Category Archives: Consumer Protection

Nasty Phone Call From IRS Auditor: Could It Be a Hoax?

Consumer Complaint iStock_000004051547XSmallASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I received the same threatening message three separate times on my home answering machine. The voice is strongly accented, loud, threatening, cruel, harsh, nasty, condemning, harassing, and then oddly, at the very end, almost kind and pleasant. 

Here is the transcription – the punctuation is mine: 

“Hi this is Melwyn Thatcher (name unclear due to accent) calling from the tax audit department of the Internal Revenue Service. The nature behind this voicemail is to make you aware about a situation. We have received a legal petition notice against your name concerning an illegal tax evasion, a tax fraud. Be aware that we are taking the matter to the federal (unclear word) courthouse and we’re about to issue a warrant for your arrest. But before we go ahead and do anything like that, if you need any further details relating to this case you can call us back on our call back number 888-393-2421. I repeat 888-393-2421. Again this is Melwyn. You have a great day here. Thank you very much.”

By the way, I do not owe the IRS any money. In fact, I am totally debt free. Is this a hoax, or something I should be worried about? 

Very truly yours, 


Dear Anita,

Should you be worried? Absolutely not.

I am so glad you didn’t return the phone call. If you had, THAT would be worrisome.

I have no doubt that many serious crimes are involved in the transmission of that message. You and probably thousands of other people are the intended victims of an outrageous consumer fraud scam. In fact, see IRS warns of pervasive phone scam.

Many of these fraudsters operate out of telephone boiler rooms in Eastern Europe and Southern Asia. Some are members of criminal gangs, others are funneling the money to fund international terrorism.

If you were to reply to this type of message, you would be badgered to pay a fictitious debt. Even if you refused to pay anything, the fraudster might still trick you into providing personal financial information and then later use this information to steal your identity. (Learn how to avoid identity theft.)

Some people do fall for these types of scam phone calls. Perhaps they have a guilty conscience about unfiled tax returns, or an old bank debt they assume has prompted the call.

You will probably receive more calls from this outfit.  Like all telemarketers, they are working their phone list. The bottom line is this:  Don’t call them back. If you answer when they call you, just hang up.

The Federal Trade Commission also recommends that you report the call to them using the FTC Complaint Assistant at (Add “IRS Telephone Scam” to the comments of your complaint.)


Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

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Biggest Payday Loan Rip Offs: Idaho, South Dakota, Wisconsin, and Nevada

Customer service satisfaction surveyThe Pew Charitable Trusts recently released a study of payday loan rates across the country. While payday loans are exorbitantly expensive wherever they are allowed (15 states don’t allow them), a number of states have incredibly high average rates.  Those states and their average interest rates on payday loans are:

  • Idaho – 582%
  • South Dakota and Wisconsin – 574%
  • Nevada – 521%
  • Delaware – 517%
  • Utah – 474%

Notably, none of these states have laws that cap the amount of interest that payday loan lenders can charge. Rates in these states are often double those in states that do a better job of regulating the payday loan industry. (If these numbers aren’t sufficient to make you run the other way, read more about why you should avoid payday loans.)

Competition Does Not Bring Rates Down

The Pew study also found that competition does nothing to bring rates down. Those states with the highest rates also often had the highest number of payday loan storefronts.

To get information about the study results, check out the Pew Charitable Trust’s Fact Sheet:  How State Rate Limits Affect Payday Loan Prices.

What You Should Know About Timeshares & Timeshare Foreclosures

Swimming pool at VIP villas, Antalya, TurkeyThinking about buying a timeshare? Trying to get rid of a timeshare you no longer want? Can’t make your timeshare payments? Facing a timeshare foreclosure?

If any of these scenarios apply to you, be sure to check out Nolo’s new online articles on timeshares.

  • If you are thinking about purchasing a timeshare or have one you want to get rid of, check out our Buying or Selling a Timeshare topic area.
  • If you are having trouble making payments or are already in foreclosure, visit our Timeshare Foreclosure topic area.

Buying and Selling a Timeshare

Timeshare salespeople are notorious for making the hard sell. All too often, people join a timeshare sales presentation in order to get a free hotel stay or round of golf, and end up walking out as a timeshare owner.  Unfortunately, many folks who sign timeshare contracts do not understand the full costs involved, tax issues, or contract cancellation rights. And if you’re looking to unload your timeshare, scammers await.

Before you attend a timeshare presentation, sign a timeshare contract, or pay money to a timeshare reseller, visit Nolo’s Buying or Selling a Timeshare topic area.

