FRCA – Time Limitations related to charged-off accounts reported to credit bureaus

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 This is an actual letter I found while doing some research on time limitations rules based upon the FCRA. Clarke W. Brinkerhoff is a Federal Trade Commission attorney charged with responding to consumer complaints and questions regarding FCRA issues. It’s a little complicated, so put on your thinking cap and read CAREFULLY. Division of Financial Practices Clarke W. Brinckerhoff Attorney 202-326-3224 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20580 February 15, 2000 Ms. Alaina K. Amason 14155 Shire Oak San Antonio, TX 78247 Dear Ms. Amason: This responds to your letter concerning the time limitations imposed by the Fair Credit Reporting Act (“FCRA”) on the reporting of chargeoff accounts by a consumer reporting agency (“CRA,” usually a credit bureau). We list your inquiries on this topic below in italics, with our replies immediately following each item. 1. What reporting limits does the FCRA provide with respect to chargeoffs, and how long have they been in effect? Section 605(a)(4), which has been in effect since the FCRA became effective in April 1971, has always prohibited CRAs from reporting chargeoffs that are more than seven years old.(1) Section 623(a)(5), which became law in September 1997, requires a creditor that reports a chargeoff 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 preceded” the chargeoff. Section 605(c)(1) provides that the seven year period begins 180 days from that date. Both provisions were part of the major revision to the FCRA that were enacted in 1996.(2) 2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or (C) the consumer disputes the account with a CRA? Does it matter whether the 7-year period has expired when any of these events occurs? No. In enacting the new provisions discussed above, Congress intended to establish a date certain — 180 days after the start of the delinquency that led to the chargeoff — to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/99; Johnson, 08/31/98) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed — sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer — changes the allowable period for a CRA to report a chargeoff. 3. Since Sections 623(a)(5) and 605(c)(1) provide new rules for calculating the 7-year period that became effective in 1997, do chargeoff accounts now have different obsolescence periods depending on when the chargeoff occurred? Yes. Section 605(c)(2) states that the section “shall apply only to items of information added to the (CRA) file of a consumer on or after” 455 days after enactment, or December 29, 1997. Therefore, a chargeoff reported to a CRA on or after that date is subject to the new commencement-of-the-delinquency method of calculating the obsolescence period set forth in Sections 623(a)(5) and 605(c)(1). On the other hand, a chargeoff reported to a CRA before December 29, 1997, is not covered by the new provisions, as discussed in one of the enclosed letters (Kosmerl, 06/04/99). If a credit account was reported as a chargeoff before that date, the Commission’s view has been that it can be reported for seven years from the date the creditor actually charged it off.(3) The opinions set forth in this informal staff letter are not binding on the Commission. Sincerely yours, Clarke W. Brinckerhoff 1. Section 605(b) provides that there is no time limit applicable to a report made in connection with credit involving a principal amount (or insurance with a face amount) of $150,000 or more, or employment for a salary of $75,000 or more. Prior to September 1997, those amounts were $50,000 and $20,000, respectively. 2. The Consumer Credit Reporting Reform Act of 1996 (Title II, Subchapter D, of Public Law 104-280, signed into law on September 30, 1996), made many other changes to the FCRA. 3. Commentary on the Fair Credit Reporting Act, 16 CFR Part 600 Appendix, comment 605(a)(4)-2. 55 Fed. Reg. 18804, 18818 (May 4, 1990

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Here is the entire legal text of the Fair Credit Reporting Act pertaining to the credit reporting time period (if you quote it is “Section 605 of the FCRA”):
§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]
(a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:
(1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment, antedate the report by more than seven years.
(4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.⁽¹⁾
(5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.¹
(b) Exempted cases. The provisions of subsection (a) of this section are not applicable in the case of any consumer credit report to be used in connection with
(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
(2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
(3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
(c) Running of reporting period.
(1) In general. The 7-year period referred to in paragraphs (4) and (6) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
(2) Effective date. Paragraph (1) shall apply only to items of information added to the file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act of 1996.

