Chapter 10 - Glossary

Glossary 

30 DAY DEMAND LETTER: In essence it’s an introduction letter from a Collection Agency or Law Firm that gives you a 30 day period to dispute a debt. When responding to a 30 Demand Letter it’s highly recommended that you send a Validation of Debt request. According to the Fair Debt Collection Practices Act, (FDCPA Section 809 Validation of Debts) every debtor is entitled to request proof that they actually owe a debt and that the Collection Agency or Law Firm is legally able to collect it.

ANNUAL PERCENTAGE RATE (APR): There are many different types of APR depending on the loan you have. Some have fixed rates while others are variable. In relation to Credit Cards, Nominal APR is the interest rate associated with a loan, not including any taxes or fees. Effective APR includes fees that have been or will be added to your balance. For this reason, Effective APR is often higher than Nominal APR. Knowing a loan's APR tells the borrower what the true cost of borrowing is as it includes all of the fees related to the loan, not just the interest payments. Credit Card Companies can advertise monthly interest rates, but they’re required to clearly disclose the APR before an agreement is signed.

ANSWER: When served with a Summons and Complaint, the defendant has a period of time to respond, in writing, to the Lawsuit with the Court. This is known as filing a “Response” or “Answer.” Depending on the Court House, there is a specific form to fill out and a filing fee which can range anywhere from $10 to hundreds of dollars. Some states or counties require that you physically show up to a court date whether an Answer is filed or not.

ASSETS: The total economic value of a person or business that is determined by tangible items such as cash, property, cars, furniture, stocks/bonds, equipment, etc.

ASSOCIATION OF CREDIT AND COLLECTION PROFESSIONALS (ACA Int.): The ACA International is a non-government agency set up to help represent Collection Agencies, Debt Buyers, Attorney Collectors and creditors. It’s a non-profit company with over 5000 members. The ACA may attempt to mediate and resolve certain issues between a debtor and a collector or its agency.

ATTORNEY: An individual who has studied and graduated Law School and is licensed to legally represent a person in legal matters or authorized to act on another’s behalf.

ATTORNEY GENERAL: The Chief Legal Officer of a County, State or the Head of the U.S. Department of Justice. In most cases, when referring to the Chief Legal Officer for a state, you would say “California Attorney General” or “Florida Attorney General.” If you were referring to the President’s Council, you would say “The Attorney General for the United States.”

BANK LEVY: When a person, company or agency exercises the right to freeze bank accounts and seize funds for a past due debt. The most common reasons for a bank levy are unpaid taxes, unpaid debt and past due vehicle registration. In most cases, a judgment must be filed before a bank levy can be placed on a bank account. However, in situations where the IRS is involved a bank levy can be done immediately when a tax payer goes delinquent.

BANKRUPTCY: The condition or state of being totally bankrupt. Having little to no assets or money - broke. Typically it’s used when referring to someone who has legally filed, or declared, financial insolvency and is unable to pay back their creditors/debt.

BETTER BUSINESS BUREAU (BBB): The BBB is a non-government agency that collects and reports information (usually complaints) about businesses. It applies a rating system for businesses from “A” to “F” similar to restaurant ratings. As a business receives complaints from consumers, their “rating” score with the BBB gets affected. The BBB has no authority to resolve any issues with a company or business. If anything, they can place a call or send a letter regarding the complaint filed, but that’s pretty much it. All you’re doing by filing a complaint with the BBB is harming the business’s online reputation.

CALL LOG: In the area of Debt Collection, it’s the process in which you make or keep a record of phone calls or messages received from creditors. This can be done using a pad of paper and pen, a Word document, Excel worksheet, or other such software. The purpose of a Call Log is to monitor and maintain a record of how many calls you get throughout a day, week or month. If a creditor is calling you more than usual, during inconvenient times or if your account has changed hands, a Call Log is your running record of communication.

CEASE AND DESIST LETTER: Also called a (C&D) is an order or request to an agency, business or person to stop an activity or behavior. You can stop a debt collector from contacting you by writing a C&D Letter. Once the collector receives the letter, they may not contact you again, except to say there will be no further contact or to notify you they intend to take some action, such as a lawsuit. Please note, sending such a letter does not make a debt go away if you actually owe it. All a C&D can do is cease communication.

CHARGE OFF: A negative marking on your credit report. A Charge-Off occurs when a debtor has become seriously delinquent, typically after 120 days to six months of non-payment. This is also when the Original Creditor considers your account uncollectable and sends it to a collection agency.

CIVIL CASE: This refers to a Lawsuit that involves Civil Law versus Criminal Law. Civil Law is the body of Law used to resolve disputes between small businesses, individuals, family, etc. Civil Law typically relates to issues which involve broken contracts, divorce, child custody, landlord/tenant disputes, debt collection and more.

COLLECTION AGENCY: Is a Business or Corporation specializing in the area of collecting money for past due debts from consumers or other businesses. Collection Agencies are compensated by receiving a percentage of the amount of money they collect on behalf of the Original Creditor. Some Collection Agencies will purchase past due debts in bulk which makes them the owner of those debts. In this case, any money collected is 100% theirs. They are referred to as “Debt Buyers.”

CONSUMER: Anyone who acquires or purchases goods or services for personal use.

