Credit Sesame discusses consumer debt and credit complaints, the fifth most-complained about category in a new report released early August.
In 2021, consumers had plenty of Covid-related grievances. Price gouging, vaccine scams, masking policies, and housing issues were the source of many complaints. Consumer debt and credit complaints were rife regardless of the pandemic.
According to an annual report released in early August by the Consumer Federation of America, dishonest credit repair companies and debt collectors, along with bad mortgage advice, were some of the most common credit and debt-related consumer complaints in 2021.
Consumer debt and credit complaints ranked fifth in the top 10 complaint categories in the CFA survey. Complaints in this category were about lending issues such as mortgages, banking, debt collection, credit reporting, and other financial services.
Top 10 complaint categories ranked
- Auto sales and repair
- Landlord and tenant complaints
- Home improvement repairs and contractors
- Retail purchases
- Consumer debt and credit
- Frauds and scams
- (TIE) Healthcare and wellness/Robocalls and telemarketing
- Professional services
- Travel and recreation
Problems with credit repair and debt collectors
Dishonest credit repair and harassment by debt collectors were listed as particularly prevalent in the debt and credit complaints.
The survey cited the Georgia Attorney General’s Consumer Protection Division reporting of allegations of illegal credit repair services by a company called Right Now Credit Repair & Services. The company claimed affiliations with the state of Georgia and the Women’s Business Enterprise National Council. This was not true.
Another company in Georgia, Turtle Creek Assets, was accused of harassing and deceiving consumers in three ways:
- Failing to disclose it was a debt collector attempting to collect a debt.
- Failing to provide consumers, within five days after the initial communication, a written notice containing certain information required by law.
- Threatening consumers with arrest or imprisonment if they didn’t pay a debt.
All of those actions are illegal under federal law.
The debt collection company Advance Capital Solutions in Canton, Ohio, was part of a multi-state sweep to expose egregious debt collection practices.
An investigation revealed a pattern of illegal practices such as calling and harassing consumers’ co-workers and family members, attempting to collect debt that consumers didn’t owe or had already paid, and failing to verify debts.
Two complaints about affordable housing in Massachusetts focused on homeowners falling behind on their mortgage payments after mistakes by their lenders.
One married couple’s home loan was transferred to a new lender after being approved for a modification. An agent from the new lender advised them to open a bank account and deposit monthly payments there, which they did for several years. They’re now facing foreclosure.
The Attorney General’s Office in Massachusetts is working with the couple to find documented proof so the lender can accept the past due amount and remove additional fees so the homeowner becomes current on payments.
Another case involved a Spanish-speaking senior couple who lost income and fell behind on mortgage payments. At least two agencies are helping them get a loan modification.
How to protect yourself against debt and credit fraud
Consumers are advised to be proactive when dealing with their credit reports, loans and any other debts that companies may try to help with or that cause debt collectors to contact them.
Check your credit report
The CFA’s first recommendation is to check your credit report to ensure that recent changes to medical debt reporting are accurately reflected.
The three major credit reporting bureaus — Equifax, TransUnion, and Experian — recently removed all medical debt that was paid after being sent to collections. Checking your credit report is a free and easy first step to checking that paid medical debt was removed.
Contact creditors and prioritize debt
You can call creditors yourself to request new payment plans. Before missing a payment, you can contact mortgage servicers, auto lenders, student loan servicers, utility companies, credit card companies, and other creditors to request new repayment plans, deferments, and forbearance options.
You can also prioritize debts that can harm you or your family if you don’t make payments on time. Debts that can be prioritized include:
- Rent payments
- Auto loans
- Court payments
- Child support bills
- Real estate taxes
- Taxes owed to the IRS
Check how loans affect credit score
Falling behind on your mortgage payments can cause your credit score to drop, which can make getting approved for other types of loans difficult. And, of course, not making your mortgage payments can lead to foreclosure on your home.
Whether you’re getting a new credit card, payday loan or mortgage, CFA recommends computing the total cost of the loan so you know if you can afford it. Some lenders don’t incorporate all fees into the annual percentage rate, which make it more expensive than it may look at first.
The report also recommends seeking installment loans with amortizing payments, rather than high-cost balloon payment loans like payday loans, which cost drastically more. Borrowers are advised to avoid collateral based lending, which gives lenders a powerful tool if you miss a payment.
Know your rights against debt collectors
Unfortunately, debt collectors have a bad reputation. Here are some of the rights consumers have under the federal Fair Debt Collection Practices Act, or FDCPA:
- It’s illegal to use abusive, unfair, or deceptive practices when collecting debts.
- Debt collectors can’t contact you before 8 a.m. or after 9 p.m., unless you agree to it.
- They can’t contact you at work if you tell them you’re not allowed to get calls there.
- To stop a collection company from contacting you, mail it a letter telling it to stop. It can then only contact you to confirm it will stop contacting you in the future or tell you it plans to take a specific action, such as filing a lawsuit.
- If you’re represented by an attorney, tell the collector, who must then communicate with your attorney and not you.
- A debt collector can contact other people to find your contact information and where you work, but it usually can’t contact them more than once, and it can’t tell them you owe a debt.
- You must be told how much you owe and the name of the creditor.
- Debt collectors must tell you what to do if you don’t think it’s your debt.
The bottom line for debit and credit complaints
If you have your own list of debt and credit complaints or perhaps your money management skills may not be as good as you’d like, that doesn’t mean you should be taken advantage of by unscrupulous lenders, debt collectors, credit repair specialists, and other financial services.
Federal and state laws protect consumers in many ways and your local and state officials can be a good place to start when seeking help with debt and credit complaints about companies you’re doing business with or are considering working with.
You may also be interested in:
- Rising Credit Card Debt and the Consequences for Consumers
- What Finance Tips Would you Give to a Friend?
- Tactics for a Debt-Free Life and More Control Over Your Money
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.