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FTC Issues Final Rule to Protect Consumers in Credit Card Debt

2010-07-29T16:15:00.000-04:00

Amendments to Telemarketing Sales Rule Prohibiting Debt Relief Companies From Collecting Advance Fees Will Take Effect in October 2010

Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.
“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”
Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:

require debt relief companies to make specific disclosures to consumers;
prohibit them from making misrepresentations; an
extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.
Advance Fee Ban
The Final Rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected until:

the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt. First, the provider’s fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts.
Dedicated Account for Fees and Savings
Another new provision of the Final Rule will allow debt relief companies to require that consumers set aside their fees and savings for payment to creditors in a “dedicated account.” However, providers may only require a dedicated account as long as five conditions are met:

the dedicated account is maintained at an insured financial institution;
the consumer owns the funds (including any interest accrued);
the consumer can withdraw the funds at any time without penalty;
the provider does not own or control or have any affiliation with the company administering the account; and
the provider does not exchange any referral fees with the company administering the account.

Disclosures and Prohibited Misrepresentations
Under the Final Rule, providers will have to make several disclosures when telemarketing their services to consumers. Before the consumer signs up for any debt relief service, providers must disclose fundamental aspects of their services, including how long it will take for consumers to see results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts if they choose to require them.
The Final Rule also prohibits misrepresentations about any debt relief service, including success rates and whether the provider is a nonprofit entity. The FTC’s Statement of Basis and Purpose, which accompanies the Final Rule, provides extensive guidance about the evidence providers must have to make advertising claims commonly used in selling debt relief services.
The Rulemaking Process
In August 2009, the FTC published in the Federal Register a notice of proposed rulemaking proposing amendments to the Telemarketing Sales Rule and requesting public comments. Over 300 commenters, representing a wide variety of stakeholders, submitted comments in response. The Commission also held a public forum on the proposed amendments on November 4, 2009. The FTC developed the Final Rule based on the public comments, the record of the public forum and the FTC’s September 2008 Workshop on the debt settlement industry, recent testimony before Congress, and law enforcement actions brought by the Commission and the states.
Information for Businesses
Today, the FTC staff issued a compliance guide to help businesses comply with the new debt relief rules. The compliance guide describes the key changes to the Telemarketing Sales Rule affecting debt relief services, helps businesses determine if they are covered by the new rules, details information that covered entities must disclose to customers, and discusses how fees may now be collected. It can be found at http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdf on the agency’s website and is linked to this press release.
The FTC vote approving publication of the Federal Register notice was 4-1, with Commissioner J. Thomas Rosch voting no. The notice will be published in the Federal Register shortly, and is available now on the FTC’s website at http://www.ftc.gov/os/2010/07/R411001finalrule.pdf. The provisions of the Final Rule will take effect on September 27, with the exception of the advance fee ban provision, which will take effect on October 27.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

MEDIA CONTACT:: Mitchell J. Katz, Office of Public Affairs202-326-2161
STAFF CONTACT:: Alice Hrdy, Allison Brown, or Evan Zullow, Bureau of Consumer Protection202-326-3224

(FTC File No. R411001)
(Debt Services.final)

Debt Collection: A Look Inside Collection Training

2010-07-22T15:41:00.000-04:00

As if the mass mailings and multiple calls weren’t enough to drive you to drink, collectors are also obtaining free online tips on how to better bang out calls to bring in your bucks. Learn what collectors are being coached on to better their efforts against consumers with accounts in collections. Read through these training tips collectors are using to manipulate or trap you into making a payment over the phone.

1. Be Prepared: Write down a list of common excuses debtors make and prepare your rebuttals to combat the debtors excuses. Exchange other ideas with co-workers and then categorize the possible excuses and incorporate them into your call script. It’s also wise to have handy: Exact amount of debt owed, Terms of sale, Product/service purchased, Payment due date.

2. Think Positive: Develop a positive mental state before jumping on the phone. Act as if every call is your first call on a great day. Wear a smile, it helps with tone. Be positive and maintain control of the call. Give the debtor a good personal vibe and work a payment out of them in a positive, professional manner. They may not like the collection agency, but you could be their best friend.

3. Respect My Authority: Tone is a strong tool when dialing for dollars. Debtors respond to tone. The tone, pitch, and speed at which you speak can have a powerful influence over your debtor. Take an anchorman or a radio DJ for example. Their voices command attention with little effort. You can take control of your call the same way with a confident tone and still maintain professionalism.

