Financial counselors often work with clients who have low credit scores. This harsh reality may negatively impact options available to better their financial stability: obtaining stable housing, employment and affordable sources of credit. However, gaining a clear understanding of the low credit score—whether caused by personal choices or consumer fraud—is critical. The answer may uncover additional steps that a client can take to remedy their financial situation at a faster pace. When a client shares a financial goal of increasing a credit score or tackling past due debt, it is helpful to obtain a free copy of his or her credit report from each credit bureau at www.annualcreditreport.com. Review the reports with the client to identify inaccurate information.
Scam Versus Identity Theft—Per Merriam-Webster, scams are “a dishonest way to make money by deceiving people” and identity theft is “the illegal use of someone else's personal information (such as a Social Security number) especially in order to obtain money or credit.” When a client is a victim of a scam, he or she can inform the State Attorney General and local law enforcement, submit a statement to credit bureaus (to explain an unpaid debt due to a scam) and file a fraud alert or freeze. When a client is a victim of identity theft, he or she can inform local law enforcement, file an identity theft report, contact credit bureaus, file a fraud alert or freeze, and dispute any inaccurate information on their credit report.
In 2016, the Consumer Sentinel Network (CSN) received more than 3 million consumer complaints. This organization electronically tallies and stores consumer complaints from the Federal Trade Commission (FTC), federal and state law enforcement, national consumer protection organizations as well as governmental organizations. To view all 30 Complaint Categories for 2016, visit the Consumer Sentinel Network Data Book. The top four complaints were:
Debt Collection (859,090 complaints)
Imposter Scams (406,578 complaints)
Identity Theft (399,225 complaints)
Telephone and Mobile services (292,155 complaints)
Debt Collection—According to CSN, complaints consisted of debt collectors making false representation of the amount or status of debt, failing to send written notices, using profane language and making threats, failing to identify self as debt collector and/or violating other stipulations of the Fair Debt Collection Practices Act. It is important that practitioners inform clients about their rights when debt collectors call. Clients who have debt collectors calling can view this video about Dealing with Debt Collectors and review this list of banned debt collectors. If your client thinks they have been a victim of unfair debt collection practices, he or she can file a complaint with the Federal Trade Commission.
Imposter Scams—Imposter scams occur when someone pretends he or she is someone else in an effort to convince an individual to send money. Last fall, the Internal Revenue Service (IRS) imposter scam led to raids in India. This, in turn, led the U. S. Department of Justice (DOJ) to indict several IRS imposters. Although complaints have dropped, the FTC and DOJ warn consumers to remain on alert. The IRS will never call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS will generally mail a bill if a tax filer owes any taxes. Practitioners should caution clients. Anyone who does not owe taxes yet receives a call from someone claiming to be from the IRS demanding immediate payment, should hang up and call the IRS directly at 1.800.829.1040 to verify if they actually owe the debt.
Identity Theft—So, what were the top reported types of identity theft? According to CSN; employment or tax-related fraud was the most common (34%), followed by credit card fraud (33%), phone or utilities fraud (13%) and bank fraud (12%). Other types of fraud reported included loan or lease fraud (7%) and government documents or benefits fraud (7%). Identity theft can occur from a variety of tactics including a data breach, stolen wallet, hacked account, stolen mail, etc. Therefore, it is imperative for practitioners to remind clients to obtain free credit reports annually, from www.annualcreditreport.com. Clients should be encouraged to review the reports for accuracy and dispute any inaccurate information.
Telephone and Mobile services—Telephone and or mobile services were mentioned under numerous categories in the CSN Data Book. For example; debt collection (telephone and or mobile services 10%), fraud (of the 55% of respondents who reported the type of initial contact, 77% said the telephone), and phone and utilities fraud. Phone scams are varied and have included telemarketers who promise free money, scammers who fake caller ID, and recently robocalls who ask, “Can you hear me now?” Encourage clients to visit the Federal Trade Commission for additional examples of phone fraud and for steps to block unwanted calls.
Often clients are unaware that their personal information has been compromised. It may be helpful to share the warning signs with your clients. The following are warning signs that personal information may have been compromised:
Notices from the IRS
Strange withdrawals from your bank account
Receiving bills that are not yours
Receiving calls about debts that you do not owe
Seeing unfamiliar accounts on your credit report
If you have clients who think that they have been a victim of identity theft, the key is to act quickly. Visit the Federal Trade Commission for steps to help minimize and repair the damage. Practitioners should be aware of the various scams and consumer complaints so they can inform clients.
Credit Report Request Form: www.annualcreditreport.com
Definition of a scam: https://www.merriam-webster.com/dictionary/scam