Part 1: MONEY, DEBT, AND THE LAW 101
According to the Federal Reserve, credit card debt reached $884.8 billion this month, and student loan debt topped out at $1.8 trillion. The average household carries $15,609 in credit card debt, while the average student loan debt is $32,956. At the same time that people are struggling to manage their debt burden, it is quite likely that many people who could benefit from financial planning, financial counseling and financial literacy education are reluctant to seek any help because they are so focused on their debt load, living in the problem rather than seeking out a solution.
These “missing clients” present missed opportunities for the financial professionals who aim to increase consumers’ access to financial resources, and for consumers, who are being deprived of opportunities to grow their assets with the guidance of the very experts who could make a huge difference in their long-term financial stability.
Consumer debt generally refers to household, rather than business debt, and includes credit cards, medical debt, student loans (a category unto itself), auto loans, and other forms of household-credit. Consumers may fall into delinquency on the debts they owe for a variety of reasons: either as a result of a consumer’ own dereliction (i.e. slow or missed payments due to overspending or poor budgeting); as a result of the misdeeds of others(i.e. identity fraud or a vendor’s errors in recording balances and payment histories); or through uncontrollable causes, such as the loss of a job or as a result of a serious illness, which can have an equally disastrous impact on a consumer’s ability to repay her debts in a timely fashion.
Not surprisingly, the debt collection industry has become increasingly aggressive over the years as consumer debt has escalated and more and more consumers have fallen behind on their obligations.
Generally, once a consumer is far enough into arrears, creditors are going to characterize the account as in default and refer the account to collection regardless of the reason for the default. The collection process often starts off in a company’s in-house collection department since a creditor’s first choice is to recover whatever it can without having to pay an outside debt collector for their services. Eventually, the large, institutional creditors will sell off uncollectible debts for pennies on the dollar, recouping whatever they can and leaving the consumer to deal directly with whatever company purchases the debt.
An entire industry has grown up around these “third-party” debt-buyers who, in the worst case, are known for their predilection towards predatory debt collection practices as the norm. Such practices include harassing or abusive phone calls, threats of violence or illicit enforcement actions, or contact with an employer even when they know that such contact is prohibited by the employer.
Unfortunately, the debt collection industry is largely unregulated. The good news is that every level of government has begun to take steps to protect consumers from predatory debt collection practices.
As a lawyer, I occasionally volunteer in some consumer law clinics, and I have found that most consumers want to pay what they owe, but they also want to be protected against predatory debt collection practices. Many debtors, already in trouble with their finances, fear that a creditor will take the assets that they do have without giving them a chance to defend themselves. Suffice it to say, regardless of how much a consumer owes or whom he owes it to, every debtor is entitled to notice and an opportunity to be heard before a collector can start garnishing wages and freezing bank accounts.
Increasing awareness among financial professionals about the rights and responsibilities that attend the debt collection process, increases the benefits to clients and consumers. In the coming weeks I will discuss some of these most basic legal rights and responsibilities. More about notice and an opportunity to be heard next week.
Guest Contributor: Marcy Einhorn, Esq.
Marcy will host AFCPE’s FPA Connect Webinar on Thursday, June 18, 2015. Her 3 part series on Money, Debt & the Law will be posted each Thursday leading up to this event.
MFLN Personal Finance Webinars
Founded in 2012, Military Families Learning Network (MFLN) Personal Finance aims to build the financial management capability and educational background of Personal Financial Management (PFM) Program Managers. PFMs are employed by the military to provide educational and counseling to active duty military, their family members, and retirees. Many PFMs hold the Accredited Financial Counselor (AFC®) certification.
Held monthly, MFLN webinars offer AFC professionals the opportunity to earn continuing education credits on topics that are tailored for and specific to the work they are doing in the field. The online format accommodates the unique needs of PFMs located on military installations anywhere in the world. Recordings of the webinars and online social media spaces can also be utilized at the convenience of these professionals, without regard to the impact of location or time zones.