4. Establish Control & Maintain It. Address the debtor by name during the entire conversation. This displays respect and demands constant attention. Agree with your debtor, right or wrong. – I understand why you feel like that John – Validating their concerns keeps the lines of communication open and will eventually disarm the debtor. Ask open ended questions to lure your debtor in and absorb as much information as you can squeeze out. Silence is deadly. Count to 5 before replying to a debtor, wait a few seconds after being asked a question. An uncomfortable silence can create a sense of urgency in the debtor to satisfy the dead air, losing focus of the original reason for the call.

5. Lock & Key. Don’t waste your call. Every call should end with a payment, partial payment, or a commitment to make a payment in the very near future. If you don’t get a payment by phone at least you have obtained some ammunition and an open invitation to continue contacting the debtor for a committed payment. Have the debtor set up a payment for an extended date. This alleviates playing cat and mouse down the road and locks the debtor into a payment.

6. Adaptation. Every debtor is different. Lock into details like location and accents. What was the debt you’re collecting on? Identify who your debtor is before making contact. Listen to your debtor and pick up clues about their lifestyle and personality. This will help you decipher the best way to handle each situation.

Understanding your rights under the Fair Debt Collections Practices Act (FDCPA) will enable you to defend yourself against collection tactics and unscrupulous measures to collect. Use the information collectors are using against you to prepare and protect yourself when combating collection calls.

Work with a credit professional and see what’s affecting your credit, good or bad. Credit repair programs can eliminate erroneous information and protect you from being a victim of identity theft. Score better credit with Great American Credit Repair Company and get the FICO score you deserve.

Credit CARD ACT

2010-07-15T11:34:00.001-04:00

The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 went into effect on February 22, 2010. The new law means significant changes to fees, interest rates and restrictions. Here’s an overview of the new law and what it means for you as a consumer and credit card holder.

Fees
The new regulations limit fees such as those charged when consumers exceed their credit limits or pay bills online or by phone. Credit issuers will no longer be able to charge over-limit fees unless cardholders are notified that the purchase will put them over their limit and they authorize it regardless. And they can no longer engage in double-cycle billing, where interest charges are spread over two billing cycles rather than one. The new laws also limit upfront fees for subprime credit cards issued to people with less-than-great credit. Rules for billing statements have changed too; now they must be mailed at least 21 days before account due dates.

Interest rates
New interest rate regulations are aimed to help consumers avoid paying hefty interest charges. Credit card issuers face new requirements for how account payments are applied, including one that prohibits them from organizing monthly payments to maximize interest charges to consumers. If a card has more than one interest rate on balances, payments must be applied to the highest interest rate first. Issuers are also prohibited from making arbitrary interest rate increases and setting misleading terms. Consumers now have the right to opt out of certain term changes. Interest rates can’t be raised during the first year of an account (with a few exceptions, including teaser rates). Customers must be over 60 days late on payments before their interest rate can be raised on balances. If the rate is raised, it will go back to the lower rate if customers make the minimum payment on time for six months in a row.

Restrictions
One of the most significant restrictions in the new legislation concerns credit cards for young adults. From now on, anyone under 21 must have an adult co-sign if they want to open their own credit card accounts or prove that they can repay the card debt themselves. The new law is designed to help prevent college-age young adults from getting in over their heads.

Other restrictions include a ban on shifting due dates so that payments will be due on the same day every month. Gift cards are required to extend for five years, and issuers can’t charge dormancy fees for unused amounts left on cards.

Disclosures on Account Changes
Finally, the law aims to get credit issuers to be more transparent in disclosures about account policies. From now on, creditors must post their written credit card agreements online, and give 30-day advance notice before closing accounts. They are also required to give cardholders at least 45 days notice of any change in terms.

With all these reforms in effect, you may be wondering what hasn’t changed. The new law doesn’t completely eliminate an issuer’s ability to charge new fees or raise rates. And it doesn’t limit payday lenders, who offer short-term loans at very high interest rates.

For more free financial information please visit our score credit blog site or the official website greatamericancreditrepair.com. Call 800.491.6578 for a free credit repair consultation. Get the credit score you deserve with Great American Credit repair Company.

