Disclosures If You Need Debt Help – How Important Are They?

Very, but those doing the disclosing are not really helping with the little information they give.

When a person is struggling with debt and looking for outside help from a company or person, they should certainly have risks and rewards disclosed to them. Ideally, the disclosures would help a person to best evaluate which direction to take for help, and who to trust. A recent article by Elisabeth Rosenthal in the NYT: I Disclose… Nothing helps to underscore what I find to be the biggest shortcoming of disclosures in debt relief – No context.

From NYT article linked above:

“… disclosure laws — meant to elucidate — do not necessarily lead to greater transparency or prevent the things they were meant to deter.”

One or two sentence disclosures rarely do. Disclosures about the affects of a debt relief option to ones credit score are a good example.

Credit counselors and debt settlement companies offering legitimate services will disclose that there will be an impact to credit scores and those things will appear on the consumer’s credit report as a result of enrolling in their respective programs. If a consumer is hyper concerned about her credit score and credit report, but unable to pay the minimum monthly amount due on her Citi card, she may be more prone to try and avoid bankruptcy with a DMP than by opting for debt settlement. In this way, one would think disclosures about the impact to credit that this consumer read or heard – performed exactly as meant to. Nope.

The problem debt she has is a $17,000.00 balance with an interest rate of over 20%. A credit counselor offering a monthly payment of 357.00 sounds better than the 500.00 plus she cannot afford now, but the 357.00 monthly payments are going to be a stretch too. She enrolls in the DMP and scrambles up the 357.00 each month only to miss a payment in month 8.  She finds herself unable to get back on track the following month. The account was closed by the creditor when she enrolled in the debt management plan, she now has a 30 and 60 day late pay reporting, and she blew through 2500.00 in payments toward a solution she was not going to succeed with. That 2500.00 would have more than covered the cost of a chapter 7 bankruptcy that she was qualified to file. And, as it turns out, that 2500.00 was enough to settle the account with card services in month 7 after she fell off the DMP.

More from the NYT piece linked above:

“One fundamental problem is that disclosure requirements merely get information onto the table, but themselves demand no further action. According to political theory, disclosure is both a citizen’s right and a tool to ensure good government and consumer protection, because it provides information that leads to informed decisions. Instead, disclosure has often become an endpoint in the chain of responsibility, an act of compliance with the letter of the law rather than the spirit of transparency.”

A good example of this would be companies offering debt settlement disclosing the fact that nonpayment to creditors could result in being sued by a creditor in their attempt to collect. That lawsuit may result in judgment which could result in bank levy or garnishment. A consumer given this disclosure is now informed of a known risk. The company making this disclosure can feel that they covered their own butt because the risk was plainly stated to the customer in advance. However, if any real context were provided to the consumer about this known risk, it would involve much more detail – detail that cannot fit into a tidy paragraph or three, let alone one sentence. Being sued by a creditor IS a real risk. Do settlement companies and those who promote them state plainly that the risk of being sued increases the longer debts remain unpaid? Most don’t go into that type of detail as it would scare off a consumer from beginning the savings and settlement plan.

More from the NYT article:

“Many disclosure programs today cloud rather than clarify a particular situation. As disclosure statements have become more numerous and more complicated, “consumers just ignore them or don’t understand what they say,” said Jeff Sovern, an expert in consumer law at St. John’s University.”

The type of disclosure context needed that provides an individual seeking debt relief a meaningful grasp of the issues they face; that educates and informs to the degree that would maximize awareness of the wrong and right steps to take; how to evaluate the immediate need for relief alongside concerns for ones future success and goals; that applies disclosures to the unique circumstances of the relief seeker – is simply not provided in the main by those offering alternatives to bankruptcy.

