New basic credit card scam: phony debt collectors and phony collection agencies

In this type of economy we live in we have to be vigilant about scams. Everyone wants to get your cash. When dealing with debt collectors or a collection agency, before making any payment or payment arrangement, make sure you get it in writing. Don't fall into the time pressure they put on you with claims that if you don't pay by the end of the phone call they will sue you. The legal process is a long process and doesn't happen overnight. One more day to get it in writing and to call them back to make sure the people you are dealing with are legitimate is worth the wait. Once you send them the cash, it will be almost impossible to get it back.



CLEVELAND - Ohio consumers are getting phone calls from someone claiming to be a debt collector. But, is the caller legit?

"Fast talking foreigner and he said I was delinquent and we're going to take legal action," Tim Swancer remembered.

Swancer is a college student working full time, and figured a payment from an online payday loan slipped through the cracks. He had no reason to doubt the debt collector, so he paid it off.

"He knew who it was from. He knew how much. He knew the last four digits of my social security number. He knew my birthday and place of employment," Swancer explained.

Under the law, Swancer has the right to request documentation of the debt before making any payment. Swancer didn't exercise that right.

After he paid, he looked through his paperwork for proof of debt. Swancer didn't find anything. The debt also didn't appear on his credit report.

"Two days later, I got a letter from CashNet USA saying we value you as a customer," Swancer said. The letter offered a promotional rate if he took out another loan.

The timing didn't add up for Swancer, so he called CashNet USA.

"They knew exactly what was going on. They knew there were fraudulent phone calls," Swancer said.

CashNet USA warns consumers about these phony calls on its website and says the calls are not being made by anyone affiliated with the company.

The parent company of CashNet USA did not return our repeated calls for comment. According to the company's website, customers of Payday Advance, Cashland, Cash America, and SuperPawn are also getting calls. Some people who never did business with these companies are getting calls.

The Illinois Attorney General also issued a warning for bogus debt collectors using a variety of names beside CashNet USA including: Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, America Legal Services, Quick Cash, and ACS.

Swancer just wonders why he never got a letter warning him about this problem.

"I'm afraid someone might have my information," Swancer said.

Swancer is lucky. His bank refunded the debit card payment.

CashNet USA refers consumers to the Federal Trade Commission, but that agency won't say if it's investigating.

Dealing with Collection Agencies on deliquent credit cards and charge offs

This was a very good article that I think consumers who are new to collections may find helpful.  In this economy, dealing with collectors can be difficult.  Most of them do violate the FDCPA and try to intimidate consumers to pay.

There are remedies to deal with credit card delinquencies and charge offs.

Collections Recon:

If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a debtor. If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a debt collector.

When owing a legitimate bill that is overdue, a debtor should immediately try to make arrangements with the company owed. If arrangements are unsuccessful or the amount owed is still not paid, collection agencies will usually be called upon to contact the debtor. Most of these agencies are ethical in their practices. However, some use practices that are unethical as well as illegal.

The federal Fair Debt Collection Practices Act requires that debt collectors treat you fairly by prohibiting certain methods of debt collection. Much of the law places limits on the activities of debt collectors, which are defined as any person, other than the creditor, who regularly collects debts owed to others. For instance, it can be an attorney who regularly collects debts or a company that pursues debt collection as a business practice.

Debt collectors may contact you in person, through the mail, or by telephone, telegram, or fax. However, they may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves.

You can stop a debt collector from contacting you by writing a letter to the collection agency telling it to stop. After that, the agency may only contact you to say there will be no further contact or to notify you that some specific action will be taken. This however, does not stop the collection proceedings, only the contacts.

Certain types of collection practices are expressly prohibited. Harassment, threats of bodily harm, or the advertisement of your debt is prohibited. Debt collectors may not make false statements about your credit history or lie about what action they can legally take against you.
Often collection agencies obtain a group of overdue accounts from a creditor. If the agency collects what is owed, they receive a percentage of the payment in return for their services. If the collection agency collects a percentage of what is paid, the original creditor still owns the account and the collection agency has no right to sue the debtor. Some unscrupulous collectors will threaten to take a debtor to court when actually they do not have the legal right and have no intention to do so. This kind of scare tactic frequently works but is illegal. All the collection agency can do in this situation is to put a derogatory entry into a debtor’s credit report, which may follow the debtor for years. 

Some collection agencies buy bad debts called “charge-offs” from original creditors. The debtor now owes the full amount to the purchaser. The agency might only pay the original creditor 1 percent to 5 percent of face value because the chances of recovery decrease substantially with time. The agencies’ profits come from the difference between the purchase price and the amounts that are eventually collected.

You have the right to sue a debt collector in state or federal court if you believe the law was violated. However, even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you truly owe it.

The North Dakota Department of Financial Institutions must license all debt collectors. You can file a complaint against a debt collector by contacting the Department of Financial Institutions at 701-328-9933.