Related articles

• 5 Myths of Credit Repair (creditrepair.com)
• What is a Credit Report? (creditrepair.com)
• The Truth About the Credit Bureaus (creditrepair.com)
• FRCA Section 623 – Disputing a listing with the Original Creditor (consumercreditwatch.wordpress.com)

How To know if a trade line has been RE-Aged by a collection agency

Share | If you have finally decided to take a look at your credit report (this can be scary for some – for others, not so much) and you see some very old, maybe even ancient debt that you thought should have been long gone by now, it might be because they have been re-aged. This is not a new concept in the world of credit repair. In fact, re-aging of debts is about as old as the bureaus who keep the records. It is a practice proliferated by collection agencies that allows them to keep a debt listed on your credit report in hopes that you will pay it off even though you don’t have to any longer. This practice is illegal. The Fair Credit Reporting Act dictates that most debts can only remain on your credit report for 7 years. The proverbial "clock" starts ticking at exactly 180 days from the date of first delinquency; the day that your payments to the original creditor were first classified as late.
Don't confuse the statute of limitations for lawsuits with the credit reporting period's statute of limitations. These are two totally different time frames. The statute of limitations for lawsuits refers to the amount of time a debt collector can legally sue you in your state. Each state has different statutes of limitations. Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account.
The Federal Trade Commission lists the following steps as the appropriate method for resolving credit reporting inaccuracies. This is codified in § 632 of the FCRA, and 15 U.S.C. § 1681s-2.

Step 1: Get Your Credit Report

An amendment to the FCRA requires each of the nationwide consumer reporting companies -- Equifax, Experian, and TransUnion -- to provide you with a free copy of your credit report, at your request, once every 12 months.There is only ONE website that allows a person to get a free copy of their credit every 12 months. It is called AnnualCreditReport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print this FTC form.

Step 2: Look for Errors

Review the report and compare the information it contains to information you know to be accurate. In particular, make sure the report contains your accurate:

1. Name
2. Social Security number
3. Address and previous addresses
4. Accounts and account numbers
5. Date of first delinquency on each of your trade lines

If any of the above information is inaccurate, the consumer credit reporting agency may have added incorrect information to your account accidentally. This is very common. If incorrect addresses or Social Security numbers appear, this may be evidence of someone using your identity.
Under the FCRA, both the consumer reporting agency and the information provider – original creditor (i.e., the person, company, or organization that provides information about you to a consumer reporting agency) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting agency and the information provider.

Step 3: Correct the Errors

Tell the consumer reporting agency, in writing what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, "return receipt requested," so you can document what the consumer reporting agency received. Keep copies of your dispute letter and enclosures.

Consumer reporting agencies must investigate the items in question -- usually within 30 days -- unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. (please see my article on e-Oscar for information on how this is ALWAYS done incorrectly).After the information provider receives notice of a dispute from the consumer reporting agency, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.When the investigation is complete, the consumer reporting agency must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.If you ask, the consumer reporting agency must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation does not resolve your dispute with the consumer reporting agency, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting agency to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

Re-aged collections on your credit report can leave you getting turned down for loans and credit you actually qualify for simply because a collection agency is violating federal law. If you suspect that a collection agency is intentionally reporting the wrong dates to the credit bureaus in an effort to leave its black mark on your credit report for longer than the law allows, your first course of action should be to get a copy of your credit report from each credit bureau – Experian, Equifax and TransUnion.
Remember, federal law entitles you to one free credit report per year. If you order that free credit report from AnnualCreditReport.com, you won't have to deal with giving out your credit card number and then canceling any ridiculous subscriptions later on down the road. AnnualCreditReport.com is regulated by the FTC, and its the only place you should turn to for free credit reports.

