Great segment on last week’s episode of 60 Minutes about the excesses, abuses, and just plain shoddy work done by the credit reporting industry. Many people don’t know that the “credit reports” you get from the reporting agencies’ websites don’t actually provide you the information your lenders see: they just give you a subset of the information, which can hide crucial errors from you and prevent you from getting them fixed. If you do find an error on your credit report, the reporting agencies’ websites and Continue reading
Credit
The Credit Bureau VIP List
A lot of our business these days involves disputing credit bureau errors, so we were very interested to read this rather appalling story:
The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people. Those on the list — and they may not even realize they are on it — get special help from workers in the United States in fixing mistakes on their credit reports. Any errors are usually corrected immediately, one lawyer said.
For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — “account not his/hers,” for example — and sending a dispute form to the creditor to investigate. Many times, consumer advocates say, the investigation translates to a perfunctory check of its records.
We’re old-fashioned enough to believe that anyone who’s been unfairly denied credit or otherwise penalized deserves the VIP treatment from credit reporting agencies.
(Obligatory pitch: Contact us for help straightening out inaccurate or obsolete information on your credit report. We’ve made credit bureaus wish they’d put our clients on the VIP list!)
Banksters to Public: Don’t Even Ask About Your Mortgage
Apparently you cannot even request the name and information of the owner of your loan without getting your credit report dinged. This sobering story from the Huffington Post tells the story of a poor chap who had a 780 credit score that dove to 740 after he simply asked the question of his mortgage loan servicer. (Notably, the credit expert noted in the article, Evan Henricks, is currently working with one of our clients on a credit reporting case. If your credit has been dinged due to no fault of your own, call us!)
How to Win Customers and Alienate People
“Hello, My name is Stanley with DecorMyEyes.com,” the post began. “I just wanted to let you guys know that the more replies you people post, the more business and the more hits and sales I get. My goal is NEGATIVE advertisement.”
It’s all part of a sales strategy, he said. Online chatter about DecorMyEyes, even furious online chatter, pushed the site higher in Google search results, which led to greater sales. He closed with a sardonic expression of gratitude: “I never had the amount of traffic I have now since my 1st complaint. I am in heaven.”
Interesting New York Times article about a Brooklyn scammer who makes money by exploiting a structural loophole in Google’s page-ranking algorithm. (You will not be surprised to learn that Citibank is wholly uninterested in helping its customers who get taken by this guy.)
Debt Settlement Companies Can No Longer Take Advanced Fees
Over the past few years, “debt settlement” companies have proliferated to the point that one in three potential new bankruptcy clients that we see have already attempted to settle their debts with one of these companies. Most ask for exorbitant upfront fees and show little to no results. By the time most of these clients find me they have already spent several thousand dollars in an effort to settle their debts, only to be sued in state court anyway by their credit card company.
We work hard to get back all the fees that our clients have paid debt settlement companies; when we succeed, the refund is often enough to cover what the client owes us and more. Unfortunately, it’s not always easy to recover these funds, and I can see that I will be forced to sue one of these companies in the near future. We believe that our clients should not have to pay for a solution to their debt problems twice, and we do everything in our power to aid clients who find themselves into this situation.
On October 27, a new FTC regulation went into effect that makes it illegal for debt settlement companies to collect non-refundable advance fees before doing any work. This is actually a bit of a double-edged sword for us and our clients, as it may result in a number of these companies going out of business and make it more difficult for us to recover funds from them. Overall, though, the new regulation is great news for consumers, and we applaud the FTC for enacting it.
If you’ve already been taken advantage of by one of these unscrupulous companies and want to try to recover the funds you’ve paid them, contact us today so we can set the process in motion while the company is still around to sue.
Credit Card Reform Bill Passes the Senate, 90-5
This is certainly good news, despite the many ways the bill was watered down in the Senate. Having passed the House last month, the bill goes to conference committee now to reconcile the differences between the House and Senate versions of the bill. Hopefully the conference committee will manage to restore some of the protections the Senate stripped out of the bill.
Credit Card Debt Forgiveness On the Horizon?
