Scams

This blog post is part of a series for National Consumer Protection Week

When you buy something it’s hard to know if you’re getting the best deal – and that includes when military families, who are often targets for marketers, are making big financial decisions. Even though some companies might try to take advantage of people, there are things servicemembers can do to make sure they’re getting their money’s worth.

Have you ever bought something online and clicked the box that says “accept” without having any idea of what you’re actually accepting? Or maybe you looked at the fine print but it didn’t make any sense.

Or, you sit in an office with a salesperson who has a stack of paperwork for a product you’re financing. They give you a two-minute explanation of what it all means and ask if you have any questions. You say “no” because it’s embarrassing to say that you didn’t understand what they just said. And when they say “sign here” you do it. Congratulations! You’ve just bought an iPad for… $3,600?!!

So, what can servicemembers do when they’re confused at signing time?

• Get help.
  If you can’t make heads or tails of a contract, take it to someone who can: your installation Personal Financial Manager or JAG. If the seller doesn’t want to give you a copy of the contract before you sign, that’s a red flag; so is pressure to sign it “right now, while the offer is still available!”
• Don’t be afraid to step away and say you want to take time to think the purchase over.
  You are the buyer and you should be in the driver’s seat in this transaction. You are under no obligation to please the seller; don’t cave even if they act like they are disappointed or disgusted that you won’t commit.
• Think about the total cost of what you’re buying, not just the monthly payment.
  I can’t tell you how many times I’ve seen servicemembers sign up for what seems to be an affordable monthly payment, and then realize they’re paying an outrageous total price for the item. The $3,600 iPad I mentioned above is a true story. So is the story of the servicemember who signed a contract to borrow $1,600 – at a cost of $15,000 in finance charges!
• If someone says they only accept payment by allotment, consider walking away.
  Under federal law, a business generally can’t require consumers to make payments by automatic electronic payment, but there’s an exception to this that leaves out military allotments. When you pay by allotment directly from DFAS (Defense Finance & Accounting Service), it may be convenient for your creditor, but it means you miss out on protections that you might have had if the money was deposited in your bank account and then paid out from there (like not being required to pay by automatic electronic payments).
• Never give someone access to or control over your financial accounts unless they are someone you trust completely and there is a compelling reason to do so (like a power of attorney when you are deployed).
  Many scams on servicemembers, veterans, and their families have started with giving a persuasive acquaintance or “advisor” access to their accounts.

The term “buyer beware” goes all the way back to the Roman era: caveat emptor. Take a hint from Caesar and his legions and protect yourself from getting into a bad deal. But if you do feel that you’ve been scammed or treated unfairly, come see us at consumerfinance.gov/Servicemembers.

We are here to help!

Sometimes people in the military have interesting beliefs about things that impact their finances. Sometimes they’re correct; sometimes they’re partially true; and sometimes they’re just flat wrong. Check out the statements below – hit or myth?

“Shopping around for a loan will kill my credit score.”
This one is a myth – sometimes. When you apply for or inquire about getting a loan, a lender will request a copy of your credit score from the major credit bureaus (that’s called a hard inquiry.) And usually, each hard inquiry will cause a small reduction in your credit score because it can be a sign that you have taken on a new debt that hasn’t shown up yet on your credit report – which would make you more of a credit risk. But, the major credit bureaus and their score providers have made an exception if you’re shopping for an auto, home, or student loan. In that case, they treat multiple hard inquiries within a short period (it varies from 14 to 45 days) as a single inquiry, since they understand you’re just looking for the best deal, not planning to take out ten new loans. So, shopping around for a few weeks for a car, home, or student loan shouldn’t have much effect on your credit score.

“If I buy something, I am guaranteed a 36-hour “cooling-off period” where I can change my mind and cancel the deal.”
This one is mostly a myth but there are a few transactions that may have a cooling-off period. The Federal Trade Commission’s Cooling-Off Rule generally gives you three days to cancel purchases of $25 or more if the sale was made at your home, workplace, or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel rooms, convention centers, fairgrounds, and restaurants. Federal law also provides limited cancellation rights for some types of mortgage loans and student loans, and state law in some states might have cooling-off periods relating to real estate deals, such as apartment leases.
In the vast majority of cases, though, once you’ve bought it, it’s yours right away and there’s no going back in a few days and saying “I’ve changed my mind.”

“I have to be behind on my mortgage payments before I can apply for a loan modification or short sale on my house.”
If you’re in the military, this is now a myth in many cases. The Department of the Treasury, the Federal Housing Finance Agency, and the government-sponsored enterprises Fannie Mae and Freddie Mac have all changed their guidance to say that a military permanent-change-of-station move qualifies you to apply for a loan modification or short sale even if you’re not behind on your mortgage payments. Be sure to mention your military status and PCS orders when you talk to your lender!

