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More on the UltraFICO- Not Good for Consumers

Posted on by Dawn Kennedy

I had the amazing privilege to attend the Consumer Assembly last week in Washington DC, and there was a panel discussion on credit scoring. The panel was actually a discussion on a group of American consumers that are dubbed by the industry the, “Credit Invisibles.” These are people who cannot get a “good” credit score in the typical way, by having open lines of credit that are at least six months old. The industry that scores credit, including the Fair Isaac Corporation (FICO), the developers of the FICO credit scoring models, and Vantage Score Solutions, LLC, the developers of the Vantage credit scoring models, feel that “credit invisibles” are disadvantaged in receiving access to credit products. And they are, but this new model by FICO to address the credit invisibles and those with marginal credit is not good for consumers.

I first blogged on the new “UltraFICO” score back in October in a two-part article series. The first was an introduction to the scoring model and the second was on some unspoken dangers related to judgments and bank account attachment when the credit reporting agencies have you bank account information, which you must consent to disclose under this model.

During last week’s panel discussion I learned more about the purpose of the model, and some facts that have me re-thinking my original posts about how this score may be “OK” for a mortgage product. And I was wrong in my previous posts. The model is not “OK” for any credit. None.

Before I move on to the specifics, I have to take a moment and point out that the panelists, including the VP from FICO from whom I received the information directly, entered into the lion’s den of an audience of consumer advocates, and spoke openly and answered questions about their products. That was a very nice thing to do, and I am appreciative of their honesty. I also know that in their “heart of hearts” they believe that they are helping consumers. It is at that point, I cannot disagree more. Remember, the credit scoring businesses are in the business to help people get and stay in debt. Any model that they can create to help consumers access credit is good for them, not necessarily for you. They sell these models. You are denied under one, they offer a second. Here are five “Fun Facts” about the UltraFICO:

1. The “UltraFICO” will be marketed, and is intended, for all types of credit not just secured, collateralized mortgages. In my original post, I speculated that the releasing of banking information to show the history of cash transactions might be “ok” or even great for mortgage lending, the only good use I could envision for this model. Well, when you apply for a mortgage, the banks take your last months of bank statements anyway. So, for that credit product, this appears to be moot. The UltraFICO will be available to all creditors who wish to purchase it.

2. The UltraFICO is intended to be a “second chance” credit scoring model. This little piece of information was new to me, and this is the first indication that it is not good for consumers. I originally believed that borrowers could just “opt-in” to this model by consenting to include their banking info. Actually, this is intended to be an option for people who would be denied credit in the original model. The credit denial becomes a “maybe” and the borrower has the option to “consent” to include their banking info in the hopes that their credit score will go up and they can be approved.

3. The Premise of the UltraFICO by Fair Isaac is faulty. One telling thing about this model is the statement by the panelist that the checking account information would be reliable because, “Consumer’s are in control of those accounts.” I disagree. I had a debit card number stolen and used in a fish market in Mexico. Filed the report, got the money back, but in this day and age of data breaches, I would never make the statement that consumers are always in control. FICO assured us that their model would be able to determine these little situations and not count them, but the scoring models are not transparent. All types of situations can arise where a consumer, for a period of time, may not be in complete control of every transaction in their account.

4. The UltraFICO model needs two to three years of banking information. Ah, another tidbit of info I was previously lacking. To use this model, consumers must 1. not have bounced a check in the last twelve months 2. Have at least two to three years of checking account information available for the model and 3. Have an average balance of $400.00. Good to know. 78% of consumers live paycheck to paycheck. There are many consumers that cannot maintain an average $400.00 balance after bills are paid and groceries are purchased. The VP assured us that in the beta-testing, using Experian as the Credit Reporting Agency (CRA), most consumers had their score increase under this model. But this now provides the information that a consumer may know they do not have, and “opt-out” of the model, rather than be denied AND have a score decrease.

5. Your banking info will be out there to the CRA, including “new” Finicity, who will become a CRA to comply with the Fair Credit Reporting Act. A fourth CRA will enter into the picture, Finicity who will be the CRA for these UltraFICO banking information providers to FICO for scoring. Because FICO never sees anything but the “raw data” they have zero, none, no liability for what happens to your info. Under this model, FICO assures us that it will be a “single use” calculation of the borrowers banking info. Okay, what happens then? The CRA and the creditors are responsible for protecting the data and are subject to the FCRA, so, it’s good. Or is it?

