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New York State Department Of Financial Services Proposes Comprehensive …

September 1st, 2014

The New York State Department of Financial Services
(DFS) recently became the first state regulator to
propose a regulatory framework for the bitcoin virtual currency
industry. DFS posted its Regulation of the Conduct of Virtual
Currency Business on its website, as well as on the social
media websites Reddit and Twitter, forums utilized by many bitcoin
stakeholders. Given New York#39;s historical role as a
clearinghouse for financial and currency transactions, DFS#39;s
broad regulatory purview as New York#39;s main financial
regulator, and the high-profile initiatives and enforcement actions
this new regulator has pursued since opening its doors in October
2011, it is no surprise that DFS is at the forefront in attempting
to regulate bitcoin.1

At the core of DFS#39;s proposed regulation is a licensing
requirement—the BitLicense—for virtual
currency firms operating in New York. Under DFS#39;s proposal,
firms subject to the licensing requirement must comply with rules
regarding consumer protections, capital requirements, anti-money
laundering, and cyber security. Notably, DFS#39;s proposed rules
are designed for virtual currency businesses. As stated in its
official Notice of Proposed Rule Making, the purpose of DFS#39;s
proposal is to protect New York consumers and users and
to ensure the safety and soundness of businesses
providing virtual currency products and services in New
York.2

Virtual Currency Developments in the Past Year

Since our November 2013 article regarding bitcoin and
DFS,3 significant developments have occurred in the
nascent virtual currency industry. In January 2014, for example,
federal prosecutors in New York seized almost 30,000 bitcoins,
worth approximately $28 million at the time, from the servers of
Silk Road, an online black market site.4 Transactions on
Silk Road are alleged to have occurred entirely in the virtual
currency, which allows users to remain anonymous. A few days later,
a prominent bitcoin advocate, Charlie Shrem, was indicted by a
federal grand jury in New York on charges of running a
bitcoin-laundering scheme through Silk
Road.5 In February 2014, Japan#39;s Mt. Gox, once the
largest bitcoin exchange, announced that its network systems had
been hacked, resulting in the loss of approximately 850,000 of its
customers#39; bitcoins, and about 100,000 of its own, which had a
combined value of about $500 million.6 In March 2014,
the Internal Revenue Service pronounced that for US federal tax
purposes, virtual currency is treated as property, not
currency.7 Because this ruling has significant
implications for when and how a taxpayer should report any gain or
loss on transactions involving virtual currency, some commentators
have suggested that it could reduce the volume of virtual currency
business. And in April 2014, the Chinese government ordered
commercial banks and payment firms to shut down all bitcoin trading
accounts.8

While these reports, and the recent volatility of bitcoin#39;s
price, suggest that the bitcoin market is incurring some growing
pains, there are other signs that it has begun to mature and
stabilize. In May 2014, a pair of prominent bitcoin investors
disclosed in a regulatory filing their intent to list a bitcoin
exchange-traded fund on the Nasdaq stock exchange.9 In
June 2014, the State of California repealed a state law prohibiting
commerce using anything but US currency.10 California
businesses may now accept virtual currencies as a form of payment.
In July 2014, the European Banking Authority warned banks that they
should not buy, hold, or sell virtual currencies until regulators
develop adequate safeguards.11 Significantly, a handful
of major retailers have recently announced that they would take
bitcoin as a form of payment, and real estate deals in excess of a
million dollars have reportedly been completed solely with the
virtual currency.12

These developments have shaped the marketplace within which
bitcoin firms operate. For virtual currency businesses, however,
DFS#39;s regulatory action may have the greatest impact.

The BitLicense

Scope of the Licensing Requirement. The
centerpiece of DFS#39;s proposed bitcoin regulations is the
BitLicense, an idea which DFS introduced in November
2013.13 In order to engage in virtual currency
business activity involving New York, a firm would be
required to obtain a license from DFS.14 A BitLicense
would be required to: 

  1. receive or transmit virtual currency on behalf of
    consumers;
  2. secure, store, or maintain custody or control of such virtual
    currency on behalf of customers;
  3. perform retail conversion services;
  4. buy and sell virtual currency as a customer business; and
  5. control, administer, or issue virtual
    currency.15

DFS#39;s proposed regulation would exempt three types of
entities from the licensing requirement: (1) merchants and
consumers, (2) virtual currency miners, and (3) firms
approved under New York law to conduct exchange services and to
engage in virtual currency business activity.16

The BitLicense Application. To obtain a
BitLicense, a firm must submit an application and an application
fee to DFS.17 The application must include, among other
things:

  • for each principal director, officer, shareholder, and
    beneficiary, detailed biographical information, a background
    report, and a complete set of fingerprints;
  • a detailed business plan;
  • current and projected financial statements; and
  • an explanation of the methodologies used to calculate the
    value of Virtual Currency in Fiat Currency, that is, currency
    issued and designated by a government as legal
    tender.18

DFS must approve or deny each application within 90 days of
filing a complete application.19 Once issued, the
BitLicense remains effective until surrendered by the licensee or
revoked or suspended by DFS.20 DFS may revoke or suspend
a BitLicense, for example, for a violation of any provision of the
proposed regulations.21

A firm with a BitLicense must obtain DFS#39;s prior approval
before taking any action that may result in a material change to an
existing product or service or that may result in a change of
control of the licensed firm or its assets.22

Compliance, Capital, and Examination Requirements

DFS#39;s proposed bitcoin regulations set out detailed
requirements for compliance, capital, books and records, and
reporting.

Compliance Requirements. To ensure compliance
with all applicable federal and state laws, rules, and regulations,
a virtual currency firm will be required to designate a compliance
officer and to maintain written compliance policies reviewed and
approved by its governing body.23 The firm#39;s
compliance policies must include policies regarding antifraud,
anti-money laundering, cyber security, data privacy, and
information security.

Capital Requirements. DFS#39;s proposed
regulations require virtual currency firms to maintain capital in
levels sufficient to maintain the firm#39;s financial
stability.24 DFS will determine a licensee#39;s capital
requirements based on a variety of factors, such as the volume of
the firm#39;s virtual currency business, the amount of leverage
used by the firm, and the firm#39;s liquidity position.
Furthermore, the proposed rules restrict a firm#39;s investment of
retained earnings to certain types of low-risk investments, such as
US government securities, with maturities of up to one year.

Books and Records. For at least ten years, each
firm must keep books and records, including information regarding
each and every transaction, bank statements, minutes of board
meetings, compliance records, including customer identification
documents, and documentation of consumer complaints.25
At DFS#39;s request, each licensed firm must provide immediate
access to all of its facilities and records. 

