Representative Carolyn Maloney (D-N.Y.) has been fighting for credit card holders rights since she first introduced the Credit Cardholder’s Bill of rights Act of 2008 to the House of Representatives.
In September, the bill passed the House with an overwhelming vote of 312 to 112, but then died in the Senate. She felt that while Senators recognized the need, other issues in the larger economy took attention from this legislation.
Then in December, regulators, including the Federal Reserve, passed rules to crack down on credit issuer abuses and strengthen consumer rights. As we’ve all heard, these new rules aren’t set to go into effect until July 2010.
That’s not good enough for Representative Maloney, so she introduced a revamped Bill to the House on January 15. Along with further strengthening consumers’ rights, her bill would speed implementation of the rules. If passed, the Bill would go into effect 90 days later.
When asked why legislation was needed when regulators have already agreed to impose rules, Representative Maloney noted that regulation does not carry the force of law that legislation does. It is too easy to change regulation, whereas changing legislation is more difficult.
In addition, consumer groups are concerned that the time delay granted with the regulations will be harmful to consumers. It gives credit card issuers time to re-vamp their policies and impose both higher interest rates and higher fees, while they reduce credit limits on even their most reliable customers.
We’ve been reading about some of the new rules – the requirement that card issuers must notify cardholders 45 days in advance before raising interest rates, ending the practice of double-billing, preventing interest rate increases on current balances, and ensuring that cardholders receive credit card statements well in advance of due dates.
In addition, Representative Maloney’s bill would prevent card issuers from granting cards to people under 18 years of age, and would allow consumers to set hard caps on their credit limits to prevent accidental over limit charges.
While credit card issuers defend their actions by pointing to the worsening economy and the high rate of credit card default, there are those who believe they are partially to blame for that high rate of default.
When a card holder has been making payments regularly and carrying a cushion of unused credit, he wasn’t likely to default. But when he suddenly opens a statement to find an overdraft charge because his interest rate has doubled and his credit limit lowered without his prior knowledge, his attitude and dedication to making those payments begins to change. If he’s unable to meet the new minimum payment due to the high interest rate, it deteriorates even faster.
You know that one reason why you need to keep your credit scores high is to keep your insurance premiums low. Companies that issue insurance on your home and your car have been using low credit scores as an excuse to raise your premiums – or to completely deny you access to insurance.
Even long-term customers may find their rates skyrocketing as a result of financial difficulties that have affected their credit scores.
In Florida, at least, this practice may soon come to an end. Consumer advocates say a person’s credit has nothing to do with his or her driving abilities, and that insurers should only be able to use a person’s driving record in determining automobile insurance rates.
Insurers, including Allstate, Geico, Progressive, Nationwide, and State Farm, testified in hearings last week – saying that credit information does help them determine a customer’s risk.
They compared use of credit data for car insurance to use of health data for medical or life insurance. If a person smokes, they’re at a greater risk for ill health, so in their eyes, it seems to follow that if a person has poor credit, they’re at a greater risk for an automobile accident. So their belief is that in spite of having no tickets and no accidents, a low credit score makes a person a higher risk for an accident claim.
Although not stated in the report, perhaps the real issue is that insurers feel that consumers with poor credit are a greater risk for insurance fraud. If that is the case, they should present the statistics to back the belief.
Some consumer advocates believe that there is yet another hidden agenda: Thinking that use of credit rating data enables insurance companies to discriminate against certain groups – by either charging them excessive rates or denying insurance altogether.
If Florida changes this law, it will be a step forward for consumers. But there’s a long way to go before all states adopt similar rules. That means it is still in every consumer’s best interests to keep their credit scores in the high ranges.
The first step is to check your own credit report, with scores, and see how you stand. Almost everyone can find some room for improvement, so begin making adjustments to your spending and bill-paying habits in an effort to raise the score.
Be sure to also check your report for errors – even credit bureau representatives say that 25% of all credit reports have at least one mistake. Fixing those could give your score an immediate boost.
