Zombie Debt: Help stop the haunting!

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I have lived most of my adult life in Seattle, Washington. I have experienced life as a stable, working member of the community, and I have also fallen on times so hard that I had to live in my car and depend upon food banks to feed myself. If you visit food banks and emergency homeless shelters enough, eventually you will meet some very interesting people. I once met a brilliant young man who was an Oregon State University law-school drop out. He told me (as we sat on the sidewalk eating turkey sandwiches we had just scored from a homeless shelter) that he dropped out of law school in his 3rd year because he couldn’t stay focused, and could not get help to treat his ADHD (attention deficit hyperactivity disorder) condition. I remember thinking what a waste of a good mind.  If only he could have gotten the medical attention he needed, he could have finished law school. I don't know what he would have been doing had he finished law school, but I 'd bet he would not have been sitting on a corner eating a food-bank sandwich with me!

I’ve met a wide variety of people who exists as virtual ghosts, living in the underbelly of Seattle; they live under bridges, in alleys, in abandoned or foreclosed homes. ”Ordinary” people see the homeless but rarely acknowledge them - as if they exist on some other time-plane that makes their presence not quite physical. If you do take a minute and speak to a homeless person, or someone at a food-bank you will immediately notice that they are quite real, and as the Pemco Insurance commercial says, “a lot like you- a little different.”

Another thing I have noticed is Seattle has a large number of homeless persons who aren’t natives of Washington State. I am amazed by the number of people who have casually told me they came to Seattle because they heard the social, and low-income services administered by non-profit organizations were the best in the country. I don’t know this to be true from experience, as I have never needed to access social welfare programs in any state other than Washington, but I am convinced that Seattle has some pretty awesome low-income social service organizations here. I have featured two such agencies in this blog-post.

Below is a link to a video I found at the ‘Solid Ground’ website - a great non-profit organization in Seattle Washington, on how zombie debt is increasingly being used by collection agencies to unlawfully collect time-barred debts from consumers, and how it disproportionately affects the lives of low- income persons.  The video is part a campaign to get our state legislators to pass HB 1069. Poverty Action says HB 1069 is being considered by the legislature right now. This legislation would prevent debt buyers from:

• Suing debtors for time-barred debt (outside the statute of limitations);
• Suing debtors without sufficient proof that the debt buyer actually owns the debt;
• Not having proof of assignments of the debt to indicate a chain of title for the debt.

Zombie Debt: Help stop the haunting! The video was produced by Marcy Bowers of the Statewide Poverty Action network http://povertyaction.org/. Both organizations are committed to helping the poor through social service programs and housing assistance. Solid Ground has been around for a long time here in Seattle. Formerly known as the Fremont Public Association, the non-profit is widely acknowledged for their work helping low-income individuals and families. They also help the homeless overcome economic crises and develop skills and resources they need to get back on their feet. They offer over 30 programs and services to help needy families and individuals.

The Poverty Action Network is more focused upon building grass-roots campaigns that address issues such as consumer protections, basic needs, racial equity, and Immigration and Refugee justice. Poverty Action was founded in 1996 as a response to the federal government’s passage of the Personal Responsibility and Work Opportunity Reconciliation Act or “welfare reform.”

Poverty Action says they are Washington state’s largest anti-poverty organization.

Related articles

• 7 steps to avoiding zombie debt (thewiseme.com)
• Zombie Foreclosures: Reanimated Mortgage Debts (sgtreport.com)
• Old debt, uncollectable and not taxable (dontmesswithtaxes.typepad.com)
• The Walking Debt……Zombie Mortgage Appocalpse (kswiggins.wordpress.com)
• The Worst Part of Being Homeless: ‘No One Sees Me’ (alternet.org)

Can the new mortgage rules of the CFPB really protect the consumer from predatory lending?

On January 12th of this year, the Consumer Financial Protection Bureau issued it’s new mortgage servicing rules via a long-awaited press release. “For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures. Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.” said CFPB Director, Richard Cordray.

The new servicing rules highlight three basic areas of mortgage servicing: foreclosure avoidance, servicing transparency, and uncomplicated business procedures. The consumer Finance Protection Bureau has obviously done their homework. They probably conducted polls to find out what the major complaints were among those who were experiencing mortgage foreclosures. In the early to mid 2000’s, most American homeowners who found themselves trapped in bad mortgages were not wholly to blame as some would argue. Sure, there is something to be said for paying attention to what their loan paperwork actually said, but what if the loan originator had an ulterior motive that had absolutely nothing to do with what was even on the paperwork? Did not that loan originator have a fiduciary responsibility to their client? The answer to that obviously rhetorical question is, yes. In doing research to write this blog, I purposely read articles from differing perspectives – from the more conservative Wall Street perspective as well as from writers who had a more liberal perspective.

