Posts Tagged ‘authors’

Tips for a better credit report and score

October 20th, 2008

To get a good credit score the first tip is to pay your bills on time. It does not matter how bad your credit history is you must pay all your bills on time. This will help build a positive payment history on your credit report. This is the second most important factor when calculating your credit score.

It also matters how much time has passed between derogatory items on your credit report and when your score is calculated. After an amount of time, allegedly four years, negative items on your credit are not weighed as heavily. Thus it is very important for you to build a positive payment history.

The next tip is to remove any inaccurate information. Unfortunately our credit reporting system has many flaws. Often a divorce will result in bad credit. The divorce judge will divide the debts between both parties. Then if one of the parties defaults on a loan, even though they were court ordered to pay, it will be reported on both parties credit.

You can also have bad credit due to a lender mistake. It happens all the time, where the amount due changes and due to a mistake on the lenders side you are never notified and keep making your regular payments. Yet the whole time your credit is being ruined with derogatory marks.

You can also have a negative mark due to stolen identity, or just a credit reporting error. These are very common, where someone somewhere makes a mistake but your credit pays the price.

These are all inaccurate marks on your credit report. You should dispute and remove all of these marks.

Congress passed legislation to protect people just like you that find themselves in this situation. The Fair Credit Reporting Act says that inaccurate information must be removed.

To dispute an inaccurate mark you can hire a credit repair service. They will draft a dispute letter and send it to each credit bureau that is reporting the inaccurate listing. Or you can do this compose a letter yourself, however you should know that credit bureaus often do not conduct investigations based on one dispute letter.

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Going undercover as a debt collector

October 8th, 2008

Fred Williams, a reporter for the Buffalo News, worked for three months at a debt-collection agency to see how one operates. Here is his report,

Ethel, you did this!” Joe barks into the phone, his voice booming through the divider between our desks. Joe is trying to collect a credit-card bill, but Ethel is unaware of the card’s existence — or claims to be. “Stop making excuses!” Joe tells her.

It’s my first week on the job as a debt collector, and already I’m learning a lot. Or rather, unlearning a lot. Everything I know about consumer finance is wrong here.

In this upside-down world, unpaid bills are a boon, not a curse. The bigger, the better. If we collect, the agency gets a bounty of 10% to 50% from the creditor, and it gives us a cut. Top collectors are handed bonuses of $10,000 or more at a monthly assembly, while envious co-workers clap and cheer.

In this world, identity theft isn’t an epidemic. It’s an excuse used by weaseling debtors — like job loss, illness or even the death of a spouse. In the notes we make after each call, these excuses are summed up with the code HLS — hard-luck story.

Joe tells Ethel that he’s looking at her credit report and it doesn’t support her innocence. “This card was paid every month for two years,” he says. “Identity thieves don’t do that!” Maybe he’s right and she’s trying to skip a legitimate bill. Or maybe he’s making it up.

The collection industry gets the most complaints of any industry regulated by the U.S. Federal Trade Commission — more than 300,000 in the past five years. The trade association, ACA International, blames the griping on consumers’ increasing debt burden.

But inside the large, well-established agency where I work, that’s not the whole story. Motivated strictly by cash, collectors manipulate, shame and threaten people into paying, without caring whether the bill is legitimate.

“Get the money!” our team leader exhorts us in a brief morning huddle. Then we hit the phones, making 150 to 200 calls a day. Most are answered by machines or by people who say we’ve got a wrong number.

Debtors are cagey about picking up, so we’re taught to mask the purpose of the call as long as possible. We ask for them casually by first name, like an acquaintance. Outright deception is forbidden, but sometimes my co-workers pose as paralegals or even as “fraud investigators,” to imply that criminal charges are looming.

Once a debtor is on the line, we demand that they pay the overdue balance immediately. But the balance is like the sticker price on a car — a starting point for negotiation. On some accounts, I may offer a settlement that wipes out half the bill. This helps to placate debtors. They’re usually sputtering mad because their actual purchases are a pittance compared with the interest, late fees and over-limit fees they now owe.

If a debtor opts to settle, I am trained to take their application. In a bored voice I ask for their cell-phone number, their spouse’s work phone and so on, as if I’m filling out a form. There’s no application; we get the phone numbers to hound them if their payment falls through.

To help debtors raise money, we are trained to give them financial advice that would make their accountant blanch, if they had one. We suggest that they take money out of their IRA, drain their home equity with a second mortgage, load up a different credit card or even skip a mortgage payment.

