Fair Debt Collection Practices Act – New Video from the FTC

The FTC (Federal Trade Commission) recently produced a new video the concisely explains consumers rights per the Fair Debt Collection Practices Act (FDCPA).  It does a good job of quickly explaining what debt collectors can or cannot do when attempting to collect a debt.

For more information on the FDCPA and other money matters visit www.ftc.gov/moneymatters.

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Bank-based Student Loans Ending

The U.S. House of Representatives approved a bill yesterday that would end bank-based student loans.  If approved by the Senate the bill would only allow student loans to be issued by the government through the Direct Loan program and other federal programs.  Private lenders would no longer be able to originate government backed student loans.

Many private bank-based student loans carry unfavorable terms and rates whereas government backed student loans typically have low rates and flexible repayment options.

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Charge-Off Rates Set Quarterly Record

An important indicator in the banking industry is the charge off rate.  According to the FDIC’s Quarterly Banking Profile for Q209 “charge-offs and noncurrent loans continue to rise”.

FDIC insured banks charged off $48.9 billion in the second quarter of 2009 as compared to $26.4 billion a year earlier.  The annualized net charge-off rate was 2.55% as compared to 1.95% in Q4 of 2008. 

A $22.5 billion year-over-year increase in charge-offs were from commercial and industrial loans, while credit card loans represented a $4.6 billion increase.  The annualized net charge-off rate on credit card loans reached a record 9.95% in Q209.

Also of note is the fact that the noncurrent (90 days or more past due or in a nonaccrual status) loan rate has risen to a record level (increased by $41.4 billion in Q209).  It’s no surprise that residential mortgages led the charge followed by real estate construction and development loans.  This is the 13th consecutive quarter where the noncurrent loan rate has increased.

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Credit Card Rates Increasing

Within the past year I have had numerous conversations regarding the increase in credit card APR/rates.  From my ground level perspective it has been readily apparent the credit card companies have been increasing rates and payment requirements in an effort to bolster their bottom line.

With the credit card reform act going into full effect by February of 2010 many credit card issuers are trying to extract as much money as they can from their credit card holders.  The new act will provide greater consumer protection against increases in rates and other payment provisions.  However, many believe that the new act is too little too late.

For more information visit CNNMoney.com or click to read “Credit card rates rise in 1st half of ‘09: Group says bank profit from credit card debt rose as their costs to borrow money declined“.

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How Should I Pay Off My Credit Card Debt?

Generally speaking the best way to pay off your debt is to pay it off in full and on your own without the help of credit counseling or debt settlement.  However, if you think it is going to take more than three years to pay off your debt on your own then it may be worth considering enrollment in a debt settlement program. 

If you are curious about how long it will take you to pay off your unsecured debt (credit cards, personal loans, lines of credit etc.) use an online calculator like the one found at www.bankrate.com.  There are several calculators on the website but I would recommend using “What Will It Take To Pay Off My Credit Card“.  Play around with different figures but you should get a sense for how long it will take you to pay off your different accounts.

Two important considerations are the interest rate charged and the monthly amount you are required to pay by the creditor.  Keep in mind that the creditor can typically change these amounts any time they wish.  If your interest rate is 10% now it may not be that way for the entire time you are paying off the debt.  Interest rates have been increasing for many consumers as creditors have lowered limits and increased monthly payment requirements.

Staying current with your monthly payments to your creditors does not guarantee that you will have a good credit score.  Consider all of your options carefully but in the end I would recommend choosing the option that will result in you getting out debt sooner rather than later.

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How To Choose A Debt Settlement Company

With the downturn in the economy many fly-by-night debt settlement/debt negotiation companies have cropped up.  If you are shopping around for a debt settlement company be careful.  It seems with each passing week I hear another horror story about a company that took a client’s money and ran.  Not to mention an increasing number of companies are being pursued by the Federal Trade Commission in connection with complaints filed by consumers.

I previously wrote about the Ten Questions to Ask When Evaluating a Debt Settlement Company.  Now, more than ever, it is critical that YOU ask these questions when seeking help from a qualified debt settlement company.  Do not take the word of the sales rep/debt consultant when calling a debt settlement company.  It will only take you a few minutes to do some research online to find out how long a company has been in business and what their Better Business Bureau rating is.

Remember that committing to a debt settlement program is a long-term relationship.  Avoid high pressure sales tactics and take your time in making a decision.

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Know Your Rights!

If you’ve ever had to deal with a debt collector, then you would know it’s like stepping into a boxing ring for a fight against one of the toughest in the industry. Knowing just your simple rights as a debtor will prepare you for what could be a long, emotionally draining battle.