CONSUMER FINANCIAL PROTECTION BUREAU (CFPB): A Federal Government Regulatory Agency established by The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The CFPB’s primary responsibility is to regulate and protect consumers from unfair, deceptive, or abusive practices from banks, businesses, Credit Card Companies, auto finance lenders, the Credit Bureaus and more. The CFPB is a Government Agency which has the authority to examine, enforce justice and protect consumers from unethical and illegal practices in the area of finance.

CONTEMPT OF COURT: Having disrespect or being disrespectful in a Court of Law. Any deliberate act intended to lessen the authority or dignity of a Court and/or its Judge; to embarrass, hinder or obstruct the administration of justice or disobey a Court’s Order or judgment. Contempt of Court is a criminal offense and is punishable by fine and/or imprisonment.

CREDIT RATING/SCORE: Is a numerical summary of a credit history which defines credit worthiness, also known as FICO Score. There are three major credit reporting bureaus in the United States: Experian, Equifax and TransUnion. The Credit Score is used to determine a consumer’s ability to repay loans. The Credit Score will vary between 300 (lowest score) and 850 (highest score.)

CREDIT REPORT: A detailed report of a credit/financial history, the status of credit accounts (current or late payments), employment and personal information (current/previous addresses), and Civil Court rulings such as judgments. When applying for a credit card or loan, the lender will generally pull a credit report to determine credit worthiness.

CREDIT REPORTING AGENCY: There is a variety of Credit Reporting Agencies that exist, however, there are three specific national agencies which are the most common; Experian, Equifax and TransUnion. The Fair Credit Reporting Act permits consumers to request a free copy of their Credit Report once every 12 months from each of the three major credit reporting agencies. Aside from consumers, there are also several Commercial Credit Reporting Agencies that exist to evaluate business credit worthiness; the most popular being Dun & Bradstreet and Credit.net.

CREDITOR: Money that's owed to a person or Company. Mortgage Companies, Credit Card Companies, Finance Companies or Uncle Joe. Essentially, anyone that's owed money for anything is a Creditor.

DEBT BUYER: Any Company, Agency, Law Firm or person who purchases debts (old and new) typically at a reduced rate and in bulk. Also known as a “Third Party Agency.” When purchasing large amounts of old debt that are usually past the Statute of Limitations, they're referred to as “Junk Debt Buyer.”

DEBT SETTLEMENT: Also known as Debt Negotiation. It’s the process in which an arrangement with a Creditor to pay only a percentage of the amount owed. The actual settlement percentage that’s worked out depends on a number of variables including, how old the debt is, how large the balance is, and how eager the creditor is to get paid.  When a creditor accepts a settlement offer, he forgives a portion of a debt.

DEBTOR: A Person, Company or Institution that owes money to another party.

DEFAULT INTEREST RATE: The interest rate that’s assessed and charged on a loan and/or the terms of an agreement when defaulted. The Default Interest Rate is higher than the Regular Interest Rate. The Credit Card Accountability, Responsibility and Disclosure Act -- or CARD Act -- states that a consumer must be at least two months behind on their payments before a Company can apply the Default Rate. Also, if payments are on time for at least six months, the Credit Card Company must drop from the Default Rate back to the Original Interest Rate.

DISMISSAL NOTICE (BANKRUPTCY): A Bankruptcy Notice of Dismissal is a notice issued by a Court that shows that the Bankruptcy was thrown out, and all creditors can contact the debtor for payment on his/her debts. This notice is given if a debtor doesn’t stick to the arrangements as set forth by a Bankruptcy Court.

FAIR DEBT COLLECTION PRACTICES ACT (FDCPA): Is the Federal Law which regulates the Debt Collection Industry and Debt collector conduct. To view the entire bill, visit the Federal Trade Commission website at www.FTC.gov.

FEDERAL TRADE COMMISSION (FTC): Is an independent government regulatory agency that collects information and complaints about companies, business practices, identity theft and more; ensuring that consumers are protected and that competition remains fair across the nation. The FTC is considered to be a law enforcement agency. Although the FTC cannot punish violators, that's the responsibility of the judicial system, it can investigate and issue Cease and Desist orders and argue cases in federal and administrative courts.

FICO SCORE: FICO stands for Fair Isaac Corporation. FICO is a public company founded in 1956 that developed software in the 1980’s to help companies, and lenders gather data and analytics regarding a consumer’s credit worthiness. This became known as a FICO score (credit score) and was implemented by the three major credit reporting agencies, Experian, Equifax and TransUnion.

FORBEARANCE: When a creditor grants the debtor an extension of time to pay back a loan or debt.

GARNISHMENT: An order by the court(s) allowing a creditor to take the property of a debtor for repayment of a debt or loan. This is done by taking a portion of their wages and/or freezing their bank account and seizing funds until the debt is sufficiently paid.

HOUSING BUBBLE: While the actual cause of the housing bubble is up for debate, it’s said that in 1999 Fannie Mae and Freddie Mac, two of the largest buyers and sellers of home loans, encouraged banks to ease up on their credit requirements for home buyers who normally wouldn’t qualify. By 2001, the Federal Reserve dropped interest rates from 6% to 1.75%, an all-time low. Between 2003-2007, the Federal Reserve failed to regulate the big banks who abandon normal loan approval standards and began handing out home loans to just about anyone. Americans began buying and building homes/real estate with fervor. U.S. home ownership rates peaked to an all-time high. By 2007 the housing bubble burst. Interest rates began to rise again, property values decreased, and it became evident that many of those homeowners were approved to loosely and couldn’t afford their mortgages. By 2008, foreclosures hit an all-time high, and the National Bureau of Economic Research announced that the economy was in a recession. The federal government seized Fannie Mae and Freddie Mac and placed them into conservatorship. Many banks filed for bankruptcy, leaving thousands of Americans unemployed. The Federal Reserve lent over $100 billion dollars to American International Group (AIG), and announced that it would provide $900 billion in short-term loans to banks as well as 1.3 trillion dollars directly to companies outside the banking sector. By 2009, over 3 million foreclosures were filed and unemployment was at an all-time high.

