Qwest Credit Blog

The purpose of this blog is to share with Realtors, Lenders and Consumers the recent changes that went into effect on 4/1/2012 and how they can affect credit scores…Obviously FHA sets these requirements, so if they need to be met in order to get a loan approved then so be it…However, my advice is to make sure the credit score is already qualified, as following these instructions can have an adverse impact on a consumers FICO score…for more specific advice on the potential impact to credit scores, contact our office directly…

From FHA Mortgagee Letter 2012-3
Purpose:

The purpose of this Mortgagee Letter (ML) is to:

• Modify documentation requirements for self-employed borrowers,
• Provide new guidance on disputed accounts, and
• Expand the current definition of family members for identity of interest transaction

Summary –Handling of Disputed Accounts, Public Records-FHA Total User Guide

Additional information on Handling of Disputed Accounts and Public Records

* Exception: An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments, and provides documentation indicating that a minimum of three months payments have been made according to the agreement. The monthly payment must be included in the borrower’s debt-to-income ratio.

Examples of acceptable documentation to support the resolution of disputed accounts or the payoff of accounts would be a letter from the creditor outlining the terms of the payment arrangements, or verifying payoff of debt, cancelled check(s), or a supplement to the credit report verifying payoff or payment arrangements.

Note: Paying “down” of balances on disputed accounts and collections to reduce the singular or acumulative balance to below $1,000, is not an acceptable resolution of accounts.

From Bloomberg: By John Hechinger - Mar 31, 2012 12:00 AM ET

The Obama administration proposed requiring that debt collectors let student-loan borrowers make payments based on what they can afford, rather than on the size of their debt.

The U.S. Education Department, which hires private collectors, said yesterday it would mandate that the companies use a standard form to gather debtors’ income and expenses. If borrowers protest, they would be offered an income-based formula, which can result in payments as low as $50 a month for an unmarried person with $20,000 in income and $20,000 in loans.

Enlarge image

A “Bail Out Schools, Not Banks” protest as President Barack Obama spoke about college affordability at Colorado University in Denver on October 26, 2011. Photographer: Jewel Samad/AFP/Getty Images

The collection companies — which receive commissions of as much as 20 percent of recoveries — are facing complaints that they insist on stiff payments from defaulted borrowers even though the Obama administration and Congress have approved more- lenient plans, Bloomberg News reported March 26. The education department is also reviewing the commissions it pays collectors.

“We definitely feel a sense of urgency to make sure we are doing everything we can to serve the interests of taxpayers and students,” Justin Hamilton, an Education Department spokesman, said in a telephone interview.

The agency first proposed changing the rule governing the treatment of defaulted borrowers a year ago, Hamilton said. After a public comment period, the regulation may take effect as soon as July 2013.

More Favorable

The final proposal, worked out yesterday in discussions with negotiators representing the government, industry and borrowers, was more favorable to the debtors than what the agency originally suggested, according to Deanne Loonin, an attorney with the National Consumer Law Center in Boston.

In particular, for students seeking to “rehabilitate” their loans in default, the proposed rule prohibits basing payments on a borrower’s loan amount, which has been standard practice for collectors, Loonin said in a telephone interview. Current government contracts provide what are among the biggest incentives to debt collectors that extract minimum payments based on loan amounts.

“This regulation is a really important step toward treating very vulnerable borrowers consistently and fairly and giving them the second chance they are entitled to by law,” said Loonin, who represented borrowers in the negotiations.

‘Best Information’

Along with examining incentive payments in borrower contracts, the department is looking at collector scripts and “making sure they’re giving people the best information available,” Secretary of Education Arne Duncan said in an interview on March 28, after testifying about the agency’s budget before a House panel.

With $67 billion of student loans in default, the Education Department hires 23 private debt-collection companies to chase borrowers. The contractors include Pioneer Credit Recovery, a unit of SLM Corp. (SLM), the largest student-loan company, known as Sallie Mae.

