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.

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.

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.

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“.

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.

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.

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.

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.

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Provanta Launches Video Blogging

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