“While regulators and consumers see disclosure as a way to improve transparency, companies often regard it as a risk-management strategy. “Often the goal of disclosure is to reduce or eliminate the legal risk,” Dr. Weinfurt said. “It is so they can say, ‘Hey we told you so.’ ”

When it comes to the debt relief industry, companies and people provide disclosures in order to meet a minimum standard and to limit their own liability. Any substantive and informative discussion around disclosures to debt relief seeking customers that allows them to truly weigh and measure how the facts disclosed apply to them at the moment and on a forward looking basis, typically never happens. If meaningful discussion about key disclosures does occur, it would most likely be down the line when a disclosure item is triggered and after irreversible action steps in debt relief have been taken. This is where most of the headaches for debt relief customers and companies occur. Unhappy customers who were not fully aware of the implications of the decisions they were making at the time they enrolled in a debt relief plan. Customers of debt management & debt settlement plans may want to place blame on a service provider when things don’t go as planned. The service provider will want to point to a disclosure and say, “we told you this at the beginning”.

The consumer seeking debt relief is not shopping for a toaster oven. Companies and individuals representing they can help someone in need are selling something. That something is not as benign as describing the convection cooking features of a counter top oven. The responsibility debt relief service providers have to inform and educate the consumers they come in contact with cannot be underscored enough.

A friend of mine started a unique consulting service a couple years ago. He provides paid consultations with consumers in order to help them understand the debt relief options available to them. He does not provide settlement, debt management or bankruptcy services. What does he do? He provides detailed debt relief disclosures as they relate to the individuals set of circumstances that are not readily provided to consumers in any meaningful way by the companies who DO provide the services. He fills a niche that should not even exist, but it does, and will remain until disclosure gaps are filled with useful information, consumer education, and side by side comparisons.

There are tools and solutions available to legitimate service providers that can fill the disclosure gap. CRN offers educational tools and training to the debt relief services industry along side the products and services we provide direct to consumers in need of debt relief. Contact us for more information.

A couple of friends of mine who are experts in the debt relief industry came together recently to put a together a powerful tool for consumers and industry experts. The calculator and additional tools you will find discussed and linked below will help you determine what debt elimination option may be right for you. I like this tool. It focuses on the math of each option first. In debt relief, if you cannot make the numbers work, you cannot make the solution work.

You may still need to discuss your particular situation with a professional service provider to discuss program benefits and drawbacks, but by starting with the calculator and determining what your financial abilities are first, you will be able to narrow your options and save yourself quite a bit of time.

Here is the press release from earlier today:

Introducing The Amazing How to Get Out of Debt Calculator

Every single day I help people for free to find good solutions for problem debt. Not long ago I was talking with some friends and it occurred to me there was no one single tool people could use to better understand all of their options to tackle their debt. Why not?

So in collaboration with the smart technology people at USDR we created just such an online calculator to give people a somewhat personalized side-by-side comparison of the options, costs and payments of the different approaches to eliminate their debt.

We’ve just launched the How to Get Out of Debt Calculator and I think it gives people an impartial and detached view of what they can do to tackle their debt.

The use of the calculator is free and does not require people to share any personal identifying information.

Each option for getting out of debt certainly has plusses and minuses. But through education and awareness each person can make a better choice about the approach that’s right for them.

The calculator is not designed to be the creator of a final plan to implement, in fact we don’t sell any debt relief services at GetOutOfDebt.org.

At GetOutOfDebt.org what we do is provide information, education, free help and resources for people dealing with debt. This new free online educational tool helps us to further that mission.

The unique online calculator is designed to give people a wider eyed view of the logical solutions available so they can have an educated discussion with any for-profit or non-profit debt relief provider they ultimately choose to work with.

And now, without further fanfare, I invite you to try and enjoy The Amazing How to Get Out of Debt Calculator. I think you’ll find it to be pretty amazing in the distilled education it presents users.

Feel free to link to the How to Get Out of Debt Calculator in an effort to help people better understand their options. Your link to the calculator simply helps us to help people.

And in the interest of educating consumers further I’ve also just recently released another online tool that provides comprehensive information to show consumers the regulation, licensing, and registration required of debt relief companies on a state-by-state basis. It’s yet another free resource available through GetOutOfDebt.org to protect consumers looking for debt help. You can find links to this in the resource section at GetOutOfDebt.org.

Good news for struggling home owners in Massachusetts came this past week in the form of money released to assist in making mortgage payments. The press release below gives some details. The downside is that the program has a narrow window of time for residents of the state to seek qualification to receive no interest loans designed to prevent home loss. If you or someone you know in MA could benefit from the program outlined below, get them in touch with Cambridge ASAP at: 1-888-544-3457.