The Fair Debt Collections Practices Act (FDCPA) was created to help protect you, the debtor, against the unlawful and abusive tactics that these collection agencies practice everyday. Just knowing the restrictions that are placed on these collection agencies will prepare you when it comes to dealing with them directly. For more information on what a creditor can and can’t do, please visit:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

Just remember, creditors are use to dealing with debtors who know nothing about their rights and therefore bully consumers into providing what they want. It is important that you stay strong and do not give into the creditors scare tactics. Do not be afraid to stand your ground and let creditors know that you are aware of your rights and ability to file official complaints with the Federal Trade Commission (FTC). The creditors are simply pushing you as far as they can, so do not be afraid to stand up for yourself.

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Stop Using Your Credit Cards

Someone recently asked me if they could continue to use their credit cards while enrolled in the program. This question never ceases to amaze me. 

If you’re at a point where you realize you need help with your financial situation, then you should already understand that using any forms of credit is doing nothing for you besides digging a deeper hole of debt. Not only do you need to realize that you will be further in debt than you already are but the consequences that lie behind your actions. 

How would a creditor take this? Your creditors have access to pull and review your credit report, and how would it look if they saw that you have been opening new lines of credit or see that you have the ability to make monthly payments to other creditors. Because of the appearance of bad-faith on your part in the eyes of your creditors to which you are delinquent, it is likely to keep you from receiving debt settlement benefits as favorable as those received by debtors who have stopped using their credit cards. It may also increase the risk that these creditors will refuse to negotiate a debt settlement in favor of filing a law suit to collect the amount they claim is owed to them.

Don’t stress over having to use any form of credit.  Credit cards weren’t introduced until the mid 1900’s and since then the ability for consumers to save rather than charge has become almost non-existent.  Any form of credit is nothing but a temporary “fix” on situations.  While you may be able to escape some of your problems at the present time through the use of credit cards, it will eventually catch up with you in the end.

Technorati Tags: credit report, experian, equifax, transunion, free credit report, credit card debt, debt settlement, consumer credit counseling, FICO, financing, home loan, mortgage

Tweeting Debt

You can now follow Provanta on Twitter.

Click here to follow Provanta.

Provanta Launches Video Blogging

video management, video solution, video streaming

Loan Modification – Do It Yourself

Scams – Last week it was announced that Federal and State agencies are targeting foreclosure rescue scams/loan modification fraud.  The complete press release can be read on the Federal Housing Administration website here:

http://portal.hud.gov/portal/page?_pageid=73,7931933&_dad=portal&_schema=PORTAL. 

The California Department of Real Estate also recently launched a website alerting consumers to loan modification service scams:

http://www.dre.ca.gov/mlb_adv_fees.html. 

Contact your State’s Department of Real Estate to see who is licensed to do business in your State.

Just about everyone these days is receiving SPAM e-mails or regular mail advertising loan modification or foreclosure assistance.  Many of these companies are not licensed or registered to conduct this type of business.  Be extremely wary of ANY service that requires an upfront fee.  If you do enlist the help of a loan modification specialist make sure they have a 100% money back guarantee.  It is also important to realize that if they successfully reduce your mortgage payment, even if only by a few dollars, they are still entitled to receiving their fee in most cases.  This fee typically ranges from $2000 to $4000.

You Can Do It Yourself - Start here: http://www.hud.gov/offices/hsg/sfh/hcc/fc/.  The U.S. Department of Housing and Urban Development has approved counseling agencies that are equipped to provide you with advice for FREE.  Before you go and pay someone to modify your loan do yourself a favor and speak to an approved counselor about your situation.  In most cases they will assist you in making a decision and with providing the lender the requisite information so that your lender’s loss mitigation department can process your request.

Another fantastic resource is Hope Now (www.hopenow.com), an alliance between HUD counseling agents, mortgage companies, investors, and other mortgage market participants that provides free foreclosure prevention assistance.  Take some time to explore the website and resources available online.  If you are not comfortable accessing information online feel free to call them directly at (800) 995-HOPE.

If you have the time and desire you can most likely work directly with your lender to successfully modify your home loan(s).  This process is going to require a lot of patience and determination but it’s not overly complex.  In most cases the lender is simply going to require that you provide an outline of your budget (monthly income and expenses aka profit and loss statement), a hardship letter, and some form of income verification for the past six months (pay stubs if you are employed or bank statements if you are self-employed).  Once they receive this information it will typically take the bank’s loss mitigation department between 4 – 12 weeks to review your file.  This depends entirely on how backed up the lender is.  Keep track of everything you send and how.  You may quickly discover that it is difficult and frustrating dealing with your lender.  Don’t give up.  Make sure they get your faxes.  Make sure they answer the phone.  Find someone to speak with that communicates well and call them every week until your loan modification request is complete.  Every lender is different in how they handle loan modification requests so make sure you continually ask them if they need anything else.  Make sure they have all the information they need to make a decision for you.

