David McCullough
Sales & Marketing Manager at Provanta for four years. Previous experience as a financial advisor with over seven years of experience in the financial services industry. BA, University of California, Davis.

dmccullough@provanta.com

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.

Technorati Tags: FDCPA, fair debt collection practices act, FTC, federal trade commission, debt collectors, fair debt collection, collection agencies, debt settlement

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.

Technorati Tags: student loans, federal direct loan, government backed student loans

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.

Technorati Tags: FDIC, charge-off rates set quarterly record, charge off, commercial and industrial loans, noncurrent loan rate, quarterly banking profile

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“.

Technorati Tags: rate increases, credit card rates, APR, annual percentage rate, credit card reform act, credit card payment requirements

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.

Technorati Tags: how should i pay off my credit card debt, payoff options, debt settlement, credit counseling, bankrate.com, what will it take to pay off my credit card

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.

Technorati Tags: how to choose a debt settlement company, better business bureau, debt negotiation, debt relief, debt management

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.

 

Technorati Tags: debt settlement, settlement verification, third-party collection, litigation, collector, client service

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.

Technorati Tags: ftc, federal trade commission, credit report, experian, equifax, transunion, free credit report

Can I Avoid Bankruptcy?

Often times this question simply boils down to cash flow.   If one has enough net income every month to pay for their living expenses and there’s a little left over for one’s creditors then bankruptcy might be avoided.

If you are struggling to make your monthly payments to your creditors it’s time to take a hard look at your budget.  Take a few moments to prepare a simple budget analysis to determine if you have sufficient cash flow to make ends meet.  If you’re running negative then it may be time to arrange for a free consultation with a qualified bankruptcy attorney.  However, if you have a little income left over to work with then bankruptcy could be avoided.  For more information on budgeting see: “Can You Afford A Debt Settlement Program”.

Qualifying for bankruptcy can be tough.  There are several means tests that a qualified bankruptcy attorney will perform in order to determine if you should file either Chapter 7 or Chapter 13 bankruptcy.  If you actually qualify for bankruptcy you are in essence rescinding most of your control over your finances.  Additionally, the cost of filing usually starts at about $1,500 and goes up from there depending on the complexity of your circumstances.  See http://www.provanta.com/bankruptcy/.

Take a moment to determine if you really are Living Beyond Your Means.  If you make some time now to examine your financial circumstances you may be able to avoid impending financial ruin.  Don’t wait until it’s too late to to take a hard look at your finances.  It may be painful but once you do you will be that much closer to experiencing financial freedom.  You may have several options from CCCS (consumer credit counseling services), to debt settlement, to bankruptcy.  However, if you wait too long you may ultimately limit yourself to the last and most painful option of bankruptcy.

Provanta is not a law firm and none of our employees or contractors are attorneys.  However, if you are interested in determining if you qualify for our debt settlement program please feel free to contact us for a consultation.

Technorati Tags: bankruptcy alternatives, alternatives to bankruptcy, debt settlement, debt forgiveness, budgeting, budget, bankruptcy attorney

Money Basics – What Exactly Is Money?

When one ponders how money is made thoughts often turn to images of a press churning out millions of dollar bills.  The reality though is that money is made every time a loan is given.  The government is not necessarily the primary creator of money.  Banks are.  These days you may hear about the economy contracting or shrinking.  This simply means that there is less available credit and fewer loans are being issued by lenders.  Economic growth is directly tied to the ability of banks to give loans.

A few months ago a friend of mine sent me a link to wonderful video produced by Paul Grignon that explains in very simple terms what money is and how it is made.  While it may bit a little bit on the long side I found it extremely entertaining and informative.  No matter what your age or background I am sure that you will find it very enlightening. 

“Money as Debt”

If you are unable to view the video above click here.

Technorati Tags: money as debt, economy, credit, loans, financing, money education, monetary theory, paul grignon

Does Your Credit Score Matter?

Almost every other day I see those goofy commercials on TV for your free credit report.  You know, the ones where some guy in a pirate hat is singing and playing his guitar.  Quite amusing to say the least but quite misleading on several levels. 

The advertising on TV and radio for “free” credit reports often comes at a price.  They often give you your credit report in exchange for signing you up for a monthly credit monitoring service that you have to pay for.  Not free in the least bit.  Several years ago the Government supported the creation of a site where you can obtain all three of your credit reports (Equifax, Experian, and Transunion) for FREE once a year: www.annualcreditreport.com.  Or, you can call the toll free number to order your reports by mail: 1-877-322-8228.