The differences between liberal and conservative perspectives on this issue were stark. The wall street pundits blame globalization, Trade deficits, market upheaval, shadow banking systems, world-wide fixed income investment increases, and artificial currency manipulation in the East. Liberal economists like Paul Krugman tended to focus on US Monetary Policy, Foreign Policy, and individuals like former Chairman of the Federal Reserve, Allen Greenspan, his predecessor, Ben Bernanke and their anti-regulation policies. Allen Greenspan publicly admitted during a Congressional hearing that he “had made a mistake in presuming that financial firms could regulate themselves.” In a Wall Street Journal article, columnist David Henderson, wrote, “It’s become conventional wisdom that Alan Greenspan’s Federal Reserve was responsible for the housing crisis. Virtually every commentator who blames Mr. Greenspan points to the low-interest rates during his last few years at the Fed” Henderson was referring to the decision Allen Greenspan made to lower interest rates from 3.5% to 1% in the wake of the 911 attacks and end of the Internet tech-bubble in hopes of avoiding an economic slowdown. I vaguely remember then President Bush telling America the best response to the 911 attacks was to, “go shopping.”

So let’s bring this thing back to Main Street America because that’s where you and I live – and because it was we who paid the price for Wall-Streets’ mistakes and Washington’s’ wrong-headed monetary policies. Now that the damage has been done, and lives have been ruined, we now look to our political ‘knight in shining armor’, the Consumer Financial Protection Bureau; the bureau that was birthed amidst a fire-storm of right-wing resistance, and was the brain-child of the champion of consumer rights herself – Elizabeth Warren. After all, it was she who originally sounded the clarion call in Congress to make those, “too big to fail” financial institutions pay back their TARP handouts, and pushed for more regulation of the financial services industry as a whole.

There is no longer any doubt in anyone’s mind that predatory lending was not just a phenomenon, it was going on before the credit crunch, and will continue if it is not stopped. It is malicious, destructive, and it is pervasive. It was born out of pure greed. The question is how to stop it. The CFPB has taken a very effective first step, but I believe the the problem goes much deeper than regulating the loan servicing department of a bank or financial institution. I believe the root of the problem is the securitization of Credit itself. In their book, The Securitization of Credit, James A. Rosenthal and Juan M. Ocampo, define credit securitization like this: “Credit securitization is the carefully structured process whereby loans and other receivables are packaged, underwritten, and sold in the form of securities (instruments called asset-backed securities).”
The causes of the 2007 mortgage default crisis has been described as a “systemic event,” meaning that the entire US financial system was in crisis to the point of insolvency. Too big to fail is no joke. If Citi-group, Bank of America, AIG, and the other too big to fail financial institutions had not received TARP funds, the United States would have collapsed financially, and yes, we would have had another Great Depression on our hands. While I truly believe the CFPB has committed some of the best legal and economic minds we have in this country to solving this problem, I cannot believe anything less than a total overhaul of our financial system is the only remedy that will prevent this from happening again. It may not happen in the mortgage/housing industry, but possibly another sector. In an excellent paper written by Gale Gorton and Andrew Metrick of Yale University, they describe the securitization of credit like this:

“An important part of the subprime mortgage innovation was how the mortgages were financed. In 2005 and 2006, about 80 percent of the subprime mortgages were financed via securitization, that is, the mortgages were sold in residential mortgage-backed securities (RMBS), which involves pooling thousands of mortgages together, selling the pool to a special purpose vehicle (SPV) which finances their purchase by issuing investment-grade securities (i.e., bonds with ratings in the categories of AAA, AA, A, BBB) with different seniority (called “tranches”) in the capital markets. Securitization does not involve public issuance of equity in the SPV. SPVs are bankruptcy remote in the sense that the originator of the underlying loans cannot claw back those assets if the originator goes bankrupt. Also, the SPV is designed so that it cannot go bankrupt.”

It stands to reason that any player in the financial services industry will undoubtedly experience what liberal economist, Paul Krugman calls ‘Moral Hazard.’ Moral is a concept saying that people will take risks if they have an incentive to do so. The idea is that people might ignore the moral implications of their choices. Instead, they will do what benefits them the most. Most people understand the trade off between risk and reward. If you take risks, there may be consequences. However, you might be rewarded.
What if those trade offs weren’t there? If you knew you could take risks without consequences, would you take more risk? What if someone else had to suffer the consequences of your actions? Moreover, Wikipedia notes: That is essentially what happened in mortgage default crisis with respect to the originators of sub prime loans, many may have suspected that the borrowers would not be able to maintain their payments in the long run and that, for this reason, the loans were not going to be worth much. Still, because there were many buyers of these loans (or of pools of these loans) willing to take on that risk, the originators did not concern themselves with the potential long-term consequences of making these loans. After selling the loans, the originators bore none of the risk so there was little to no incentive for the originators to investigate the long-term value of the loans. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party isolated from risk behaves differently from how it would if it were fully exposed to the risk.
Until the CFPB, the FTC, and Dodd-Frank can construct a systemic remedy for moral hazard in the financial services industry, you can bet the love of money will undoubtedly cause another financial catastrophe similar to the mortgage default crisis 2007.

