Posts Tagged ‘customers’

Don’t let yourself be taken by shady credit repair offers

October 25th, 2008

This economy is causing consumers with credit issues to become more desperate and seek out quick fixes to their credit problems rather than do the real work needed to clean up credit issues. We’ve been educating consumers on line since 1995 about do it yourself credit repair, and more than ever, consumers should be very careful when choosing a credit repair company to help clean up their credit.

Credit repair agencies are legal but they must follow certain laws to make sure they comply.  A credit repair company who is promising all sorts of major changes to your credit reports should be avoided. A credit repair company has to follow the Credit Repair Organizations Act (CROA) and they cant charge you in advance for work they have yet to do, nor can they make exaggerated claims of guaranteed removals.

This week we told you about the latest crackdown by the FTC against these shady offers and according to the L.A Times, a credit repair company based in Woodland Hills California has been targeted by the FTC for violating such laws.  Success Credit Services was accused in an FTC civil suit of violating the Credit Repair Organizations Act by contending that it could quickly clean up credit reports by removing legitimate negative items, such as late payments, bankruptcies and tax liens.

You’d think by now, with all the crackdowns across the nation by the FTC, that credit repair companies would get a clue that they cannot get away with taking our money and doing nothing. They are sitting ducks for groups like the FTC and the Attorneys General. It’s a risk these companies should not be taking.

There’s a reason we decided in 1995 to bring credit education online to consumers nationwide. People were desperate for information about how to clean up their credit reports and not get ripped off in the process. By educating you to do the work yourself, you are going to not only save money but you’ll be sure to stay in control of exactly what is being done along the way. A shady credit repair company CAN make your credit worse.

We’ve never wanted to go into the business of fixing your credit for you and there’s a simple reason for that. We feel it’s very possible to do the work yourself by simply following some key educational steps. It’s that simple. Learn to understand the credit industry and how it works and you can take on the task of credit issues yourself. With what you learn, you could see dramatic improvements in your credit reports and spend next to nothing to do it.

Sure, there are some people that just do not want to undertake the task themselves, and they have the right to hire someone to do it for them, but just realize you are hiring someone to do pretty basic tasks like letter writing and debt negotiating.  What you are paying for is a service to simply do “the steps” you don’t want to bother with. That’s fine. You are paying a “service fee”. Just make sure the company is reputable and I’d recommend checking their record with the BBB (Better Business Bureau), completely reading their terms before you sign anything, and most importantly research them online. You can uncover a lot by reading what past customers have to say about them.

You don’t have to fall victim to these credit correction scams. Choose wisely just as you would choose a bank, mechanic, or mortgage broker. If the service is offering all sorts of exaggerated promises then it’s a pretty sure bet that you are going to get taken. These types of so called “businesses” are just waiting for the desperate buyer.

There is no reason that all rational should fly out the window when choosing a credit repair company. Many of these crackdowns could be avoided all together if consumers would use great caution when dealing with credit repair companies and do their homework. Common sense should prevail and if it doesn’t feel quite right then trust your instinct.

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Do it yourself credit repair | Easier than you think and cheap!

September 16th, 2008

You can improve your creditworthiness and get legitimate resources for low or no-cost help.

 

You may get calls from telemarketers offering credit repair services.  The Scam, companies’ nationwide, appeal to consumers with poor credit histories and who are desperate. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. Desperate consumers fall prey to this scam. Remember, if it sounds too good to be true. It is.

 

Some credit repair services get sleazy when they promise to do a job that’s just not possible. Unlimited credit report disputes, corrections, and removals with Equifax, Experian, and TransUnion and guaranteed deletions are just some of the promises you hear.

 

An ethical firm (usually reputable lawyers, not shysters) will not tout miracles, charge you in advance or make false promises. if they do, sooner or later the FTC will find them.

