checking account

If a bank or credit union denies your application to open a checking account, it may be because of negative information in your checking account consumer report, such as, having a checking account involuntarily closed due to unpaid fees. If the bank or credit union denies your application due to information in your report, you should request a copy of and review it for any errors. If you find errors, you can use our sample letters to file a dispute with both the checking account reporting company that created the report and the bank or credit union that provided the information to the reporting company.

If you have had past difficulties managing a checking account, you should still be able to access the banking services that you need. Many banks and credit unions offer checking accounts that are designed to reduce risks for both you and financial institutions by preventing overdraft and overdraft fees. You might also consider getting a prepaid card. Learn more about the steps you can take in our guides to choosing and managing checking accounts.

Check out our consumer guides to checking accounts

If you have had past difficulties managing a checking account, you should still be able to access the banking services that you need. Many banks and credit unions offer checking accounts that are designed to reduce risks for both you and financial institutions by preventing overdrafts and overdraft fees. You might also consider getting a prepaid card. Learn more about the steps you can take in our consumer guides to choosing and managing checking accounts:

You may also find other helpful information about checking accounts in the CFPB’s Newcomer’s Guide to Managing Money

If you’re helping someone else with issues related to their checking account, there’s information available here.

We want to hear from you

If you’re having an issue with your checking account, you can submit a complaint to the CFPB at consumerfinance.gov/complaint or call (855) 411-2372 toll-free.

You can also tell us your story, good or bad, about your experience with checking accounts at help.consumerfinance.gov/app/tellyourstory.

Have questions about checking accounts or other consumer financial products and services? Find answers at consumerfinance.gov/askcfpb.

Key tips to consider if choosing a lump-sum pension payout

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Your pension plan may give you the option of taking your full pension in a lump sum when you retire. When you choose a lump-sum payout instead of a monthly pension payment, you replace a lifetime monthly payment for a one-time payout. A lump-sum payout can give you the flexibility of choosing where to invest or save your money, and when and how much money to withdraw. However, it also shifts responsibility from your employer to you for making your money last and protecting it from a variety of risks ranging from inflation to fraud.

Here are things to know and do if you have the option of taking out a lump-sum payout on your pension:

Proceed with caution: This is a one-time choice. Consider your health, and your overall retirement income and needs. If you are married, consider the long-term financial well-being of your spouse.

Ask your employer or plan administrator for more specific information about your payout options and their requirements and deadlines. Ask if your plan may allow a combination of payouts.

Detect and correct errors in your lump sum calculation: Mistakes can happen. Many factors determine your lump -sum payment amount including your age, years of work, your earnings history, taxes withheld, and the terms of your plan.

Take a look at your most recent pension statement, and verify that the information used to calculate your lump sum matches.

Plan for tax consequences: You will pay taxes on your lump-sum payout. Your lump sum money is generally treated as ordinary income for that year. For this reason, your employer is required to withhold 20 percent on the amount.

In addition, you could pay a 10 percent early withdrawal penalty tax if you have not reached age 59½.

If you don’t need all the money immediately, consider rolling it over into a qualified retirement account within 60 days of taking the lump sum. A qualified retirement account will protect your money from an early withdrawal penalty and defer income taxes until you take money out.

Make your money last: You and your spouse may spend 20 or more years in retirement. For example, if you decide to invest or save your money the value of your lump sum can erode over time due to fees and commissions, poor stock market performance, and inflation.

Seek help from financial professionals as needed.

Protect your money from fraud and scams: Scammers and fraudsters often target older consumers. Be wary of anyone promising high investment returns and low risk, and pressuring you to act quickly.

Take your time. Verify information, ask questions, and seek advice from trusted professionals, family, and friends; this will help you spot a fraud or scam.

Plan ahead: Timing your retirement or separation date is the easiest way to maximize your payout options and the amount that you can get under each one of them.

Check out our guide to pension lump-sum payouts and your retirement security and learn more about your pension payout options.