The MFLN team includes two long-time AFCPE® leaders and personal finance and resource management experts, Dr. Michael Gutter, PhD and Dr. Barbara O’Neill, PhD, CFP®, AFC®, CHC®. Dr. Gutter and Dr. O’Neill act as webinar speakers or reviewers of outside speakers’ content, including presentation PowerPoint slides and any resources or web links shared with participants. Their social media specialist, Molly Herndon, MS, works with the team to develop new and innovative ways to engage our network online, including the use of blogs, videos, and Twitter chats. The MFLNPF team frequently interacts with DoD staff to assure that planned programs meet audience needs.
MFLN is a leader in professional development opportunities for financial professionals who work directly with our servicemembers, veterans and military families.
MFLN programming is a collaborative of Cooperative Extension, the US Department of Defense (DoD) and the US Department of Agriculture, and the MFLNPF team frequently interacts with the DoD to assure that planned programs meet audience needs. They also meet the needs of Extension professionals and others working in a financial education or counseling capacity with military Service Members.
MFLN team strives to address the unique financial concerns of the military by applying current research and feedback from their audience on these topics. Throughout the webinars, moderators keep content engaging through the use of interactive polls and questions directed to participants. Speakers also select engaging resources for participants, which supplement materials and topics covered in web conferences. These include relevant journal article, topical news articles and links, web resources, case studies, and videos.
For those new to MFLN webinars, all webinars and related resources are recorded and archived so that they may be accessed at no cost by anyone at any time. This allows practitioners to, not only review slides, but to put the content shared into context and to review the content as often as needed. PFM staff is also encouraged to replicate programs, and program resources are shared with participants who are interested in presenting, replicating, or adapting MFLN programs to best meet the needs of their audiences.
MFLN is a leader in professional development opportunities for financial professionals who work directly with our servicemembers, veterans and military families and the results of their educational efforts can be seen through the positive feedback received from program attendees, as well as the work of our military’s PFMs. In a recent anonymous survey, 95% of respondents found the content of MFLN webinars to be directly relevant to their work, 68% reported an increase in their knowledge due to the subject matter presented, 94% intended to directly apply knowledge gained to their jobs and 89% of respondents indicated they felt better prepared to teach clients about subject areas covered in MFLN programming.
Click here to learn more about the annual AFCPE Awards and 2014 award winners. Nominations for the 2015 AFCPE Awards opens in June.
In honor of 2015 Military Spouse Appreciation Day, AFCPE is proud to honor the incredible work of the FINRA Foundation Military Spouse Fellows. Since the program’s inception in 2006, military spouses have provided hundreds of thousands of hours of financial counseling and education to our military service members, military families and veterans.
Through one-on-one counseling, group counseling and educational trainings, the work that they do positively impacts the financial readiness of the military community at military installations around the world.
Today we say pause to say thank you for all of your incredible work and your commitment to serving our country!
Sometimes we just need to get back to the basics. What is your definition of a need? How do you define a want? A popular movement in America is the minimalist approach. By their lifestyle and desire to be free from debt, many are getting rid of all but the basics to live a simpler life. On the other hand we have people laden with heavy debt because they’ve over-indulged in acquiring things. In fact, we’ve lost a sense of what we need in life versus what we think we need. It is so easy to grasp onto the extreme way of handling finances rather than being diligent in finding a right balance. So what constitutes a genuine need?
A NEED is:
Necessary for survival:
Eating- Food is necessary to survive. In America we have an overabundance of convenient, rich, succulent foods. However, most cultures around the world can survive on simple grains, vegetables, legumes, and fruits. Meat is a luxury, unless you don’t mind eating hunted foods. It is possible in hard financial times to eat inexpensively if you exercise the self discipline to plan ahead and prepare less convenient foods.
Ensemble- We all need clothing to shelter our bodies, keep us warm, and make us presentable. Visit thrift shops and discount stores to find the clothing you need. In our culturewe often let fashion define who we are. But in reality you could get by with undergarments, socks, one or two pair of shoes (depending on your job), bottoms and tops.
