DMCC Awarded HUD Grant

Debt Management Credit Counseling Corp (, a nonprofit charitable organization (DMCC), awarded grant of $17,366 from HUD to provide free comprehensive housing counseling to consumers in South Florida. Counseling to include pre-purchase home buying, post-purchase home ownership, foreclosure prevention and homeless services. DMCC also provides free budget counseling and assistance to consumers to repay unsecured debt.

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Thrifty Spending Issue 91

FEATURE ARTICLE:   Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

The ads are on the radio, television, the Internet, even in the mail. They refer to payday loans, cash advance loans, check advance loans, post-dated check loans, or deferred deposit loans. The Federal Trade Commission, the nation’s consumer protection agency, says that regardless of their name, these small, short-term, high-rate loans by check cashers, finance companies and others all come at a very high price.

Here’s how they work: A borrower writes a personal check payable to the lender for the amount the person wants to borrow, plus the fee they must pay for borrowing. The company gives the borrower the amount of the check less the fee, and agrees to hold the check until the loan is due, usually the borrower’s next payday. Or, with the borrower’s permission, the company deposits the amount borrowed — less the fee — into the borrower’s checking account electronically. The loan amount is due to be debited the next payday. The fees on these loans can be a percentage of the face value of the check — or they can be based on increments of money borrowed: say, a fee for every $50 or $100 borrowed. The borrower is charged new fees each time the same loan is extended or “rolled over.”

The federal Truth in Lending Act treats payday loans like other types of credit: the lenders must disclose the cost of the loan. Payday lenders must give you the finance charge (a dollar amount) and the annual percentage rate (APR — the cost of credit on a yearly basis) in writing before you sign for the loan. The APR is based on several things, including the amount you borrow, the interest rate and credit costs you’re being charged, and the length of your loan.

A payday loan — that is, a cash advance secured by a personal check or paid by electronic transfer is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The check casher or payday lender agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing for 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Alternatives to Payday Loans

Before you decide to take out a payday loan, consider some alternatives.

  1. Consider a small loan from your credit union or a small loan company. Some banks may offer short-term loans for small amounts at competitive rates. A local community-based organization may make small business loans to people. A cash advance on a credit card also may be possible, but it may have a higher interest rate than other sources of funds: find out the terms before you decide. In any case, shop first and compare all available offers.
  2. Shop for the credit offer with the lowest cost. Compare the APR and the finance charge, which includes loan fees, interest and other credit costs. You are looking for the lowest APR. Military personnel have special protections against super-high fees or rates, and all consumers in some states and the District of Columbia have some protections dealing with limits on rates. Even with these protections, payday loans can be expensive, particularly if you roll-over the loan and are responsible for paying additional fees. Other credit offers may come with lower rates and costs.
  3. Contact your creditors or loan servicer as quickly as possible if you are having trouble with your payments, and ask for more time. Many may be willing to work with consumers who they believe are acting in good faith. They may offer an extension on your bills; make sure to find out what the charges would be for that service — a late charge, an additional finance charge, or a higher interest rate.
  4. Contact your local consumer credit counseling service if you need help working out a debt repayment plan with creditors or developing a budget. Non-profit groups in every state offer credit guidance to consumers for no or low cost. You may want to check with your employer, credit union, or housing authority for no- or low-cost credit counseling programs, too.
  5. Make a realistic budget, including your monthly and daily expenditures, and plan, plan, plan. Try to avoid unnecessary purchases: the costs of small, every-day items like a cup of coffee add up. At the same time, try to build some savings: small deposits do help. A savings plan — however modest — can help you avoid borrowing for emergencies. Saving the fee on a $300 payday loan for six months, for example, can help you create a buffer against financial emergencies.
  6. Find out if you have — or if your bank will offer you — overdraft protection on your checking account. If you are using most or all the funds in your account regularly and you make a mistake in your account records, overdraft protection can help protect you from further credit problems. Find out the terms of the overdraft protection available to you — both what it costs and what it covers. Some banks offer “bounce protection,” which may cover individual overdrafts from checks or electronic withdrawals, generally for a fee. It can be costly, and may not guarantee that the bank automatically will pay the overdraft.

The bottom line on payday loans: Try to find an alternative. If you must use one, try to limit the amount. Borrow only as much as you can afford to pay with your next paycheck — and still have enough to make it to next payday.

MONEY SAVING TIP:  Break your restaurant routine

Or, try something different –- and cheaper. Pick up a restaurant guide or a tour book of your city for budget-friendly suggestions. If you eat out three times a week, cutting just $5 from each meal ticket will save you $60 a month.

DID YOU KNOW…Military consumers have certain protections with payday loans?

Payday loans (and certain other financing) offered to servicemembers and their dependents must include certain protections, under Federal law and a Department of Defense rule. For example, for payday loans offered after October 1, 2007, the military annual percentage rate cannot exceed 36%. Most fees and charges, with few exceptions, are included in the rate. Creditors also may not, for example, require use of a check or access to a bank account for the loan, mandatory arbitration, and unreasonable legal notices. Military consumers also must be given certain disclosures about the loan costs and your rights. Credit agreements that violate the protections are void. Creditors that offer payday loans may ask loan applicants to sign a statement about their military affiliation.

