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.