It’s happened to so many of us. We get scammed, and it sucks. Today, I’m throwing at ya a guest post from Josh over at Faith Family Finance who gives us the skinny on how we could be scammed, and what to do about it.
When it comes to protecting yourself from being scammed, you don’t just have to worry about clicking on a bad link in that spam email you got that promised to make your debt disappear instantly. It’s also important that you
ensure that the financial services companies that you deal with aren’t taking advantage of you. While most
While most financial companies can be trusted, some have common practices that exploit, defraud, or harm their customers. That’s why you need to know what to look for in order to make sure you don’t become another victim.
Here are some common ways financial services companies might scam you.
1. Opening Accounts Without Your Permission
Many financial companies pay their employees commissions or bonuses if they meet certain targets for opening new accounts. For that reason, there have been reports that customers have had accounts opened without their
knowledge at banks.
The most widely reported of these situations happened at Wells Fargo and resulted in a $110 million settlement for those who claimed accounts had been opened without their permission. Many customers did not notice for a while that they had accounts opened and paid fees for the accounts.
This fraud is not limited to just bank accounts, but there are reports of banks fraudulently opening credit cards and loans without a customer’s permission.
In fact, the Consumer Financial Protection Bureau (CFPB) received around 638 complaints in around a year and a half from people about getting credit cards in the mail for which they did not ask. Of these reports, 28 were from Wells Fargo, 59 were from J.P. Morgan Chase, 83 were from Citibank, and 31 were from Bank of America.
Even if these financial service companies do not open up accounts without your knowledge, they often use high-pressure sales tactics in order to convince you to open a new account. Sometimes, they tell you that you can cancel the account or the service before a certain deadline and not be charged. But most people forget.
In order to check if an account was open in your name, you should request a copy of your credit report to review your accounts. If you find an account that you did not agree to open, it’s important to take action quickly. Start by
placing a 90-day fraud alert on your credit report or credit file. You can do this by contacting the fraud departments of one of the three major credit bureaus. This step will establish new verification procedures whenever an account is being opened in your name.
2. Misapplying Student Loan Payments
The Consumer Financial Protection Bureau has accused student loan servicers of misapplying extra payments and not adequately providing information about income-driven repayment plans.
In one example, the CFPB found that Navient, one of the largest loan servicers, was using extra payments incorrectly – which ended up resulting in late fees and interest charges for borrowers.
The company also often recommended forbearance to borrowers when income-driven repayment was a better option and didn’t notify borrowers about important deadlines in order to maintain their income-driven repayment eligibility.
When servicers misapply your extra payments, they put the money towards your next month’s payment rather than using the money to pay down your principal. This doesn’t help you pay off your loan faster, it just means that you won’t owe money the next month. It often sticks you with a larger bill down the road if you keep letting it happen.
It can stick you with a larger bill down the road if you keep letting it happen.
If you want to avoid this, you’ll have to ensure that your payments are applied properly by either indicating online or via a letter that you send with your check exactly how you would like your additional payments to be applied. If
If you want to use it to pay off the loan with the highest interest rate, you will have to specify the loan number and say that you would like it to go towards the principal.
It’s important to do this every time that you send in an extra payment, and you must check your payment history with the servicers to ensure that the money was properly applied. It should be clear if the next payment is $0.
If you find that a payment was misapplied, then call your servicer and ask them to fix it. They should fix it for you, but if they give you a hard time, then you are left with lodging a complaint to either the CFPB or the Department of Education.
3. Debt Relief Companies
Debt relief or settlement companies can use a number of methods to scam you. One of the most common scams is that they often charge for services that they don’t provide themselves or that you could do on your own. For
For example, if you have student loans, they might offer to get you on a different repayment plan, but you can easily do that yourself. Another way they might scam you is by telling you that there is a government program that will allow them to erase your debt quickly.
Unfortunately, there is no way to get rid of debt without it greatly affecting your credit. That’s why it’s important to understand your debt and credit before working with a debt relief or debt settlement company. Get a second
opinion before agreeing to file for bankruptcy or ask for a debt settlement from your creditors.
A better option would be to never work with a debt relief company, or at the very least, never agree to pay them anything. You can find debt relief advice online for free, and there are plenty of ways to get support without having to fork over serious cash. Do some research!
And certainly, don’t work with a company that reaches out to you in an unsolicited way.
Have you ever been scammed? How did the scam work, and how did you discover that you were the victim of a scam?
Josh Wilson is the owner of a start-up personal finance blog, Family Faith Finance. Feel free to check out his blog and learn more about his journey through life.
Steve is a 38-year-old early retiree who writes about the intersection of happiness and financial independence. Steve is a regular contributor to MarketWatch, CNBC, and The Ladders. He lives full-time in his 30′ Airstream Classic and travels the country with his wife Courtney and two rescued dogs.