Related articles

• CFPB to Help Mortgage Industry With Implementation of Rules (broadcastarchives.net)
• U.S. Mortgage Overhaul Turns Eyes on Borrowers (bloomberg.com)
• Warren, Brown, Reed demand majority vote on Cordray nomination (dailykos.com)
• New Mortgage Rules Readied by CFPB as Banks Seek Time to … – Bloomberg (bloomberg.com

Subprime credit card company survives CROA attack in Supreme court

Technorati Tags: CROA section 1979,Credit card deceptive practices

Wanda Greenwood and two others had filed a class action against CompuCredit and Columbus Bank and Trust over Aspire Visa subprime credit cards that the defendants marketed to consumers with low credit scores.
Though CompuCredit and Columbus advertised that there was "no deposit required" for the cards, which would help them rebuild their credit, they charged about $257 in fees during the first year, against a $300 credit limit, the class claimed. 

On January 10, 2012, the Supreme Court decided CompuCredit Corp. v. Greenwood, No. 10-948, holding that the Credit Repair Organizations Act ("CROA") does not preclude enforcement of an agreement to arbitrate claims brought under that act.
Congress passed the Credit Repair Organizations Act (CROA) to assist consumers in making informed decisions and to protect consumers from unfair or deceptive practices when dealing with companies that claim to help rebuild credit. The CROA augments the Consumer
Credit Protection Act with additional nonwaivable consumer
protections, including a mandatory precontractual disclosure of consumers’ rights when contracting with a credit repair organization.      
In Greenwood v. CompuCredit Corp., the Ninth Circuit denied a request to compel arbitration based on a predispute arbitration agreement, holding that the CROA’s mandatory disclosure term “right
to sue” creates a substantive, non-waivable right that precludes arbitration. 

Plaintiffs in the action—respondents in the Supreme Court—opened credit card accounts through petitioner CompuCredit. They later brought a putative class action, alleging that CompuCredit violated the CROA by making allegedly misleading representations regarding the credit cards' use to rebuild poor credit. The district court denied CompuCredit's motion to compel arbitration, concluding that CROA claims are not arbitrable. A divided panel of the Ninth Circuit affirmed.

The Supreme Court reversed and held that CROA claims may indeed be arbitrated. Federal statutory claims, just like other claims, are subject to the "liberal federal policy favoring arbitration agreements." Under Section 2 of the Federal Arbitration Act ("FAA"), contracts to arbitrate federal claims must thus be enforced—unless the FAA has been "overridden by a contrary congressional command."  The Aspire Visa card is marketed and owned by CompuCredit.  The card was the subject of a massive amount of complaints from consumer rights advocates and the card-holders themselves.  It was basically outlawed by Section 105 of the CARD Act of 2009.

CompuCredit is best known in consumer credit circles as the target of a 2008 FDIC enforcement action documenting the features of these cards, which typically come with a low credit limit and high up-front fees. The card at issue here had a credit limit of $300 and first-year fees of $257, leaving an available credit limit of only $43. Collectively, those features are likely to push the effective interest rate on purchases with the card far above one hundred percent per year. So CompuCredit is no stranger to dissatisfied customers.

CompuCredit represents what is wrong with this country’s financial system and why Congress had to pass the Dodd-Frank Reform and Consumer Protection Act. Following the 2008 near-collapse of the U.S. economy, which was fueled by the crash of the housing bubble, the Dodd-Frank Financial Regulatory Reform Bill established restrictive measures in an attempt to prevent such events in the future. In order to protect unsuspecting borrowers against abusive lending and mortgage practices, the reform bill established government agencies to monitor banking practices and oversight of troubled financial institutions.

In a report from the National Consumer Law Center, staff attorneys Rick Jurgens and Chi-Chi Woo stated Below is the executive summary of their scathing report:

EXECUTIVE SUMMARY

Millions of consumers are being victimized by “credit” card offers that charge hundreds of dollars in fees and extend minimal available credit – sometimes as little as $50. These cards, which we call “fee harvester” cards, share a common thread: high fees that eat up most of an already low credit limit, leaving the consumer with little real, useable credit and at a high price.  For example, one of the fee-harvester cards featured in this report comes with a credit limit of $250. However, the consumer who signs up for this card will automatically incur a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee – an instant debt of $178 and buying power of only $72. While high fees, high interest rates, and other abuses pose a threat to consumers of prime credit cards as well as to those with bad and no credit histories, fee-harvester cards are designed to maximize profits by targeting the most vulnerable consumers. Fee-harvester cards are part of the subprime strata of credit cards, and represent an extreme version of the abuses by the card industry.