Cambridge Credit Awarded HUD Funding to Help Unemployed Homeowners Avoid Foreclosure

Deadline for Emergency Homeowners’ Loan Program applications is July 22, 2011.

Cambridge Credit Counseling Corporation, a professional housing and credit counseling agency based in Agawam, Massachusetts, has been awarded funding from the U.S. Department of Housing and Urban Development to help Commonwealth residents avoid foreclosure. The Emergency Homeowners’ Loan Program (EHLP) is designed to help ease the current housing crisis, in which more than 6.3 million homeowners are threatened with foreclosure. Homeowners who have experienced a substantial loss of income due to unemployment, underemployment, or medical condition can receive interest-free, forgivable loans to pay their mortgage, property tax and insurance bills for up to two years, or until they exhaust the maximum EHLP loan amount of $50,000 – whichever comes first.

Approved homeowners are eligible to receive one-time EHLP assistance to bring their mortgage current, as well as ongoing monthly assistance. If a homeowner is selected to receive a loan through the EHLP program, payments will subsidize their monthly mortgage bill; allowing them to pay just 31% of their income or $150, whichever is greater – EHLP will pay the balance. No payments are due on the 5-year term of these loans, providing that the homeowner meets all the conditions of the program. If so, the loan will be forgiven in 20% increments each year.

“This is great news for homeowners who’ve lost their jobs, are underemployed, or are suffering from challenging medical conditions,” remarked Cambridge president Christopher Viale. “We’re happy to be able to provide meaningful help to homeowners throughout Massachusetts.”

Homeowners applying for an EHLP loan will have to complete a Pre-Applicant Screen Worksheet, which is available by calling Cambridge at 888-544-EHLP (888-544-3457). The worksheet must be submitted to an EHLP counseling agency by July 22, 2011. Applicants will need to work with an approved EHLP housing counseling agency and provide required documentation. A checklist of these documents is listed in the Pre-Applicant Screen Worksheet.

“Many of our member churches have been trying to offer support to parishioners facing these serious circumstances,” noted Archbishop Timothy Paul of the Council of Churches of Greater Springfield. “The lack of effective government programs has made it difficult, but Cambridge’s participation in EHLP offers new hope to our congregations.”

If you live in Massachusetts and are facing foreclosure due to a substantial loss of income arising from unemployment, underemployment, or medical condition, call 888-544-EHLP (888-544-3457) to talk to a HUD-certified housing counselor who can help you determine your eligibility for the new Emergency Homeowners’ Loan Program.

ABOUT CAMBRIDGE CREDIT COUNSELING CORP.

Cambridge Credit Counseling Corp. is a professional housing and debt counseling agency dedicated to educating young adults on the importance of sound financial management, and to providing financially distressed Americans with education and debt management services appropriate to their needs. Visit Cambridge Credit Counseling Corp. online at http://www.cambridgecredit.org.

I generally begin any consultation I do with people who reach out to my company in search of help with debt with this question: “What has you reaching out to a perfect stranger? What is going on with you financially”? Then, I shut up and listen. I am sometimes the first person the caller has ever spoken to about the situation they are in.

The responses I hear vary, as does the time someone will take to outline the details of their hardship. By listening closely, I am able to hear the stress and fear they have about their debt. I often hear the struggles they have gone through to try and keep current with credit card bills, or the difficulty they have had in communicating with creditors and collectors.

The other day, I heard one of the simplest and shortest answers to my initial question that I have had to date.

“My Debt Is Crippling Me.”

While this response does not provide details I generally look to key off of in order to identify the debt pieces or solutions to putting the person’s financial puzzle back together, it said a great deal in a very powerful way.

Struggles with debt DO feel crippling. In the very sense that someone with a physical disability is forced to deal with every day of their lives. The stress and fear with debt problems are debilitating and can often manifest into actual maladies. The worry and frustration about money, and the lack of money, carries over from one day to the next. What am I going to do at the end of the month when these other bills are due? When will I ever be out of credit card debt? How did I get trapped in a home now worth far less than I owe? What if I get laid off with no savings? How would I get by with maxed out credit cards and no income?