Reporting Requirements and Regular
Examinations. Each virtual currency firm must submit
quarterly and audited annual financial statements to
DFS.26 Notably, each licensee must notify DFS in writing
of any proposed change to the methodology used by the firm to
calculate the value of virtual currency in fiat currency. Whenever
DFS deems necessary, and at least every two years, DFS shall
examine a virtual currency firm#39;s financial condition, safety
and soundness, management policies, compliance with laws and
regulations, and any activities outside of New York State affecting
the firm#39;s New York business.27  

Anti-Money-Laundering Compliance

DFS#39;s proposed regulatory framework requires virtual
currency firms to establish and maintain an anti-money-laundering
program (AML).28 The firm#39;s governing
body must review and approve a written AML policy, and the firm
must designate an individual as responsible for overseeing and
enforcing the firm#39;s AML program. At a minimum, a
licensee#39;s AML program will include internal policies and
procedures and ongoing training for appropriate personnel to ensure
compliance with AML laws. As part of its AML program, each firm
must keep detailed records for each transaction involving virtual
currency, including the identity of the parties involved and the
precise time of the transaction.

Customer Verification. When opening a new
account for a customer, the firm must verify the customer#39;s
identity and check it against lists maintained by the US Treasury
Department#39;s Office of Foreign Asset Control. For any
transaction involving more than $3,000, the licensed firm must
require verification of the identity of the account holder
initiating the transaction. Additional factors, such as high-risk
customers, high-volume accounts, or accounts on which a suspicious
activity report has been filed, may require enhanced due diligence.
Enhanced due diligence is mandatory for accounts involving foreign
entities, and accounts with foreign shell entities are
prohibited. 

Reporting of Suspected Fraud and Illicit
Activity. Firms must monitor transactions for activity
that might signify money laundering, tax evasion, or any illegal or
criminal activity. The firm must immediately notify DFS upon
detection of a suspicious transaction, including any transaction,
or series of transactions, exceeding $10,000 by a person in a
day.

Cyber Security Requirements

Under DFS#39;s proposed regulations, licensed firms will also
be required to implement a cyber security program.29
Among other things, the firm#39;s cyber security program must
address information security, systems and network security,
customer data privacy, and business continuity and recovery
planning. The proposed rules specifically require the
cyber-security program to provide for various audit
functions, including an annual assessment of the
vulnerability of its systems; audit trail systems, which allow for
the complete and accurate reconstruction of all transactions; and
source code reviews by independent third parties. To oversee and
enforce its cyber-security program on a day-to-day basis, each firm
must designate a Chief Information Security Officer.

Business Continuity and Disaster Recovery Plan.
In case a cyber event occurs which disrupts the firm#39;s normal
business activities, each licensed firm must have in place a
disaster recovery plan to ensure the continuity of services during
an emergency. Among other things, the firm#39;s business
continuity plan must identify data, facilities, and personnel
essential to the continued operations of the firm#39;s
business as well as procedures for maintaining backup facilities
and systems to enable the recovery of data and resumption of
operations. Each firm must maintain a copy of its business
continuity plan at an off-site location.

Consumer Protection

DFS#39;s proposed bitcoin regulations also provide protections
for customer assets.

Consumer Assets. For the protection of the
firm#39;s customers, a licensed firm must maintain a bond or trust
account in US dollars in a form and amount acceptable to
DFS.30 The firm must also hold virtual currency of
the same type and amount, which it owes to each customer.
DFS#39;s proposed regulations prohibit firms from using or
encumbering assets held by the firm on behalf of an account
holder.

Consumer Disclosures. Licensed firms must
disclose to customers general terms and conditions for doing
business with the firm, including the customer#39;s right to
monthly account statements, as well as all material risks
associated with the firm#39;s products, services, and activities
and with virtual currency in general.31 In disclosing
material risks, DFS#39;s proposed rules require the firm to state
that virtual currency is not legal tender, that
transactions in virtual currency are generally
irreversible, that virtual currency#39;s value derives from
the continued willingness of market participants to exchange
Fiat Currency for Virtual Currency, and that the nature
of Virtual Currency may lead to an increased risk of fraud or cyber
attack. A licensed firm must also disclose details specific
to each transaction, including the amount of the transaction and
any fees charged to the customer. 

Consumer Complaint Policies. DFS#39;s proposed
regulations require virtual currency firms to establish written
policies and procedures pertaining to the resolution of customer
complaints.32 In addition to disclosing the firm#39;s
mailing address, email address, and telephone number for receiving
complaints, the firm must also provide notice that consumers can
contact DFS regarding complaints. Once a transaction is complete, a
licensed firm must provide a detailed receipt to its
customers.33

Advertising and Marketing. In any advertising
materials, virtual currency firms must include a legend showing
that the firm is licensed by DFS.34 Licensees must
maintain records of all advertising and marketing materials for
examination by DFS.

Conclusion

The initial 45-day window for public comment on DFS#39;s
proposed BitLicense regulatory framework opened on July 23, 2014,
the official publication date of DFS#39;s notice of
rulemaking.  Members of the virtual currency industry
immediately requested additional time to consider and respond to
DFS#39;s BitLicense proposal since it is the first of its kind and
may serve as a model for other jurisdictions. Some commentators,
for example, have argued that the proposed rules are too onerous
for small businesses.  Instead, they recommend either relaxing
the reporting burdens or exempting small virtual currency firms
altogether. 

In response, DFS has extended the comment period by an
additional 45 days. Comments are now due on October 21, 2014. 
As it currently stands, the proposed regulations require any
existing firm that would be subject to the licensing requirement to
apply for a BitLicense within 45 days of the effective date of the
proposed DFS regulations.  

We will continue to monitor developments with DFS#39;s proposed
bitcoin regulations, along with DFS initiatives generally.

Footnotes

1 For a general discussion of the creation of DFS and its
powers, please see our December 2011 Jones Day Commentary,
The Department of Financial Services: New York#39;s Newest
Financial Regulator (
http://www.jonesday.com/department_of_financial_services/). For
a discussion of DFS#39;s regulatory and enforcement activities in
the first year following its inception, please see our May 2013
Jones Day Commentary, The New York State Department
of Financial Services at the One-Year Mark: A New Aggressive
Regulator WorthFollowing (

http://www.jonesday.com/the-new-york-state-department-of-financial-services-at-the-one-year-mark-a-new-aggressive-regulator-worth-following-05-10-2013/).

For a discussion of DFS#39;s regulatory and enforcement activities
in the second year following its inception, please see our May 2014
Jones Day Commentary, The New York State Department
of Financial Services#39; Recent Enforcement Efforts (

http://www.jonesday.com/the-new-york-state-department-of-financial-services-recent-enforcement-efforts-05-14-2014/).