INSOLVENT: When an individual, company or institution can no longer pay back their debts or loans, and are financial ruined. Most commonly used in connection with Bankruptcy.

INTEREST RATE: Is a percentage of money that’s charged for borrowing money. The amount of interest calculated and charged varies for each type of loan and can be dependent on the credit history. Typically those with a higher credit rating are charged less interest while those with a poor credit rating are often charged with a higher interest rate.

JUDGMENT: A judgment is the official decision by the court as a result of a lawsuit. For example, if you were sued for owing a debt and lost the case, you would be issued a judgment, and it would reflect on your credit report. Once the judgment is issued, the creditor can take appropriate measures to collect the money owed.

JUNK DEBT BUYER: Is a company or collection agency that purchases delinquent debts from a creditor for a fraction of the debt amount. Once the debt is purchased the company can either attempt to collect the debt or transfer it to another collection agency or junk debt buyer. The types of debts that are bought and sold consist of primarily credit cards, automobile loans, utility bills, medical bills and more. These types of collection agencies deal with large volumes of business and are known to lack in customer service skills. In addition, some agencies purchase debts which they know nothing about and may violate the FDCPA while attempting to collect them.

LAW FIRM: A business which consists of one or more attorneys who engage in the practice of law for an exchange of money. Law firms don’t all practice the same area of law. Some may specialize in criminal law while others may only handle civil lawsuits.

LAWSUIT: A civil action brought to the attention of a court for the purpose of resolving a dispute or complaint between two or more parties. The person suing is called the Plaintiff while the person being sued is called the Defendant.

LIEN: A legal right to take, hold, and/or sell another’s property or assets to satisfy a debt. Typically, as a result of a lawsuit. Liens can be structured in many different ways. Property liens are common for creditors who want to collect past due debts. How it works, is simple. A creditor will attach a lien to the title of a home/property. Although the creditor has the right to have the property sold it’s very expensive, time consuming and rarely done. Most creditors prefer to wait until the property is sold or refinanced. Some liens may sit for a long time before being satisfied. When the property is sold or refinanced, the creditor is paid before any profit is distributed.

LOAN MODIFICATION: When the terms and conditions of a home loan are modified from the original contract. For example, if you originally bought your home with a fixed interest rate of 4% for 30 years but want to try and lower your rate, you would apply for a loan modification with your bank or lender. For this type of loan modification, you usually have to be delinquent on your mortgage payments in order to qualify.

MINI-MIRANDA: The FDCPA states that every time a collector contacts a debtor they must disclose who they are and what they’re calling about. It helps keep Collectors from being deceptive or misleading. This is known as the Mini-Miranda and generally goes as follows: “THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE. THIS IS A COMMUNICATION FROM A DEBT COLLECTOR.”

MOTION TO VACATE: Is a request to the court to dismiss, set aside or void a judgment or final ruling resulting from a previous lawsuit. Typically a court hearing is set once the motion is filed. The amount of time you have to file a motion to vacate, depends on the type of case and your state.

 
NATIONAL DO NOT CALL REGISTRY: The Federal Communications Commission along with the Federal Trade Commission established the registry in 2003 to help consumers limit the amount of telemarketing calls they receive. Upon registering a number into their database, a telemarketer has 31 days to cease calling that number. There are many rules regarding the registry including what types of numbers are exempt, what types of organizations can call, and for what purpose. To get more information, consumers can call 1-888-382-1222 or visit the website at https://www.donotcall.gov/.

NEGOTIATION: To communicate with another or others so as to reach a mutual agreement or decision. In the context of this book, negotiation is used when referring to the process of reaching an agreement with a creditor regarding the repayment of a debt for less than the amount owed.

OFFICE OF CONSUMER AFFAIRS: Each state has their own office of Consumer Affairs. These government agencies are set up to help protect consumers, and businesses alike, from unfair, unlicensed, or dishonest companies. If a collection agency isn’t properly licensed to do business in your state you can contact your office of consumer affairs, and they’ll initiate an investigation that can lead to court, fines, penalties and more.

 
PRE-CHARGE OFF: It refers to the amount of time prior to an account or loan charging off. This is considered a very sensitive time period as a consumer can get great settlement deals and save their credit report from a negative entry. See “Charge Off” for more information.

 
PROCESS SERVER: Our Constitution states that when being sued, every citizen must be notified in writing. This can be done by hiring a third party to deliver the legal documents. Depending on your state, a process server isn’t always mandatory; you can simply mail the legal documents. The requirements for becoming a process server, such as licensing, also vary amongst states.

 
SECURED DEBT: A secured debt is a loan backed by an asset or collateral, in other words, actual property. An example would be a car or home loan. If you default on a secured loan, the creditor has the right to repossess the property or vehicle.

 
SMALL CLAIMS COURT: These courts are for lawsuits that involve smaller amounts of money, anywhere from $1000 to $10,000 or less. Some states have restrictions and will not allow the Plaintiff or Defendant to be represented by an attorney.