Timeshare Foreclosures

In most cases, buying a timeshare is the same as buying an interest in a piece of real estate. This means that if you default on the loan payments, taxes, assessments, or developer fees, you could face foreclosure. To learn about how timeshare foreclosures work, what happens if your timeshare is foreclosed, and how to avoid a timeshare foreclosure, check out the articles in Nolo’s Timeshare Foreclosure topic area.

State Laws Governing Timeshares and Timeshare Foreclosures

Much of timeshare law, such as foreclosure procedures, rights of cancellation, required contract disclosures, and rules regulating timeshare resellers, is governed by state law. Nolo has articles discussing the specific state laws governing timeshares in California, Texas, New York, and Florida. And Nolo will be expanding this list in the near future – so check back soon to find the timeshare laws in your state.

Feds to Crack Down on Payday Lenders That Target Servicemembers

Devil with piggybankThe federal Consumer Financial Protection Bureau (CFPB) recently announced that it’s going to keep a close eye on payday lenders that issue small loans to military servicemembers and their families. As part of its efforts to protect servicemembers from payday lending scams and abuses, it released updated guidelines for its examiners who are tasked with investigating and supervising payday lenders.

Payday Loans: A Bad Deal for Everyone

A traditional payday loan works like this:   Either you give the lender a check and get back an amount of money less than the face value of the check, or you sign an agreement giving the lender the right to withdraw money from your bank account. But laws targeting payday loans typically cover any short-term loan for a small amount of money.

The payday loan industry is notorious for charging exorbitant interest rates, often upwards of 200% to 500%. It also gets customers to roll over loans – basically renewing the loan by paying the finance charge. This results in hundreds of dollars in fees with no reduction in the loan amount, and customers get trapped into the loan treadmill.

(To learn more, see Nolo’s article Reasons to Avoid Payday Loans.)

Payday Loans Targeting the Military

Short-term small-dollar lenders have been targeting military bases for years.  Because of this, in 2007 Congress passed legislation regulating the payday loan industry when dealing with active duty servicemembers (the law is called the Military Lending Act, and its provision apply to more than just payday loans).  Among other things, the law put a cap on interest rates (to 36%) and banned rolling over loans (unless the new terms of the loan are favorable to the servicemember).

Some states have also enacted laws that restrict payday lending activities.

CFPB Examiners to Get More Guidance When Supervising Payday Lenders

In 2012, Congress gave the CFPB the authority to regulate the payday loan industry. And, at least according to the recent press release, it appears that the CFPB is serious about enforcing the law. Its new manual provides examiners with specific guidance on what to look for when gathering information from lenders that provide short-term, small-dollar loans to servicemembers. According to the CFPB, the examiners will:

  • evaluate lender’s policies and procedures
  • determine if they are in compliance with the law, and
  • identify problems and risks for consumers throughout the lending process.

If you are struggling under a mound of debt, before resorting to a payday loan, visit Nolo’s Debt Management Center to learn about other options.

Identity Theft Tops FTC Complaint List in 2012

Consumer protectionThe Federal Trade Commission (FTC) recently released it’s 2012 Top Ten Consumer Complaints report. In this annual report, the FTC reports on the number of consumer complaints made to it and other government agencies (such as the new Consumer Financial Protection Bureau).

According to the report, 18% of all 2012 consumer complaints  were related to identity theft. Of those identify theft complaints, a whopping 43% derived from some sort of wage or tax fraud. This marks the 13th year that identify theft topped the FTC’s list. (To learn about identity theft and how to protect yourself from it, visit Nolo’s Identity Theft topic area.)

The other categories of complaints that made it to the top ten list are:

Debt collection — 10% of all complaints

Banks and lenders — 6%

Shop-at-home and catalog sales — 6%

Prizes, sweepstakes, and lotteries — 5%

Imposter scams — 4%

Internet services — 4%

Auto-related — 4%

Telephone and mobile services — 4%

Credit cards — 3%

(For information on common consumer scams, visit Nolo’s Consumer Protection area.)

In the FTC press release, you can find a link to the actual report.


Got a Consumer Complaint?

If you have a complaint about your credit card company, student loan holder, mortgage lender, car loan lender, or bank, you can log your grievances on the new Consumer Financial Protection Bureau  (CFPB) website.

The CFPB is now fielding complaints in the areas of:

  • credit cards
  • student loans
  • mortgages
  • car loans
  • bank accounts or services

To file a complaint, visit the complaint center on the CFPB website at (

Once a complaint is lodged, the CFPB confirms that the lender has in fact done business with the consumer. The lender then has 15 days to respond to the complaint and 60 days to address the problem. To learn more about the complaint process, see the CFPB’s Consumer Reports: A Snapshot of Complaints Received.