2 Notice of Proposed Rulemaking on the Regulation of
the Conduct of Virtual Currency Businesses, New York State
Department of Financial Services, 36 NY Reg. 14 (July. 23, 2014).
(http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf.)

3 NY Regulators Turn Their Attention to
Bitcoin, Law 360, Nov. 18, 2013 (http://www.law360.com/articles/488882).

4 Silk Road Forfeits $28 Million of Bitcoins,
The Wall Street Journal, Jan. 16, 2014 (http://online.wsj.com/news/articles/SB10001424052702304603704579325132563396104).

5 Bitcoin Entrepreneur Pleads Not-Guilty to
Money-Laundering, The Wall Street Journal, Apr. 29,
2014 (http://online.wsj.com/news/articles/SB10001424052702304163604579532191256477378);
Two Charged in Alleged Bitcoin-Laundering Scheme,
The Wall Street Journal, Jan. 27, 2014 (http://online.wsj.com/news/articles/SB10001424052702303553204579346711725068816).

6 Almost Half a Billion of Bitcoins Vanishes,
The Wall Street Journal, Feb. 28, 2014 (http://online.wsj.com/news/articles/SB10001424052702303801304579410010379087576).
Mt. Gox has since found about 200,000 of the missing Bitcoins in an
old-format wallet. Mt. Gox Says It Found Missing
Bitcoin Worth About $116 Million, The New York
Times, March 21, 2014 (http://dealbook.nytimes.com/2014/03/21/mt-gox-says-it-has-found-200000-bitcoins-worth-about-114-million/).
Mt. Gox declared bankruptcy in Japan in February and in the United
States in March. Mt. Gox US Bankruptcy Approved to Help
Bitcoin Hunt, Bloomberg, June 17, 2014 (http://www.bloomberg.com/news/print/2014-06-17/mt-gox-u-s-bankruptcy-approved-to-help-bitcoin-hunt.html);
Mt. Gox Head Believes No More Bitcoins Will be Found,
The Wall Street Journal,  June 29, 2014 (http://online.wsj.com/articles/mt-gox-head-believes-no-more-bitcoin-will-be-found-1403850830).

7 IRS Virtual Currency Guidance, Notice 2014-21,
Mar. 25, 2014 (http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance).

8 China Central Bank Warns Banks on Bitcoin,
The Wall Street Journal,  May 7, 2014 (http://online.wsj.com/news/articles/SB10001424052702304655304579547251552490962).

9 Winklevoss Twins to List Bitcoin Fund on
Nasdaq, The New York Times, May 8, 2014 (http://dealbook.nytimes.com/2014/05/08/winklevoss-twins-to-list-bitcoin-fund-on-nasdaq/).
In February 2014, the Winklevoss brothers launched the Winklevoss
Index, which is one of several indices that price bitcoin.
Winklevoss Twins Plan Bitcoin Index, Fortune,
Feb. 19, 2014 (http://fortune.com/2014/07/22/on-winklevoss-bitcoin-index-its-open-season-for-developers/).

10 California Assembly Bill No. 129 (2014);
California Governor Signs Bill to Bring Bitcoin and Other
Currency into Fold, Reuters, June 28, 2014 (

http://www.reuters.com/article/2014/06/29/us-usa-california-bitcoin-idUSKBN0F402T20140629).

11 Bitcoin Faces Regulatory Backlash as EU Tells
Banks to Stay Away, Bloomberg, July 4, 2014 (http://www.bloomberg.com/news/2014-07-04/bitcoin-faces-regulatory-backlash-as-eu-tells-banks-to-stay-away.html).

12 Expedia and Dell have joined Overstock.com, The
Chicago Sun-Times, and Dish Network as retailers which now
accept bitcoin. Expedia Starts Accepting Bitcoin for Hotel
Bookings, The Wall Street Journal, June 11, 2014 (http://blogs.wsj.com/moneybeat/2014/06/11/expedia-starts-accepting-bitcoin-for-hotel-bookings/);
Dell Begins Accepting Bitcoin, The New York
Times, July 18, 2014 (http://dealbook.nytimes.com/2014/07/18/dell-begins-accepting-bitcoin/);
Lake Tahoe Property Sells for $1.6 million in
Bitcoins—Transaction Is Just One of a Handful to Use the
Virtual Currency, The Wall Street Journal, Aug. 8,
2014 (http://online.wsj.com/articles/lake-tahoe-property-sells-for-1-6-million-in-bitcoins-1407534997).
Recently, other investors used bitcoin to purchase a Stradivarius
violin valued in the low millions. Musical Gold:
Can three ambitious siblings turn old violins into a new investment
strategy? The New Yorker,July 28, 2014 (http://www.newyorker.com/magazine/2014/07/28/musical-gold).

13 Press Release, DFS, Nov. 14, 2013, (http://www.dfs.ny.gov/about/press2013/virtual-currency-131114.pdf).

14 NY State Dep#39;t of Financial Services Regulation
of the Conduct of Virtual Currency Businesses, § 200.3(a)
(proposed July 23, 2014) (http://www.dfs.ny.gov/about/press2014/pr1407171-vc.pdf).

15 Proposed Regulation, §§
200.2(n).

16 In March 2014, DFS began accepting applications to
operate virtual currency exchanges, which explains the exemption
for previously approved firms. Order, DFS, Mar. 11, 2014 (http://www.dfs.ny.gov/about/po_vc_03112014.pdf).
While DFS#39;s framework expressly exempts merchants, consumers,
and previously approved firms from the licensing requirement, the
proposed regulations do not identify virtual currency miners by
name. Instead, DFS noted in its July 17, 2014 press release that
the activity of controlling, administering, or issuing a
virtual currency … does not refer to virtual currency
miners. Since some early commenters on DFS#39;s proposal
contend that DFS should exempt miners from the licensing
requirement, it appears that DFS may need to clarify this issue
before finalizing its regulation. See Proposed Regulation,
§ 200.3(c); Press Release, DFS, July 17, 2014(http://www.dfs.ny.gov/about/press2014/pr1407171.html).
For an explanation of how virtual currency is created, or
mined, please see ourcommentary, NY Regulators
Turn Their Attention to Bitcoin, Law 360, Nov. 18,
2013 (http://www.law360.com/articles/488882).

17 Proposed Regulation, § 200.4(a).

18 Proposed Regulation, § 200.4(a)(1) – (14);
200.2(d).

19 Proposed Regulation, § 200.6(b).

20 Proposed Regulation, § 200.6(b).

21 Proposed Regulation, § 200.6(c).

22 Proposed Regulation, § 200.11(a) and
(b).

23 Proposed Regulation, § 200.7(a) –
(c).

24 Proposed Regulation, § 200.8.

25 Proposed Regulation, § 200.12.

26 Proposed Regulation, § 200.14.

27 Proposed Regulation, § 200.13(a)(1) –
(5).

28 Proposed Regulation, § 200.15.

29 Proposed Regulation, §§ 200.16,
200.17.

30 Proposed Regulation, § 200.9.

31 Proposed Regulation, § 200.19.

32 Proposed Regulation, § 200.20(a).

33 Proposed Regulation, § 200.19(e)(1) –
(6).

34 Proposed Regulation, § 200.18.

The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should be
sought about your specific circumstances.