Find Each Collection Account's Removal Date
Find the correct deletion date, flip to the collection accounts section of each credit report. The error you're searching for is collection accounts that show up on your credit report for longer than the time limit allowed by the Fair Credit Reporting Act. The FCRA says that collection accounts must be deleted from your credit report 7 years from the date of first delinquency on the original account. The date of first delinquency is 180 days from the date of your very last payment to the original creditor. The most effective way to verify the first day your account went delinquent is to find the paperwork that should have been sent to you by the original creditor, or call them and ask for the information.
If the Credit Bureau Doesn't Delete the Entry
If the credit bureau doesn't delete the re-aged collection account from your credit report, its time to take the fight directly to the collection agency. Send the company a letter noting the following:

1. You recently requested the name and address of the original creditor from the collection agency and the date of first delinquency for that particular debt occurred more than 7 years ago.
2. The credit bureaus deleted the original creditor's negative tradeline after 7 years and 180 days in compliance with the FCRA. The collection account should have been removed at the same time.
3. You notified the credit bureaus of the discrepancy and the credit bureaus contacted the collection agency, which verified the dates were accurate when, in fact, they couldn't be if the original creditor for the account was accurate.
4. The dates for the collection account were clearly re-aged – an illegal practice under the FCRA.
5. The collection agency must immediately delete its tradeline from your credit report to remain in compliance with federal law. If it does not, you will report the collection agency to the Federal Trade Commission for re-aging, contact your attorney general and file a lawsuit against the company for violating the FCRA.

If the collection agency persists, or ignores you, take more aggressive action by filing a complaint with your local Attorney General’s Office. If you can, have an attorney contact the collection agency on your behalf and prepare to send them a Summons indicating your intention to file a lawsuit. Most collection agencies will indeed respond to this by deleting the inaccurate information.

Related articles

• Fair Credit Reporting Act - 101 (consumercreditwatch.wordpress.com)
• FRCA - Time Limitations related to charged-off accounts reported to credit bureaus (consumercreditwatch.wordpress.com)
• Debt collectors are only allowed to report negative remarks on your credit score report if the debt is current and valid (politics4all.com)

Can accumulating enormous debt have an effect on your credit score?

Share |  Posted April 19, 2013 by guest writer Andy Raybuck at AscendantEquity.com

Can accumulating enormous debt have an effect on your credit score?
If you have incurred enormous debts, then you will have to take the necessary steps to pay them off. The company may write off your debt so that they can get tax benefit but, generally, your debt gets sold to a collection agency. The agency may either take legal action against you or sell it to the other collectors. This will ultimately fall off your credit report and leave a negative impact on your credit score for several years. If debts have become unmanageable for you, you may take the help of credit card consolidation and get rid of debt problems soon.

Old debts – What is their reporting time?
The old debts generally get charged off when you do not agree to pay them. As such, the banks usually write off credit card outstanding balance within 180 days of negligence. The bill then gets sold to the debt collectors and it appears on your Equifax, Experian and TransUnion credit reports for seven years. The collection agencies may add up their own entries that will stay on the credit report for the same period of time. With having old debts, your credit score will get lowered till they get removed automatically in seven years.
Debt – What effect does it have on your credit score?
There are several factors such as old and new debts that affect your credit score to a great extent. The old debt consists of collection agency accounts and charged off bills that are a part of your credit report. This includes 35 percent of your credit score. You counterbalance the effects of the old debt by maintaining revolving account balances low and paying off the present accounts within their due date. Lenders will show more interest in your present financial condition than your previous mistakes.
Debt Settlement Law – What do you need to know about it?
Debt settlement is an industry that has conventionally not been regulated. As a result, many consumers have taken undue advantage by deceitful individuals in this sector. It has been undecided as to what organization should be controlling the debt settlement industry. Attorney Generals of individual states have varied in their approaches to safeguard the people. This has created a puzzled network of rules and regulations that often leave the consumer susceptible to untrustworthy debt settlement companies.
The Federal Trade Commission (FTC) has formulated a set of new regulations that will enable the FTC to better administer the debt settlement industry in a more uniform manner. The new FTC rules require that you do not need to pay any fees till debt settlement services takes place. This provides assurance to the clients that they’ll receive the services they had enlisted for implementation.
Old accounts – What are its considerations?
The old accounts usually get removed through the dispute process by the Fair Credit Reporting Act if there appears any error in the credit report entries. You can obtain your free credit reports through AnnualCreditReport.com and find even a small incorrectness to dispute with Equifax, TransUnion and Experian. The credit bureaus are needed in order to attempt legalization with the lender. The lender may even be out of the business if the debt is old by many years. However, if they fail to validate, it means that the wrong entry will be removed from your credit report. This, in turn, will help you raise your credit score.
Old debt – How is statute of limitation different from one state to the other?
You need to know that old debt has a statute of limitation that varies from state to state. This is the reason as to why the collection agency or the creditor cannot file a suit against you when the statute has been passed. The NOLO legal website cautions that dishonest debt collectors purchase your old debts and, in turn, make false threats to get the payments. They may even tell you that they’ll put previous bill on your credit report and hurt your credit score. However, they do not have the legal right to do so. Tell the debt collectors that you are aware about the law very much and will dispute for change in the credit report and report them to your state attorney general in case they may follow through.
Thus, if you have accumulated huge debt, this will hurt your credit score. As such, you should try to pay off your debts on time. This will prevent you from dropping your credit score.

