Financial products like loans, credit cards and bank accounts offer easy access to cash but come with complicated rules and serious penalties. Before entering into any loan be sure to understand all of the terms of the agreement to repay it. Pay careful attention to the interest rate and payment amount. Remember that an auto-title loan gives the borrower the right to repossess the car for nonpayment of the loan.
- Student loans
- Pay day loans
- Auto title loans
How to Get Your Free Credit Report and Why You Need It
To help prevent identity theft and ensure your ability to receive favorable loan interest rates, housing, and a job, you should get your free credit report. This brochure tells you how to obtain your three free credit reports each year from the three credit report companies, TransUnion, Equifax, and Experian. It recommends that you get one credit report from a different company every four months.
More information is available in this brochure published by Legal Aid: Get Your Free Credit Report
Here is the form to send in to the Annual Credit Report Request Service to receive your free report: Credit Report Application Form
Will your auto title loan cause problems with employment?
“Jobs in Northeast Ohio are least accessible for the people who need them most,” according to Brett Barkley, Cleveland Federal Reserve. Over the last 15 years, Cleveland has experienced a large drop in jobs located near where people live and currently ranks below average for access to employment by public transport.1 In areas of high poverty, this drop has been especially large. Jobs which have lower qualifications, such as those that only require a high school diploma or pay less than $1,250 a month, are the hardest to get to by public transportation.2
Auto title loans are making this transportation and jobs problem worse. An auto title loan is a loan where a person borrows money using the title of their car as “collateral” or security for the loan. These loans usually have very high fees and the borrower often cannot afford to pay off the loan when due. If the borrower does not pay the loan when due, the lender can repossess and sell the car to pay off the loan. Borrowers who cannot pay off the original loan are forced to take out another loan or lose their car. The new loan again includes the high fees. Each time the borrower is unable to pay off the loan, the borrower is forced to take out another loan with the same high fees, so the borrower falls deeper and deeper in debt.3
The federal Consumer Financial Protection Bureau reports one out of five people who borrow auto title loans lose their vehicle.4 The Center for Responsible Lending reported that in 2013, 135,746 auto title loans were made in the state of Ohio. So, approximately 27,000 Ohioans, in 2013 alone, may have lost their cars due to their inability to pay off an auto title loan.5
Auto title loans may seem like a quick fix in an emergency, but very seldom provide the help a person needs. Because jobs are not always accessible by public transportation, the loss of a car can also mean the loss of a job. For these reasons, auto title loans should be avoided. Not only do these loans create problems for individuals, but they can impact our entire community by undermining opportunities for employment.
By Christopher Kolezynski
What should I know about student loans?
Student loans give needed financial assistance to people who want to attend college but can’t afford it. Many colleges and universities offer many student loan options. The information in this article will help people when making important decisions about where to go to school and how to pay for it.
Choose a College Carefully. There are three different types of colleges and universities to choose from:
- Public colleges and universities (eg. Cuyahoga Community College, Cleveland State University)
- Non-profit colleges and universities (eg. Baldwin Wallace University)
- For-profit or “proprietary” schools (eg. Lincoln College of Technology)
In general, Ohio’s public universities have the cheapest tuition for Ohio residents. For example, one semester tuition at Tri-C in an associate degree program costs as little as $1,200, and one semester tuition at Cleveland State University in a bachelor’s degree program costs about $4,700. In contrast, one semester tuition at Lincoln College of Technology in an associate degree program costs as much as $13,200.
Choose a Loan Carefully: There are two basic types of student loans: federal and private. Federal loans are regulated by the U.S. Department of Education, which sets the terms and limits the interest rates. Private loans come from private lenders who set their own terms and interest rates. Before signing any loan contract, compare loan offers from different lenders because some loans are more expensive than others. Always ask lenders the following questions:
- How much money are you lending me?
- What is the interest rate?
- When will interest start to “accrue” (build up)?
- When do I have to start paying the loan back?
- How much will my monthly payments be?
- What kinds of repayment plans are available for this loan?
One advantage of federal student loans is the option for an income-based repayment (IBR) plan for borrowers who have a financial hardship. Under IBR plans, monthly payments are limited based on the borrower’s income.