Companies that collect student loans directly for the department and through state agencies received about $1 billion in commissions last year, according to a review of contracts and agency data.

Sallie Mae, based in Newark, Delaware, will abide by any changes from the Education Department, said Patricia Nash Christel, a spokeswoman.

“We’re proud to offer programs that give consumers the opportunity to improve their credit and provide cost savings for the American taxpayer,” Christel said in an e-mail.

In 2009, Congress expanded a program that lets lower-income borrowers tie payments to their incomes. Debtors pay on a sliding scale tied to their debt, salaries and family obligations.

In October, Obama proposed making payments even lower and forgiving loans after two decades for some borrowers, a change that could take effect as soon as this year.

To contact the reporter on this story: John Hechinger in Boston at jhechinger@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net

From Huffington Post:  Posted: 03/29/2012 10:28 am:

What could be worse than a criminal approaching you, assaulting you and demanding money?

When criminals are hired to do just that at a desk for their 9-to-5 job.

Every line of work has people who start out fine but go astray somewhere along the way, breaking the rules and maybe even the law. It would be convenient to paint such an innocent, it-happens-to-everyone portrait of the debt-collection industry, but the truth looks much less like a portrait and more like a mug shot: The debt-collection business has become a career of choice for criminals.

One woman disclosed on her application that she previously had been convicted of financial-card fraud and also for being a lookout in a burglary. She was hired by a major debt-collection firm, which told the Minnesota Commerce Department that she had no criminal history. That company had on its staff at least 81 people with felony or gross-misdemeanor convictions.

In other cases, criminals simply checked “no” to the application question about prior criminal convictions and that was a sufficient background check for the debt-collection company:

• One guy had a felony conviction in 2006 for sexually assaulting a woman. His debt-collection company fired him — not for the conviction but because he did not collect enough money.

• A woman was convicted of forgery and then went on to swindle her former employer using fake payment requests. While on felony probation, she became a debt collector and stole credit-card data to pay for $1,561 of jewelry, food and car repairs.

• Another felon was convicted for receiving stolen goods and for felony domestic assault, after police found his girlfriend bleeding in a hotel lobby. Nevertheless, eight years later he was still working for a debt-collection firm.

Lobbyists for the debt-collection industry whine that these are isolated incidents of “bad apples,” but that’s not how Minnesota Department of Commerce Commissioner Mike Rothman saw it, who has come down hard on debt-collection companies: “Our investigation discovered a handful of companies that disobeyed the law, and effectively let the wolves loose in the henhouse. In numerous instances, credit card numbers, bank accounts and personal financial information of vulnerable, financially stressed people were handed over to criminals. It should come as no surprise what happened next.” He added that the same thing has happened in many other states.

Fortunately for Minnesotans, Attorney General Lori Swanson has been aggressive in prosecuting companies with a history of abuse of various types.

Then there are the constables. In case you have a romantic image of these officers walking down the street, smiling and whistling, that’s not what we’re talking about: A Massachusetts woman heard a knock on her door shortly after midnight. “They looked like police officers,” she said. One of them was tapping his nightstick and the other one said they were there to seize her car for unpaid credit-card debt. They said: “Don’t argue with us.”

Constables are appointed by towns to serve court papers and execute court orders. They receive no training and no state agency keeps track of their identities, yet they get to carry a badge and can charge whatever they like to seize a car. The fee previously was capped at $25, but constables sometimes charge $600 or more if you want your car back. If you don’t pay, they get part of the proceeds when your car is auctioned.

A Boston Globe investigation of just five counties showed that constables seized around 2,500 cars for debt collectors. In Boston alone, 88 constables had criminal arrest records.

Massachusetts Attorney General Martha Coakley has proposed regulations that would hold debt buyers responsible for abusive behavior by third parties that collect on their behalf.