The Consumer Financial Protection Bureau Turns its Gaze To Collection Agency Business Practices

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Today the Consumer Protection Bureau released a new set of rules allowing them to monitor and regulate how debts are collected by debt collectors, junk debt buyers, and any law firm or business who acts as a debt collector. These rules give the CFPB the authority to regulate any firm that has more than $10,000 in receipts from consumer debt collection activities. The CFPB’s authority over these business entities will begin on in January of 2013. This move by the CFPB to regulate debt collection activity is no doubt a response to the thousands of consumer complaints they have received. Companies like LVNV Funding, AFNI, Asset Acceptance Corp., and NCO Financial Systems are considered the worst of the worst amongst a murder of crows. The stories I have read on many credit repair blogs, and my own experience dealing with them confirm they are the biggest offenders of the law and will stop at nothing to collect a debt – whether the debt is valid or not. ”Millions of consumers are affected by debt collection, we want to make sure they are treated fairly”, said Director of the CFPB, Richard Cordray. “Today we are announcing we will be supervising the larger debt collectors in the market for the first time at the federal level” We want companies to realize that the better business choice is to follow the law, not break it”
Did you hear that sound? That is the collective sound of hundreds of thousands of Americans breaking forth in a great sigh of relief! Finally, the consumer has a protector – a champion who has not only the prerogative, but also the muscle to slay the beast…the Beowulf. Here are the details of what the CFPB is going to do regarding their supervision of collection agencies and how they are going to to do it:
Pursuant to the CFPB’s supervision authority, examiners will be assessing potential risks to consumers and whether debt collectors are complying with requirements of federal consumer financial law. Among other things, examiners will be evaluating whether debt collectors:

• Provide Required Disclosures: Examiners will evaluate whether debt collectors are properly identifying themselves and properly disclosing the amount of debt owed. The CFPB intends to ensure that debt collectors are upfront and clear with consumers.
• Provide Accurate Information: Examiners will assess whether debt collectors are using accurate data in their pursuit of debt. Inaccurate information can lead to collectors attempting to collect debt that consumers do not owe or have already paid.
• Have a Consumer Complaint and Dispute Resolution Process: As part of the CFPB’s compliance management review, examiners will assess whether complaints are resolved adequately and in a timely manner, whether the complaints highlight violations of federal consumer financial law, and whether the debt collector has a process in place to address consumer disputes.
• Communicate Civilly and Honestly with Consumers: Examiners will be assessing whether debt collectors have harassed or deceived consumers in pursuit of debt. For example, debt collectors should not be using obscene or profane language with consumers. Nor should they be engaging the consumer in telephone conversations repeatedly or continuously with intent to annoy, abuse, or harass. Debt collectors cannot threaten to imprison consumers who do not pay their debt or threaten to tell the consumer’s employer about the debt.

According to a report on the CFPB website, the CFPB is also publishing new questions and answers about debt collection in its Ask CFPB database. This interactive, online database answers consumers’ most frequently asked questions in plain language. The questions cover topics such as the definition of a debt collector, the best way to negotiate a settlement with a collector, and what a collector has the authority to do. You can also find information on debt collection on the FTC website under the Consumer Protection tab.