Remember, student loans must be repaid, even if the student does not graduate, cannot find a job, or was unhappy with the school. Student loans are not automatically discharged in bankruptcy.
For more information on student loans, visit the U.S. Department of Education website, www.ed.gov. Another helpful website is www.studentloanborrowerassistance.org, which comes from the National Consumer Law Center.
If you have problems with federal student loans, contact the Federal Student Aid Ombudsman Group at www.ombudsman.ed.gov. If you have problems with private student loans, contact the Consumer Financial Protection Bureau’s Private Student Loan Ombudsman at www.consumerfinance.gov/complaint (click on “Student Loan”).
IMPORTANT: Avoid Scholarship Scams! Many colleges and universities have limited scholarships, or money that does not need to be paid back. Find out how to apply for scholarships on a school’s website or by contacting the financial aid office.
Beware! Some companies claim to offer “scholarships,” but they are actually trying to steal your cash, credit card number, or bank account number. Ways to protect yourself are:
- Never give your credit card or bank account number to “hold” a scholarship “” this is a scam! Real scholarships do not ask for credit card or bank account numbers.
- Real scholarships are free. If you have to pay money to apply, the scholarship is a scam.
- If someone calls and says you were “selected” for a scholarship, but you never applied for any scholarship, this is a scam! Hang up the phone and do not provide any personal financial information.
 Cuyahoga Community College, Tuition & Payment Schedule for 2013-2014 Academic Year, available at http://www.tri-c.edu/payingforcollege/Pages/TuitionPaymentSchedule.aspx. The cost is about $1,200 for Cuyahoga County residents and about $1,500 for other Ohio residents.
 Cleveland State University, Tuition and Fees 2013-2014, available at http://www.csuohio.edu/treasury-services/tuition-and-fees.
 Lincoln College of Technology, Net Price Calculator, available at http://www.lincolnedu.com/net-price-calculator.
This article was written by Legal Aid Managing Attorney Julie Robie and appeared in The Alert: Volume 29, Issue 3. Click here to read the full issue.
What should I know about pre-paid debit cards?
People are swiping more at the checkout line, and they are not using a traditional credit or debit card. Millions of consumers are now using prepaid debit cards to make payments. Prepaid cards are debit cards without a bank account attached. Cards provide instant benefits to customers including access to a wide array of ATM networks, faster payment, and less of a need to carry cash.
The speedy growth in the prepaid debit card market is due to several needs. First, nearly 30 percent of Ohioans are under-banked. This means either they have no bank account or they have an account but use check cashers and fringe lenders. These cards fill some of that void. Second, cards reduce costs to employers and government agencies. It is cheaper and quicker to use a debit card than to produce a paper check. Ohio has moved to cards (if direct deposit is not used) for unemployment and food assistance. Social Security, if not direct deposited, is now also provided on debit cards. Nevertheless, there are some costs to the consumer. Consumer advocates have rightful concerns about the fees on these cards and how much the user knows about them. Some cards charge for basic services like monthly access and ATM fees. Additional fees include overdraft, replacement, paper statements, customer service calls, and load fees. A major concern is that some cards have a point-of-sale transaction fee, meaning a charge “per” swipe. The overall concern is that fees will add up and reduce the overall benefit of the card.
Perhaps the largest challenge for clients entering the field of prepaid debit cards is the abundance of choices. There are hundreds of different cards with different fee structures. Greater openness is needed so that customers can compare cards to each other. A nonprofit research group, CFSI, designed a disclosure box that is an excellent way for customers to understand the costs of a card and compare it to others (see below).
Some advice for card shopping includes:
- Stay away from celebrity-branded cards, which often have higher fees;
- Avoid cards with overdraft fees and lines of credit;
- Determine what functions are of interest to identify the best card; and
- Direct deposit into a bank account is almost always the best option.
This FAQ was written by David Rothstein of Policy Matters Ohio and the New America Foundation, and appeared as a story in Volume 28, Issue 3 of “The Alert” – a newsletter for seniors published by Legal Aid. Click here to read the full issue.
What should I know about payday loans?
