Credit Repair Kit For Dummies, 4th Edition
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It has been said that a person can’t be too good-looking or have too many friends. This has never been truer than in the world of credit — at least the part about friends. The world of credit can be complex, unforgiving, and very expensive! The credit-granting, credit-reporting, and credit-scoring industries have become increasingly complex and powerful to the point where they are used for everything from issuing credit cards to getting jobs.

Consumer advocates recognized that we need effective ways to keep errors, both yours and theirs, from seriously complicating your life. The result is a series of laws, protections, and agencies whose purpose is to keep the credit game honest and give consumers a fair opportunity to access the American financial system. These protections may not always work as you’d like, but if they didn’t exist, you’d be at the mercy of big business, and that’s no place you want to be.

In this article, we cover the top ten legal protection resources you have to guide you in dealing with the world of consumer credit.

The Fair Debt Collection Practices Act

Being protected is especially important when a debt collector comes a-calling. The Fair Debt Collection Practices Act (FDCPA) limits debt collectors’ activities and spells out your rights. Highlights include:
  • Prohibiting collectors from abusing you, being unfair, and trying to trick you into paying.
  • Applying the law to most personal debts, including credit cards, auto loans, medical debts, and debts secured by your home.
  • Defining when and where a debt can be collected — for example, between 8 a.m. and 9 p.m., or not at work.
  • Requiring a validation notice that specifies how much you owe and what you should do if the debt isn’t yours or has been paid already.
  • Allowing you to just say no. If you don’t want to hear from a collector, you can write to the collection agency and demand that it not contact you again. Doing so doesn’t satisfy a legitimate debt, but it ends collector contact. It may, however, begin legal contact to sue you for the debt.
  • Giving you the right to sue for breach of the rules. You have a year to bring action for violations.

The Bankruptcy Abuse Prevention and Consumer Protection Act

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) revised the process of getting a fresh start when you are overwhelmed by debt. The major provisions in this law include
  • Mandatory credit counseling before filing
  • Stricter eligibility for Chapter 7 filing to encourage Chapter 13
  • Fewer debts discharged and fewer state exemptions
  • Tax returns and proof of income required for means test
  • Mandatory five-year Chapter 13 plan if over your state’s median income
  • Mandatory financial management education after filing
  • Time between Chapter 7 filings increased to eight years
Bankruptcy was designed to give you the ultimate protection of the courts from your creditors. The process can be as effective as it is damaging to your credit, and you should use it with great care, and only if you’ve already considered less-damaging courses of action.

In some states, you can file your own bankruptcy petition (called pro se); in others, you need an attorney. Regardless, we recommend that you use an attorney who does this for a living. A poorly thought out or executed bankruptcy can leave you with unresolved debts and deprive you of the opportunity to use this protection again for several years. A good bankruptcy attorney will spend a significant amount of time with you to compare bankruptcy with other possible ways of handling financial problems.

Your lawyer

Lawyers often get a bad rap, but if you want an effective weapon in providing consumer protection, you need look no further. Whether your issue is a debt collector, a retailer who won’t step up to resolve a problem, or a contract with unsuspected gotcha clauses, a knowledgeable and persistent attorney is hard to beat.

Yes, we know, lawyers are expensive, but there are times when only the best will do. Using a second-rate attorney is like showing up at a gunfight with the second-fastest gunslinger. Better not to show up at all!

Here are some points to consider when looking for a consumer attorney:

  • Nothing is better than a referral from a satisfied friend, colleague, or relative. Ask someone in whom you have confidence. You may get a great referral or a solution you hadn’t thought of.
  • Look for someone who does a lot of what you need. Like picking a heart surgeon, you want lots of experience here.
  • If you already have a lawyer, ask for a specialist recommendation.
  • Check your local American Bar Association affiliate or attorney association. They often maintain lawyer referral services.
  • Look for someone your gut says you can work with. Is the lawyer concerned about you and your problem? Always interview more than one attorney. This situation is important.
  • Don’t be deterred by hourly rates. A good attorney who charges more can be a bargain if you get resolution quickly and permanently.
  • Get all agreements in writing to avoid miscommunication. Be sure to read the agreement before you sign it, and ask about anything that’s not clear to you.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help minimize the impact of the COVID-19 pandemic. The CARES Act provides a number of important financial safeguards intended to last until the crisis is over or for a set period of time afterward. Given Congress’s penchant for keeping laws on the books long after originally intended, and because no one at this time can tell when or if the crisis will be resolved, here are some relevant highlights of the CARES Act:
  • Protections for renters: If you rent in federally subsidized housing or are renting from an owner who has a federally or government-sponsored enterprise (GSE)–backed mortgage (for example, Federal Housing Administration [FHA], Veterans Affairs [VA], U.S. Department of Agriculture [USDA], Fannie Mae, or Freddie Mac), the CARES Act may provide for a suspension or moratorium on evictions.
  • Protections for homeowners: If you have a federally or GSE-backed mortgage and had a hardship caused by COVID-19, you have the right to request and obtain a forbearance extension for up to another 180 days (for a total of up to 360 days), without additional fees, penalties, or additional interest (beyond scheduled amounts). The law prohibits GSE lenders and servicers from beginning or finalizing a judicial or nonjudicial foreclosure or sale against you.
  • Protections for those with student loans: You get automatic suspension of principal and interest payments on federally held student loans through September 30, 2020. And what’s more, suspended payments count toward any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.