Does the act of a criminal employee make the company a criminal itself? It does when the company doesn’t take its responsibilities seriously to screen carefully, train fully, monitor constantly, and fix problems immediately. And the same is true for debt-collection industry lobbyists and spokespeople: They need to stop their see-no-evil approach to claiming that the business only has a few “bad apples.” As with any degenerative addiction, only when the patient is honest about having a serious problem can effective treatment begin.

From Lawyers.com:

The Federal Trade Commission reached a settlement this month with two debt collectors who were accused of abusive and over-the-top practices, including threatening to rape a debtor’s mother, kill the family dog and desecrate the corpses of debtors’ dead children.

Conduct of debt collectors governed by Fair Debt Collection Practices Act
Abuses are widespread due to ignorance of law and difficulty of enforcement
Know how to protect yourself from abusive collectors

Pay This Bill Right Now, or . . .

The FTC settlement agreement stipulates that Frank Lindstrom and Kevin Medley of Rumson, Bolling and Associates pay over a million dollars in penalties between them, and cease work in the debt collection industry.

The FTC complaint included an astounding list of abuses committed by the collectors, including “threatening physical harm and death to [alleged debtors] and their pets, threatening to desecrate the bodies of deceased relatives, and using obscene and profane language. The defendants also allegedly improperly revealed consumers’ debts to third parties, such as the consumers’ employers, co-workers, neighbors, and family members; falsely threatened consumers with lawsuits, arrest, seizure of their assets, or wage garnishment; and falsely claimed that consumers would be liable for legal fees incurred in the collection of the debt.”

The laws regarding what collectors can and can’t do to wring payment out of debtors are governed by the Fair Debt Collection Practices Act, and Lindstrom and Medley broke just about all of them. Along with a list of colorful and offensive names the defendants called the people they were trying to collect from, at one point they told one, “Are you going to pay this bill right now … or am I going to have to kill you?” Note that death threats are usually illegal even outside the realm of debt collection.

Dire Consequences

Unfortunately complaints against collectors like Lindstrom and Medley are far too common. The FTC registered 140,036 complaints about debt collectors in 2010, or 27 percent of all complaints taken, a big jump from 119,609 complaints in 2009. The agency produces a Fair Debt Collection report that contains a laundry list of the most common abuses by collectors:

Harassing the alleged debtor or others
Demanding a larger payment than is permitted by law
Failing to send required consumer notice
Threatening dire consequences if consumer fails to pay
Failing to identify self as debt collector
Revealing alleged debt to third parties
Impermissible calls to consumer’s place of employment
Failing to verify disputed debts
Continuing to contact consumer after receiving “cease communication” notice
In general, collectors are not permitted to tell third parties about your debt, nor can they make untrue claims about potential consequences if you don’t pay up. Among other abuses, collectors can’t call before 8 a.m. or after 9 p.m., can’t call over and over and over again, can’t use abusive or profane language and can’t contact debtors who already have an attorney handling their case. Consumers may notify a collector in writing to cease contact and the collector is bound to respect the request (though the collector can still continue certain legal remedies to collect the debt).

Wild Wild West

Scott T. Dillon

Tough-guy collectors are an unenviable consequence of falling into debt. “It’s the wild wild west with those guys,” says Scott Dillon, a bankruptcy attorney at Tully Rinckey in New York. “It’s all a commission-based service industry. They have to be as aggressive as they can, and there are probably not too many controls as far as management is concerned. You’ve got monetary incentive to be as impressive as possible.”

Scare tactics can be effective when vulnerable and scared consumers aren’t familiar with the ins and outs of the law. “I can’t tell you how often my clients come in under the complete belief that if they don’t pay the debts, they’re going to jail,” Dillon says. “That is continuously a theme I see with debt collectors.”

Dillon says he also sees frequent cases where debtors’ family members and employers have been contacted, and instances where the collectors falsely threaten to take legal action or intercept money they have no claim to. “A lot of senior citizens are being told they’ll get sued and garnished for the rest of their lives,” the attorney says. “It’s completely untrue. Social Security is completely exempt from garnishment.” Most other federal benefits are also exempt.