Data breaches have recently revealed sensitive info that an identity thief can use to create an account, such as social security number and date of birth. But now, a breach can put your banking info at risk, no need to create a fake account when they can raid yours, or use the UltraFICO themselves. How many additional hours will consumers add to the identity theft cleanup mess when the bank must investigate everything, and to close that account could subject the consumer to bounced checks and whatever else. But, you can file a dispute with the Credit Reporting Agency online. Eyeroll.

If you are purchasing a house, find a bank who will perform manual underwriting, and do not use the UltraFICO to provide your banking account information. Please. Your info will be out on the internet for who knows how long. Even if the CRAs pinky swear to delete it. For other types of credit, if you are going to be denied without this info- you are going to be denied. The interest rate is likely higher than you would expect anyway once the UltraFICO model is used. And for the car dealers and others who will “deny” people initially to access their banking information for approval, we know, we know. If you give a mouse a cookie, he will want a glass of milk. Protect your banking from the UltraFICO.

 

The Consumer Lawsuit Part III- Consumer as Plaintiff

Posted on by Dawn Kennedy

This is the final article in the “Consumer Lawsuit” series. Part I covered what happens when the consumer is defendant (served with a lawsuit) and what to do. Part II covered two instances “when” the consumer should consider suing a creditor, collector, or credit reporting agency. This article will cover what to expect when the consumer is the plaintiff, or the party that files a lawsuit. I am going to emphasize again in Part III – very few people like lawsuits. They can be stressful, frustrating, and exhausting. But sometimes they are necessary to protect legal rights.

I want to start with one of the biggest obstacles for consumers who should consider a lawsuit- attorneys and fees. Attorneys are often seen as the bad guys in consumer disputes. The creditors often have teams of attorneys, and many collection agencies employ attorneys to collect on debts. This is why collection notices may originate from a law office. For many consumers who want to fight, the thought and costs associated with legal representation are a huge issue. However, these concerns are directly addressed within the consumer protection laws themselves to make sure consumers can get relief.

Consumers can be Awarded Costs and Attorney Fees Under Fee-Shifting Statutes from Violators

For cases brought by consumer under the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA), there are provisions for plaintiffs “who prevail” against the collector or credit reporting agency who violated the law. In addition to “actual” damages the consumer suffered by the violation, there are “statutory” damages, meaning money damages available to the consumer within the law just for the violation, and under “fee-shifting” provisions, the law provides the collector or credit reporting agency pay, “costs” and “reasonable attorney fees.” Rarely is the client out of pocket “up front” for these cases, and many attorneys evaluate these cases without a fee. Also, once a consumer is represented by an attorney, the collector cannot contact them directly, the collector must only contact the consumer through their attorney.

Procedures in a Lawsuit Itself

When a consumer decides to file a lawsuit, there are procedures that must be followed under our system of laws and justice. There is an order to things, and this order must be strictly followed. This is another part of the frustration and emotional toll many lawsuits can take on consumers. Lawsuits may seem overly complicated, slow moving, and the other side has rights to file motions as well. As I covered in Part I, every defendant has the right to receive notice of the lawsuit filed against them and has the right to respond.

If we describe the process in the most basic order of steps, and not all suits are straight lines, there are four to five steps that are common. The lawsuit will contain the original complaint, or pleading to the court, service to and the answer by the defendant, motions and “discovery” around evidence, conferences before a trial with settlement talks, and then a trial. Not all lawsuits make it to trial, in fact most are resolved much earlier in the process. Sometimes settlement talks can occur right after the answer is filed by the defendant and the evidence of consumer law violations is produced. This is because the consumer protection laws under the FDCPA and FCRA are “strict liability” meaning, if the violation occurs, the collector or credit reporting agency is liable. There is no need to prove that the agency had bad intent or malice toward the consumer. Because there is a strict liability component to the laws, many consumers receive relief from the courts when they enforce their legal rights and defend themselves against abusive and illegal tactics to collect debts or credit reporting errors that the agencies refuse to correct.

And that’s really about it for the basics of the consumer lawsuit. If you missed Part I or Part II, you may want to go back and read them. If you have questions or comments about this series, please let me know. I want to re-emphasize that if a consumer owes money, there is a right way to collect a debt within the law, and a wrong way that violates the law. If a credit reporting agency makes an error, and refuses to correct it, there can be serious consequences for the consumer, whether it is being denied a job, having a security clearance revoked, or increased insurance rates. When agencies violate the law, consumers have rights, and they need to enforce them.

