I have crummy credit. Should I hire a credit repair service?

Has your credit score taken a hit in the last few years? Is your credit score creating obstacles in obtaining a car loan or mortgage?

If so, and you think you need credit repair services, I can’t help you. And you should be wary of any company or person who says they can repair your credit. Credit repair usually involves accurate information on a credit report, and attempts to trick the credit reporting bureaus into believing these accurate entries are wrong so that they change them.

Recently, the CFPB sued a credit repair company called Prime Marketing Holdings, LLC for doing a number of bad things to consumers:

  • Charging up front, advance fees to challenge entries on a credit report (this is illegal)
  • Representing that they could get your credit report fixed in a short amount of time (this is an unsubstantiated claim, which is misleading, and therefore illegal)
  • They also claimed to be able to boost your credit score by a significant margin and remove virtually all negative information from your credit score (also misleading)
  • Charged monthly fees to consumers that were not disclosed in sales calls
  • They advertised a “money back guarantee” that sounded good, but in fact, was essentially useless for consumers in practice because of all the conditions on being able to use it (all that “fine print” stuff)

Remember:

  • You don’t have to pay for a credit report – you get a free one each year through www.annualcreditreport.com
  • Credit repair does not happen over night. It takes time and patience for negative entries to drop off.
  • If there is a genuine problem or mistake on your credit report, you can dispute it and get it fixed. You don’t have to use a credit repair company to do that.

 

Consumer Resources

One time, before I started working on consumer law cases, I had a problem with a gym who demanded that I continue making monthly payments even though I’d tried repeatedly to end my gym membership. It was frustrating, and I felt like I was harassed by the random Texas company the gym used to do their collection calls.

In my frustration and anger, I searched for places that could hear my complaint, perhaps mediate an “OK” outcome for both sides, and get this Texas company to stop calling me twice a day, every day.

I either was a bad researcher, or just didn’t take the time to look very hard. My first thought was to file a complaint with the Better Business Bureau. Like the movie, The Revenant, the BBB didn’t do much for me. I did get to air my grievance, I suppose, in a long winded series of entries typed into the BBB’s online form. But the Texas company continued to call.

Don’t be like me. There are certainly times to use the BBB, but there are perhaps more useful outlets than the BBB to lodge complaints over debt collection problems. For instance, let’s talk about the Nebraska Attorney General today.

The Nebraska AG’s office has a consumer protection division, under the “public protection” link. One of the jobs of the AG’s office is to protect the public from fraudulent business activities and also to educate consumers. I don’t know how many attorneys work in the AG’s office, let alone how many staff the consumer protection division. I do know, after reading Bad Paper, that larger states like New York, had only two attorneys assigned to the entire consumer protection division. That’s either a lot of complaints handled by only 2 attorneys, or there’s not that many complaints filed with the AG’s office in New York.

If you have a problem with a debt collector, or get sold a lemon for a car, or have another consumer law problem, there is a form on the Nebraska AG’s website to file a complaint. They ask you questions like “have you hired an attorney for this matter?” and “how much did you pay for this product?” and “please describe what resolution you are seeking for this complaint.” It is thorough and also asks you to submit any documents that support your complaint.

I’d like to know how many of these complaints the AG’s office receives on an annual basis, and what the average resolution to these cases are. Anyone out there gone through it and willing to share stories from the other side?

I haven’t seen any data published by the Nebraska AG’s office on how many complaints they receive annually for illegal debt collection practices, but I did find a news release by the Nebraska AG stating that they were joining a coalition to “address illegal debt collection practices.” You can read the entire news release here. So at least you know that the Nebraska AG has teamed up with a lot of other government agencies, both federal and state, to participate in “Operation Collection Protection.” Whatever that means.

 

Reading Round Up

Keeping up with all the news is hard. I’ve rounded up a few articles that should interest consumers, both at the national and Nebraska level…

  • CFPB fines Wells Fargo $100 million for creating fraudulent accounts. Were you affected? I’m interested to see how they go about reimbursing the people who had money diverted from their Wells Fargo bank accounts into fake accounts, just so middle managers could meet sales goals. The CFPB said that consumers didn’t need to file any claim to get the reimbursement.
  • Class settlement postcards were mailed out for the Powers case. I have talked about that case here and here. Postcards direct affected consumers to enter a unique code on this website. So don’t lose your postcard! Each postcard has its own unique code, which I don’t believe can be re-created.
  • How regulation failed Wells Fargo – good article from The New Yorker about how banks are routinely not regulated the way they should be. It does seem ridiculous that no upper management or VPs at Wells Fargo got fired, weren’t they the ones creating these unrealistic sales goals for these lower management folks? Heads roll, but the head honchos still get their multi-million dollar bonuses.

