Not so very long ago, ruthless debt collectors used humiliating and harassing methods to try to squeeze payments out of consumers. Embarrassing post cards, abusive calls at all hours of the day and night, calls to the workplace, calls to friends and family members, and publicly published lists of debtors were among the tactics that collection agencies used to strongarm people into forking over money.
The Fair Debt Collection Practices Act, a statute added in 1978 as part of the Consumer Credit Protection Act to protect consumers from abusive, deceptive and unfair debt collection practices, is at the center of a wave of lawsuits by consumers that have been dragging debt collection lawyers into court for violating the law.
Among the reasons: mistakes in court filings made by those who purchase debt from creditors but frequently lack enough information to avoid making false statements in pleadings, and debt collectors that are filing cases with inaccurate information or filing after the debt's statute of limitations has expired.
There were more than 69,000 consumer complaints made to the FTC about debt collectors in 2006, which is more complaints than the FTC receives about any other specific industry. This was an overall increase of 3.8% over 2005.
How does this impact you - the consumer?
Recent court decisions in fair debt cases are causing a great deal of anxiety among debt collectors and creditors. Increasingly, debt-collection lawyers are relying on what's called the "bona fide error defense" - claims that the mistakes are unintentional and occurred in spite of the debt collector's best efforts to avoid them. But this defense is being successfully challenged in a number of cases. What exactly is a "bona fide error"? This remains unclear.
The National Law Journal reports that a recent federal court decision that denied litigation immunity to a debt-collection law firm creates more risk for debt-collection lawyers.
The FTC is currently examining the law, which hasn't had a major overhaul in its 30-year history, to see if it is out of step with industry developments. Stay tuned.
Thursday, November 29, 2007
Wednesday, November 28, 2007
Warning! Potential Identity Theft Scam
A colleague of mine received a telephone call last night from a person who asked for her by name, then told her that he was calling on behalf of Bank of America ("BOA"). The caller said that BOA was going to provide her with a "complimentary" copy of her credit report in the next 72 days. She told them she was not interested and did not authorize them to request her report. The caller persisted, saying, "But it is complimentary." She informed him that she didn't care and that they could pay her $100 and she still would not authorize them to send her report. The caller became agitated, said "whatever" and hung up.
She immediately called BOA to inquire whether they were actually offering this service. The customer service representative checked the bank's services to see if this was a legitimate offer, and then told her to file a complaint with the FTC because this is not a service being offered by BOA.
The caller I.D. number was "IC 307-737-9533." (She said she had been receiving telephone calls from the same or very similar number every day for the past few weeks, but no one was ever on the other end of the line until last night).
As part of the Fair and Accurate Credit Transactions Act (FACTA), everyone is entitled to obtain a free copy of his or her credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Experian, Equifax and TransUnion). Simply go to http://www.annualcreditreport.com/.
Remember, you should never provide your personal information to any other company or person for requesting free credit reports.
She immediately called BOA to inquire whether they were actually offering this service. The customer service representative checked the bank's services to see if this was a legitimate offer, and then told her to file a complaint with the FTC because this is not a service being offered by BOA.
The caller I.D. number was "IC 307-737-9533." (She said she had been receiving telephone calls from the same or very similar number every day for the past few weeks, but no one was ever on the other end of the line until last night).
As part of the Fair and Accurate Credit Transactions Act (FACTA), everyone is entitled to obtain a free copy of his or her credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Experian, Equifax and TransUnion). Simply go to http://www.annualcreditreport.com/.
Remember, you should never provide your personal information to any other company or person for requesting free credit reports.
Wednesday, November 7, 2007
Beware of Predatory Credit Cards
So let's say you're one of the millions of Americans with weak or non-existent credit. You're desperate to rebuild your credit history, since you know that poor credit leads to higher rates for mortgages, auto loans, insurance and can even affect whether or not you land that job you want. You've heard that one way to rebuild a weak or non-existent credit history is by signing up for a credit card and making small purchases, repaying the debt on time every month.
Somehow these banks seem to know that you want credit - you've received e-mails and offers in the mail. Lured in by promises of credit lines up to $2,000, you apply for a credit card. Congratulations- you're approved! You're a little disappointed that the limit they give you is just $250. It wasn't as much as you'd hoped for, but it's a start.