Do away with debt distress

August 31st, 2014

A man named Steve is smiling in his sleep. Apparently, this is because his monthly loan payments were reduced by Dh4,500. If the headline and picture are not convincing enough, this new advertisement from Abu Dhabi Islamic Bank (ADIB) spells out the bank’s offer in detail — take existing credit cards, loans, and other payments to ADIB Debt Settlement, for an interest rate of 4.99 per cent that will eventually reduce to a flat 2.65 per cent per annum.
“Need funds to make your dreams a reality? Now you can get up to Dh5 million against your property,” says Emirates NBD on its website. “If you own a property in the UAE, Emirates NBD offers you the most convenient way to get a loan by mortgaging your owned and unencumbered property.”
RAKBANK is very direct in its online messaging: “Is your outstanding credit card balance causing you pain? Are you suffering from a severe case of card ache? We have just the remedy.” Transferring outstanding balance from other bank cards comes with the offer of a 0 per cent interest for the first three months, and a monthly interest rate of 2 per cent thereafter.
Debt consolidation can typically take any one of these guises — a consolidation loan, a second mortgage or home equity loan or a balance transfer credit card — and it addresses the needs of a diverse target audience. Although the concept is just gaining ground in the UAE, several expatriates may already be familiar with it, and according to one bank, Emiratis have been quick to learn.
On its website, Mashreq explains its debt consolidation loan: “A single payment each month is more manageable than paying several debts at a higher interest rate. That is why so many Emiratis change banks and take advantage of our long-term debt consolidation loans.”

Studentloanconsolidationreviews.org Announces Top Two Student Debt Relief …

August 30th, 2014

>PRWEB.COM Newswire

Baltimore, MD (PRWEB) August 26, 2014

During revolutionary times, Rockville, Maryland was known as Hungerfords Tavern, which was the name of its most familiar landmark. One of the first calls to freedom from British rule was heard at the tavern in 1774. However, one thing Maryland is not free from is unemployment. While it added 7700 jobs this past June, its economy took something of a U-turn as its unemployment rate rose for a second straight month from 5.6% in May to 5.8% in June.

Marylanders are also not free from debt as its residents carry an average of $5,345 in credit card debt and the picture is even bleaker for the states college students. This is because recent graduates owe an average of $25,951 in student loans, which ranks the state as 26th worst in the nation.

While there are a number of reasons why Maryland students are required to borrow money to finance their educations, the biggest is the cost of going to school in state. For example one year at the University of Maryland-College Park now costs $23,876 and a year for a Maryland resident at Towson State University is $23,439. And it gets even worse when it comes to private schools as a year at Hood College costs $48,463 and the total cost of attending St. Johns University for just one year is a mind-boggling $61,083.

The company Studentloanconsolidationreviews.org recently undertook a study of debt relief companies available to help Marylanders that are struggling with student debt. What it concluded is that the two best are National Debt Review and SoFi (Social Finances Inc.).

Studentloanconsolidationreviews.com based this finding on three factors company history, the type of help it offers customers and how it charges them.

We felt that National Debt Relief ranked highest in all three of these categories, said Studentloanconsolidationreviews.org spokesman Michael Smith. It has been in business since 2007 and has helped more than 100,000 families and individuals find relief from their debts. It offers its customers good help in repaying their loans and charges just a flat, one time fee.

What makes National Debt Relief unique is that it does not provide student debt consolidation loans. Weve long adhered to that old saying that you cant borrow your way out of debt, said the companys Paul Ritz. We believe the best way to handle student debts is by finding our customers a repayment plan with lower monthly payments and better terms making it far easier for them to pay off their loans.

National Debt Relief first does an exhaustive study of a clients financial situation and its federal student loan portfolio. It then recommends the repayment plan that would be best for that client. Assuming the client accepts National Debt Reliefs recommendation, the company then prepares all the paperwork necessary to get that person into the new repayment program. Of course, a person could do this paperwork himself or herself for free. However, many of them choose to let the professionals at National Debt Relief shoulder this burden for them.

Studentloanconsolidationreviews.com also gave National Debt Relief high marks because it consistently maintains an A rating with the Better Business Bureau.

The second best option for Marylanders struggling with student debt, according to Studentloanconsolidationreviews.com, is SoFi. However, it is not for everyone as it utilizes peer-to-peer lending and its loans come from the alumni of SoFis 550 member colleges and universities and are restricted to students who are attending or are an alumnus of those schools. In addition, SoFi offers only debt consolidation loans and debt restructuring. Its loans are very inflexible in that they have both fixed monthly payments and fixed terms. Once a person obtains a loan from SoFi he or she loses the ability to change to a different repayment plan should their financial circumstances change dramatically.

SoFi has other eligibility requirements including the fact that a borrower must be a US citizen or permanent resident and must either be employed or have an offer of employment and must be able to enter into a binding contract.

Maryland residents that are struggling with their student debts should definitely go to the Studentloanconsolidationreviews.org for more information on National Debt Relief and SoFi.

Read the full story at http://www.prweb.com/releases/student_loan_debt_relief/in_Maryland/prweb12114970.htm

Here’s what you need to know before taking out a peer-to-peer loan

August 30th, 2014

But what’s all the fuss about, anyway? Here’s a quick rundown of how the P2P lending business works — and if this alternative mode of lending could be appropriate for average consumers.

Since its launch in 2007, Lending Club has served as an alternative to traditional credit lenders for consumers looking for small loans at decent interest rates. The company couldn’t have had better timing. In the wake of the 2008 financial crisis, banks and lenders grew so tightfisted that it became increasingly difficult for subprime borrowers to get access to loans. Peer-to-peer lenders like Lending Club (and its main competitor, Prosper) were more willing to take on these riskier borrowers.

The biggest difference between peer-to-peer lenders and traditional lenders is that the loans are backed by everyday investors. Think of them like Uber but for loans.

What do I need to do to qualify for a loan?

Both Prosper and Lending Club require borrowers to fill out an application for loans online. Unlike typical credit applications, however, they only count as “soft” inquiries on your credit report and won’t negatively impact your credit score. If approved, your interest rate will depend on your credit score, loan amount, loan term, and credit usage and history. The minimum credit score required to qualify for Lending Club is 660 and 640 for Prosper.