STATE BAR ASSOCIATION: The use of the term bar refers to "the whole body of lawyers, the legal profession." The bar association is a community of persons, lawyers and attorneys who engage in the practice of law. Some states require membership with their bar association in order to practice law while others don’t. In addition to the State Bar Association, many states have sub-bar groups of attorneys.

STATE BAR EXAM: The use of the term bar refers to "the whole body of lawyers, the legal profession." In order to be licensed as a lawyer or attorney in a state, you must take the State Bar Exam. The exam occurs twice a year and is generally two to three days long.

 
STATUTE OF LIMITATIONS: A “statute” is a law or Act passed by a legislative body. A statute of limitations is the period of time, after an event, for which you can file a lawsuit or other sorts of legal action. Depending on the type of action and your state, the statute of limitation will vary.

 
SUMMONS AND COMPLAINT: A summons and complaint are in actuality two different legal documents but are used in connection with each other. A Summons is exactly what it sounds like, it’s a legal document which summons someone to court. It’ll normally have the court date and time listed, the court house location, the case number and the plaintiff’s information. The Complaint is an explanation of why the law suit is being filed and what remedy the Plaintiff is asking for. The format for the Complaint will vary depending on the state. The Complaint usually includes attached documentation of the claimed grievance.

TELEPHONE CONSUMER PROTECTION ACT (TCPA): Is an Act passed by congress in 1991 which governs telephone solicitation, telemarketing and the use of automated telephone equipment (i.e. auto dialers, pre-recorded messages, text messages and fax machines.) Anyone or any company looking to market their services or products should get familiar with the TCPA.

 

THIRD PARTY AGENCY: When referring to debt and Collectors, a “Third Party” is generally used to describe a collection agency, debt buyer, law firm or any company that wasn’t part of the original loan contract. When a consumer signs up for a credit card, the “First Party” is the original creditor. The “Second Party” is the consumer or debtor. The “Third Party” is any other agency which attempts to collect or handle the account.

 

TIME BARRED DEBTS: Are debts, which are so old, that consumers can’t be sued. Creditors and Collectors have a prescribed period of time to sue a consumer in connection with a debt. The period of time is known as the statute of limitations (SOL) and will vary depending on the state, and the type of contract signed. You can do a quick search online to find out what the SOL is for your state.

 

UNSECURED DEBT: This type of loan is typically used to describe credit cards, medical bills, personal, department store, and some payday loans. With unsecured loans, there is no property attached. These types of loans are usually given based off credit rating and income alone. Because there are no assets attached, the creditor has to work harder at collecting any money owed.

 

USURY LAWS: “Usury” is the act of lending money with unreasonable interest rates (Loan Sharks and some Payday Loan companies.) Most states have regulations on how much interest can be charged, however, some states have no regulations at all. Many online loan companies that operate in as many as 50 states, are usually not properly licensed for each state and are generally violators of Usury law.

VALIDATION OF DEBT: Is the process in which you request the creditor to provide proof that you, in fact, owe a debt. According to the Fair Debt Collection Practices Act, FDCPA Section 809. Validation of Debts., every debtor is entitled to request proof that they owe the debt and that the collection agency is legally able to collect it.

Chapter 9 - Conclusion

Whatever the situation, there are answers! Remember that, because you’re not alone. The majority of Americans are in the same boat you are and were never taught how to handle credit cards. “Credit for everybody” has been the motto since 1950 when the first credit cards were born. Now it’s time to handle that credit card debt and not be stuck to it for the next 50 years. Believe it or not, that’s what it’ll take when making minimums.

If you made it this far, I’m proud of you. I know this book wasn’t like my other ones that were light and funny. I wanted you to have all the information, and in order to do that, there were a lot of technical things that I needed to go over. I tried where I could to give stories and make it a little more exciting, but more importantly, I wanted you to have all the data. Every single little bit. That way you’re fully prepared and ready to go.

Consumer’s need to know how to handle money, plain and simple. Whether it be to buy groceries, a pair of shoes, a new car or a house. Everybody uses money, even the bums on the street, for a jug of wine or a cup of coffee. Money is the thing that we use to get what we need and want. I know you understand this concept, but let’s look at this in a different way. Instead of feeling like you have to have money, you don’t have money, or always have attention on money, why not have your attention on something else. Like, being more productive, enjoying what you’re doing and being in control of your life. Here’s the reality of it, if you want to buy a loaf of bread, you have to give the grocery store $3.65, it’s a bunch of paper that you use to get what you want. Now, if you work and put in an eight hour day, your company will give you say, $150. for that day. Again, a bunch of paper that you get in exchange for working. So really, all money is, is a bunch of paper that you can use to exchange for stuff that you need and want. The more you do to make money the more money you’ll have, obviously. So instead of putting all your attention on money, try putting your attention on the things you do to make money. Realize that money comes as a result of your actions, so that’s where your attention should be paid. I hope that makes sense because believe it or not, if you have your attention on production and work, and not on the greenbacks, then maybe, just maybe, you’ll end up with more money at the end of the day and fewer problems in your life.

Okay, I hope I didn’t get to mushy on you, I want you to see how a shift in your point of view could make all the difference in the world.

