Raúl Torrez | Attorney General

Consumer Protection Week Day 4: “D” is for Dealing with Debt

FOR IMMEDIATE RELEASE: March 8, 2017 

Contact: James Hallinan (505) 660-2216

Santa Fe, NM – On Day 4 of National Consumer Protection Week, Attorney General Hector Balderas released guidelines for dealing with debt. Sometimes consumers find themselves in more debt than they can handle, but there are many options out there for New Mexicans.

“When you’re struggling just to make ends meet every month, debt-collection can be very scary,” said Attorney General Balderas. “But the worst thing you can do in that situation is nothing at all, and that’s why I’m encouraging New Mexicans to learn about their options and to create a sound plan to emerge from debt.”

Dealing with Debt

Make a plan. It’s important to take a realistic look at your monthly income compared to your monthly expenses. Start by listing all your income sources. List all your bills that are the same every month (car, mortgage, student loan payments, etc.) and then write down all the expenses that vary by month (groceries, gas, entertainment, etc.). Make sure you list even little things that seem insignificant– like your daily coffee purchase. Identify which of those expenses are unavoidable– like your mortgage– and then prioritize the rest. The idea is to make sure your income can cover the unavoidable expenses before the rest of your expenses. For help making a budget go here: https://www.consumer.ftc.gov/articles/pdf-1020-make-budget-worksheet.pdf.

Communication is key. When you first find yourself unable to make ends meet, call your creditors. Explain to them the difficulties you are having and see if there is a way to reduce your monthly payments. This communication helps in two ways: first, it helps with your monthly budget and second, it helps tell your creditors that you intend to pay your debts.

Living with student loan debt. Many New Mexicans are facing a staggering amount of student loan debt. It’s important to understand your options to repay this debt and how to avoid scams that take advantage of students struggling with this debt. There are many repayment plans that can help make your federal student loan payment affordable. Visit the following link for an overview of the different repayment plans: https://studentaid.ed.gov/sa/repayloans/understand/plans.

Never pay for something you can do yourself for free. Many of the companies offering help consolidating your loans, getting an income driven repayment (IDR) plan, filling out a defense to repayment applications, or doing closed school discharge requests are basically just document processing companies. You wind up paying them to process your paperwork, but you still have to submit it all yourself. You can do all of these things for free with your loan servicer – you do not need to pay anyone to do this for you.

Be on the Lookout for Scams

Be wary of any company that:

  1.  Represents that you have been pre-qualified
  2. Contacts you through a robo-dialer
  3. Requires an upfront fee
  4. States they are affiliated with the federal Department of Education
  5. Promises total loan forgiveness
  6. Tells you to stop paying your loans or to stop talking to your loan servicer
  7. Claims to have special access to the federal government, loan forgiveness programs or loan consolidation programs
  8. Pressures you to “act fast.”

Debt Restructuring, Debt Settlements and Avoiding Scams

Do your homework. If you’ve already contacted your creditors and are unable to work out a reduced payment on your own, you may consider working with a debt relief service. If you choose to use these services, make sure you research them first. Call the New Mexico Office of the Attorney General toll free at 1-844-255-9210 to see if there are any consumer complaints against the company.

Ask the company what services they provide, how much it costs and how long it takes for them to get results. Ask whether the company has had success in negotiating with your specific creditors in the past– creditors are under no obligation to settle your debt. Ask about how payments are made and whether your debts will continue to accrue interest and fees. Know that this could continue to negatively affect your credit score. As with all transactions, make sure to read the contract completely and ask questions about anything that is unclear.

Be wary of scams. Some companies seek to charge upfront fees to help settle or reduce your debt. Avoid companies that charge a fee before they have settled or reduced your debt. If a company touts a “new government program” to bail out personal credit card debt, be very cautious. No company can guarantee to make your unsecured debt go away. Any company that tells you to stop communicating with your creditors, should also explain the serious consequences of that action. If they don’t, avoid them.

You should be able to review information about a company’s services without having to provide your personal financial information, like your credit card account numbers and bank balances.  You should be able to get their information before you give them your information.

Debt Collectors. In the past nine months alone, the Office of the Attorney General has received close to 100 complaints about debt collections. If you are unable to get your debt otherwise resolved, and you fall behind in your payments, your creditors may turn your account over to debt collectors. While these debt collection companies may in some cases take drastic measures to collect from you, there are things that they cannot do.

Debt Collectors cannot:

  1.  Threaten violence or harm, or use profanity or obscene language
  2. Misrepresent the amount you owe
  3. Call before 8 AM or after 9 PM
  4.  Threaten action that they cannot, or will not take
  5. Tell others about your debt without your permission.

If you are contacted by a debt collector, you have options. They must send you a written validation notice that you can dispute. If you don’t believe you owe them money, make sure to dispute that amountwithin 30 days of the validation notice.

If you choose to stop communicating with the debt collector, you can tell them to stop contacting you. Send them a request, in writing, to stop contacting you. Be careful, just because you tell a debt collector to stop contacting you, it doesn’t mean you have resolved the debt you owe. The collector can still sue you to collect on the debt.

Questions? Do not hesitate to call the New Mexico Office of the Attorney General toll free at 1-844-255-9210.

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Raul Torrez

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