A client of mine was sued, and did the proper thing, answered the complaint immediately. Well, now the lawyers for a major Junk Debt Buyer in the Collection Industry whom I’ll just call JDB Collections for this post. I even recognized the law firm representing JBD Collections, who handles most of their cases. Well, whatever flunky newbie lawyer they got to draft the documents did a really terrible job. I’ll also call the Original Creditor (the credit card company) ABC Credit Cards.
All over the documents, my client was requested to answer the following typical statements:
“The Defendant applied for a credit card from JDB Collections, assignee of ABC Credit Cards”.
“The Defendant received a credit card from JDB Collections, assignee of ABC Credit Cards”.
“The Defendant made payments for a credit card to JDB Collections, assignee of ABC Credit Cards”.
Ummmm - why would a consumer apply for a credit card from a collection agency?? I didn’t know collection agencies issued credit cards!
What a dumb lawyer. And who checked these documents?? Because of the way they are phrased….the consumer can truthfully answer “no” to any of those questions. Now you know what brilliant minds consumers are up against when a collection agency sues them.
Auto shoppers beware! This woman went at looked at cars at the VW Porsche Dealership in Corpus Christi with her son and the dealership used her credit to apply to numerous loans without her permission. Apparently, VW is pulling out of this dealership as a result of this video on You Tube. You go girl!
Think the “stimulus package” checks are sweet? One board member just got a check for $750 from a class action lawsuit filed against First Premiere Bank, a sub-prime credit card company.
Usually checks from class action lawsuits net you around $30 - sometimes not worth the paperwork you have to fill out to file your claim in the award. But $750 is pretty sweet.
This is the way First Premier worked its program:
In reality, most consumers received a $250 to $300 credit line at a 9.9% interest rate that could more than double without notice. Even before consumers had a chance to activate or use their credit card, First Premier billed $178 upfront fees for processing the credit card application. As a result, consumers’ found themselves with $70 - $120 in available credit, perilously close to the credit limit, and strapped with bills most believed they were obligated to pay. Additionally, most consumers reported their balance ballooned within a few months, sometimes from $20 to $400 as a result of hidden fees.
It’s too late unfortunately if you haven’t filed a claim for your money - you needed to do it within 90 days of 8-15-07.
Frequently, when doing credit counseling, I look at a credit report which is full of pot holes: collections, late pays, charge-offs and the initial focus of the client is on removing inquires.
Sure, the removal of inquiries is pretty easy. But it will have a pretty small effect on the client’s score. The client with this kind of credit report has bigger fish to fry rather than working on inquires. I always suggest focusing on the biggest bang for the buck (listed in order of importance) FIRST:
Removing late pays on credit cards, mortgages. See the credit repair method.
Once you deal with these items, then I’d say you can work on the inquires. Or if your credit report is fairly clean, but you have a ton of inquiries (more than 10), then I’d say a little effort towards removing them is a good idea.
Since foreclosure rates are going through the roof, I am getting this question a lot lately. If you are faced with this situation, you’ll probably want to know how big a hit your credit is going to take.
My typical answer to all things score related is “if I knew the answer, I’d be a millionaire”. The exact credit score calculations are known only to Fair Isaac, some math modeling dweebs at banking institutions and the creator of the little known and unused Vantage Score.
Now that I’ve given my disclaimer, let’s tackle the answer. As with anything else credit score related - the effect a single item will have depends on what the rest of your credit report looks like. Does your credit report look like an exploded mine field? Then the answer is: a foreclosure won’t have a whole lot of effect, since the rest of your report was in poor shape to begin with. However, if the foreclosure is the only new blemish, it’s not unreasonable to assume the drop could be from the mid-700s to a score ranging from the high-500s to the low 600s. I’ve seen a lone new collection have a similar effect on a credit report and a foreclosure is a much more serious negative mark.
And don’t think a short sale will be better for you. You are still technically defaulting on the loan - you are getting the bank to accept less money then the principal amount. So the effects will be the same on your credit score and it will read as a foreclosure on your credit report.
How to recover? The same as the recover from any negative: time and credit rebuilding efforts.
Did you know that Wal-mart charges its own employees a fee to cash its own paychecks? Well, its true and it only point out how poorly Wal-mart pays - otherwise the staff would no doubt have savings and checking accounts and have no need to pay a fee to cash a check. It’s very similar to payday lending, in my view.
In a curious twist, Wal-mart realizes that there is big competition for those stimulus checks and is trying to get the checks cashed in its own stores. It is now offering free check cashing on stimulus checks and even allowing the money to be added to the Wal-mart money cards. How generous of them. While other retailers are offering “free bonus money” to customers, Wal-Mart is negating that by flexing its pricing power as the world’s biggest grocer and undercutting prices on basic food items.
Wal-Mart already cashes a million checks a week, so prepare for that number to grow. And once people realize they can cash checks at Wal-mart, the retail giant may be taking on payday lenders.
No, these settlemensts weren’t made with the collection agency, but with the credit card companies themselves.
Just talked to a client today about his debt settlement techniques. He had a few cards to go, but did really well working with MBNA and Chase bank. He settled with Chase for 25% and MBNA for 35% on the balance. That’s pretty good.
The last biggie was with American Express, who had already offered him 60%. American Express is always a little tougher to deal with than other credit card companies, they seem to have their act together more. His card was already charged off - but AMEX is typically still willing to talk to consumers about doing a settlement even after the charge-off. They don’t always immediately sell off bad debts. So it is always worth trying to talk to them. The other one who will do this is Capitol One.
He is going to try and get them lower than 60%, but I am not holding much hope for this. But he is going to give it a try. Good for him. BTW, he said he read everything in my debt settlement book and it helped immensely.
If you’re interested in counseling services, call 877 933 6932.
I love defending people against debt buyers because the Plaintiffs case is as strong as a house of cards in a hurricane. Debt buyers buy judgments, credit card charge offs and other sordid garbage debt for pennies on the dollar. Hell, there are even debt buyers that buy debt that has already been through a collection agency or two. Usually, when a debt buyer purchases his paper, he gets little more than the judgments or a spreadsheet showing the balances due. What does this mean for the consumer that is sued? Everything. The debtor buyer has no proof that the consumer owes anything other than some shmoe’s word for it that the debt was owed in the first instance. Recently, someone got wise to the idea that an attorney who sues on this crap and does not have the goods to show that the debt is actually owed, may be violating the Fair Debt Collection Practices Act.
OK, the feds are “trying” to be responsible by reigning in the abusive credit card practices. Two different papers reported that 7 new reforms are proposed.
Federal bank regulators on Friday proposed a new set of rules to make it more difficult for credit card companies to raise rates arbitrarily, conceal high penalty fees or engage in other practices that consumer groups say are abusive.
Of course, the banks and the credit cards companies are opposed. As quoted in the NYT article, Edward L. Yingling, president and chief executive of the American Bankers Association…. “We are deeply concerned that these rules will result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards. In short, everyday consumers will bear the real cost of these proposals.”
Isn’t this what Microsoft said when they wanted to break up their stranglehold on PC software??
According to this article, even Ben Bernanke is throwing his support behond it…
“The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate,” said Ben Bernanke, chairman of the Federal Reserve, which regulates many U.S. banks. “Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs.”
This should be interesting, as the credit card industry is a multi-trillion dollar industry and lots of their profits come from the things the Fed wants to reform, namely:
Allow consumers more time to pay monthly bills.
Prevent companies from applying interest-rate increases retroactively to pre-existing balances.
Ban “double cycle billing,” a practice that computes finance charges based on previous billing cycles.
