For those of you that follow this blog, you may recall our post about collectors that threaten legal action.  Legally, a debt collector cannot threaten legal action unless they intend to actually take you to court.  So, if a collector threatens legal action, the best thing to do is ask for the name of the attorney that is filing the case.  If the collector refuses to give that info, or makes a comment like the collector did in this case, you can be pretty sure they are not actually taking you to court and they are being deceptive on top of that, which is also illegal.  In a case like this, the last thing you should feel compelled to do is give them money…!!

Also remember that even if they legitimately have forward the case to an attorney for legal action, a court hearing is not something that happens immediately.  Meaning, an attorney that engages in the practice of debt collection is simply a debt collector.  That means that they have to follow the same rules that the collection agencies do.  So, they have to send the consumer a letter within 5 days of obtaining the debt and the consumer has 30 days to challenge the validity of the account.  Only once that has passed, can they then file legal action.  Even once legal action is filed with the court, it still usually takes several weeks, or in some cases a month or 2, for a court date.  So, never is there a possibility that a collector can threaten a lawsuit and give the impression that you can be drug into court the next day.  Since that is the case, there usually is not ever a reason that any consumer should  be compelled to pay a debt “immediately”, before any due diligence is done.

Always treat a debt collector as a SUPPOSED representative of someone you may POSSIBLY owe money to.  Look at it from this perspective:

You owe “Jimmy” 100$.  You have not heard from “Jimmy” for over a year.  One day, a guy named “Jeff” shows up at your home and starts demanding the money that you owe “Jimmy”.  He also says that the debt is not $100 anymore, and now the amount owed is $200.  Would you pay him…??  Of course you wouldnt.  How would you know that this person even knows “Jimmy”?  Maybe he just heard from someone else about the money you owed “Jimmy” and if you pay him the money may just go in his pocket and not even make its way to “Jimmy”.  Or maybe “Jimmy” actually did send “Jeff” to collect the money, but “Jeff” is standing there threatening harm to you if you dont pay him immediately.  You may not be an attorney, but you know enough to know that threats like that are illegal.  Would you pay him…??  NO, you would slam the door in his face and do your due diligence.  You would first make sure that this actually is a representative of the person that you originally owed the money to.  Once you  have confirmed that, you will take them to task over the egregious behavior of the representative that they sent to harass you.  Then you would probably contact your attorney.

Truth is, all debt collection scenarios should be imagined from this perspective.  Imagine this was a personal debt and someone who you dont know is now trying to collect on it…then behave accordingly.  The funny thing is that once you look at it from this perspective, you will laugh at all the times money was given over the phone to debt collectors that call out of the blue.

http://www.huffingtonpost.com/2012/04/24/heart-attack-grill-collapse_n_1448694.html

Read the entire article from the NY Times:

http://www.nytimes.com/2012/04/25/business/debt-collector-is-faulted-for-tough-tactics-in-hospitals.html?_r=2&hp&goback=%2Egde_1956790_member_110470776

The answer is NO…not from all 3 credit bureaus. A recently as a few years ago, a consumer could buy their 3 FICO scores online at myfico.com. Experian opted out of that service, probably in a effort to steer more traffic to their own website, where they sell credit scores and reports to consumers. So, a consumer can go to myfico.com and buy their Equifax and Transunion FICO score, but not experian…

To clarify, a consumer can obtain their credit score from all 3 credit bureaus from a large number of websites these days. However, those scores are not FICO scores. The score model that most lenders use to evaluate the consumer is a FICO score…

Proposed Rule Would Subject Industries to Federal Supervision for the First Time

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today announced a proposed rule to include debt collectors and consumer reporting agencies under its nonbank supervision program. This would mark the first time these important and far-reaching consumer financial market participants are subject to federal supervision.

“Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks,” said Richard Cordray, CFPB Director. “Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks. This oversight would help restore confidence that the federal government is standing beside the American consumer.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, authorizes the CFPB to supervise nonbanks in the specific markets of residential mortgage, payday lending, and private education lending. In addition, for other nonbank markets for consumer financial products or services, the CFPB has the authority to supervise “larger participants.” As directed by Dodd-Frank, the Bureau must define such “larger participants” by rule, and an initial such rule must be issued by July 21, 2012. Last summer, the CFPB sought public comment about possible markets to include in the initial rule and available data sources the Bureau could use to define larger participants in nonbank markets.