Technorati Tags: do it yourself loan modification, loan modification hardship letter, loan modification scams, HUD, U.S. Department of Housing and Urban Development, DRE, Department of Real Estate, Hope Now, foreclosure counseling, foreclosure prevention, modify your loan, foreclosure rescue scams

Post Settlement Verification

Since accounts are sold and outsourced to different agents to collect so often it is easy for an agent to forgot or overlook an account when they update their system. Sometimes it’s a matter of the creditor / agent just closing the account in their office.

This situation is pretty simple to correct. Our client service department will contact the current collector and inform them the account has already been settled. Agents will request settlement documentation at that time which we will provide (acceptance letter & copies of all checks cashed if available) we do this as a courtesy to our client. Technically once we inform a collector that an account has already been settled it is their responsibility to go back to the original creditor and confirm this info. Once we provide the settlement information the accounts are closed and no further collect attempts are made.

In rare situations it will take a second conversation with the collector to get the account closed and marked as settled. Our clients can also pull a credit report and dispute the account in question to ensure no further collection action is taken. The client can also file a complaint with the FTC if the agents start to harass them after collection proof is provided.

There is only 1 time that I can recall that collections efforts escalated into litigation. In that situation the client went to court, provided all settlement documentation to the judge, and the case was dismissed.

In a nutshell this is a easy problem to fix.

 

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Do Not Spend Your Tax Refund

If you received a tax refund this year please do not spend the money.  The first and best option is to save the money for a rainy day.  Most financial advisers recommend saving at least six months worth of net income in the form of savings for that proverbial rainy day.  If you don’t have this much money saved start saving now.

If you already have plenty of money in your savings account consider opening a Roth or traditional IRA.  These retirement accounts will help you save money and possibly reduce your taxable income.  If you strategize appropriately they will help you pay less in taxes once you do retire.  For more information see:

http://www.investopedia.com/articles/retirement/03/012203.asp.

Of course, if you have a significant amount of unsecured debt you MUST create a plan to pay off this type of debt before you even consider saving money, either in a traditional savings account or for retirement.  Unsecured debt (credit cards etc.) will continue to hold you back financially until you pay them off… completely!  If you have debt use your task refund to either pay off your debt completely or create a plan to pay it off within a year.  If you cannot pay off your unsecured debt within two years on your own consider utilizing the services of a reputable Consumer Credit Counseling Service (CCCS) or Debt Settlement company.

Technorati Tags: tax refund, taxes, saving, IRA, Roth IRA, retirement, consumer credit counseling, debt settlement, budgeting, save

Cut Up Your Credit Cards – Now!

Credit cards, personal loans, and any form of unsecured credit is pure evil.  The average American consumer does not need credit cards or ready access to unsecured credit.  Credit cards peddled at college campuses truly are the “starter drug” that gets consumers hooked on living on credit. 

Advertising for credit reports and credit monitoring services simply perpetuate this belief that one’s credit score (aka FICO score) is the one and only indication of creditworthiness.  The invention of the credit card (unsecured line of credit) and the FICO score have become the bane of many Americans’ existence.  Hardly a day goes by where I don’t see a TV commercial for free credit reports or free credit reporting services.  Hardly free, these services continue to increase awareness in consumers’ minds that their credit score is the most important financial aspect of their lives.  Wrong!

The single most important aspect of one’s financial position is life is their ability to SAVE money; not spend it.  The next time you get a paycheck don’t think about what you can buy.  Rather, think about how much you can save.  Set worthy financial goals for yourself such as paying cash for your car.  Do NOT finance consumers goods… period.  These days, the only item you should ever need to finance is your home.  This is a relatively reasonable purchase to finance because property values have historically increased, there are tax benefits, and as a result it is considered an asset.  Unless you are business owner, you should not have to finance anything else.

Just spend a moment thinking about how your parent’s and/or grandparent’s generation made it through life.  I guarantee you they did not leverage every penny they earned financing furniture, appliances, tv’s, cars, homes etc.  Next time you have a family get together ask the oldest living member of your family how they managed/manage their finances.

Technorati Tags: credit report, experian, equifax, transunion, free credit report, credit card debt, debt settlement, consumer credit counseling, FICO, financing, home loan, mortgage

The FTC Fights Back

In an effort to educate consumers the FTC (Federal Trade Commission) launched a campaign today debunking the silly and false advertising associated with the television ads for FreeCreditReport.com.  The only website for consumers to legitimately obtain their credit report for free is found at www.annualcreditreport.com.

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