An Hour of Your Life

Although enforcement can be difficult, consumers do have options to put a stop to around-the-clock phone calls, threats and other shady practices by aggressive collectors:

Write a certified letter asking them to stop contacting you.
Contact your state attorney general’s office or the FTC to lodge a complaint.
Hire an attorney. You can sue the collectors if they are overly abusive, or file for bankruptcy if necessary to protect yourself. If nothing else, if you retain a lawyer the collectors are then bound to bother the attorney about the debt instead of you.
What’s more, bankruptcy attorneys usually offer free consultations. “What does it cost you? An hour of your life just to meet?” says Dillon. “Anyone who thinks they have their rights violated, talk to an attorney. You will know exactly what your rights are when you leave.”

Even for a veteran bankruptcy lawyer used to hearing about illegal acts by collectors, the sheer audacity and venom in the Lindstrom and Medley examples is surprising. “The death threats is a new one for me, to be honest,” Dillon says. “It seems to be beyond the pale.”

From Huffington Post Today:

Medical researchers came up with a breakthrough in the 1980s in their quest to cure patients of HIV. They developed the Highly Active Antiretroviral Therapy, which non-scientists called a “drug cocktail.” Even though any single medicine was not powerful enough to cure people with HIV, it was discovered that the right cocktail of drugs could be highly effective.

Many U.S. attorneys general are working with each other and with the federal government to employ the same strategy to control and eventually eradicate the scourge that is unethical debt collectors, because just one strategy alone seems not to be enough.

West Virginia Attorney General Darrell McGraw saw how the settlement against a major debt collector in a class-action lawsuit would pay out a lousy ten bucks per victim. Exercising his rights to protect the citizens of West Virginia, McGraw then brought his own suit against the company for using false affidavits when obtaining default judgments against West Virginians and for not including necessary details when suing consumers.

Attorney General McGraw said:

Many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights.
Minnesota Attorney General Lori Swanson is prosecuting agencies who work with attorneys to scam consumers. Debt-settlement companies align themselves with lawyers so they can use official-looking letterhead to collect fees up-front for promising to help consumers with their overwhelming debts. Then they fail to deliver, leaving the consumers in even-deeper debt. Attorney General Swanson said: “It’s particularly galling. Here you’re seeing people who have a special privilege — the privilege to practice law — abusing consumers who are down on their luck.”

Illinois Attorney General Lisa Madigan is going after lawyers who specialize in requesting arrest warrants for consumers behind on their bills. One example is a 53-year-old woman who was stopped for a broken taillight. When the police ran her name, she was handcuffed in front of her kids and hauled away for a $2,200 debt that had turned into a default judgment.

The Wall Street Journal surveyed just nine counties in the U.S. and found more than 5,000 such arrest warrants issued since 2010 for debt-related cases. Attorney General Madigan said: “We can no longer allow debt collectors to pervert the courts.”

Texas Attorney General Greg Abbott has gone after multiple debt-collection companies, including one whose employees took the arrest-warrant threat to a whole new level. Their employees claimed to be associated with law-enforcement agencies and the IRS. They would insist that consumers pay their debts or risk facing arrest, prosecution, and imprisonment.

Massachusetts Attorney General Martha Coakley is onto the game some debt collectors play of threatening consumers with legal action while hiding the fact that the debt is “time-barred”; in other words, the debt has passed the statute of limitations for any legal action. Her amended regulations would require that consumers be informed of that fact.

Ohio Attorney General Mike DeWine has banded together with 18 other states to go after NCO Financial, a large debt-collector, for a whole range of violations, including extracting money from consumers for debts they did not owe, and charging excessive interest.

Ohio has a tradition of pursuing debt collectors. As Attorney General in 2010, Richard Cordray investigated two other debt-collection firms, and now he heads the Consumer Financial Protection Bureau. He therefore has first-hand knowledge of the games debt collectors play.

No doubt that is why Director Cordray has already proposed regulations that would involve on-site federal inspection of the top debt collectors representing 63 percent of collections in the U.S.

