Student Loan Defaults at an All Time High: This May be the Unexpected Solution

Student Loan Default Leads


More than 7 million consumers are in default on federal or private student loans, according to a new study, and standardized financial literacy is on the horizon to stop it in future generations.

The Consumer Financial Protection Bureau (CFPB) found that student loans now outpace credit cards as the highest level of consumer debt.

In the U.S., existing student loan debt is estimated at $1.2 trillion.

Default typically occurs when a loan receives no payment for 270 days. New collection costs are then added to the loan’s balance, and the loan becomes more expensive than its original principal. The added costs can only be reduced or eliminated through negotiation or legal action.

According to the U.S. Department of Education, 37 million Americans currently have outstanding student loans and 11% of all student loans are at least 90 days delinquent.

“We strongly believe in the importance of communication and financial education that helps students better understand the serious ramifications of defaults, delinquencies and forbearance,” said Pat Morris, CEO of ACA International, an association of credit and collections professionals.

Problem is many Americans are illiterate when it comes to finances.

A John Hancock Survey found that 46% of respondents who answered a literacy quiz earned a failing grade with 22% earning a D and 23% receiving an F.

While some were able to select correct answers to questions about financial concepts or product definitions, most exhibited significant knowledge gaps.

For example, only 37% were able to choose the correct answer when asked about an optimal retirement savings strategy.

About 94% of those surveyed properly identified the definition of asset allocation and 85% understood dollar cost averaging but only 62% understand that the price of a bond or bond fund decreases as interest rates rise.

“It is critical that children learn the grammar of economics and finance, the specialized language that describes how our economy operates,” said Nan J. Morrison, president and CEO of Council for Economic Education (CEE). “Without that proficiency, they are likely to remain on the periphery of their own potential.”

Currently, only four states require a minimum of one semester of financial literacy education in primary and secondary school and only 20 states require that the topic be taught within another subject area.

That will soon change if Rep. Matt Cartwright has his way. He introduced the Financial Literacy for Students Act, HR 2920 with the support of 23 Representatives earlier this month.

The Act would create incentive grants to states who agree to provide financial literacy education in Title I public elementary and secondary schools.

“The importance of consumer sophistication on financial matters has never been more important than it is in today’s economy,” said Cartwright. “The key to improving the financial literacy of all Americans is ensuring that our students have access, at all appropriate stages of their education, to formal financial literacy education.”

Under current law, individual states are left to create and implement financial literacy education curriculum and courses in their districts and schools.

Below are 5 financial terms that improve your financial literary

  • 1. Dollar cost-averaging: Purchasing the same dollar amount of investments each month so when      share prices are low you get more shares, and when share prices are high      you get fewer shares.
  • 2. Asset allocation: A method of assigning your financial contributions to different      risk classes of investments, such as equities and bonds and cash.
  • 3. Index funds: Seek to match the investment returns of a specified stock or bond      benchmark, such as the S&P 500
  • 4. Forbearance: An agreement that allows graduates to temporarily postpone or      reduce their federal student loan payments.
  • 5. Delinquency: Student loan default is a state of delinquency on student loans      occurring after a missed payment exceeds 270 days. Student loan default      remains on a graduates credit report for seven years.

–Written by Juliette Fairley for MainStreet


Payday lenders covered by FTC Act

Magistrate Judge’s finding: Payday lenders covered by FTC Act even if affiliated with American Indian Tribes


In an FTC action challenging allegedly illegal business practices by a payday loan operation affiliated with American Indian Tribes, a United States Magistrate Judge just issued a report and recommendation on the scope of the FTC Act.  Attorneys will want to give the order a careful read, but here’s the need-to-know nugget:  Over the defendants’ vigorous opposition, the Magistrate Judge concluded that the FTC Act “gives the FTC the authority to bring suit against Indian Tribes, arms of Indian Tribes, and employees and contractors of arms of Indian Tribes.”  Most importantly, the Judge’s finding confirms that the FTC’s consumer protection laws apply to businesses regardless of tribal affiliation.  The FTC sees that as a key step in protecting consumers from deceptive and unfair practices.

The FTC sued a web of defendants — including AMG Services, Inc., 3 other Internet-based lending companies, 7 related companies, and 6 individuals, including race car driver Scott Tucker and his brother Blaine Tucker — for violating Section 5 of the FTC Act, the Electronic Fund Transfer Act, and the Truth in Lending Act in their payday loan practices.  Some of the defendants tried to get the FTC case dismissed, claiming that their affiliation with American Indian Tribes makes them immune from those federal statutes.

