Sen. Dick Blumenthal wants explanations from the three credit rating bureaus about a New York Times report about a VIP list they allegedly keep that favors the rich and famous over everyone else.
The Connecticut Democrat wrote a letter Monday to Equifax, Experian and TransUnion about the reported separate system in which errors and disputes are resolved faster and with more attention than with other consumers, who must rely on an automated system and outsourced customer support to clear up mistakes.
“I am deeply troubled by the implication that your companies are neglecting the majority of consumers and providing preferential treatment for wealthy, famous or well-connected persons, and I ask you to confirm or deny these reports and provide more information on your dispute resolution process,” he wrote in the letter.
“An error-free credit report is vital to a consumer’s financial health, and consumers must be able to quickly resolve disputes and mistakes with the cooperation of the credit reporting bureau,” he wrote. “Every consumer deserves this cooperation, not just the rich and powerful.”
But the credit bureaus deny keeping VIP lists.
“We did respond to the senator, and to be as clear as possible, we do not have VIP lists that provides preferential treatment to anyone,” Tim Klein, a spokesman for Equifax, told FoxNews.com.
“We received the letter, and will be providing a response to Sen. Blumenthal,” Gerry Tschopp, a spokesman for Experian, said in an email to FoxNews.com. “As we’ve stated before, Experian does not have a VIP list.”
The New York Times interviewed an Arkansas resident who said she had been denied employment and credit because her filing was mixed up with a felon who had the same name and birthday, and a Louisiana consumer struggled to remove errors from her credit report that stemmed from a mix-up with a less credit-worthy person with the same name, similar address and Social Security number.
The newspaper also interviewed a number of consumer lawyers and advocates who accused the credit bureaus of lacking an incentive to improve the system because their main clients are the creditors, not consumers.
But Klein cited a new study from the Policy and Economic Research Council that showed less than 1 percent of all credit reports reviewed by the consumers prompted a dispute that resulted in a credit score correction and an increase of a credit score of 25 points or greater. It also showed that one half of one percent of all credit reports reviewed by consumers after the dispute process ended had credit scores that moved to a higher “credit risk tier” as a result of the dispute.
“We’re not perfect by any stretch, but we get it right a preponderance of the time,” he said.
Published May 17, 2011 | FoxNews.com
Here is a bit of information I found- By the Numbers
Credit-Savings-Mortgage, By The Numbers
That’s the credit score you need to qualify for the lowest interest rate on a new home or car. It makes a huge difference: On a $300,000 mortgage, someone with a score of 760 or higher could get the best rate of 3.24 percent, which works out to roughly $1,304 a month. But if your score drops 100 points, your payment will shoot up another $100. Ouch. The best ways to raise your number? Pay all your bills on time and pay down your debt–those two things make up 65 percent of your score. To make sure there are no errors dragging you down, get your credit reports annually from each of the major credit-reporting agencies (Experian, TransUnion, and Equifax) for free at annualcreditreport.com
This is the national average for credit card interest rates. If you’ve got a card in your wallet with a higher rate, pay that balance off first, because you’re getting slammed with major charges. The good news: Interest rates are generally negotiable. If you regularly pay at least the minimum on time, try haggling your way to a better rate, or consider moving the balance to your card with the lowest one–but do that only if you won’t get socked with hefty fees for the transfer.
That’s the maximum percentage of your take-home pay that should go toward housing, including mortgage payments, insurance, and property taxes. Pre-recession, many experts put the figure at 33 percent, but in this unpredictable job market, that’s too high. If you and your spouse make a combined $80,000, keep your new-home budget under $200,000. And if your housing expenses top the 25-percent mark, refinance your mortgage to lower your interest rate. You’ll feel a huge financial lift once you can truly afford the roof over your head.
That’s the amount to sock away each week in a savings account reserved for emergencies. You should have a six- to nine-month reserve in case you lose your job or face some other budget-blowing problem, but that goal can seem overwhelming. So start small with $50 a week. In one year, that’s more than $2,500 saved, which will put you ahead of many households. One recent poll found that roughly one in four Americans wouldn’t be able to come up with $2,000 in 30 days if they needed it. Start saving now.
The number of savings goals you should have. A recent University of Toronto study found that people who limit themselves to three goals under one theme–say, long-term saving–are three times more likely to say they’ll save than those who have myriad competing goals, such as retirement, a super-luxe vacation, a new home, and college funds for your kids. We say: Focus on retirement and an emergency fund, and the last one is up to you–so pick something worth it!
How $5 ruined my credit score
Even a small bill can hammer your credit rating if it goes to collections. Fortunately, there are ways to protect yourself.