More bad news is in store for crooked debt collectors. Recently, state and federal officials gathered to announce the $25 billion mortgage-servicing settlement. Attorney General Lisa Madigan used that event to reinforce the regulatory cocktail that’s being assembled against the worst debt collectors:

Know that this is neither the beginning nor the end of our work to hold banks and other institutions accountable…. Today’s settlement should serve as a warning for financial institutions: there are consequences for engaging in practices that jeopardize the stability of our communities and our economy.

A: NO…
Lets clarify something first, there is a difference between a credit report and a credit score. An employer is permitted to view a potential employees credit report, but is not permitted access to their credit score.
The reason I take time to clarify this, is because it so often gets confused. For example, here is an article from the Denver Post which discusses a recent bill that was just stalled in their State that would have taken away an employers ability to view credit reports of potential employees:

http://blogs.denverpost.com/thespot/2012/03/20/credit-scoring-bill-dies-spin-begins/64101/

In the article, the Democratic press release does not seem to understand the distinction between credit reports and scores…it also fails to identify the fact that employers are not allowed access to a credit score.

I personally would have been in support of this bill, as it has been proven though research that an employees credit history does not indicate their ability to perform. The Republican press release mentioned an employers need to confirm that the ID information provided was not fraudulent, hence the need to perform a credit check. While this may be a valid point, the solution to this would be simply permitting a soft inquiry that only confirms the personal information on a credit report…similar to what is done when you want to rent a car without a credit card.
I think that with the economy in the position that it has been in for the last several years, discounting someone from potential employment due to blemishes on their credit report is unfair and an unnecessary part of employment screening.

Since the FTC published its annual report recently, and debt collection complaints totaled 181,000 in 2011, here are some tips to help you keep your cool if contacted by an aggressive debt collector:

1. Collectors cannot call and bother you at work.  As outlined in the FDCPA, once you advise a collector that its not appropriate to contact you at work, they must immediately cease contacting you there.  Take detailed notes of who you spoke with, so its documented.  If that company calls you again at work, they have just violated the FDCPA.

2. Collectors will set imaginary deadlines.  A common tactic is to offer you a settlement with an imaginary expiration date, and tell you that if you dont pay by the deadline, the amount will go up.  Truth is, in the 3rd party, non-judicial collection world, settlement amounts tend to go down the longer an account is in collection.  Most collectors have deadlines before an account is either sent back to the original creditor or sold off to another agency.  So in fact, its the collector that has the deadline.

3. Collectors will threaten to report a refusal to pay.  There is no such thing.  This is an empty threat that collectors use to scare consumers into thinking that they can further impact their credit rating.  Its bogus.  Its already considered a refusal to pay…its in collection.

4. Collectors will tell consumers that paying an old debt will improve their credit rating.  This is simply not true.  Once a collection account is paid, it is not removed from your credit report, it is simply reported as zero balance.  The balance of the collection account is not very relevant in regard to your credit score.  What is hurting your score is the history of an account being in collection.  That does not change when the account is paid.

5. They cannot contact others about your debt.  If a collection agency ever is to call a neighbor, relative, co-worker or friend about your debt, or threaten to do so, they have just violated several areas of the FDCPA and you should contact an attorney.

6. They cannot threaten to garnish your wages or take your property.  A collector has absolutely zero authority to do any of these things unless they are to first take you to court and obtain a judgment.  It is also illegal for them to threaten court action if they do not actually intend to take you to court. So if they make a threat like this, ask them which attorney is filing the court action and get the contact info.  If they were bluffing, which in most cases they are, they just violated the FDCPA.

7. They cannot do anything about old debts at a certain point.  Each state has a certain statue of limitations that ranges typically from 3-5 years.  After that, the ability to sue you for that debt is expired and your risk is minimized.  Be aware of your States statute laws and also be aware that paying an expired debt can revive it and make it legally actionable again.