 

The Consumer Lawsuit Part II- When a Consumer Should Sue

Posted on by Dawn Kennedy

In the first article of this series, I discussed the consumer lawsuit from the perspective of the consumer as defendant, meaning the consumer received a lawsuit from a creditor, debt collector, or debt buyer. In this article, Part II, I want to discuss when a consumer might consider suing a creditor, debt collector, or even credit reporting agency (Equifax, Experian, or Trans Union).  I want to say what I said last article, very few people like lawsuits, they can be time consuming and emotionally draining.  Consumers file suit against collectors at a far lower rate than collectors sue consumers. Unfortunately, there are times where a lawsuit may need to be filed by a consumer to stop abusive practices against them or to correct inaccurate information causing serious consequences. Here are two instances when a lawsuit may be the consumer’s only real option.

1. If after the consumer has tried all of the self-help strategies available and the collector or credit agency is refusing to comply with the law, a lawsuit may be necessary to protect the consumer’s legal rights. There are many, many steps a consumer can take to try and work with a collector or credit reporting agency, whether the debt is owed. Here are some resources for different types of consumer problems that outline what the consumer can do on their own, without legal assistance:

A. Identity Theft. If the consumer is a victim of identity theft there are steps to dispute debts and credit reporting items that do not belong to the victim. If the consumer follows these steps, and the collector or credit reporting agency refuses to comply with the law, a lawsuit may be necessary.

B. Collector Harassment. Even when a consumer owes the money, there are federal laws that protect consumers from misrepresentation and abuse by collectors. A great resource describing the limitations on debt collectors, what they are allowed to say or do, and not allowed to say or do is available on the Consumer Financial Protection Bureau Website. If the collector continues to violate the law, a lawsuit may be necessary.

C. Credit Reporting Errors. If the consumer has already disputed mistakes on their credit reports with Experian, Equifax, and TransUnion. The steps for consumers to order a free report from each of the bureaus and dispute any items on the report is found on this Federal Trade Commission Link. It is important to note that the credit reporting agencies are just that, reporting information provided by the “furnishers” of information- creditors, collectors, debt buyers, the IRS, bankruptcy courts, etc. If there is an issue with the organization that granted credit, the consumer must make sure to address the dispute with the furnisher as well.

2. If the Consumer is sued by a collector, creditor, or debt buyer, violations by these organizations may be grounds for a counter-suit (cross-complaint) at the time the consumer is sued. When the consumer has suffered frustrating months leading up to a lawsuit by a collector who does not follow the law, the consumer may bring a counter claim against the collector. In the last article, I talked about when a consumer receives a lawsuit, but if the consumer has been a victim of abuse, harassment, misrepresentation, etc, these claims can often be brought in court even when the consumer has been served.

 A collector or creditor does not get a pass on following the law just because the consumer is sued to collect a debt.  If a consumer receives a lawsuit, they should speak with an attorney. Look to local legal aid societies or find a “debt defense” or “consumer law” attorney for help. The consumer must respond to any lawsuit quickly, and if counter-claims are available, they must be filed with the answer.  If the consumer is represented by an attorney, the collector can only talk to the attorney, and no longer contact the consumer directly.

State Laws for Consumers and Other Protections for the Military
It is also important to note that most states have consumer protection statutes, many that are similar to the federal statutes. For Example, In California there is a body of law under the Unfair and Deceptive Acts ad Practices (UDAP) that protect consumers.  This means that the collector may have violated state law, and there may be a lawsuit in state court available to the consumer to protect their legal rights.   If the consumer is a military member (or dependent in some cases) there are specific laws such as the Servicemen’s Civil Relief Act (SCRA) and the Military Lending Act (MLA) that may be available to a military consumer. The military consumer can contact the local Judge Advocate General’s (JAG) office for assistance.

The Consumer Must Preserve Their Rights by Keeping all Letters and Starting a Call Log.   First, the consumer should save EVERY piece of correspondence received from a debt collector or creditor. If a law firm sends a letter trying to collect, save it. Start a folder and save everything. Second, start a call log. Texts, calls, and email messages. There are rules about identifying themselves as a collector, and a requirement to let the consumer know they are calling to collect a debt.

Note when a phone call is received or when the consumer makes one, who they talked to, any promises made, and what the outcome of the call was. In this day and age, we have caller ID, and we can note the date and time of calls, voicemail messages, and hang ups. It is critical that the consumer preserve this proof that they are receiving calls in violation of the law. And many collectors call in violation of the law. Either too early in the morning, or too late, or at work, or even after the consumer requests they stop calling.

