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Struggling private student loan borrowers are still searching for help

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In the years leading up to the financial crisis, many of the same subprime lending practices that led to troubles in the mortgage market also existed in the private student loan market. Like the homeowners who turned to their mortgage servicer to modify their loans but ran into customer service dead ends, lost paperwork and other breakdowns, many private student loan borrowers are looking for a clear path to stay current and avoid default.

Today we’re releasing a new report summarizing complaints from private student loan borrowers about difficulties faced when working with a lender or servicer to avoid default.

While federal student loans have a number of loan modification options to help borrowers avoid default, private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy.

For example, our analysis of complaints reveals that many of you tried to find out more information by calling your lender or servicer, but received conflicting or inaccurate information as you were bounced between call center staff. Many of you told us how you were provided no option at all, driving you into default, even though a reduced payment plan might be in the best interest of both you and your lender.

Request for repayment options

After listening to you and to the student loan industry, we’ve developed some advice for borrowers who want accurate information on alternative repayment plans and loan modification options, including a set of instructions that you can consider sending to your private student loan servicer (the company that sends a bill each month).

You can download the sample letter and mail it to your lender or 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.

Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. Using this letter may help you get a clear answer and avoid long hold times and transfers from one call center representative to another.

I am writing to you because I need to reduce my monthly private student loan payment due to a financial hardship. I am requesting a payment that allows me to meet my other necessary living expenses.

Please conduct a review of my account to determine whether I am eligible for an alternative repayment plan.

[This paragraph is optional] I believe I can afford to pay $____ per month toward my loan(s). If you require details on my monthly income and expenses, I have attached a worksheet which you can use to make an evaluation.

If you require additional authorization in order to reduce the amount of my monthly payment, please consider this letter a written request that you contact my lender or other authorized party to conduct a review of my account and provide a response within 15 days of receipt of this letter.

If you do not grant this request for a reduced payment plan, I will be at risk of default. If I receive a reduced payment plan, I may be able to avoid default, which is in the best interest of all parties.

If you determine that you are unwilling to provide a reduced payment plan, please provide the following information:

  • What available reduced payment options do you offer other than forbearance?
  • For what reason(s) am I ineligible for these repayment programs?
  • If I am not eligible for these repayment programs, when will I become eligible?
  • What steps do I need to take to qualify for these repayment programs?
  • Do you anticipate modifying these repayment programs in the future?
  • Where on your website can I find additional information on these alternative repayment programs?

In addition, if you are unable to provide any of the information or documentation I have requested or otherwise cannot comply with this request, please provide an explanation.

I hope we will be able to agree upon an acceptable repayment plan.

Thank you for your cooperation.

These instructions may help you get valuable information on repayment options to reduce your monthly payment or to temporarily postpone making payments. You can also download a sample financial worksheet that you can use to determine the maximum amount of money you can put toward student loans.

Some student loan companies have told us that they may ask for recent pay stubs or a bank statement to verify income and expenses. Consider including these documents with your request, which you can mail or send through your private student loan servicer’s website after you login.

We also have other sample letters you can send to your student loan servicer to give payment instructions or request that your co-signer be released and others you can send to a student loan debt collector.

If you’re experiencing a problem with a student loan or debt collection, you can submit a complaint online or call us at (855) 411-2372.

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.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about our work for students and young Americans, visit consumerfinance.gov/students.

Special notice for Corinthian students

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Today, we announced a lawsuit against for-profit college chain Corinthian Colleges, Inc. We allege that the company lured in tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Our lawsuit also alleges that Corinthian used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.

Corinthian Colleges, Inc. is one of the largest for-profit college companies in the United States, operating more than 100 school campuses under the names Everest, Heald, and WyoTech.

Today, we’re also publishing a special notice for current and former Corinthian students to help you navigate your options in this time of uncertainty, including information on loan discharge options.

If you experience difficulty with your student loan you can submit a complaint online or by calling (855) 411-2372. You can also find more information about options for repaying your student loan on our website.

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

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Yesterday, Home Depot confirmed that there has been a breach of its payment data systems. According to the company, the breach could potentially impact any customer that has used their card for payment at a Home Depot in the U.S. or Canada since April 2014.

