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Sound off on student loan servicing

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http://files.consumerfinance.gov/f/201505_cfpb-student-debt-stress-header
A few weeks ago, we announced that we’re gathering information about student loan servicers — the companies responsible for collecting and processing student loan payments. Although student loans are usually thought of as a younger American issue, in reality there are an increasing number of older Americans paying back student loan debt. Many older consumers struggle with student loan debt, sometimes forcing them to delay retirement or threatening their financial security when in retirement.

Older consumers may hold student loan debt because they are still paying off loans that were:

  • accrued when they were much younger
  • acquired during the course of a mid- or late-career switch, or
  • taken out for the education of their children or grandchildren.

According to a recent Government Accountability Office report, here are some concerning trends about older consumers and student loan debt:

  • Between 2005 and 2013, outstanding federal student loan debt owed by older borrowers grew from less than $3 billion to more than $18 billion, more than a six-fold increase.
  • Delinquency rates for older borrowers doubled between 2005 and 2012, rising from 6 to 12.5 percent.
  • Older borrowers defaulted on federal loans at much higher rates than other borrowers. More than a quarter of federal loans owed by borrowers ages 65-74 are in default. For borrowers 75 years or older, more than half of outstanding federal loans are in default.
  • The number of older consumers whose social security benefits were offset for the collection of federal student loan debt increased nearly 400 percent from 2002 through 2013. For consumers 65 or older the increase was roughly 500 percent.

Many older consumers who have submitted complaints to the Bureau about student loans report being billed for loans they never borrowed, receiving harassing and abusive debt collection calls, being wrongly charged fees because of the servicer’s accounting errors, and having their credit rating impacted by incorrect reporting of student loan information.

We now want to hear from you. If you’ve had problems with student loan debt or run into repayment roadblocks, share your story. Here are just a few things you can tell us about:

  • Disclosure, accessibility, and availability of options to release a co-signer from their legal obligation to repay a co-signed student loan
  • Disclosure, accessibility, and availability of options to discharge or reduce student loan debt in the event of the death or disability of a borrower or co-signer
  • Processing, allocation, and application of loan payments
  • The imposition and disclosure of late fees
  • The complaint resolution process (including how allegations of fraud are resolved)
  • Furnishing of credit information to credit reporting agencies

To share your story for the public record, go to regulations.gov or click this link to send us an email. Please don’t include sensitive information like account numbers and social security numbers. Submit your input and ideas by July 13, 2015. Having trouble with a link in this blog post? You can also submit an official comment online.

If you experience any problem with a student loan, you can submit a complaint online or call us at (855) 411-2372. We’ll forward your complaint to the company and work to get a response from them.

Consumer advisory: Don’t be misled by reverse mortgage advertising

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Reverse Mortgage Ads photo

You might see enticing images of youthful retirees on the golf course or enjoying other leisure activities in a reverse mortgage advertisement. A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the accrued equity in their homes. The loan must be paid back when the borrower dies, moves, or no longer lives in the home.

Ads for reverse mortgages are found on television, radio, in print, and on the internet, and many ads feature celebrity spokespeople discussing the benefits of reverse mortgages without mentioning risks. We looked closely at many ads and found incomplete and inaccurate statements used to describe the loans. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.

In conducting our study, we met with older homeowners in Washington DC, Chicago, and Los Angeles to learn about their thoughts and impressions of reverse mortgage ads. After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid. Instead, some thought they could access their equity interest-free, or that the federal government provided the money as a benefit to seniors. Homeowners told us that the most attractive messages in the ads were “you can live in your home as long as you want,” and that you “still own your home.” Many ads, however, didn’t mention that seniors could lose their homes if they don’t satisfy the loan requirements, such as paying property taxes or homeowners insurance.

Seniors said the ads made reverse mortgages look like a good way to travel and enjoy retirement while they were still young and active. Yet Americans are living longer, more active lives than ever before. Reverse mortgage borrowers can outlive their loan funds by borrowing without careful planning.

Reverse mortgage ads don’t always tell the whole story, so consider these facts when you see advertisements:

1. A reverse mortgage is a home loan, not a government benefit

Reverse mortgages have fees and compounding interest that must be repaid, just like other home loans. With most reverse mortgages, federal insurance guarantees that borrowers will receive their loan funds if their lender has financial difficulty or if their loan balance exceeds the value of their home. However, borrowers pay for this insurance and it’s not a government benefit.

2. You can lose your home with a reverse mortgage

When a reverse mortgage ad says you’ll retain ownership of your home, or that you can live there as long as you want to, don’t take these messages at face value. These statements are true only if you continue to meet all requirements of the reverse mortgage. If you fall behind on your property taxes or homeowners insurance, are absent from your home for longer than six months, or fail to satisfy other requirements, you can trigger a loan default. If you don’t take care of the default in time, the lender can foreclose on your home. Sometimes these requirements are listed in fine print, but not always. If you have a question about reverse mortgage requirements, contact a HUD-approved housing counselor near you.

3. Without a good plan, you could outlive your loan money

After seeing a reverse mortgage ad, you might think that a reverse mortgage guarantees your financial security no matter how long you live. Americans are living longer today than they were just a generation ago. Make sure you have a financial plan in place that accounts for a long life. That way if you need to tap your home equity, you won’t do it too early and risk running out of retirement resources later in life.

If you have a problem with your reverse mortgage

Check out Ask CFPB to learn more about reverse mortgages. You can also download a printer-friendly version of this information to share with friends or clients.