Because each state has its own regulations about securities and investing, borrowing and investing from P2P lenders isn’t allowed everywhere. Some states may allow P2P borrowing, while blocking P2P investing, and vice versa. For borrowers, Lending Club is allowed in all but five states (Iowa, Idaho, Maine, North Dakota, and Nebraska). Prosper is blocked in Iowa, Maine and North Dakota. LendingAcademy.com keeps an updated map of states that allow P2P transactions.

How much can I borrow?

Personal loans start as low as $1,000 and can’t exceed $35,000. For small businesses, loans start at $15,000 and are capped at $100,000. Prosper loans range from $2,000 – $35,000 for both personal and small business use. The vast majority (83%) of Lending Club borrowers use their loans to refinance existing loans or pay off their credit cards, and about 5% use loans for home improvement projects. Loans are issued with three or five-year terms, with monthly payments.

What’s so great about P2P loans anyway?

The biggest draw for P2P loans are their interest rates — as low as 7% for borrowers with stellar credit. The average Lending Club interest rate is around 14.7% (slightly higher than the national average for 13%). Considering that the average borrower on the site typically carries debt with a 20.7% interest rate, it can be a much cheaper option to consolidate that debt and go the P2P lending route. That being said, the more risky a borrower appears, the higher their rates will be — just like a traditional mortgage lender or credit card issuer. (Lending Club’s rates go as high as 24.63%, while Prosper’s interest rates are as high as 35.36%).

Here’s a sample of Lending Club’s interest rates. (“Loan Grade” refers to creditworthiness of the borrower, with A being the most creditworthy.

How long will it take to pay my loan off?

P2P loans are issued with three- or five-year terms, with monthly payments. The fact that they’re term-based is another reason to favor them over traditional bank loans.

“Some people like the idea of having a fixed term for the payment,” says Peter Renton, founder of LendAcademy.com, an educational site for novice P2P borrowers and investors. “It’s a kind of enforced discipline. They know they have three or five years on a loan and they will have paid off their debt.”

Are there any hidden fees?

Prosper and Lending Club both charge fees for new loans (1.11% to 5% of the total loan amount at Lending Club, 1% to 5% for Prosper), depending on the size of the loan. The origination fee is included in your APR and subtracted from your total loan balance before you receive it.

If you’re late on payments, however, fees start to pile up. Both sites charge $15 for payments that bounce back and either 5% or $15 (whichever is greater) for payments that are more than 15 days late. If you want to pay with checks, there’s another $15 fee for processing (clearly, online payments are the way to go)

Any tips for a beginner borrower?

You never want to take out a loan that is more than you actually need. Like any type of loan, whether it’s from a bank or a P2P lender, falling behind on payments means paying even more in the long term.

Renton always counsels borrowers to take out the shortest term loans. Shorter terms means lower interest payments.

“The five-year loan is always seductive because it has a lower monthly payment,” he says. “But your interest bill is going to be a lot more.”

Another pro tip: Renton says you might score a lower rate on your loan if you apply for an amount that’s slightly less than a round number. For example, take out a $4,995 loan rather than $5,000. (Because P2P lenders don’t publish the interest rates for loan amounts, we can’t verify this tip, but it may be worth a try.)

Do your homework:

P2P loans can be an inexpensive way to tackle many debts at once. But you should be aware of other options, too. Plenty of credit lenders have 0% balance transfer offers. You can also check to see what the rates are for debt consolidation loans at your bank or credit union.

For more information, there are plenty of free resources on the web that you can use before taking out a P2P loan. Lendingmemo.com offers a free ebook on P2P lending, which you can download here. LendAcademy.com is another great resource and offers daily newsletters with tips for P2P borrowers and investors, alike. Sign up here.

Have you ever used peer-to-peer lending sites like Lending Club or Prosper? We’d love to hear about your experience. E-mail us here: yfmoneymailbag@yahoo.com

READ MORE:

Debt collectors are now preying on other debt collectors

Heres how much $100 is worth in your state

Are college aid planners worth the money?

Conact Mandi here: mandiw@yahoo-inc.com.

Farm Bureau Financial Services Supports Life Insurance Awareness Month

August 30th, 2014

In recognition of September as Life Insurance Awareness Month, Farm Bureau Financial Services is focused on helping consumers better understand their life insurance options and secure the coverage they need for long-term financial stability.

According to the 2014 Life Studies report by LIMRA, a financial industry research company, less than one quarter of middle-market consumers are comfortable with their knowledge of financial-services including life insurance.1

“Life is complicated, but buying life insurance shouldn’t be,” says James P. Brannen, Farm Bureau Financial Services’ Chief Executive Officer. “The best first step is contacting a licensed agent and leveraging his or her industry and product knowledge and experience to help guide you.”

There are many misperceptions about life insurance and the extent to which it can make a difference for individuals, families and businesses. Farm Bureau Financial Services is celebrating Life Insurance Awareness Month by providing the facts that bust some of the most common myths and make life insurance easier to understand for today’s time constrained consumers.

Myth #1: Life insurance is too expensive.
BUSTED: Up to 85% of Americans overestimate the actual cost of life insurance1 and may not realize there are many options from which to choose. A $250,000 15-year level term policy for a healthy 30-year old costs just $250 a year.2

Myth #2: Only families with young children need it.
BUSTED: Life insurance can be the foundation of financial security for your family or business. Proceeds from a life insurance policy can help cover outstanding debt like a mortgage and credit cards or fund financial objectives including retirement.

Myth #3: Children don’t need life insurance.
BUSTED: Buying life insurance for children guarantees their insurability into the future and can be an affordable way to purchase additional coverage as they grow into adulthood. It’s a great way for parents and grandparents to give the young people in their lives the gift of financial security.

Myth #4: I’m young and healthy and don’t need it right now.
BUSTED: Buying life insurance when you’re young and healthy is best! You can benefit from lower rates and also ensure that you have the coverage – and financial security – you need for the long haul.

Myth #5: The life insurance I purchase at work is enough.
BUSTED: The general rule of thumb is that 5-8 times your salary is needed to replace your income if you have dependents (some experts recommend 10-12 times).3 That said, employer benefits, are often just 1-2 times the employee’s annual salary and typically end when your employment ends.

Myth #6: Term insurance can’t be converted to permanent.
BUSTED: Many term policies are renewable and convertible to a permanent policy. After holding your term policy for a set period of time, it may be possible to convert it with a special credit for doing so. The credit helps offset any increase in premium and the usual health assessment may be waived.

Myth #7: Stay-at-home parents don’t need insurance.
BUSTED: Don’t underestimate the importance of a stay-at-home parent; the value he or she adds to the financial stability of the family is substantial. If the person responsible for child care and general household management is no longer in the picture, money will be needed to cover all of those bases so you concentrate on keeping the family grounded and focused on more important things.