Is your private information secure?

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For the last few days the news media has been all abuzz about an alleged cyber-attack on either one or all of the “Big three” credit bureaus that involved the publicizing of private financial information belonging to several celebrities including the First Lady, Michele Obama. According the AP news wire, a Russian based website called “exposed” is responsible for releasing the information. And the list of celebrities who’s information is now public is growing. No one is sure if the information is correct, but I don’t think it would be smart for any curious onlookers to somehow try to confirm the information as the White House has “released the hounds” to investigate who the owners of the website are and how they were able to hack their way into the three largest credit reporting agencies in the US.

Have you ever heard the saying, “if a tree falls in the forest and no one hears it, did it really make any noise? I use that analogy to say that there is an estimated 42 million credit reports held by Experian, Equifax, and TransUnion and in recent years, all three companies have experienced a massive increase in identity theft cases, some due to data security breaches at the agencies themselves, and other types because some guy decides to go through his neighbors garbage looking for bank statements. Apparently, it doesn’t really make the news until it happens to a celebrity. Believe me, my paltry $589.00 in my Bank of America checking account is just as important to me as Oprah Winfrey’s $589 million.

“We should not be surprised that if you’ve got hackers who want to dig in and devote a lot of resources, that they can access people’s private information,” Obama told ABC News in an interview aired Wednesday. “It is a big problem.”
Obama added: “It would not shock me if some information among people who presumably have pretty good safeguards against it, still gets out. Even though President Obama is not the one person whom I would assume has the last word on this country’s cyber security situation, it’s a pretty good bet that he is privy to some high-level information that informed his statements.

That alone is just scary.

The United States Department of Justice stated that in 2010, 7% of all United States households had at least one member of the family at or over the age of 12 who has been a victim of some sort of identity theft. Identify theft comes in various forms: medical information fraud, stealing the identity of persons deceased, credit card fraud, and check fraud. It is estimated that there 34,520 cases of various forms of identity theft per day, up from 22, 000+ in 2011.

Back in October of 2012, South Carolina Governor, Nikki Haley announced a massive security breach in the State’s Department of Revenue that resulted in the theft of 3.6 million social security numbers and 387,000 credit/debit card numbers (only 16,000 of which, it is believed, were unencrypted). These kinds of cyber-attacks are becoming more numerous as hackers are becoming more sophisticated.

I found a some good information on this subject at a site called Quizzle.com. They suggest some ways to protect yourself from cyber-attacks and identify-theft:

 

Don’t save credit card information on-line. I know that Google has an auto-fill plug -in that auto fill forms and job applications, etc. That same plug-in can save your credit card information as well. Don’t do it. Many hackers can figure out passwords by simply typing in multiple common passwords with different numeric combinations. If they get into an account that has stored your credit card number, they can easily charge items to your card without you knowing. The best way to avoid this is to use sophisticated password and not save your credit card number on any online store account

Keep your credit card pin number to yourself. Keep your credit/ debit card and the pin in completely separate places. And I don’t mean separately on your person, I mean if you have your credit card with you, your pin number should be at home. You should never write your PIN number on your credit card, according to experts at Identitytheft.com. Doing so makes it easy for thieves to access your account, if they get hold of your actual credit card. It’s also smart to shred all mail that you don’t want. This includes credit card offers and other mail that asks for financial information or social security number.

Be weary of Wi-Fi

Wi-fi has introduced a new opportunity for hackers to steal your identity, according to Hacked Info, a website devoted to cyber security. Most wi-fi networks are not covered by security software, thus making them a goldmine for hackers hoping to steal your identity. And computers typically have standard default settings that are common knowledge to most hackers, making it easy to get into your personal information.

To avoid having your computer overtaken through wi-fi networks, change the password on your wireless router. Passwords are often standard on routers, so replacing that password with your own is a great way to protect your computer from cyber attacks.