Obama announced a rescue plan for homeowners that are in trouble with there current mortgage payments. This new mortgage policy is a multi-faucet of policies to help out struggling home owners. Some of the key components include refinancing mortgages that are upside down, restructuring delinquent loans, and delivering money to federal housing agencies to keep mortgage rates low.
With this new plan a estimated 4 to 5 million homeowners will be help in some for or fashion. Obama says this new policy will also provide a opportunity for sub-prime loans that are underwater or the amount owed is more than the house is worth to be part of the plan as well. Often the homeowners that are in loans like these are subject to a maze of rules and regulations as opposed to resolutions “says Obama.”
This type of policy will help out 12% of the crumbling real estate sector. This policy will subsidized some of the cost through the government so mortgage companies can help out homeowners in trouble.
The new rescue plan will not help out homeowners that were investors looking to flip homes for profit, nor will it help those who bought homes they cannot afford.
Refinancing for people that got in trouble with there mortgage because of ARM loans, declining value or job loss was almost impossible for them to obtain. Since all loans are based on risk this sounds like a possible solution for 4 to 5 Million Homeowners.
Being a lender this has been a mess, especially when you get a call from a past homeowner wanting help. There has not been a whole lot lenders could do since bad credit paper was not sellable on the secondary market.
Maybe with this new mortgage rescue bill lenders will in a sense allow the government to take on the high risk of bad paper loans, especially since the Federal Government is buying up Freddie and Fannie back loans.
In the end, we as tax payers will foot the bill. There also is no guarantee that this will work either.
During challenging times like now, it can feel very frustrating when your debts have gone to collection due to job loss, or even the company you are working for files for bankruptcy. What ever your situation is there is no quick resolution to repairing your credit report. Lots of credit repair companies will sell you on quick fixes, but depending on how bad your credit report is littered with collections and how much money you have to work with, will determine how long the process will take. Don’t get trapped into quick credit repair schemes. There is no such thing. I assure you of that. I wanted to discuss the process in this article about how to repair you credit and the FACTS about the process.
Here are the proper steps………..
Step 1: Credit Education The first step is to be aware of what will destroy your credit while you are trying to repair your credit. Collections and late payments are the ultimate death of good credit scores. If you are in the process of trying to figure out how to fix your credit, that would be a good start. Make sure you don’t have any late payments ever, and definitely make sure nothing goes to collection. It does no good to work on your credit if you continue to have obligations go to collections and / or late payments on stuff. This is the first step before you start any type of credit repair.
Step 2: Pull your credit report Don’t be scared; pull a recent copy of your credit report to determine what you need to work on. Pulling your own credit report does not hurt your credit scores.
Step 3: Review your credit report Determine what is accurate and inaccurate. If you find stuff on your credit report that is not yours, dispute it with CreditScoreQuick.com’s on-line dispute process. These are links that take you to each credit bureau so you can dispute inaccurate information.
Step 4: Negotiate collection accounts After you have determined what collection accounts you have acquired, you will need to figure out what your budget is to pay off these collections. Most collection companies will take pennies on the dollar for debts owed. Phone numbers for these creditors will be on your credit report somewhere. You will need to look for the collection company’s number. The number is usually on towards the back of your report. For example: If your credit report says you owed $300.00 to so and so collection company, you will offer them $150.00 dollars to settle. You may offer less, depending on what your budget is. You need to start with the most recent collections and the smallest collections on your report. Once you come to a agreement with a collection company whether its payment arrangements or settlement, make sure you follow through on the agreement.
Step 5: Get letters from Collection Company of agreement terms Once you have paid a collection, the collection company is suppose to mail you a letter stating what you did, and report that to the credit bureaus. Make sure you get these letters from these collection companies. Put those letters in your file cabinet and remember where they are. You may need them if the credit bureaus don’t update properly. That is your proof to cover yourself.