About Farm Bureau Financial Services
Through an exclusive, multi-state agent force, the companies affiliated with the Farm Bureau Financial Services brand underwrite, market and distribute a broad range of insurance and financial services products to individuals and businesses. To learn more about our companies or life insurance options, visit www.fbfs.com or: www.facebook.com/farmbureaufinancialservices, www.twitter.com/fbfs or www.youtube.com/FarmBureauFinclSvcs.

1 LIMRA and LIFE Foundation 2014 Insurance Barometer Study
2 Through a Farm Bureau Financial Services agent
3www.Forbes.com

Photos/Multimedia Gallery Available: http://www.businesswire.com/multimedia/home/20140828005985/en/

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Here’s what you need to know before taking out a peer-to-peer loan

August 29th, 2014

But what’s all the fuss about, anyway? Here’s a quick rundown of how the P2P lending business works — and if this alternative mode of lending could be appropriate for average consumers.

Since its launch in 2007, Lending Club has served as an alternative to traditional credit lenders for consumers looking for small loans at decent interest rates. The company couldn’t have had better timing. In the wake of the 2008 financial crisis, banks and lenders grew so tightfisted that it became increasingly difficult for subprime borrowers to get access to loans. Peer-to-peer lenders like Lending Club (and its main competitor, Prosper) were more willing to take on these riskier borrowers.

The biggest difference between peer-to-peer lenders and traditional lenders is that the loans are backed by everyday investors. Think of them like Uber but for loans.

What do I need to do to qualify for a loan?

Both Prosper and Lending Club require borrowers to fill out an application for loans online. Unlike typical credit applications, however, they only count as “soft” inquiries on your credit report and won’t negatively impact your credit score. If approved, your interest rate will depend on your credit score, loan amount, loan term, and credit usage and history. The minimum credit score required to qualify for Lending Club is 660 and 640 for Prosper.

Because each state has its own regulations about securities and investing, borrowing and investing from P2P lenders isn’t allowed everywhere. Some states may allow P2P borrowing, while blocking P2P investing, and vice versa. For borrowers, Lending Club is allowed in all but five states (Iowa, Idaho, Maine, North Dakota, and Nebraska). Prosper is blocked in Iowa, Maine and North Dakota. LendingAcademy.com keeps an updated map of states that allow P2P transactions.

How much can I borrow?

Personal loans start as low as $1,000 and can’t exceed $35,000. For small businesses, loans start at $15,000 and are capped at $100,000. Prosper loans range from $2,000 – $35,000 for both personal and small business use. The vast majority (83%) of Lending Club borrowers use their loans to refinance existing loans or pay off their credit cards, and about 5% use loans for home improvement projects. Loans are issued with three or five-year terms, with monthly payments.

What’s so great about P2P loans anyway?

The biggest draw for P2P loans are their interest rates — as low as 7% for borrowers with stellar credit. The average Lending Club interest rate is around 14.7% (slightly higher than the national average for 13%). Considering that the average borrower on the site typically carries debt with a 20.7% interest rate, it can be a much cheaper option to consolidate that debt and go the P2P lending route. That being said, the more risky a borrower appears, the higher their rates will be — just like a traditional mortgage lender or credit card issuer. Lending Club’s rates go as high as 24.63%, while Prosper’s interest rates are as high as 35.36%).

Here’s a sample of Lending Club’s interest rates. (“Loan Grade” refers to creditworthiness of the borrower, with A being the most creditworthy.

How long will it take to pay my loan off?

P2P loans are issued with three- or five-year terms, with monthly payments. The fact that they’re term-based is another reason to favor them over traditional bank loans.

“Some people like the idea of having a fixed term for the payment,” says Peter Renton, founder of LendAcademy.com, an educational site for novice P2P borrowers and investors. “It’s a kind of enforced discipline. They know they have three or five years on a loan and they will have paid off their debt.”

Are there any hidden fees?

Prosper and Lending Club both charge fees for new loans (1.11% to 5% of the total loan amount at Lending Club, 1% to 5% for Prosper), depending on the size of the loan. The origination fee is included in your APR and subtracted from your total loan balance before you receive it.

If you’re late on payments, however, fees start to pile up. Both sites charge $15 for payments that bounce back and either 5% or $15 (whichever is greater) for payments that are more than 15 days late. If you want to pay with checks, there’s another $15 fee for processing (clearly, online payments are the way to go)

Any tips for a beginner borrower?

You never want to take out a loan that is more than you actually need. Like any type of loan, whether it’s from a bank or a P2P lender, falling behind on payments means paying even more in the long term.

Renton always counsels borrowers to take out the shortest term loans. Shorter terms means lower interest payments.

“The five-year loan is always seductive because it has a lower monthly payment,” he says. “But your interest bill is going to be a lot more.”

Another pro tip: Renton says you might score a lower rate on your loan if you apply for an amount that’s slightly less than a round number. For example, take out a $4,995 loan rather than $5,000. (Because P2P lenders don’t publish the interest rates for loan amounts, we can’t verify this tip, but it may be worth a try.)

Do your homework:

P2P loans can be an inexpensive way to tackle many debts at once. But you should be aware of other options, too. Plenty of credit lenders have 0% balance transfer offers. You can also check to see what the rates are for debt consolidation loans at your bank or credit union.

For more information, there are plenty of free resources on the web that you can use before taking out a P2P loan. Lendingmemo.com offers a free ebook on P2P lending, which you can download here. LendAcademy.com is another great resource and offers daily newsletters with tips for P2P borrowers and investors, alike. Sign up here.

Have you ever used peer-to-peer lending sites like Lending Club or Prosper? We’d love to hear about your experience. E-mail us here: yfmoneymailbag@yahoo.com

READ MORE:

Debt collectors are now preying on other debt collectors

Heres how much $100 is worth in your state

Are college aid planners worth the money?

Conact Mandi here: mandiw@yahoo-inc.com.

Studentloanconsolidationreviews.org Names Two Best Student Debt Relief …

August 28th, 2014

The top two student debt relief options for Minnesota residents reviewed and ranked by Studentloanconsolidationreviews.org.

Minneapolis, MN (PRWEB) August 28, 2014

The state of Minnesota is probably best known for two things – its cold winters and for being the land of 10,000 lakes. Residents of the state know that it actually has more than 10,000 lakes because of the way a lake is defined. Even at that the state has 90,000 miles of shoreline, which is more than California, Florida, and Hawaii combined. As you might guess, Minnesota is a great place to go if you love fishing and water sports.

A fact about the state of Minnesota that isnt quite so much fun is the percentage of its students that are required to borrow money to get through college — an astonishing 70% making Minnesota the fourth worst in the nation. In addition, the average Minnesota student graduates from college owing $31,497. This also makes Minnesota fourth worst in the nation.

