Attorney Richard Gaudreau

Be on the Look Out for Credit Fraud

The Credit Crunch Hits Home
The Credit Crunch Hits Home

Like many Americans, nearly one in four today, you may be out of work and having difficulty paying your bills on time.  The phone rings non-stop at home, the warning letters arrive daily, and you wonder if you will ever have another moment’s peace again. Consumers do have rights even when they are behind in payments.  Knowing your rights and how to resolve errors on your credit reports can ease the stress of overbearing creditors and help you to rectify unfair situations.

 

The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Protection Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices in order to collect on a debt. The act covers personal, family, and household debts, including money you owe on a personal credit card, a medical bill and your mortgage.  The FDCPA doesn’t cover debts you incurred to run a business.

 What are your rights?

Consumers do have rights throughout the debit resolution process as ensured by the FTC.

  • Debt collectors can only contact you during normal business hours of 8 a.m. to 9 p.m. They may not contact you at work if they are told (orally or in writing) that you are not allowed to receive calls.
  • Debt collectors can only contact those parties not directly involved in the debt action to discover information regarding your home address, phone number and where you work.  They cannot contact outside third parties more than once. Otherwise, a debt collector is generally not permitted to discuss your debt with anyone other than you, your spouse, or your attorney. It is illegal for a debt collector to try to embarrass you into paying by discussing your debt with family members or co-workers.
  • Debt collectors must send you a written ‘validation notice’ telling you how much money you owe.  This letter must be sent within five (5) business days after they have first contacted you. You will then have thirty (30) days after you receive the notice to respond if you don’t believe that you owe the debt.  After 30 days without contact, the debt collector can begin contacting you again.

 

Know the difference between secured and unsecured loans.

Most consumers carry two types of loans.  Secured loans tied to an asset such as an automobile, boat, property or home.  Consumers take unsecured loans with the understanding that failure to repay the loan can result in repossession or foreclosure of the property.  Secured loans can be recalled any time the loan is in default and without warning to the consumer.  Rather than letting the loan default, it may be wiser to sell the vehicle outright and repay the loan.  You’ll avoid added fees, storage and towing charges and the bad mark on your credit report.

 

If you are having difficulty making mortgage payments, it is best to immediately call your lending agent.  Most lenders are willing to work with homeowners to avoid foreclosure and the government is also offering new mortgage interest rate reductions in the hopes of easing the recent mortgage crisis. President Obama’s Homeowner Affordability and Stability Plan provides some $75 billion in relief grants and mortgage modifications to 7 to 9 million homeowners.  The Plan also gives judges the power to modify home mortgages during bankruptcy.  Even if you were previously denied a change in your mortgage, it may be worth resubmitting your request to see if you qualify under the new legislation.

 

Unsecured loans are not tied to any asset and usually include credit cards, signature loans, medical bills and other service debts.  While nothing can be repossessed, the creditors can petition the court to order you to make a monthly payment in order to ensure repayment of the debt.  If a debtor defaults on this hearing, a court can issue an arrest cupias. Again, an open line of communication with the credit card agencies may enable you to take advantage of reduced interest rates or other repayment programs available.

 

What can you do to help yourself?

 

Don’t hide from your creditors. Rather than letting all those calls go to voicemail, take the call and work to establish a modified repayment schedule with them.  Whether your reason is illness, layoff, or other situation, be honest and tell them why repayment is difficult. If you wait until the account is turned over to a collection agency, it will be too late and the creditor can no longer intervene to make modifications.

 

Set up a workable budget – and stick to it.  It may sound old school, but take your budget back to basics. Money in must be equal to or less than money going back out each month.  If you’re having trouble setting or maintaining a budget, it may be time to call in the experts.  There are many reputable credit counseling organizations that have staff certified and trained in consumer credit, money management, and budgeting.  Beware of agencies that charge high fees, or request that you make ‘voluntary’ contributions as they are often fraudulent in nature.  Some agencies offer debt management plans (DMP) that establish a monthly account for you to deposit funds. They in turn then make arrangements to pay your creditors, student loans, medical bills or any other unsecured loans you have according to an agreed upon payment schedule. Often the creditors will provide a reduced interest rate or waive certain fees if you are paying through a DMP.

 

Questions to ask a potential DMP (obtained from www.FTC.gov/credit)

  1. What services do you offer?
  2. Are you licensed to offer services in my state?
  3. Do you offer free information?
  4. Is there a formal written agreement or contract?
  5. What accreditations or qualifications are held by the organization’s counselors?
  6. How is the organization paid?
  7. What are the fees?
  8. How is my personal information stored or destroyed?
  9. Are you a nonprofit funded by money from the credit card industry?

 

The best financial advice is to not allow your creditors to obtain the upper hand.  Stay on top of your situation and communicate with creditors as soon as you become aware of a delay in payment or change in your financial situation.  If you’re still unable to work out a repayment plan or if you find that your creditor is behaving in a difficult or illegal manner, talk with a legal professional about your options.