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Bankruptcy is sort of a relief valve for the economy. When financial pressure (debt) builds up to a certain point, the relief valve opens and people use bankruptcy to discharge their debt. Then, they go back to being consumers and the economy can return to a healthy state. There are other relief valves, of course, but bankruptcy is really the only one available to consumers. Bailouts are for too-big-to-fail banks, not the little guy.
If consumers cannot declare bankruptcy, they cannot go back to being consumers. That means the pressure stays high and the economy has trouble returning to a healthy state.
A “child-nutrition manager” in Salt-Lake City, notified of an unusually-large number of students who owed money for lunch at Uintah Elementary School, came up with a brilliant plan: take away their lunches. Students with delinquent school-lunch accounts went through the lunch line as usual, but when their card was declined at the register, the lunch-room staff tossed their meal in the trash.
Several parents told the Salt Lake Tribune that they were not notified that they owed money for their children’s lunches. It doesn’t seem like anyone was notified that their children would have their lunches taken away from them, either. The school has said it is “currently investigating to see if [notification] guidelines were followed correctly.”
The Minnesota interest rate for debts due to overdrawn bank accounts is 6%. Bradstreet & Associates was trying to charge 21.75%. According to Minnesota Attorney General Lori Swanson,
Since 2009, Bradstreet and its predecessor company bought at least $18 million in debt that originated with Wells Fargo and U.S. Bank. This affects, we believe, at least 16,000 Minnesota consumers.
Under the terms of the settlement reached in several class actions against Midland Funding for its (apparently past) practice of employing robo-signers to execute affidavits for debt buyer lawsuits, each class member would receive under $20 — and that’s it. The Sixth Circuit rightly decided this was unfair (pdf).
Unfortunately, the Sixth Circuit seemed to think the settlement was unfair primarily because the named plaintiffs (i.e., those whose names actually appeared on the complaints) would receive $8,000 plus the elimination of their debts. The class members who opted into the settlement just got $17.38 each, and still owed their debts:
It turns out that a comically-large number (26%) of consumer credit reports may have errors. However, 95% of those with errors do not need to worry about them, because those errors do not affect their “credit risk tier.” Or, conversely, only 5% of the consumers with errors on their credit reports were “significant enough” that the consumers affected (about 10 million) might have been denied credit or paid more for it.
Which means there is a good chance that you have errors on at least one of your credit reports (which you should obviously fix), although they probably do not affect your credit.
Of course, being denied for credit or paying more for it are only two consequences of credit reporting errors. Many more people experience other consequences, like incessant calls from debt collectors looking for someone else.
Right now, you have a right to a free credit report, but not a free credit score. That’s annoying, because the score is what really matters whenever you apply for credit. Consumer Union wants to make it easier for consumers to get their score, and is putting in motion a grass-roots campaign to put free credit scores on Congress’s agenda.
So contact your representatives, and let them know you want a free credit score. Here’s where you can find out how to contact them:
The Fair Debt Collection Practices Act is basically a checklist for debt collectors, a list of things they must do and things they cannot do. With some regularity, someone actually breaks it up into a list. Consumerist just put together a list of 23 things debt collectors may not do, which includes the obvious:
As well as the not-so-obvious:
This list is far from complete, but it is a good place to start. It is also worth pointing out that these prohibitions only apply to consumer debts; they do not apply to business debts. (Via Consumer Law & Policy Blog)
Refund anticipation loans are very similar to payday loans; they are short-term, high-interest loans made in anticipation of future income — your tax refund, in this case. And they are a bad deal.
The best interest rate you can expect from a refund anticipation loan is around 36% APR. That is two or three times the rate someone with decent credit can expect to get from a credit card. But APRs of 100% or more are still common. That means if you paid the loan back in one year, you would actually pay back twice the amount you borrowed.
In other words, the math doesn’t make sense. It is much better to just wait for the check from the IRS.
I’ve said as much, and the Minnesota Attorney General thinks so, too. Well, actually, she thinks “a debt buyer should have admissible evidence” to back up its claims. That’s not really a higher burden; it’s what the law requires. Except in cases of default, which is what debt buyers really want, after all.
The reason this is even an issue is that debt buyers often file thousands of lawsuits without the ability to back up their claims. They often have faulty information, and frequently get default judgments, which gives them the right to garnish bank accounts.
The ability to garnish bank accounts is serious. It gives debt buyers the right to freeze money in a defaulted defendant’s account before the court is even aware of the lawsuit. This is too serious to allow without knowing whether or not the debt buyer can even produce evidence to support its claims.
Sometimes administrative errors cause real problems for real people. From Consumerist:
Typically, the notices of delinquent bills get mailed in late January to mid-February, but this year there was a transition to a new collection agency, which delayed the process.
That same transition mucked up the city’s ability to easily figure out which property owners still owed some or all of their $178 annual fee for the last 10 years. Instead, the collection company was authorized to use the city’s written records to put together a database of who still owed money.
It sounds like they send collection notices to a lot of people who already paid. Residents are pissed, but the city seems to think it’s no big deal. “If a property owner can produce proof of payment, such as a receipt or canceled check, [the city treasurer] will certify that the fee was paid.” I’m sure that will be great comfort to everyone who has kept 10 years of receipts and canceled checks.
Read “Scranton sends out delinquent garbage bills from 1999 through 2011” on the Scranton Times-Tribune.