 

Just this past week, a credit repair company was shut down and fined by the FTC for making promises it couldn’t possibly keep, by assuring buyers that they could remove negative accounts even if accurate and for collecting money in advance for work yet to be performed.

 

That’s a key word. Accurate. The foundation of credit repair isn’t an industry trade secret. It’s using the law with your customized disputes to garner the best possible results. Period. 

 

By using existing state and federal laws, you CAN remove negative information from your credit reports. The fundamentals aren’t whether the item is negative or positive. It’s is it accurate.  The FCRA is quite clear on this issue. If it isn’t verifiable or accurate, it cannot remain.

 

It doesn’t matter what your history, background, or credit record is, you’ll be amazed at how simple correction can be. You’ve probably been told that your credit history will stick with you forever, or it takes years to clean up. 

 

While no one can guarantee you a spotless credit record, real credit repair is a worthwhile investment, and if the bureaus, collection agencies, and creditors were doing their job, credit report repair wouldn’t be the top search online.

 

People are desperate because credit reports DO contain lots of errors. Nearly every consumer has an error in at least one credit report from one of the major credit bureaus. Credit bureaus generate your report they receive from your creditors; they don’t verify it… Unless you ask.

 

The simple truth is that the credit bureaus and even furnishers of information must comply with federal law. Doing so isn’t so easy for them. You need to leverage that. It will take time, but it’s a very worthwhile investment.

 

 

Don’t despair.  It’s never too late to become credit worthy – just get started, and remember that it won’t happen overnight and you must commit to doing the work. Doing the work can be justified in how much money you are going to save if you don’t have to hire someone AND in rates if you do have an improved credit report.

 

While I can certainly understand the FTC warning us all to avoid credit repair and scams, what I don’t understand is why they don’t focus a campaign on just how difficult the credit system makes fixing your credit. The bureaus don’t work for us, they make billions and our disputes are a kink in there rhythm. They sort of help us because they have to, not because they want to.

 

So, what ends up happening, is the consumer gets frustrated and seeks out a service to fix their credit for them, and often, it’s a scam.  The FTC moves in, shuts them down, and reminds us that we can do this ourselves. Trouble is, people get lost in the process and the FTC doesn’t tell us that communication with the credit bureaus, debt collectors, and furnishers of information can be a vicious cycle.

 

That’s why it’s important to educate yourself and if you are going to do the work, do some research online. You’ll quickly find there are only a handful a really good , reputable DIY sites and credit repair lawyers.  

 

The highly effective letters that we offer have been proven to WORK in correcting negative items on your credit that may be outdated, obsolete, or inaccurate (unverifiable). When you combine the right letters to cut through the bureaucracy of the credit system, you’ll garner much better results, save money and avoid mistakes that can cause you more trouble and more time. Not to mention, you’ll understand the dangers of dealing with bill collectors without proper knowledge.

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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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Summer is credit check time: Get credit scores free

June 21st, 2008

When you’re looking for convenience, FreeCreditReport.com is pretty good. I’ve tried many different credit report sites, some out of business now, but FreeCreditReport has served up over 20 million customers and they’ve pretty much wired what the consumer wants.

They gives you access 24/7, they make it easy to order, they deliver all three credit reports in very consumer friendly formats and they give you the free credit scores.

I like all the tools they offer along with the product and I like being to log in quickly and easy and manage my credit reports.

Summer is a time where people buy new cars, boats, and rental property so if you’re getting ready for a purchase, check your credit BEFORE you apply for any loan to make sure everything looks good. One small problem and you can see your rates jump.

With credit card companies penalizing consumers more than ever before, you need to make sure your credit stays good. Otherwise you may see a rate jump as much as 9%.

Make sure you keep an eye on your credit score and pay everything on time so it doesn’t go down. Remember, getting your credit reports from FreeCreditReport.com does NOT add a hard inquiry to your credit, so it wont harm your score.

There is no one thing that will always improve your score. In general, there are several things you can do to increase or maintain your score.