Dwelling- You need a place to live. So many people get into a bind by renting or purchasing a home far outside of a logical and reasonable budget. Find a clean, safe place that serves the purpose of keeping you and your family out of the elements that fits into your budget.
So what constitutes a want? Here are some popular things that our modern society will often say are needs, but in reality, if someone wants to be honest, a person could live without.
Wheels- If you don’t have the money for a vehicle or for the basic upkeep of a vehicle, research your alternatives. Can you walk, ride a bike, use public transportation, ask for a ride, carpool, etc? We recently heard of James Robertson, a Detroit man who walked 21 miles to and from work every day since 2005. He came to everyone’s attention because a college student heard of his plight and started a crowdfunding campaign to raise money for him. He is a modern day example of working hard and surviving without a vehicle.
Activities- “I need to do stuff.” Think about ideas to engage in free and appropriate activities. Libraries, parks, playgrounds, and community events are a few ideas that offer alternatives with vast opportunities.
Network: Internet, phone, etc. Everyone needs to be accessible right? Use a prepaid cell phone plan. Utilize the free Wi-Fi offered at most public places. Don’t pay unnecessarily “for home use” if you need to find ways to save money. Or stay at the cheapest tier possible. It might be a little slower but at least you have access when you want it.
Television- I remember hearing in an education setting that every child needed to have a television to stay in touch with society. But if you can’t afford a basic access, don’t overextend yourself for entertainment. You and your kids have plenty of interaction with society. Most schools have educational videos they play during class. Newer TVs are usually programmed so you can use antennae to get local content. Save up for a one time purchase of a TV antennae and still access TV in your home.
The bottom line is: If you cannot afford it, you might not truly need it. Once you’ve managed your debts and paid them down you might be able to reincorporate your wants back into your lifestyle comfortably. Work to get back to the basics!
Guest Blogger: Ester Johnson, AFC®
As we say goodbye to April and Financial Literacy month, we reflect on numerous wonderful events that many of you probably participated in to promote this topic so dear to us. These events have all grown out of one special event, Financial Literacy Day on Capitol Hill. The event began in 2003 as a small gathering sponsored by the Council for Economic Education, Junior Achievement, and the Jump$tart Coalition. This year, more than 60 organizations came together to promote financial literacy and share the services they provide with congressional staff and the public.
Laura Levine, president and CEO of Jump$tart Coalition welcomed the gathering and commented on the ability of the event to bring together such a diverse group of organizations to share their unique talents and services but ultimately focused on the same noble goal: financial literacy for all. This idea struck me in her remarks but even more so as the day wore on. While a few staffers came by the booth to talk to me, the majority of my day was spent discussing AFCPE® with representatives from many of the other organizations present. This is one thing that I love about our industry. While each company wants to succeed, everyone is united in a desire to help our clients achieve financial self-sufficiency. Each group may bring a different service or tackle the challenge from a different angle, but we are all part of the greater solution.
Our booth this year was situated next to the representative from the CFP Board. Throughout the day we had a great conversation about how our certifications complement each other and provide for talented practitioners throughout the spectrum of financial education. I would overhear my neighbor plugging AFCPE and the AFC® in his discussions with other represented organizations and I did the same for him.
Throughout the day I was able to speak with representatives from universities, financial service providers, financial service foundations, non-profits, government agencies, and private companies. I talked to students and staffers as well as people from Jump$tart, Junior Achievement, the USDA, Vanguard, National Credit Union Foundation, and Nerd Wallet among many others. Some were personally interested in our certifications, some the research our members are doing. Some wanted to tap into our wealth of member knowledge, and some were hoping our members may utilize the tools they offer. But at the end of the day, they were all interested in hearing about how AFCPE supports financial literacy and how they or their organization may be able to join us in that mission.
As we look forward to next year’s financial literacy month, I encourage you to seek out or reach out to other organizations in your area that are promoting financial education. See what they are offering, how you can utilize their expertise, and how AFCPE, your AFC experience, or other organizations you are affiliated with can benefit them.
Guest Blogger: Kira Dentes is a 2013 FINRA Foundation Military Spouse Fellow and AFC® candidate.