Fee-harvesting is very profitable. In 2006, one company – CompuCredit – collected $400 million in fees from a portfolio of fee-harvester cards that by mid-2007 had saddled cardholders with nearly $1 billion in debt.  The business models of CompuCredit and others that issue and market fee-harvester cards depend upon federal banking laws and regulations that preempt state interest rate caps and consumer protection laws.  Preemption also benefits the mainstream credit card industry, which makes enormous profits by charging interest rates and fees that could otherwise be limited by the states. Weak enforcement actions and guidelines issued by federal banking regulators have done little to contain the harm.  Preemption makes bank charters an invitation to extract high fees. For example, CompuCredit, frustrated in efforts to get its own bank charter, has marketed fee-harvester cards in partnerships with compliant banks that act as issuers.  Recently, CompuCredit partnered with Urban Trust Bank, which says its “mission” is to bring affordable banking services to minority communities. CompuCredit has other powerful partners, including a unit of Synovus, a large Georgia bank holding company that is also a major service provider to mainstream credit card companies. CompuCredit also has ties to some of Wall Street’s largest and most prestigious banks.

Several small banks specialize in the issuance of fee-harvester cards, including South Dakota-based First Premier; First National of Pierre; Delaware-based First Bank of Delaware; and Applied Bank, formerly known as Cross Country Bank. Some big banks also have big stakes in the subprime market, including Capital One, which has sometimes used the fee-harvesting model, and HSBC.

Congress should act to end preemption and to close the legal loopholes that now enable banks to attach high fees to nearly meaningless offers of credit that are at the heart of fee-harvesting. In addition, Congress should regulate interest rates, fees, and unilateral contract changes throughout the credit card industry, and permit individual consumers to seek recourse when creditors violate their rights under the Federal Trade Commission Act.

The entire report is excellent.  Definitely mandatory reading for anyone interested in the credit industry. 

The supreme court is well aware of these companies and how they prey on minorities the economically lower-class populations.  Justice Ruth Bader Ginsburg was the ONLY justice to speak out on the side of the “common man” as she put it.  In her lone dissenting opinion from the bench, she wrote in part: “here, congress’ intended target was vulnerable consumers likely to read the words “right to sue” to mean the right to litigate in court. She distinguished the case from other decisions holding that a statutory right of action does not preclude arbitration agreements, noting that the CROA specifically refers to a “right to sue”, mandates that consumers be informed of this right, and precludes the waiver of any “right” conferred by the act.” 

Ginsburg was the only justice who got it right.  Just because the CROA is “silent” with regard to overriding the FAA rule, the whole purpose Congress created the statute was to protect consumers from the exact kinds of greed and market manipulation perpetrated upon low-income and minority populations by so many credit banks and card companies, like CompuCredit and Columbus Bank. 

How to get assistance from the Consumer Finance Protection Bureau

 Mortgage Assistance – CFPB

The CFPB can help you get connected to a HUD-approved housing counselor. At no cost to you, the counselor can help you work with your mortgage company to try to avoid foreclosure. A housing counselor can help you organize your finances, understand your mortgage options, and find a solution that works for you.
Here’s what to do:
Have this ready when you work with your mortgage company or housing counselor to discuss a possible work-out solution.

• Mortgage loan number (account number)
• Any additional paperwork from your mortgage company
• Recent pay stubs
• Recent tax return
• Household expenses (bills including food, utilities, car payments, insurance, cable, phone, credit cards, car loans, and student loans)

Call the CFPB at 1.855.411.CFPB (2372)
If you would prefer to look for mortgage help online, HUD provides a list of foreclosure prevention resources arranged by state. Military members or veterans can call us or visit the VA’s home loan website to get personalized assistance.
Foreclosure prevention and loan modification scammers target homeowners who are having trouble paying their mortgages. These scammers might promise “guaranteed” or “immediate” relief from foreclosure, and they might charge you very high fees for little or no services. Don’t get scammed. If it sounds too good to be true, it probably is. Call the CFPB if you think you may be the target or victim of a scam.

Legal aid

If you believe you are in need of an attorney, or if you have been served with a notice of foreclosure or other related legal complaint, there might be legal representation available at little or no cost to you. Find legal aid in your state.

Mortgage Assistance – FTC (federal trade commission)
The Federal Trade Commission has help for homeowners in distress.  They have useful suggestions and some resources that might provide you with the help you need.
To learn more about mortgages and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government’s portal to financial education.
The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit MyMoney.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

 

There's a New Sheriff in Town: The Consumer Financial Protection Bureau

For years, the big three credit reporting agencies - Equifax, TransUnion, and Experian, have operated with little to no government oversight or regulation. These are the three agencies that control who gets approved or rejected for loans on everything from credit cards, to cars, to even buying a home.