Here’s what you can do to protect yourself if you spot unauthorized 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 will 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 are 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, immediately call the card provider’s toll-free customer service number on the back of your card. If the provider asks, follow up with a written letter. The provider should give you the address where you need to send the letter. Make sure to send it as soon as possible after you tell the provider about the unauthorized charge.

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.

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 is under investigation. You also have a right to see the results of their investigations.

3. You can submit a complaint to the CFPB if you have an issue with your bank account or credit card

If you have an issue with your bank account or credit card, you can submit a complaint online or by calling (855) 411-CFPB (2372), TTY/TDD (855) 729-CFPB (2372).We’ll forward your complaint to the company and work to get you a response.

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. Reliable sources of contact information for your card provider include the customer service number or web address listed on your bank or credit card statement or the back of your card.

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

For more information, check out the consumer advisory.

You could still end up paying interest on a zero percent interest credit card offer

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What could be better than zero percent interest for one year? Nothing, nada, free…right? Not exactly.

These kinds of promotional rates are common with credit card offers. They can be connected to:

  • Balance transfer offers
  • Pitches for low-cost ways to finance big purchases, such as “deferred interest” offers
  • So-called “convenience checks,” which invite you to write checks against your credit account and pay the amount back within the specific promotional period

Credit card companies market these promotions as a way for you to save money.

But, what some credit card companies may not have been telling you is that new purchases could cost you more than you expect. While your transferred balance or your first big purchase has the zero or low annual percentage rate (APR) for the promotional period, any additional purchases you make with the card may get dinged with regular interest charges right away. The only way to avoid those charges is to pay off your whole balance, including the promotional balance and the new purchases, by the payment due date.

The marketing materials may have focused on one-time fees, such as balance transfer fees or deferred interest fees, and not provided clear and prominent information about the cost of new purchases due to the loss of the grace period.

Fall from grace

Most credit cards offer a grace period on purchases. The grace period – if you have one – is the time when you don’t have to pay interest on a purchase or other transaction. With most credit cards, you can avoid paying interest on new purchases if you pay off your whole balance by the payment due date each month.

However if you don’t pay off your entire balance by the due date, you will lose your grace period. Without a grace period, you will have to pay interest on new purchases from the date you make them. Carrying a promotional balance can cause you to lose your grace period or make it harder for you to get it back. This is why accepting promotional balance offers can cost you more than you expect.

We’re alerting credit card companies that some of them may be at risk of breaking the law because of the way that they market promotional rates. We told them that their marketing materials should clearly, prominently, and accurately tell you that you will pay interest right away on new purchases if you accept a promotional offer but don’t pay off the entire balance, including the promotional balance, by the payment due date.

Avoid the interest

If you decide to accept a promotional offer, here are a few things you should consider.

If you usually don’t carry a balance: If you usually keep your grace period by paying off your full statement balance each month, you can avoid interest by not making new purchases with the promotional rate card until you have paid off the entire promotional balance. Consider making your new purchases with cash, debit, or another credit card that doesn’t have a balance.

If you usually carry a balance: If you already carry a balance on all your credit cards, consider paying with cash or debit. However, if you decide to use a credit card, compare the interest rates among your cards to decide which is the better deal for new purchases.

Also, make sure you make all of your payments on time, and for promotional and deferred interest balances, pay off the entire balance before the end of the promotional period.

Let us know if you have a problem

If you have a problem with a credit card, you can submit a complaint online or by calling (855) 411-2372.

For more information about grace periods or how credit cards work, check out Ask CFPB.

Updated: Save the date, Indianapolis!

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Join us for a field hearing in Indianapolis, Indiana on auto finance. The hearing will take place on Thursday, September 18 at 11 a.m. EDT. The field hearing will take place at:

Indiana University – Purdue University Indianapolis
Hine Hall Auditorium
850 W. Michigan Street
Indianapolis, Ind. 46202

The hearing will feature remarks from Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public.

This event is open to the public, but RSVP is required to attend. Send us an email to RSVP. A livestream will also be available here on our blog.

If you need an accommodation to participate, you can make a request.

See you there!

Updated on September 11, 2014 to include the venue information.

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.