One of the overwhelming benefits to people we talk with is that we can reduce, or even remove the stress and fear they have about their debt problem in one phone call.

This gentleman did not feel crippled when we finished talking about his problem because I plainly laid out the facts of his finances (after several additional questions to be sure), and was able to point out to him the mathematical rational solution to his debt. His solution did not involve needing to engage my company for a product or service, as he was past the point of debt settlement or a creditor sponsored hardship plan being a viable option.

He learned that, unlike someone who has a physical disability for the rest of their life, his crippling debt could actually be cured and with little fuss or expense. He was not at all excited to know that his only real option was to file for chapter 7 bankruptcy, but he saw the wisdom in doing so and hung up the phone with no fear and less stress.

I asked him before we hung up from the call “How crippling is your debt now?”.
He replied “Not at all.”

There is always and answer to recover from debt. The answers do often involve tough choices and some action steps that are not exactly a thrill to take, but can be arrived at through the process of elimination. Generally, I can walk through the following things and eliminate 3 or 4 out of the 5:

• Creditor monthly payment concessions
• Debt Management Plans through a credit counseling group
• Bankruptcy
• Debt Settlement
• Doing nothing (sometimes the right thing for brief period – couple months)

Knowledge removes the fear of the unknown, and unemotional, boring, old arithmetic is the compass to find your way to healthier finances.

My advice to anyone feeling crippled with debt boils down to the “Four Gets”:

• Get real about your finances;
• Get informed about your options;
• Get a plan in place; and
• Get started

If you would like to start getting informed the same way the man who inspired this article did, send me an email to schedule a consult: michael@consumerrecoverynetwork.com. I will consult with you personally.

I can also recommend scheduling time to speak with any member of the American Association of Credit Counselors (AACC) who are a diverse group of debt relief service providers committed to excellence working with people in debt.

I have covered credit reporting on other posts here on debt bytes, but mostly as it applies to people who need some form of debt relief due to a financial hardship. While that is an important topic and a concern for more and more people as a result of our tough economy, what about the furnishing of bad data on people who are managing their debts well? What affect does bad information supplied to the credit reporting agencies have on them?

Your credit score and loan product modeling is calculated not just by your timely payment history, but is also based on your credit utilization, debt to income ratio and a few other key points.

Due to how information in your credit report is factored, mistakes made by those furnishing information about you to the reporting agencies can have a major impact on how much credit will cost you and whether you are approved for a credit product at all.

This morning, I read a good example of the type of damage that can be inflicted by a simple loan classification error:

Issue: Most scoring systems take data at face value with little or no interpretation. If you track the erroneous “Installment Loan” designation downstream, the credit scoring systems would see the following:

• An installment loan for an extremely large sum (i.e. $200,000).
• Duration of payments for these loans was reported as 30, however, the number reported for an installment loan is seen by Metro 2® as 30 months, whereas, the number reported for a mortgage is seen by Metro 2® as 30 years.

Result: Most credit scores would be calculated based on the facts reported — “Installment” loan of $200,000 with what looks like payment term of 30 months. In effect, a 30 month payback period would require each payment be approximately $6600, whereas a 30 year payback period would yield a monthly payment in the vicinity of $1000. The perceived debt of $6600 per month could potentially negatively impact multiple factors of consumer lending such as approval scores, debt ratios, bankruptcy scores, pre-screen scores, etc.

And those types of errors are just the tip of the credit reporting iceberg. From a potential litigation standpoint, data furnishers that do not invest the time and resources required to evaluate the accuracy and integrity of their credit reporting on an ongoing basis are making a potential titanic mistake.

To read the full article click here: troubling times ahead for credit bureau data furnishers

This type of loan classification error would seem easy for the furnisher to fix. Indeed, common sense dictates that it should be fixed.  It will cost money to do it though.

My experience with reporting agencies and furnishers is that they do not always think with “sense”, but think more in terms of dollars and “cents”.

The key to “common-cents” and violations of the Fair Credit Reporting Act (FCRA) is that it is more profitable to do the wrong thing than the right.

Some credit report information furnishers get it absolutely bass-ackwards.