CardRatings.com asked readers to tell us how they helped or hurt their credit scores. This story from reader Melinda Graham of York, Pa., shows how a little bill can cost you big money.
“In the fall of 2008, I got a flu shot at my doctor’s office. A few weeks later, I got billed $5 for my co-pay on a ‘blood draw’ on that date. I procrastinated a bit on calling in to ask my doctor’s office to fix what was probably just a miscoded procedure. Eventually I called and went through the usual ordeal of explaining the situation to person after person before finding the one who said they could take care of it.
“In the fall of 2009, I got a notice from a collection agency that my doctor’s office had turned over a $5 unpaid bill for collection. I racked my brain for another bill that might have fallen through the cracks and couldn’t come up with anything but the co-pay. So, there I was, looking at this collection notice and remembering the time spent on the phone the first time around, and I decided $5 wasn’t worth the hassle. I mailed a check to the collection agency.
“Fast-forward a few months, when my fiancé and I decided to really get into discussing our finances in preparation for merging them after we got married. I told him about AnnualCreditReport.com, and how I like to review my credit report every few months. I hadn’t checked it in a while, so we thought we should get our reports and pay for credit scores, too. And then I nearly fell off my chair when I saw that because the $5 medical bill had been reported by the collection agency, my score had dropped from 785 to 689! I was shocked: $5 = 96 points?! Boy, did I ever regret my decision to avoid the minor hassle of a phone call to straighten out the billing error.
What to do about a damaged credit rating
“Subsequently, I did contact the doctor’s billing office and got it all straightened out. They also notified the collection agency of the billing error and had that entry removed from my credit report with the credit bureaus. Unfortunately, my score only went back up to 764.
“No more collection agencies for me!”
Here’s what every consumer should do to protect or improve a credit score:
- Pay all bills on time, and keep your credit usage low. To improve your score, try to use only 1% to 10% of your available credit line.
- Check credit reports regularly. Federal law allows you to get a free report once a year from each of the credit-reporting agencies — Equifax, Experian and TransUnion. Log on to AnnualCreditReport.com to order or download yours.
- Fix mistakes on your credit report. While lenders and credit card issuers report your activity to the credit bureaus, you are responsible for the accuracy of your credit report. Errors can be as simple as a wrong name or address or as complex as a line of credit that has been opened in your name, meaning you may be the victim of identity theft. Follow these six steps to fix errors on your credit reports.
- Pay for your credit scores. If you anticipate applying for a loan such as a mortgage, you should get your credit scores a few months in advance so you can work on raising them. The higher your scores, the lower your interest rate will be. You may also want to subscribe to a credit-monitoring service, which will give you access to your scores on a regular basis. Knowing how much your scores go up or down based on your financial behavior may help you improve your money-management skills. Also, keeping an eye on your credit report and scores means you can jump on a problem before it gets out of hand and destroys your credit.
Seven Ways To Defend a Debt Collection Lawsuit
What happens when you are sued by a debt collector? While it may feel like the end of the world to you, it’s a pretty routine occurrence in courts across the country. “Most debt collection law firms file hundreds of lawsuits a day, assuming that 99% of defendants will not answer,” explains Atlanta bankruptcy attorney Jonathan Ginsberg.
While it would be easy to dismiss these as simply a matter of debtors getting what they deserve, it’s not always cut and dried. It’s not unheard of for a debtor to be hounded by multiple collection agencies for the same debt. Or “zombie debts” may show up in court years after the debtor defaulted.
A recent New York Times story compared the recent spate of debt collection “robo-lawsuits” to the “robo-signing” mess in the mortgage industry and quoted Brooklyn Civil Court Judge Noach Dear as saying, “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.” Judge Dear says he sees as many as 100 of these cases a day.
Even when debts are legitimate, the additional costs that result from a lawsuit can make it that much harder for the borrower to resolve the debt.
So what can you do if you are sued by a collection agency? Here are seven options:
The number one mistake borrowers make when they are sued for a debt is failing to respond to the notice, which usually arrives in the form of a “summons and complaint.” If you owe the debt and can’t pay it, then you may assume there’s not much you can do. If you fail to respond, however, the collection agency will get a default judgment against you. That opens up new avenues of collection for them, including wage garnishment or the ability to take money from your bank account, depending on state law. Worse, the collector may be able to add attorney’s fees, court costs, or interest to the balance. In some cases, the balance can double or triple due to these additional costs.