If you’ve decided to settle your accounts, then follow the steps in this book and ask me lots of questions. Remember, in order to get anything done, you need to work at it. Take one step at a time, follow the examples and you’ll be debt free. In order to stay that way, I would highly recommend reading my first book, Money – Paper or Plastic, that way you’ll learn about a budget and how to use credit cards the right way if that’s the direction you want to go. Also, if you want more training on how to talk to creditors you can read my book, “Lose 100 pounds of debt weight.” This book gives you the insider secrets on bill collectors and how to handle them.

Now it’s time to get started if you have any questions, at all, email or call me, and I’ll answer them immediately. Go out into the world and concur it, let’s get moving!

The Debt Lady says, “Purr like a kitten, bark like a dog and pounce all over those nasty bill collectors.”

Chapter 8 - Questions and Answers

Sometimes I’ll get off the wall questions from my clients, and I wonder, “Why didn’t I think of that?” I decided to start keeping track of those questions and have compiled this chapter full of them. As a side note, I have a section on my website which is dedicated to questions and answers. I set it up that way so people who have firsthand experience in resolving a financial problem can pass it along to help others.

Let’s get started!

Q: What happens if I have a co-signer on my credit cards, and I go delinquent?

A: The co-signers credit score will be affected. This can get tricky. I’ve known some consumers who were married and then separated or divorced. One of the spouses or partners ended up falling behind on the cards and didn’t notify the other until it was too late. In addition, the co-signer was legally liable for the debt, which means, they were susceptible to wage garnishment, bank levy and property lien. So, think twice before you stick that court summons in your trash can or your kitchen cabinet above the fridge.

Q: I recently went delinquent on my loans, my husband is NOT a co-signer on the accounts. Can they still go after him for my debts?

A: If you live in a community property state, then a spouse or partner may be liable for your debts. Even If your husband isn’t on the account, he can still be affected. You can do a quick search online to find out if you live in a community property state. 

Q: I have several debts being handled by the same collection agency. I’m disputing two of the accounts as I have no knowledge of ever accruing them. I recently made a payment, only to find out they applied it to one of the accounts I’m disputing. Is that legal?

A: If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you don’t owe. If you’re mailing checks or a money order, mark the proper account number on the check. If you’re calling in a payment over the phone, make sure the call is being recorded and give them the appropriate account number. 

Q: Can I negotiate and settle my car loan for less than the original loan amount?

A: Yes, and No. If you still have the car, going delinquent on your loan will inevitably cause repossession. So long as you still have the vehicle, your loan is considered secured, and the chances of working out a settlement are slim to none. You’re more likely to work out a settlement if the car gets repossessed, or you turn it in to the dealership. At that point, the debt would be un-secured, and the settlement potential is very high.

Q: How do I know if my account is past the statute of limitations?

A: This is pretty easy to find out. When did you make your last payment, and what are the statute of limitations time lines for your state? If you know these two things, then you’ll have a pretty good idea of when your account is past the statute of limitations. If you don’t know when you made your last payment, you can ask the creditor that’s handling the account, or pull your credit report to see when the account went delinquent.

Q: I’m still receiving collection calls for a debt that is over 15 years old. Isn’t that illegal?

A: It depends. If you’ve been sued for a debt and lost, you probably have a judgment. Judgments are good for 10 years or more, depending on your state. If you weren’t sued, they can still attempt to collect an old debt by calling you or sending letters; however, it should have been removed from your credit report. If you don’t wish to receive phone calls for an old debt, just send them a cease and desist letter and remind them that they are violating the statute of limitations for your state.

Q: I’m receiving calls from a collector about five times a day, seven days a week. Is that considered harassment? How often are they legally able to contact me?

A: The FDCPA doesn’t specifically state how many calls constitute as harassment; however it’s generally thought to be when you’re receiving calls constantly or back to back. In your example above, five times a day from the same collector would definitely be considered harassment. Collectors should attempt contact once or twice a week.

Q: A debt collector called my house and spoke to my eight year old the other day. They informed him, “Mommy owed a lot of money!” Is that legal?

A: No! It is NOT. Unless you’ve given the collector prior consent, this is completely illegal. You should notify the collection agency or file the proper complaints.

Q: What’s the difference between debt consolidation and credit counseling?

A: Debt consolidation is when you pay off all your debts with one or several loans. You still owe the same debt amount, but you’ll probably save money from high interest accounts depending on your original interest rates. Credit counseling is typically a service from a non-profit company that’ll reduce your interest rates or restructure your payments. Most of these companies pay your monthly minimums on your behalf. In the end, you still owe the same principle amount and most likely will take you years to pay off, depending on how much you owe. 

Q: If I cancel some of my lines of credit will it affect my credit score?

A: Yes, and No. There are so many variables when it comes to how the credit bureaus score your credit. For example, if you only have three lines of credit and you cancel two, then I would presume your credit score will lower. If you have pages and pages of lines of credit and you cancel some, it may increase your score as you have less debt.

Q: I heard you can pull your credit report for FREE once a year. How can I do that?

A: You are correct! Visit www.AnnualCreditReport.com.

Q: My debt was originally $3,000. I’ve been delinquent two years and just received a collection letter claiming I owe $7,000!? Is that legal?

A: What does your original contract say? Most credit card agreements will tell you what your “default rate” is. It can be as high as 30 percent or more! Let’s not forget late fees and other fees that the banks charge. Each state has its own laws on how much interest they can charge, it’s called Usury Laws. Start by asking the creditor to provide a written itemization showing how the current balance was calculated, including charges and payments made, interest added, penalty fees, late fees, and any other charges added.