What you probably didn't do, though, is ask about the TERMS. And you soon discover that your $250 credit line is actually much less, because by merely signing up for the card, you incurred $178 of instant debt due to all those fees that you didn't know you'd be responsible for. There's a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee. If you didn't realize that your actual buying power was really just $72, you might buy something that causes you to go over your limit - which, of course, generates yet another fee.
This is just one example of "fee harvesting," a practice by which credit card companies pile on junk fees to unsuspecting consumers - typically low-income, fixed-income and minorities. It's a lucrative business, generating millions in fees for companies and billions of dollars of debt for consumers.
A report issued by the National Consumer Law Center details how banks and marketers take advantage of inadequate laws and weak oversight by regulators by selling these predatory cards. The biggest offenders named in the report include CompuCredit, Urban Trust Bank, South Dakota-based First Premier and First National of Pierre, and Delaware-based First Bank of Delaware and Applied Bank (formerly known as Cross Country Bank), Capital One and HSBC.
They'll tell you their mission is bringing affordable banking services to the underserved. But what they are really doing is profiting from the poor and desperate.
The root of the problem lies in regulatory and legal loopholes that allow this practice to continue. I don't advocate cutting off people's access to credit. Rather, we need tougher federal controls. Until Congress acts to protect consumers from fee harvesting and other predatory practices, you must protect yourself.
The smaller the print, the more important it is to read it. Before you agree to anything, ask to read the terms. If you don't understand the terms, ask someone you trust to explain them to you.
Remember, if it seems too good to be true, it probably is.
Listen to NPR's report: Low Wage America - Credit Card Companies Abuse the Unwitting.
Somehow these banks seem to know that you want credit - you've received e-mails and offers in the mail. Lured in by promises of credit lines up to $2,000, you apply for a credit card. Congratulations- you're approved! You're a little disappointed that the limit they give you is just $250. It wasn't as much as you'd hoped for, but it's a start.
What you probably didn't do, though, is ask about the TERMS. And you soon discover that your $250 credit line is actually much less, because by merely signing up for the card, you incurred $178 of instant debt due to all those fees that you didn't know you'd be responsible for. There's a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee. If you didn't realize that your actual buying power was really just $72, you might buy something that causes you to go over your limit - which, of course, generates yet another fee.
This is just one example of "fee harvesting," a practice by which credit card companies pile on junk fees to unsuspecting consumers - typically low-income, fixed-income and minorities. It's a lucrative business, generating millions in fees for companies and billions of dollars of debt for consumers.
A report issued by the National Consumer Law Center details how banks and marketers take advantage of inadequate laws and weak oversight by regulators by selling these predatory cards. The biggest offenders named in the report include CompuCredit, Urban Trust Bank, South Dakota-based First Premier and First National of Pierre, and Delaware-based First Bank of Delaware and Applied Bank (formerly known as Cross Country Bank), Capital One and HSBC.
They'll tell you their mission is bringing affordable banking services to the underserved. But what they are really doing is profiting from the poor and desperate.
The root of the problem lies in regulatory and legal loopholes that allow this practice to continue. I don't advocate cutting off people's access to credit. Rather, we need tougher federal controls. Until Congress acts to protect consumers from fee harvesting and other predatory practices, you must protect yourself.
The smaller the print, the more important it is to read it. Before you agree to anything, ask to read the terms. If you don't understand the terms, ask someone you trust to explain them to you.
Remember, if it seems too good to be true, it probably is.
Listen to NPR's report: Low Wage America - Credit Card Companies Abuse the Unwitting.
Monday, November 5, 2007
$3,000 Credit Limit and No Job
When I went to college, I was armed with a word processor (because I couldn't afford one of the newfangled computers), flannel jeans (I was a Florida girl who couldn't wait to experience her first Boston winter) and a toaster oven (for making toast and baking cookies). What I didn't bring, though, was any lick of common sense about credit or credit cards or interest rates. (Not entirely my fault - growing up, my parents were very hush-hush about finances. Talking about finances was like talking about that crazy mouthy aunt with chin hairs - you just didn't do it, but if you had to, it was always in a low voice and the topic was always dropped after a minute or two.)