What options are available to Minnesotans for student debt relief? According to the online firm Studentloanconsolidationreviews.org there are a number of companies available to Minnesotans but only two that rank best. They are National Debt Relief (NDR) and SoFi (Social Finance Inc.).

While both these companies can help student debt strapped Minnesotans, they use two different approaches, said Studentloanconsolidationreviews.com spokesman Michael Smith. As you might guess from its name SoFi is more of a social organization. It specializes in debt consolidation loans and student loan debt restructuring for a certain type of people. National Debt Relief is a professional debt relief company that offers its customers a variety of repayment options via the US Department of Education.”

The way that National Debt Relief helps a customer is by first analyzing his or her financial situation including family size, current earnings, debts, future earning potential and more. It evaluates the clients federal student loan portfolio then checks to see if there is a repayment plan that would have better terms and a lower monthly payment. If it is able to find such a plan it prepares all of the paperwork required to get its client into the new program. National Debt Relief makes it clear that clients can do this paperwork for themselves free but that many choose to let the professionals at NDR do this for them.

Paul Ritz, a spokesman for NDR said that, “The reason why many people are struggling to repay their student debts is because they were arbitrarily put into the 10-Year Standard Repayment program when they graduated from school. However, this may not be the best program for him or her given their financial circumstances. For example, once we have analyzed their finances and their student loan portfolios we might recommend Pay As You Earn repayment. This is where the borrowers monthly payments are capped at 10% of her or his monthly income. This is a program that was recently modified by Pres. Obama to make as many as 1.4 million more people eligible. Barring this, another and better option might be Extended Repayment where the person would have up to 25 years to repay his or her student loans, which would mean a substantially lower monthly payment”.

Studentloanconsolidationreviews.com also noted that National Debt Relief has consistently maintained an A rating with the Better Business Bureau and that it is a member of the American Fair Credit Council.

As noted above, SoFi is basically a social organization. It has 550 member colleges and universities. For a person to be eligible for a loan from SoFi it must be either attending or an alumnus of one of these schools. On the upside, SoFi offers consolidation loans at both fixed and variable interest rates with introductory rates starting at 0.99%. Its loans include deferment in the event a client becomes unemployed and will even help him or her find a new job. On the downside, SoFi will consolidate both federal and private student loans, which many experts point out is a very bad idea. Once a person does this, he or she loses all of the benefits that come with a federal student loan such as cancellation, deferment, forgiveness and all the repayment options.

Save Money Using the Smart Generations FCU Credit Card

August 28th, 2014

Save Money Using the Smart Generations FCU Credit Card

  • 0 Comments
  • By Katherine Peach
  • August 27, 2014

Generations Federal Credit Union in San Antonio, Texas, provides its members with a way to shop smarter and better manage their money through its low-interest Generations Visa Platinum Credit Card. The card eliminates unnecessary fees, allowing cardholders to use the extra money to enjoy all the entertainment and culture San Antonio has to offer.

Avoid Hidden Costs With the Generations FCU Credit Card

The Generations FCU low-interest credit card offers an APR as low as 8%, with a 25-day grace period on all purchases. Members can avoid interest entirely by paying off the balance each month before the due date. For added savings, there are never cash advance, balance transfer or annual fees. Cardholders can use the credit card to get cash at any of the 55,000 ATMs in the nationwide network without worrying about added costs on purchases.

Transfer to a Low-Interest Credit Card In San Antonio

Afraid to use your credit due to its high interest rates? Unreasonable interest rates can delay paying off credit balances by months or even years for borrowers who are burdened with large debt. Transferring to a low-interest credit card will help keep debt from getting out of control.

Generations FCU members save money thanks to a low, variable APR based on creditworthiness, on top of no balance transfer fees. Whether celebrating 100 years of the San Antonio Zoo at the Zootennial or catching a Spurs game, members are able to include their favorite pastimes this summer with Generations FCUs budget-friendly loan option.

San Antonio Borrowers Owe Less Debt Than National Average

Debt.org reports Texans are more responsible than the typical borrower in the United States; residents owe, on average, $13,500 less debt per person. That said, the debt-help organization found many Texans still struggle to make payments on time.

Generations FCU provides multiple payment options, so members wont run into trouble if they cant make it to a branch during regular business hours. Cardholders have access to online banking 24/7 and may sign up for automatic payments directly from their account each month. Email and text alerts are also helpful reminders to keep track of account activity.

How to Qualify for the Generations FCU Credit Card

To be eligible for the Generations FCU credit card and other financial services, you must reside, be employed, volunteer, attend worship or school, or be a business owner in Bexar County, Texas. To learn more about products or services available in the San Antonio area, contact a credit union representative at (210) 229-1128 or visit one of the 14 branch locations.

Generations Federal Credit Union is a GOBankingRates client.

Student Loan Repayment Scams: How To Avoid Being Ripped Off

August 28th, 2014

NBC News – Millions of Americans are struggling to pay off their student loans and desperate to find a way to lower those monthly payments. Scammers know this, so they’ve created phony student loan “debt relief” companies that promise to help – for a price.

Law enforcement has taken notice of this relatively new industry. Illinois Attorney General Lisa Madigan is cracking down on companies that can’t deliver on their “too good to be true claims” to reduce or eliminate student loan debt. Earlier this month, Illinois became the first state to file a lawsuit against a student loan debt relief agency.

Madigan charged two companies with deceptive marketing for selling bogus or worthless services. Some of these ads promised to help clients enroll in the “Obama Forgiveness Program” – there is no such program. According to the lawsuit, the companies charged as much as $1,200 to do nothing more than fill out paperwork for free government programs.

Telephone agents often falsely claimed the company was affiliated with the US Department of Education, the lawsuit alleges.

Student loan debt is a serious and growing problem in this country. The Consumer Financial Protection Bureau (CFPB) estimates that outstanding student loan debt is approaching $1.2 trillion. About seven million student loan borrowers are now in default.

Last year, the National Consumer Law Center (NCLC), a non-profit advocacy group, studied the student loan debt relief industry. NCLC investigators visited websites, made secret shopper calls, examined contracts and reviewed online complaints.

“There’s a whole range of misrepresentations,” said staff attorney Deanne Loonan. “They either make up a program that doesn’t exist, or they describe a government program and make it sound like it’s their own or claim to have some special way to access it for you.”

In its report, Searching for Relief, the NCLC found numerous problems, including: charging for services that are available for free, failure to disclose fees online or when initially requested, and providing inaccurate information about crucial topics such as consolidation loans and garnishment.

Most of these companies claimed to offer a broad range of services, but NCLC’s secret shoppers didn’t find that. “They’re not a counseling service and they don’t usually go through all the options available,” Loonan told CNBC.