If a debtor still won’t pay, we play a version of good cop/bad cop. Two collectors will team up on one call, with one posing as a hard-hearted manager. The other listens patiently and pretends to be sympathetic. The idea is to make the debtor want to please the sympathetic collector, who closes the deal.

Even people like Ethel, who claim to be fraud victims, can be squeezed for cash. We say it was probably their child or someone else in their household who abused the card, and if they don’t call the police, we will.

But Joe loses his battle of wills with Ethel for today when she simply hangs up. Calling her back immediately would violate rules against harassment. I go around the divider to commiserate, and to see whether Ethel’s credit report really implicated her. But Joe has already deleted it from his screen and pulled up another account, preparing to make his next call.

Our group manager has also been listening. “You blew it,” he tells Joe loudly, so the rest of the group can hear. “You should’ve got her to pay.”

Kiplinger’s Personal Finance. Author Fred Williams’s book, Inside Debt Collection, is available at lulu.com.

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Credit repair website shut down by FTC

September 12th, 2008

FTC Obtains Court Order Against Husband-Wife Credit Repair Team

Here’s a perfect example of why you should never believe when someone tells you that they can guarantee you to remove anything and charge advanced fees for removal of negative items.

The Federal Trade Commission charged two credit repair marketers with violating federal law by collecting advance payment for credit repair services and falsely promising to remove derogatory information from consumers’ credit reports – even if the information is accurate and not obsolete. At the Commission’s request, a federal court halted the defendants’ allegedly unlawful business practices and froze their assets pending further litigation. The FTC seeks to bar the defendants from further violations and make them forfeit their ill-gotten gains.

According to the FTC’s complaint, the defendants marketed their “services” to consumers throughout the nation via an Internet Web site, www.lhcreditrepair.com, classified ads in USA Today, Thrifty Nickel, Common Cents, and www.americanclassifieds.com, and online listings such as www.kellysearch.com and www.aboutus.org. Statements on their Web site include, “Have you had a bankruptcy? We will repair your credit so that this past event does not haunt your future.” Consumers who called the defendants in response to their ads were told, “Anything that hurts you, we’re going to get it off of [your credit report].”

The complaint states that the defendants often led consumers to believe that accurate information on their credit reports might somehow be considered inaccurate and subject to removal. Even when consumers told them that the information was accurate, the defendants led consumers to believe that it could be removed. The defendants allegedly claimed they had special knowledge and expertise that enabled them to permanently remove negative information, including late payments, charge-offs, Collections, tax liens, repossessions, foreclosures, bankruptcies, and judgments, even when the information was accurate and not outdated.

According to the complaint, the defendants offer four levels of service ranging from $250 to $1,150 per person. They require an advance fee they call a deposit, which varies in amount, depending upon the program selected. On their Web site’s home page they claim, without qualification, that “[a]fter we have cleared your files we will stay with you for life, at no additional charge, to catch any other bad files that might show up.” Subsequent Web pages indicate, however, that only one of the four service levels includes the “for life” feature.

The defendants are Rudolph Joseph Strobel, a/k/a Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration (LHCR), all located in Naples, Texas. They are charged with violating the credit repair Organizations Act (CROA) and the FTC Act by falsely representing that they can improve consumers’ credit reports by permanently removing negative information, even when the information is accurate and not obsolete. The defendants are also charged with violating the CROA by requiring advance payment for credit repair services; and by failing to provide, before contracts are signed, the written “Consumer Credit File Rights Under State and Federal Law.” In addition, they are charged with violating the CROA by failing to include in their consumer contract a full and detailed description of the services to be performed, including all guarantees of performance and an estimate of the date by which the services will be performed; and failing to include a conspicuous statement about the consumer’s right to cancel the contract without penalty or obligation within three business days after the contract is signed.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Texas, Marshall Division.

Additional credit repair information is available in “Credit Repair: Self-Help May Be Best,” at www.ftc.gov/bcp/conline/pubs/credit/repair.shtm. The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected – free of charge. Federal law requires that the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been
or is being violated, and it appears to the Commission that a proceeding is in the public interest.
The complaint is not a finding or ruling that the defendant has actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Frank Dorman,
Office of Public Affairs
202-326-2674
STAFF CONTACT:
Anne D. Lejeune
FTC’s Southwest Region
214-979-9371
(Lee Harrison Credit Restoration)
(FTC File No. 0823141)

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Piggybacking will survive new FICO enhancements, for now

August 13th, 2008

If you’re a serious credit enhancer, like many of us, you were well aware that FICO (the universal credit score company) was going to release its new scoring module in 2008 and get rid of piggybacking account holders.