Consumer protection organizations such as US PIRG (US Public Interest Research Group) have long claimed that the big three operate under a mysterious shroud of secrecy and are the reason the entire credit and lending system is plagued with inaccuracies and erroneous information.

Several studies over many years have repeatedly documented the chronic problem of inaccuracies in credit reports. The U.S. PIRG has conducted at least six studies between 1991 and 1998 and each time has found a shocking number of serious errors in consumer credit reports. US PIRG’s most recent study in 1998 revealed the following:

Twenty-nine percent (29%) of the credit reports contained serious errors --false delinquencies or accounts that had never belonged to the consumer --that could result in the denial of credit; 

 Forty-one percent (41%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect; 

Twenty percent (20%) of the credit reports were missing major credit, loan, mortgage, or other consumer accounts that would demonstrate the positive creditworthiness of the consumer; 

Twenty-six percent (26%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open; 

Altogether, 70% of the credit reports contained either serious errors or other mistakes of some kind.


Federal laws like the Fair Credit Reporting Act (FCRA) and the Fair Debt Collections Practices Act (FDCPA) provide consumers with some protections and more importantly, a basis for litigation against companies who violate consumer protection laws regarding how consumer credit information is handled, and how debts should be collected by collection agencies. Still, it seems collection agencies, and the big three credit reporting agencies have managed to sidestep the regulations aimed at protecting consumers from their mistakes, lack of security and illegal collection practices. Credit reporting agencies and collection agencies try to defend (even in courts of law) severely flawed business models that make it extremely difficult if not impossible for the average consumer to call them on their mistakes and get relief from practices that are intentionally harmful to a consumers credit file. Consumer requests to the credit reporting agencies to correct erroneous or inaccurate information in their file are routinely ignored or mishandled. Consumer investigation requests are conducted via a process that has been describes as “shoddy” and “grossly irresponsible” by legal professionals in the industry.


Evidence of high error rates in the credit reporting system is also found in the complaints received by the Federal Trade Commission regarding credit reports. For many years consumer complaints about credit reports have ranked at the top of all complaints submitted to the FTC for any reason. Identity theft, which also involves creditors or furnishers of credit information and credit reporting agencies, is now at the top of all fraud complaints received by the FTC. The FTC reported to Congress that as of March 2002, the FTC received approximately 3000 calls per week to their toll-free identity theft hot line. Approximately 43% of all complaints received by the FTC in all subjects are identity theft related. When one considers number of people applying for credit in the US on a daily basis, the number of persons affected by credit reporting agency mistakes and information mismanagement is absolutely staggering.


It is clear that the credit reporting agencies and the collection companies need more regulation and oversight. A close examination of their procedures and Operations reveal that their business models complement each other, resulting in a two-pronged attack upon the consumer. Well, it appears the consumers’ cry for help after all these years has finally been heard.


On July 16th in Detroit Michigan, the new director of the newly formed Consumer Financial Protection Bureau (CFPB) Richard Cordray announced: “the Consumer Bureau is issuing a new regulation to expand our supervision program to oversee these credit reporting companies. The authority to supervise firms is the authority to conduct on-site examinations of whether and how they are complying with the law. It affords an opportunity to gain a more thorough understanding of their business models and their business practices, to work with them to correct any problems we find, and to find ways to resolve matters that may be causing harm to consumers.”


Cordray went on to comment about the important role credit reporting agencies play in our entire economy:

“So this critical market is at the heart of our lending systems. It has enabled many of us to get credit and to afford a home or a college education. But it is also clearly a market that can cause considerable problems for consumers. For example, sometimes credit reports contain errors that inaccurately reflect people’s financial histories and can unfairly block them from getting approved for credit or can make it cost more than it should. Consumers also can encounter great difficulties at times in getting errors corrected. When the Consumer Bureau first opened its doors almost a year ago, we asked people to share their consumer experiences with us. We have heard reports since from many consumers that their credit reports are not accurate, and it is difficult to get them corrected. Because of the critical role that credit reports play in consumers’ lives, it is our job to make sure we understand the full extent of these problems and address them effectively.”

“Given its enormity, given its influence, and given its wide impact on our overall economy, you can see that there is much at stake in ensuring that the credit reporting market is working properly for consumers.”

David Holt, with Clear Point Credit Counseling Solutions says it's a good move. "This is a big deal for consumers," he says. The goal is to ensure credit reporting agencies are working properly for consumers, lenders and the economy. "The laws are already there in the Fair Credit Reporting Act but they are going to shore up the rules on what the agencies have to do," Holt says.