“If I enter active duty with student loans, the thing to do is ask for a military deferment on the loans so I don’t have to pay.”
I’d call this one a myth in most cases. Unless it’s a subsidized federal student loan, the loan will keep accruing interest even though you’ve deferred payment, and you’ll end up owing even more (maybe a lot more) by the time you leave active duty. Consider this instead: no matter what type of loan it is (federal or private) under the Servicemembers Civil Relief Act, you could ask your loan servicer to reduce your interest rate to six percent while you’re on active duty. And if it’s a federal loan, you could also sign up for Income-Based Repayment so your monthly payment’s affordable, and you could count your payments towards Public Service Loan Forgiveness and be done with the debt after 120 qualifying payments.

“I can get a free copy of my credit report from each of the three major credit-reporting agencies every year at www.AnnualCreditReport.com.”
This one’s a hit! www.AnnualCreditReport.com is the official site to get a free copy of your credit report once a year from Equifax, Experian, and TransUnion. Other websites – including FreeCreditReport.com or CreditReport.com – are not.

“If I have a bad credit report the first thing I should do is pay someone to fix it.”
Myth! If there are mistakes on your credit report, you can contact the credit bureau – or the company that provided the information – yourself and request they be fixed. But if the negative information on your report is legit, then only the passage of time will make the bad info disappear – you can’t speed up the process and neither can a credit repair company.

“If I am deployed to a combat zone, the government offers a savings account that earns ten percent interest while I am deployed.”
Hit! The Savings Deposit Program will earn ten percent APR on up to $10,000 while you are deployed to a combat zone. You can set up the account through your unit’s finance officer once you are deployed.

“The CFPB can fix all my financial problems.”
Sorry, that’s a myth! But we can help you with many of your consumer financial issues. Come see us at consumerfinance.gov/Servicemembers and learn what we do!

No, really. Just because something has a government logo on it doesn’t mean that it’s legitimate.

Just today, we announced that we’re cracking down on two mortgage loan modification operations that allegedly ripped-off struggling homeowners across the country using websites, emails, and other advertising materials with government logos, letterhead, or other marks to trick consumers into believing that their services were associated with government agencies.

For example, one of the operations claimed that, for a fee, they could help people get benefits from programs offering government-sponsored relief for homeowners, including the recent nationwide mortgage servicing settlement or the federal Independent Foreclosure Review program. In fact, you don’t have to pay anything to get the benefits of these programs, you just have to qualify.

The national mortgage settlement is a $25 billion agreement with the nation’s five largest mortgage servicers to provide relief to homeowners – including loan modification and refinancing – for homeowners covered under the agreement. The federal Independent Foreclosure Review program provides homeowners the opportunity to request an independent review of their foreclosure process under consent orders between federal regulators and 14 mortgage servicing companies.

If you think you might qualify and want more information, don’t rely on any information you receive just because it has a government logo on it – check out the official government sites about the settlement or the Independent Foreclosure Review program.

How to spot a scam

Mortgage assistance and foreclosure relief scams are designed to take your money. They often use mail or email designed with emblems, logos and names intended to mimic government agencies or programs, lawyers or law firms, or legitimate creditors. Unfortunately, scammers are also constantly re-inventing new ways to scam struggling homeowners. So it’s not always easy to tell the difference between the scams and legitimate services. But there are a number of ways to help spot the fakes. Keep an eye out for red flags if a mortgage assistance or foreclosure relief scheme:

• Tells you to stop making mortgage loan payments. Not making your mortgage loan payments could hurt your credit score and limit your options.
• Tells you to start making payments to someone other than your servicer or lender.
• Ask you to pay high fees upfront to receive services.
• Promises to get you a loan modification.
• Asks you to sign over title to your property.
• Asks you to sign papers you do not understand.
• Pressure you to sign papers immediately.

Get real help, fast

Don’t be fooled. You can get real help by calling us at (855) 411-CFPB (2372) from 8 a.m. – 8 p.m. ET, Monday-Friday to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

A mortgage assistance or foreclosure relief scam could cost you your house. If you think you’ve been scammed, report suspected fraud immediately. The longer you wait, the more difficult it could be to prevent serious problems. There are lots of ways to register a complaint or report suspected scams:

• Contact your State Attorney General.
• Report a scam to the federal Financial Fraud Enforcement Task Force.
• File a complaint with the Federal Trade Commission.
• Tell us about your experience.

Share this information with others
It can be hard for people to talk about finances, especially if they’re in trouble. Even if you’re not facing foreclosure yourself, please share a link to this advice with your networks using the hashtag #ForeclosureHelpisFree. You never know who you might be able to help.