What Debt Collectors Can’t Do…#4

This time, in our monthly series, we’re talking about false or misleading representations debt collectors may make to consumers.

Of the many prohibitions in this section, let’s zoom in on one particular no-no:

Representing or implying that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.

Bottomline: debt collectors can not call you up, tell you that you owe X amount of money, and then inform you that you will be arrested if you don’t pay that money by the end of the day. Or that you’ll be thrown into jail if you don’t pay the debt.

That’s not how debt collection, or the legal process in general, works.

But it is scary, to listen to someone you don’t know, who you assume probably knows more about this area than you do, threaten you with legal actions that seem out of your control.

Here’s a tip: people who are thrown into jail have received some sort of judicial notice – whether by court order or bench warrant – that they are facing jail time. The only other way I can think of is if you violate a criminal law, like assaulting someone or disturbing the peace or distributing drugs, you can expect that if you get caught, you’ll likely be spending a night or two in jail before getting to see the judge to discuss a bond.

My point is that jail happens to those who commit criminal acts and are considered a threat to themselves or the community, NOT to people who have a debt being collected on. There is no authority for a private individual or entity to have someone locked up in jail. That only happens after a judge or jury has weighed the evidence, or law enforcement recognizes that there’s an imminent threat of harm, or the criminal act already occurred and the damage is done.

So if you get that call from the debt collector, and they threaten jail time or arrest if you don’t pay your debt, make a record of it and let them know they’ve violated the Fair Debt Collection Practices Act.

Negative Information Falling Off Your Credit Report

We’ve talked before about the difference between credit repair and righting consumer law violations here.

So with that in mind, let’s talk about a commonly discussed issue that comes up regularly when negative information pops up on credit reports. What does it mean when someone tells you “Don’t worry about that ding on your credit report, it’ll drop off in 7-10 years”?

First of all, what’s a ding on your credit report?

Any negative information reported accurately or inaccurately on your credit report. Remember that inaccurate information on your credit report, such as an entry that suggests a debt wasn’t paid off when it actually was, can be addressed and fixed through the Fair Credit Reporting Act. If you have wrong information on your credit report, truly-wrong-and-not-just-wishful-thinking-wrong, you should go through the process to get it fixed, starting by reading my post on what the Fair Credit Reporting Act here.

Now we come to accurate negative information on your credit report. Maybe you missed a few rental payments on your apartment, or you didn’t pay your credit account at Sherwin Williams (that’s an actual case), and those debts were turned over to collections. Those are “dings” on your credit report. Those types of entries are negative information that can affect your credit score.

So do these dings really fall off your credit report at some point?

Yes and no.

15 U.S.C. 1681c(a) lists each entry that has a shelf life on a credit report. No credit reporting agency may generate a credit report with the following information:

  1. Bankruptcies older than 10 years (time begins when the order for relief is entered)
  2. Civil suits, civil judgments and records of arrest older than 7 years (time begins on the date of entry)
  3. Paid tax liens older than 7 years (time begins on date of payment)
  4. Accounts placed for collection older than 7 years
  5. Any other “adverse item of information” older than 7 years (except for convictions for crimes)

There’s the official list of dings that do fall off your credit report after a certain amount of time. There are exemptions and more details surrounding timing of when the clock begins to run, of course, but hopefully this provides some good, basic information when you spot a ding on your credit report.

Are you part of this class action?

I talked about this great decision by Judge Bataillon in an earlier post here.

But I figured with the recent certification of the class by the new federal judge, Judge Rossiter, the case merited another round of hearty applause.

Judge Rossiter recently approved the plaintiffs’ motion for class certification, and for preliminary approval of a class action settlement. What does this mean? Basically, it means that the court and the parties have agreed to parameters for defining what consumers are included in the class action and what the terms of settlement will be.

Here are the parameters (see if they apply to you):

  1. Must have an address in Nebraska;
  2. Credit Management Services served a county court complaint on you after January 1, 2008 (NCPA), or after December 18, 2010 (FDCPA);
  3. CMS’ complaint asked for attorneys fees and prejudgment interest and costs;
  4. CMS did not provide you notice of the claim 90 days before filing the county court complaint; and
  5. CMS’ complaint was an effort to collect a debt.