Lenders must report any current loans on which they offer forbearance to the credit bureaus as being current as long as the terms of the agreement are observed.

Although not part of the law, the three main credit bureaus are allowing free weekly credit reports at least through April 2021.

Statute of limitations laws

This protection is worthy of Perry Mason: “I object, Your Honor, for this charge is too old.” Well, maybe Perry didn’t say exactly that, but he’d be happy to see that each state has a law called a statute of limitations (SOL) that sets a limit on how long a debt collector can sue you in court, depending on the type of loan you allegedly owe. This is only fair, because after several years, who keeps all those receipts and slips of paper? Either hurry up and sue or forget about it!

This protection isn’t automatic; you have to ask for it. What do you need to know and do? Read on.

  • If a debt is past the SOL, the creditor can’t successfully sue you in court to collect it. But you must show up and prove that the debt is too old.
  • Credit reports show a delinquency for seven years. This has nothing to do with the time a debt is collectible.
  • The period used to figure how old your debt is starts when you miss a payment and never make another one. A payment may restart the SOL clock, depending on the state in which you live.

Your state attorney general

Every state has an attorney general. All attorneys general have at least one thing in common: One of their primary responsibilities is to enforce their states’ consumer protection laws. Every state has a consumer protection statute prohibiting deceptive acts and practices. These statutes include laws that address specific industries or practices. For example, many FACT Act protections, especially for credit reporting, have stricter state regulations, giving you more rights and a local resource for help.

State attorneys general love to go after abuses and illegalities in the marketplace, including deceptive trade practices, telemarketing and internet fraud, fake charities, ID theft, and false or misleading advertising. It’s good press for them and good protection for you. Generally, these public officials have a low tolerance for financial shenanigans. So, if you think you’re being abused, taken advantage of, or scammed in a credit or personal finance transaction, this is the office to call.

I’ve had good luck working with the consumer protection sections of several state attorneys general. If you decide to ask them for help, we suggest that you be organized and to the point, and have the pertinent information at hand. Attorneys general are no-nonsense law enforcement officials who appreciate you calling for their help but not wasting their time.

The Consumer Financial Protection Bureau

Reforming our financial system isn’t easy, and the Feds know it, so they formed a new agency — the Consumer Financial Protection Bureau, or CFPB — to carry on the fight of protecting you long after the ink dried on the Dodd-Frank Wall Street Reform and Consumer Protection Act (the legislation that created the CFPB). Not since J. Edgar Hoover headed up the FBI has a federal agency had such far-reaching powers. The CFPB sets rules for payday lenders, credit card issuers, and all the players in between. Here are the major protections this agency delivers:
  • Need information? Use the question-and-answer service for inquiries about mortgages, student loans, debt collections, credit reports, and more.
  • Have a complaint? Let ‘em have it. Bank accounts, credit cards, credit reporting, debt collections, money transfers, mortgages, student loans, and consumer loans are among the topics you can get help with. You complain, and the CFPB forwards your beef to the company and works to get an answer. It reviews the response and shares it with other agencies to identify patterns of abuse and write better regulations. It also sends you e-mail updates and has a secure consumer portal that you can use to track your complaint and give feedback about company responses to help the CFPB prioritize complaints. Just like the Dragnet guys: dum-ta-dum dum!
  • It requires anyone who issues credit or prepaid cards to give you better, more easily understandable terms-and-cost disclosures.
  • If you have to sign it, you should be able to understand it. The CPFB assures that paperwork is understandable.
  • It helps set rules on transaction fees for interchange activity, like on your Visa or MasterCard.
  • It closely regulates consumer credit counseling, debt settlement, and debt collectors to keep you from being victimized.