After the shock of a disaster, it’s time to rebuild. Starting over requires a lot of complex choices, uncertainty and expense. Being prepared and knowing how to protect yourself can help you avoid scams, save money and get back on your feet faster.

Relief organizations like the Red Cross can help you with your immediate needs in a disaster. Local organizations will establish shelters, provide vouchers for meals, clothing and a limited amount of personal goods. If you are in a presidentially declared disaster area, the Federal Emergency Management Agency (FEMA) will help you find disaster assistance.

Your home

Contact your insurance company as soon as possible to start the claims process. Also be sure to ask for a copy of your policy if you don’t have one available. This will help you verify your coverage. Take pictures of the damage.

Your next call should be to your mortgage servicer, if you own your home. Damage to your home does not stop your responsibility to pay your mortgage. Tell your servicer about your situation and take careful notes during the conversation. There may be a number of options available that could help you put off or reduce your mortgage payments. Both Fannie Mae and Freddie Mac have told mortgage servicers that they can help homeowners affected by Hurricane Sandy. You can find out if your mortgage is owned by Fannie or Freddie on their websites.

If you don’t have a monthly mortgage statement or coupon book with you, search the Mortgage Electronic Registration Systems (MERS) or call them toll-free at (888) 679-6377 to find the company that services your mortgage. You can also call the CFPB at (855) 411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor.

Adjusters and contractors

Once your insurance claim is received, the insurance company may send out an adjuster to look at the property damage and help you through the claims process. In many states you can also hire public adjusters. A public adjuster represents you as the claimant, but will charge you a percentage of your settlement.

Be careful if you choose to hire a public adjuster. Be sure the adjuster is licensed to do business in your state. Avoid adjusters who come from out of state or who knock on your door looking for business. Other warning signs to watch for are:

• Red flag: Adjusters who charge big upfront fees. Don’t pay a lot before you know if the adjuster is going to help you. Many states put a limit on fees.
• Red flag: The adjuster refers you to a contractor. Dishonest adjusters will sometimes work with contractors that give them kickbacks.
• Red flag: Avoid any adjuster or advisor who asks you to make a false or inflated claim. This is fraud against the insurance company.
• Red flag: Avoid hiring a public adjuster who asks you for a suspicious amount of personal information. Some con artists may pose as adjusters to steal your personal information.

When picking a contractor:

• Get bids from several local, established contractors.
• Avoid contractors who are working door to door, come from out of state, don’t provide an address and phone number, or refuse to show identification.
• Ask if the contractor has the required licenses. Ask for the license number and use your state licensing agency’s website or hotline to make sure it’s valid.
• Check with licensing agencies to see if the contractor has a history of complaints.
• Never pay in advance.
• Never pay in cash.
• Never provide personal financial information, such as your checking account credit card or debit card numbers. You might be told this will “speed up payment” to start the repair process. Don’t believe it.
• If you have to borrow to pay for repairs, don’t let the contractor steer you toward a particular lender.
• Never sign anything before carefully reading it.

The Coalition Against Insurance Fraud has more information on avoiding adjuster and contractor scams.

When you get your settlement

When your settlement is paid, the check will probably be made out to both you and your mortgage servicer. Most mortgage agreements require this.

Your insurance settlement is to rebuild your home. So the amount may be more or less than what you owe on your loan.

Keep in mind that the market value of your home may not match the insured replacement value. That’s because, in some locations, the materials and labor that go into rebuilding your home may be less than the overall value of your property – its location, desirability and other things that go into housing prices. There are also special laws in various states addressing what happens if your home was insured for less than its replacement value. Your state Department of Insurance or Insurance Commissioner may have useful information. You may also need the advice of a lawyer if your claim is large.

Typically, your mortgage servicer will release a portion of the settlement money before work begins so you can hire a contractor. When the work is halfway finished, the servicer will typically release more money. The rest will be released once the job is finished and the home passes inspection.

Creditors, bills and budgeting

You may have lost your job because of a disaster, or had your income interrupted. If you don’t think you will be able to pay your credit cards or other loans, be sure to contact your lenders as soon as possible. Explain your situation and when you think you will be able to resume normal payments.

Most creditors will try to find a way to work with you. The important thing is to make the call before your next payments are due. Late or missing payments could damage your credit score at a time when you need access to credit most.

If your home is so damaged that you can’t live in it, you’ll also want to contact your utility companies and ask to suspend your service. This could help free up money in your budget for other expenses.

Take a look at your other bills and set priorities. Your mortgage, rent and insurance payments should stay high on your list.

Next, take a look at your income and savings and determine how much you have available. If you don’t have an emergency savings account, consider starting one as soon as you can. If you are unable to work because of the disaster, federal or state benefits may also be available to you.