Step 6: Re-Establish your credit In order for your credit report to score you, your credit report needs credit reporting on that report. If all your obligations went to collection, you will need to re-establish credit. The quickest way to establish credit is to apply for a secured credit card. These types of cards usually require a deposit from you in the amount of $200.00 to $300.00 in an account of the banks choice. The terms and fees are usually not good, but it is what it will take to re-establish your credit. Make sure you are not late on any payments, and pay off the card as soon as possible, even though it was your money that secured the card. Ideally you need a couple of these cards, so get two. While you have this card, charge small purchases on these cards, and pay it in full every month. With good payment history these credit card companies will extend credit to you over time. You will need at least 3 lines of credit on your credit report. Get a couple of secured credit cards, and if you don’t have a third, apply for a small personal loan that reports to all 3 credit bureaus.
Step 7: Re-check your credit report After you have paid off collections and/ or re-established your credit, pull a copy of your credit report to see the progress. This is not a quick process and can take up to a year or so. The timeline depends on how much negative information is on your credit report. Don’t get frustrated, this process that I have discussed will work. Eventually your credit report and credit scores will progress depending on how quick you pay off your obligations and re-establish new credit. If you see inaccuracies on your credit report, especially for those obligations you have paid, use our “Fix credit report errors” article.
I have been reviewing your site and I am interested in improving my credit. Your site is very informative and discredits the misconceptions of deleting debts. I have a better understanding and would like to repair what is inaccurate and old. I would like to do settlement offers for what is accurate. I do not know what to do when old debt continues to transfer from company to company. What can I do?
A:
Hi Tamika,
In regards to the collections being sold, I would recommend pulling a recent copy of your credit report, and call the recent collection that is being reported. It will show recent reported date, and that is the collection company you call to negotiate for pennies on the dollar.
Investors with high FICO scores and a little money in the bank are right now living in the land of opportunity.
With prices in many areas plummeting, good homes can be purchased for pennies on the dollar. Add the Fed’s decision to keep interest rates at an all-time low, and investors willing to stay in for the long haul can expect high profits in years to come.
Not everyone has the personality to deal with investment real estate – it involves hard work and persistence, and a good dose of patience when dealing with tenants who don’t always uphold their end of agreements.
But consider the rewards, as compared to an investment in the stock market.
With $50,000 you can buy $50,000 worth of stocks – or use the magic of leveraging to buy a $200,000 home. Assuming that both appreciate at 5% per year for the next 30 years, the stock will have grown to $197,000. That’s not bad. But look what the house will have done…
Appreciation will have affected the entire $200,000 – not just your $50,000 investment, so your house is now valued at $784,000. In the meantime, your tenant has been furnishing the money for payments, and hopefully, a bit of cash flow on top of it.
AND – you’ve been able to depreciate the house, which has lowered your tax on other income.
Even more impressive – at the end of the 30 years the only way you’ll see a cash return from your stocks is to sell them, but your now “paid for” house can keep right on giving you rental income every month. And, since rents are tied to value, those rental payments will be 3 or 4 times higher than they were when you first purchased the house.
On the other side of the coin, investors need to remember that real estate is not a liquid investment. While they could sell their stocks in a day if need be, a house may take many months to turn into cash.
Also, as we see in this housing crisis, real estate has its up and down cycles. That makes it an investment for the long haul, even though some ambitious entrepreneurs do have the ability to “fix and flip” houses when the market is right.
Experts say that money is made in real estate at the purchase – not the sale. That means finding the best bargains on the most problem-free homes and not buying a house just because you fell in love with it. Smart investors are extremely knowledgeable about construction issues and know the red flags that say “stay away” from some houses.
Investors who are persistent and patient in hunting for bargains can find properties that offer a large cash flow – and in those cases can escape the day-to-day management by hiring a rental manager. This is often the best choice for investors who own large portfolios of homes, especially when they are located over a large geographic area.
The first key to becoming a profitable real estate investor is to have the credit scores to qualify for low interest loans. Without that, all the real estate knowledge in the world won’t get you a bargain. So check your credit scores today, and push them to the top before approaching a bank or mortgage lender for your first purchase of investment real estate.
The Veterans Administration security breach in 2006 is a graphic example of how your most personal data can easily get into the hands of identity thieves.