For more information on your rights under the Federal Fair Debt Collection Practices Act see http://www.ag.nd.gov/Brochures/FactSheet/Fair.pdf.
The Attorney General’s Consumer Protection Division investigates allegations of fraud in the marketplace. Investigators also mediate individual complaints against businesses. If you have a consumer problem or question, call the Consumer Protection Division at 328-3404, toll-free at 1-800-472-2600, or 1-800-366-6888 (w/TTY). This article and other consumer information is located on our website at www.ag.nd.gov.

If your spouse dies, then do you have to pay the credit card?

My understanding of credit cards regardless of whether you live in a community property state or not is that only the primary cardholder is responsible if it is a individual account. Even if that cardholder authorizes others to use the card, only the primary person is responsible. If the primary card holder passes away, then the authorized cardholders are not held responsible for the debt.

This is different from a joint account where both users were approved jointly as co-applicants. In that case, both are held responsible for the debt even if one of them passes away.

Check out this HSBC recent story in the Chicago Tribune:

For most of his adult life, Elmer Duncan was a loyal Carson Pirie Scott customer.

By his wife's estimation, he first opened an account with the Chicago department store in the mid-1950s. Ruby Duncan said it was her husband's preferred place to shop, and he always paid his bills on time.

When he died July 17, Elmer Duncan left a $2,361.04 balance on his Carson Pirie Scott credit card, which is administered by HSBCbank.

Since her name was never on the account, Ruby Duncan sent HSBC a copy of her husband's death certificate and assumed the debt would go away.

Instead, HSBC sent a new bill — with her name on it.

"It's never been my account. I never signed any papers that said it was my account," she said. "I thought it was very distasteful."

In November, HSBC sent the account to collections in Ruby Duncan's name. Fed up, Duncan quit trying to contact HSBC and began ignoring their calls.

"I'm still grieving for my husband," she said. "We were married 38 years. That's a long time. I didn't need all the aggravation that I got from them."

After realizing the problem would not go away, Duncan wrote What's Your Problem? in late January.

"I pay my bills, and my credit is good," she said. "They tried to mess up my credit, and that's what really made me angry. Your credit is part of your life. As old as I am, I still want my credit to be good."

Duncan said that if the debt was hers, she would pay it. But the credit card in question was strictly her husband's.

The Problem Partner, Kristin Samuelson, contacted HSBC spokeswoman Kate Durham, who reviewed Duncan's concerns.

Two days later, HSBC decided to erase the $2,361.04 debt and correct Duncan's credit record.

Durham said she could not discuss the specifics of Duncan's case, citing privacy concerns. But she said the company's goal is to ensure "all of our customers receive a positive card experience with each and every interaction."

"Since learning more about this particular situation, we have since resolved the matter in Ms. Duncan's favor," Durham said.

Duncan said HSBC sent her a letter telling her it had erased the charges and would inform the credit bureaus within 90 days.

"I'm happy that they decided to do that, but I felt they really kind of messed me over because they kept trying to send letters," she said. "They tried to mess up my credit. They knew they weren't supposed to do that."

HIgher interest rates on the way for everyone

In the past credit card companies would base your interest rates on your personal credit profile, job stability, and net worth (assets minus liabilities). That was the past and under the new economy, they are making decisions across the board on their entire credit card portfolio.

Frankly, the credit card companies are bleeding losses through charge offs that reflect the current unemployment rate of +10%. That is an extremely high number and will continue to go only up in the near future. Thus, the credit card companies have to make up the money through higher interest rates and fees on the remaining credit card customers.

New York Times:

In their defense, banking officials say they have no choice but to raise rates and limit credit. Because of the new rules and the prolonged economic malaise, they say it is now far riskier to issue credit cards than it was just a few years ago.

“We sell credit; we don’t sell sweaters,” said Kenneth J. Clayton, senior vice president for card policy at the American Bankers Association. “The only way to manage your return is through the price of the product or the availability.”

The nation’s largest banks are scrambling to figure out a new business model that fits within the new rules and current economic conditions. Those banks made handsome profits over the last decade by charging high interest rates and penalty fees to a small group of customers who routinely paid late or exceeded their balances.

Already, banks are shifting to a model in which a smaller pool of Americans will be eligible for credit cards, and customers with cards will probably pay more for the privilege through annual fees and higher interest.

Basic credit card reform

Credit card reform is on the way. The reforms are to protect consumers from the abuses that take place now from credit card companies. Basically the credit card companies can raise interest rates, minimum payment amounts, or any terms of the contract at any time, but with the new laws enacted the credit card companies will be required to give written notice.

Channel3000.com:

The Credit Card Act of 2009 is being hailed as the largest reform ever imposed on the credit card industry, and the move is meant to increase consumer protection -- but it could also have some negative effects for those with good credit.

In the current fast-paced world fraught with economic challenges, paper or plastic has taken on a whole new meaning. More and more people are relying on plastic for their purchases, but credit cards as we know them today are undergoing a big change.