As ordered by the court, CMS will pay $198,000.00 into the settlement fund, to be disbursed to persons who fall into this class of consumers. CMS is also ordered by the court to distribute notices by postcard to anyone who may have been affected by this decision, so if you think you fall into this category, keep your eyes peeled when looking through your mail.

In order to be part of the class, you have to fill out a claim form. I believe the court said individuals who may be part of this class have 60 days from the day the notification postcards are mailed out to fill out a claim and become part of the class.

Again, kudos to Pam Car, attorney in Omaha, for her great work on behalf of Nebraska consumers.

What Debt Collectors Can’t Do….#3

For #2, go here.

For #1, go here

This time around in our “what debt collectors can’t do” series, let’s talk about when player 3 enters the game. For all of you non-video gamers, you are Player 1, debt collector is Player 2, and any third party is Player 3. There are a series of prohibitions in 15 U.S.C. 1692b concerning what debt collectors can’t do if they communicate with third parties. Here’s a brief check list of prohibitions in that section:

  • Failing to identify themselves as a debt collector;
  • Stating to a third party that the consumer owes any debt;
  • Contacting a third party more than once, unless requested to do so;
  • Using postcards;
  • Using language or symbols on any envelope or communication indicating debt collection business;
  • Contacting a third party after knowing the consumer is represented by an attorney.

But hold up, wait a minute. Does my dog count as a third party? Uh, no. Here’s the specific language describing what a third party is:

“Any debt collector communicating with any person other than the consumer…”

So not my dog. But definitely your neighbor, boss, spouse, girlfriend, boyfriend, friend you are only friends with on facebook and don’t talk in real life, sister, brother, nephew, niece, aunt, uncle, grammy, grampa, and even your kids.

In an effort to be even more exhaustive in my list making, here’s a list of third parties a debt collector CAN contact when trying to collect a debt:

  • The consumer
  • The consumer’s attorney
  • A consumer reporting agency (if permitted by local law)
  • The creditor
  • The creditor’s attorney
  • The debt collector’s attorney

Anyone else, and the debt collector better have prior specific permission from the consumer or local court OR only be seeking location information for the consumer from a third party. Location information means basically the contact information for the consumer, like address and telephone number. And this statute also specifically includes “employer information” as part of the “location information” that a debt collector may seek from a third party.

Improving the Debt Collection Market for Consumers

In a recent press release, the Consumer Financial Protection Bureau announced that it is considering a proposal to strengthen protections for consumers in the debt collection market. Its reasons for turning a magnifying glass to the debt collection industry have to do with how many complaints the CFPB has received, and how many consumers are likely to be affected at one point or another with a call from a debt collector.

Read the CFPB’s article here.

The CFPB noted that the bulk of the complaints it receives has to do with debt collectors calling consumers about debts that were already paid off, discharged in bankruptcy, or wasn’t their debt in the first place. Not surprising there.

Sometimes it seems like the CFPB is more awestruck with the highest number it can boast on its website – like telling us that more than 70 million consumers were contacted by a debt collector within the past year. Or that, because of CFPB’s enforcement actions against creditors and debt collectors, they’ve gotten hundreds of millions of dollars refunded to consumers.

That’s great and all, but what are they proposing to do about tightening up the debt collection industry? Turns out, the million dollar numbers the CFPB likes to brag about is a lot more concrete than the proposals of tightening up the debt collecting industry:

  1. Capping collector contact attempts;
  2. Making sure that companies collect the correct debt – which means collectors would have to have more information and more accurate information on debtors before they start collecting;
  3. Collection companies would have to make it easier for consumers to dispute a debt.

I understand and really appreciate what the CFPB is trying to do here. But what I’d like to see more of is hard and fast rules about how many “contact attempts” are too many, and exactly how much information is enough to move forward with collecting a debt. It’s not surprising at all to me that the bulk of complaints the CFPB receives is about debt collectors – it’s a tough and underhanded business meant to make the consumer feel bad, confused, and frustrated.

Indeed, the CFPB notes, like the Bad Paper book, that often the original creditor only gives names and debt amounts to a debt collector, in exchange for a nominal sum of money for each account. Given how loose and fast the original creditor and debt collectors play with consumers’ information, I’m surprised there aren’t more complaints filed with the CFPB.

Beware the Scam of the Month

Sometimes I have a hard time telling the difference between a good deal and just some marketing ploy intended to get me to buy more, more, more. It happens a lot in the grocery store, and it drives me crazy when I find out I fell for the sucker deal instead of the legitimately good deal.