Think about what you’re posting on social networks

Cyber thieves stole above $25 million from businesses in the first quarter of 2009, and that number is consistently rising, according to Krebsonsecurity.com. And cyber theft has yet another target – social networking sites. People share information about themselves so freely that it is easy for criminals to pose as someone else and find your personal information.

The cyber theft process is easy for those with experience in programming, but many are buying software to steal information as well. Firewalls were once thought to protect your computer, but even they are not enough anymore.

Cyber security is all about being careful. If you engage in on-line shopping, slow down and ask yourself few questions before you enter that credit card number, “am I doing the most secure thing with my credit card information, or, am I sure this website is secure?” Be thoughtful about what you say and do while on the Internet and even on your home computer. A little common sense will go a long way to keeping your personal information safe from hackers and would-be identity thieves. And remember if you want to keep financial records like credit card numbers, and pin numbers or passwords more secure, place them on a thumb drive so the information is not just sitting online or on your computer waiting for some sophisticated hacker to get at it.

Related articles

My thanks to Shannon Dickinson at Quizzle for her article, “Combating Identity Theft: How to protect yourself from cyber crime” http://www.quizzle.com/blog/2010/10/combating-identity-theft-how-to-protect-yourself-from-cyber-crime/

• Chase Bank fends off cyber attack (heraldtimesonline.com)
• How To Prevent Identity Theft and Protect Your Credit Score (creditrepair.com)
• Senior US Official Says China Must Stop Cyber-Attacks (theepochtimes.com)
• Michelle Obama Victim of Hacking, Obama Does Not Confirm Amidst Meetings on Cyber Security (+Video) (theepochtimes.com)
• What To Do About Identity Theft (nationaldebtrelief.com)
• Pursuit of hackers who took credit reports expands (news.yahoo.com)
• Hackers Attack Bank Minutes After NSA Chief Warns Senate About Hackers Attacking Banks (theatlanticwire.com)
• Identity Theft in America by The Numbers (creditloan.com)

What to do if you get sued by a collection agency

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Today I received a text from my old college roommate who said he received a Summons and Complaint from a Junk debt buyer. He’s a Paralegal and will know what to do, but it got me thinking about how scary it is to be on the receiving end of one those things. So I jumped on over to one of my favorite credit repair go-to websites, Creditinfocenter and found a very good article on what you should do if you ever get sued by an original creditor, collection agency, or ANYONE for that matter. Here is a copy of what I found on the Creditinforcenter blog:

Sued by a Creditor? Learn How to Fight a Debt Lawsuit

 

With many collection agencies and JDBs turning to the legal system to collect, more and more people are talking to me about lawsuits over debts. This article will cover the best way to handle the situation if you find yourself with a summons. This article covers lawsuits dealing with DEBT ONLY. You might also watch to watch our video on being sued.

Please Note: I AM NOT A LAWYER. If you are facing court, it’s ALWAYS a good idea to hire an attorney or get some legal assistance. Depending on your area and circumstances, in some cases, you can get free help. If you cannot afford it, though, take heart. Lot of people have handled their cases pro per (in other words, without a lawyer.)

What To Do If You Are Served a Lawsuit

If you have been served with a lawsuit, the time to send a debt validation letter is OVER. People always think that sending a debt validation letter to the law firm/collection agency/junk debt buyer will somehow stop the court case or serve as a proper answer to the summons. IT DOES NOT. At this point, your priority should be writing your answer to the court addressing each point in the complaint. If you don’t do this, you automatically lose the case. Your time to answer the complaint is limited, usually 20-30 days from the day you are served. Don’t waste this precious time on debt validation.

What is a Summons and Complaint?

In the packet of papers you received from the process server, you will find:

• A paper telling you when your court date is,
• Some kind of certification that you were served (meaning it goes over how you were notified of the lawsuit: in person, by mail, etc.),
• Instructions for answering the complaint or a form to fill out,
• Any evidence the Plaintiff (i.e. collection agency) is submitting. There could be documents such as affidavits from the collection agency. There might also be documents from the original creditor, although this is extremely rare,
• A list of allegations, which constitutes the complaint. The paper may or may not be titled “Complaint”. Next we will go over the steps to identify the complaint in the paperwork. There will ALWAYS be a complaint in your paperwork. Please look for it.