  •  Pay your bills on time  This is the single most important factor tied to having a good score.
  •  Establish a credit history  Having a few debts is good, it shows that you can responsibly pay for items. Keeping those accounts open for  many years also helps ‘age’ your report.  Having an established credit history for 5 years is better than only having credit for 5 months.
  •  Don’t take on too much debt  The more debt you owe the higher risk you are to future creditors.
  • Get your FREE credit score and more!

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Credit score will determine what you pay: Insurance and Loans

June 4th, 2008

Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay

Ever wonder how a lender decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards, auto loans, and mortgages. These days, many more types of businesses — including insurance companies and phone companies — are using credit scores to decide whether to approve you for a loan or service and on what terms. Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if you’d be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance — or pay less for it.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how credit scoring works.

What is credit scoring?
Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.

Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they’re due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit report. Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are — how likely it is that you will repay a loan and make the payments when they’re due.

Some insurance companies also use credit report information, along with other factors, to help predict your likelihood of filing an insurance claim and the amount of the claim. They may consider these factors when they decide whether to grant you insurance and the amount of the premium they charge. The credit scores insurance companies use sometimes are called “insurance scores” or “credit-based insurance scores.”

Credit scores and credit reports
Your credit report is a key part of many credit scoring systems. That’s why it is critical to make sure your credit report is accurate. Federal law gives you the right to get a free copy of your credit reports from each of the three national consumer reporting companies once every 12 months.

The Fair Credit Reporting Act (FCRA) also gives you the right to get your credit score from the national consumer reporting companies. They are allowed to charge a reasonable fee, generally around $8, for the score. When you buy your score, often you get information on how you can improve it.

To order your free annual report from one or all the national consumer reporting companies, and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281. For more information, see Your Access to Free Credit Reports.

How is a credit scoring system developed?
To develop a credit scoring system or model, a creditor or insurance company selects a random sample of its customers, or a sample of similar customers, and analyzes it statistically to identify characteristics that relate to risk. Each of the characteristics then is assigned a weight based on how strong a predictor it is of who would be a good risk. Each company may use its own scoring model, different scoring models for different types of credit or insurance, or a generic model developed by a scoring company.

Under the Equal Credit Opportunity Act (ECOA), a creditor’s scoring system may not use certain characteristics — for example, race, sex, marital status, national origin, or religion — as factors. The law allows creditors to use age in properly designed scoring systems. But any credit scoring system that includes age must give equal treatment to elderly applicants.

What can I do to improve my score?
Credit scoring systems are complex and vary among creditors or insurance companies and for different types of credit or insurance. If one factor changes, your score may change — but improvement generally depends on how that factor relates to others the system considers. Only the business using the scoring knows what might improve your score under the particular model they use to evaluate your application.

Nevertheless, scoring models usually consider the following types of information in your credit report to help compute your credit score:

Have you paid your bills on time? You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.
Are you maxed out? Many scoring systems evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it’s likely to have a negative effect on your score.

How long have you had credit? Generally, scoring systems consider the length of your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.

Have you applied for new credit lately? Many scoring systems consider whether you have applied for credit recently by looking at “inquiries” on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn’t counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not considered liabilities.

How many credit accounts do you have and what kinds of accounts are they? Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.

Scoring models may be based on more than the information in your credit report. When you are applying for a mortgage loan, for example, the system may consider the amount of your down payment, your total debt, and your income, among other things.

Improving your score significantly is likely to take some time, but it can be done. To improve your credit score under most systems, focus on paying your bills in a timely way, paying down any outstanding balances, and staying away from new debt.

Are credit scoring systems reliable?
Credit scoring systems enable creditors or insurance companies to evaluate millions of applicants consistently on many different characteristics. To be statistically valid, these systems must be based on a big enough sample. They generally vary among businesses that use them.