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint to us 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 work and questions to ask, read our guide to reverse mortgages for older consumers and their families. Do you or a loved one have a reverse mortgage loan? Here are three steps you should take.

Planning for financial decisions as you age

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Though it’s hard to think about, as we age, sometimes we lose the ability to manage our own money and property. We often think about our financial capability, like our ability to drive, as an important measure of our independence. But planning ahead may actually help you stay in control.

Here at the CFPB, we worked with our federal partners at the Securities and Exchange Commission to create a Consumer Advisory and Investor Bulletin on planning for the future, when you may not be able to manage your money and property. This is often referred to as diminished capacity. The advisory has advice on planning for your financial future, getting your documents in order, and watching out for financial exploitation.

If age-related decline seems far in the distant future, this advisory is still a useful tool for you too, as it can help you help your parents or other loved ones. It stresses the importance of talking with them about advance planning before it’s too late. It also has good tips to help you to manage their money when the time comes. Working together across generations can help older Americans have a safe and secure financial future. Check out more of our work to protect older Americans.

Consumer advisory: Your benefits are protected from garnishment

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Your benefits are protected from garnishment

Older Americans, like many of their younger counterparts, increasingly have debts in collection. Over one-third of the complaints that older consumers submit to us are related to debt collection. In some of these complaints, consumers told us that debt collectors threatened to garnish their benefits from Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), and VA benefits, even though these funds usually can’t be garnished.

Garnishment can happen after a collector wins a lawsuit against you for a debt. A collector can then ask your bank or credit union to turn over money in your account to pay the debt.

According to the complaints we reviewed, threats to garnish these benefits cause older consumers and veterans significant distress, especially when they depend on this income to pay essential living costs. We’ve created a sample letter to help consumers tell debt collectors that their income is protected from garnishment.

We also explain how Social Security and VA benefits are protected in Ask CFPB. Here’s a preview:

Automatic protections for Social Security and VA benefits

If you receive Social Security or VA benefits by direct deposit, then your bank must protect 2 months’ worth of benefits in your account. This means you can continue using that money.

For example, if you receive $1,000 in Social Security each month, your bank will see that $2,000 in Social Security was direct deposited in the last two months. The bank must allow you to continue using up to $2,000 in the account. However, if you have $3,000 in your account, the bank can freeze $1,000 of the $3,000. It must give you access to the remaining $2,000 so you can continue to pay bills and withdraw cash as usual.

What happens if any of your money is frozen

If any of your money is frozen, your bank must send you a notice of garnishment. Then, a judge decides whether the amount that was frozen should be turned over to the debt collector based on factors such as the source of your income and state law. Seek help from a lawyer to alert the judge that your income is protected. If you can’t afford a lawyer, you may be eligible for free legal help.

Automatic protections for benefits on a prepaid card

Many people receive Social Security or VA benefits on a prepaid card. If your benefits are loaded onto a Direct Express prepaid card or into another prepaid account, they are still automatically protected from garnishment, just like money in a bank account.

Exceptions

Social Security and SSDI can be garnished to pay government debts such as back taxes or federal student loans, and debts for child or spousal support. Some other means-tested benefits, such as SSI, are protected from garnishment – even to pay a government debt or child or spousal support.

Learn more

To learn more, visit Ask CFPB. You can also download a printer-friendly version of this information to share with friends or clients.

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

Consumer advisory: 3 pension advance traps to avoid

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Many retirees depend on a pension to cover day-to-day as well as occasional unexpected expenses, such as health emergencies or home repairs. We’ve heard that some retirees with pensions who are facing financial challenges have responded to ads for cash advances on their pensions. Although pension advances may seem like a “quick fix” to your financial problems, they can eat into your retirement income when you start paying back the advance plus interest and fees.

A pension advance is a cash advance in exchange for a portion, or all, of your future pension payments. Pension advance companies typically charge high interest rates and fees and often target government retirees with pensions. Former servicemembers should also be on guard. Military retirees and veterans who receive monetary benefits from the Department of Veterans Affairs (VA) have been offered pension advances even though it’s illegal for lenders to take a military pension or veterans’ benefits. Many of those companies use patriotic-sounding names or logos and even claim they are endorsed by the VA as a way of enticing potential customers.

If you or a loved one is considering a pension advance, consider your alternatives. A financial coach or credit counselor can help you weigh your options and plan for new or unexpected financial demands. The National Foundation for Credit Counseling (NFCC) provides a list of member agencies around the country. You can also search for local credit counseling agencies on the Association of Independent Consumer Credit Counseling Agencies (AICCA)’s website.

Here are 3 things you can do to protect your retirement pension:

  1. Avoid loans with high fees and interest. Pension advance companies may not always advertise their fees and interest rates, but you will certainly feel them in your bottom line. Before you sign anything, learn what you are getting and how much you are giving up.
  2. Don’t sign over control of your benefits. Companies sometimes arrange for monthly payments to be automatically deposited in a newly created bank account so the company can withdraw payments, fees and interest charges from the account. This leaves you with little control.
  3. Don’t buy life insurance that you don’t want or need. Pension advance companies sometimes require consumers to sign up for life insurance with the company as the consumer’s beneficiary. If you sign up for life insurance with the pension advance company as your beneficiary, you could end up footing the bill, whether you know it or not.

You can also get a printer-friendly version of this information to share with friends or clients who are considering pension advances.

If you know someone who’s received a pension advance offer, we want to hear about their experiences, good and bad. Please ask them to share their story at consumerfinance.gov/your-story/.

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.

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 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.

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.