Watch out for fraud

In times of crisis most Americans pull together. But some people may try to rip you off. Frauds take many shapes, but the con artists often use a handful of common tricks to manipulate our emotions. It is hardest to make rational decisions when emotions run high.

Recognizing the tricks that con artist use, and the effects they have on us, can help you spot scams easier. The best way to avoid scams is to ask questions, lots of them. Asking questions puts you back in control and puts any crooks on the spot.

Avoid over-confidence. The first thing to remember is that most con artists are professionals. Anyone can be victimized by fraud. The problem is that most of us believe it will never happen to us. The more overconfident we are, research shows, the more susceptible we are to fraud. The best way to avoid over-confidence is to always be on the lookout for fraud, especially immediately after a disaster or other times of financial stress.

Don’t give credibility to titles and uniforms that can be faked. Con artists will often pose as government employees, insurance adjusters, law enforcement officials, bank employees, or whatever it takes to get to your money. Credibility can be easily faked. Always ask for identification. And never give personal information to anyone you don’t know. Also remember that government employees will never ask you for financial information or request payment of any kind.

Another common credibility scam is fake charities. These cons use names that are similar to national organizations to get you to make a “donation.” But your money ends up in their pocket. Never make donations over the phone. Make sure you get the organization’s name and contact information and review written materials closely.

Don’t fall for “limited time only” offers. Scarcity is common in disasters. But don’t let it get the better of you. Be suspicious of contractors or others offering to move you to the front of the line. Also beware of “opportunities” that force you to make a snap decision. You should never make a decision under pressure. Take your time. Never sign anything without fully reading and understanding it first. And if necessary, ask a trusted relative, friend, or attorney for a second opinion before acting.

Americans up and down the East Coast are still coping with the devastation of Hurricane Sandy. Power outages, food shortages, and long lines at the gas pump are affecting millions of families.

In the days following a disaster of this magnitude, your first priorities are the safety of you and your family, and meeting your day-to-day needs. But as help arrives and rebuilding begins, it is important to take smart and decisive steps to start putting your life back together.

The checklist below will help guide you through some of the financial decisions you will need to make in the coming weeks.

As soon as possible

•  If your home, car or property was damaged by the storm, contact your insurance company to start the claims process.
• Ask for a copy of your insurance policy if you don’t have one available. It will help you verify your coverage.
• Damage to your home does not stop your responsibility to pay your mortgage. However, many mortgage servicers have been told they can help homeowners affected by the storm. So you should contact your mortgage servicer and tell them about your situation.
• If you don’t have a monthly mortgage statement or coupon book with you, search the Mortgage Electronic Registration Systems (MERS) or call them toll-free at (888) 679-6377 to find the company that services your mortgage.
• Take a look at your income and savings and determine how much money you have available to pay bills and creditors.
• If your income is interrupted and you don’t think you will be able to pay your credit cards or other loans, be sure to contact your lenders as soon as possible. Explain your situation and when you think you will be able to resume normal payments. The important thing is to make the calls before your next payments are due.
• If you are in a presidentially declared disaster area, you may qualify for disaster assistance. Check with the Federal Emergency Management Agency (FEMA) for more information.
• If your home is damaged to the point that you can’t live in it, contact your utility companies and ask to suspend your service. This could help free up money in your budget for other expenses
• Take a look at your bills and set priorities. Your mortgage, rent and insurance payments should stay high on your list.

As you rebuild

• Be careful if you choose to hire a public adjuster to help with your insurance claim. Be sure the adjuster is licensed to do business in your state. Also watch out for these red flags:
  • Big upfront fees. Don’t pay a lot before you know if the adjuster is going to help you. Many states put a limit on fees.
  • References to contractors who can help. Dishonest adjusters will sometimes work with contractors that give them kickbacks.
  • False or inflated claims. This is fraud against the insurance company.
  • Asks for a suspicious amount of personal information. Some con artists may pose as adjusters to steal your personal information.
• Get bids from several local, established contractors. And avoid contractors who:
  • Are working door to door
  • Come from out of state
  • Don’t provide an address and phone number, or refuse to show identification
• Ask if the contractor has the required licenses, and get license numbers.
• Check with your state licensing agency’s website or hotline to make sure the licenses are valid.
• Ask the licensing agencies if the contractor has a history of complaints.

Contractor don’ts

• Don’t pay in advance.
• Don’t pay in cash.
• Don’t sign anything before carefully reading it.
• Don’t provide personal financial information, such as your checking account, credit card or debit card numbers.
• If you have to borrow to pay for repairs, don’t let the contractor steer you toward a particular lender.

For more details, including tips to avoid other forms of fraud, learn how to protect and rebuild after a disaster.