Finance & Law for Not-So-Dummies: collection agency

Showing posts with label collection agency. Show all posts

Monday, September 5, 2011

It's The Economy - Your Economy

Now that the economy is no longer an issue, we have to turn to a new topic- "The Economy", but a different sense of the economy - YOUR economic condition. This may mirror the government's or, perhaps, you may actually understand the state of your finances, as you read this.

Are/If you are in a position where "deficit spending" is necessary for you to pay your bills (not unlike the issue of the Federal debt-ceiling - we had to get Congress to let us borrow more so we could pay the interest on the bill we already have incurred) which is like getting a new credit card with an extra few thousand dollars of credit available so you can pay the interest due on the other cards, and buy food, or pay the mortgage, or put gas in the car or... well you get the idea, you need to reconsider your position immediately.

Unlike the United States of America, you cannot keep getting more debt without near term (tomorrow or the day after) consequences. Consequences like bill collectors calling; Court appearances being required; car payments missed; a mortgage payment missed or paid more than a month late; a foreclosure; or just ANXIETY and WORRY about what you are going to do when the credit limit is exhausted.

Here is a short check-list to review:

1. Is the reason for the excessive debt, spending, reduced income, or both?

2. If it's reduced income, is the situation temporary with an end in sight or long-term?

3. If the debt is due to spending but not because of a loss of income, what caused the spending? Necessities, like food and shelter, or costs that could have been deferred, like extra clothes, a "new" car, a vacation? If the run-up of credit card or other debt is because of buying or spending for necessities, you cannot fix the problem alone. If the debt is for any other reason than necessary living expenses, then STOP SPENDING NOW.

4. In either case, figure how much you owe to each creditor. Then determine how much is due each month; for credit cards use the minimum payment PLUS 10% of that payment; for long term debt like a mortgage or car loan, use the actual payments due each month. When dealing with medical bills, remember that most often a call to the doctor or hospital with a discussion about a monthly payment plan will bring results that you may be able to afford - and may be with no interest.

5. Compare the monthly payments to creditors, ALL OF THEM, to your take home income. Remember that if you get paid weekly, you should multiply your take home pay times 52 weeks and then divide the result by 12. If your pay is every other week multiply your take home by 26 and then divide the result by 12. That way you have accounted for the 4 "extra" weeks each year.

6. Make the same comparison of monthly payments to creditors to your GROSS INCOME -No Deductions for taxes, insurance etc taken.

7. If you divide your payments to creditors by the amount of your income (net income first, then gross income) you will see quickly whether you can afford the payments (based on general averages). For example: Gross income = $4000 per month - monthly payments to creditors (called debt service) = $ 2,000 per month (that is a Debt to Income, called "DTI", Ratio of 50%), you are probably running out of groceries or gasoline or RUNNING UP CREDIT CARD BALANCES, because there is not enough money to go around. The ratio should be no more than 40%! Even that is a stretch against GROSS INCOME

8. Once you reach that point, unless you take immediate action, like earning more money, cutting back living expenses and LOWERING THE MONTH DEBT SERVICE, you will end up losing a car, losing a house, AND LOSING YOUR PEACE OF MIND.

9. If the Debt Service cannot be lowered, if you cannot cut back on payments to creditors without a foreclosure or a repossession, and if your income is maxed-out, YOU SHOULD CONSULT AN ATTORNEY ABOUT BANKRUPTCY.

REMEMBER "BANKRUPTCY" IS NOT A FOUR-LETTER WORD BUT "DEBT" IS!!

Look for the next post which will explain about the "okayness" of filing for Protection From Creditors by a Bankruptcy Filing. (Coming to a theater near you (actually just this blog) on 9/9/11)

Author's Copyright by Richard I. Isacoff, Esq, September, 2011
rii@isacofflaw.com
http://www.isacofflaw.com

Wednesday, February 11, 2009

Credit Card Companies - Legal Loan Sharking?

The last post discussed the Debt Collection practices of many credit card companies. As the economy tightens even more, many people will turn to their credit cards as a last resort to buy necessities, like food, medicine, and gasoline (to get to work if they still have jobs). An earlier post discussed the companies raising interest rates for no other reason than they can.

The majority of the card companies are owned by banks In some cases these are the same banks which are trying to recover losses incurred in bad loans; often, improper mortgage lending practice results. So, "Let it go forth throughout the land that WE, who can offer 0% financing and raise the rate the next day, have determined that NOW is the time to strike. The masses need us more than ever and we can cash-in".

LOSE HERE, MAKE IT UP THERE!

Cynical - no - realistic. I was in the business and know how it used to work. Consequently, I understand all to well the need for a profitable business line in the Bank to offset losses. Citibank, as an example, has let business many customers know, that at the expiration of the current card, the interest rate will go to the prime rate (the rate the best businesses get from banks) PLUS 18.99%. Even now, with the prime rate extremely low, the effective interest factor on one of those business cards would be 22.24%. And that is for business which pay every month, and pay more than the minimum. Others are being told that they are no longer welcome, and to find another lender.