Also note the outcome of the conversation. Did the collector promise to send something? Promise to remove the consumer form the auto-dialer?  Promise not to call because the consumer made a promise to pay, “next Friday?” Write it down. And as frustrating as it may be, dealing with the collector, the consumer must not BREAK THE LAW themselves. The collector will advise the consumer that the call is being recorded, but depending on state law, the consumer may not record the conversation. Write it down. 

Part III of this series on the Consumer Lawsuit will address what the consumer should expect (in most instances) if they decide to file a lawsuit against a creditor, collector or credit reporting agency.  Unlike the collectors who often have teams of lawyers (or are lawyers), many consumers do not have an advocate, know where to get one, or are afraid of the costs involved. These are all real concerns, particularly if the consumer is already in financial trouble.   

 

 

The Consumer Lawsuit Part I: Consumer as Defendant

Posted on by Dawn Kennedy

Creditors and debt collectors sue consumers on all types of delinquent debt, including credit cards, medical bills and auto loans. Honestly, very few people like to be involved with a lawsuit. Bringing an action in court is time-consuming and can be both frustrating and emotionally exhausting.  If a collector escalates a delinquent debt into a lawsuit many times it is because the consumer fails to respond to attempts to collect or cuts off any collection action with a cease and desist letter. Unfortunately, it is not always possible to avoid a lawsuit. When the consumer is properly served (with notice of) the lawsuit papers, a response to the complaint is the best course of action.

Debt collectors (and creditors) file many more lawsuits each year against the consumer than consumers file against the collector. Statistics compiled by data and analytics firm Web Recon, LLC reveal that consumers filed 15409 lawsuits under three consumer protection statutes nationally for the entire year in 2017. These lawsuits were filed under the Fair Debt Collection Practices Act (9784 times), the Fair Credit Reporting Act (4346 times), and the Telephone Consumer Protection Act (4392 times).

For comparison, during that same timeframe in Texas, and only Texas, creditors and collectors filed over 160,000 lawsuits against consumers. That’s right, in 2017 lawsuits filed against consumers to collect a debt in Texas were ten times the number of lawsuits filed nationally by consumers against collectors. The ugly truth is that a recent Consumer Financial Protection Bureau Debt Collection Survey found about 1 in 15 consumers with a debt in collections was sued in 2017. Scary numbers, but consumers have rights in these suits, and often do not assert them. The purpose of  the rest of this article is to provide the steps a consumer can take to ensure their legal rights are protected. 

First and Foremost Consumers Should NEVER Ignore a Lawsuit

Depending on where a consumer lives, a response to the complaint will be due back to the court quickly, typically within 20-30 days. If the consumer (now the defendant) does not respond, they can lose their right to defend themselves in court. If the debtor ignores the lawsuit the collector can get a “default judgment” against them, meaning the plaintiff collector will get an order from the court saying the consumer owes the money without needing any evidence to prove it. The collector wins automatically because the consumer didn’t show up to the court hearing. With that default judgment in hand, the collector has a legal right to collect the money awarded by the court, often with additional collection and attorney fees. Collectors can take that legal order and attach the consumer’s bank accounts, garnish wages, etc.

Consumers Should Seek Legal Assistance Pronto

Contact an attorney or local legal aid program. It can be a result of a consumer’s shame or fear that will stop them from contacting a lawyer. Most legal aid programs offer legal help either free or for a reduced cost. There may be debt defense options available to the consumer, such as having the creditor prove the amount of the debt owed and even that they have a legal right to collect the debt. With the recent proliferation of “debt buyers” which are debt collectors who buy debt accounts from other companies, often the original creditor, who has already written off the debt. Many times the creditor who sells the account databases with the list of debts does not guarantee the accuracy of the accounts they sell to debt buyers!

Some of the accounts that debt buyers receive are inaccurate, or too old to sue on, or may be already paid off, but weren’t cleared from collections before they were sold. Yet, these debt buyers will aggressively attempt to collect on these mistakes, or file suit. It doesn’t really hurt the collector to file a suit with the anticipation that the consumer won’t show, and they will get a default judgment. If the consumer responds and appears in court, they may even drop the suit right then. If the consumer ignores the suit because they were scared, or believed the suit was a mistake, when they don’t respond the collector wins. Every consumer who receives notice of a lawsuit should at least speak with legal counsel.

If You Find a Judgment by Checking Your Credit Report

Sometimes a consumer will only learn about a lawsuit from their credit report. A default judgment was entered under “public records” and the consumer never even received notice of the lawsuit! This tactic is affectionately known as “sewer service” and is used by some unscrupulous organizations to secretly file suits to get default judgments on debts. And this tactic is illegal. Consumers must be personally served the with the lawsuit. In our system of justice, the party being sued has the absolute right to notice and must have a chance to respond to a lawsuit.