From FTC Website:

Operation Deceived Clients and Harassed Consumers, FTC Alleged
Two men who worked for an allegedly abusive and deceptive debt collection operation will be banned from the business as part of settlements reached with the Federal Trade Commission.

The settlement orders against the two employees of the debt collection firm doing business as Rumson, Bolling & Associates are part of the FTC’s efforts against illegal debt collection practices. The two men, both of whom were managers in the operation, will surrender assets and are barred from misrepresenting any claim, including those related to providing debt relief, mortgage modification, and credit repair services to consumers. They also are barred from disclosing any consumer information they may have obtained, and are ordered to destroy it.

Frank E. Lindstrom, Jr. has agreed to a $673,000 judgment, representing the income he obtained from the operation since he began receiving a salary in 2005. This amount will be suspended except for $29,500, due to his inability to pay.
Kevin Medley has agreed to a $390,000 judgment, representing what he received from the operation operation since he began receiving a salary in 2005. This amount will be suspended due to his inability to pay, except for $17,500.
If the FTC finds that either defendant has misrepresented his assets, the full amount of his judgment will immediately become due.

At the FTC’s request last fall, a U.S. district court halted the activities of California-based Rumson, Bolling & Associates. The order froze the assets of the company, and appointed a receiver to run it. Lindstrom, Medley, and four other people, along with three companies, were charged with multiple violations of the FTC Act and the Fair Debt Collection Practices Act.

According to the complaint, the defendants harassed and abused consumers by threatening physical harm and death to them and their pets, threatening to desecrate the bodies of deceased relatives, and using obscene and profane language. The defendants also allegedly improperly revealed consumers’ debts to third parties, such as the consumers’ employers, co-workers, neighbors, and family members; falsely threatened consumers with lawsuits, arrest, seizure of their assets, or wage garnishment; and falsely claimed that consumers would be liable for legal fees incurred in the collection of the debt.

Using the slogan “no recovery, no fee,” the defendants allegedly deceived small businesses and other clients and potential clients by claiming that they would collect debts on contingency – charging a fee only when they successfully collected a debt, according to the FTC complaint. But often, the defendants collected money from consumers on a client’s behalf and then allegedly kept more than they were entitled to, sometimes keeping all the money for themselves, instead of forwarding what was owed to the client. At times, the defendants asked clients for additional fees, purportedly for legal expenses in filing a lawsuit that would “guarantee” the successful collection of a debt, the complaint stated. According to the complaint, many clients paid these fees, but the defendants often failed to file the promised lawsuits and the clients never received any money in satisfaction of the debt in question.

For consumer information about dealing with debt collectors, see Debt Collection FAQs: A Guide for Consumers.

The Commission vote approving the proposed consent decrees against Frank E. Lindstrom, Jr. and Kevin Medley was 4-0. The consent decrees are subject to court approval. The FTC filed the proposed consent decrees in the U.S. District Court for the Central District of California on March 8, 2012. The court entered the Lindstrom consent decree March 13, 2012.

The complaint naming Lindstrom and Medley also named as defendants Forensic Case Management Services, Inc. (doing business as Rumson, Bolling & Associates, FCMS, Inc., Commercial Recovery Solutions, Inc., and Commercial Investigations, Inc.), Specialized Recovery, Inc. (doing business as Joseph, Steven & Associates and Specialized Debt Recovery), Commercial Receivables Acquisition, Inc. (doing business as Commercial Recovery Authority, Inc. and The Forwarding Company), David M. Hynes II, James Hynes, Heather True, and Lorena Quiroz-Hynes. Litigation continues against these defendants.

NOTE: These consent decrees are for settlement purposes only and do not constitute an admission by the defendant that the law has been violated. Consent decrees have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

http://www.autoremarketing.com/financial-services/cfpb-director-stresses-pledge-reform-debt-collection

Think a creditor must have proof of the account if they are taking you to court…?? Think Again…!!

http://www.insidearm.com/daily/debt-buying-topics/debt-buying/government-probing-chase-debt-collection-practices-report/