Debt collectors and consumer reporting agencies touch millions of American consumers. About 30 million Americans have debt under collection. For these consumers, the average amount under collection is $1,400. Three main kinds of debt collection firms dominate the market: firms that collect debt owned by another company in return for a fee; firms that buy debt and collect the proceeds for themselves; and debt collection attorneys and law firms that collect through litigation. A single company may collect through any or all of these activities.

Under the proposed rule, debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to supervision. Based on available data, the CFPB estimates that the proposed rule would cover approximately 175 debt collection firms — or 4 percent of debt collection firms — and that these firms account for 63 percent of annual receipts from the debt collection market.

The consumer reporting market plays a critical role in the consumer financial services marketplace and in consumers’ financial lives. It includes the largest credit bureaus selling comprehensive consumer reports, consumer report resellers, and specialty consumer reporting agencies. According to the Consumer Data Industry Association, each year there are 36 billion updates to consumer files, and three billion reports are issued. The three largest consumer reporting agencies alone maintain information on 200 million American consumers.

Lenders use consumer reports, which are commonly called credit reports, when evaluating applications for credit cards, home mortgage loans, automobile loans, and other types of credit. Specialty consumer reporting agencies collect and provide information used to make eligibility decisions for a variety of products, such as checking accounts.

Under the proposed rule, consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities would be subject to supervision. This would include approximately 7 percent of consumer reporting agencies based on available data. The proposed threshold would allow the CFPB to cover about 30 consumer reporting agencies. The CFPB estimates that these 30 companies account for about 94 percent of the annual receipts from consumer reporting.

This is the CFPB’s first in a series of rulemakings to define larger participants. The CFPB chose annual receipts as the criterion for both debt collection and consumer reporting because it approximates market participation in these two markets. As the CFPB adds new markets, it will choose the best criteria and the appropriate thresholds for each market.

The proposed rule is open for comment for 60 days after the rule is published in the Federal Register. The CFPB welcomes comment from the public on the proposed rule.

The proposed rule will be published online on Thursday at 11 a.m. here: http://www.consumerfinance.gov/notice-and-comment/

More information about the CFPB’s Nonbank Supervision Program is available here:http://www.consumerfinance.gov/pressrelease/consumer-financial-protection-bureau-launches-nonbank-supervision-program/

# # #

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.ConsumerFinance.gov.

Debt collectors in West Virginia, watch out. The state is coming for you.

West Virginia Attorney General Darrell McGraw filed suit against seven unlicensed debt collection companies in his state, according to a news release. The suits allege that the companies impersonated law enforcement, repeatedly harassed borrowers over the phone, made false threats and collected nonexistent debts or debts that were already paid.

“In recent years, my office has been flooded with complaints against companies making unlawful threats of arrest or legal action to coerce consumers to pay nonexistent debts or debts that have already been paid,” McGraw said in the release. “These companies refuse to become licensed in West Virginia and often go through great lengths to keep their whereabouts hidden in order to evade regulation.”

McGraw has a history of aggressively taking on debt collectors. He sued two units of a debt collection company last month, alleging that they robo-signed affidavits when they were trying to get judgments against West Virginia borrowers.

His actions come as Americans are struggling to deal with both the debts and the collectors. The number of debt collector complaints to the Federal Trade Commissionspiked 17 percent in 2010 from the year before, USA Today reports. Today, one in seven Americans is being pursued by a debt collector, according to Matt Stoller, a fellow at the Roosevelt Institute.

The increased aggressiveness of collectors is in part the result of Americans struggling to repay past debts. Millions of Americans are out of work and, of those do have jobs, many more are getting by on stagnant wages.

In this climate, debt collectors are allegedly cursing and threatening people who they’re trying to get to pay up, according to market research firm Marketdata Enterprises. In addition, they may be telling lies that violate the law. Those tactics have helped to push the firms’ revenues to record highs.

In response, officials are cracking down. A Michigan-based debt collection agency paid $2.5 million in January to settle allegations of misconduct brought by the FTC. In addition, the FTC temporarily froze the assets of seven California debt collection companies in December,accusing them of using lies, threats and intimidation to pay up.

Another government watchdog, the Consumer Financial Protection Bureau, has also taken a hard look at the debt collection industry. The agency is cracking down on debt collectors as part of its increased scrutiny on “nonbanks.”

