How to Protect Yourself: Co-Signing a Loan

How to Protect Yourself: Co-signing a Loan
Source: The Florida Attorney General’s Office

Before you decide to co-sign a loan with someone, make certain that you understand exactly what cosigning a loan involves and what your obligations will be. Be sure you can afford to pay if you have to, and that you want to accept this responsibility. Consider these suggestions:

Federal Trade Commission (FTC) Rule
Under the rule, 16 CFR s.444.3, creditors are required to give a cosigner a notice that explains what his or her obligations would be. The cosigner’s notice states that the co-signer is being asked to guarantee this debt; and may have to pay up to the full amount of the debt if the borrower does not pay; may also have to pay late fees or collection costs.

It also states the creditor can collect this debt from the co-signer without first trying to collect it from the borrower and the creditor can use the same collection methods against the co-signer that can be used against the borrower, such as a lawsuit, garnished wages, etc. If the debt is ever in default, that fact may become a part of the co-signer’s credit record.

This notice is not the contract that makes you liable for the debt.

Cosigners Often Are Required to Pay
You, as a co-signer, are being asked to guarantee someone else’s debt. The lender would not require a co-signer if the borrower met the criteria for the loan. If the borrower misses a single payment, the lender can collect from you immediately. Also, the amount you pay may be increased by adding late fees, not to mention court costs and attorney’s fees if the lender decides to sue to collect. If the lender wins the case, your wages and property may be garnished or taken.

If You Decide to Cosign
If you decide to cosign despite the many risks, remember to carefully consider all factors. Be sure you can afford to pay the loan – you should keep in mind that you are obligating yourself to the loan, which may prevent you from obtaining other credit you may want. Do not pledge property to secure the loan unless you fully understand the consequences. If the borrower defaults, you could lose your property. You may also want to ask the lender to limit your liability upon default. For example, the lender could include a statement in the contract that “the co-signer will be responsible only for the principal balance on the loan at the time of default.” You could ask the lender to notify you, in writing, if the borrower misses a payment. Lastly, make sure you get copies of all documents related to the loan. The lender is not required to give them to you, and if the lender does not provide them, ask the borrower to make you a copy of the documents.

Additional Information
If you have questions or concerns regarding a bank, a finance company or a loan company, you should contact the Florida Office of Financial Regulation’s consumer hotline at 1-800-848-3792. You may also wish to write to the FTC, Public Reference, Washington, DC 20580, to obtain these free publications: Credit Practices Rule and Solving Credit Problems. You may also phone the FTC at 202-326-2222 or TDD, 202-326-2502.

How to Protect Yourself: Sweepstakes Scams

How to Protect Yourself: Sweepstakes
Source: The Florida Attorney General’s Office

If you receive a letter or phone call telling you that you have won a substantial cash award or other fantastic prize, be extremely cautious. The likelihood is great that you have won nothing of any value and are merely the victim of a slick merchandising trick designed to induce you to purchase the company’s products.

Don’t Pay To Win
Legitimate sweepstakes do not require you to pay anything to receive the prize you have won. If you are told that you must pre-pay taxes, you are probably being scammed. Taxes can either be withheld from a cash award or, more commonly, are reported by the company to the IRS and you declare the prize as part of your annual tax return. You should never have to pre-pay them. Phrases like “shipping and handling charges” and “processing fees” that the company says must be paid prior to delivery of your prize are clear warning signs that the offer is not a legitimate one. Legitimate sweepstakes companies pay the cost of delivery for the prizes they award.

Question Prize Descriptions
That “1998 model car” you are told you have just won for a delivery charge of $29.95 is probably a scale model car that will fit nicely into the bottom of your children’s toy box. Be skeptical of descriptions such as “regulation pool table” and “precious gemstones”. Often these and similar terms are designed to deceive you as to the size, quality and value of the product you have supposedly won. Ask questions and demand detailed descriptions of the prize you are being offered.

Suspect Official Appearing Documents
Legitimate sweepstakes companies do not attempt to mislead you about who they are. If you receive a sweepstakes offering in the mail that gives the appearance of being from a government agency or government sponsored or approved, be suspicious immediately. Similarly, if the mailing or telephone solicitation suggests to you that you must respond immediately and cannot take time to consider or investigate the offering, you are probably being deceived.

Don’t Give Your Credit Card Numbers
Legitimate sweepstakes companies have no need for your credit card numbers. If a company says they need your credit card information “to secure your prize” or “for verification”, there is an excellent chance that this information is really being sought for another purpose that will cost you money.

Investigate The Company
Be sure that the company you are dealing with has a good track record in the business community. Verify their name and address. A company whose only address is a post office box or other mail drop should be dealt with cautiously. Do your homework by contacting the Better Business Bureau in your community and in the community where the business is located. Also, check with the Florida Department of Agriculture and Consumer Services, by calling them at 1-800-HELP-FLA or by visiting their website at www.800helpfla.com or by contacting the Federal Trade Commission as well as your local county consumer service agencies. If you are dealing with a company whose offices are outside the State of Florida, you should also check with the Attorney General’s Office and state consumer agencies in that state. Finally, you should also check up on any company who makes a sweepstakes offer and with which you are considering doing business by contacting the National Fraud Information Center at (800) 876-7060.