Old Debt – Beware of resetting the clock

Everyone makes mistakes, but when mistakes are committed pertaining to financial decisions, the consequences have a tendency to be more far reaching. For instance, things like foreclosure, bankruptcy and old debt can stay on your credit report and impact your credit score for many years before it is

essentially erased from your record. While it’s possible to enact credit repair strategies while you wait for the clock to expire on these negatives, your score likely won’t see the boost that you’re looking for until time expires on the debt. It’s important for consumers to be aware of the statute of limitations pertaining to debt in their particular state – but it’s also just as important for consumers to be aware of a variety of no-no’s that could potentially

restart the clock on old debt, keeping it on your record for many more years. This post will take a look at several of these things to stay away from so you don’t restart the clock on old debt that is soon to expire.

How Not to Reset the Clock on Old Debt

1. Watch the Clock: There are two “clocks” you need to be aware of – the statute of limitations clock and the credit report clock. The former varies by state, is usually anywhere from three to six years and basically sets a timeframe for how long collections may be forced on a debt. The credit report clock dictates how long old debt can stay on your record, which is seven years.

2. Know the Default Date: Seven years after you’ve defaulted on a debt, it must come off your credit report. Be sure you know this date and build good credit, as your score will likely progress the closer you get to the seven year mark. Judgments are the exception, as they can stay on your report up to seven years from the filing date.

3. Be Careful with Collectors: A debt collector’s job is to get you to settle or make payments on a debt. Some try to accomplish this by any means necessary. Be careful what you say if you choose to speak with them, as just an admittance that the debt is yours can essentially tick the clock back to the start.

4. Tell Collectors to Stop: If you’re being pestered by debt collectors, it’s your right to tell them to stop. This can be an ideal way to avoid a possible slip up – just be sure not to admit the debt is yours when you contact them.

5. Be Wary of Payment Options: Many collectors will offer the option of paying off a debt for a lesser amount than what you actually owe. Be wary of paying off debt and always be sure you have confirmation that it was paid in full if you proceed with such an option.

6. Hire a Lawyer: If you ever believe you’re in the wrong, seek legal representation.

Earlier this month, “Last Week Tonight” host John Oliver made television history when he orchestrated the largest one-time giveaway in history on his HBO program. But he didn’t give away a car to everyone in his studio audience, a la Oprah Winfrey from back in 2004, a stunt which gave away an estimated $8 million in prizes. No, instead Oliver did something a bit more unique – he forgave about $15 million in total debt from about 9,000 consumers. It was debt that Oliver bought for about $60,000 – less than half a cent per dollar – after he started his own debt buying company. But as you might imagine, Oliver has no interest in becoming a debt buyer, the giveaway was really the culmination of a scathing takedown on debt buyers and how unregulated the practice is – especially when many debt buyers are attempting to recoup significant medical debt, debt that people need to either take on or risk death in some cases.

What is Debt Buying (and Why is it Scary)?

It’s estimated that Americans owe a total of about $12 trillion in debt, $435 million of which is considered to be “seriously delinquent,” or 90 days or more past its due date. Such debt can also take a toll on one’s credit score. When a lender has “given up” to a certain extent on collecting debt, it has become common for them to sell it off at an extremely reduced rate to a debt buying company. This debt buyer can then go after the consumer in an effort to recoup the total amount owed, as they now have access to consumer names, social security numbers, phone numbers and other personal information.

Debt buyers are unlike a collection agency because they’re not working for a lender – they own the debt outright, and sometimes the lengths at which they’ll go to collect are extreme and possibly illegal. For instance, they’ll often harass people at home or at work, threaten violence or even contact their bosses at their places of employment.

And if they can’t get the debt through intimidation, they’ll file a lawsuit. In fact, in some American cities, debt buyers file more lawsuits than any other type of plaintiff.

As Oliver highlighted in “Last Week Tonight,” debt buying is a sleazy business. But what really makes it scary is how unregulated it is. In many U.S. states, for example, anyone can become a debt buyer. Oliver himself knows this because he spent $50 to create CARP, a debt buying company based in Mississippi, in order to buy the $15 million in medical debt that he forgave on his show.

Oliver forgave the debt that he acquired through CARP, but he’s probably the only debt buyer that has done so. But here’s to hoping his stunt on “Last Week Tonight” opened the eyes of policymakers that debt buying needs some significant reform.

For one reason or another, things happen. And when circumstances affecting one’s financial situation arise, consumers may find it difficult to keep up on things like credit card bills, phone bills and more. If there’s an issue making ends meet, a consumer may stop paying a certain bill. While this is never advised, like we said, things happen. After the creditor realizes payments are not being made, they’ll contact the consumer to let them know, but eventually, after three to six months of inactivity, the debt may be turned over to a collection agency. At this point, the credit bureaus will also be notified and you’ll likely see your credit score take a hit.