What makes this difficult is that the same approach is being taken in the retail side, with ordinary people who pay every month, with maybe a late payment (5-10 days) once in a while. They get charged a late fee of $29-$39 depending on the card, and then, if they are late at all, the card issuer raises the rate to the "Default Rate" which is between 24.99% and 31.99%. Further, in all of the card agreements the issuers state that they have the right to raise the rate to the Default Rate if, in the opinion of the issuer, the card holder has a change in financial circumstances. This translates to "if you are late on any card, even once, we can jump your rate from 6.99% to the Default Rate. The term for this provision and practice is the "Universal Default Provision".

Delinquencies are rising quickly, not because people do not want to pay, but because of a late payment the interest rate has jumped 400%, and the card holder can no longer make even the minimum payment. If he/she has more than one card, the effect is multiplied by the number of cards. Now come the collectors!

COLLECTORS - THEY DEMAND THE 30 PIECES OF SILVER - OR ELSE!

Most collectors receive a commission on what they collect. Some collectors are paid strictly on a commission basis. To make a living, the collectors will lie, insult, threaten, call family members, neighbors, ask for post-dated checks, and do many of the things that are illegal under federal or state laws, or both. (see the post dated February 8, 2009 for details).

If you get behind and the calls start "when will you be sending in you payment? If I don't get it by then I will repossess your dentures", do not panic. Keep track of who call, when the call takes place, and the basic content of the call. Again, please refer the the Feb. 8th posting for details.

Try to determine if you can enter a payment arrangement, not with an individual creditor if you have multiple cards, but with all of them. Contact "Consumer Credit Counseling Services", or "Money Management International". They are the only 2 true non-profit organizations that have good relationships with most card issuers and which charge a nominal fee for services. They DO NOT charge a large up-front fee. Run from places that do.

AGAIN, E-MAIL OR CALL ME IF YOU HAVE SPECIFIC QUESTIONS AND NEED HELP.

Author's Copyright by Richard I. Isacoff, Esq, February, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

Sunday, February 8, 2009

FAIR Debt Collection

While we are waiting for Congress to decide if the economy is worth saving, making up their minds if home ownership is a thing of the past, we should all be aware of what DEBT COLLECTORS can and cannot do LEGALLY. (While some of these rules are Massachusetts specific, many are not. Where possible annotations will be made. The Massachusetts Regulations are being used as a base because they are actually more stringent and strict than the federal Fair Debt Collections Practices Act - "FDCPA")

The primary difference, between many states' and the federal rules, is that the federal rules apply to Debt Collectors which specifically leave out a collector in the employ of the actual original creditor. For instance, a Debt Collector is an agency, call it the "XYZ Collection Agency", working for the "Bank of Wherever". On the other hand, if a bank employee, from the bank's own collection department calls trying to collect a debt, the FDCPA does not view that as a Debt Collector, which would trigger many of the protections. Massachusetts law regards employees of a creditor and collection agencies in the same light.

(NOTE: For the sake of ease, where the Federal Rule is stricter the note "FR" will appear after the item)

Collection Agencies and Creditors MAY NOT

1. Call you at home about one debt more than twice in any 7 day period, or more than twice in a 30 day period at any place else, like your place of work

2.Call you at work if you ask that they not. Unless the request is put in writing by you, the request is only good for 10 days. Put it in writing and send it certified return receipt requested. Then unless you specifically allow such calls, they are banned totally.

3.Call you without identifying the name of the creditor and collection agency for which the call is being made, and the name of the person calling. He/she can use a fake name, but the creditor/agency must be able to state who the person really is.

4. Contact you at all if you state that you are represented by an attorney (give them the attorneys name as a safety measure)

5.Use profanity or obscene language FR

6.Threaten you with legal action that the creditor/collection agency or does not take or expect to take "FR"

7.Tell anyone, except an attorney whose name you have given to the collector, about your debt, or that you even have one. The exception is if you give the collector written authority to do so.

8.Mail you anything that would lead anyone to believe that you have a debt (sending a postcard or using a return address like "XYZ Collection Agency, 5 Nasty Lane,..." or "XYZ Visa, Collections Department, ...."

9.Ask you to send post-dated checks "FR"

10.Call you outside of normal waking hours. If the caller does not know, 8am-9pm is allowed. If you state that you work nights and sleep days, any call during the day will be a violation

As delinquencies and other late payments increase, collectors, both in-house and working for an agency, will become significantly more aggressive. That has already started. Many collectors work on a strict commission basis, so getting you to send anything is good for the collector. Even getting a promise to send money by a certain day can bring the collector a commission. Remember, when all is said and done, a collector is a salesman - he/she is selling you the need to pay, even if you cannot.

Do not fall for the line "Well, I see on your credit report that you still have $1,200 left on the ABC Mastercard. Why don't you use that to pay us. I will be glad to take your card information over the phone. That will stop us from taking you to Court next week" DO NOT DO IT!!!! In addition to taking money that you cannot pay back, you are allowing yourself to be bullied and are permitting the collector to act illegally. Get his name, the company name and a return telephone number. Send the information to the Attorney General's Office, Division of Consumer Affairs, or the equivalent in your state.

More about creditors, and credit card companies in particular, within a few days.

As always, if you have a specific question, e-mail or call me. Please state that you have a question related to this BLOG.

Author's Copyright by Richard I. Isacoff, Esq, February, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

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