Posts Tagged ‘delinquent’

Charge offs and delinquency rise for credit card issuers

November 1st, 2008

Credit card companies are next in line to feel the credit crunch. Credit card companies say that their charge-offs of delinquent debt from card-holders have spiked to 5.5 percent, and could jump to 8 percent in coming months, a level not seen since the dot-com bust in 2001, according to Washington Post.

Banks considering debt settlements
USA Today reports that banks are proposing that they forgive up to 40% of the credit card debt owed by the most financially stressed consumers, who are close to bankruptcy. These consumers would then get five years to pay off their remaining card debt, interest-free. Banks would pilot this program with 50,000 consumers, in hopes of expanding it to tens of thousands of others to avoid their debts being lost all together through a bankruptcy.

We’ve known for years that debt settlements is a very sound solution to critical credit issues. Banks have always been resistant to debt settlements but now, they may have little choice. It’s a simple question really. Would you rather get half or lose it all?

Banks seem to finally have their heads out of the sand on this issue and this could be great news for consumers. One, it will cause consumers to think twice about filing for bankruptcy if the banks are willing to work with them, and two- banks will decrease their total charge off amounts by recouping at least half of the debt.

“With consumers losing their homes at record numbers, the last thing they are worried about is credit card debt. If they are already in a position to lose their biggest (secured) asset, their home, then the credit card debt will do little to jar them. It’s unsecured and much easier to discharge in a bankruptcy”,  says Credit Expert, Kristi Feathers.

Bully Debt Collectors
The other issue that’s going to be at hand here is the on-slot of debt collector abuse to consumers with accounts referred to collections. Debt collectors are probably a few of the only businesses thriving in this downturn and they will be all over these debtors, and that is going to cause more complaints nationwide to groups like the FTC.

Right now, consumers with credit card debt mounting and considering bankruptcy need to contact the card issuers and try to work out a debt settlement. They should explain their situation and see if a 40% debt reduction is possible and above all, get these agreements in writing.

A settled debt on a consumers credit report is much better than a charge off and once the debts are settled, the consumer can focus on rebuilding their credit from a stronger standpoint. Remember, settled debts will show paid whereas a charge off is unpaid, so that’s motivation in settling your debts if you are able.

At least with the banks being open to the idea of debt settlement, you have an advantage that once was harder to achieve.

Remember the following;

  • Get all agreements in writing with your creditors/collection agencies
  • Follow up with the credit bureaus to make sure debts are reported accurately as “settled” not “charged off”
  • Be sure to ask the creditor to also settle the rating from paid collection to settled
  • Try to handle the issue BEFORE its assigned to the collection agency
  • Educate yourself on debt settlement issues (you can do so here free)
  • Report any abuse by debt collectors to the Federal Trade Commission at FTC.gov
  • Keep a log of all your communications with creditors and collectors
  • Use DIY help if needed (FDCPA, FCRA)

If you credit card issuer isn’t willing to settle or If you are not in a position to settle your debts, you can contact a credit counseling firm to spread your payments out, reduce interest and fees, and help you get breathing room. Debt settlements is different from debt management.

N2credit.com

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Court orders credit bureaus to clean up consumer credit reports

October 4th, 2008

We just covered this issue again last week in the members area. Old zombie debts that just live on and on, often outliving you. Our credit system is very unforgiving. If they don’t get you for 7 years from the bankruptcy, they’ll try to get you for another 6-10 through erroneous reporting, either on the suppliers end or the credit bureaus end.

It’s a vicious cycle and is it a wonder people give in and hire credit repair attorneys?

This court order is going to make some consumers and credit repair agencies very happy- and make their jobs easier when it comes to deleting negative trade lines that were part of a bankruptcy.

The issue is millions of debts that were included in a bankruptcy are being reported incorrectly as delinquent or past due with a balance. The debts, however, should be listed as “included in bankruptcy” with a zero balance. This can have a major impact on your credit score.