You have protections when it comes to automatic debit payments from your account

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People use automatic payments set up with a merchant or other service provider to pay bills and other recurring payments from their bank or credit union accounts. This could be for utility bills, credit card bills, monthly fees for childcare, gym fees, car payments, or even a mortgage. Such automatic payments can be a convenient way for people to make sure they pay their bills on time. Some lenders offer an interest rate reduction on loans for paying by automatic debit. However, consumers have told us that in certain cases, they have had trouble stopping automatic payments after providing a company with their bank account number.

Therefore, before you give anyone your bank account number and permission to automatically withdraw money from your bank account on a regular basis, it’s good to know how automatic debits work, what to be careful about, and how to stop the automatic payments if you cancel the service or just change your mind about how you want to pay.

How do automatic debit payments work?

You have choices about how to pay your bills. Some of your choices are to pay by check or to pay electronically. Most banks provide online or mobile bill payment services that let you schedule and send payments through your bank, either on a one-time or recurring basis. Another electronic payment option is to give permission directly to a company, such as a merchant or lender, to take payments from your bank account on a recurring basis. We’ll call these automatic debit payments. Let’s take a closer look at this last form of electronic payments.

To set up automatic debits directly with a company, such as a student loan or mortgage servicer or even a gym, you give the company your checking account or debit card information and give them permission (“authorization”), in advance, to:

  • electronically withdraw money from your account;
  • on a recurring basis, usually at regular intervals like every month.

You can set up automatic debit payments to pay the same amount each time, or you can allow payments that vary in amount within a specified range – for example, for your utility bill that changes each month. The company should let you know at least 10 days before a scheduled payment if the payment will be different from the authorized amount or range, or the amount of the most recent payment.

How are automatic debit payments different from bill-pay?

Automatic debit payments work differently than the recurring bill-pay feature offered by your bank. For recurring bill-pay, you give permission to your bank to send payments to the company. With automatic debits, you give your permission to the company to take the payments from your bank account.

Be cautious about giving anyone your bank account information and authorization

Automatic payments can help you stay on track with bills and other regular payments. However, be careful about giving a company permission to take payments directly from your account.

Before you give a company permission to make automatic withdrawals:

  • Verify the company. Before agreeing to let a company automatically take money out of your bank account, make sure the company is legitimate and credible. Consider using a different payment method until you’re sure you’re happy with the company or service. Never give your bank account or debit card information to a company that you’re at all unsure about.
  • Know your rights. A company cannot require you to repay a loan by automatic debit from your checking account as a condition for giving you a loan (unless the loan is an overdraft line of credit). Be wary of a company that pressures you to repay by automatic debit.
  • Be careful about overdraft and insufficient funds (NSF) fees. Automatic payments can help you avoid late fees on your bills. But if you forget to track your account balance and it’s too low when an automatic (or other) payment is due, you might have to pay overdraft or NSF fees. Both the bank and the company might charge you a fee if there is not enough in your account. These fees can add up quickly. Pay close attention to your bank account balance and upcoming automatic payments to make sure there will be enough money in your account when the payment is scheduled.
  • Review the terms of your agreement for the automatic payment. The company must give you a copy of the terms of your payment authorization. The payment authorization is your agreement to allow the company to debit your bank account for payment. The terms of your authorization must be laid out in a clear and understandable way. It’s important to review the copy of your authorization and keep a copy for your records. Make sure you understand how much and how often money will be taken out of your account. Monitor your account to make sure the amount and timing of the transfers are what you agreed to.

You have protections – including the right to stop automatic payments

Federal law provides certain protections for recurring automatic payments. You have the right to stop a company from taking automatic payments from your bank account, even if you previously allowed the payments. For example, you may decide to cancel your membership or service with the company, or you might decide to pay a different way.