The CFPB has already created a database that compiles credit card complaints, and has made this information public. The database doesn’t disclose the consumer’s name, but does disclose how the credit card company dealt with the issue. The CFPB plans to have similar databases for the other types of complaints in the future.

Problem With a Private Student Loan? Tell the CFPB

In February, the newly formed federal Consumer Financial Protection Bureau (CFPB) put out a call to student loan borrowers:  If you have a beef regarding a private student loan, file a complaint on the CFPB website.

What Is a Private Student Loan?

If a bank or other financial institution loaned you money to attend school, and that loan is not backed by the federal government (that is, it’s not federally guaranteed), you have a private student loan.

The CFPB Now Oversees Private Student Loans

Prior to the formation of the CFPB, there was no one agency that oversaw and regulated the private student loan industry. (Public student loans, on the other hand, are regulated by the Department of Education.) Since July 2011, the CFPB has taken over that role. As part of its oversight, the CFPB has created an ombudsman program. The ombudsman will review complaints about private student loans and assist those borrowers.

Types of Complaints

The CFPB ombudsman is urging students and former students to file complaints of any nature. Some examples of complaints it anticipates receiving include:

  • trouble making payments
  • confusing advertising or marketing terms
  • billing disputes
  • deferment and forbearance issues, and
  • debt collection and credit reporting problems.

You can find the online complaint form, here.

Or, if you don’t want to file a formal complaint, but just want to tell your story, you can do that here.

What Will the CFPB Do?

The CFPB states that it will help all student loan borrowers who are having trouble:

  • getting a private student loan
  • repaying a private student loan
  • managing a student loan that has gone into default, or
  • dealing with a student loan that has been referred to a debt collector.

Once the CFPB receives your compliant, it will give you a case number so you can track progress of the complaint.  It will forward your complaint to the financial institution involved and then keep track of progress. The CFPB says it expects to have cases come to resolution within 60 days. It’s unclear from the information on the CFPB’s website what role the ombudsman will take in resolving those issues.

The CFBP will use the information it gathers from borrowers’ complaints and stories to report to Congress on the private student loan industry.

Another Handy Tool

The CFPB also has a handy online tool, the Student Debt Repayment Assistant, to help you figure out your student loan repayment options. You can also find information about repayment in Nolo’s article Student Loan Repayment Options.

How to Contact the CFPB


Consumer Protection Bureau Has New Director, Finally

Recently, while Congress was not in session, President Obama appointed Richard Cordray as Director of the newly formed Consumer Financial Protection Bureau (CFPB).  Republicans had blocked Cordray’s nomination for over half a year, arguing that the CFPB should be run by a board, not a Director. Needless to say, Republicans were livid about the appointment. There’s a possibility that as Congress regroups today for its new session, they may use rules to block some of Obama’s recess appointments (there were 70 in all).

Meanwhile, Cordray dove right into his work. Although the CFBP has been in existence since July of 2011, the agency could not legally take certain actions without a Director. Within the few short weeks that he’s been at the helm, Cordray has already issued a “field guide” for its examiners to review the practices of payday loan companies and started the public comment process to simplify disclosures for credit cards, mortgages, and student loans.

To get a better sense of Cordray’s philosophy and goals for consumer protection, check out this interview with him. Cordray stresses that he wants to hear from everyone who has a complaint about a financial business, and to that end you can file a complaint on the new Bureau’s website at The website also has lots of information for consumers about credit cards, student loan repayment options, your options if you have trouble repaying your mortgage, and more.

Consumer Financial Protection Bureau Still Has No Director

In July, I blogged about the nomination of Bill Cordray as the Director of the Consumer Financial Protection Bureau (CFPB), the new federal agency created in the wake of the financial debacle on Wall Street that was responsible, in part, for the contraction of the U.S. economy. The CFPB is a government watchdog agency, overseeing consumer protection for all things related to lending, including credit cards, private student loan, pay day loans, and mortgages.

(You can learn more about consumer protection here.)

Since July, Republicans have continued to fight against the CFPB, vowing not to approve a Director until the agency is restructured. The U.S. Chamber of Commerce has also expressed its opposition to the CFPB, arguing that it would be too powerful as it currently stands.

Without a Director, the CFPB is prevented from performing some of its intended tasks, including overseeing some financial sectors that currently have no agency watching over them (like mortgage brokers and payday lenders).

Several days ago, the Senate Banking Committee approved Cordray as the Director of the CFPB. This is definitely a welcome move by consumer advocates. But Senate Republicans continue to promise to block the nomination of any director to the CFPB until the agency’s powers are diluted.