They seem to be saying “We know we have a problem and that it screws people over, but we will continue to do so until it is more cost effective to fix the problem than to continue to get sued”.

The linked article above speaks to a specific case in the 9^th circuit that allows a class action to proceed against one company that may end up costing them between 29 and 290 million. My guess is that their legal defense bill alone would have covered the costs of auditing and correcting their reporting systems on a regular basis which would prevent actions like this from occurring.

It is a small wonder to me that more legal action is not brought against furnishers of bad information about you to credit bureaus.

Similar to the economy of furnishers and reporting agencies making changes only when it makes “cents” to do so, suing them for their transgressions and missteps has long been about the costs for bringing the action and what can be gained from doing so.

Perhaps this attitude will change with the potential for more class action lawsuits that can lead to tens of millions in costs.

Perhaps there is a class out there forming to bring the particularly egregious practice of reporting a balance still due after a settlement on a past due debt is reached, accepted and funded, and where both parties agree that the debt is settled, there is no balance due, but the amount of debt forgiven remains on the trade line and shows that portion of the balance as outstanding when it no longer is!  I wrote about this practice recently. Read more about it here: Why Does Capital One Screw People Who Settle Their Debt.

It is as important now as ever before for people to take responsibility for policing the accuracy of their credit profile. No one else is going to do it for you.

If you find inaccurate, erroneous or out of date information – You Can Fix It!

You have the ability to dispute bad information with the reporting agencies and you can also send direct disputes to the furnisher of the information. If they do not correct the discrepancies after sending your dispute certified mail return receipt it may be the best use of your time to next consult with a skilled consumer law attorney.

There are not that many attorneys experienced with FCRA violations around the country, but a case they may bring can be filed in federal court, which may make speaking with one you find with an office outside of your state worth the effort.

To locate an experienced FCRA consumer attorney you can go to www.naca.net and search using your zip code to find one nearest you.

Two attorneys I know that specialize in this area are:

Jason Rapa in PA

www.rapalegal.com

Michael or Justin Baxter in OR

www.baxterlaw.com

If you have a specific question about debt or credit, click here to post your question and get it answered.

If you have questions or feedback about this topic, feel free to participate in the comment section below.

For Immediate Release

Media Contact:

Ken Luck

(336) 553‐1804

kluck@rlfcommunications.com

Debt Relief Companies Form New Consumer Advocacy Organization

Raleigh, N.C. (Feb. 9, 2011) – In an ongoing effort to raise standards in the debt relief industry and improve consumer protections, a diverse group of leading debt relief companies have formed a new organization devoted to consumer advocacy. The organization is spearheaded by Steve Rhode, aconsumer advocate and founder of the website GetOutofDebt.org. Membership is by invitation only to companies who promote transparency and have a demonstrated track record in properly helping consumers address financial hardships.

The American Association of Credit Counselors (AACC) will include nonprofit credit counseling agencies, debt management companies, debt settlement companies and other providers who are focused on serving consumers in financial distress. The AACC name reflects the revival of an organization that existed with a similar mission but has been defunct for more than 20 years.

This is the first debt relief association formed solely to find collaborative ways to work for the betterment of consumers rather than to lobby on behalf of the industry.

“We’re not an official association, we’re not a traditional industry group that anyone can join as long as they are willing to pay the membership dues,” said Rhode, one of the most vocal and active advocates for consumer interests. “We’re really a club, a club that only accepts the best companies who’ve demonstrated a commitment to the highest standards in serving consumers and who want to work collaboratively to protect consumers facing money troubles.”

All member companies in the AACC have agreed to a set of common standards, including:

• • Charging no upfront fees for debt settlement services;
• • Providing customers with good faith estimates before they enroll in any debt relief service;
• • Outlining the potential risks of a debt settlement or debt management program in easy‐to understand language;
• • Providing openness and transparency regarding performance results; and
• • Making top management readily available to their customers.

The group has adopted the motto “Putting Consumers First.”

“We are thrilled to be a part of this group, which is really focused on creating educated consumers and campaigning for their rights and protection,” said Chris Schornak, president of Debt Solutions Network, one of the founding members. “There are a wide range of debt relief options out there, but not every option will work for every individual. It’s exciting to see a group of companies standing up and saying that education is more important than deception and that the needs of the consumer are more important than a company’s bottom line.”