In response to charges from the Federal Trade Commission, a U.S. district court has halted an operation that the agency alleges collected phantom payday loan debts that consumers either didn’t owe to the defendants or didn’t owe at all. The defendants’ scheme involved more than 2.7 million calls to at least 600,000 different phone numbers nationwide, according to the FTC. In less than two years, they fraudulently collected more than $5.2 million from consumers, many of whom were strapped for cash and thought the money they were paying would be applied to loans they owed, according to FTC documents filed with the court.

The court order temporarily stops the illegal conduct and freezes the operation’s assets while the FTC moves ahead with the court proceedings and seeks refunds for consumers.

As part of its continuing crackdown on scams that target consumers in financial distress, the agency charged Tracy, California-based Kirit Patel and two companies he controls with violating the FTC Act and the Fair Debt Collection Practices Act (FDCPA).

Often pretending to be American law enforcement agents such as “Officer Mike Johnson” or representatives of fake government agencies like the “Federal Crime Unit of the Department of Justice,” callers from India who were working with the defendants would harass consumers with back-to-back calls, according to the FTC. One consumer reported that the caller threatened to have her children taken away if she did not pay, according to court documents.

Another consumer told the FTC, “The callers threatened me and claimed they would arrest me if I didn’t pay them the alleged debt. One of the callers even contacted my neighbors and told me he was watching my house.”

The case is strikingly similar to another action announced by the FTC earlier in the year, although the defendants’ names are different. The FTC did not note that the two cases were related.

In difficult economic times, consumers may turn to high-interest, short-term payday loans between paychecks. The FTC alleges that information submitted by consumers who applied for these loans online found its way into the defendants’ hands.  Because the callers had this information – which often included Social Security or bank account numbers – and because many of the victims already were in a tenuous financial situation, they often believed that they owed the defendants the money, according to the FTC. In some cases, when consumers made the allegedly bogus payments, they had nothing left over to cover legitimate expenses: Two mothers reported that they could not buy Christmas presents for their families after making payments on the phony debts.

The defendants typically demanded several hundred dollars and, in violation of federal law, routinely used obscene language and threatened to sue or have consumers arrested, according to the FTC’s complaint. They also threatened to tell the victims’ employers, relatives, and neighbors about the bogus debt, and sometimes followed through on these threats, the FTC alleged.

Once victims were pressured into paying, the callers instructed them to use a pre-paid debit card such as a Wal-Mart MoneyCard, another debit card, a credit card, or Western Union so the money could be deposited into one of the defendants’ merchant processing accounts, the FTC alleged. Even after victims made a payment, the harassing calls often continued, forcing them to change their phone numbers, or close their credit cards or bank accounts in an effort to get the calls to stop, according to documents filed with the court.

The FTC alleged that of the $5.2 million the defendants collected, almost $1 million was returned or charged back by their merchant processor, resulting in consumer injury totaling more than $4.2 million.

The complaint alleges that the defendants violated the FTC Act and the Fair Debt Collection Practices Act by:

• misrepresenting that they had the authority to collect on supposedly delinquent loans that consumers owed, they were a law enforcement authority or were affiliated with a government agency, and that consumers would be arrested, imprisoned, or sued; and
• using obscene or profane language, and calling consumers repeatedly with the intent to annoy, abuse, or harass them.

In January 2010, the average credit score in the United States was 692, according to Experian’s National Score Index.

Today, it’s between 700 and 710, according to John Ulzheimer, president of consumer education at SmartCredit.com, a credit-monitoring website. In an interview with CNBC.com, he said that reduction of credit-card debt is the main factor behind increased credit scores. “There’s no doubt,” he said.

If average credit scores are rising because consumers have begun to pay down their credit-card debts, then economic conditions must be improving to some degree. However, this average includes everybody, from the person who just became debt-free to the person who hasn’t made the minimum payment in months.

Just as these people are not all created equal, neither are the states that they call home. As a result, some states will have average credit scores that indicate a rebounding economy, while others will have average credit scores that indicate economic decline.

Mortgage Marvel, a mortgage-shopping website, crunched the numbers from over 330,000 mortgage applications received in 2011 and determined which states had the highest average credit scores.

The results don’t tell the whole story, but they paint a picture of how the states have fared economically, and residents of which states have done the best job of paying their bills.

1. California

Average credit score: 754

The only state on Mortgage Marvel’s list to retain its 2010 standing is California. According to the list, residents of the Golden State have the best credit scores in the country, a status that is unchanged since the previous year.

California’s average credit score is 754, a drop of one point from 2010. However, it still outpaces its nearest competitor, Oregon, by four points.

2. Oregon

Average credit score: 751

Oregon occupied fourth place in 2010. In 2011, it moved up two spots, even though the average credit score went down.

