Brent’s Credit and Debt blog

There was a credit company practice that has been around for a while called ‘Universal Default’.  Basically, what this means is that a creditor, usually a credit card company, could raise your credit rates if you were late on a credit account that THEY DID NOT OWN!

Let’s look at an example:

You have 2 credit cards, one for Bob’s Bif Burgers restaurant, and one for Jake’s Jiant Jambalaya (yes, I am hungry).

You have been making regular payments on both cards, but one month your Bob’s payment gets lost in the mail.

Jake checks your credit report, and sees that you made a payment late.  So, Jake decides that your interest rate should be 29% instead of the 14% he had been charging you.

Universal default also covers making a late payment to a credit card company and having that company raise the rate.

For many cards that are considered ‘sub-prime’ (in other words they were easy to get), a single late payment would result in a rate increase after a very short grace period of a few days.  They did this to protect themselves by taking in larger profits in case you were going to default on the card.  However, what this really did was take someone who was in trouble and make matters worse for them.  The net result was a much longer life on credit card debt.

The new bill stops that.  Now, a debt has to be at least 60 days late before a company can raise your rates.  This is a big boon to the consumer, and will cover simple mistakes.  However, I would expect those rate increases to be bigger now, as the credit companies will be protecting against default more agressively.

Score on for the consumer, but this this is a big blow to reputable credit companies.

It is a really helpless feeling.  When the collector calls, you feel angry, frustrated, and scared.  The calls seem to come in constantly!  All day, from 8:00 in the morning until 9:00 at night, the phone will ring.

I felt nervous every time I heard that ring tone.  Looking at the caller ID, it was an 800 number or an ‘Unknown ID’.  I knew who it was.  And I chose not to answer.

Finally, I got smart.  There is a law, Called the Fair Debt Collection Practices Act, or FDCPA, that regulates how debt collectors are allowed to contact you, including how often, where they can call, and what they can say.

If you are getting calls and want them to stop, you can do that easily.  Answer the phone.  I know, you don’t want to, but answer it.  Get the following information from the person you talk to:

• The collection company name.
• The mailing address of the collection agency.
• A supervisors name.
• The name of the person calling you.

Also, write down the time and date of the call, and anything you can recall being said.  You don’t need the peoples names, or the time and date, unless they don;t stop calling you.  In that case, if you pursue legal action for a violation of your rights, that information will be critical.

Write a letter to the collection agency.  In your letter, be nice but firm.  Have it say something like this:

To whom it may concern,

You are causing me undue stress by continuing to call me regarding a supposed debt.

Do not contact me by phone any longer at the following number:  (713) 555-2167.

If you wish to contact me, you may write me at the address you have on file.

If you continue to try to contact me by phone, I will be forced to take legal action under the FDCPA.

You have 5 business days to comply with this letter.

Sincerely,

Me

Now, a couple of key points.  It is a ‘supposed’ debt.  Never admit it is your debt.  They can use that to sue you.

If you aren’t allowed to be called at work, say so.

They can’t cause you to feel nervous, so tell them your calls are causing stress.

Send your letter certified mail, return receipt requested, and make sure it is there in at most 3 days.  That way they can set up their auto dialers to stop calling you.

Keep a copy of the letter, and your receipt from the mailing.  If they continue to call, contact your state’s attorney generals office.

I’d like to know, have you had problems with a collector continuing to call?  What do you think of collections in general?  Leave me a comment and let me know.

A senate bill that is expected to be signed into law soon is going to change the way credit card companies do business.

In addition to putting limits on interest rate change policies and the fees that can be imposed for credit mistakes, the bill also seeks to place limits on who can get a card based on age.

Like any change to an existing business practice, this will have big implications for both the credit industry and the consumers of credit.  I will be analyzing the impact of this bill over the next several days.

In the mean time, take a look at this:

Senate OKs bill to reign in credit industry