David Holt of Clear Point is exactly right, this is a big deal. However, the effectiveness of this new bureau will surely be measured by what they actually do, and what real regulative authority they have. I believe the effectiveness of any regulatory government agency should be measured first by its leadership, and second, by its mission statement. The CFPB is headed up by Richard Cordray. But as anyone who hasn’t spent the last three years in a cave would know, the first choice to lead the agency was Elizabeth Warren, the up and coming Harvard Law professor who gained notoriety as an outspoken critic and Chairman of the Congressional Oversight Panel of the infamous TARP Bailout of 2008.

In the hallowed halls of congress, Warren is considered the Champion of the beleaguered Middle Class. The CPFB was her own brainchild. As she crisscrossed the country, spreading the word about the C.F.P.B., Warren became a familiar face to many, especially to those who had seen her on television—on CNBC, Real Time with Bill Maher, and The Daily Show with Jon Stewart. Whatever the reasons, president Obama ignored scores of political groups like the AFL-CIO and thousands of people around the county who had petitioned him to appoint her as the nation’s top consumer protection watchdog. (See article in Vanity Fair).

So, who is Richard Cordray? As attorney general of Ohio, Cordray aggressively pursued lawsuits against some of the country’s biggest financial firms — including AIG, Bank of America and Fannie Mae — for misleading the state’s pension funds, ultimately securing a $700 million settlement from AIG over accounting fraud. He also led an early effort to go after so-called “foreclosure mills” that used falsified documents to speed up foreclosures on consumers, suing Ally Financial in 2010 and campaigning for big banks to slow down their own foreclosure proceedings. “We pursued many actions against foreclosure rescue scammers who were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes,” His background seems well suited for the position, but the jury is still out as to what direction the bureau will take and how affective it will be. For Mark Spindel, co-founder of the Potomac River Fund, that will be a major indicator of how effective the CFPB can be. “The key for me is whether and when and if this will have some impact on the foreclosure and housing markets. the real test for the CFPB will be in seeing how aggressive Cordray will be in pushing financial policy to favor consumers.















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The FHA Rethinks Its Mortgage Lending

The FHA Rethinks Its Mortgage Lending

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No. 03-1235. - JOHNSON v. MBNA AMERICA BANK NA LLC - US 4th Circuit

This court case represents how some collection agencies violate the FCRA by routinely performing "unreasonable" investigations when a consumer disputes an erroneous item on their credit report.

No. 03-1235. - JOHNSON v. MBNA AMERICA BANK NA LLC - US 4th Circuit

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The new Credit Card Act of 2010

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The events of the 2008 credit crisis and its fallout will shape the economic landscape for decades to come. The latest credit card usage trends are not encouraging. Take a quick look at these statistics provided by Credit Cards.com -an online credit card statistics data base:


Total cards in circulation in U.S.

(Through year-end 2009)

Visa credit: 270.1 million, down 11 percent (Source: Visa.com)

Visa debit: 382 million, up 18 percent (Source: Visa.com)

MasterCard credit: 203 million, down 22 percent (Source: MasterCard.com)

MasterCard debit: 125 million, up 1 percent (Source: MasterCard.com)

American Express credit: 48.9 million, down 9 percent (Source: AmericanExpress.com)

Discover credit: 54.4 million, down 6 percent (Source: Discover.com)

TOTAL CREDIT CARDS: 576.4 million

TOTAL DEBIT CARDS: 507 million

Most general purpose credit cards in circulation in 2008



Chase - 119.4 million

Citi - 92 million

Bank of America - 80.2 million

Discover - 48 million

American Express - 46.5 million

Capital One - 46.3 million

HSBC - 38.8 million

GE Money - 27.2 million

Target - 23.4 million

Wells Fargo - 17.3 million

(Original source: Nilson Report, February 2009)





Better take a second look at that credit card bill!According to the venerable researchers at TransUnion- one of the three major Credit reporting bureas-analyzed information from a data base of 27 million consumer records illustrating consumer credit use and performance. Nationally, the average credit card debt rose 4.81% compared to the 3rd quarter of 2008 , to $1,694 per houshold. Yet, credit card offers through the mail and other media continue to increase. The high rates of debt and delinquencies can easily be attributed to the current economic crisis; job losses, lay-offs, mortgage foreclosures, etc.. No doubt the current White House administration is aware of these dismal and downright scary numbers. As part of a comprehensive financial reform package, President Obama recently signed into law the Credit Card Accountability Responsibility and Disclosure Act. Here is the official White House Press release:



THE WHITE HOUSE



Office of the Press Secretary

________________________________________________________

FOR IMMEDIATE RELEASE May 22, 2009



FACT SHEET: REFORMS TO PROTECT AMERICAN CREDIT CARD HOLDERS

President Obama signs Credit Card Accountability, Responsibility, and Disclosure Act



WASHINGTON – Today, President Obama signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees.