In June 2008, consumer advocates celebrated when former Governor Strickland signed the Short- Term Loan Act. The Act capped annual interest rates on payday loans at 28%. It also provided for several other protections on the use of payday loans. Consumers had another victory in November 2008. Ohio voters upheld this new law by a landslide vote. However, these victories were short-lived. The payday loan industry quickly came up with ways to get around the new law and continues to operate in a predatory way. Today, four years after the Short-Term Loan Act passed, payday lenders continue to avoid the law.
Payday loans in Ohio are usually small, short-term loans where the borrower gives a personal check to the lender payable in two to four weeks, or allows the lender to electronically debit the borrower”s checking account at some point in the next few weeks. Since many borrowers do not have the funds to pay off the loan when it is due, they take out new loans to cover their earlier ones. They now owe even more fees and interest. This process traps borrowers in a cycle of debt that they can spend years trying to escape. Under the 1995 law that created payday loans in Ohio, lenders could charge an annual percentage rate (APR) of up to 391%. The 2008 law was supposed to address the worst terms of payday loans. It capped the APR at 28% and limited borrowers to four loans per year. Each loan had to last at least 31 days.
When the Short-Term Loan Act became law, many payday lenders predicted that following the new law would put them out of business. As a result, lenders did not change their loans to fit the new rules. Instead, the lenders found ways to get around the Short-Term Loan Act. They either got licenses to offer loans under the Ohio Small Loan Act or the Ohio Mortgage Loan Act. Neither of these acts was meant to regulate short-term loans like payday loans. These two laws allow for fees and loan terms that are specifically not allowed under the Short-Term Loan Act. For example, under the Small Loan Act, APRs for payday loans can reach as high as 423%. Using the Mortgage Loan Act pokies online for payday loans can result in APRs as high as 680%.
Payday lending under the Small Loan Act and Mortgage Loan Act is happening all around the state. The Ohio Department of Commerce 2010 Annual Report shows the most recent breakdown of license numbers. There were 510 Small Loan Act licensees and 1,555 Mortgage Loan Act registrants in Ohio in 2010. Those numbers are up from 50 Small Loan Act licensees and 1,175 Mortgage Loan Act registrants in 2008. On the other hand, there were zero Short-Term Loan Act registrants in 2010. This means that all the payday lenders currently operating in Ohio are doing business under other laws and can charge higher interest and fees. No payday lenders are operating under the new Short-Term Loan Act. The law specifically designed to protect consumers from abusive terms is not being used. These are troubling numbers for consumers in need of a small, short-term loan with fair terms.
As of right now, there are no new laws being considered in the Ohio General Assembly that would close these loopholes and solve the problems with the 2008 law. The payday loan industry has avoided the Short-Term Loan Act for four years, and it does not look like this problem will be resolved soon. As a result, it is important for consumers to remain cautious about payday loan stores and, where possible, borrow from places other than payday lenders.
This FAQ was written by Katherine Hollingsworth, Esq. and appeared as a story in Volume 28, Issue 2 of “The Alert” – a newsletter for seniors published by Legal Aid. Click here to read the full issue.
Consumer Protections and Scams: What should I know about stimulus check scams and collection by creditors or banks?
How will I know my stimulus payment is real and not a scam?
Most people who get a stimulus check will have it automatically direct deposited into their bank account by the IRS within weeks. But some scammers may use official-looking fake checks to steal money and confuse people into sharing personal information.
Some things to know to avoid fake check scams include:
- The check is not in the mail – yet. Reports say that paper checks – for people without direct deposit – will start arriving in May at the earliest. So, if you get an economic impact payment, stimulus, or relief check before then, or you get a check when you’re expecting a direct deposit, it’s a scam.
- The IRS will not send you an overpayment and make you send the money back in cash, gift cards, or through a money transfer.If you get an official-looking check for more than what you were expecting – say, for $3,000 – the next call you’re likely to get is from a scammer. They’ll tell you to keep your $1,200 payment, and return the rest by sending cash, gift cards, or money transfers. It’s a scam that will leave you owing money to your bank.
- That’s not the IRS calling, texting, or emailing. Scammers are sending official-looking messages – including postcards with a password to be used online to “access” or “verify” your payment or direct deposit information. The IRS will not contact you to collect your personal information or bank account. It’s a scam.