Complaint

If you are still having trouble finding the complaint, this next information may help. Most complaints will look like the following.
Complaint Number #XXXXXXX Collection Attorney Plaintiff vs. YOU Defendant
Allegation 1: Allegation 2: Allegation 3: Typically, this next allegation will say something like “Defendant obtained a credit card from Credit card Company X” Allegation 4: Typically, this next allegation will say something like “Defendant used the credit card to obtain goods and services using the card” Allegation 5: Typically, this next allegation will say something like “Defendant racked up charges totally $XX and then refused to pay”

Answer

The most important thing you can do is to answer the complaint by the due date. This is the most important thing you can do when you receive a summons.
Once you’ve identified the paperwork which constitutes the complaint, you must answer it. You merely reply by stating whether or not you agree with the statements in the complaint and why. Don’t hide your head in the sand, you have NOTHING to lose by answering the complaint, even if you don’t do it exactly right. You must do it quickly, you only have 20-30 days (depending on your court) to answer the complaint. If you do NOTHING, you automatically lose and the collection agency has a judgment against you.

You MUST answer the complaint. It will cost you next to nothing to answer, and it’s pretty easy to do. If you do nothing, you AUTOMATICALLY LOSE. By answering, you have a good chance of winning.

Answering the Complaint Correctly

You can write your answer on a plain piece of paper, or type them up on your computer. No fancy or legal format is necessary. As long as your answer is clear, it will be fine. In some court systems, they provide written forms for you to fill out. You can use them and attach a more detailed answer. A sample answer is posted at the bottom of this page.
IMPORTANT: You must ADMIT or DENY each allegation. Failure to deny an allegation means that you are admitting to it. In the above complaint example

Your answer to Allegation number 1 can be: In your answer, you would ADMIT allegation 1, that the plaintiff is who they say they are.
Your answer to Allegation number 2 can be: You would also ADMIT allegation 2: that you (the defendant) are who Plaintiff says you are.
Your answer to Allegation number 3 can be: We are assuming in allegation 3, that you opened a credit card account with them, has been backed up by zero evidence. For instance, some lawsuits are filed by Junk Debt Buyers acting as collection agencies who don’t even list the account number of the original credit card. They don’t have any statements from the credit card companies, nothing. They’ve provided no proof so you, as a result, have no idea what they are talking about. The same holds true for allegations 4 and 5.
ADMIT in part. I did have an account with Bank X. DENY in part, I have been presented no evidence that the account I had with Bank X is the same account as the debt alleged in this complaint.
-or-
DENY. Responding Party objects to this request on the ground that it is vague, ambiguous and unintelligible in that Responding Party has to speculate as to the meaning of “the credit card” and “the account.”
Your answer to Allegation number 4 can be: DENY. This request calls for admission of matter defendant has denied and thus it is improper.
-or-
DENY. Responding Party objects to this request on the ground that it is vague, ambiguous and unintelligible in that Responding Party has to speculate as to the meaning of “the credit card” and “the account.”
Your answer to Allegation number 5 can be: DENY. This request calls for admission of matter defendant has denied and thus it is improper.

Affirmative Defenses

Affirmative defenses are legal reasons why the complaint should be thrown out. Some of the best affirmative defenses are:

• Failed to state the basis of the lawsuit: They did not cite an actual state law which was violated.
• Debt is Time-barred: The statute of limitations has passed.
• Statute of Frauds: No contract exists as proof.
• Failure of Consideration: No exchange of money or goods occurred between the plaintiff and the defendant.
• Lack of Privity: No relationship exists between the collection agency and you. You never signed a contract or agreement with the collection agency, remember?

You can list these affirmative defenses at the bottom of your answer, after the specific responses to the allegations.

File Your Answer

You will need to send a copy of your answer to the courts and the lawyer listed in the complaint. Make sure you send them within the time allowed and send them registered mail! As another option for selected states, here is a service where you can submit your court filing online.
A sample answer is posted at the bottom of this page.