In Part II of this series, I will discuss the steps consumers can take as plaintiffs under a number of consumer protection laws. These statutes cover areas such as debt collection and consumer credit reports. There are instances where the consumer may have to bring a lawsuit under one of these federal statutes to stop illegal and unlawful actions taken against them.

 

Student Loan Garnishment? How Much of Your Income is Actually at Risk

Posted on by Dawn Kennedy

Lots of news floating around about how a new legislative proposal where the federal government would take 10% of a student’s wages as an automatic payment for student loans, basically a garnishment, and this may affect many of the current 44 Million borrowers. This suggestion has drawn fire from many consumer law advocates, like myself, who feel that this plan would allow the government to prioritize student loan debt above necessary living expenses; food, utilities, shelter, and transportation. But this proposal also has me thinking about the state of current student loan garnishment structure.

Garnishment is simply a “forced” withholding of part of a consumer’s income in response to a debt. Federal Student Loans are subject to “administrative wage garnishment” and will not need a court order if the borrower is in default. The current percentage of wages which is subject to administrative wage garnishment is 15% of a borrower’s “disposable income”, defined as the net check, or income after withholding taxes and other deductions. But this 15% is after mandatory minimum amounts that are protected from any garnishment. I will cover both consumers earning regular wages, and then consumers on fixed Social Security income.

Please note that PRIVATE student loans require a court order and a judgement against the borrower before the lender can garnish. Also note that the total amount of garnishment for debt allowed by law is 25% of the debtor’s wages… meaning, I am going to talk at the 15% rate in this article, but if the consumer already has a garnishment from somewhere else, the total garnishment cannot exceed 25%, so the federal student loan garnishment may be less than the full 15%.

For Consumers Earning Wages

The rule is 15% of wages after deductions, but what exactly does that mean? First of all, there are minimum amounts that are “exempt from levy” meaning, that amount cannot be touched for any reason by federal student loan garnishment. The current amount, as of this article, is 30 times the minimum wage after deductions. This means, at the current minimum wage, which is at $7.25 an hour (15 USC §1673), the consumer “keeps” the first $217.50 per week. That is the amount “exempted” from any garnishment calculation. The government can then take the LESSER of either the amount that is left after the $217.50, OR 15% of the consumer’s total income. It can be confusing, so a few examples are in order.

A. Consumer’s net income is $300.00 per week. After the exempted $217.50, the consumer has $82.50 left over. 15% of the $300.00 is $45.00. The government can take the LESSER amount, or $45.00 per week. In perspective, out of $1200.00 net income per month, the government can take $180.00. (This is why us student loan/ consumer law types want to do everything possible within the law to prevent garnishment for student loan delinquency.)

B. Consumer’s net income is $500.00 per week. After the exempted $217.50, the consumer has $282.50. But, 15% of $500 is $75.00, so the LESSER is $75.00 a week, or $300.00 per month. Another ouch. This is one reason that over a certain threshold, the calculation is almost always just 15% of disposable income.

One more thing, both Federal Pension and Private Retirement payments that are exempted from garnishment for debts in most states, is also subject to garnishment for delinquent student loans.

For Consumers on Social Security Retirement and Social Security Disability

Unfortunately, most of the time when I run into the “offset” (garnishment) of social security payments, it is because the consumer co-signed someone else’s student loan. If the borrower becomes permanently disabled, there are administrative actions that can be taken towards forgiveness of the federal loan debt. This is true for federal loans where the student passes away as well. But there are many cases where the Department of Education is offsetting Social Security Retirement Income (SSRI) and Social Security Disability Income (SSDI) payments. SSI, the program for the indigent, is exempted from “offset”.

Social Security Retirement and Disability are subject to an “offset” to recover federal debts since 2001 under the “Debt Collection Improvement Act of 1996.” The Department of Education can offset up to 15% (31 USC §3716). The amount offset is the LESSER of 1. The total amount of the debt 2. The amount that exceeds $750.00 per month, OR 3. 15% of the total benefit amount.
Here are the actual examples from the legislation:

Example 1:
A debtor receives a monthly benefit payment of $850. The amount that is offset is the lesser of $127.50 (15% of 850) or $100 (the amount by which $850 exceeds $750). In this example, $100 would be offset.
Example 2:
A debtor receives a monthly benefit of $1250. The amount that is offset is the lesser of $187.50 (15% of 1250) or $500 (the amount by which 1250 exceeds 750). In this example, the offset amount is $187.50 (assuming the debt is $187.50 or more).
If the recipient receives $750 or less, nothing will be offset.