Q: I received a 30 day letter regarding a debt that I believe isn’t mine. I sent the collection agency a dispute letter within the 30 day time frame. It’s now been several months and I have yet to hear or receive anything from them. What do I do now?

A: Sit and wait. Depending on your state there may be no time limit on how long the creditor has to provide you with proof of the debt. You can do a quick search online to find out. Just keep in mind that during this waiting period a collector can no longer attempt to collect the debt until such time as they prove you actually owe it. If you’re 100 percent sure it’s not your debt, you may want to send a dispute letter to the credit bureaus.

Q: I disputed a debt and requested a number of documents including a copy of my original contract. However, a few weeks later, all I got was a huge envelope that consisted of three years of statements. Now they’re trying to collect the debt again by calling me constantly.

A: Unfortunately the FDCPA only specifies that a collector must provide (1) a copy of the judgment (if there was one); (2) name and address of the original creditor. It doesn’t state that they MUST provide you with a copy of your original contract. If it’s a case of identity theft; file a police report, fill out an FTC Identity Theft Affidavit online and forward the information to the collector and the credit bureaus at once.

Q: How much do I start saving every month in order to begin settling my debt?

A: Good question! While there are many variables to this, you can apply a simple mathematical equation. First, set a target date to be debt free, but be realistic. For example, if you have $50,000 of debt, decide on two or three years. Next, divide the 36 months by the debt amount you have. This should give you a figure of $1,388 per month that should be put into a savings account, mattress, or cookie jar. Once you’ve saved 30 percent of the smallest balance account, you should begin negotiating. Start with one account and once complete move on to the next. Remember, that this equation is not set in stone because interest and penalties can accrue on accounts. This is simply a guideline to get you moving. The best thing to do is take every penny you can possibly muster, and put it away. The more you put in, the faster you get out of debt.

Q: My account was in collections for seven years and eventually removed from my credit report. Within a month, I was notified by another collection agency that they were attempting to collect the debt. Does that mean the seven year statute of limitations starts over again?

A: No, it doesn’t. Your account could bounce from agency to agency numerous times during or after the seven years. The statute starts from the moment you go delinquent and only restarts when you make a payment toward the account.

Q: I settled my account over two months ago and have yet to see any difference on my credit report. How long does it usually take?

A: Once an account is settled it could take 30-60 days for the credit bureaus to update your report.

Q: I almost filed for bankruptcy a couple years back. I’m now trying to negotiate a debt; however the creditor’s telling me they can’t settle because the account was included in a bankruptcy. How do I prove I never filed?

A: This can be a difficult thing to sort out, I mean, how do you prove you did NOT do something? You can always try writing a letter and include any documentation you have such as a dismissal notice from the bankruptcy court. Realize that bankruptcy is a matter of public record.  If you file for bankruptcy, your name will be included in the federal court’s system known as PACER. Obviously, if you NEVER filed, you won’t be in the database. Some creditors have access to this system, ask them to check.

Q: I became delinquent on a loan over a year ago; however, it’s not showing on my credit report. I thought the creditor had 120-180 days to report it.

A: It’s up to the creditor whether or not to report your delinquency to the credit bureaus. Consider it a good thing.

Q: Is it better for me to settle one debt at a time or several at once?

A: It’s up to you! Some folks aren’t the best at managing their finances or simply don’t have enough money to settle more than one debt at a time.  If you feel comfortable settling multiple accounts at once and have the funds to do it, then go for it! This just means you’re going to be debt free and have your credit report on its way to recovery sooner than later.

Q: How do I know if a collection agency is legitimate before I pay them? I want to be sure they aren’t some scam company looking to profit from unsuspecting consumers. I’ve heard this sort of thing has happened before.

A: You can always do a quick search online with the Association of Credit and Collection Professionals (ACA International). However, not every collection agency is a member. You can contact your states business licensing office, by calling or e-mailing to find out whether or not the agency is licensed to do business in your state. Keep in mind that some states may not require that all types of companies be licensed. You can also see if they have a website and an attorney listed. If so, you can go onto your state bar’s website, and find out if the attorney is listed and in good standing.

Q: I want to pay off my debt in full. I offered the creditor $100 a month, but they told me they would refuse my payment. Can they do that?

A: You can pay as little or as much as you want toward a debt, but the creditor doesn’t have to accept your payment. In fact, they can send your money right back to you if they choose to. If you read your original loan contract carefully, you’ll notice a small clause that states they don’t have to accept anything less than payment in full. You can always try mailing payments as you wish, and in most cases they’ll still cash them in. However, keep in mind, they’re not legally obligated to do so. In most cases, if a collection agency rejects your payment, it means they’re planning to file a lawsuit against you, by accepting payments they’re agreeing to those terms and can’t sue a consumer unless they default on the payment arrangement.

Q: I incurred a debt in California several years ago, however, I’ve since moved to Texas. Which statute of limitations applies to my debt?

A: Another great question! I’ve been asked this many times. In general, the statute of limitations for your current state of residence applies. But, there are exceptions. Read your original contract thoroughly and/or get familiar with your state laws.

Q: I’ve been contacted by a collector for a debt I’ve never heard of. When I asked for proof of the debt, he flat out refused. Now he’s calling me twice as often. What can I do?

A: You can dispute a debt at any time. I recommend sending a validation of debt request letter. Verbal requests aren’t as effective. If you’ve gone past the 30 day validation/dispute period; the creditor must still provide you with the documentation, however, in some states there’s no time limit. In addition, they can still contact you and attempt to collect. If you’re genuinely concerned about the debt, consider writing a dispute letter to the credit bureaus.