Properly designed, credit scoring systems generally enable faster, more accurate, and more impartial decisions than individual people can make. And some creditors design their systems so that some applicants — those with scores not high enough to pass easily or low enough to fail absolutely — are referred to a credit manager who decides whether the company or lender will extend credit. Referrals can result in discussion and negotiation between the credit manager and the would-be borrower.

What if I am denied credit or insurance, or don’t get the terms I want?
If you are denied credit, the ECOA requires that the creditor give you a notice with the specific reasons your application was rejected or the news that you have the right to learn the reasons if you ask within 60 days. Ask the creditor to be specific: Indefinite and vague reasons for denial are illegal. Acceptable reasons might be “your income was low” or “you haven’t been employed long enough.” Unacceptable reasons include “you didn’t meet our minimum standards” or “you didn’t receive enough points on our credit scoring system.”

Sometimes you can be denied credit or insurance — or initially be charged a higher premium — because of information in your credit report. In that case, the FCRA requires the creditor or insurance company to give you the name, address, and phone number of the consumer reporting company that supplied the information. Contact the company to find out what your report said. This information is free if you ask for it within 60 days of being turned down for credit or insurance. The consumer reporting company can tell you what’s in your report; only the creditor or insurance company can tell you why your application was denied.

If a creditor or insurance company says you were denied credit or insurance because you are too near your credit limits on your credit cards, you may want to reapply after paying down your balances. Because credit scores are based on credit report information, a score often changes when the information in the credit report changes.

If you’ve been denied credit or insurance or didn’t get the rate or terms you want, ask questions:

Ask the creditor or insurance company if a credit scoring system was used. If it was, ask what characteristics or factors were used in the system, and how you can improve your application. If you get the credit or insurance, ask the creditor or insurance company whether you are getting the best rate and terms available. If you’re not, ask why.

If you are denied credit or not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information with the consumer reporting company. To learn more about this right, see How to Dispute Credit Report Errors.

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 or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

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FTC Charges Home Buying Consulting Business with Credit Repair Violations

May 27th, 2008

A home-buying consulting business that offers credit repair and home-buying consulting services has agreed to settle with the Federal Trade Commission for alleged federal law violations, including illegally charging an advance fee for credit repair and falsely claiming that they can remove negative information from consumers’ credit reports, even if the information is accurate and timely. At the Commission’s request, the U.S. Department of Justice (DOJ) filed the FTC’s complaint and proposed settlement in federal court.

According to the complaint, consumers are led to Home Buyers Consulting Network, Inc. (HBCN), which is based in Raleigh, North Carolina, through its Web sites and by a company that sells lists of foreclosed properties and suggests that its customers call HBCN if they need credit repair or access to zero or low down-payment home financing. In sales pitches for its credit repair services alone, and in conjunction with pitches for its home-buying consulting services, HBCN makes claims such as: “Our program offers the ability to REPAIR, RESTORE, or ESTABLISH your credit so that you may be able to qualify for 100 % home financing, lower interest rates and better quality credit.” HBCN also offers a “money back guarantee . . . to increase your credit score by 50 to 100 points or delete six derogatory items (from a consumer’s credit report).” HBCN also promises consumers help with finding a home to buy, through a referral to its purported network of realtors and lenders, the complaint stated.

Before performing the promised credit repair services, HBCN’s representatives typically require advance payment of at least $99 for those services, and $399 for bundled credit repair and home-buying consulting services. They also require additional advance payments for credit repair services, typically ranging from $19 per week to $49 per month, and promise to refund all but a $99 fee if consumers do not receive the promised results, provided that the consumers work with them for a period ranging from six months to a year.