More information from the Federal Trade Commission can be found at https://www.consumer.ftc.gov/blog/2020/04/coronavirus-checks-flattening-scam-curve.
If you think something is suspicious, you can report the activity to the FTC here.
If I owe my bank for overdraft fees, can the bank take my stimulus check money to pay that fee?
Yes. Banks have the right to “offset” any deposits to pay off delinquent loans, overdraft fees, or other charges. Banks have immediate access to the stimulus checks when they are direct deposited into accounts for their customers. In addition, banks can repay debts owed to them ahead of other private debt collectors having access to the money in the account. Some banks are choosing to pause their collections on negative account balances and overdraft fees to give customers access to the full stimulus money deposited into their account, but many others are not. If you think you might owe your bank money, you should call your bank to ask how they are handling this situation.
A creditor has a judgment against me. Can it attach my bank account to take my stimulus check?
Probably yes. While the stimulus checks cannot be garnished/attached for debts owed to federal or state governments, the law does not stop private debt collectors from seizing the money through a bank account attachment. On April 13, 2020, Ohio Attorney General Dave Yost issued a notice which said that the stimulus checks should be protected from any sort of attachment or garnishment by someone who has a judgment against you (also known as a “judgment creditor”). This means that the judgment creditor should not be able to take the money from your stimulus check. However, AG Yost’s notice does not prevent a Court from granting a request from a judgment creditor to garnish or attach your bank account.
If a judgment creditor may be able to take my stimulus check, how can I protect the money that I receive?
Your safest bet is to withdraw the money you receive from your stimulus check as soon as it hits your bank account. You should either take the money out as cash or spend the money using a debit card to pay for necessary goods or services (i.e. groceries). Judgment creditors are more likely to focus on larger bank, so you may be more protected if you bank with a smaller local bank or use a prepaid card for your banking.
My stimulus check was taken by a judgment creditor or by my bank. What do I do now?
Contact Legal Aid’s intake department (https://lasclev.org/contact/). Depending on the facts of your situation, there may be claims that an attorney can make against the judgment creditor or bank for unfair or improper debt collection.
Where Can I Get Reliable Information about COVID-19 scams?
For up to date information about scams related to COVID-19, visit the Federal Trade Commission, The Office of the Ohio Attorney General or the United States Department of Health and Human Services Office of Inspector General. For free virtual tax preparation services through the Cuyahoga Earned Income Tax Credit Coalition, email firstname.lastname@example.org with a name, phone number and what assistance is needed.
Nonprofits and Small Businesses: What programs can help nonprofits and small businesses during COVID-19?
Where can I find guidance for businesses during COVID-19?
There are many federal, state, and local resources providing valuable information for small business owners.
State of Ohio Resources:
You may contact a local Small Business Development Center of Ohio for small business guidance and resources. To find a local center, visit https://clients.ohiosbdc.ohio.gov/.
The Ohio Chamber of Commerce COVID-19 Business Resources webpage provides information for small business owners on a variety of COVID-19 related topics including Ohio’s Executive Orders, Unemployment and Workers’ Compensation for employers, Ohio Department of Health Employee Screening Guidelines, and financial relief resources.
There are several organizations/government agencies in Northeast Ohio providing valuable information and assistance for small business owners during the coronavirus pandemic. These organizations include:
Northeast Ohio Hispanic Business Center (ask for a referral to Legal Aid if needed)
Economic & Community Development Institute(ECDI)(ask for a referral to Legal Aid if needed)
Are there any funding or financial relief programs for small businesses?
Yes. The Coronavirus Aid, Relief, and Economic Security (CARES) Act recently passed by Congress included several programs intended to support small businesses. The Small Business Owner’s Guide to the CARES Act published by the U.S. Senate Committee on Small Business & Entrepreneurship provides a comprehensive overview of these programs. Below is information about specific CARES Act programs and links to relevant resources.
What loans are available to help small businesses in Ohio cover basic operating expenses during COVID 19?