Piggybacking means that you allow others to piggyback off your credit rating as a card holder or authorized user and they get your good credit rating. Brilliant isn’t it.

As with anything else, shady businesses started taking advantage of this and were charging people to allow piggybacking and thus making a profit from it and claiming it as credit repair. Not only did it cause a great deal of controversy but it ruined it for a lot of consumers who were using the method to rebuild their credit by surfing off someone else’s good credit rating, say a spouse or brother.

Well, apparently FICO received such an uproar about removing this method that they have come up with a solution (so they think) and are going to have it continue on. Long live piggybacking! Let’s just hope the scurges of the world don’t ruin this for us all too.

Piggybacking became so controversial. Consumers used to be the ones taking advantage of this little loophole in the credit system, but like everything else, shady businesses came along and were offering it as a new form of credit repair and guess what, it was legal…

In a nutshell, these businesses were charging a consumer with bad credit to surf off a guy with good credit and quickly improve his credit rating overnight. Suddenly the guy with bad credit could easily have a credit history of very good credit using the other guys credit history. The good guy gets paid, the bad guy pays and everyone benefited.  

It didn’t take too long for consumer watchdog groups to catch onto this, and the worst part was that it appeared a “legal credit repair method. You can read more on piggybacking schemes here.

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Credit scoring: what you need to know

August 3rd, 2008

What is a credit score?

A credit score is a number that reflects your credit risk level, typically with a higher number indicating lower risk. It is generated through statistical models using elements from your credit report; however, your score is not physically stored as part of your credit history on the credit file. Rather, it is typically generated at the time a lender requests your credit report, and is then included as part of the report. Your credit score is a fluid number, and it changes as the elements in your credit report change. For example, payment updates or a new account could cause your score to fluctuate. There are many different credit scores used in the financial service industry. Your score may be different from lender to lender (or from car loan to mortgage loan), depending on the type of credit scoring model that was used.

Why are credit scores used?

Before credit scores, lenders physically looked over each applicant’s credit report to determine whether to grant credit. A lender might deny credit based on a subjective judgment that a consumer already held too much debt, or had too many recent late payments. Not only was this time consuming, but human judgment was prone to mistakes and bias. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant’s ability to repay debt. Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

Who uses credit scores and how are they used?

Banks, credit card companies, auto dealers, retail stores, and most other lenders use scores to quickly summarize a consumer’s credit history, saving the need to manually review an applicant’s credit report and provide a better, faster risk decision. Although many additional factors are used in determining risk, such as an applicant’s income vs. the size of the loan, a credit score is a leading indicator of one’s basic creditworthiness.

What information impacts my credit score?

The information that impacts a credit score varies depending on the score being used. Generally, credit scores are affected by elements in your credit report, such as:

  •  Number and severity of late payments
  •  Type, number and age of accounts
  •  Total debt
  •  Recent inquiries

Credit bureau-based scores, like those generated by Experian, cannot use demographics prohibited under the Equal Credit Opportunity Act, such as race, color, religion, national origin, gender, age, marital status, receipt of public assistance or exercise of rights under Consumer Credit Protection Act. Scores used by individual lenders may use such elements as income, occupation, and type of residence in determining their own custom credit score.

Credit scoring 101

History of credit scores

Credit scores became widely used in the 1980′s. Long before credit scores, human judgment was the sole factor in deciding who received credit. Lenders used their past experience at observing consumer credit behavior as the basis for judging new consumers. Not only was this a slow process, but it was also unreliable because of human error. Lenders eventually began to standardize how they made credit decisions by using a point system that scored the different variables on a consumer’s credit report. This point system helped to eliminate much of the bias that previously existed; however, it was still tied to intuitive measures of credit worthiness and was not based on actual consumer behavior. Credit granting took a huge leap forward when statistical models were built that considered numerous variables and combinations of variables. These models were built using payment information from thousands of actual consumers, which made scores highly effective in predicting consumer credit behavior. When combined with computer applications, scoring models have made the credit granting process extremely fast, efficient and objective, facilitating commerce and helping consumers quickly get the credit they need.