The genesis of the organization came out of an event Rhode hosted in late November called “A Group Conversation about Restoring Truth to Debt Relief.” The day‐long meeting brought together heads of debt relief companies, consumer advocates and regulatory agencies to discuss ways to improve consumer protections while still making debt relief services available to those in need and explore ways to increase the credibility of legitimate debt relief providers.

“That meeting created some great conversations among various debt relief providers about ways to better the industry as a whole and to make services from credible providers more readily available to consumers,” said Rhode. “Those discussions have continued over the last few months as these companies, while competitors, have found they have common interests and a shared vision for improving the industry. They felt there would be strength in numbers and have decided to work together for change.”

Charter members of the organization are:

• • Active Debt Solutions, a Florida‐based company that offers credit counseling, debt consolidations, bankruptcy referrals, and debt settlement programs;

• • Cambridge Credit Counseling , a Massachusetts‐based nonprofit that offers financial education and debt management services;

• • CareOne Services Inc., a Maryland‐based company that offers credit counseling, debt management and debt settlement programs and bankruptcy referral services;

• • Consumer Recovery Network, an Idaho‐based company which provides DIY instruction and offers debt settlement services

• • Debt Solutions Network LLC, a Michigan‐based company that offers debt settlement and debt consolidation services;

• • New Era Debt Solutions, a California‐based company that offers debt settlement services; and

“We take great pride in being part of a group that puts consumers first,” said Alex Viecco, vice president of New Era Debt Solutions. “This is something that has been lacking in this industry for a very long time.”

The original AACC was created in 1955 and disbanded in the 1980s.

About the American Association of Credit Counselors

The American Association of Credit Counselors was founded with the mission of “Putting Consumers First” in debt relief services. Membership in the organization is by invitation only and all of the members have agreed to meet specific standards and principles in offering their services. The AACC has eight members. For more information, visit http://newaacc.org/.

Individuals and small business owners burdened with huge credit card debt balances of $100,000 or more are turning to debt settlement coaching, negotiating their own settlements, and saving thousands on third-party negotiation fees.

San Diego, CA (PRWEB) February 10, 2011

Consumers and small business owners are negotiating with their creditors and settling their own debt obligations without the need for professional third-party assistance, according to ZipDebt.com, one of the nation’s leading providers of self-help financial coaching for struggling consumers.

America’s economic recession has pushed millions of individuals toward bankruptcy with massive levels of debt. As small businesses fail and previously high-income households face the new jobless environment, credit card debt loads of $100,000 or more have become much more common. For people with such high debt balances, formal bankruptcy often means filing under Chapter 13, which can be a difficult five-year process that entails partial or full repayment of the debts. Debt settlement through creditor negotiation provides many of those debtors with a realistic alternative to bankruptcy.

According to Charles J. Phelan, founder and President of ZipDebt.com, consumers and small business owners can avoid Chapter 13 bankruptcy if they educate themselves about negotiating compromise solutions with their creditors. “Many of the people who come to us have very large debt balances, and none of the usual ‘one-size-fits-all’ debt solutions will work for them,” Phelan says. “We teach people a process called Fast-Track Debt Settlement™. It has the most successful track record compared to any other approach to debt settlement.”

Phelan recommends the “do-it-yourself with coaching” approach to debt negotiation and settlement because it gives consumers complete control over the process. Instead of paying thousands in fees to a professional firm, consumers can apply 100% of their available resources to eliminating problem debt. “There is no reason for someone who owes $100,000 to pay $15,000 in negotiation fees,” Phelan says. “We’ve taught thousands of people how to settle their own debts, and it’s a much faster process without the stiff fees.”

For additional information on debt settlement coaching for high balance debtors, a free report is available for immediate download at ZipDebt.com.

About ZipDebt.com

Charles J. Phelan has been helping consumers avoid bankruptcy since 1997. A former executive with one of the nation’s first debt settlement firms, Phelan launched ZipDebt.com in 2004 to provide an affordable alternative to professional debt services. ZipDebt.com’s audio-CD training course is supported with personal one-on-one consultation and follow-up coaching, and the program successfully helps debt-challenged consumers achieve professional results for a small fraction of the usual cost.