JobsOhio, Peoples Bank, and First Federal/Home Savings Bank have formed a partnership to support existing small business clients with maintaining operations and payroll. JobsOhio has committed up to $50 million to assist Peoples Bank and recently merged First Federal Bank and Home Savings Bank with providing lending support to companies negatively affected by COVID-19. This assistance bolsters each bank’s ability to provide additional financing on favorable terms for local businesses in good standing that would otherwise not be able to access this credit due to COVID-19. Eligible businesses can use the newly available loan funds for working capital, including payroll, rent, mortgages or other fixed debts, utilities, and other bills. For information on how to apply for this lending support, businesses should visit peoplesbancorp.com/coronavirus, First-fedbanking.com/COVID-19 or Homesavings.com/COVID-19.
What is the Paycheck Protection Program (PPP)?
The Paycheck Protection Program established by the CARES Act provides funds to small businesses, eligible nonprofit organizations, Veterans organizations, and Tribal businesses. These funds may be used to pay up to 8 weeks of payroll costs including benefits; and to pay interest on mortgages, rent, and utilities.
For more information about the Paycheck Protection Program visit the Small Business Administration website at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp.
To apply for the PPP, contact the bank where your business already has an account. If your bank is not an SBA lender, search for other banks who are SBA lenders and who will make loan to a business that is not already a customer of that bank. Find an eligible lender here. Find a sample PPP borrower application form here, but check with your bank because it may have its own form.
What is the Small Business Debt Relief Program?
The Small Business Debt Relief program provides immediate relief to small businesses with non-disaster loans through the Small Business Administration (SBA). Under this program the SBA will cover all loan payments on these SBA loans for six months, including principal, interest, and fees.
For more information about the Small Business Debt Relief Program, visit the U.S. Small Business Administration website at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-debt-relief.
What are the Economic Injury Disaster Loans & Emergency Economic Injury Grants?
Under the Economic Injury Disaster Loan (EIDL) small businesses may request up to $2M per business to provide economic relief for businesses experiencing a loss of revenue. Up to $10,0000 of the EIDL may be considered an “advance” EIDL advance funds will not have to be repaid.
For more information about the Economic Injury Disaster Loan visit: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance.
To apply for the Economic Injury Disaster Loan visit: https://disasterloanassistance.sba.gov/s/Here are step-by-step instructions on how to fill out the EIDL application.
Can I apply for both EIDL and PPP?
Yes, you can apply to both. However, you cannot use EIDL and PPP money for the same purposes during the same period of time.
What resources assist small businesses located in the City of Cleveland?
The City of Cleveland is prepared to help businesses weather the economic impact of the COVID-19 pandemic and has established the Emergency Working Capital Fund Loan. For more information and to apply visit: https://rethinkcleveland.org/news/city-of-cleveland-emergency-working-capital-loan-fund.
The Cleveland City Council also recently passed Ordinance No. 341-2020 which authorizes the Director of Economic Development to defer payments on loans owed to the City. For more information visit the City of Cleveland Economic Development Department at https://rethinkcleveland.org/covid-19.
I want to save more money for emergencies. How do I start?
Saving money is hard. If it were easy, we all would have plenty for retirement and at least three months of income socked away in emergency savings accounts. The worst thing people do when it comes to saving is not start at all.
More than 25 percent of Clevelanders are “under-banked” meaning if they have a checking account they don’t have anything in savings or use high-cost non-bank services. More than half of all American families don’t have enough reserves in their savings accounts to pay $1,000 for an emergency.
For every message we hear about saving, there are ten about how to spend. Cleveland Saves, a project of NHS of Greater Cleveland, is all about the message of saving by setting goals, planning, and starting small. One type of savings account that families should strive to set-up and keep separate from spending accounts is an emergency savings account. An emergency account is the best way to avoid borrowing and increasing debt if something unplanned occurs such as a car repair, health issue, or home repair.
Cleveland Saves works with Savers at all income levels. Some of the best practices to save money are…
- Split your paycheck, some into checking (about 90 percent) and the rest into savings. Your HR department can help you do this easily with direct deposit.
- Reduce your eating out budget, especially lunches. Food budgets are one area that we have a lot of control over.
- Watch spending on credit cards and other loans since paying interest takes away from earning interest.
- If you get a tax refund, be sure to purchase U.S. Savings Bonds or split your tax refund into a savings account.