The credit modeling process

Designers of credit scoring models review a set of consumers – often over a million – who opened loans at the same time, and determine who paid their loan and who did not. The credit profiles of the consumers who defaulted on the loans are examined to identify common variables they exhibited at the time they applied for the loan. The designers then build statistical models that assign weights to each variable, and these variables are combined to create a credit score. Models for specific types of loans, such as auto or home, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer’s past credit history that most effectively predict future credit behavior.

Risk categories

In determining credit scores, lenders place you in a risk category that compares you to a large number of consumers with similar credit histories. This allows lenders to compare “apples to apples,” ensuring that your credit behavior is judged in a context that is relevant and fair. For example, consumers with brief credit histories and only a few accounts are not compared to consumers with long-established credit histories. Rather, these consumers will be compared to other consumers who also have brief credit histories. Keep in mind that the attributes of your risk category (i.e. number of accounts, total debt, etc.) may not have the same impact to a credit score for consumers in another risk category.

What are score factors?

Score factors are the elements from your credit report that drive your credit score. For example, such elements as your total debt, types of accounts, number of late payments and age of accounts are what determine the outcome of your credit score. Score factors can have a positive or negative affect on your credit score. Lenders must provide consumers with the most significant score factors when they are declined credit.

Your credit score

How can I see my credit score?

Lenders, especially mortgage lenders, often make credit scores available to consumers during the loan process, although they are under no obligation to do so. However, there is a good possibility that consumers will soon have the benefit of new disclosure laws concerning credit scores. For example, the state of California recently passed a law that will obligate mortgage lenders to reveal credit scores to loan applicants beginning in July 2001. Industry analysts expect other states to follow suit. To get access to your PLUS score, credit report and other membership benefits right now, sign up for Experian Credit Manager.

Why don’t I have a credit score? Credit scoring models cannot generate a score without sufficient credit information. If you have little or no credit history, you will probably not have a credit score available.

How often does my credit score change?

Your credit score is a fluid number that changes as your credit report changes. Therefore, any change to your credit report could impact your score.

How do my spouse or other family members affect my credit?

If you hold a joint credit account, have co-signed a loan or have authorized use of another person’s credit, these items could affect your score if they appear on your credit report. It’s important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder. A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.

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Bankruptcy law changed the debt settlement industry

July 31st, 2008

This is an excellent article by our good friend and professional debt negotiator, Charles Phelan. In this article, Charles reveals why the debt settlement industry has changed and how debt settlement critics have it all wrong.

If you have time, this is a must read! Especially now with soaring gas prices, job loss and people in more debt than ever before. Charles offers audio courses and personal debt settlement coaching. if you are serious about settling your debts the RIGHT way, read on.

A lot more people are becoming interested in debt settlement as an alternative to bankruptcy. That’s because a new bankruptcy law was enacted on October 17, 2005, and it means a rude awakening for many consumers seeking a fresh start in bankruptcy court.

It used to be that 7 out of 10 people filing personal bankruptcy were granted Chapter 7 status, where the unsecured debts are totally wiped away. That has changed under the new rules. If your income is above the median for your state, or you can pay back at least $100 per month toward your debts, then you’ll be turned down for Chapter 7. Instead, you’ll be shifted into Chapter 13, where you pay back a portion of the debt over 3-5 years.

It gets worse. When the court calculates your allowable living expenses, it will use the approved IRS schedules, not your actual documented expenses. So even if you don’t think you can pay $100 a month or more, the judge will probably disagree. Instead of a fresh start, many people will be faced with the grim reality of a harsh 5-year plan, on a court-mandated budget that forces them to adopt a much lower standard of living. That’s where debt settlement starts to look pretty attractive.

Yes, I know debt settlement has its critics. I’ve criticized aspects of the industry myself. But what the critics don’t seem to understand is that this approach is for people who would otherwise go bankrupt! Let’s examine the three main complaints against debt settlement and see where the critics are missing the mark.

“Debt settlement has a negative impact on your credit score.”

Wow. Big deal! Pretend it’s two years from now. Would you rather have an A+ credit rating or be totally free of debt? Pick one please, because you can’t have both. All debt reduction programs have a negative impact on credit scores. That’s why only people who truly can’t keep up with their bills should go into one of these programs. But it’s pointless to worry about your credit while you’re being crushed with debt. That’s like worrying about how the yard looks after your house has burned down.

“You might have to pay taxes on the canceled portion of the debt.”