Even with these protections, payday loans can be costly, especially if you roll-over the loan. You instead may be able to obtain financial assistance from military aid societies, such as the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, or Coast Guard Mutual Aid. You may be able to borrow from families or friends, or get an advance on your paycheck from your employer. If you still need credit, loans from a credit union, bank, or a small loan company may offer you lower rates and costs. They may have special offers for military applicants, and may help you start a savings account. A cash advance on your credit card may be possible, but it could be costly. Find out the terms for any credit before you sign. You may request free legal advice about a credit application from a service legal assistance office, or financial counseling from a consumer credit counselor, including about deferring your payments.

Military consumers can contact the Department of Defense, toll-free 24 hours a day, 7 days a week, at 1-800-342-9647, or Information on the Department of Defense rule, alternatives to payday loans, financial planning, and other guidance is available.

Thrifty Spending Issue 90

FEATURE ARTICLE:  What’s Behind Ads for a New Credit Identity? It

Could Be ID Theft Involving Children’s Social Security Numbers

If your credit is less than golden, you’ve probably seen pitches from companies promising a fresh start. Some claim you can get a “new credit identity” by applying for credit with a nine-digit number they sell you, rather than with your own Social Security number that you’ve used for years.

The Federal Trade Commission, the nation’s consumer protection agency, says don’t take the bait. The scheme often involves Social Security numbers stolen from children. Not only won’t you get credit, but you could face fines or prison.

The Pitch: A “New Credit Identity”

How do these fraudsters operate? They advertise in the classifieds, on radio and TV, and on the Internet. If you pay them a fee, they promise to help you hide a bad credit history or a bankruptcy. And after you pay them, they send you a nine-digit number that looks like a Social Security number. They may call it a CPN — a credit profile number or a credit privacy number. They’ll tell you to apply for credit using the CPN, rather than your own Social Security number. Some lie and tell you the scheme is legal.

Here’s what they don’t tell you:  In many cases, they’re selling you someone else’s Social Security number — often one stolen from a child. Using a stolen Social Security number to apply for a loan on another person’s good credit record is identity theft. And by encouraging you to use the stolen number as your own, the con artists have involved you in their scam.

It’s a crime to make a false statement on a credit or loan application. That includes misrepresenting your Social Security number. If you use the number they sell you, you could face criminal prosecution or civil fraud charges.

As a result, the fraudsters have pulled off a double whammy: They’ve created identity theft headaches for the families of children whose numbers they stole; and by selling you a stolen number to use on credit or loan applications, they’ve put you smack in the middle of a federal crime.

Spotting the Signs of Other Credit Repair Scams

The CPN ploy is the latest lie promising a quick fix to poor credit. The truth is that only time and sticking to a personal debt repayment plan will improve your credit report.

Here are some telltale signs of a credit repair fraud:

  • companies that insist you pay them before they do any work on your behalf;
  • companies that tell you not to contact the credit reporting companies directly;
  • companies that tell you to dispute everything in your credit report — even information you know is accurate;
  • companies that tell you to give false information on your applications for credit or a loan;
  • companies that don’t take the time to spell out your legal rights when they tell you how their business operates or what they say they can do for you.

Your Rights Under the Law

The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to make false statements about what they can do for you and to charge you until after they’ve performed their services. The law, which is enforced by the FTC, requires credit repair companies to explain your legal rights in a written contract that also details the services they’ll perform, how long it will take to get results, the total cost, and any guarantees. Under the law, these contracts must explain that you have three days to cancel without any charge.

What if a credit repair company you hired doesn’t live up to its promises? You have the right to sue them in federal court for your actual losses or for what you paid them, whichever is more. You also can seek punitive damages — money to punish the company for violating the law. The law allows class actions, too, where people join together in one lawsuit. If you win, the other side has to pay your attorney’s fees.

The CROA is a federal law. Many states also have laws regulating credit repair companies. If you have a problem with a credit repair company, report it to your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines or let you file a complaint online. Check the blue pages of the phone book or your state website.

You also can file a complaint with the Federal Trade Commission. Although the FTC can’t resolve individual credit disputes, it can take action against a company if there’s a pattern of possible law violations. File a complaint online at or call 1-877-FTC-HELP.

Need information about legitimate ways to deal with debt? Visit

MONEY SAVING TIP:   Mind the unit price

Many grocery store tags will tell you how much an item costs per ounce, per pound or by some other unit of measure. Comparison-shop by unit price and save.

For example, a pack of 40 diapers at our local drug store cost $13, or 33 cents per diaper. A box of 144 diapers cost $35, or 24 cents per diaper. A difference of 9 cents may not seem like much, but when you change a diaper six to eight times each day, that amounts to a savings of $16 to $22 per month.

One caveat: Don’t buy in bulk if you won’t use it all — otherwise, you wasted your money, no matter how good a deal it was.

DID YOU KNOW…Maxing out a single credit card can hurt your credit?

As MainStreet has previously reported, it’s never a good idea to bump up against your overall credit limit because your credit utilization ration will appear sky-high.  However, according to Chris Mettler, founder of, maxing out a single card can negatively influence your credit score as well.  The impact this will have on your credit will depend on the rest of your credit profile.  As such, if you do have a particular card that’s bumping up against the limit, you will want to pay that down as soon as possible.

“The recommended balance to carry is 30% or lower of your available credit line,” Mettler says.