- Leverage community resources that are near or entirely free such as public libraries, free tax preparation, playgrounds, and museums.
Sign-up for Cleveland Saves now. Go to www.clevelandsaves.org and you will be enrolled in minutes. Remember that saving is a habit. If you start small and think big, the habit of saving will help you during times in your life you earn less, and will be passed on to your children. Have more questions? Contact one of our financial capability counselors at 216.458.HOME.
This article was written by David Rothstein from Neighborhood Housing Services of Greater Cleveland and appeared in The Alert: Volume 30, Issue 1. Click here to read the full issue.
I feel trapped by payday loans. How can I escape the cycle?
A payday loan is a short term, high interest loan designed to cover your expenses until your next payday. Payday lenders increase their profits by making loans with very high interest rates, but borrowers often cannot afford to pay them back. As a result, borrowers get trapped in a cycle of borrowing more each pay period and paying more fees to cover the original loan. Payday loans seem like an easy solution for unexpected emergencies like a hospital bill or car repair, but usually end up costing more than you expect.
Below are some steps that you can take to get out of the payday lending cycle.
- Consider taking out a small loan with an affordable annual percentage rate (APR) from a credit union to help you get out of debt with the payday loan company. Always compare options from different lenders and find out about the terms of any loan before you commit to it. If you have trouble making your payments, contact your credit union right away to ask for more time or a payment plan.
- Contact your local consumer credit counseling service for help working out a debt repayment plan with payday lenders.
- If payday lenders are electronically withdrawing money from your bank account, tell the lender in writing they are no longer authorized to withdraw money from your account. Also, send a letter to your bank to let them know that automatic withdrawals by the payday lender are no longer authorized. Include a copy of the letter you sent the payday lender. Be sure you date and sign the letters, as well as keep copies.
Some ways to avoid getting stuck in a payday loan cycle in the future include creating a budget and sticking to it. Also, begin saving just a small amount each month. See the article in this issue of The Alert called “Cleveland Saves” for helpful ideas about how to start saving. Additional information about payday lending problems and solutions is available on the Federal Trade Commission website at www.consumer.ftc.gov/articles/0097-payday-loans.
This article was written by Legal Aid volunteer Iva Jeras and appeared in The Alert: Volume 30, Issue 1. Click here to read the full issue.
Loan shark pushed woman to homelessness, makes recompense when confronted with attorney
All of Hannah Richard’s money was going toward what seemed like never-ending payments on a $2,000 auto title loan she had taken out to fix her car after an accident. An auto title loan is a loan for a small amount of money and for a short time. To get an auto title loan, you give the lender the title to your vehicle – for example, your car, truck or motorcycle. You also pay the lender a fee to borrow the money. You usually have to repay the loan in 30 days. These types of loans can easily trap someone like Ms. Richards in a downward spiral of debt.
As the debt snowballed, Ms. Richards (name changed to protect client privacy) was no longer able to pay her rent. The 61-year-old, had to leave her long administrative career because of health issues, and was reduced to couch surfing and living out of her car. Yet the loan company insisted she still owed them nearly $1,600, even after she paid them more than double the original loan amount.
Ms. Richards turned to Legal Aid, where attorney Katherine Hollingsworth, paralegal Kristen Nawrocki and social worker Dani Lachina worked on her case. Despite being homeless, Ms. Richards had kept all her financial documentation. Armed with this evidence, Ms. Hollingsworth contacted the lender’s attorney, who was quick to offer to drop the lien, return the title, and give Ms. Richards $1,000.
“When she went to the lender herself they were unsympathetic,” said Ms. Hollingsworth. “But the company seems to have made a business decision to offer a quick settlement if they are contacted by a lawyer.”
In addition to saving Ms. Richard’s car from wrongful repossession and recovering some of the thousands she had paid in fees and interest over the course of the loan, Legal Aid helped connect her to affordable housing options. Now that her monthly income isn’t disappearing into an endless loan payment, Ms. Richards is in a better position to move into stable housing.
“I’m very grateful for the help,” Ms. Richards says of her Legal Aid experience. “My attorney and paralegal were extremely thorough, professional and caring. They made the nightmare end.”