Responding to a debt collection lawsuit, then, is a must. “Even if you owe the plaintiff money, a two-sentence response denying liability to the lawsuit filed in court will likely lead to a negotiated settlement that will save you money,” advises Ginsberg. “If you do respond and force them to work, they will either back down or offer a settlement on favorable terms.” He adds that it is not sufficient to simply send a letter to the plaintiff (the person bringing the lawsuit). “You must file your response to the lawsuit, called an “Answer,” in the court where you were sued within the designated time to respond — usually 20 to 30 days after service — and you must send a file stamped copy of your answer to the plaintiff’s lawyer.” You can get a file stamped copy from the court where you filed the answer.
When you do respond, don’t just state that you can’t afford to pay the debt. “If you admit liability then 90% of the fight is over and they are not forced to prove their case,” warns Billy Howard, attorney and head of the consumer protection division of Morgan & Morgan. He likens it to a criminal case where the defendant says, “I did it!”
#2 Challenge the lawsuit.
“Challenge the plaintiff’s ability to bring the lawsuit by challenging their standing to sue in their own name,” suggests Ohio consumer lawyer Troy Doucet. He explains that credit card debt is often bought for pennies on the dollar, by collection agencies, which then sue to collect. “The collection company needs to prove they have the right to collect, as evidenced by a transfer of the signed credit card agreement, in order to be in court and ask the court to win. The right to sue is called ‘standing’ and what the consumer should challenge.”
Howard agrees: “Ask the court to dismiss the case because they don’t have standing and lack the chain of custody of paperwork. A lot of judges look at the paperwork (collectors provide) and tell the plaintiff that they must be joking.”
#3 Make them prove what you owe.
“We always demand to see the original signed agreement and a balance on the account from zero to the present,” says Ginsberg. More often than not, the debt collector’s documentation will be inadequate. Debts may have changed hands multiple times before the current collection agency purchased them.
Even original creditors may lack accurate documentation of the debts customers owed. A former employee of JP Morgan Chase says she was fired after she raised questions about the documentation being provided to buyers of the issuer’s delinquent debts. She alleged that as many as a quarter of the files showed incorrect amounts owed, with errors often in the bank’s favor. If credit card issuers can’t provide accurate documentation, there’s a good possibility collection agencies won’t have it either.
#4 Raise the statute of limitations as a defense.
In most states, creditors have a maximum of four to six years to sue to collect a debt. After that, the statute of limitations expires. That doesn’t always stop collectors from suing, however, because they are counting on borrowers failing to show up in court. If the statute of limitations has expired, and the borrower raises that as a defense, the collector will lose. Making a payment on an old debt may start the clock ticking all over again, though, so a debtor should get legal advice before making a payment on a very old debt.
#5 Sue them back.
If a debt collector has violated provisions of the Fair Debt Collection Practices Act, you may be able to sue them. “Once you attach their lawsuit as Exhibit A to your lawsuit against them the tide turns, and if you or your attorney knows what they are doing, the alleged debtors can get damages and attorney’s fees and costs,” says Howard. He’s referring to the fact that consumers who successfully sue for violations of the FDCPA are entitled to statutory damages of $1000, plus punitive and economic damages, if awarded. In addition, the collection agency will be required to pay the attorney’s fees and costs.
#6 Bring in the big guns.
Debtors often hesitate to contact an attorney when they are being sued over a debt they owe; perhaps due to embarrassment, or maybe they figure they can’t afford one. Attorneys who regularly take on these types of cases, however, will typically offer a free consultation. And they will often represent a consumer for free if they think the collector has broken the law. That’s because they will expect to collect their fees from the plaintiff. “Do not be afraid or intimidated to call or email a consumer protection or bankruptcy lawyer for a quick word of advice,” Ginsberg says.
Once the collection agency is notified that you are represented by an attorney, it may be much more amenable to settling the debt, rather than trying to duke it out in court.
#7 File for bankruptcy.
While bankruptcy usually doesn’t make sense when you just owe a small amount of money, if the debt you are being sued for is large or if it is just one of many other debts you owe, it may make sense to file for bankruptcy. When you do, you will be protected by the “automatic stay,” which will halt collection efforts against you.
A tip: If you are thinking about bankruptcy, it’s best to talk with an attorney as soon as you are served with notice of the lawsuit, rather than waiting until the day you’re due in court.
by Gerri Detweiler
Accountability in military education
By Holly Petraeus
Tomorrow, April 27th, I will join the President and First Lady at Fort Stewart, Georgia, where he will sign an Executive Order directing the Departments of Education, Defense, and Veterans Affairs, in consultation with the Consumer Financial Protection Bureau (CFPB), to take steps to ensure that servicemembers, veterans and their families can get the information they need about the schools where they spend their education benefits. His directive also strengthens oversight and accountability of the schools that offer educational programs to the military.