According to the WSJ; Erica Noe of Burke, Va., says an old debt on her husband’s credit file cost them their home — in part because it prevented them from being able to refinance their interest-only adjustable-rate mortgage last year. Her husband, Kenneth, had filed for Chapter 7 bankruptcy in 2002; in that proceeding, the court discharged his prior debts. Nevertheless, they were unaware that a previous $7,000 credit-union loan remained on his report, pulling down his credit score for several years.

“We thought that once we filed for bankruptcy, it would go away,” says Ms. Noe. “But it didn’t. It affected everything.” The 31-year-old nurse says they didn’t find out about the error until they tried — but failed — to refinance their mortgage. When the rate reset, the Noes’ monthly mortgage payments shot up by about $1,000; they lost their home to foreclosure last November. “It was a snowball effect,” she says. “Unfortunately, everything just kind of worked against us at the same time.

“I tried to fix the error on the report by calling the credit union and telling them to stop reporting,” she says. Currently, their lawyer, Robert Weed, is filing a separate lawsuit against Equifax and the credit union. Equifax declined to comment on an ongoing suit.

A recent court order requires the three major credit-reporting bureaus — Experian Group Ltd., Equifax Inc. and TransUnion LLC — to clean up the credit files of millions of consumers who have filed for Chapter 7 bankruptcy. The problem: Old debts, which are typically forgiven by the courts in a bankruptcy filing, are still being reported as active on many consumers’ credit reports.

The changes could be particularly important to borrowers now, as consumer credit tightens across the board. It is perhaps more important than ever for people to make sure their credit scores are accurate and as high as possible.

This ruling is expected to clean up the credit files — and potentially boost the credit scores — of an estimated six million to 10 million people who have filed for Chapter 7 bankruptcy but still had errors in their files, according to plaintiffs’ attorneys. Consumers with so-called zombie debt — old loans they may have paid off years ago that can resurface when an aggressive debt collector erroneously demands payment — are also likely to get some relief, if those debts also were discharged under Chapter 7 protection.

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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 scores damaged by industry mishap

May 20th, 2008

One million consumers affected: If you are a loan holder with Sallie Mae, you should immediately check your credit score to see if it has decreased because of this mishap.

A mistake last week by student loan firm Sallie Mae temporarily wrecked the credit scores of a million loan holders, with some victims saying their scores had sunk 100 points or more. While the scores have since been fixed, the Sallie Mae mishap provides a startling look at the impact of credit scores, how fragile the credit-scoring business is and how severe the punishment can be for one credit-related error: a potential cost of hundreds of thousands of dollars to individual consumers.

Earlier this week, Sallie Mae said it had changed the way it sends monthly payment information to the credit bureaus, and that change inadvertently caused about one million loan holders to end up with a serious blemish on the credit reports. The college lending giants offers borrowers graduated payment plans that allow former students to pay a little less in the initial years after they leave school, and a little more later. Sallie Mae’s change caused the bureaus to view those on graduated payments as “arrangements made with credit grantor to make partial payments.” That sounded to the credit bureaus as if the borrowers had signed up for a reduced payment plan after being delinquent, which carries with it a serious credit score stigma.

As to whose fault the errors ultimately were, take your pick: Sallie Mae, for changing the payment information provided to the bureaus; the bureaus for reporting the errors; or Fair Issac, the company that invented the formula used to calculate the scores?

Sallie Mae spokeswoman Martha Holler said the glitch affected “roughly 10 percent of our 10 million customers.”

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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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How to deal with bill collectors

February 2nd, 2008

So you’ve screwed up. You’re drowning in debt. Maybe the credit card was burning a hole in your pocket and you just had to get the HDTV. Or maybe you or a family member had a medical emergency while you we laid off. It doesn’t matter to your creditors; they lent you the money and now they want it back.

The lender will try to work with you for a while and its best to try to negotiate with them at this stage. If you can’t work something out or just don’t pay, they will send your file to either an in-house bill collector or, more commonly to an outside agency.

Bill collectors are a tough bunch. They have heard all the sob stories and aren’t interested in yours. They mostly get paid on commission, so they just want to get money out of you and move on.