If you decide you want to stop automatic debit payments from your account:

  1. Call and write the company. Tell the company that you are taking away your permission for the company to take automatic payments out of your bank account. This is called “revoking authorization.” Click here for a sample letter.
  2. Call and write your bank or credit union. Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. Click here for a sample letter. Some banks and credit unions may offer you an online form.
  3. Even if you have not revoked your authorization with the company, you can stop an automatic payment from being charged to your account by giving your bank a “stop payment order.” This instructs your bank to stop allowing the company to take payments from your account. Click here for a sample “stop payment order.”
    1. To stop the next scheduled payment, give your bank the stop payment order at least three business days before the payment is scheduled. You can give the order in person, over the phone or in writing.
    2. To stop future payments, you might have to send your bank the stop payment order in writing. If your bank asks for a written order, make sure to provide it within 14 days of your oral notification.
    3. Be prepared to include a copy of your revocation to the company (see step 1) with your written stop-payment order.
  • Monitor your accounts. Tell your bank right away if you see a payment that you did not allow (authorize), or a payment that was made after you revoked authorization. Federal law gives you the right to dispute and get your money back for any unauthorized transfers from your account as long as you tell your bank in time. Click here for a sample letter.

Be aware that banks commonly charge a fee for a stop payment order. Further, cancelling your automatic payment does not cancel your contract with the company. If you want to cancel a contract for a service, like cable or a gym, be sure to cancel your contract with the company as well as telling it to stop automatic payments. If you cancel an automatic payment on a loan, you still have to make payments on that loan.

We want to know about your experiences, good or bad, with using and with cancelling automatic payments – leave a comment on the blog below.

If you’re having a problem with a bank account or service, submit a complaint to the CFPB at consumerfinance.gov/complaint or call (855) 411-2372.

Have questions about consumer financial products and services? Find answers at consumerfinance.gov/askcfpb .

Know Before You Owe: Making the mortgage process easier for you

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Know Before You Owe: Making the mortgage process easier for you

Since opening our doors over four years ago we’ve heard from homebuyers that the process of buying a home is overwhelming and confusing. We’ve heard that closing is often rushed, not allowing enough time to review before signing on the dotted line. For consumers who apply for most mortgages on or after October 3, 2015, the stress of shopping for a mortgage will be reduced, as our new mortgage disclosure rule takes effect. The new rule and disclosures ease the process of taking out a mortgage, helping you save money, and ensuring you know before you owe.

Here’s what will change:

  • Four overlapping disclosure forms will be streamlined into two forms, the Loan Estimate and the Closing Disclosure.
  • You’ll have more time to review your closing documents. Currently, lenders must give you your HUD-1 Settlement Statement disclosure 24 hours in advance, if you request it; after October 3, you’ll receive your Closing Disclosure three business days before you sign the forms and accept the terms of your mortgage, no request needed.

Here’s how these changes will improve the mortgage process:

  • The new forms will make it easier to understand complicated mortgage terms.
  • The Loan Estimate makes it easier to shop around and compare loan offers from multiple lenders. Consider applying for loans from at least three lenders before choosing a mortgage so you can find the best deal for you.
  • The three days required between getting your Closing Disclosure and signing on the dotted line allow you to make sure there aren’t major changes from the deal you were offered on your Loan Estimate. It also gives you time to ask your lender all the questions you might have about the terms of your mortgage and consult with a lawyer or housing counselor.

More resources to help make mortgages understandable

We’ve released “Your Home Loan Toolkit.” The toolkit has worksheets and conversation starters to help you at key points in the mortgage process. You’ll receive the toolkit when you apply for a home purchase mortgage. However, you can also download it now.

In addition, while these forms make the process of taking out a mortgage easier, we have also created digital resources to help you use and understand your Loan Estimate and Closing Disclosure. These tools give you definitions of terms like “balloon payments” and “points.” They also show you where to look, page-by-page, to check that terms and numbers on both documents match up.

For a better understanding of what it takes to get a mortgage, we’ve updated our “Owning a Home” site with an overview of the mortgage process. This step-by-step guide to getting a mortgage takes you from creating a budget to filing away your important closing documents after you accept the terms and sign on the dotted line. “Owning a Home” also has tools and resources to help you learn more about your loan options, make decisions, and prepare for closing.

Housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) are another great resource. They can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. To find a housing counselor near you, use our search tool.

The new forms work

Over the past four years, we’ve done extensive work, including testing the new forms with consumers around the country and getting feedback from industry. In our testing, we determined that these new forms helped people better understand the terms and types of mortgages in the market.