Q: I’ve been served a summons to appear in court regarding a debt I owe. Should I send them a validation of debt letter?

A: No, you’re wasting your time. A VOD letter will not stop legal action. What you need to do is file a “Response” or “Answer” with the courts, so you don’t get a default judgment immediately. If proof of debt is the issue at hand, include that in your court document.

Q: I have a delinquent student loan which is now over 20 years old. I was just served with a summons to appear in court. How do I know if this debt is past the statute of limitations?

A: Federal student loans have no expiration date or statute of limitations. Privately funded student loans generally have the same statute of limitations as would a regular loan. I suggest doing some research to find out if your loan was federally or privately funded.

Q: If I chose to settle my debts can I still use a credit card during the process?

A: You can, however, I don’t recommend it. Collection agencies and some creditors will check your credit history before determining what settlement to approve. If they see you’re current with one card and not with them, they may take it personally. For example, you’re trying to settle a debt with Chase because you went delinquent; however, they look at your credit report and see that you’re current with three other cards. Why would they settle? They’d want you to pay in full because your other cards are current. I do recommend that you keep a credit card for emergency use only, but don’t use it unless you absolutely have to.

Q: Do I have to pay taxes on the money I save on a settlement?

A: Believe it or not, YES! Once an account’s settled, any savings over $600 is considered income and is taxable according to the IRS. The creditor will send you a 1099C form at the end of the year showing that your account was settled. If you didn’t receive a 1099C from the creditor, call them and ask for one. Most consumers that are faced with delinquent debt are financially insolvent.

Financial insolvency can be best described as having no money or assets in relation to your debts or financial obligations. In order to determine whether you’re insolvent, you’ll need to visit the IRS website at www.IRS.gov and file form 982. This form determines if you’re eligible for financial insolvency. They’re going to want to review your income and assets such as, bank accounts, home, vehicles, retirement accounts, IRA’s, 401K’s etc. There are no guarantees the IRS will approve your request, talking to your tax professional will assist you with this process.

Q: Can I settle with a credit card company if my account is current?

A: I’ve actually seen, on very few occasions that a credit card company will settle for a lesser amount if the account is current. However, it’s highly unlikely. What’s their incentive to settle the account at that point? That’s right, NONE. First of all, if you’re current, they’re making money on your interest and want you to continue to do so. Next, they don’t want to make it easy on you. If they settle with you, then your credit won’t be marked as delinquent, and they’re out all the money in the future. Here is where your biggest decision comes into play. If you’re current and want to settle, then you’ll have to go delinquent. This is tricky because if there’s no legitimate hardship on your part, and you can afford payments, it wouldn’t be ethical to break your agreement with the bank. But, if you have a hardship, something that’s explained earlier in the book, and you’re looking at bankruptcy, then you need to decide what’s best for you and your family. Take a good look, get all the information and make the right decision, whatever that may be.

Q: What do I do now?

A: That’s a good question. Well first all, you’re at the end of the book, and hopefully you have the ammunition you need to move forward. Do the exercises, reread sections that you didn’t understand, and contact me for anything that you feel wasn’t covered. If you’ve decided that debt settlement isn’t for you, my first book “Money - Paper or Plastic” can help. It will give you the necessary information on the history of the credit card, and how to put a budget together so that you can get out of debt without going delinquent. Believe it or not, there are many other ways to handle your situation. If you’re in need of consulting, then give me a call, and we can work out a plan that’s unique to your situation.

Chapter 7 - Completing Your Settlements

Completing Your Settlements…The Proper Way

You got your settlement letter, you paid your settlement amount(s), what more needs to be done right? Not so fast. There are a couple things you should know.

Correcting your Credit Score

When a settlement is complete, there are several things that occur. Within the first 30-60 days of the final payment being made, a creditor will notify the credit bureaus that your account is either SETTLED, PAID NOT AS AGREED or PAID. As I mentioned earlier in the book. (Chapter 5) Make sure you negotiate the terms of your credit while negotiating the account.

Once you settle your last account, wait about a month or two before you pull your credit report. You’ll need to check each account to ensure the creditor has properly marked it. If you were a good negotiator, and followed my advice, you should have notes or copies of your settlement letters for each one of your accounts.

If your credit report doesn’t properly reflect the agreed terms you set with your creditor, all you have to do is provide a copy of the letter to the credit bureaus. Allow them two to three weeks to process, and you should get a letter in the mail with an update.

Checking your credit is vital as in some instances, one account could be reported two or three times if it’s been sent to multiple agencies. There have been times when one collection agency will report the delinquency, then the next agency will report the same account again. This can reduce your score. Make sure you correct it by providing the settlement letter, and proof of payment to the credit bureau, then let them know that there is more than one reporting on the same debt. They have to remove it from your report.

If you’re having difficulties with resolving an error on your credit report, you can file a complaint against the credit bureaus too. Keep reading as I explain what agencies to contact and what to expect.

Where to file complaints

It seems all too often these days that consumers gets the raw end of the deal while big companies continue to profit from them. You have rights as a consumer, and you also have the power to exercise those rights.

It used to be that a consumer could file a complaint against a collection agency or credit card company and most likely it got filed in some cabinet. Eventually when the cabinet began to overflow with paperwork, a little investigation or a slap on the hand would occur. This isn’t good enough. If you have a valid complaint against a creditor, collector, collection agency, law firm or the credit bureau something needs to be done about it.