There aren’t many laws to get you off the hook as far as the debt goes (bankruptcy is your only choice). But there are laws that prevent harassment and abuse by bill collectors. Debt collectors tend to try to ignore these laws, but if you know your rights and insist on them, at the very least you might be able to collect damages if the bill collector persists in ignoring them.

The major law protecting you is the Federal Fair Debt Collection Practices Act. Some states have their own versions of this law.

The law does not prevent a bill collector from contacting you, but it must be at convenient times. Contact can’t be before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if you tell him that your employer disapproves of such contacts.

If you don’t want to be harassed, get the name, address and telephone number of the bill collector. Then send a certified letter, return receipt requested telling the collector to leave you alone. Once the collector receives your letter, he can not contact you again, except to say there will be no further contact or to notify you that the bill collector or the creditor intends to take some specific action against you, such as sue you or report your delinquency to a credit bureau.

The bill collector can contact friends, relatives or neighbors, but just to find out where you are. They are not supposed to be spreading the word that you’re past due on your debts.

Within five days of first contact, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money. You have 30 days to dispute the debt, in writing (certified mail RRR again). The bill collector is then not allowed any other contact with you until he is able to send you proof of your debt.

According to the Federal Trade Commission (FTC) the agency charged with enforcing the Fair Debt Collection Practices Act: Debt collectors may not:

use threats of violence or harm; 
publish a list of consumers who refuse to pay their debts (except to a credit bureau); 
use obscene or profane language; or 
repeatedly use the telephone to annoy someone.

Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not:

falsely imply that they are attorneys or government representatives; 
falsely imply that you have committed a crime; 
falsely represent that they operate or work for a credit bureau;
misrepresent the amount of your debt; 
indicate that papers being sent to you are legal forms when they are not; or 
indicate that papers being sent to you are not legal forms when they are.

Debt collectors also may not state that:

you will be arrested if you do not pay your debt; 
they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or 
actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.

Debt collectors may not:

give false credit information about you to anyone, including a credit bureau; 
send you anything that looks like an official document from a court or government agency when it is not; or
use a false name.

Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not:

? collect any amount greater than your debt, unless your state law permits such a charge;
? deposit a post-dated check prematurely;
? use deception to make you accept collect calls or pay for telegrams;
? take or threaten to take your property unless this can be done legally; or
? contact you by postcard.

However, as I said before, a lot of debt collectors will ignore this law whenever they can. So it is very important that you build a case against harassing debt collectors. Send repeated certified letters outlining what they said or did.

Tape the phone conversations. Tell the collector you’re doing so. If he continues to talk, he’s considered to have consented to the taping.

If you contest the debt, ask that you be sent proof of it in writing. In many cases, neither the creditor nor the collector can produce this.

Check your credit report and, if you see false entries, contest them right away.

If you do owe the debt, negotiate calmly and in good faith. Because it gives you more time to think, I would try to carry out all negotiations in writing or hire an attorney to do them for you. This will also give you a paper trail if you have to proceed in court.

Do not be bullied into rushing into an agreement and do not make any payments unless the agreement is in writing. For example, if the bill collector agrees to take half of the amount you owe as full payment and report the debt paid to the credit bureaus, get it in writing. If the collector won’t send you a letter, send him a certified letter accurately stating all the terms of your agreement.

It is not unknown for bill collectors to settle the case with a debtor and then sell the rest of the debt to another collection agency, which will try to collect the unpaid balance. This is why it is very important to have a paper trail.

If you have old debts that have apparently gone away, beware of the zombie bill collectors. They are buying unpaid debts for pennies per hundred of dollars of debt and then trying to harass debtors to pay. Even if they only get a few dollars, they make money.

The problem is that in many cases the statute of limitations on collecting the debt is run. If you make a payment, you can reopen the statute, the debt can be reported to credit bureaus as freshly delinquent and you can open yourself up to all sorts of problems. Sometimes even saying the wrong thing to one of these guys can be considered an acknowledgement of the debt, allowing them to reopen the statute of limitations.