Not so, urged the FTC.  True, the FTC Act makes no specific reference either way to its applicability to tribal entities.  But citing Supreme Court and Ninth Circuit precedent, the FTC reasoned that “statutes of general applicability that are silent on tribal issues presumptively apply to tribes and tribal businesses.”

The defendants responded that the FTC Act isn’t a “statute of general applicability” because Congress wrote certain exemptions into the law.

“Exemptions alone aren’t dispositive,” said the FTC, quoting the Ninth Circuit’s Chapa De case.  As the Court held in Chapa De, “The issue is whether the statute is generally applicable, not whether it is universally applicable.  We have previously held that other federal statutes that contain exemptions are nevertheless generally applicable.”

Citing that decision and others, the Magistrate Judge’s report and recommendation rejected the defendants’ immunity theory and concluded that “the FTC Act has a broad reach and is one of general applicability.”  The order reserves judgment on whether the defendants are “not for profit” corporations

for purposes of the FTC Act, but held that TILA and EFTA apply regardless of the defendants’ disputed for-profit status.

The Magistrate Judge’s report and recommendation is now subject to review by United States District Judge Gloria M. Navarro.

A related update:  The FTC reached a partial settlement with the principal defendants in the case.  Under the terms of the order, those defendants will be barred from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of getting credit.  The FTC continues to litigate other counts against the AMG defendants, including that they deceived consumers about the cost of their loans by charging undisclosed charges and inflated fees.

By Lesley Fair

Your Bizopp Lead Clients. Entrepreneur or Contrepreneurs? Helping Them Stay on the Right Side of the Law.

biz opp leads


Call them contrepreneurs — marketers who use hyped-up promises to sell business opportunities to people eager to be their own boss. As part of a federal-state blitz on bogus bizopps, the FTC announced seven law enforcement actions and developments in five other cases against outfits the agency says used illegal tactics to take more than half a billion dollars from two million Americans trying to make ends meet.

The FTC isn’t alone in the effort. The crackdown by the Consumer Protection Working Group of the Financial Fraud Enforcement Task Force also includes 38 criminal actions filed by the Department of Justice, 15 cease and desist orders by the U.S. Postal Inspection Service, and another 20 from state AGs in Arizona, California, Colorado, Indiana, and Ohio.

The FTC actions illustrate the breadth of questionable business opportunities out there: mystery shopper services, credit card processing operations, websites claiming affiliations with high-end brands, promoters promising the inside track on Postal Service jobs, bizopps related to refunds for mortgage insurance premiums, rebate and credit card application processing, and an operation claiming to match companies that have excess inventory with businesses looking to buy. But according to the FTC, they all had one thing in common: They used deceptive tactics to peddle their bizopps.

The new cases dovetail with related FTC actions, including an August 2012 $478 million judgment against John Beck Amazing Profits and the return of almost $6 million to buyers as a result of lawsuits against Infusion Media Inc., AED Inc., and Abili-Staff Ltd.

The tactics targeted in today’s cases aren’t new — the FTC has a history of challenging bogus bizopps — but this time the agency has an additional tool for taking on the contrepreneurs: the amended Business Opportunity Rule, which requires a wide range of bizopp sellers to disclose key information upfront in a streamlined one-page document.

The message for people interested in being their own boss: Before investing so much as a dime, consult free resources from the FTC (also available in Spanish) to help you evaluate what’s out there and spot the signs of a bizopp barracuda.

What do bizopp sellers need to know? First, federal and state partners take deception seriously. Illegal activities can result in tough injunctive provisions, multimillion dollar judgments — and prison time. But for sellers eager to avoid an enforcement run-in, the FTC has materials to make it easier to comply with the law, including Selling a Work-at-Home or Other Business Opportunity? Revised Rule May Apply to You.

  • By Lesley Fair
  • November 15, 2012

For True Quality Bizz Opp Leads vistit or email us at

Is Data Your Stock in Trade?

If information is your stock in trade, FTC settlements with consumer reporting giant Equifax Information Services and San Diego-based Direct Lending Source merit your attention.  The cases are a timely reminder to businesses that when buying and selling data, it’s important to build legal compliance into your day-to-day operations.