HBCN, d/b/a Home Buyers Network, Good Credit Company, GoodCredit.com, and 0downhomebuyers.com, and Douglas Andersen Moore a/k/a Douglas A. Moore, HBCN’s president, CEO, and majority shareholder, are charged with violating the Credit Repair Organizations Act (CROA) and the FTC Act by falsely representing that they can obtain permanent removal of derogatory information from consumers’ credit reports, including bankruptcies, even where the information is accurate and not obsolete. They also are charged with violating CROA by requiring advance payment for their credit repair services; not including on their consumer contracts conspicuous statements about the consumer’s right to cancel the contract without penalty or obligation at any time before the third business day after the consumer signed the contract; and not providing, before the contract was signed, the written statement of consumer credit file rights under state and federal law, and the written “Notice of Cancellation,” both required by CROA.

Under the proposed settlement, the defendants are barred from further CROA violations, and from further misrepresentations affecting a consumer’s decision to buy anything from them, including credit repair services. They also are barred from selling, renting, or otherwise disclosing personal information about anyone who was a client before the order is entered, and from using or benefitting from that information.

The settlement contains a $573,000 civil penalty that will be suspended, and, for consumer restitution, a $40,000 monetary judgment that will be suspended upon payment of $10,000. The full civil penalty and judgment amounts will be imposed if the defendants are found to have misrepresented their financial condition. The settlement also contains standard record-keeping provisions to allow the FTC to monitor compliance with its order.

This case was brought with assistance from the North Carolina Department of Justice, Office of the Attorney General, and the Better Business Bureau Serving Eastern North Carolina.

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. Other credit repair information is available at http://www.ftc.gov.

The Commission vote to authorize staff to refer the complaint and stipulated final order to the DOJ for filing was 5–0. The complaint and proposed stipulated consent order were filed in the U.S. District Court for the Southern District of New York on May 14, 2008, and are subject to court approval.

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. This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. 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. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

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Proposed regulations aim to protect credit card users

May 7th, 2008

Consumers may soon get a break from high penalty fees and retroactive rate increases on their credit cards. The Federal Reserve and other banking regulators last week proposed new regulations designed to end unfair and deceptive credit card practices that have cost consumers billions of dollars. As Fed Chairman Ben Bernanke put it, the rules “are intended to establish a new baseline for fairness in how credit card plans operate.”

Consumer advocates hail the proposed regulations, which are expected to be finalized by the end of the year, as a good first step, but argue that more reforms are necessary to protect the unwary.
Gail Hillebrand, senior attorney with Consumers Union, the nonprofit publisher of Consumer Reports magazine, said the most important change is that card issuers will be prohibited from boosting the interest rate on outstanding balances, unless an account is delinquent. Delinquent, as defined by the regulators, means the minimum payment hasn’t been received within 30 days of the due date.

“I get letters all the time from people who paid one day late, two days late and got bumped into penalty interest – to 29 percent, say, from 12 or 14 percent,” she said. “The new regulations mean that they (card issuers) can’t raise the rate on money already borrowed for no reason or a flimsy reason.”

Another proposed rule will end a problem involving “teaser” rates, such as the zero-percent offers on balance transfers. Currently, credit card companies will take a consumer’s payment and apply it to the balance with a zero-percent rate and not to the balance reflecting new purchases at a higher rate. Under the new regulations, the payment will have to be divided among the various categories.

Card issuers have complained that this is the equivalent of forcing them to provide consumers with a free loan.

“Yes it is, because that’s what you promised,” Hillebrand responds. “Now the person actually will have to get the benefit of the promotional rate they signed up for.”

Other proposed changes would prohibit companies from charging late fees if their bills haven’t been mailed at least 21 days before the payment due date and would ban so-called double-cycle billing, which can result in consumers paying interest on a previous month’s balance that already has been paid.

Card issuers say they’re worried that adoption of the rules could have unintended consequences.

Ken Clayton, senior vice president of card policy for the American Bankers Association trade group in Washington, D.C., said the regulations as proposed would make it harder for card issuers to price their products to account for risky customers.

“Right now, people who manage credit well get lower interest and pay lower costs … and that’s the majority of Americans out there,” he said. “Unfortunately, some of the proposals may keep us from imposing higher costs on those with higher risk, so we would have to impose higher costs on everyone, including those who weren’t so risky, and that’s unfair.”