I applaud this effort to see that servicemembers, veterans, and their families get the most “bang for their buck” when they use their educational benefits. During the past year I’ve traveled to military installations in 15 states and spoken to active-duty, National Guard, and Reserve military members and their families. I’ve also met with veterans and their families, as well as those who advocate for them. One issue that has come up repeatedly in my conversations with them is the challenge of making an informed decision on where to use GI Bill and Military Tuition Assistance benefits. How do they find a quality school that will charge them a fair price, provide adequate support, and set them up for success after graduation without a mountain of student loan debt holding them back?
Too often the schools being selected are for-profit institutions more notable for their slick marketing than for their academic credentials and sound value, much less the gainful employment history of their graduates. Here are just a few stories I’ve heard on my travels:
- An active-duty military spouse at Fort Campbell, Kentucky, was under the impression she was attending a “military-affiliated college” (she wasn’t; it was a for-profit school with no official military status). After she filled out an interest form she was called 10-15 times a day until she enrolled. When she had trouble logging on to her online class, she couldn’t get anyone from the college to help her. She failed the class due to lack of access but was charged the full fee.
- National Guard education officers in Ohio and North Carolina told me they are besieged by for-profit colleges desiring access to the troops. They noted that if they hold a job fair, over half the tables may be for-profit colleges, and that servicemembers may see a school’s presence at a job fair as an implied promise that you will get a job if you graduate from that school.
- A veteran at a forum I attended in Chicago, Illinois, had used up her benefits and incurred $100,000 in student loan debt for Bachelor’s and Master’s degrees from a for-profit college, but was unable to find an employer who was interested in her degrees. She was still working at the same job she had before she went to college.
The CFPB has been working on military education issues. This month at ConsumerFinance.gov we began testing a new online tool, the Financial Aid Comparison Shopper, which includes a military benefits calculator, to help people compare options at different colleges, as well as see graduation and retention rates. We have set up a student loan complaint system, and my office reviews all complaints from servicemembers, veterans, and their families. And we’ve been coordinating with the Federal Trade Commission and the Departments of Justice, Education, Veterans Affairs, and Defense on military education issues.
It’s in everyone’s interest to see that military education dollars are well-spent. If they are, they will provide our country with educated veterans and family members who, like the World War II generation before them, can become the engine that drives our economy forward.
Holly Petraeus leads the Office of Servicemember Affairs at the Consumer Financial Protection Bureau. Last year, she wrote about the incentives that lead for-profit colleges to see servicemembers as “nothing more than dollar signs in uniforms.”
College and Your Credit
Here’s a great article on college and credit. Just in time for the new school year!
Life After High School: Credit Lessons They Won’t Teach You in College
Graduation season is just around the corner— a time when high school seniors across the country will walk down the aisle to accept their diplomas and officially enter the world of adulthood. Many of these smart young adults will spend the next four plus years in college, working hard to earn a degree and all the benefits that a bright and successful future has to offer.
Every year I make it a point to speak with high school seniors heading off to college, and every year my message remains the same. In school, you can screw up on a test and if you study hard and focus, you can make up for it on the next test. If you screw up on a mid-term, you can study harder and make up for it on the final.
But in the financial/credit world if you screw up, it’s not a quick and easy fix and it can end up costing you for years to come. Unfortunately, Credit 101 isn’t a course you’ll find in your college curriculum, which is why my goal here is to empower you with the knowledge and knowhow to avoid these costly mistakes. Without further ado, here’s are a few of the most important credit lessons I think every high school senior should know before heading off to college.
I. Laws in place to protect students from predatory marketing
In the past, college campuses and college students specifically were fair game for credit card companies. Credit card companies were notorious for targeting college students with aggressive marketing tactics, making it nearly impossible to walk around a college campus without being solicited to apply for a credit card in exchange for free “swag.” This swag was usually some type of college themed marketing freebie used to entice students to apply for a new credit card.
To add insult to injury, these credit card offers were insanely easy to qualify for – if you had a pulse and were currently enrolled as a student, there was a pretty good chance you’d qualify. No job? No income? No problem! Predatory credit card marketing practices and college campuses went hand in hand and students were considered fair game.
Credit card companies are smart. They saw the future potential for college students to become lifelong customers — especially if they could convince you to sign up and become the first credit card in your wallet. Afterall, you’re working hard for that bright and successful future – a future with lots of potential, a future with a great job and an even better paycheck, the perfect customer with which to build a lifelong financial relationship.