"It's going to be a different playing field," said Michael Johnson, finance instructor at Madison Area Technical College. "It's not going to be quite as easy to get into trouble as it has been in the past."

The Credit Card Act of 2009 is 33 pages of very complicated material, but it is full of important information for those who use credit cards. For example, under the legislation, 18 to 20 year olds will no longer be able to get a credit card without a co-signer.

Another change aimed at protecting consumers adds the right of the cardholder to reject an interest rate hike.

Starting in February, when the legislation takes effect, credit card companies must inform you in writing that they're going to increase your rate -- and you can say no. The rejection would close your account, but would still allow you to continue paying off the balance at the current interest rate.Another thing that will change is how credit card companies apply your monthly payments to your credit card balance.

Unfortunately, the credit card companies have already taken preemptive action to get around those new laws. Specifically, they have already raised interest rates and payments, and changed fixed rate to variable interest rates.

Why was my credit card limit reduced

We live in an unusual time as far as the economy is concerned. It seems like normal financial advice dished out by the money experts no longer apply. During these recessionary times, this one specifically, all credit card companies without exception are doing things that they normally don't.
Credit card companies are reducing credit card limits without any regard to consumer credit profiles, credit scores, or financial situations based on debt to income ratios. The banks simply have taken many more losses than in normal times, so they have to tighten credit standards to reduce losses. They are far from the customer service era of doing things to satisfy customers. They have changed their attitude and focused everything on the bottom line. Banks do not care if they piss off loyal customers paying on time because they are being buried in losses and just trying to stay afloat.
If you find your credit limit reduced and your financial situation has not changed, then chances are you are simply a victim of the credit card company reducing limits based on entire portfolios being minimized for loss exposure. It doesn't matter if your FICO score is high, you have no other debt or no debt at all, or if you have a high net worth. I know it is hard not to take it personal and become angry, but the fact of the matter is credit card companies are reducing every one's credit. The idea is if you have no more credit available, you can't default on it. It doesn't make any sense in the big scheme of things, but the credit card companies aren't looking pass today in making their credit limit decisions.

Basic Credit Card Relief

In the environment we live in, we have been taught to pay our bills on time and if possible pay them off in full every month. Unfortunately, during these recessionary times you may find yourself overextended because of job loss, hours cut, spouse's job loss , or simply reduced income for whatever reason.

The number one priority is taking care of your family that includes making sure they have a roof over their heads, food on the table, and money to pay all the utilities. Keep you car loan current so you have a vehicle to get back and forth to work. The credit cards should be the least of your worries.

You can call the credit card companies and ask to for reduced rates and reduced payments. They generally will not accommodate you if your payment is on time and your account is current. However, once you fall behind and talk to a collections representative, they will have programs to get you current.

I was surprised to see Suze Orman with her latest advice which I agree with. In these hard times if you don't have a big emergency cash fund, then pay only the minimum on your credit cards. This is advice I would recommend from Suze.

Suze Orman and the New Rules of Credit Card Debt

"If you have an unpaid credit card balance [and] not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can," Orman said on the program.

Telling her fans not to prioritize paying off credit card debt is quite a shocker since her focus has long been about getting out of debt. In her latest book, 2009 Action Plan: Keeping Your Money Safe & Sound, she dedicates an entire chapter on the subject. But Orman says that now, with the number of unemployed Americans rising, having an emergency savings fund is even more important than being debt-free. "The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been in paying your bills on time," she said, referring to the fact that credit card companies have been lowering credit limits, increasing interest rates, and revoking credit cards altogether.

That means that many Americans could find themselves without any access to credit following a job loss, when they need it most. If someone finds themselves out of work and without a credit card, then Orman worries about her ability to put food on the table. That is why an emergency fund is key, she says. So instead of prioritizing paying of debt, Orman says that all spare dough--after making the minimum payments--should go into an emergency savings fund. Ideally, she says, that fund should contain eight months worth of living expenses.

While this approach makes sense for those living with little or no savings, consumers who already have a significant emergency fund should still focus on paying off credit card debt. That's something Orman, along with other financial experts, really emphasize. For those with rainy day funds large enough to last eight months, these more familiar rules still apply:

If you are just in over your head and can't take the nonstop calls you get from your credit card companies, then you should explore bankruptcy as an option. Yes, your ego may hurt, but you should put this aside for the sake of taking care of your family. You don't want to become a casualty of the recession/depression we are in and become homeless on top of being unemployed.

Credit card videos

There is a ton of information about credit cards on the internet. It is sometimes difficult to read and understand the terms of agreement that come with credit cards. Most of them are basic and are intended to protect the credit card companies.

The credit card agreement is a contract that allows the credit card issuers to charge off the account (write off the credit card debt) for non payment, transfer or sell the card to another bank or card issuer, change the terms and conditions, as well as sue you for default or breach of contract.

The video below helps explain financial terms to help you understand better how your credit cards and other loan products work.

Watch the latest videos on YouTube.com