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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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 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

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.

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

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

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

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

Smear Campaigns: Idiocracy

It never ceases to amaze me how many other debt settlement (DS), consumer credit counseling service (CCCS), and debt management companies like to sling mud at each other.  All of these debt relief options have successfully existed for many years.  I don’t think DS and CCCS are going away anytime soon.  In fact, if the economy is any indicator, the debt relief industry is really taking off right now.  That being said why are so many companies high centered on spending money on trying to derail the competition?  There are two reasons for this.

The first reason a company resorts to a smear campaign to try and find clients is simply because they have not been in business for very long.  They really have no depth of knowledge, no experience, and actually have no idea what they are saying when they attempt to attack the competition.

The second reason is that a few bad apples may be giving the wrong impression.  Every industry suffers from a few companies that are poorly managed and possibly unethical.  It is a shame that some resort to bad mouthing an entire industry simply because of their experience with one company.  This just goes to show that due diligence must be done up front when deciding on a company to resolve one’s debt.  Two excellent indicators of a company’s track record and stability are: the years they have been in business and their Better Business Beaureu (BBB) report. Provanta has been a member in good standing with the local chapter of the BBB since 1994.

There are many debt relief options.  Regardless of what type of program or what company is chosen to help eliminate one’s debt, make sure appropriate research is performed.  If you feel rushed through the application process and uncomfortable for any reason, take a moment to step back.  Thoroughly evaluate your options before making a decision.

Lastly, don’t work with a company that is spending all their time and effort bad mouthing the competition.  In reality, they probably don’t know what they’re talking about and will probably be out of business within a couple years.  If they spend all their time telling you why you should not be dealing with their competition, you might wonder why they’re not spending it telling you about why you ought to consider working with them. Given two options, A and B, discovering that A is a bad one doesn’t nesessarily mean that B is a good one. Option B must still be evaluated independently.

We invite you to evaluate Provanta.

Technorati Tags: debt settlement, consumer credit counseling service, debt relief marketing, debt management

Fighting Fire With Fire

Sometimes, it’s like a battlefield…

In October 2007, Provanta negotiated a settlement on a $12,900 account with a collection agency who was representing the original creditor.  As with all settlements, Provanta required the collection agency to supply a written settlement agreement before any payment to them.  We received the written agreement, sent the settlement payment of $5,600 to the collection agency, and saved our clients a gross amount of $7,300. 

Three weeks later, Provanta received a call from a supervisor at the collection agency.  She informed us that the original creditor recalled the account and as a result they could not proceed with the settlement agreement.  This was completely unacceptable to Provanta, for we had a valid, signed settlement agreement that was in already in place, performed upon, and the payment accepted. 

To make matters worse, the original creditor sent the account to a collection attorney who threatened to sue our clients unless they paid the balance in full.  This was the last straw for Provanta, and we contacted an attorney that we have worked with for many years.  He specializes in consumer law and FDCPA, Fair Debt Collection Practices Act, violations.  He was more than happy to assist our clients. 

It took about 6 months and lot of letters to reach an agreement but we finally did.  In the end, the collection attorney agreed to accept the $5600 original settlement agreement, or deal with a lawsuit against themselves, as well as the original creditor, should they persist.

Technorati Tags: FDCPA, Fair Debt Collection Practices Act, debt settlement, accord and satisfaction, consumer law, consumer protection, FTC

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Fee Harvesting

During the course of a conversation with a young woman about her debt, she gave me some very interesting information about one account she had with a balance of about $475.  It turns out she opened this account about 4 months ago with a very large and popular credit card company.  She did so in her last attempt to manage her debt on her own and avoid having to enroll in a debt program or filing bankruptcy.  She was hoping that this card, which only had a $500 limit and low interest for the first 6 months, would give her some cushion to pay for increasing food and gas prices while she the juggled the payments on her other 6 accounts.  She admitted to me that this was not a well thought out plan to begin with and I had to agree with her. 

Anyway, she had the card for about a  month and she hadn’t even had a chance to charge anything yet when she received her first statement.  There were 4 charges on the account-an initiation fee of over $100, an annual fee to be in a rewards program for $25, another monthly maitenance fee of $10, and a set up fee of $25.  She had already accumulated over $150 of debt with this company and she not even signed the back of the card yet.  Needless to say her struggles with her budget and debt did not improve.           

This is an example of fee harvesting and it’s something that I’m coming across more and more as I talk to clients about their experiences.  Fee harvesting generally refers to a credit card company’s practice of applying fees to a customer’s account so that the interest drawing balance continues to grow even if the person is no longer actively using the account.  Simply put, it allows a creditor to charge you a fee and then charge you interest on the fee.  Highly profitable for the creditors, and highly dangerous for individuals who do not read the fine print when they sign up for these offers that sound too great to be true.       

Technorati Tags: fee harvesting, interest rates, credit card practices, budgeting, bankruptcy, debt options, credit limits, debt consolidation