I’ve always been amazed at how frequently this lame criticism is repeated in article after article. Yes, it’s possible that you may need to pay taxes on forgiven debt balances, but the odds are against it. That’s because the IRS allows insolvent taxpayers to exclude canceled debts. So unless you have a positive net worth, you probably won’t need to pay taxes on your settlements. And even if you did, so what? You’d be paying taxes because you saved a bunch of money off your debts! And this is a problem?

“Collection activity will continue and you might get sued.”

Yes, if you fall behind on your bills, your creditors will most certainly continue attempts to collect what’s owed, and one or more of those creditors might sue you in civil court. But again, this criticism totally misses the mark. Collection activity is already a function of being in debt trouble. At least debt settlement allows the consumer to use the collection process to eliminate debt through negotiated compromises. Even lawsuits need not be cause for panic, since they can often be settled out of court. The only reason to allow a legal action to proceed to the point of wage garnishment, property lien, or bank levy is lack of financial resources with which to settle. And if that’s the case, the debtor should be talking to a bankruptcy attorney anyway.

In contrast, let’s look at some of the positives of debt settlement.

1. You can save $1,000s versus any other method of debt elimination (except for Chapter 7 bankruptcy, which is much more difficult to accomplish now that the new law is in effect).

2. You can get out of debt in 2-3 years, and much faster if there is some available home equity to work with. This is a lot better than 5 years in the financial boot camp of Chapter 13 bankruptcy, or 5-9 years in a credit counseling program.

3. You keep control over the process more than with any other approach.

4. You maintain personal privacy. With bankruptcy, your case file becomes a matter of public record, easily located via Internet search by future employers, landlords, or creditors.

5. You retain your dignity while working through your financial problems. Bankruptcy still feels like failure to a lot of people. Debt settlement represents an honest and ethical alternative to that extreme solution.

6. You can adjust your monthly funding into the settlement program up or down depending on real-world conditions in your financial life. If your income fluctuates from one month to the next, or you get hit with an unexpected expense, it won’t torpedo the whole program. The built-in flexibility of debt settlement gives it a huge advantage over other options, all of which require a fixed monthly payment.

Once you’ve made the determination that debt settlement makes sense for your situation, you’ll need to decide whether to go it alone or seek professional assistance. For people who aren’t easily intimidated, there’s no question that the do-it-yourself approach is the way to go. For others who can’t handle the least bit of pressure or just want to focus their time and energy elsewhere, hiring a professional settlement company may be the correct choice.

If you do decide to take the do-it-yourself approach, follow these tips:

* Use a privacy manager on your telephone service to screen creditor calls so that you only speak to creditors when you’re ready.

* Make sure you have a solid game plan for building up money to settle with, and set the funds aside in a separate bank account.

* Do not send settlement funds until you have the deal in writing. No exceptions!

* After paying the settlement, follow up to obtain a zero balance letter from the creditor, so you don’t have bogus collection problems later on.

* Know your rights as a consumer by reading the free resource articles on debt, credit, and collections at the Federal Trade Commission website: www.ftc.gov

* Don’t be intimidated or pressured into accepting a settlement deal that you can’t handle.

Remember, thousands of people settle their own debts every year without the need for lawyers or bankruptcy. You can do it too if you’re disciplined, determined, and prepared to ignore some of the crazy stuff that bill collectors say. When you’re finally debt-free, you’ll feel a lot better about having worked it out on your own.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation.

The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost.

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How to fix mistakes in your credit reports

June 16th, 2008

Statistics say over 70 percent of consumers have at least one error on their credit report. Errors almost always affect your credit score negatively, which means you won’t get those good deals on credit cards, auto loans, or even a mortgage.

But while it’s time consuming, it’s not difficult to erase mistakes from your record. Eddie Daroza, is a personal investor and stock market junkie. Besides contributing content to efinancedirectory, he works on the financial news show Rob Black and Your Money, broadcast daily on San Francisco’s KRON 4. Eddie is also a reporter for PBS’ Update News.

Verifying Your Credit Score

Yahoo Finance, Finance.Yahoo.com, says, you should actively work to keep your credit report true. Credit bureaus don’t verify information provided by your lenders, so it is up to you to make sure everything is in order. Interest rate specialist Bankrate.com says, because of the Fair Credit Billing Act, credit bureaus are required to promptly fix errors in your report, and do so without damaging your credit. As soon as they receive your letter of dispute, they have thirty days to investigate the claim.