(from: 31 C.F.R. § 285.4(e)(3)(i), 31 C.F.R. § 285.4(e)(3)(ii), & 31 C.F.R. § 285.4(e)(3)(iii))

Alternatives to Default, Garnishment or Offset

I have covered in previous articles how dangerous it is to a consumer’s financial future if they default on student loans. There are currently nine, that is right, NINE repayment options available through the Department of Education for student loans, and while nobody qualifies for all of them, many qualify for more than two. So PLEASE readers, know your options. Please do not let your student loans go 269 days past due. Call your servicer or a student loan attorney if you need help. If you have private student loans, the payment options may be limited. But contact the lender if there is a problem making your payment. As for the topic that inspired this article, legislation proposing the 10% monthly payment option. You can see how it would begin to prevent defaults, and the amount proposed is less than the current garnishment scheme. But then again, I believe consumers should control their income and not have to choose between food and federal debts. A garnishment is imposed because federal student loan notices were ignored, or nine total monthly payments were missed in a row.

Consumer Debt Collection Laws to Change in 2019

Posted on by Dawn Kennedy

The National Consumer Law Center (NCLC) recently published a report on debt collections and complaints surrounding those collection actions for 2018. This report includes an online interactive map, which can be searched by state, showing the statistics on the percentage of the state residents in collections, along with the top complaint types against debt collectors. Honestly, it’s an ugly state of affairs. And if you, my reader, are currently in collections, you may want to take a look at the information for your state. I promise, you are NOT alone in the frustration and fear surrounding collections, particularly when bad actors break the law. The top three complaints reported by the NCLC?

> “Calls After Getting ‘Stop Calling’ Notice” (227,917 complaints),
> “Calls Repeatedly” (210,238 complaints),
> “Makes False Representation about Debt” (192,704 complaints),

I also promise you, dear reader, these numbers are way underreported. A vast number of consumers won’t complain. Won’t assert their rights. And collectors know this, which is why they continue to violate federal law. The Urban Institute reported in July 2018 that 71 million American adults had at least one account in collections. 71 million Americans in collections, yet under one million complaints against collection agencies who violate the law.

There is a very honorable, yet misguided reason, many people won’t report harassment from collectors. Because they owe the money. But do they really? One of the biggest complaints is that consumers are harassed about debts that don’t owe, or that are time-barred form a lawsuit when the statute of limitations runs out. That’s right. The debt can become too old for a lawsuit. Still on the consumer’s report? Sure. Consumer still technically owes the money? Sure. But the consumer cannot be sued in court.

This is a huge distinction under the law and there is one mistake many consumers make. The statute of limitations will be restated if any payment is made on the account, no matter how small. Let me reiterate that very important point: Collectors will harass, call, and threaten a consumer for just, “any payment at all” because if the consumer gives them even a dollar on a debt that is too old to sue on, THE CONSUMER WILL RESTART THE STATUTE OF LIMITATIONS.

And they won’t warn the consumer that the debt they are calling on is too old, sometimes called a “zombie” debt. Why? Because it is part of their business model. They aren’t obligated by the law to tell the debtor. They will call and ask the consumer to settle. If the consumer makes ANY payment or promise, and revives they statute of limitations, the consumer is again are at risk for a lawsuit. Even if the debt was only days from being time-barred. So they do it. Call on very, very old debt. And they will harass the consumer to try to get them to settle again, or start to threaten with a lawsuit. And make no mistake, threatening a lawsuit when they do not intend to follow through is a violation of the law. Credit.com has an interactive map with the statute of limitations for each state. It’s possible that the collector may, however, still report a time-barred debt to the credit bureaus. Unless the debt is too old for the collector to do that either. And they won’t tell the consumer that tidbit either when they call.

But, there is some good news, and some maybe not good news on the horizon for 2019. First, the good news. Many states have debt collection laws that are stronger than the Federal Debt Collection Practices Act. Ans some states are taking aggressive action to force collectors to tell consumers when the debts are too old. California, for example, recently enacted legislation that require collectors to place specific notices on communications to ensure consumers know when the collector is trying to collect a time-barred debt, including an additional notification if the debt is so old it can no longer be reported to the credit bureaus under the Fair Credit Reporting Act. Many states have an “Unfair Practices Act” type set of laws as well that have protections for consumers, these vary by state.