More important than actually finding the right place to get your credit report is actually determining whether or not you need to in the first place.  The lending industry would love for all American consumers to believe that their financial livelihood hinges solely on knowing what’s on their credit report and what their credit score is.  Constant advertising for services providing this information doesn’t help.  In reality, most lenders are more concerned with your debt-to-income ratio than your actual credit/FICO score.  (FICO is the credit score used by most lenders and is generated by the Fair Isaac company.  See www.myfico.com for more information on how your credit score is actually calculated).

If you have a large amount of revolving unsecured debt (primarily credit cards and personal loans) then you have a problem that far outweighs concern for your credit score.  Your credit score will most likely continue to decline as the years pass even if you are making your minimum payments every month.  The only way to see your credit score improve in this situation is to pay off your debt as fast as you can.  To find out how fast it will take you to pay off your debt use this calculator: http://www.bankrate.com/brm/calc/creditcardpay.asp.  If you find that it will take more than 3 years to pay off your debt find help NOW!  Don’t wait around thinking that you can pay off your debt on your own.

Even if you have obtained lower interest rates from your creditors or managed to get them to accept lower payments it is only a short-term solution.  These types of arrangements typically only last 3 – 12 months and then you’re back in the same boat.

For unsecured accounts such as credit cards the terms of the loans are quite arbitrary.  Your creditor can increase your payment or your interest at just about any point in time.  If they believe that you pose a greater risk and if your creditworthiness decreases they may begin to limit your available credit and increase your APR.  You might have low interest now but ask yourself how long you think that’s going to last.

With so many banks going out of business, merging, or being acquired by other banks, the terms of  your original credit card contract may become void.  Any time your creditor changes you will receive a new contract with potentially very different terms than your previous one.

Don’t get hung up on this notion that your credit score is all important.  If you have a large amount of unsecured debt getting out of debt is far more important.  Focus on this and before you know it you’ll be in a position where you can rebuild financially.

Technorati Tags: FICO score, credit score, credit report, experian, transunion, equifax

10 Questions to Ask When Evaluating a Debt Settlement Company

Evaluating a debt settlement company can be tough.  It seems that wherever you turn some debt relief company is trying to get your attention via a variety of channels from radio, TV, the Internet, e-mail, to even the bus bench.  Who can you trust? Who is reputable? And, more importantly, who is going to actually perform for you?  

As discussed in previous postings (see “Commitment“), entering a debt settlement program is a LONG-TERM commitment.  It takes a great deal of time and effort for the debt settlement company to negotiate settlements and it takes time and effort for you, the client, to save money for the settlements.

When evaluating doing business with a debt settlement company there are many important questions to ask.  However, the following items represent what I consider to be the “top 10″ questions to ask as you investigate various debt settlement companies:

1. How long have you been in the debt settlement business? In my opinion the answer needs to be at least 10 years.  Any less and the company does not have enough of a track record to provide feedback on average settlement rates etc. 
2. Are you going to be handling my settlements or do you outsource this to a third-party?  Generally speaking you do NOT want to be dealing with more than one company.  You are going to feel more at ease dealing with a single entity rather than several.
3. Are you a member of the Better Business Bureau (BBB)?  If not you can immediately discard the company regardless of what they say.  If they are a member visit www.bbb.org to search for the business listing.  Make sure that all outstanding complaints, if any, have been resolved.
4. Can you do business in my state of residence?
5. Can you reach settlements with my creditors?  Provide the company a list of your creditors with the respective balances.  Make sure they have a history of settling with your particular creditors.  Tell them your story.   Provide a little background as to how the debt accrued.
6. What is the total cost of the program including fees?  This figure should be somewhere around 60% of your current debt amount.
7. How much are your fees and how are they assessed?  The answer you should be looking for is somewhere between 15 – 20% and the fees should be fixed.  If there are “administrative”, “retainer”, “variable”, or other fees involved, or if the company cannot quote you a figure for fees then this might be a red flag.
8. What are your hours of business and who can I contact if I have a question regarding my account?  The rep you speak with on the phone with may not ultimately be the person you have to deal with if you have an issue.  Strong customer service is the cornerstone of a successful debt settlement company.
9. What is your web address (URL)?  The company website can provide a wealth of information as to the legitimacy of the business.  Make sure they list a physical address under the “contact us/about us” page.  Look around for fresh content.  Make sure the site is copyrighted for the current year.  Make sure there are no discrepancies between the messages on the website and what the representative on the phone tells you.
10. Ask a couple tough questions and guage the response.  For example, “can my creditors sue me”, “will they continue to call me”, and “will my credit score go down”?  The answer to all these questions is “yes” so make sure the representative does a good job explaining why.

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