Here’s what the FTC says happened.  For about a two-year period, Equifax sold Direct Lending and its affiliates lists of people who met selected criteria — prescreened lists. The criterion that got millions of people on those lists?  Being 30, 60, or 90 days late on their mortgage payments. The lists included other sensitive data, like people’s credit scores.  According to the complaint, Direct Lending turned around and sold the information to outfits that were peddling products and services targeting consumers struggling to stay afloat. The FTC says that some of those companies have been the subject of law enforcement actions centering on allegedly deceptive practices.

Is it illegal for consumer reporting agencies to sell prescreened lists and for other businesses to buy them?  No.  The Fair Credit Reporting Act allows companies like Equifax to furnish reports to those who have a “permissible purpose.” But under the law, the only permissible purpose for getting a prescreened list is to make a “firm offer of credit or insurance.” What about using prescreened lists to send marketing solicitations to people in financial distress? That’s not a permissible purpose.  The FCRA doesn’t allow prescreened lists to be sold for pure marketing purposes because there is no firm offer of credit and that’s why the FTC says both Equifax and Direct Lending violated the FCRA.

Among other allegations, the FTC’s complaint charges that Direct Lending — along with its affiliates and principals — violated the FCRA and the FTC Act by getting prescreened lists when it didn’t have a permissible purpose, by reselling reports without telling Equifax who was going to wind up with the info, by failing to maintain reasonable procedures to make sure the people they were selling to had a permissible purpose, and by failing to use appropriate measures to control access to sensitive consumer financial information.

What about Equifax’s involvement? In addition to charging that Equifax provided lists to companies that didn’t have a permissible purpose, the complaint alleges that it didn’t have appropriate procedures in place to prevent that from happening.  For example, according to the FTC, Equifax didn’t properly investigate when it found out that Direct Lending was violating Equifax’s own policies on prescreening.  The FTC also says that Equifax knew or should have known that Direct Lending was reselling the data without telling Equifax who was going to wind up with it — and yet Equifax continued selling prescreened lists to Direct Lending.  The complaint charges that Equifax’s failure to employ appropriate measures to control access to sensitive consumer information was an unfair practice, in violation of Section 5 of the FTC Act.

The settlement with Direct Lending, filed in federal court in California, imposes a $1.2 million civil penalty and puts provisions in place to protect consumers in the future.  Also named in that case are Bailey & Associates Advertising, Inc., Virtual Lending Source, LLC, Robert Bailey, and Linda Giordano.

The proposed administrative settlement with Equifax, which the FTC has published for public comment, includes a $393,000 payment.  Under the proposed order, Equifax will have to tighten up its procedures and make sure that before providing prescreened lists, the company has good reason to believe the people buying them have a “permissible purpose.”

The message to marketers? The Fair Credit Reporting Act puts limits on how companies can traffic in consumer information.  Consumer reporting agencies that want to keep their operations within the law understand the importance of keeping a close watch on who’s getting prescreened lists, what they’re doing with the data, and how it’s being handled downstream.

Business Owners. It’s Just a Matter of Time…

@angel__network: Infographic – Small Business Owners: Here’s How to Manage Your Time:


USPS Makes Simplified Address Direct Mail Trial Permanent

The US Postal Service is asking regulators to allow its simplified direct marketing service for small businesses to become a permanent offering.

The Every Door Direct Mail service has proved successful since the start of trials last year, USPS told the Postal Regulatory Commission as it filed a request to add the programme to its portfolio of market-dominant products.

EDDM allows small businesses to use Standard Mail to send out advertising materials to every residential address on a carrier route, sending out up to 5,000 mailpieces at a time without requiring a mailing permit.

The key to the success of the saturation mail service is the ease with which an SME can select which carrier route or routes in which to distribute marketing materials through an online tool. Items are then dropped off at the customer’s local post office.

Along with simplified rules, EDDM is seen as an important way to bring onboard small businesses who have not used the mail as a marketing channel before because they lack staff with specific direct marketing skills.

USPS has also been trialling a larger scale version of EDDM for larger companies dropping mail at business mail entry units, but this week said it wants to add the retail version of the programme to its Mail Classification Schedule.

The retail programme has brought in $43m in revenues since trials began at the end of March 2011, the Postal Service said this week, while revenues since the start of April – when USPS launched a major advertising campaign surrounding the service – have already reached $38m.

Up to June, more than 32,000 small businesses had signed up to participate in the programme, while there have been more than 105,000 transactions at post offices.

USPS believes the programme will reach the $50m limit on revenue from a trial service by September.

“The market test has already demonstrated that sending advertising mail to every address within a community, with fewer rules, rates, and regulations, is a popular way to connect to potential and actual local customers,” the USPS told regulators.