In 2010, the average credit score in Oregon was 751, but it dropped slightly to 750 in 2011. However, Hawaii and Connecticut both dropped out of their top three 2010 rankings, allowing Oregon to sneak into second place.

3. Wisconsin

Average credit score: 749

The Mortgage Marvel list is made up almost exclusively of states in the Northeast or West. The sole exception is Wisconsin. This Midwestern state rose from its 2010 rank of number five. The average credit score is 749, an increase of two points from 2010.

4. Hawaii

Average credit score: 748

Hawaii is a paradise of beaches, hula dancing and cocktails served in coconut shells. It’s also home to an average credit score of 748.

Hawaii’s 2011 credit score is four points lower than in 2010. This accounts for its drop from the No. 2 spot on Mortgage Marvel’s list.

5. Connecticut

Average credit score: 745

Connecticut stands at a respectable No. 5, a two-notch drop from 2010. The average credit score in the state was 745 in 2011.

The state’s current credit ranking is the result of a six-point drop from a more impressive score of 751 in 2010. However, it’s still well above the national average.

6. Rhode Island

Average credit score: 745

Rhode Island is the tiny Northeastern state that gave us Elisabeth Hasselbeck, the Farrelly Brothers and Ruth Buzzi. It has an average credit score of 745.

This 2011 credit score is unchanged from 2010. However, due to the reshuffling of other states on the list, Rhode Island climbed one spot.

7. New Hampshire

Average credit score: 744

New Hampshire’s license plates say “Live Free or Die,” and accordingly, there’s no sales tax. Still, its residents need to have good credit scores like everyone else, and 2011 saw their average go up from 741 to 744.

In 2010, New Hampshire occupied the No. 9 spot on Mortgage Marvel’s list. The improvement in its average credit score has given it a modest bump to No. 7.

8. Washington

Average credit score: 744

Washington is one of four Western states on this list. Like Maryland, it didn’t make the cut in 2010, ranking at No. 11. However, its average credit score rose from 741 to 744 in 2011, placing it at a respectable 8th place.

9. Massachusetts

Average credit score: 740

Like Maryland, Massachusetts has fared well enough in the last two years to make the list. However, it slipped one notch from its 2010 ranking of number eight. The average credit score in Massachusetts is 740, the same as in Maryland.

10. Maryland

Average credit score: 734

Of all the states in the Mortgage Marvel top 10, Maryland jumped the highest from its 2010 position — an impressive 12 spots.

While the jump is notable, a closer look shows that it’s not based on a dramatic increase in the state’s average credit score. In 2010, Maryland had a credit score of 734, while in 2011 it rose to 740, an increase of just six points.

This article, “States with the best credit scores,” first appeared on CNBC.com.

http://abclocal.go.com/ktrk/story?section=news/consumer&id=8606977

The writer of this article is correct about a few things related to medical collections.  Medical collections can appear on credit reports much quicker than most consumers are aware, and regardless of the fact that they are medical, they do impact the credit score the same as any other type of collections.  It is also common for a medical bill to get sent to collection before the insurance company gets around to paying the bill, and once the bill is paid, it will still report on the consumers credit as a paid collection.  For those of you that have read these blogs, you know that paid collections still have and adverse impact on a credit score.

The bad advice I see from this article is in several areas.  First, to suggest to a consumer that they should simply attach an explanation to each collection account with the credit bureaus is a completely useless exercise.  This is no way will reverse or minimize the negative impact the medical collection has on the credit score.  Also, by attaching an explanation to the account, depending on what the consumer says, they may be officially admitting the account is valid.  The best thing the consumer can do is dispute the validity of the account directly with the collection agency and the credit bureaus, since the idea is that the account should have never been sent to collection.

The other bad advice I saw was the suggestion to the consumer to first obtain their free credit report from annualcreditreport.com.  The reason this is bad advice is that if a consumer is to exercise their right to the free annual report, and if they initiate any disputes with the credit bureaus after that, the bureaus have 45 days instead of the typical 30 days to conduct their “investigation”.  Even though I dont have alot of regard for the “investigation process” at the bureaus, giving them 50% more time to conduct it is not going to make it any more favorable to the consumer.  Consumers should all have some sort of credit monitoring service to keep an eye on their credit reports.  Most of these service will send email alerts when any changes occur to the report.  Even though the credit scores provided by these sites are mostly fictional, the monitoring function is usually pretty functional.