Myth #1 - Credit Repair is illegal

2010-07-15T10:07:00.000-04:00

Actually credit repair is very legal and two Federal laws protect it.

The Federal laws entitled "The Federal Credit Report Act" and the Credit Repair Organizations Act" specifically say it is legal for you to repair your own credit or to hire someone else to do it on your behalf. Credit repair organizations like Great American are governed by these laws and must abide by their requirements.

Visit Great American Credit Repair for more information on how to improve your credit score.

Myth #2 - Your Credit Score only counts when your're looking to borrow money.

2010-07-15T09:57:00.000-04:00

Definitely not true.

Right now your credit score is affecting almost everything you do.

When your're applying for auto insurance, homeowners insurance, life insurance-- they look at your credit score and your credit history. When your're applying for a job or being considered for a promotion, they look at your credit score. That's why it's so important to clean up your credit. It is essential that your credit report reflects only accurate information. Anything which is not 100% accurate, 100% timely, and 100% verifiable must be deleted.

Visit Great American Credit Repair for more information on how to improve your credit score.

Myth #3 - It will take me seven years to improve my credit.

2010-07-15T09:51:00.000-04:00

False.

It doesn't take a certain amount of time. It is a process.

If you do it right and with intensity, you can accomplish a great deal in just three to six months. If you have a bankruptcy, foreclosure or short sale, it might take a bit longer but with some advanced tactics we are able to even eliminate those in under 120 days.

Most negative items will remain on your credit report for up to seven years. So many items being reported are not 100% accurate, 100% timely, or 100% verifiable and must be removed immediately. No matter whether you take decisive action to clear up the sins of the past, you should definitely start to improve your credit by maintaining a positive payment history, not making lots of inquiries for new credit cards, maintaining lower balances and a low debt utilization rates on your exisitng cards (keep under 30%), and establish new accounts if you don't have at least two current tradelines.

Visit Great American Credit Repair for more information on how to improve your credit score.

Myth #4 - Too Many Accounts will hurt my credit score....

2010-07-15T09:17:00.000-04:00

A very common myth and people who believe this end up closing accounts.
The important thing to remember is that 15% of your credit score is based on the average age of your accounts. The more accounts that are older results in your having a better overall age of accounts and this will have a positive effect on your score. So never close an account (especially an older one) as this will negatively impact the weighted average of all your accounts.

Also keep in mind that 30% of your score is based on Utilization rate...a ratio of how much your existing revolving trade lines (not installment or mortgage loans) are used. For instance two years ago, an individual who was borrowing $4,000 against total trade lines of $8,000 was said to have a 50% Utilization Rate which had no negative impact on their score. Today, the scoring model has been tightened up and people with Utiization rates of greater than 25% to 30% are experiencing a drop of between 50 and 100 points in credit score. They have two options to correct this problem...pay down the amount of debt being borrowed or increase the amount of trades lines. In most cases, people don't have a lot of extra money to pay down their debt so they are forced to find new tradelines.

Our clients are able to get a Guaranteed $5,000 line of credit which will add somewhere between 50 adn 120 points in about 45 to 60 days...a very useful product for boosting your credit score quickly when wanting to qualify for a home or auto loan and get a lower interest rate. For more information on this product, call me or go to www.easynewtradeline.com

Visit Great American Credit Repair for more information on how to improve your credit score.

Myth #5 Piggybacking does not work anymore.

2010-06-28T19:41:00.000-04:00

Another myth.

The new scoring model known as FICO 08 was supposed to have altered the way that piggybacking (being added as an authorized user on someone's account who has great credit) was to have been handled and eliminate the practice of "renting" someone else's good credit in order to boost yours.

The practice continues as FICO 08 has not been adopted by too many lenders over the two years it has been available. This tactic is not recommend as it really is fraudulent to do so. Among relatives like a son or daughter being added to a parent's credit card, it is recommend and is a terrific way of helping a young person to build credit. Our clients have access to a $5,000 Guaranteed Tradeline (www.easynewtradeline.com) which will add between 50 and 120 points to a person's credit score within 60 days. Anyone thinking of buying a home or car should rush to boost their credit score in order to reduce their interest rate and lower their payments.

Contact me if you want more information about this terrific product which is legal and very legitiimate and widely used by professionals in the credit repair business.

Visit Great American Credit Repair for more information on how to improve your credit score.