Do you know what your options are if you have a dispute with your credit card company? If you are like most cardholders, you are limited by arbitration agreements that govern how you can handle problems that come up between you and your bank. A new study from the Consumer Financial Protection Bureau show that these mandatory agreements do not provide cost savings and can actually be harmful to consumers.

How Arbitration Affects Consumers

Mandatory Credit Card Arbitration is a way to settle disputes outside the court system. CFPB found that tens of millions of credit card holders were bound by arbitration clauses. About half of all credit card companies make these agreements a requirement to get a card. But, most consumers do not understand the effects of these sorts of agreements. In a CFPB survey, 75% of respondents did not know whether their cards had mandatory arbitration. And, only seven percent of people who are bound by arbitration clauses realized that this means that they are not allowed to sue their credit card companies.

Between 2010 and 2012, more than 1800 arbitration disputes were filed. Consumers only filed about 600 of these; the balance were filed by credit card issuers against their clients. And, the vast majority of outcomes favored banks and credit card issuers. While about $175,000 in damages and $190,000 in debt forbearance was awarded to consumers, arbitrators ordered consumers to pay over $2.8 million to their lenders.

Additionally, arbitration clauses prevent consumers from participating in class action lawsuits against credit card issuers. CFPB found that credit card companies invoked arbitration clauses in 65% of class action lawsuits to prevent the suits from going forward. Over 32 million consumers are eligible for relief through consumer finance class action suits each year. Suits studied had over $1.1 billion in payments to consumers. When class action suits are blocked, it can come at a substantial cost.

What to Do If You Are Forced Into Arbitration

If you wind up in a situation where you must enter arbitration with your credit card company, take action to protect your finances and your credit score:

  • Get a copy of your credit report before arbitration. This will allow you to check for any errors that should be handled.
  • Make sure that the debt that is being arbitrated hasn’t passed your state’s statute of limitations.
  • Consider getting a lawyer. A lawyer can help you navigate tricky financial waters and negotiate a better outcome.
  • If it looks unlikely that you will win, try to settle. This can save money over going to court.

While many financial laws and agreements favor big business over individuals, you can protect yourself by staying educated about your rights. Talk to Key Credit Repair about how you can protect your credit rating and preserve your financial opportunities. For any additional questions you may have, feel free to contact us at 617-265-7900, or schedule a free consultation below.

CFPB - Consumer Financial Protection Bureau

CFPB Protection – How the agency is protecting you.

How Does the CFPB Protect You Against Deceptive Collection Practices?Have you received a threatening call or letter from a debt collector for a debt that you’ve paid or that wasn’t yours in the first place? If so, you aren’t alone. Debt collections are covered by a patchwork of laws that have typically been poorly enforced. Illegal debt collection practices led to over 199,000 complaints to the FTC in 2012 and over $56 million in penalties since 2010. But, even this is a drop in the bucket compared to the levels of abuse that exist. For this reason, the Consumer Financial Protection Bureau was formed.

What is the Consumer Financial Protection Bureau?

In the 2000s, expanding access to credit and elimination of many consumer protections left millions of Americans with complicated debts that they did not understand. The CFPB was created by Congress in 2010 as a response to the rampant abuses in the credit and debt collection industries. Its establishment was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The organization’s first director, Rich Cordray, was appointed in 2012. The organization provides three essential services: educating consumers; enforcing consumer finance laws; and studying consumer behavior, financial markets and financial service providers.

Educating Consumers

Between loosened credit protections and the 2007 downturn, more and more people are turning to credit to make ends meet. But, many people do not understand the drawbacks of certain types of credit or their rights under the law. The CFPB has a section of their site that contains scores of credit tips that can help consumers learn more about the pros and cons of different kinds of credit and what rights they have when dealing with a debt. Consumers can learn more about credit repair, effective debt management and what makes up their credit scores.

Enforcing Laws

The CFPB oversees the activities of the 175 largest financial companies and exact penalties when those companies break the law. The CFPB website has sections for both individual consumers and whistleblowers who have seen illegal behavior to submit complaints. The organization also enforces laws against discrimination and other unfair consumer finance practices.

If a debt that you have paid or that did not belong to you in the first place is threatening your credit score, a complaint with the CFPB can help you get a resolution. They will forward your complaint to the offending company and work to get a response. They handle debts that include vehicle loans, payday loans, credit cards, mortgages and others. These complaints can be a good first step in eliminating harassing calls and beginning to repair credit.

Studying Finances

Consumers and the economy suffered a shocking blow during the 2007 financial crisis. Home values dropped, people lost their savings, jobs were eliminated and credit become impossible to find. To avoid future crises, the CFPB studies the economy to learn more about consumer behavior and monitor the financial markets to identify new risks to consumers and the economy. Through this and its roles educating consumers and protecting against unfair or dangerous practices, the CFPB can help individuals and help support a stronger economy.

For additional information feel free to contact our office at 617-265-7900, or schedule a free consultation below.

What Exactly Is A Charge-Off?

Debt Collectors Can’t Pay Their Own Debt

Debt Collectors Can't Pay Their Own DebtWhat happens if you miss a payment? Default on a loan? Can no longer afford to make the payments required?

Simple – you’re taken to task. The bill can go to collections, debt collectors can come after you and the mishap will be reflected in a negative credit score, forcing you to put debt management and credit repair plans into place to save face. In more dire situations, you might have to declare bankruptcy or seize some of your assets.

Yes, not being able to pay off debt according to the policy you originally agreed on can have dire consequences for your credit score and overall finances. But what happens when debt collectors can’t pay off their own debt? We ask that in lieu of two recent incidents where debt collection agencies have been handed hefty fines that they can’t pay, yet are allowed to remain in business. Here’s a closer look:

  • RBT Enterprises was handed a $4 million fine from the Federal Trade Commission for a series of deceptive collection practices that are believed to have cost consumers over $1.3 in unethical fees. RBT Enterprises can’t pony up the $4 million, but the FTC is allowing it to stay in business, pending it pays a $100,000 fee to suspend the judgment and the owner turns over his assets. The FTC is also allowing RBT to stay in business pending suspension of its unethical collection practices.
  • The second example involves ACE Cash Express, a payday advance loan company. The Consumer Financial Protection Bureau (CFPB) alleges that ACE used illegal tactics to force overdue borrowers into taking out more loans. As a result, the CFPB is ordering ACE to pony up $10 million – $5 million in customer refunds and another $5 million in penalties – to make amends, as well as discontinue their illegal tactics.

It seems a little odd and unfair that unethical debt collectors are allowed to stay in business after breaking so many rules and are given leeway when they can’t pay up as a result of their actions, especially when individuals faced with similar financial issues are judged so harshly and may have to spend years following a series of credit tips to repair credit in order to become a “good” borrower again.

But the aforementioned examples should highlight how careful you should be if collectors are coming after you. Remember, debt collectors can’t lie to you – that’s illegal. But apparently if they do lie and deceive consumers, they can still stay in business after a smack on the wrist…

For additional information on how to deal with debt collectors, please contact our office at 617-265-7900, or request a free consultation below.