First and foremost, you should always TRY to resolve the issue with the collection agency or law firm first. However, if time is of the essence and/or the agency isn’t working with you, then you should consider filing a complaint with one of the below agencies.

There are several agencies you can file complaints with; however, you need to know how each one will handle your complaint before you waste your time. For example, let’s say a collection agency has been harassing and calling you at 6 a.m. every day. You’ve informed them that they’re violating the law and to cease, but they continue. You’ve mailed them a cease and desist letter, but they ignore it and keep calling. It’s time to take action! For one, you could sue them for this, but, if you don’t want to go that route, you can always file the complaints. Trust me, if nothing else, It’ll make you feel better.

Association of Credit and Collection Professionals (ACA): The ACA International is a non-government agency set up to help represent collection agencies, debt buyers, attorneys and creditors. It’s a non-profit company that has over 5000 members. If you encounter any problems and have been unable to resolve your issue, you can always contact this agency. The ACA may attempt to mediate and resolve certain issues between you and a collector or its agency. I can’t say you’ll have definitive results; however, it’s worth a shot. 

Better Business Bureau (BBB): The BBB is not a government regulated agency, in fact, it’s recently been under scrutiny as companies have to register and pay in order to get a higher rating. There’s a scoring system from A to F, similar to restaurant ratings. Eventually, when a business receives enough complaints from consumers it can lower the companies score online. However, the BBB has no authority to resolve any issues you may have with a company or business. If anything, they can place a call or send a letter regarding the complaint filed, but that’s pretty much it. All you’re doing by filing a complaint with the BBB is harming the creditor’s online reputation. My suggestion is to file a complaint with a few agencies such as the BBB, the FTC, the CFPB and Attorney General. (I’ll explain what those are in a minute) This should generate enough pressure on the creditor to handle the complaint.

The Federal Trade Commission (FTC): I believe all consumers should become familiar with this agency. The FTC regulates companies in the area of telemarketing, advertising, identity protection, financial services and more. The FTC enacted a bill in the 1970’s known as the Fair Debt Collection Practices Act. This act regulates the debt collection industry. I highly recommend you get familiar with it. Filing a complaint with the FTC can be helpful in building a case against an agency; however, you’re not likely to get an immediate resolution. The FTC will initiate an investigation after having received a number of complaints. This could eventually lead to fines, penalties and other repercussions for the company, agency, its employees, owner, or affiliates. I recommend filing a complaint no matter what. You know what they say; a pebble thrown in water can create big ripples in the long run.

Consumer Financial Protection Bureau (CFPB): There’s recently been a change in the financial industry like I’ve never seen. The federal government launched a new regulatory agency to help consumers receive the justice they deserve. Unlike the BBB, the CFPB is a government agency which has the authority to enforce justice and protect consumers from unethical and illegal practices in the area of finance. This includes the big banks, auto finance, home loan lenders and pay day loan providers. In fact, this is the first agency that regulates the credit bureaus. If you have any false or inaccurate markings on your credit, and the bureau isn’t correcting the issue, you now have a place to file a complaint. This is the first agency I would file a complaint with!

Office of Consumer Affairs: Each state has their own Office of Consumer Affairs. They’re there to help protect consumers, and businesses alike, from unfair, unlicensed, or dishonest companies. This would be a good agency to file a complaint with, for example if a collection agency isn’t properly licensed to do business in your state. If you’re unsure about whether a company is operating illegally, just contact your states Office of Consumer Affairs and ask. You can also file a complaint online, it’s pretty easy. Depending on the complaint and the company, they’ll initiate an investigation that can lead to court, fines, penalties and more.

Attorney General (AG): The Attorney General’s office for your state is pretty much as high as you can go for any legal related issues. Consider these guys the head sheriff in town. They’re set up to protect the public from any illegal civil or criminal activity. The AG is one step up from your District Attorney. If you’ve encountered any issues with a collection agency, a collector or its affiliates, which can be considered illegal, you may want to file a complaint with the AG. For example, if you worked out a settlement for one of your debts and the collection agency processed the payment twice and refuses to do a refund, it’s illegal and downright stealing.

Let me tell you, when a collection agency receives a letter or phone call from one or more of the above, they WILL want to resolve your case. At the same time, make sure your complaint is valid. If it’s petty, I guaranty you’re not going to get results. When I say “petty” I mean filing a complaint with your Attorney General because a collector cursed at you. That’s more of an FTC or BBB complaint. If you’re still unsure about which agency to file a complaint with, I suggest doing some research online for your state. Just remember, you have recourse as a consumer, just because you owe money doesn’t mean you’re a deadbeat. If that were the case, I think all of America would be in the same boat, and then what? You have rights, get to know them.

Well, I hope that helps you to realize that there are things that you can do if you are being harassed by a creditor or collector. Let’s say someone broke into your house and stole your computer, what would you do? You would call the cops and report it. Or, if someone in a store is rude to you, you would contact their manager and report it. In most cases, consumers don’t know that they could do something about being abused by collectors. You do have recourse and should use these resources if the situation arises.

In the next chapter, I’ve compiled questions and answers that have come up over the years. If you have a question that hasn’t been answered through this book, don’t hesitate to contact me directly, and I’ll answer it for you. Or check out my website, www.TheDebtLady.com, you might just find what you’re looking for.

Believe it or not, you’re almost done! Keep going, I swear you won’t regret it.