“They’re usually selling loan consolidation, so they are going to steer you in that direction, no matter what.” Loan consolidation is a good option for some people, but it doesn’t work for everybody and may not be available to all borrowers, Loonan said.

NCLC’s mystery shoppers also found that some companies charge a monthly fee of from $20-$50 on top of the steep upfront payment. The report calls these fees “particularly suspect” since it’s unclear what service, if any, the customer is buying on a monthly basis.

What can be done?

People are looking for debt relief, but they don’t know where to get help. That enables companies to charge them for something they could do on their own for free. And while that’s not illegal, it is against the law to make false claims about the nature of the service or lie about being affiliated with the governments Direct Loan Program.

Mark Kantrowitz, an expert on student aid and publisher of the Edvisors Network, believes students should receive better counseling about their loan repayment options – especially students who are about to drop out of school. Dropouts are four times more likely to default and represent about two-thirds of the loan defaults, he said.

Kantrowitz would like to see Congress require debt relief services to “clearly and conspicuously disclose in their advertising and on their websites” that borrowers can consolidate their loans on their own for free at StudentLoans.gov.” In 2008, Congress decided to require a similar notice for companies that charge to prepare the Free Application for Federal Student Aid (FAFSA) form, he noted.

Last week, Illinois AG Madigan told a congressional committee that these scams are the result of a larger problem – too many former students are having a hard time paying down their student loan debt. At the very least, she said, the Department of Education should create a public awareness campaign to get the message out to current and former higher education students that there are programs available that can help them.

“The scammers have advertisements and these advertisements are working,” she testified. “We need ads highlighting real programs to counteract them.”

Madigan would like to see a “streamlined and accessible system” within the Education Department to provide borrowers with information about their options and federal programs that might be able to assist them with repayment. She also called on lawmakers to pass legislation that would allow students to refinance their federal loans to take advantage of today’s low interest rates, similar to what is already offered to homeowners.

Protect yourself.

Do your homework before you do anything. Start with free options and be highly skeptical of any company that charges a fee and requires payment in advance. “Watch out for companies pretending to be blessed by or vetted by the federal government and watch out for companies that pretend to be part of a public repayment program,” cautioned Michelle Grajales, an attorney with the Federal Trade Commission.

Visit the Consumer Financial Protection Bureau or the National Consumer Law Center websites for information about legitimate sources of free assistance. The Illinois AG’s office has prepared a step-by-step guide on student loan debt relief.

Student Loan Repayment Scams: How To Avoid Being Ripped Off

August 27th, 2014

Washington DC — Millions of Americans are struggling to pay off their student loans and desperate to find a way to lower those monthly payments. Scammers know this, so theyve created phony student loan debt relief companies that promise to help for a price.

Law enforcement has taken notice of this relatively new industry. Illinois Attorney General Lisa Madigan is cracking down on companies that cant deliver on their too good to be true claims to reduce or eliminate student loan debt. Earlier this month, Illinois became the first state to file a lawsuit against a student loan debt relief agency.

Madigan charged two companies with deceptive marketing for selling bogus or worthless services. Some of these ads promised to help clients enroll in the Obama Forgiveness Program there is no such program. According to the lawsuit, the companies charged as much as $1,200 to do nothing more than fill out paperwork for free government programs.

Telephone agents often falsely claimed the company was affiliated with the US Department of Education, the lawsuit alleges.

Student loan debt is a serious and growing problem in this country. The Consumer Financial Protection Bureau (CFPB) estimates that outstanding student loan debt is approaching $1.2 trillion. About seven million student loan borrowers are now in default.

Last year, the National Consumer Law Center (NCLC), a non-profit advocacy group, studied the student loan debt relief industry. NCLC investigators visited websites, made secret shopper calls, examined contracts and reviewed online complaints.

Theres a whole range of misrepresentations, said staff attorney Deanne Loonan. They either make up a program that doesnt exist, or they describe a government program and make it sound like its their own or claim to have some special way to access it for you.

In its report, Searching for Relief, the NCLC found numerous problems, including: charging for services that are available for free, failure to disclose fees online or when initially requested, and providing inaccurate information about crucial topics such as consolidation loans and garnishment.

Most of these companies claimed to offer a broad range of services, but NCLCs secret shoppers didnt find that. Theyre not a counseling service and they dont usually go through all the options available, Loonan told CNBC.

Theyre usually selling loan consolidation, so they are going to steer you in that direction, no matter what. Loan consolidation is a good option for some people, but it doesnt work for everybody and may not be available to all borrowers, Loonan said.

NCLCs mystery shoppers also found that some companies charge a monthly fee of from $20-$50 on top of the steep upfront payment. The report calls these fees particularly suspect since its unclear what service, if any, the customer is buying on a monthly basis.

What can be done?

People are looking for debt relief, but they dont know where to get help. That enables companies to charge them for something they could do on their own for free. And while thats not illegal, it is against the law to make false claims about the nature of the service or lie about being affiliated with the governments Direct Loan Program.

Mark Kantrowitz, an expert on student aid and publisher of the Edvisors Network, believes students should receive better counseling about their loan repayment options especially students who are about to drop out of school. Dropouts are four times more likely to default and represent about two-thirds of the loan defaults, he said.

Kantrowitz would like to see Congress require debt relief services to clearly and conspicuously disclose in their advertising and on their websites that borrowers can consolidate their loans on their own for free at StudentLoans.gov. In 2008, Congress decided to require a similar notice for companies that charge to prepare the Free Application for Federal Student Aid (FAFSA) form, he noted.

Last week, Illinois AG Madigan told a congressional committee that these scams are the result of a larger problem too many former students are having a hard time paying down their student loan debt. At the very least, she said, the Department of Education should create a public awareness campaign to get the message out to current and former higher education students that there are programs available that can help them.

The scammers have advertisements and these advertisements are working, she testified. We need ads highlighting real programs to counteract them.

Madigan would like to see a streamlined and accessible system within the Education Department to provide borrowers with information about their options and federal programs that might be able to assist them with repayment. She also called on lawmakers to pass legislation that would allow students to refinance their federal loans to take advantage of todays low interest rates, similar to what is already offered to homeowners.

Protect yourself.

Do your homework before you do anything. Start with free options and be highly skeptical of any company that charges a fee and requires payment in advance. Watch out for companies pretending to be blessed by or vetted by the federal government and watch out for companies that pretend to be part of a public repayment program, cautioned Michelle Grajales, an attorney with the Federal Trade Commission.

Visit the Consumer Financial Protection Bureau or the National Consumer Law Center websites for information about legitimate sources of free assistance. The Illinois AGs office has prepared a step-by-step guide on student loan debt relief.

ByHerb Weisbaum.