How to Correct Errors in your Credit Report

Once you have downloaded your free report from one of the three credit bureaus (Equifax, Experian, or TransUnion), clearly mark all discrepancies and the reasons they are wrong.

Provided with your report is a dispute form. Fill out the form, and either submit it through a link on their webpage, or send it by mail. Along with the dispute form, include a letter detailing inaccurate claims. Bankrate.com has sample letters on their site with the proper way to address the bureau.

After completing their investigation, the credit bureau will remove any items they do not verify as accurate. If the bureau makes any changes, they will send you a free, updated report.

Also, on their website, Bankrate has a document titled 7 Steps to Fixing Your Credit Report, which is a good reference for tough problems.

For more information on credit reports visit www.bankrate.com, www.finance.yahoo.com, or www.freecreditreport.com 

Author: Eddie Daroza, is a personal investor and stock market junkie. Besides contributing content to efinancedirectory, he works on the financial news show Rob Black and Your Money, broadcast daily on San Francisco’s KRON 4.

Eddie is also a reporter for PBS’ Update News.Eddie Daroza, is a personal investor and stock market junkie. Besides contributing content to efinancedirectory, he works on the financial news show Rob Black and Your Money, broadcast daily on San Francisco’s KRON 4. Eddie is also a reporter for PBS’ Update News.

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Defendants in Debt Collection Scheme Aimed At Hispanics Agree to Settle FTC Charges

June 11th, 2008

Two defendants have agreed to settle Federal Trade Commission charges for allegedly victimizing Spanish-speaking consumers nationwide by posing as debt collectors seeking money the consumers did not owe. They and the corporate defendants they controlled have been barred from further violations of federal law involving debt collection.

According to the FTC’s complaint, Maria Oceguera, her daughter Dulce Rickards (aka Dulce Ugalde and Dulce Ruiz), and others sold an English-language course, “Inglés con Ritmo.” They advertised the course as free except for a shipping and handling fee.

Several years after the defendants stopped selling the course, they tried to collect money, typically $900, from consumers who had purchased or inquired about the course. An overwhelming majority of the consumers who were contacted owed nothing, and yet the defendants routinely engaged in a variety of deceptive debt collection practices. At the FTC’s request, in 2007 a federal judge stopped the operation and froze the defendants’ assets.

Under the settlement, the defendants are barred from violating the FTC Act by misrepresenting that they’re collecting on a valid debt, that they’re attorneys or represent attorneys, that they will take action they cannot take legally or do not intend to take, and that nonpayment of an alleged obligation will result in arrest, imprisonment, or loss of property or wages. The settlement prohibits the defendants from misrepresenting the consequences of paying or not paying a debt, making misrepresentations in order to collect a debt, and misrepresenting or omitting any fact material to a person’s decision to buy or use a product or service.

The defendants are banned from violating the Fair Debt Collection Practices Act (FDCPA) by using falsehood or deception to collect a debt, indicating that they’re attorneys or represent attorneys, and representing that nonpayment will result in arrest, imprisonment, or loss of property or wages unless the action is lawful and they intend to pursue such action. They are also prohibited from threatening to take an action unless it’s lawful and they intend to do so, and from using a business name other than the collector’s real name.

Oceguera and Rickards are also barred from violating the FDCPA by collecting an amount not expressly authorized by the agreement creating the debt or permitted by law;harassing consumers, including causing a telephone to ring or conversing with consumers to annoy or abuse them; and failing to notify consumers of their right to dispute and obtain verification of their debts and to obtain the name of the original creditor.

In addition, the court ordered the same permanent injunctive relief against the companies controlled by Oceguera and Rickards: Tono Publishing; Promo Music; and Tono Records, dba Tono Music; and Professional Legal Services.

The settlement with Oceguera and Rickards includes a $1,186,754 judgment, all but $50,934 of which is suspended based on their inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition. The settlement also contains standard record-keeping provisions to allow the FTC to monitor compliance with the order.

By a 4-0 vote, the Commission approved the filing of the consent decree in the U.S. District Court for the Central District of California. On May 1, the court approved the FTC’s settlement with Oceguera and Rickards. On May 27, the court entered a separate final judgment and order for permanent injunction against the corporate defendants.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A consent decree requires approval by the court and has the force of law when signed by the judge.

Copies of the consent decree and order are available from the FTC’s Web site at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.shtm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.

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