Although taking data home was against the rules, a data analyst did just that – and when his suburban home was burglarized in May 2006, the thieves took both his laptop and the external hard drive containing names, birth dates, and Social Security numbers of every Veteran who had been discharged after 1975 – up to 26.5 million veterans.
The laptop was eventually recovered and VA spokesman Phil Budahn was quoted as saying “…there is no evidence that the information involved in this incident was used to harm a single veteran.”
No one knows if the thieves had any idea about what was on that computer or if they copied data while it was in their possession.
Veterans were informed of the security breach in late May – about 3 weeks after it occurred – and the following month five veterans groups filed a class action lawsuit on behalf of all veterans. The lawsuit asked for $1,000 in damages for every veteran whose information was compromised in the theft.
Now, after nearly 3 years, the parties have come to an agreement that leaves most veterans out of the settlement. Veterans who can show proof of actual harm, such as emotional distress leading to physical symptoms, or expenses for credit monitoring, will be eligible to receive payments up to $1,500.
Once the settlement is approved by a U.S. District Judge, the terms will become final. Then notices will be published in magazines and newspapers across the country, giving veterans a toll-free number for information on filing a claim. Any funds remaining from the $20 million after payment to those veterans will be donated to veterans’ charities.
The VA, of course, is not the only entity to lose personal records. In a June 2006 news article, the Privacy Rights Clearinghouse estimated that in the previous 16 months, 170 data breaches had occurred – exposing more than 80 million Americans to potential identity theft.
The VA itself had a second security breach in 2006. Again, a missing computer was the cause. Unisys, a subcontractor providing software support to the Pittsburgh and Philadelphia VA Medical Centers, reported the loss on August 3. This time insurance data for 16,000 living veterans and about 2,000 deceased veterans was compromised.
Again, VA spokesmen stated that there was no evidence of the information being used to harm any veteran. All veterans affected were notified, however.
These occurrences are often the result of stolen laptop computers – computers which should be left at the office but are taken home instead.
When the government decided to hand $700 billion to the banks under the Troubled Asset Relief Program, the expectation was that banks would start lending again – and stimulate the economy.
But that hasn’t happened, and since the money was handed over with “no strings attached” there isn’t anything to say they must.
As private citizens and government officials debate over how much control the government should have over bank’s operations – and whether there should have been strings attached – banks are cutting back on lending. Credit lines are being reduced or cancelled, credit card accounts are being closed, and the requirements for getting a loan are becoming tougher.
Of the top 13 largest banks who received a cash injection, 10 reported a drop in lending of 1.4% during the 4th quarter of 2008. Reports are not yet in for the others.
Former Federal Reserve vice-chairman Alan S. Blinder told Bloomberg that financial institutions are “just sitting on the capital” as a way to appear strong to investors. He added that since the money came from the public purse, the public should get something in return – but we are not.
Some experts believe that banks are holding on to this money because they anticipate more defaults in the coming months – on everything from credit cards to home loans. Credit card charge-offs have already risen by 31% and experts predict as many as 8 million foreclosures over the next four years.
Thus, instead of making new loans, banks are using TARP funds to shore up their balance sheets and protect against future losses.
In a Wall Street Journal interview, Duke University finance professor Campbell Harvey summed up what many Americans are thinking with regard to TARP and the bank bailout: “It has failed. Basically we have dropped a huge amount of money… and we have nothing to show for what we actually wanted to happen.”
The bottom line for consumers is this: If you plan to borrow money at any time in the near future, do all in your power to pay down current debt, put money in the bank, and raise your credit scores as high as they’ll go.
For years, credit card issuers aggressively pursued new borrowers and urged old borrowers to charge more. Mailboxes across the country were filled with new offers, introductory rates, and rewards for getting those cards out of wallets and into use.
Each issuer tried to outdo the other with promises of low rates on balance transfers and ever higher credit limits. Then, the financial crisis reared its ugly head and those card issuers began to face larger and larger losses.
The past few months have seen major credit card issuers pull back on new credit cards, lower credit limits, raise interest rates, and close accounts – even for their most creditworthy borrowers.