Executives have said including the bulk mail version of the service, they want to see Every Door Direct Mail become a billion dollar revenue generator.

Rates to rise

The EDDM retail programme is currently priced at the Standard Mail saturation mail rate, but when it becomes a permanent fixture, USPS wants to set a 16 cent per piece rate, about 10% more than the standard saturation rate.

The new price would set the retail version of the programme as more expensive than the version for larger mailers.

So far the trial programme has proved quite profitable for USPS, with its regulatory filing suggesting that attributable costs for the service have been just under the 8 cent per piece level.

USPS said the higher rate proposed for the retail product was justified because of the added convenience for its customers of being able to drop off items at post offices and avoid paying a permit fee.

Source: Post&Parcel/PRC

What Goes Around Comes Around – Taking Care of a “Problem Client”

By Ron Burley | Inc


Several years ago, a single problem customer changed the fate of my company. Here’s the story.

In business, we’re often all about the numbers–occasionally to a fault. I’m not saying statistics and metrics aren’t useful tools. Sometimes, however, the success or failure of an enterprise comes down to individual interaction–say, a handshake or a phone call.

Let me give you a good example.

In 1995, I bootstrapped a tech company, Broadcast Software. We created digital audio and automation software for broadcast radio stations. After four years, we had 16 employees and customers in 40 countries.

But we were at a transition point. If companies need to grow or die, we were in need of a transfusion. We had grown beyond my ability to fund future growth out of my back pocket, and it was time to get outside capital. It also turned out to be time for the tech bubble to burst. Our potential funding sources instantly disappeared.

I was a hands-on CEO. I had written the original code and knew many of our customers personally. I had told my employees that the buck stopped with me, that I’d be willing to speak with any customer they couldn’t help or satisfy. If need be, they should even give out my personal number.

Challenging Customer

So when my cell phone vibrated at 2 a.m. on a Sunday morning, I recognized the 618 area as Southern Illinois. That meant the caller was Bob, a crusty old-time radio engineer and owner of a very small rural radio station near Mt. Vernon. He’d purchased one of our systems several months before and had been struggling to get it up and running.

Bob’s biggest problem was that he’d never even used a computer before. My support manager more than once had recommended that we just refund Bob’s money. But we’d marketed our products as easy to use, so we couldn’t abandon someone because they’d found otherwise.

I climbed out of bed, closed the door behind me, and spent the next two hours coaching Bob on how to configure the start-up options for Microsoft Windows. It wasn’t an issue with our software, but it was a problem for our customer, Bob–which made it our problem. At the end of the conversation, I thought we’d made a lot of progress. Bob was enthusiastic. I was hopeful.

That was the last anyone heard from Bob. He didn’t call tech support. He didn’t call me. As time passed, I wondered whether we’d actually fixed the problem or whether he’d just given up. I made a mental note to check in on him as soon as I’d figured out the bigger financial issues.

Surprise Windfall

One situation was about to solve the other. Almost six months to the day after I’d hung up the phone with Bob, I received another call. The chief of engineering of a major media company informed me the company had decided to standardize on our software across its entire chain of more than 300 radio stations. It would be the biggest order in our history–more than $4 million–and would easily provide the capital we’d been needing.

The call was a complete surprise. We’d not pursued their business. In fact, it had been public knowledge that they were selecting one of our competitors. As it turned out, the reason for their mid-course change was … Bob.

That phone call with Bob saved our company. He hadn’t given up on us; he loved us. Shortly after my call with him, the same media giant made an offer he couldn’t refuse to purchase his radio station, and Bob had stayed on as a consulting engineer.

An Internal Champion

Not long after, a company meeting centered on their intentions to purchase our competitors’ products. Bob had raised his hand at the back of the room: “Have you ever heard of Broadcast Software?” he asked. He told his new colleagues the story of our phone call, and how we’d stuck with him for months even when the problems weren’t really ours. Over lunch, and then dinner, Bob sang our praises. At the end of the evening, he scribbled our website and contact info on cocktail napkin and handed it to the chief of engineering. “Check these guys out,” he said. “They’re great.”

They did, and the rest was history. Our history.

There’s a moral to the story: Every customer needs to be treated with respect, and no customer should be left dissatisfied. I’m not saying that every customer call is crucially important. But some of them certainly are–and you never know which one might be your “Bob.”

“The harder I work, the luckier I get.”
Samuel Goldwyn