If you have any old unpaid debt become familiar with the statute of limitations, generally 4 to 6 years, in the state where you live now and, if applicable, in the states you lived in when you ran up the debt.

The best way to handle a zombie bill collector is to refuse to speak to him. Just hang up the phone.

The Fair Debt Collection Practices Act is rather vigorously enforced by the FTC and state attorney generals. Make complaints to both is you feel you being unfairly treated.

Also you have a private right of action against the debt collectors. You can sue a bill collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered, plus an additional amount up to $1,000. Court costs and attorney’s fees also can be recovered. If you need a lawyer referral, go to National Association of Consumer Advocates website. http://www.naca.net.

Also I would suggest you buy or borrow from the library Money Troubles: Legal Strategies to Cope With Your Debts (Solve Your Money Troubles) by Robin Leonard, if you have a lot of debt. It best to know what you’re facing and how to handle yourself going in.

Remember, even if you can tame the bill collectors, your debts do not go away. The next step will probably be lawsuits and garnished wages. That is why the best course of action is to negotiate with your creditors from the very beginning.

Chris Cooper is a retired attorney. At http://www.credit-yourself.com/ he tries to pass on some of the knowledge he picked up in his journey to become debt free. [source]

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Credit card debt grows, delinquency does too

January 13th, 2008

If you pay attention to advertising, you’ve probably heard Capital One ask, “What’s in your wallet?”

The credit card company, of course, wants the answer to be: a Capital One card.

But in the months ahead, it looks like the company will be hoping for a little more in your wallet than the card. Capital One wants you to have enough money to pay your credit card bills too.

Lately, with high energy costs and the housing recession emptying wallets, the number of people falling more than 30 days behind on their credit card bills has climbed. And Capital One has given up on a rising number of uncollectible card payments. So-called charge-offs rose to 5.74 percent in December, from 5.34 percent a month earlier.

The company said Thursday that fourth-quarter profit will be 44 percent below what analysts had expected. In 2008, it expects $5.9 billion in unpaid credit card bills, compared with previous forecasts of $4.9 billion.

American Express also said Thursday that it’s feeling the effect of bad loans. The company will be taking a $440 million charge in the fourth quarter. Consumers are heavily in debt, with $922 billion in “revolving credit” like credit cards, according to the Federal Reserve. They have been spending nearly everything they earn.

Merrill Lynch economist David Rosenberg said the rise in credit card usage during the last six months has been rare — a level that typically shows up at times of “intense financial stress.”

In October, he said, credit card balances soared at over an 11 percent annual rate. Over the last six months, it was 9.5 percent annualized — a level that also occurred in the opening months of the 2001 recession.

In a worrisome sign for investors and credit card firms, analysts have underestimated the kinds of problems that were disclosed Thursday though they have said for months that housing problems eventually would spill over to consumers and their credit cards.

During the last few years, the credit card business had been highly profitable. Consumers were able to pluck cash out of their home equity and consolidate credit card debts. But with mortgage lending rules tighter and home equity vanishing as home prices fall, refinancing is no longer a quick fix.

Still, consumers have continued to confound some analysts by shopping more than expected.

Rosenberg said the recent credit card figures suggest what’s still keeping consumers in stores: “Consumers are hanging on by a thread, but not really a thread,” he said. “The consumer is hanging on by a piece of plastic.”

On Thursday, Fitch analysts Meghan Crowe and Christopher Wolfe noted in a report that “credit card performance began to deteriorate in the second half of 2007,” and they believe “deteriorating consumer credit trends will continue throughout 2008.”

Revolving credit usually totals about 36.5 percent of total consumer credit, “but this ratio has ticked up in recent months as trouble in the mortgage market means home-equity loans are not available,” they wrote.

In a note to investors, BCA Research warned investors not to be tempted to buy stocks in the credit card companies: “The rise in the unemployment rate warns that the rate at which credit card holders repay their debts will fall.”

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