Now a new breed of lender is offering to step in where credit card companies fear to tread. This new breed is called the Social Lender. This is peer-to-peer lending, where the lender often has a choice over who will use his or her money.
Lenders working through Kiva.org, for instance, might choose to lend $500 to a start up entrepreneur for the purchase of equipment. Since 2005, Kiva members have lent more than $58 million to more than 83,000 entrepreneurs. In years past, most were in developing countries, but now Kiva also lends in the U.S.
Pertuity Direct is the newest entrant in social lending. Investors place their funds in a mutual fund operated by National Retail bank. Borrowers seeking to use those funds apply through the website for a fixed-rate, fixed-payment loan – generally payable within 1 to 3 years. The minimum credit score required is 660 and interest rates are as low as 9.6%. Approval is almost instant, and money can be in the borrowers’ hands within 1 or 2 days.
Some social lending sites will accept lenders who wish to invest a mere $20 – giving almost anyone the opportunity to invest.
Some social lending is directly modeled after sites such as Facebook and eBay. Prosper, for example, lists loan requests ranging from debt consolidation to moving expenses. Lenders can then choose which loans they’d like to fund, and bid on those loans at interest rates and terms they’re willing to accept.
Lending Club gets even closer to the social networking model – allowing its borrowers to find potential lenders based on their location, their “network” or their “friend” status.
Social lending now also extends to student loans, which were at first excluded because of the short pay-back term. Lenders do recommend that students first apply for federal loans, and use private lenders as a fall-back option.
Several companies are participating, but the main contenders in the student loan arena are GreenNote, Zopa, and Fynanz.
GreenNote relies on the same kind of social networking as Facebook – and loans are transacted between people who are “friends.”
Zopa follows a CD model and relies heavily on partnerships with credit unions.
While Fynaz does set a bare minimum FICO score for borrowers, it relies more heavily on the “Fynanz Academic Credit Score,” which rates a student’s GPA, his or her course of study and the educational institution’s profile.
Online Banking Report has predicted that social lending will reach approximately $130 million this year.
Revolving credit – which is almost entirely credit card debt – dropped 7.8% during the month of December after already dropping 8.5% in November. According to reports from the Fed, this was the steepest percentage drop since January 1978.
Many experts are citing the drop in consumer spending as a sign of belt-tightening and a desire to pay off debt and begin saving in the face of employment worries and/or outright job loss. Wise consumers are protecting their credit scores and their futures by cutting out unnecessary spending.
And worries over future job loss are not unfounded. The nation’s unemployment rate climbed to 7.6% in January when the U.S. lost almost 600,000 jobs. Total job losses since December 2007 are more than 3 million.
This has to play a role, but two other factors naturally led to a decrease in credit card debt.
First, gasoline prices dropped. Consumers who were charging $800 per month for fuel were able to cut those charges to only $400-$500 by December.
The other reason should surprise credit card issuers the least of all. When these companies slashed credit limits and raised interest rates for millions of card holders, they could not spend more, even as they wanted to.
During the Christmas shopping season, retailers reported shoppers dividing their purchases between 2 and 3 different credit cards in order to avoid going over limit on any one card. That clearly indicates a desire to spend rather than a desire to save.
Some, of course, became angry and refused to create more debt when faced with interest rates approaching 30%.
Non-revolving debt also declined in December. That includes auto loans and student loans, along with loans for mobile homes, boats and trailers.
Auto loans seemed to lead the decline as auto lenders followed credit card issuers in a move to pull back on making loans. Average car loan interest rates were 6.4% in October and had risen to 8.4% by December. At the same time, the average length of loans fell below 60 months for the first time in years.
Some experts are predicting a spike in credit card use by March or April, due to the most recent job losses. Consumers may use savings for the first few months and then will turn to credit cards for basic living expenses such as food, utilities, and rent. However, since credit card issuers have cut spending limits, this prediction may not come true.
Disclaimer: This information has been compiled and provided by CreditScoreQuick.com as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.