Americans need a healthy flow of credit in our economy, but for too long credit card contracts and practices have been unfairly and deceptively complicated, often leading consumers to pay more than they reasonably expect. Every year, Americans pay around $15 billion in penalty fees. Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards. To tackle these problems, the Administration moved swiftly with the Congress to enact reforms.



"With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy," President Obama said.



In the Senate and throughout the campaign, President Obama called for measures to strengthen consumer protection in the credit card market. This legislation was made possible by the leadership of Chairman Frank and Representatives Maloney and Gutierrez in the House, and Chairman Dodd, Ranking Member Shelby and Senator Levin in the Senate. It builds on the strong first step taken by the Federal Reserve toward improving disclosures and ending unfair practices.





Principles for Long-term Credit Card Reform



First, there have to be strong and reliable protections for consumers.

Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight.

Third, we have to make sure that people can shop for a credit card that meets their needs without fear of being taken advantage of.

Finally, we need more accountability in the system, so that we can hold those responsible who do engage in deceptive practices that hurt families and consumers.

The Administration applauds the legislative efforts of both the House and the Senate. By working closely together, the House Financial Services Committee and the Senate Banking Committee were able quickly to enact strong protections that the President signs into law today. Below we highlight the critical elements of reform in this new law:



Bans Unfair Rate Increases

Prevents Unfair Fee Traps

Plain Sight /Plain Language Disclosures

Accountability

Protections for Students and Young People

Key Elements of the Credit CARD Act of 2009



Bans Unfair Rate Increases: Financial institutions will no longer raise rates unfairly, and consumers will have confidence that the interest rates on their existing balances will not be hiked.



Bans Retroactive Rate Increases: Bans rate increases on existing balances due to "any time, any reason" or "universal default" and severely restricts retroactive rate increases due to late payment.

First Year Protection: Contract terms must be clearly spelled out and stable for the entirety of the first year. Firms may continue to offer promotional rates with new accounts or during the life of an account, but these rates must be clearly disclosed and last at least 6 months.

Bans Unfair Fee Traps:



Ends Late Fee Traps: Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. The act also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.

Enforces Fair Interest Calculation: Credit card companies will be required to apply excess payments to the highest interest balance first, as consumers expect them to do. The act also ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.

Requires Opt-In to Over-Limit Fees: Consumers will find it easier to avoid over-limit fees because institutions will have to obtain a consumer’s permission to process transactions that would place the account over the limit.

Restrains Unfair Sub-Prime Fees: Fees on subprime, low-limit credit cards will be substantially restricted.

Limits Fees on Gift and Stored Value Cards: The act enhances disclosure on fees for gift and stored value cards and restricts inactivity fees unless the card has been inactive for at least 12 months.

Plain Sight /Plain Language Disclosures: Credit card contract terms will be disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.



Plain Language in Plain Sight: Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards. For example, pre-opening disclosures will highlight fees consumers may be charged and periodic statements will conspicuously display fees they have paid in the current month and the year to date as well as the reasons for those fees. These disclosures will help consumers make informed choices about using the right financial products and managing their own financial needs. Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that disclosures remain clear, useful, and relevant.

Real Information about the Financial Consequences of Decisions: Issuers will be required to show the consequences to consumers of their credit decisions.

Issuers will need to display on periodic statements how long it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due.

Issuers will also have to display the payment amount and total interest cost to pay off the existing balance in 36 months.

Accountability: The act will help ensure accountability from both credit card issuers and regulators who are responsible for preventing unfair practices and enforcing protections.



Public posting of credit card contracts: Today credit card contracts are usually available only in hard copy and not in plain language. Now issuers will be required to make contracts available on the Internet in a usable format. Regulators and consumer advocates will be better able to monitor changes in credit card terms and evaluate whether current disclosures and protections are adequate.

Holds regulators accountable to enforce the law: Regulators will be required to report annually to the Congress on their enforcement of credit card protections

Holds regulators accountable to keep protections current:

Regulators will be required to request public input on trends in the credit card market and potential consumer protection issues on a biennial basis to determine what new regulations or disclosures might be needed.

Regulators will be required either to update the applicable rules, or to publish findings if they deem further regulation unnecessary.



Increases penalties: Card issuers that violate these new restrictions will face significantly higher penalties than under current law, which should make violations less likely in the first place.

Cleans Up Credit Card Practices For Young People at Universities. The act contains new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing or distribution of credit cards to students.



So, with rising variable rates, deferred interest plans that leave the consumer worse off than when they initially accepted the card, and bogus advance notice rules, the consumer is once again fleeced and put out to air-dry in a cold market place. The best defense is to control how many cards you have in your wallet, control your spending, and get educated BY YOUR CREDIT CARD ISSUER regarding the small print of your credit card aggreement. It will save you a lot of money in the long run.

