Risk Management & Mitigation Flashcards

A client enrolled in debt settlement is served with a lawsuit by a creditor. What is the best risk-mitigation step for the agent?

Answer: Tell the client to respond by the court deadline and consider legal help, while prioritizing settlement of that account if possible

Ignoring a summons can lead to a default judgment and garnishment, so the client should respond on time and the account may need priority.

What may happen if a creditor gets a judgment against an enrolled client?

Answer: The creditor may be able to garnish wages or levy bank accounts, depending on state law

Judgments can allow collection tools such as wage garnishment and bank levies, which is a key risk to disclose.

Under the Fair Credit Reporting Act, how long can most negative items such as charge-offs from enrolled accounts stay on a consumer's credit report?

Answer: 7 years from the date of first delinquency

Most negative account information can be reported for seven years from the date of first delinquency.

A client with very low income and unsteady work wants to enroll in a 48-month settlement program. What is the most suitable risk-based response?

Answer: Assess affordability and suitability, and discuss alternatives such as credit counseling or bankruptcy consultation if the program is unlikely to work

Suitability screening reduces the risk of client harm, dropouts, and complaints when a client cannot keep up deposits.

Which statement about the statute of limitations on old debts is most accurate for risk discussions?

Answer: In some states, a payment or written acknowledgment can restart or revive the limitations period

State laws differ, and in some states a payment or acknowledgment can restart the clock on time-barred debt.

Before enrollment, what must a debt relief provider disclose about timing under the TSR?

Answer: The time needed to make a settlement offer to each creditor and the amount the client must save before each offer

The TSR requires disclosing how long it will take to make offers to each creditor and how much must be saved before each offer.

A client's interest and late fees keep growing while they save in the program. Why is this an important risk disclosure?

Answer: Balances may grow during the program, which can raise the amount needed to settle

Creditors may keep adding interest and fees while payments stop, so balances can rise during the saving period.