Furloughed federal workers should stay alert to avoid shutdown scams

From the office of the Washington State Attorney General

Resources are available for federal employees in Washington who are furloughed or working without pay, and other workers who are affected by the partial federal government shutdown, to help them make financial decisions and avoid scams associated with the shutdown.

Consumers who wish to make a complaint to the Attorney General’s Office about a business operating in Washington State may do so HERE.

Payday loans and tax refund advances

If you have missed paychecks as a result of the shutdown, you may be considering loans or tax refund advances to help make ends meet.

Consumers considering payday loans or tax refund advances should thoroughly investigate the costs of the loan or advance and consider less costly options, which may include:

• Obtaining a small loan from a bank or credit union. Many financial institutions are offering low- or no-interest loans to furloughed federal employees
• Considering a short-term loan from a family member or friend
• Asking your creditors for additional time to pay your bills
• Freezing subscription services you can do without for a short period, such as streaming services or gym memberships

A payday loan is a high-interest, short-term cash loan. In most cases, a consumer gives the lender a post-dated personal check for the amount of the loan plus a fee. The lender holds the check for an agreed period (usually one to four weeks), then deposits it.

The fees on payday loans typically represent exorbitantly high interest rates. For example, if a lender charges a fee of $100 to make a $1,000 loan for two weeks, the annual percentage rate of the loan is 260 percent. This is more than 15 times as high as the average credit card rate of approximately 17 percent.

The Washington Department of Financial Institutions has additional information for consumers considering payday loans on its website.

A tax refund advance — also called a refund anticipation loan — is a type of loan offered to advance part of an anticipated tax refund to a consumer.

Such loans may appear attractive to taxpayers who are concerned about the shutdown delaying their tax refunds. 

However, these loans often come with fees that make them more expensive than they appear. Some tax preparers promote tax refund advances as free, but charge application or credit-check fees, or charge higher fees for preparing tax returns. Loans that anticipate the arrival of the refund (and repayment of the loan) by a certain date may have penalties that kick in if the refund is delayed.

The Federal Trade Commission has useful information on its website for dealing with debt.

Student loan repayment

The partial shutdown does not affect your obligation to make timely student loan payments.

If you are struggling to make your student loan payments during the shutdown, you should carefully consider your options. 

While you may be able to temporarily postpone making your payments through deferment or forbearance, doing so will likely increase your monthly payments when the forbearance or deferral period ends. 

This is because interest will continue to accrue on unpaid amounts, and you will have to pay interest on the unpaid interest going forward.

In addition, the U.S. Department of Education has warned borrowers working toward Public Service Loan Forgiveness that periods of deferment or forbearance will not count toward the 120 payments needed to qualify for loan forgiveness.

Borrowers concerned about falling behind on their payments should contact their student loan servicers to discuss repayment options. The U.S. Department of Education has additional information for furloughed federal employees on its website.

Telemarketing calls

Consumers should be extra vigilant about unsolicited or automatic calls from telemarketers and scammers during the shutdown because many of the federal agencies that regulate these calls are unavailable.

For example, the national Do Not Call list is not operating during the shutdown, so consumers cannot add their phone numbers to that list.

Consumers should not respond to unsolicited calls or texts offering loans or other solicitations related to the government shutdown, and should never give personal or financial information to such a caller. 

For example, telemarketing calls indicating to federal employees that they are pre-approved for loans that require nothing more than payment of a processing fee are likely not legitimate, as no reputable lender would offer loans without checking a borrower’s credit.

Unemployment benefits

Consumers should be wary of offers to expedite unemployment benefits for furloughed federal workers for a fee.

If you are interested in applying for or obtaining information about unemployment benefits, contact the Washington Employment Security Department (ESD) directly. ESD has a webpage that answers questions about unemployment benefits related to the shutdown, and can be reached by phone at 800-318-6022.

Fake job postings and work-from-home scams

If you are looking for temporary work during the shutdown, beware of fake job postings or work-from-home offers that require application fees or other costs.

Do some research about any company you are considering working for, and ask to speak to other employees. You can find information on any business entity in Washington on the Secretary of State’s website.

Consumers who wish to make a complaint to the Attorney General’s Office about a business operating in Washington State may do so HERE.

The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions.