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Beware: Dirty Debt Collectors

November 3rd, 2008

Beware of Dirty Debt Collection Practices

Getting the Money at All Costs Causes Some Debt Collectors to Break the Law

Buffalo news reporter Fred Williams spent three months working undercover as a collector to see what some collectors are trained to do, and found that some of the tactics were dishonest or illegal.

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Debt Collectors terrifying debtors

Scammers masquerading as debt collectors and law enforcement officials have terrified consumers with threatening phone calls and bilked them out of thousands of dollars, officials with the West Virginia Attorney General’s Office say.

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Tags: buffalo news collections collector collectors debt debt collection practices debt collectors debtor debtors debts fred williams money news reporter practices report s spent spent three tactic three months

Is this financial crisis partly our fault

October 12th, 2008

Everywhere you turn you see the news talking of a plunging stock market, business bail outs and record number foreclosures.

Initially my thoughts are “What has this financial system done to us?” but on second thought, are we not intelligent enough as a society to have avoided financial collapse?

Just because a greedy bank tells you that you qualify for a mortgage ,did we not have enough sense of our own to know it was outside our budget? Did we consider the monthly payment for 30 years and factor in a slow economy or job loss?

These are the questions that one cant help but ask as it proves even more, now than ever- that we as a society are so undereducated in finances. Financial literacy should be at the top of the governments list of things to do yesterday. If you cannot teach a person to be responsible with their finances then you should expect disaster.

Remember the term “Buyer beware? “That should not only go to avoiding scams, but the buyer also need be- aware. Aware of your finances, your family structure, your ability to manage your debt, retirement, your credit reports. Consumers often close their eyes and hope for the best and the result can be disastrous.

While it is the american dream to own a home, unfortunately, not everyone is capable of doing so. There is a huge responsibility that comes with homeownership that goes far beyond the application approval. We as consumers should have known better. We should have seen this collapse coming because of the sheer volume of sub prime loans that were being handed out to literally every Tom, Dick, and Harry. Default was inevitable. Couple that with an unstable economy and disaster was at our doorstep.

Now was must reap was we sow and work our way through this financial collapse. I have no doubt in the spirit of Americans and we will survive- but maybe this time around we will take responsibility for our own finances and not leave it in the hands of Wall Street and greedy lenders.

We need to take responsibility for our own future. Manage our jobs, our retirement, our credit reports, our debt. We cannot expect the government to take 100% of the blame in this financial mess. If it had turned out good, would we blame them then? If your home’s equity were up 10% would you be shaking your fist at the greedy bankers?

Did big brother charge up your credit cards and remodel your home for you? Did big brother tell you to buy two gas guzzling SUVs and eat out all the time? We all know there is a lot of blame to go around. No one got into this alone. People were in a feeding frenzy with easy loans and easy credit.

We helped to get ourself into this mess and now we must help to get out. We cannot sit back and wait for handouts or for the market to fix itself. We need to start fresh and take inventory of our financial fitness and begin anew. Sure, we’ll see challenges all along the way but a slow and steady focus on the problem will win in the end.

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Posted in Articles & Resources, Misc.

Tags: american dream applicati approval avoiding scams banking banks best budget cards consumer consumers credit debt debts economy finance finances financial collapse fix foreclosure foreclosures help homeownership initiative lenders lists loan loans management market business mortgage mortgages no doubt on payments personal report retirement s second thought sheer volume slow stock market sub prime s tom dick and harry unstable financial literacy

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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Tags: abuse abusive aca advice agency authors barks billing bills books boon car cards clap co workers collections collector collectors consumer consumers credit creditor creditors death of a spouse debt debt debt burden debtor debtors debts delete deletions divider fee finance finances fraud fred williams hard luck story help industry line make management money mortgage mortgages negotiate on or payments personal raised regulators report s settle settlements unpaid federal trade commissi huddle violations world identity

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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Posted in Articles & Resources, FTC Updates

Tags: agency authors bankruptcy bcp best collections company consumers contracts correct credit croa debt debts equifax errors experian fee foreclosures ftc haunt help judgment judgments line lists mail make mistake mistakes on online payments personal practices programs remove repair report restore s services transunion undefined unfair violations

Credit notification moves onward and upward

August 21st, 2008

It’s not bad enough that lenders make us feel like yesterday’s trash when our credit scores don’t meet what they consider “golden”, but often you’re not even told if you’re getting a good deal or not- when it comes to the rates and terms.

Many consumers have no idea what a good rate is or isn’t, especially if they don’t use the credit system a lot. Now, a new change may make that easier for all of us by making the lenders tell us that we are getting a good or not so good deal.

People who deal in the credit system on a regular basis often lose touch with this fact, but it’s not your everyday Joe that knows if he’s getting a good deal or not. This change would make the lender tell you that you may not be getting the best deal so you’d at least be able to make an informed decision or go elsewhere before you sign on the dotted line.

proposed federal regulation that would force lenders to tell consumers “This isn’t our best deal” moved a step closer on Monday.

Now, lenders offer loans at whatever rates they like, without explanation. Consumers with the cleanest credit reports and highest credit scores tend to get the best rates.

Under the proposal, lenders that decide to offer higher-rate loans based on consumers’ credit reports would have to notify consumers of that fact. The notification would have to come before the deal was done.

The change, jointly proposed by federal regulators in May 2008, is intended to:

Make lending more transparent.

Give consumers the chance to review and fix credit report errors.

Let consumers take steps to improve their credit before committing to a loan.

In short, it requires lenders to say, “Hey, consumer, we’re giving you a bum deal because you have bum credit.” Continue to read the rest here.

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Tags: better rate bum deal card apr consumer consumers credit credit card rate comparison credit notification creditcredit reports decision decisions errors fix lenders lending line loan loans make proposal rate sign on the dotted best rates regulators report s score scores trash

Debt settlement versus debt management

August 9th, 2008

Being in the credit field, I am always surprised just how many people don’t know the difference between debt management and debt settlement (negotiations).

I talked with a man the other day who had been feverishly searching for a good debt settlement company before he ran out of time, but as I was speaking to him, I realized he didn’t have any money, so how was he going to settle his debts?

Debt settlement also referred to as debt negotiations is a method to settle your debts for less than what you owe. Debt settlement procedures can be very affective IF you know what you are doing and have some money.

When you want to avoid bankruptcy and get out of debt AND you have some money set aside, you can negotiate with your creditors or use a debt negotiator to do it for you.

Often they will offer 30-40% of the total debt to be considered as settled in full. This can cut the debt in half and consider it case closed. That means no more worrying about the creditors coming after you or worrying day and night about being sued or slapped with a judgment.

You must have money to settle your debts, otherwise there is no “debt settlement”.

Many times the creditors will accept this, especially if you are in dire straights and they fear you may file for bankruptcy and they’d be left with nothing.

A professional debt negotiator has long term relationships with many of the creditors and can work a deal for you, for a fee. You still walk away paying less, even with the fee.

Another option to consider would be do it yourself debt negotiations. If you are equipped with knowledge and understand what it takes, you may be very successful in negotiating your own debts without paying a professional. That can mean even more money in your pocket.

Debt Management is an entirely different program. Credit counseling or debt management is used to cut your monthly payments to your creditors but you still pay the full balance. It’s a good alternative if you are unable to meet your monthly obligations to your creditors and are falling behind.

A debt counselor can set up a program with your existing creditors and in essence “freeze collections” and reduce your monthly payment. This gives you adequate time to repay everyone without the worry of the accounts going into collections or being sued.

A good debt management program will be a not for profit who will work as your counselor and do all the dirty work with the creditor. You simply pay one payment to the credit counseling firm each month and they disburse your payments for you to your creditors.

You can even get many creditors to agree to freeze the interest or remove late fees. Often they will also “suspend” credit reporting while you complete the program.

Debt negotiations is NOT debt management and vise versa.

See more about debt management and the difference between it and debt consolidation.

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Posted in Articles & Resources, Misc.

Tags: bankruptcy company counseling credit credit counseling creditor creditors debt debt management debt negotiations debt negotiator debt settlement debts dire straights fee judgment long term relationships management money money in your pocket negotiate on payments programs remove report s settle settlement company settlement negotiations settlement procedures surprise

Finding the right credit card and paying less interest

August 8th, 2008

More than ever, we need to save every penny. Are you even paying attention to how much you are spending in interest and fees on your credit card?

I spoke with a friend the other day and he nonchalantly said “Yeah, I have got to look into paying off my credit cards because my interest rate is 29%“. He didn’t think twice about what he was paying and admitted he’s been too lazy to bother and transfer a balance.

I may be a credit expert and know more than the average consumer, but 29% on a credit card is outrageous. I recommended he immediately look into a balance transfer online. Even with damaged credit you can find a card that may be better than what you are currently paying and it never hurts to make sure.

With soaring gas prices and record breaking foreclosures, that maybe you can’t control, this you can. Consumers are often too busy or maybe like my friend, too lazy to make simple changes that add up to big money. Just imagine what you pay in interest at 29% over 4 years on a balance of 5,000.00.

You don’t want to know.

So get online and make sure your credit is the best it possibly can be and search for a new credit card with a better rate, fair terms and even rewards ( I just applied for one with gas rewards). Get the most from your credit card even if it is the only thing we can control in this tough economy right now.

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Tags: balance transfer cards consumer credit card credit expert economy foreclosures interest rate low interest business prepaid debit card money paying attention rates rewards s simple changes soaring gas prices spending

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.