A pilot program currently under development could mean relief for distressed credit card borrowers:
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower’s financial situation, up to a maximum of 40 percent.
It would have been nice if they’d come around to this way of thinking three years ago, but any relief is welcome, I guess.
Incidentally, if you’re wondering why the banks can’t just institute this program themselves without asking the government to get involved, it’s because they can’t:
Current government rules don’t allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.
The People Have Shouted
…in the form of 56,000 comments received by the Federal Reserve during the comment period for proposed new regulations that would impose new restrictions on the abusive practices of credit card issuers. The comment period, which ended August 4, saw a record number of responses come in to the Fed, almost all in support of the proposed regulations.
The comments file is public information and can be accessed here. It’s sobering to pick a few at random and read the individual stories of ordinary, fiscally responsible Americans who’ve gotten fed up at the capricious and punitive way they’re treated by these companies. With this kind of response, these new regulations seem all but certain to be approved. Democracy in action!
Credit Cardholders’ Bill of Rights Moves Forward
Good news from the other Washington: The Credit Cardholders’ Bill of Rights, which would outlaw some of the worst abuses of the credit card industry, passed the House Financial Services Committee yesterday by a vote of 39 to 27, surviving an effort by Rep. Mike Castle (R-Del.) to kill it. The bill now goes to the full House for a vote.
It’s not a perfect bill, but it’s a good start. See this February post at Credit Slips for a good overview of the bill.
The Candidates on Credit Card Issues
This is the third in a series of weekly posts examining the positions of the major presidential candidates on bankruptcy, debt, and personal finance issues. The first two posts covered bankruptcy and foreclosure issues. This week, let’s take a look at another issue that’s at the front of a lot of consumers’ minds: credit cards.
Barack Obama (Issues Page)
Senator Obama has two major planks that address abusive credit card issuer practices. The first of these is a “Credit Card Bill of Rights,” which would ban unilateral changes, apply interest rate increases to future debt only, prohibit interest on fees, prohibit universal default (a controversial practice in which a lender can change the terms of your debt if you default with a different lender), and require prompt and fair crediting of payments.
Obama also proposes a five-star rating system that would give consumers an easy-to-understand metric of the risk involved in different credit cards. He charges credit card issuers with making their terms too difficult for the average consumer to understand, which makes it difficult or impossible to make an educated, rational decision. Credit card companies would be required to display this rating on all application and contract materials, “enabling consumers to quickly understand all of the major provisions of a credit card without having to rely exclusively on fine print in lengthy documents.”
In a January debate, Senator Hillary Clinton criticized Obama for voting against an amendment to the 2005 bankruptcy bill proposed by Sen. Mark Dayton (D-Minn.) that would have imposed a ceiling of 30 percent on interest rates for credit cards and other consumer debt. “I thought 30 percent potentially was too high of a ceiling,” Obama explained. The amendment failed, and there is still no federally-imposed ceiling on interest rates to this day. Obama did vote against the harshly punitive bankruptcy bill as a whole, as covered here two weeks ago.
Obama talked about credit card issues in his July 8 economic speech in Georgia, starting at about the 12 minute mark:
John McCain
Senator McCain has taken no position on credit card issues during the presidential campaign, and apparently does not intend to. Obama charges that McCain “sides with the credit card companies,” citing his opposition to a 1998 effort to require to require credit card companies to affirmatively determine that borrowers under 21 could handle any debts they might incur before issuing them cards, and to a 2005 bill to require issuers to inform borrowers on their monthly statement that making the minimum payment would increase the interest they’d have to pay and the time it would take to pay their debt off. McCain criticizes Obama for his vote on the Dayton amendment discussed above, but that criticism is more than a little bit disingenuous, because McCain also voted against the amendment.
Then again, considering the $1.37 million debt on the McCain campaign’s American Express card—a card that apparently carries a 17 percent annual percentage rate—maybe a McCain administration would bring some needed perspective to the issue of abusive credit card practices. And then there’s the personal credit card with a 25.99 percent APR…
Coming next week: The Candidates on Predatory Lending