Now, for the maybe good news. On the national level, The Consumer Financial Protection Bureau is expected to take steps this March and release some changes to the rules around debt collection practices on the federal level. Consumer advocates are pushing for those changes to include a rule requiring Collectors give written notification to consumers when a debt is too old for a law suit or too old to be reported on the consumer’s credit report. I’ll let you know what comes out. For now, there are a few things to remember to do if you are in this situation:

1. Check your state statute of limitation for consumer debt before making ANY payment, no matter how small, to a collector.

2. If you are being harassed, or a collector is trying to get a payment on a debt you do not owe, contact a consumer advocacy agency or attorney and find out the federal and state laws available to protect you.

Tis the Season! Tips for Safer Online Shopping

Posted on by Dawn Kennedy

It’s close enough to Black Friday, Small Business Saturday, and Cyber Monday to talk a bit about online shopping. Some very scary statistics from 2017 showed a marked increase in online shopping fraud, using stolen credit and debit card numbers. This is not necessarily surprising because consumers are starting to trust online ordering, and the total number of “eCommerce” transactions were up by 19% over 2016 numbers. Sadly, the number of fraudulent transactions during the 2017 holiday season also increased, to 22% over 2016. And a staggering 1 in 85 transactions online was an attempted fraud. GAH!

Online retailers are taking steps to prevent fraud such as collecting IP addresses and requiring the “CVV” or verification code on the back of the card used for a purchase. But, while they do their part to protect their businesses from fraud (yes, they sustain incredible losses from fraud, it isn’t only the consumer), there are easy steps you can take to minimize the risk of being a victim of credit or debit card fraud:

1. Use Unique Usernames and Passwords for Each Merchant

Never reuse usernames and passwords for multiple merchants. If the retailer is compromised, and your login is stolen, thieves can log in to other sites using your information and make unauthorized purchases. This time of year, shipping and billing addresses often differ, so that delivery address discrepancy may not trigger a “potential fraud” flag on the merchant side. Yes, it can be a pain, but so can losing all of your holiday money temporarily until the bank refunds your fraudulent losses.

2. Check the HTTP (S)

The “s” at the end of the hypertext transfer protocol (you bet I had to look that one up) means, https://www.entrepreneur.com/article/281633 “secure.” The security includes data encryption. When you are on a site with only, “http” the data sent to the site can be intercepted by a third party.

3. Use the Code on the Back of the Card

The three or four digit verification number on your credit or debit card is requested to prove that you have the physical card in your possession when making a purchase. In addition to a billing address and card number match, the code can help reduce fraud by requiring a third data point for a purchase.

4. Limit the Potential Financial Loss

This is particularly important for debit card users who shop online this holiday season. Have a second (free) checking account with a debit card for online purchases, and only put enough in the account to cover your shopping budget. This limits the potential loss if the card used online is compromised. And always use the same card, tied to the dedicated account, when shopping online, or traveling.

5. Keep Copies of Everything and Watch Your Accounts and Statements

Print out copies of invoices and receipts. This way you have confirmation of what you ordered, and the total amount paid. If your card is compromised, you will be able to flag unauthorized purchases, while confirming the ones you actually made. And watch your statements and account carefully. Some financial institutions have a feature where you can receive an alert (we get a text) if there is a purchase made over a specific threshold. One word of caution, however, my husband was alerted to his holiday gift by this feature. The bank let him know when I purchased his gift.

There is a real emotional toll on consumers who have lost money and had to file fraud reports over the holidays. Nobody needs that stress and frustration while trying to buy gifts or make travel arrangements. There is one other layer of protection available you should consider: make sure you take advantage of the FREE credit freeze to limit access to your personal information, reducing the risk of a fraudster opening a new account using your identity.

 

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Great News- We Now Get FREE Credit Freezes

Posted on by Dawn Kennedy

It’s November! Tis the season for increased identity theft. The increased risk is due to the sheer number of transactions, hacking attempts, and ecommerce fraud attempts, which is staggering. Even more staggering? According to a report by the Identity Theft Resource Center, while most consumers detect identity theft within three months about 16% of consumers won’t detect identity theft for three years. Wow.

One of the more surprising things I read on this topic is that stolen personal information was widely used to purchase very authentic looking “fake” paychecks and other documents online, which thieves used to open accounts and even rent apartments. Since chip cards are making it harder to commit credit card fraud, auto loan fraud is growing. And the thieves are creating “synthetic identities” where the fraudsters steal some of a consumers real information and combine it with fake information, such as using a new address for statements.

The consistent thread in all identity theft schemes is that a fraudster has a consumer’s personal information. Maybe not everything, but enough to convince someone else that the thief is really the identity of the victim. And the credit bureaus have that personal information. They have it all. The three credit reporting bureaus are goldmines for personal information for ID thieves, and these keepers of your info have been hacked by savvy criminals to get it.