One of the purposes of the Debt Bytes Blog is to raise awareness and educate people on the topic of debt. This is not a new concept by any stretch. There are many sites on the web that have a great deal of information and some of these have HUGE readership and reader participation.

Not all are created equal.

Watered Down Content Sites

Some personal finance web sites have a great deal of exposure and publish a ton of material.  Some content heavy sites  barely scratch the surface on a particular topic because they are geared toward mass appeal. In other words, the more “milk toast” the message, the more reader applicability.

I can think of several really big sites with content updated daily, but that allow no interaction with their readers through open commenting. These sites also tend to have a lot of ads. Milk toast (bland) content with lots of web traffic to sell ads. Not a fan….

Informative & Innovative Sites

On the other side of the spectrum you have web sites with good content and large readership that allow and encourage comment participation. Some of these also have community forums that are a great place to learn even more specifics into a particular aspect of debt and credit.

One of the sites that I like and have frequented for several years is www.debtconsolidationcare.com. I in fact post in the forums on that site anonymously as time permits.

The DCC site offers many great self help tools and feedback for debt relief with a focus on debt settlement, debt management, dealing with debt collection, what you can do to repair and improve your credit, debt consolidation and more. Big fan….

I have connected with the site owner Vikas on several occasions. One of things that so impressed me about Vikas and his motivation and vision for the DCC site – his focus on providing free, or affordable resources for consumers who are already struggling financially. His goals are similar to what I endeavor to provide here on Debt Bytes and through my company, Consumer Recovery Network.

Over the years that I have participated by commenting in the forums at the DCC site, I have witnessed many people use the site as a resource for their own debt relief efforts very effectively and who then continue posting their experience and sharing with others long after their own personal financial storm had passed – Paying forward the help, feedback and support that was available to them.

The Debt Consolidation Care community is a stand out, as are other sites that I will cover in the future.

I encourage Debt Bytes readers to check out the DCC site and to openly participate when there.

The Consumers Union, a long standing consumer advocate and watch group, in partnership with East Bay Community Law Center, weighed in with their recommendations for amending the Fair Debt Collection Practices Act (FDCPA). Read the report they published yesterday here: PAST DUE: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now.

In their “PAST DUE” report, I found some of the most pro consumer recommendations for amending state and federal collection laws I have seen to date. Here are some of the key recommendations the report suggests should be adopted in order to better protect consumers and lessen the drain on publicly funded court resources:

The FDCPA and parallel state fair debt collection laws must be expanded so that the list of required “baseline” items also includes: (6) a statement explaining the consumer’s rights under the FDPCA; (7) the name of the original creditor, whether or not the consumer requests it; and (8) an itemization of the total principal, interest, fees and other charges that were added to the debt:

“Baseline” Information (currently required)

1. Amount of debt;

2. Name of creditor;

3. Statement re: assumption of debt validity in the absence of a dispute;

4. Statement re: if the debt is disputed the debt collector will “verify”; and

5. Statement re: upon written request the collector will provide name of original creditor if different from current creditor.

Recommended Additional “Baseline” Information

6. Statement notifying consumers of two significant rights they have under the FDCPA;

7. Name of original creditor; and

8. Itemization of: total principal, interest, fees and other charges that have been added to the debt.

The report recommends additions of items 6 though 8 to the already required baseline protections found in items 1-5. While I see recommendations 6 and 7 as good, I really like number 8! It is of major importance that there be an opportunity for consumers who find themselves in a position to effectively bounce back from past financial setbacks be able to do so with a correct measure of what they legitimately owe.

There needs to be an accurate accounting of what the true balance of debt is, rather than what are all too often highly inflated and sometimes bogus fees.