For instance, I love buying a whole pineapple. I have found that pineapple prices can vary widely, depending on where you shop. At my local grocery store, they had a sign advertising their pineapple prices in bright yellow and red colors, as if the price had dropped or it was on a good sale. And you must take advantage of this sale immediately before it goes away (what is it about red and yellow colors? Marketing gurus must have figured out long ago that human hearts will start racing at the sight of exclamation points, the color red, and words in ALL CAPS).

And I felt good about myself for spotting a deal. But then I rounded out my shopping at one of the warehouse food places (Costco, Sam’s Club, etc.), and saw that their pineapple price was almost $3 less than what I had paid. Argh. So annoying, I practically felt like I’d been hoodwinked.

Is this a peacock, or a statue of a peacock or something else entirely?

Is this a peacock, or a statue of a peacock or something else entirely?

That’s what it’s like for this month’s scam: you get an automated call saying that such and such “recovery group” or “agency” is going to take legal action against you if you don’t give up some kind of personal information, or better yet, your payment information. And that things will get much more dire for you if you don’t just do what they say.

You take the time to look them up online, and see that they have a website, and a phone number that someone answers on the other line. They seem legit. But are they?

Maybe, maybe not. Here are three information-seeking tips I have for making sure these “recovery groups” are truly legitimate debt collectors:

  1. Look at their address on Google maps, especially Google street view. They may have an address, but when you look it up on a map (especially if you can get street view), does it look like a business or just a mail drop off location?
  2. This isn’t a hard and fast rule, but look to see where they are located. For some reason, a lot of bogus debt collectors are based in the New York area, especially Buffalo, NY. Read Bad Paper, by Jake Halpern, if you don’t believe me.
  3. Finally, look beyond the first link Google pulls up for you when you search this business. Yes, they might have a website and a phone number that looks credible, but that doesn’t mean you should give them your credit card information. Often times, they have scammed others and their phone numbers or other business information have been posted on websites in an attempt to alert others.

Now that I think about it, comparing price-gouging on pineapples isn’t nearly the same as getting scammed and harassed by bogus debt collectors. But I was pretty frustrated with my less-than-bargain pineapple and needed to vent.

Disputing Debt Collections

Have you ever seen those billboards that say something along the lines “Would you take advice from your bowling buddies on how to declare bankruptcy? Probably not. So why would you listen to them when planning your financial future?” Or something along those lines. The point? There is always a lot of chatter between friends, acquaintances, co-workers, neighbors, family members, and your mail man. Some of this chatter is interesting information, some of it is helpful suggestions, and some is just plain bad advice.

Naturally, if it’s a legal issue, you should definitely consult an attorney. Just like if your tooth hurts, you don’t see your grandma about it (unless she’s your dentist).

Do you ask for advice on how to mow your lawn? I wish my neighbors would, their lawn is a disaster.

Do you ask for advice on how to mow your lawn? I wish my neighbors would, their lawn is a disaster.

I’m taking a while to get to the subject of this post: there is a LOT of information out there (both online and offline) about disputing debt collections, and not all of it that great.

Let’s clear the air on disputing debt collections.

First, what does it mean to “dispute” a debt collection?

I think of “disputing” a debt collection in two parts:

(1) The first phone call you receive from the debt collector (“What the $&%* are you talking about and how did you get my phone number??” type of dispute), and

(2) A written document you send to a collection agency after you’ve gotten over your initial shock, rage, embarrassment, and frustration with the phone calls.

When on the phone, try to talk as calmly and matter-of-factly with the caller as possible. Here’s a checklist for phone calls:

  • DO get the collection agency’s name, address, and phone number
  • DON’T provide any additional information to the caller, if they are legit, they should have all the relevant information they need.
  • DO ask for a VALIDATION NOTICE from the collection agency. This is a written notice that the collection agency must provide on request that gives you the amount of the debt they are trying to collect on, the name of the original creditor, and what to do if you don’t think you owe the debt. This is a very important step, don’t forget it when you’re rage-fuming on the phone with the debt collector.

When disputing a debt collection by written document, keep these two things in mind:

  • Be specific about why you don’t think you owe this debt (usually because they’ve tacked on interest and other fees that weren’t part of the original debt).
  • Don’t provide additional personal information than what they already have.

Above all, whether by phone or in writing, DO NOT pay the debt without getting validation that the amount is truly what you owe. There’s no reason not to postpone paying it until you can be sure it really is yours to pay.