So naturally, being a broke college student, I signed up for several credit cards. The credit card companies were everywhere on campus. What a deal! Not only did I get credit cards, I got some cool T-shirts and water bottles too.
I was thrilled when the credit cards came in the mail. I felt so "grown up." And the amount of money I could charge - one card had a $3,000 limit! - boggled my mind. Free money! I got my hair cut at a tony place on Newbury Street. I developed an obsession with expensive perfume. I treated my other broke college friends to dinner. I charged right up to my $3,000 limit.
When the bill came, it was all I could do to make the minimum payments. I had a job, but the majority of that had to go toward my work-study commitment. Long story short - I DID pay off the credit card - but it took YEARS to do so.
When I read "The dirty secret of campus credit cards" in BusinessWeek, it brought back a lot of memories and questions. Why in the world would a credit card company give a $3,000 limit to a college student who stated on her credit application that she had no job? But marketing to college students - easy targets because of their limited financial resources and naivete - has been part of campus culture for decades.
Why? Colleges and universities benefit from "sweetheart deal" kickbacks. We're not just talking free dinners. We're talking about secretive deals worth $20 million dollars per university. Schools earn "a set fee for each student, alumnus, or professor who signs up for a credit card, as well as a percentage of overall charges made on the cards." In exchange, the school gives credit card companies access to student lists and exclusive marketing privileges at school events.
Can you blame the schools? State schools are having an especially hard time as they deal with budget cuts. But in an era when more than 85 million people have joined the national Do Not Call list (and that figure is from 2005!), why are secret deals being made to release student information to the types of companies that many of us have chosen to avoid?
Well, that may stop. State legislatures in New York, Texas and Oklahoma voted earlier this year to clamp down on marketing credit cards to college students. And I understand that this is an issue that Congress will be examining in greater depth.
Don't get me wrong. I am not against issuing credit to college students or stifling capitalism. I do think, though, that college students - and many adults too - don't understand the increasingly complicated terms and conditions of credit cards, or even the basics of how they impact their credit and financial health. All I'm saying is - let's do this responsibly, and include in their education not just English, calculus and biology, but the ability to understand and manage credit cards wisely.
So naturally, being a broke college student, I signed up for several credit cards. The credit card companies were everywhere on campus. What a deal! Not only did I get credit cards, I got some cool T-shirts and water bottles too.
I was thrilled when the credit cards came in the mail. I felt so "grown up." And the amount of money I could charge - one card had a $3,000 limit! - boggled my mind. Free money! I got my hair cut at a tony place on Newbury Street. I developed an obsession with expensive perfume. I treated my other broke college friends to dinner. I charged right up to my $3,000 limit.
When the bill came, it was all I could do to make the minimum payments. I had a job, but the majority of that had to go toward my work-study commitment. Long story short - I DID pay off the credit card - but it took YEARS to do so.
When I read "The dirty secret of campus credit cards" in BusinessWeek, it brought back a lot of memories and questions. Why in the world would a credit card company give a $3,000 limit to a college student who stated on her credit application that she had no job? But marketing to college students - easy targets because of their limited financial resources and naivete - has been part of campus culture for decades.
Why? Colleges and universities benefit from "sweetheart deal" kickbacks. We're not just talking free dinners. We're talking about secretive deals worth $20 million dollars per university. Schools earn "a set fee for each student, alumnus, or professor who signs up for a credit card, as well as a percentage of overall charges made on the cards." In exchange, the school gives credit card companies access to student lists and exclusive marketing privileges at school events.
Can you blame the schools? State schools are having an especially hard time as they deal with budget cuts. But in an era when more than 85 million people have joined the national Do Not Call list (and that figure is from 2005!), why are secret deals being made to release student information to the types of companies that many of us have chosen to avoid?
Well, that may stop. State legislatures in New York, Texas and Oklahoma voted earlier this year to clamp down on marketing credit cards to college students. And I understand that this is an issue that Congress will be examining in greater depth.
Don't get me wrong. I am not against issuing credit to college students or stifling capitalism. I do think, though, that college students - and many adults too - don't understand the increasingly complicated terms and conditions of credit cards, or even the basics of how they impact their credit and financial health. All I'm saying is - let's do this responsibly, and include in their education not just English, calculus and biology, but the ability to understand and manage credit cards wisely.
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