The report further identifies what is dubbed “Baseline Plus“recommendations:

The FDCPA and parallel state fair debt collection laws should also be amended to require that debt collectors make a good faith effort to retain certain “baseline plus” information to the extent possible. A debt collector should be required to provide all “baseline plus” information it has to the consumer within five days after their first communication. Courts should also require that all available “baseline plus” information be attached to any complaint in a debt collection lawsuit:

Recommended “Baseline Plus” Information

9. Proof of indebtedness signed by the consumer;

10. Date that debt was incurred and date of last payment;

11. Chain of title if debt has been sold;

12. Original debt;

13. Each payment credited to the debt;

14. Each fee and charge added to the debt;

15. Each payment credited against those fees and charges;

16. All other debits or charges to the account; and

17. Explanation of the nature of those fees, charges, debits, and all other credits to the debt, by source and amount

Item 9 will be hard to come by if asking for a wet ink signature due to the prominence of electronic acceptance of terms and internet applications for credit.

Numbers 10, 11, 12, 14 & 17 would certainly put the nail in the coffin of most zombie debt that exists today. It would also crimp the reselling of portfolios of bad debt that had already been sold at least once prior to the enactment date of  any future legislation that includes these, or similar provisions.

None of this is a bad thing.

The report discusses the drain on court resources around the country resulting from debt collection lawsuits that are filed mill style and shows how the collection of unsecured debt has its own “robo signing” issues similar to the well published woes of foreclosure mill law firms across the country. Past Due is well worth the read.

Amendments to the FDCPA are still some time away.

If some of the “Plus” lines found in the report from Consumers Union make it into the amended federal collection laws, I predict the following:

• Fresh charge off debt portfolio values will increase to highs not seen since 2005
• An end to lawsuits filed mill style
• A bit of shrinkage in the number of debt collection shops that will continue operations
• Traffic to some of the more whacky web sites about “How to beat a debt collector with Debt Validation” will drop dramatically
• Debt buyers will adapt their portfolio performance goals and move to sue sooner after purchase than later

I believe that most of the suggestions found in the CU/EBCLC report will not only lead to better consumer protections, but also create better recovery  performance at legitimate companies operating in the collection space.

When you work with consumers who are trying to recover from financial struggles of the past or present for any significant period of time you can honestly say; the vast majority of people want to pay their obligations. You should certainly be able to do so with dignity and confidence that you actually owe the debt, are not paying too much, paying the right party and are able to put the debt behind you for good and move on with your life.

If you need professional assistance in dealing with past due bills, be sure to connect with debt relief service providers that are members of the AACC. AACC member companies are committed to putting you and your goals first. Click here to find an AACC company you can speak with: American Association of Credit Counselors

Debt Bytes welcomes your participation in discussing this important topic in the comments section below.

Collection industry insider, Bill Bartmann, has started an electronic petition he will submit to Congress where he suggests the following amendments to the Fair Debt Collection Practices Act (FDCPA):

We hereby petition Congress to amend the current debt-collection rules by adding the following provisions:

1. Increase the penalty for violations of debt-collection rules from the current $1,000 to $10,000 for each violation.
2. Ban all collection activities on debt that is older than the relevant statute of limitations.
3. Raise the requirements necessary to file a lawsuit on credit-card debt.
4. Require collection agencies to provide clear and understandable history of debt.
5. Require all collection agencies to be licensed.
6. Require all collectors to be licensed.
7. Require an annual compliance audit for all collection agencies.

Learn more about the petition here:  http://www.stopthesecriminals.com

The FDCPA regulates the collection of debt. It is well recognized that amendments need to be made to this consumer protection law from the 1970’s in order to bring it current with advances in technology, and to assist in curbing the steady increases in reported collection abuses.

Collection abuse has been #1 in industry complaints to the Federal Trade Commission several years running.

2010 saw quite a bit of interest and activity toward amending the FDCPA.  The process to amend the Act is well underway.

Want to see the collection industry cleaned up virtually overnight?

Impose a 10k penalty per FDCPA violation.

Think a penalty of ten thousand dollars is that far fetched? The FTC recently put in place an up to 16k penalty per Telemarketing Sales Rule violation that is primarily imposed upon debt relief advertisers, marketers, and service providers – companies who promote they help consumers resolve delinquent debt.

Congress could certainly impose similar statutory penalty caps for violations of the FDCPA against collection agencies – companies who work with creditors and debt buyers to resolve delinquent debt.