The only option is to freeze your credit report. A “credit freeze” restricts access to your credit reports to themselves and currently open accounts. But not everyone took the steps required to freeze accounts, even if they were not looking to open new credit, because those freezes averaged about $30.00 and were only free AFTER they were a victim of ID theft. And there were additional fees to “thaw” the account for access by new lenders for a specified period of time. But now all of those fees are gone. You do not have to pay a fee anymore. New credit law changes, effective September 21, 2018, mean any consumer can freeze and unfreeze their credit file for free. Here’s what you need to know.

1. You have to contact each bureau individually to have the freeze placed on each.
Here are the contact links and numbers to do so. You will have to verify your identity with personal info to freeze your reports, so have that ready.

• Equifax or 800-349-9960
• Experian or 888-397-3742
• TransUnion or 888-909-8872

2. You can get a free freeze for your children who are under 16. And you can also place a free freeze for anyone that you have a valid power of attorney for, when you are a fiduciary, guardian or a conservator.

3. You can still access your own credit reporting records and can order your free annual credit reports from www.annualcreditreport.com. Make sure you only use Annual Credit report, that’s the free one authorized by federal law.

4. Any current creditors or debt collectors will continue to have access after the freeze is placed.

For more information, you can read the Frequently Asked Questions (FAQ’s) directly from the Federal Trade Commission. I encourage every consumer to set aside time before the holidays to put freezes on their credit reports, which will help to protect themselves, their children, and people at risk, from identity theft.

 

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Your New “UltraFICO” Score! A Good Thing?

Posted on by Dawn Kennedy

The Fair Issacs Corporation, the creators of the mysteriously calculated FICO Credit Score, are changing the scoring method using new criteria, again. In early 2019, a new scoring method will allow consumers to contribute their banking information to a third party, Finicity, which, “allows Americans to benefit from positive financial behaviors.” The idea is that if you are newer to credit, or have a lower score, the credit bureau can have a look at your checking, savings, and money market accounts to check your credit worthiness. One argument in support of this new approach is that consumers do not currently have any input into their credit scores, because the FICO is calculated only on debt account data submitted by creditors and lenders.

Fair enough. What could possibly go wrong?

From my lowly perch, a lot. First of all, while the consumer will have a choice of accounts to include, they will not have any control over how it is collected, and whether the information is kept by the credit bureau. The process, as published in the Wall Street Journal, is as follows,“Experian will compile consumers’ banking information with help from financial-technology firm Finicity and will distribute the new score to lenders.” Yeah, read that again, Experian will send a summary of consumer bank accounts to lenders. FICO won’t keep any of that information after the score is calculated, but the credit bureau will have your banking Information.

Anyone hear about the hack on Equifax? Anyone? Of course, you have. Well, have you heard about the Experian hack? 15 Million T-Mobile customers personal data was hacked via Experian, including social security and passport numbers. Lovely. Since I don’t use T-Mobile, I am already standing in line to provide my banking info. Eyeroll. It’s already happened once, and they will not be less of a target if they are the bureau with your bank accounts.

Cybersecurity aside, who here believes that when the UltraFICO is available, creditors will accept the FICO? Lenders know the consumer can opt in banking information, so why not rely on the UltraFICO for lending decisions? This is the plot from the classic children’s book by Laura Joffe Numeroff, If You Give a Mouse a Cookie. The lesson? If you give a mouse a cookie, he will want a glass of milk, then a straw, then a napkin, and on and on.

So, why the change? Benevolent Credit Bureaus? Hardly. Since the housing melt down, the pool of traditionally “highly qualified” borrowers shrunk. The change is due to lenders requesting, “credit-reporting firms and FICO to figure out a way to help them boost lending without taking on significantly more risk.” Oh.

As a consumer law advocate, I see danger ahead. Who would be “at fault” if banking information is compromised? Any hack could mean consumer’s accounts are cleaned out until the necessary fraud investigations are completed, and the money is returned by the bank. Missed or late mortgage, car payments, or utility bills can have consequences and mean financial insecurity for the most basic needs of a family. Will your mortgage company waive the late fee if it isn’t your fault? Will the electric company leave the lights on? If not, late fees on every bill owed by the American family could add up to hundreds of dollars. And over 75% of families already live paycheck to paycheck. In my humble opinion, a “free” 12-month credit monitoring product is not going to repair that mess. Or, maybe I am just a cynic and Fair Isaacs is looking out for consumers.

 

photo:credit.org