Defaulted student loan

September 21, 2012 23:47 by Consumer Ed

Dear Consumer Ed: 

I have paid on a defaulted student loan for three years, but it is not reflected on my credit report.  The collection agency is requesting an additional $50 a month for a Rehabilitation Program in hopes that my loan will be purchased by another lender, this in addition to the $500 a month that is being garnished from my payroll check.  My payments so far total $13,585.47 with the collection company receiving $2,248.78.  My loan interest rate is 2.4% on one of the loans and 3.52% on the other; the collection agency is collecting 15%, and tells me that this will increase to 18.5% once a lender is found.  Is there any way I can have the garnishment removed, and am I still required to pay the collection agency even though my loan will be back with a lender?  If so, why would I still have to pay the collection agency if my loan is out of default?

Consumer Ed says: 

You should try to make regular payments on your loans on top of the money that is garnished from your payroll check every month.  While it’s wonderful that some of your loans have been paid off through wage garnishment, the loans will actually remain in default until you either pay them off in full, consolidate them through an approved lender, or complete a loan rehabilitation program.  If you remain in default, your credit report will not improve until the item expires, and your wages can be garnished until you’ve paid the rest of your loans in their entirety.

First, however, it’s important to confirm that your loans are from the U.S. Department of Education (DOE).  The most common loans people receive from the DoE are Direct Loans, FFEL Loans, or Perkins Loans.  If you’re not sure what type of loans you have, you can look them up through the National Student Loan Data System (www.nslds.ed.gov).  If you can’t find information about one or both of your loans on this system, your student loans are likely with a private lender.  You can find out more about some of the most popular private student loan programs by visiting www.finaid.org/loans/privatestudentloans.phtml/.
 
Based on the fact that your wages are being garnished and you’ve been encouraged to participate in a loan rehabilitation program, it sounds like your loans are from the DOE.  When a borrower goes into default, the DOE commonly hires specific collection agencies to collect those student loans (for a list of these agencies, visit www.myeddebt.com/borrower/myoptions_collectionAgencies).  The DOE (or collection agency hired to collect your loan) probably initiated the Administrative Wage Garnishment (AWG) process. Before any garnishment began, you should have received a notice of garnishment, giving you the opportunity to request a hearing before officially entering into AWG.  If you have any questions about this process you can either call 1-800-4-FED-AID, or visit https://www.myeddebt.com/borrower/.  Once selected for AWG, your employer is required to withhold up to 15% of your disposable pay. 
   
Loan rehabilitation is an option you should consider, because once you’ve completed this process, your default will permanently be removed from your credit report.  While the exact process varies depending on what type of loan you have, generally, you must make nine on-time monthly payments, and then the collection agency that is currently assigned your loan will sell it to a lender.  It’s important to note that involuntary payments, such as wage garnishments, don’t count towards completion of the rehabilitation process.  (This would also be why you haven’t seen these payments reflected on your credit report.)  Once you complete rehabilitation, you’ll no longer be in default, the default status will be removed from your credit report, and your employer will stop garnishing your wages. For more information about rehabilitation options, visit https://www.myeddebt.com/borrower/myoptions_rehabilitate.

Once you’re out of default, you’ll need to continue making payments to your new lender.  Your monthly payments after rehabilitation might be more than what you paid during the rehabilitation period, in part because collection costs and interest that were outstanding at the time of rehabilitation may be added onto the total amount that you owe. 

If you’re having problems with the collection agency handling your default, you should file complaints with the Department of Education, the collection agency, and with the Office of the Inspector General.  To file a written complaint with the Department of Education, you should send a letter and copies of any communications between you and the collection agency to:
   
    Chief of Contract Analysis and Compliance
    US Department of Education
    61 Forsyth Street, SW 19T89
    Atlanta, GA 30303

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Online merchant insisting on additional ID

February 4, 2012 00:42 by Consumer Ed

Dear Consumer Ed:

We recently ordered $800 worth of merchandise from an online store that we have purchased from in the past. A few days after placing the order, the company sent me an email stating that in order to complete the transaction, we had to email them photocopies of both front and back of the credit card used and a government-issued ID, and if we didn't they would cancel our order.  I called VISA, and they told me that the only companies allowed to request that additional information are hotels, airlines, car rental companies and cruise lines.  I did not send the company the information they requested, so they refused to send me my order. Can they do that?

Consumer Ed says: 

Many states have laws that dictate what kind of information merchants can and cannot ask for when a consumer pays with a credit card.  However, all merchants are subject to the rules and regulations outlined in their contract with the credit card company.  For example, your card company, VISA, has International Operating Regulations that state merchants cannot require a cardholder to provide any supplementary information as a condition for honoring a VISA Card, subject to some exceptions.  Supplementary cardholder information can include social security numbers, fingerprints, home or business addresses or telephone numbers, driver’s license numbers, photocopies of driver’s licenses, photocopies of the VISA Card, and other credit cards. As you stated, hotels, airlines, car rental companies, and cruise lines do fall within the exception to the rule. 

So, while a merchant may ask a consumer for identification, he generally may not deny a VISA credit card transaction because the consumer refuses to show identification.  Generally, a signed credit card is all you should need to present in order to avoid showing identification.  Be aware that identification may be required for other purposes, such as purchasing alcohol, tobacco products, or certain medications. 

Paying online or by phone can sometimes create an exception for the merchant, and they may ask for some identifying information, such as a zip code.  This varies a bit by credit card company:  MasterCard’s rule for merchants regarding supplemental identification is similar to VISA’s; American Express doesn't ban merchants from requiring customer identification, though it discourages the practice; Discover’s policy allows merchants to request identification if desired.  You should always contact your credit card company and ask about its policy regarding supplemental identification. Often, you will find that many merchants ignore or are unaware of this identification rule.  If you’re shopping in a store rather than online, and you don’t want to show identification, simply sign your card and refuse to provide ID if asked.  If you feel strongly about not showing identification, you may wish to print out a copy of the relevant merchant rule and ask to speak to a store manager. 

In your particular case, you can email the merchant a copy of Visa’s International Operation Regulations.  If the merchant still demands to see your identification, and then refuses you service if you fail to comply, you should contact your credit card company to open an incident report.  This will initiate an investigation, which can result in a warning or even a fine to the business for violating their merchant contract.

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Will a dismissed bankruptcy show up on my credit report?

October 13, 2011 17:36 by Consumer Ed

Dear Consumer Ed:

A few years ago, when my ex-husband and I were still married, we filed for bankruptcy.  A few months into it we decided to get a divorce, so we never completed the bankruptcy, and it was dismissed. Will the bankruptcy show up on my credit report, and if so, will it stay on there as long as it would have if we had actually completed the process?

Consumer Ed says: 

Yes, the dismissed bankruptcy will almost certainly show up on your credit report.  The dismissal can stay on your credit report for 7-10 years, depending on the credit bureau and the type of bankruptcy you and your husband filed.

It is a good idea to get a copy of your credit report to ensure that the information it contains is accurate. You can request a free copy of your credit report by going to www.annualcreditreport.com or by calling 877-322-8228.

If you discover errors on your credit report or if the bankruptcy dismissal has been on your report for longer than 7-10 years, contact the credit bureau directly to dispute the errors. There is no cost to do so. You can contact the credit bureaus at:

  
Experian – www.experian.com
Equifax – www.equifax.com
TransUnion -  www.transunion.com

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