But you’re not done once the debt goes to collections. No, it’s only just begun – and things can get messy and confusing. With that said, this post will cover what to expect when a debt goes to collections:

What to Expect When a Debt Goes to Collections

  • Assigned vs. sold debts: Your debt is either assigned or purchased. When it’s assigned, the debt is simply turned over to collections with a contract to collect. When it’s purchased, the creditor has sold the debt outright to a collection company. No matter the situation, the collection company has motivation to collect, as they’re paid for results. For instance, agencies with assigned debts can keep up to 60 percent of what they collect. And there’s certainly motivation for an agency to collect if they’ve purchased the debt.
  • They work fast: As soon as a debt is passed on to a collections agency, you can expect to be hearing from them. Generally speaking, the earlier contact can be made, the better the likelihood of settling or collecting.
  • Collection agents can be ruthless: There’s a lot at stake when it comes to collecting debt, so an agent may revert to extensive – and possibly illegal – tactics as a way of collecting it. Make sure you know your rights when it comes to this, as you do have rights as a consumer. If collection agencies are breaking the law, they may be punished.
  • Assigned debts can be tricky: In the case of assigned debts, the collection agency is still taking barking orders from the creditor. So as they work to recoup what is owed, agencies can’t do anything without first checking with the creditor – they’re essentially just the middle man in things. For instance, an agency can’t sue you without the creditor’s authorization. Similarly, if you settle with an agency for less than what is really owed, nothing can be set in stone until the creditor agrees to the terms.
  • Negotiating: In most cases, you may be able to settle with an agency to repay less than the amount that is actually owed.
Debt Laundering

Debt Laundering – What is it?

Ever have a debt collector repeatedly hassle you over a debt that you know was settled, or wasn’t yours in the first place? The reason why could be a loophole that allows debt collectors to approach people again and again over the same contested debts. By trying to collect again and again, collectors can waste your time, negatively affect your credit score and, sometimes, intimidate people into paying debts that they don’t owe.

The cycle of communicating with a debt collector starts all over once a different collection company is handling the account and is considered Debt Laundering. As a result, many people are harassed with the same debts over and over, even after going through all the motions with someone trying to collect the debt.

The scenario can wind up playing out like this: Sally Consumer is contacted by a debt collector who says that she owes $400 on an old phone bill. As a savvy consumer, Sally demands proof that the debt is hers. The way the law is intended to work, the debt collector has to either provide proof or stop pursuing the debt. But, by cycling the debt through another collection agency, the process starts all over again.

How to Deal with a Debt That Won’t Die

If you are receiving phone calls and letters about a debt that is not yours, remember that you have rights. When confronted with an aggressive debt collector:

1. Ask for validation of the debt. By law, the collector must send a validation notice that says how much you owe within five days of their first contact with you.

2. Notify the collector, in writing, that the debt is not yours. Do not try to settle this over the phone; the notification must be written to work. You need to send the letter within 30 days of receiving the validation. Once you have sent a letter stating that you do not owe the debt, the debt collector cannot continue to collect the debt unless there is proof that it is yours.

3. Stand up to harassment. Debt collectors cannot call you at work after being told not to, whether you convey this over the phone or in writing. They cannot call outside of regular hours, such as before 8 am or after 9 at night. They cannot threaten you with violence, use vulgar language or repeatedly call you for the purpose of annoyance.

4. Keep records of everything. Keep a small calendar specifically for contacts from debt collectors. Make a note of any phone calls or mail. Keep copies of the letters you send and the ones that you receive. This can help you go through the process of responding more quickly if your debt is passed from one collection agency to another. It can also help you see when a debt collector is violating the FDCPA. These sorts of financial records are also valuable to show yourself how far you have come in your credit repair efforts.

5. If necessary, begin legal enforcement of your rights. If a collection company is violating the law and harassing you, you can sue them in state or federal court. A just can require a collector to pay up to $1,000, even if you have suffered no monetary damages. Your state’s Attorney General’s office and the Federal Trade Commission should also be notified if you are being harassed about a debt. Often, the debt collector is violating the rights of other consumers, as well.

More Legal Protection Coming

Consumer advocates are not impressed with the practice of passing around a contested debt until one credit collection agency finally has success. The National Consumer Law Center has recommended that consumer information about debts be required to travel with those debts when they are sold to a new collector. And, every collector should be held responsible for past actions on a debt.

In late 2013, the Consumer Financial Protection Bureau announced that it would consider new debt collection rules, including rules that will put limitations on the try, try again approach. While we wait for legal remedies, consumers must protect themselves against unfair collections. Do not be afraid to advocate on your own behalf and know that you have the weight of consumer protection laws on your side.

For additional information on the debt laundering loophole and on how to deal with deceptive debt collectors, feel free to call our office 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.