The Credit Card Accountability, Responsibility, and Disclosure Act

Fed up with tricky terms, excessive penalties, fees, and unfair banking practices, Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) to give you a fair playing field in the area of credit cards. Here are your major protections:
  • Credit card companies can’t raise card interest rates except under specific circumstances, such as at the end of a promotional rate, or when a variable interest rate index to which your card is tied rises, or if you’re 60 days late on a payment. Also, double cycle interest billing, which used your average daily balance for the current and previous billing cycles to charge you more, is no longer allowed.
  • If your rate or terms change, you get 45 days’ notice to plan what to do.
  • You can opt out of changes you don’t like. Doing so may cause your account to be closed, but you can pay off the debt under the old terms.
  • Card companies can’t issue cards to people under 21 who have no income. This sounds like a no-brainer, but for years creditors had been giving students credit despite their having no income to repay their charges.
  • Creditors must give you at least 21 days after a bill is mailed to make your payment. The due date can’t be before the mail is delivered or on a weekend, a holiday, or a day when the creditor is closed for business. If you’re late, fees are limited to a maximum of $25.
  • All payment amounts above the minimum payment due must be applied to the balance with the highest interest rate, not the lowest.
  • If you exceed your credit limit, the card company must ask you whether you want that transaction to be processed and incur an over-limit fee. Saying “no thank you” results in the purchase being denied but also saves you the over-limit fee. Even if you say yes, the fee can’t exceed the amount by which you exceed the credit limit. So if you exceed your limit by $10, the fee can’t be more than $10.

The Fair and Accurate Credit Transactions Act

Fairness is something you can hope for in your dealings with the credit bureaus and those other consumer-reporting bureaus that are increasingly in the news. But before the protections afforded in the Fair and Accurate Credit Transactions Act (FACT Act or FACTA) became effective, fairness was strictly in the eye of the beholder. And the beholder wasn’t you! Congress acted to end a number of perceived and real abuses.

Congress understood that the nation’s banking system was becoming increasingly dependent on credit reporting, that inaccurate reports resulted in unfair and inefficient banking, and that you have a right to privacy. The result is that you now have more control over what’s said about you in credit bureau files and who can access your information. You also have the right to dispute errors or out-of-date information and to get a free copy of your credit report from each bureau every year. Not bad for the crowd from Washington, D.C.! Here are your main protections:

  • You must be told about any negative action taken as a result of information contained in your credit report, and you must be given free access to the same information. If the interest rate on your favorite credit card goes up, for example, you get to see a copy of the report that contains the data that led to that increase.
  • You can find out what information is in your personal file. No more secrets! It’s your information and your file, so you can look at it.
  • You can get a free copy of your credit report at least every 12 months if you ask for one. You can also get a free report whenever you’re the object of identity theft or fraud, you’re on public assistance, or you’re unemployed but expect to apply for employment within 60 days.
  • You have the right to know your credit score. This score used to be as big a secret as what was in your bureau files. Score watching has become a favorite pastime for many and a profitable business for others.
  • The data in your file must be accurate, verifiable, and current. If data is incorrect or too old, you need only to ask, and it will be verified or removed pronto.
  • Only those who have a legitimate business purpose can see your file, and you can stop everyone from accessing your file without your express permission if you like. Usually only creditors, insurers, employers, landlords, and others with whom you do business get to see what’s in your file. You can slam the door on everyone with a credit freeze.

The Federal Trade Commission

The Federal Trade Commission (FTC) is the alter ego of the Bureau of Consumer Protection (BCP). Although it doesn’t deal with individual consumer complaints, it does protect consumers by accumulating and analyzing complaints and then taking industry-wide action to address issues that you bring to it. Some examples of BCP protections are your ability to get a free annual credit report, the National Do Not Call Registry to block unwanted telemarketing calls, and appliance disclosure stickers that show the energy costs of home appliances, to name just a few.

The BCP looks out for unfair, deceptive, or fraudulent practices in the marketplace. It investigates and sues companies and people who violate the law. It also develops rules to protect you and requires businesses to give you better disclosure of your costs, rights, and dispute-resolution options. It also collects complaints about consumer fraud and identity theft and makes them available to law enforcement agencies across the country.

Of the bureau’s seven divisions, here are the five that you may find useful:

  • Advertising practices: Enforces truth-in-advertising laws. If an offer seems too good to be true and it is, complain to the FTC.
  • Financial practices: Protects you from deceptive and unfair practices in the financial services industry, including predatory or discriminatory lending practices, deceptive or unfair loan servicing and debt collection, and fraudulent credit counseling and debt settlement companies.
  • Marketing practices: Responds to internet, telecommunications, and direct-mail fraud; spam; fraudulent work-at-home schemes; and violations of the Do Not Call provisions of the Telemarketing Sales Rule.
  • Privacy and identity protection: Protects your financial privacy, investigates data breaches, helps consumers whose identities have been stolen, and implements laws and regulations for the credit reporting industry, including the FACT Act.
  • Enforcement: Sues to address issues on these practices.

Your complaint, comment, or inquiry may help identify a pattern of violations requiring law enforcement action, but the FTC doesn’t resolve individual consumer disputes.

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