Requests for Discovery

In some courts, you need to file any counter-suit along with your answer. In addition, if you intend to ask for discovery (request disclosure of information and documents from the Plaintiff), you may need to send it along with your answer. Every court’s rules are different, you need to look this up. Which brings us to the next item.

Look up Courts Rules of Procedure

Most courts have online instructions and information. Take the time to read it. You will at least need to know the timetable of your case.

Evidence Included in the Summons and Complaint

Most often you will be presented with exhibits (documentation which serves as evidence) in the case file, such as credit card agreements and affidavits of debt. Usually you can object to this evidence and get it thrown out of the case based on hearsay. If you are successful getting this evidence thrown out (struck from the records), the Plaintiff will have no evidence against you. If they have no evidence, they cannot win.

Tips for Filing Your Answer

Many courts will let you handle everything via the U.S. Mail. There is no need to take time off of work to personally file your answer. Send everything certified mail, return receipt requested; one copy to the court, one copy to the lawyer representing the Plaintiff.
Another good idea is to include a self-addressed stamped envelope and one extra copy with your answer to the court. In some cases, if you made a mistake in your answer, they will let you know immediately. If nothing else, they will send you a an endorsed-filed copy of the filing so you know it was entered. One of our readers received a hand written note from the clerk asking my reader to call so the clerk could help correct the filing.

Testimonial That This Advice Works!

I want to say THANK YOU!!!!! I was recently (11/06/08) sued by a Debt Collection agency and taken to my local District Judge for an old credit card account of just under $2500. This account was originally opened in the early 90s and I last made a payment to a collections dept. in 2002. Well, a junk debt buyer bought it and have been harassing me since 2004. I received a summons in the mail to appear in court, which I promptly replied that I would defend since referencing your creditinfocenter website.
I not only built a case using the SOL argument and re-aging, but embarrassed the counselor that showed up against me by asking for signatures, original documents, account histories, etc. He showed up with GENERIC documents w/ no signatures and I won the case!!!!
Thank you SOOOOO much. The best part was when the counselor stopped me after the judge left and said how impressed he was with my preparedness and that no one usually knows about those items!! Thanks so much.
Thanks again!
M. (Pittsburgh, PA)

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You can also read this detailed description of what it’s like to go to court against the big boys and WIN. The story is enlightening, educational and ENTERTAINING.

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Sample AnswerPLEASE DO NOT JUST CUT AND PASTE THIS – Every complaint is different. One size DOES NOT fit all. If you merely cut and paste, you WILL LOSE.

Complaint number #XXXXXXX Collection Attorney Plaintiff vs. YOU Defendant
Defendant’s Answer to Complaint
Allegation 1: Admit Allegation 2: Admit Allegation 3: Denied: Responding Party objects to this request on the ground that it is vague, ambiguous and unintelligible in that Responding Party has to speculate as to the meaning of “the credit card” and “the account.” Allegation 4: Denied: This request calls for admission of matter defendant has denied and thus it is improper. Allegation 5: Denied: This request calls for admission of matter defendant has denied and thus it is improper. FUTHERMORE, Defendant DENIES every other allegation not previously admitted, denied or controverted.
AS AND FOR AFFIRMATIVE DEFENSES
1. Plaintiff fails to state a cause of action against the defendant. 2. Plaintiff, as the defendant is informed and believes, lacks the legal standing to bring and maintain this action. 3. The action is barred by the Statute of Frauds. 4. The action is barred by the Statute of Limitations. 5. The court would unjustly enrich the plaintiff by granting the relief sought herein. 6. The plaintiff has not proven the debt is valid or the amount of the debt is accurate. The plaintiff must prove that the principal, interest, collection costs, and attorneys fees are all correct, agreed to in your contract, and lawfully charged. Defendant also insists that the plaintiff come up with the contract, account statements and purchase receipts to prove the amount of the debt.
WHEREFORE, the defendant asks the Court for judgment: a. dismissing the complaint herein with prejudice.

Not really sure who the real plaintiff is? Read this!

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.