What is Debt Validation and does it actually work?

Most people who try to fix their own credit will sooner or later run across information on debt validation. The first mistake people make when trying to validate a debt is to confuse it with debt “verification.” Let’s get this confusion clarified before we actually get into what validation actually is and how it can be used to repair a credit report.

• Debt validation refers to the process of a COLLECTION AGENCY providing a consumer with proof that a debt actually belongs to that consumer.

• Debt verification refers to the process of a CREDIT REPORTING AGENCY verifying with an original creditor or a collection agency that a debt actually belongs to a consumer.


Now that we know who the debt validation process refers to – collection agencies and NOT CRA’s (credit bureaus), we can now find out how the process works with credit repair.

The debt validation process can be found in Section 803 of the Fair Debt Collection Practices Act (FDCPA). It provides:

Section 803 (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

Plus, they must show proof positive that you owe them this debt. It's not enough to send you a computer-generated printout of the debt. They must prove in writing that they actually purchased the debt from the original credit grantor. In addition to that, they must also foot the bill for the cost of obtaining the information from the original creditor.

One way of looking at it is like this: Suppose you borrowed $50.00 from your best friend Lisa, then her friend Brian came up to you and said he bought your debt from Lisa and you now owe him the money you once owed to Lisa. These might be some of the thoughts you would have:

1. How do you know that Brian is actually collecting for Lisa? What legal documents does Brian have to prove that he is legally authorized to collect?

2. How much is the actual debt? What payments have already been made on the account? Where is the accounting of the debt, including all interest and fees? Are these fees and interest amounts legit?

3. Do you really owe Brian the money? Or was it actually a third party, James? Where is the contract showing that you made a deal with Brian and not James?

4. How do you know if you pay Brian, Lisa won’t come back and ask for the money you originally owed her?

It works the exact same way when a collection agency sends you a letter stating that you owe them a debt you once owed an original creditor. They must prove you owe them the debt. Their word on official looking letter-head or a phone call is not enough. If the collection agency cannot provide legal proof, they are in violation of the FDCPA and can be sued. Further, they cannot continue to report the debt the CRA’s, who in turn cannot continue to list the debt on your credit report. The listing must be immediately deleted. You have this right as a consumer and the law is on your side should you choose to use it.

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Time Limitations imposed by the Fair Credit Reporting Act

As a credit repair professional I have found it necessary to stay abreast of all the current laws, and new developments in the credit repair industry. Most of credit repair law is fairly straight forward and understandable to the laymen – after all, the laws were created for the consumer who desires to address their own credit issues without having to pay anyone to do it for them. However, as with any law, interpretation can be affected by situation, context and new litigation. There are as many wrong answers out there on the Internet as there are people writing about credit repair, so be careful!


I am a member of several credit repair blogs where the members have the opportunity to write about their personal experiences dealing with their credit issues. In some cases you can learn a great deal about credit repair by reading about the real-life experiences of others who are trying to do the same thing you are doing. If you look long enough, sooner or later you will come across a person who happens to be writing about a situation very similar to your own. A word of warning though, don’t take it as “gospel” just because someone on a blog says something is true. Do your own research; check other blogs, access the Federal Trade Commission’s website, Google your question in as many ways as possible to find answers to your questions. There is nothing more valuable than doing your own due diligence.


This article addresses time limitations imposed by the Fair Credit Reporting Act (FCRA) related to charged-off accounts. What I mean here is how long a charge-off can remain on your credit file after it has been reported by an original creditor or a collection agency. There appears to be much confusion about this issue and I hope this article will clear up some of that confusion.


Section 605 (a) (4) of the FCRA clearly prohibits credit reporting agencies (CRA’s) from reporting charge-offs that are more than 7 years old. Here’s how the seven year period is calculated: Section 623 (a) (5) of the FCRA, which became law in 1997 requires a creditor that reports a charge-off to a CRA to notify the agency (within 90 days of reporting the account) of the month and year of the commencement of the delinquency that immediately proceeded the charge-off. Section 605 (c) (1) provides that the seven year period BEGINS 180 days from that date. For example, if you miss your monthly car payment (an Installment Account) and that missed payment leads to the account becoming delinquent, the credit grantor must within 90 days report the exact date when they considered the account delinquent to the CRA. The CRA must then record that date as the start of the 180 day period, after which the seven year time limit begins. Here’s an example of how the process works:



1. You miss your last car payment

2. Account goes into delinquent status

3. Credit grantor must report to the CRA month and year account was considered delinquent

4. 180 days after that month and year, seven year clock commences



Contrary to popular opinion, no subsequent event or change of circumstances can interrupt the clock once it commences, whether it be the resale of the account to a collection agency, or even subsequent payments made on the account by the consumer. Nothing can reset the seven year limitation once it has commenced.

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