Thankfully, the rules have changed and with the new Credit Card Accountability Responsibility and Disclosure Act of 2009 (informally referred to as the “CARD Act”) now in place, many of these older predatory practices are now illegal or restricted. To protect students and consumers under the age of 21, credit card issuers must now:
- Obtain proof of income before issuing a credit card to consumers under 21 years of age. If you don’t have an income, a credit card co-signer is required in order for the application to be approved.
- Obtain prior consent before sending pre-approved credit card offers to anyone under the age of 21.
- Obtain written permission to increase credit limits on accounts with co-signers for accountholders under the age of 21.
- Cease all predatory lending practices and aggressive marketing tactics on or near college campuses.
II. Avoiding credit card company traps and marketing even with CARD Act regulations
The CARD Act has made great strides in protecting students from predatory credit card practices. Still, young people have to watch out for remaining credit card traps. The most important advice I can give is that you read and fully understand the terms and conditions before you apply for a card. Here are a couple of the most important things to watch out for:
- Introductory teaser rates. Don’t be fooled by the 0% introductory teaser incentives. These offers can be great deals but introductory rates are temporary and you’ll want to pay close attention to the ongoing rate after the intro period expires.
- Annual fees. Many cards, especially those that offer rewards or cash back incentives, also include annual fees. In many cases the annual fee is waived the first year but it’ll kick in every year thereafter so it’s something to pay attention to, especially when there are a number of other credit cards on the market that don’t carry an annual fee. Be aware of all possible credit card fees before you make a selection.
- Prepaid debit cards vs. credit cards. Prepaid cards have grown in popularity, especially with college students. Be aware that prepaid cards of any variety are not credit cards. Often these cards are marketed as a safe way for students to build and establish credit but the truth is that they do no such thing because like debit cards, prepaid cards are not reported to your credit reports.
III. Building credit in college
Another question that almost every student faces is; “How do I get credit when everyone wants to see how I’ve managed?” You actually have a few pretty decent options:
- Start with a secured credit card. A secured card works just like a regular credit card except for the fact that the credit limit is backed or “secured” by a cash deposit that you make with a bank in exchange for the card. For example, if you opened a secured credit card with a $500 cash deposit, the bank would issue a credit card with a $500 credit limit. The drawbacks to secured cards are their low credit limits and fairly high interest rates. Your goal should be to manage the account wisely in order to build and establish credit, and then upgrade and move on to a traditional credit card. And, if possible, always pay your bill in full each month to avoid interest costs.
- Become an authorized user on someone else’s credit card. As an authorized user you get a credit card with your name, granting you full “authorization” to use the card just like the primary cardholder. When someone adds you as an authorized user on their credit card, you essentially get all of the benefits of the primary cardholder but without any of the liability. You’re not responsible for the monthly payment and you have no obligation to pay the bill. Authorized users benefit from the primary cardholder’s credit history because credit card issuers will typically report the account to the authorized user’s credit reports.
If the account is well-established, with a long standing history of on time payments and has a low balance in relation to the credit limit, your credit and credit scores will surely benefit as a result. The opposite is also true. If the primary cardholder misses a payment or maxes out the credit limit, your credit will suffer too. If things go awry with the primary cardholder’s management of the account you can have your name removed from the account and it will then be removed from your credit reports. Being an authorized user on a credit card is like having a credit card with training wheels.
- Get a Co-Signer to vouch for you. A co-signer is someone who signs on a loan with you, accepting equal liability for the loan on your behalf. If you’re unable to make a payment, the co-signer is liable, right along with you. This means that if you miss a payment or default on the loan, both you and the co-signer’s credit will suffer. I’m including this option so that you know it exists but it’s not an option I like and it’s one I’d strongly advise against. Simply put, there are other, smarter options that work just as well — without the drawbacks and unnecessary risk for the co-signer.
IV. How to avoid leaving college with massive credit card debt
This is my final piece of advice and it’s actually quite simple. It’s sticking to it that’s the tricky part. If you want to avoid leaving college with massive amounts of credit card debt all you have to do is watch your credit card spending and only spend what you can comfortably afford to pay off in full at the end of each month when the bill arrives. If you follow this one simple rule, credit card debt is a problem you’ll never have to worry about.
Credit should not be feared and those who demonize credit cards and banks are ignoring the fact that when we get into debt it’s a voluntary act. Further, we need access to competitively priced credit, including credit cards. They provide for portable capacity and offer significant protections against fraud thanks to Federal law.
The golden rule is to always remember to use credit cards wisely. Manage the account responsibly by making every payment on time and never carrying a balance from one month to the next. Your efforts will be rewarded and your credit scores will shine.
Article by John Ulzheimer