From our very first day as an agency, we’ve been working hard to improve your experience when it comes to purchasing and paying for your home. We’ve been working to make the market safer by educating mortgage consumers, challenging practices that are illegal under federal consumer protection law, and by enacting new mortgage lending rules. In addition, we’ve worked to get responses to your mortgage complaints, and we’re exploring ways to further improve the closing experience.

You have the right to compare offers and understand the terms before you sign on the dotted line. And the information you use should be clear and easy to understand. After four years of work, these new forms and tools will help you shop for the best deal and avoid costly surprises when you sign on the dotted line.

The mortgage process is easier when you know before you owe.

When you make student loan payments on an income-driven plan, you might be in for a payment shock

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When you make student loan payments on an income-driven plan, you might be in for a (payment) shock.

Earlier this year, we asked you to share your #StudentDebtStress story. More than 30,000 of you answered, telling us about payment processing problems, servicing transfer snags, customer service confusion, and obstacles for borrowers in alternative repayment plans. You can check out the comments that were posted.

For borrowers who are experiencing financial distress and looking for a way to pay back their federal student loans, income-driven repayment plans can be the key to helping you make ends meet. But for some borrowers seeking to tie their federal loan payment to their income, we know the road can be rocky. You’ve told us about problems related to enrolling in income-driven repayment plans that ended up costing you hundreds of dollars in unexpected payments. These problems include delays in processing your paperwork and incorrect information from customer service personnel.

We’ve also heard about detours and dead ends that prevent you from keeping your payments affordable under these plans, even when you’ve filled out the required paperwork. One borrower told us:

I submitted the required documentation for the 2015 [income-based] repayment plan 8 weeks before the expiration of my previous IBR application, and within the time period [my servicer] indicated. Due to [my servicer’s]delays, my IBR application was not processed timely. While waiting for them to process my application, [my] monthly payment jumped from approximately $200 a month to $1400 a month, causing me to go into overdraft on my checking account. [My student loan servicer] failed to process my application timely even though my application was complete and no documentation was missing and failed to communicate the huge increase in payment.

Filling in the gaps

As the Bureau and other federal agencies consider ways to improve the student loan repayment process, stories like these focus our attention and raise new questions about how common these problems may be. That’s why we’re sending a letter to student loan companies asking for more information about how they make sure student loan borrowers have the information they need stay on track.

The most common income-driven repayment plans are Income-Based Repayment (IBR) and Pay As You Earn (PAYE). Each year, borrowers in income-driven repayment plans are required to submit information, generally an income tax return, proving that they still qualify for an affordable monthly payment (known as “recertification” in student loan-speak).

We’d like to learn more about how well the process of recertifying works for most people. Because student lenders and student loan servicers are not required to release this information publicly, we don’t know how many borrowers fail to recertify on time. When borrowers don’t recertify on time, their payments will snap back to the amount they would have owed under a standard 10-year repayment plan—a jump of hundreds of dollars per month, in many cases. This can be a shock to those already struggling to make these payments.

Earlier this year, the Department of Education released the first public information about recertification rates, noting that more than half of all borrowers in its sample (57 percent) missed their deadline to recertify and had their payments snap back.

What you need to know

We’ve put together some helpful advice and information for borrowers enrolled in income-driven repayment plans.

Why it’s important for your recertification to be processed on time each year

If you’re having trouble affording your federal student loan payments, getting enrolled in an income-driven repayment plan may be an important first step to staying on the road to repayment. These plans help you get a payment you can afford. If your recertification is not processed on time, it can:

  • Cause the amount you owe each month to snap back to a payment you may not be able to afford. When your recertification isn’t processed on time, even if you tell your servicer you still want to keep your payments affordable, you will probably have a gap where you are required to pay an amount that doesn’t reflect your financial circumstances. You may not realize that things aren’t going according to plan until your bank has processed an automatic payment at the higher amount or you’ve been hit with surprise overdraft fees.
  • Cost you thousands more over the life of your loan. When you enroll in an income-driven repayment plan, you may pay less each month than the interest that accrues on your loan. This means that your loan balance can grow over time. But these plans do offer an important protection for people who recertify on time each year and continue to qualify for a lower payment— any unpaid interest does not get added to your outstanding principal balance (so you don’t have to pay additional interest on the interest) unless you choose to leave the plan. But, if you miss your deadline to recertify, you lose this benefit. For some borrowers, this can cost thousands of dollars over the life of a loan.