He said the most important issue was “disclosure,” or making sure consumers know what the rules are.

“There are issues beyond disclosure, but the industry is listening – and making changes and providing consumers with choices,” Clayton said.

Travis B. Plunkett, legislative director of the nonprofit Consumer Federation of America in Washington, D.C., said consumer groups have long argued that the Fed needed to go beyond ordering more disclosure and actually ban many credit card practices.

“We said, if these practices are unfair, it doesn’t do a lot of good telling consumers about them. It’s like telling them, ‘You’re about to get mugged.’ But, in fact, it’s not fair to mug them,” he said.

Plunkett pointed out that there are a number of bills currently pending in Congress that would go beyond the proposed rules, most endorsed by consumer groups. Among the reforms:

  Greater controls on how card companies market to college students and others under 21.

  Tighter limits on late and over-limit fees.

  Putting a ceiling of 7 percent on “penalty” interest rate increases.

  Banning fees when consumers want to pay by telephone or over the Internet.

Plunkett also believes the Fed proposals don’t go far enough to ban so-called “universal default,” under which a credit card issuer can raise the rate on an account that’s current if a consumer gets into trouble with another account, or if his or her credit score drops.

Plunkett noted that such penalty rates can make it even harder for consumers to right themselves.

“It’s often the people in the most vulnerable situation who are hit … and need these protections,” he said.

Story Source: http://www.signonsandiego.com

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A Credit Card You Want to Toss

February 9th, 2008
Bank of America abruptly notified cardholders in good standing their rates would skyrocket if they didn’t opt out fast. Is BofA greedy or needy?

Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren’t behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America (BAC) is hiking rates based on no apparent deterioration in their credit scores at all.

The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter-headed “Important Amendment to Your Credit Card Agreement”-advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. “No one could give me an explanation,” says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a “periodic review” that assesses customers’ credit risk. She declined to say if the Charlotte (N.C.) bank had changed its credit standards thereby bumping some consumers’ rates or how many cardholders were being affected by the review. Bank of America has 40 million U.S. credit-card accounts.

Buzz about the letters is building on the Internet. Since mid-January Credit.com, a credit-card information site, has received 40 complaints from consumers Bank of America had notified of sharp rate increases, even though they were current on their bills, says Emily Davidson, a Credit.com researcher. Complaint sites My3cents.com and BankofAmericaBadforAmerica.org say they have also received similar complaints.

The so-called “opt-out” letters give borrowers the option of no longer using their card and paying off the balance at the old rate. But they must write Bank of America by later this month if they plan to do so-otherwise their rates on existing and new balances automatically rise.

Arbitrary Criteria

What’s striking is how arbitrary the Bank of America rate increases appear, credit industry experts say. In recent years, many card companies have turned to a practice called “risk-based pricing,” where they will raise a regular paying consumer’s rate because of a decline in the person’s FICO score. FICO is a credit-risk score developed by Fair Isaac (FIC) that includes a number of risk metrics the Minneapolis company doesn’t disclose. Credit reporting bureaus supply creditors with FICO scores along with other data, such as late payments and debts owed.

In a December congressional hearing spearheaded by Sen. Carl Levin (D-Mich.), lawmakers slammed big card companies for using such pricing with customers who pay on time. By law, credit-card lenders can change terms as long as they notify borrowers. Even so, JPMorgan Chase (JPM) and Citigroup (C) announced ahead of Levin’s hearing that they would stop the practice of raising card rates based solely on FICO scores.

But Bank of America appears to be taking an even more aggressive stance because, beyond credit scores, it is using internal criteria that aren’t available to consumers. That makes the reason for the rate increase even more opaque. “Congress has faulted credit-card companies for lack of transparency in raising rates,” says William Ryan, a financial industry analyst at Portales Partners, a New York-based research firm. “Bank of America is bringing it to a new level.”

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