Posts tagged "debt"

What if the U.S. Debt Were Your Household Debt?

(Hat tip to Graham Martin.)

High Interest Rates Only Work if You Hide Them

In the wake of the CARD Act, credit card interest rates are rising. This should not be a surprise, since the CARD Act forces lenders to put the true cost of a credit card front-and-center. Credit card issuers cannot advertise a low rate and then use fees to jack up the true cost of the card.

By forcing this sort of honesty, the CARD Act has exposed a secret: high interest rates aren’t the result of the market. If consumers know that a card has an interest rate of, say, 79.99%, they won’t pay it.

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5 Great Questions to Ask a Debt Collector

Minnesota debt collection defense attorney John Rossman wrote this breathless warning for debt collectors for InsideARM:

An army of Debtors—fully equipped with scripts drafted by consumer attorneys and recording devices—are using their telephones as weapons to wage war on unsuspecting Debt Collectors across our nation.

Rossman warns debt collectors that consumers are trying to “entrap” collectors and “trick” them into violating the Fair Debt Collection Practices Act by asking the following questions:

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Current Balance vs. Payoff Amount

Payoff amount is how much you would actually have to pay to satisfy the debt. It is not the same thing as the current balance that shows up on your statement, but is not necessarily the amount you owe. This is not obvious, but the difference between current balance and payoff amount is crucial when you are ready to pay off a debt.

Current balance means the amount you owe as of the date of the statement. As of the day after the statement, you owe more. In other words, if you are trying to pay off a credit card, and the statement says your balance is $514, you may not be able to bring your balance to zero by writing a check for $514. Instead, you would need to contact the lender to find out your payoff amount.

The payoff amount is really just a more-current balance number. But if you are trying to eliminate a debt, you need to pay it all off. If you just pay the current balance, you may be left with a few cents or dollars left in the account. Over time, that could become more than an irritation; it could become a significant obstacle to eliminating your debt.

So before you pay off a debt, call the lender to find out exactly how much you owe, and how much it will take to pay the debt off, in full.

(photo: http://www.flickr.com/photos/11811699@N07/1245660620/)

How Not to Defend a Debt Collection Lawsuit

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This article is a list of defenses that do not work. If you would rather find out what you should do, click over to “Served By a Debt Collector? What To Do Next“.

When I worked as a collection attorney, I handled many debt collection lawsuits, and I saw the same erroneous defenses over and over again. Here are some of the most common defenses I heard:

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“Deceased Collection” May Get New Regulations

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FTC proposes new guidelines for collecting debt from dead people“, reads the Washington Post’s headline. As it turns out, debts don’t die with the debtor, and debt collectors don’t let a little thing like a funeral slow them down. They keep calling, implying that relatives ought to discharge the deceased’s “moral obligation” to pay the debt, even if that means paying it out of their own pockets.

The proposed FTC rules would make it clear a debt collector may not talk about moral obligations or try to get relatives to pay the debt themselves. But the proposed rules may also weaken the Fair Debt Collection Practices Act’s prohibition against discussing a debt with third parties.

You can read the proposed rules or submit a comment to the FTC before December 1, 2010.

Stop Debt Collection Calls and Letters

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Getting a debt collector to “cease and desist” is easy, thanks to the Fair Debt Collection Practices Act (FDCPA). If you are getting calls or letters regarding a consumer debt (credit card, medical debt, rent, etc.), and you want them to stop, all you have to do is send a letter to the debt collector who is contacting you. This is all the letter needs to say:

Stop contacting me.

Just make sure you include your name, address, and phone number so the debt collector knows who to stop contacting.

If the calls or letters continue after you send this letter, the debt collector may be liable to you for $1,000, plus actual damages, costs of litigation, and attorney fees. If that happens, contact a consumer lawyer right away.

Biggest Source of Consumer Debt? Student Loans

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When people think of consumer debt, they think of credit card debt. According to the Federal Reserve, however, student loan debt has now surpassed credit card debt among consumers.

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Elizabeth Warren Wants CFPB to Level the Playing Field for Consumers

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The Consumer Financial Protection Bureau will be a success if it accomplishes nothing more than this:

The time for hiding tricks and traps in the fine print is over.

That, in a nutshell, is Elizabeth Warren’s vision for the CFPB, the formation of which she will supervize, at President Obama’s direction.

(Thanks, Consumerist!)

Avoid Debt Collection After a Divorce

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In most divorces, the ex-spouses agree that one of them will assume some or all credit cards, which were probably joint cards. Unfortunately, a divorce decree does not bind the creditors, who can still collect the debt from either account holder.

Often, the spouse who agreed to assume the credit card debt has a hard time paying it off, which lands the exes back together in collection. Debt collectors can continue to collect from both of the names on the account, regardless of what the divorce decree says.

To prevent marital debts from haunting you after divorce, be proactive. Whoever agrees to assume the debts should get a consolidation loan in his or her name only. If possible, do this before finalizing the divorce decree. If that won’t work, get your name off any account your ex has agreed to pay. Tell the banks your ex has agreed to be liable, and demand that they remove your name from the account. Do this in writing, and before the card goes into default.

If all else fails, close the account. That way, at a minimum, you can be assured that your ex cannot continue using the card and making the debt worse.