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These 5 Financial Fibs Will Get You Into Big Trouble

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Honest people know without being told that they should avoid obvious fraud such as writing bad checks or using someone else’s credit card without permission. But even bending the financial truth with small misrepresentations and ­exaggerations that seem like white lies can lead to big trouble. And even if the fibs give you an advantage in the short-term, they could end up costing you big before long.

Five financial “fibs” that can come back to haunt you…

Lying About Your Income (Upward)

When people overstate their incomes, it’s often to secure bigger loans or higher lines of credit. But even if you succeed in getting the ability to spend more by exaggerating what you earn, you may face high interest rates on balances that you can’t pay off…penalties if you don’t pay on time…and lower credit scores. Lenders (including credit card issuers) care mostly about getting paid, not ­using the courts to punish borrowers who lie on applications. However, when out of options, a lender may sue to recover what is owed.

What to do: Don’t fudge your income upward to secure a loan or line of credit that is more than you can realistically repay.

Lying About Your Income (Downward)

When people say they earn less than they do, it’s often to obtain a government benefit reserved for lower-income people such as Medicaid, rental ­assistance, etc. That’s fraud, which is a prosecutable ­offense. It also can mean that there are fewer benefits available for people who genuinely need them, so it’s a moral ­offense as well. But even if you think that a government program should be available to you despite the fact that you don’t technically qualify, you are playing with fire by claiming it.

What to do: Never misrepresent income to receive a benefit meant for people who earn less than you, especially when dealing with an official agency or a government entity.

Letting Someone Use Your Credit Card

Generally, it is not against the law to lend someone your credit card, although doing so likely breaks the contract you signed with the card issuer, which agreed to extend credit to you—not to a friend or relative of yours. In effect, you are causing the other person to lie about who he/she is—you are condoning a misrepresentation. And even though it is the other person who is misrepresenting himself, you are ultimately responsible for any use of the card by the ­person you give it to—even if he ends up charging much more than you expected. Legal responsibility would fall on the other person only if you could prove that he used the card without permission. If you don’t pay the bill, you face the same legal repercussions as if you defaulted on your own purchases. That could include being sued.

What to do: Don’t lend your credit card to someone unless you absolutely trust that person and the person’s judgment. Even better, if you want to give or loan someone money for a purchase, make the purchase yourself using your credit card or give the ­person cash.

Fudging an Insurance Claim

After a car accident, it might be tempting to lump in the cost of preexisting mechanical problems with the cost of repairs from the crash when filing an insurance claim. You heard a rattle in your exhaust for a few weeks, then you got rear-ended. Why not just say that the rattle started with the accident? But misrepresenting damage in a claim to an insurance company is illegal. It’s also very possible that you will get caught. Insurance companies employ expert investigators to examine anything suspicious, whether it’s related to a car accident, a house fire or a burglary. Insurance companies are regulated by the state, and lying on a claim can be a felony.

What to do: Resist the urge to overstate damage or loss when filing an insurance claim, and never falsely attribute loss or damage to an incident or accident.

Fabricating a Hardship

If someone owes more than he is able to pay back without undue hardship, in certain cases, especially when the bill is from a doctor or hospital, the amount might be reduced or an extended-payment plan might be arranged. However, if someone with adequate means finagles his way into such a hardship program, the organization may seek to recover the full debt, which might include suing the debtor, if the dishonesty is discovered. Even worse is fabricating a hardship to avoid court-imposed payments or fines. Whether it’s a municipality, a county, a state, etc., misrepresenting your ­finances while under oath to avoid a payment—even for something as minimal as a traffic ticket—is considered perjury, a serious offense.

What to do: Never claim to be destitute to avoid paying a fine or bill that you actually can afford. If you’re facing a legitimate hardship, be open about it and ask the creditor to work with you.

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Source: Joann ­Needleman, an attorney heading the consumer financial-services regulatory and compliance group at the law firm Clark Hill PLC in Philadelphia. She is immediate past president of the board of directors of the National Creditors Bar Association (NARCA). She serves on the Consumer Financial Protection Bureau consumer advisory board, and she has been recognized by the courts for her pro bono work with consumers facing lawsuits. ClarkHill.com Date: July 15, 2017 Publication: Bottom Line Personal
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