  • Delay the date you’re eligible for loan forgiveness (and may cause you to make unnecessary extra monthly payments). The two largest income driven plans, Income-Based Repayment (IBR) and Pay As You Earn (PAYE), feature loan forgiveness after 25 or 20 years of payments, respectively. This means that if you have high debt or low income over a long period of time, you may still have an end in sight, even if you are only making low payments. If your recertification isn’t processed on time and you need to use forbearance while your recertification is being processed, you can’t count those months toward loan forgiveness.
  • Reduce the amount of interest that the government will pay on your behalf. For borrowers with subsidized federal loans, income-driven repayment plans feature another important benefit. For three consecutive years (36 months) from the time you first sign-up, the government will waive any interest charges your monthly payment does not cover, as long as you demonstrate partial financial hardship. Because the clock on this benefit starts running immediately and won’t pause even if you don’t recertify, you are giving up a benefit every month after your payments snap back.

Next Steps

Over the next few weeks, we’re going to keep working with leaders at the Department of Education and the Department of the Treasury to figure out how to address problems like these for student loan borrowers. Check back here for more information about what we’ve learned through our public inquiry and what comes next.

If you have questions about repaying your student loans, including questions about income-driven repayment plans, check out Repay Student Debt to find out how you can tackle your student loan debt.

If you have a problem with your student loan, you can submit a complaint online or call us at (855) 411-2372.

Seth Frotman is a Deputy Assistant Director of the Consumer Financial Protection Bureau and the Acting CFPB Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit consumerfinance.gov/students.

Four years working for you

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CFPB - Four years working for you
On July 21, the Consumer Financial Protection Bureau (CFPB) will turn four years old. While our doors have only been open for a short time, our work is helping to create a financial marketplace that works for you. We’re listening to your experiences through the complaints you submit, creating new consumer protections for financial products and services, holding bad actors accountable for breaking the rules, and developing useful tools and resources to empower you to make informed financial decisions.

The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act as a direct result of the financial crisis in 2008. We were created to stand up for consumers and make sure everyone is treated fairly. To us, our work is about hearing the struggles you face in the financial marketplace and empowering you to make the best financial decisions. It’s also about rooting out bad actors or bad practices that cause harm or stand between you and your financial goals.

We hear stories like that of Ari, a servicemember, and his dad Harry who were dealing with predatory auto loans, and Venida who found an error on her credit report. They are not the only ones dealing with these problems. Their stories exemplify how you can make a difference in your financial situation.

We are here to protect consumers

Your complaints and stories play an important part in our work. As of this month, we’ve handled more than 650,000 of your complaints. When you submit your complaints and tell us your stories, it helps us spot problems and risks, and work to ensure a fair financial marketplace.

The mortgage servicing rules we enacted have brought more transparency to the home-owning process, keeping your mortgage servicers from giving you runarounds or losing your documents. For those who send money out of the country, we have created rules that make sure you know how much money will actually reach your intended recipient.

We’ve also held bad actors accountable in the marketplace, securing $10.8 billion in relief to consumers who were harmed by illegal practices. Over our four years, we have taken action against credit card companies, payday lenders, banks, mortgage companies, debt collectors, and many more.

We are your resource

Just as Venida and Harry used our resources to get help in the financial marketplace, we welcome you to do the same. We have created a number of tools and resources for you to use to help avoid financial problems, plan for the future, and reach your financial goals.

Whether you’re getting ready to make big financial decisions like Paying for College or Owning a Home, or just looking for unbiased answers to financial questions about your mortgage, your credit score, or how to deal with debt collectors, we’ve got tools to help you get answers and make the best decisions for you and your family.

You have the right to fair and transparent financial products and services and we’re committed to continue working for you.

In the coming days, we’ll share more about the work we’ve done leading up to today, so stay tuned.

Updated July 21, 2015: Graphic and text updated to reflect the amount of relief to consumers who were harmed by illegal practices.

CFPB - Four years working for you infographic