CHANGING LAWS ON MALL GIFT CARDS
Have you ever received a gift card for the mall or one of those pre-paid Visa or MasterCard, only to find out when you tried to use them that the card has expired, or due to the length of time, much of the funds were not available for your use? This is an unfortunate occurrence for many consumers. However, as of August 22, 2010, the Federal Credit Card Act has established a new set of rules and regulations relative to gift cards. The specific issues this new law tackles is relative to limiting penalty fees and rate increases, and expiration dates not listed on the card.
There are several key changes to the law as it relates to these gift cards and gift certificates is that the law limits the expiration date to five years from the date of issue. So even if you have a card that indicates it is only good for a year, the issuing company will have to provide you with a new card should such a printed expiration occur less then five years from the date of purchase.
Additionally, just because you receive a gift card, does not mean you must use it right away or loose some of the value due to inactivity or service charge fees. More specifically, there must be no activity for over one year before such penalties can be assessed and even then only once per month can any funds be deducted.
Perhaps the most important aspect of the new law is the requirement for explicit written disclose of any penalties for certain uses on the face of the gift card. In addition, the contact information for the issuing company must be clearly identified on the card, so that should the user have any questions about any loss of funds, there is an indication of the proper company who is ultimately responsible. It should be noted though that cards produced before April of 2010 can still be sold on the open market until August 1, 2011.
The bottom line is that as consumer’s and as gift givers, we are all protected against the big banks and other Creditor’s selling us a bill of goods that can not be used for its intended purpose any longer.
Debt settlement companies may mislead you
Recently, I have heard many Creditor rights and debt settlement companies making statements about bankruptcy that are at best inaccurate, and at worst an attempt to dissuade Debtors from filing bankruptcy in lieu of loosing their home and entering into long-term pay back plans with Creditors that are not in a Debtor’s best interest. For example, I read one blog article, What No One Tells You About Bankruptcy, Foreclosure and Your Credit, that suggests filing bankruptcy will not always stop a foreclosure, or that your credit score will be harmed beyond repair for a decade by filing a Chapter 13 case.With all due respect to these positions on bankruptcy and its effect on credit, I would suggest that most homeowners facing foreclosure are already at the bottom of the credit score spectrum. Additionally, the only way to guarantee that a foreclosure is stopped is by filing a bankruptcy. Pursuant to section 362(a) of Title 11, once a bankruptcy case is filed, the foreclosure MUST be stopped, and the only way a creditor can continue is by filing a motion for relief from the automatic stay. In order for a creditor to do this, the homeowner must fail to make there subsequent payments.
I will grant you that many Chapter 13 cases do fail, but the reason for that are unrealistic plans, and underestimating a Debtor’s expenses on schedule J, or an artificially inflated income on schedule I based upon untrue revenues from self employment.
What I have found in my practice is that a Debtor needs to take a hard look at there situation and determine if their house is (1) worth saving, and (2) if the homeowner has enough income to stay current and pay back their missed armaments over a 5 year period.
With respect to the contention that one’s credit score will decrease with the filing of a bankruptcy and be harmed for up to 10 years, that is a very dangerous statement to make. In fact, it is actually possible for your FICO score to increase after your bankruptcy discharge. The reason for this is very simple, approximately 35% of your credit score is based upon the amount of debt. If you discharge thousands of dollars in debt, then that part of the calculation can only increase. Another approximately 35% of the FICO score is based upon your payment history. If by filing a bankruptcy, you no longer have debts to be in arrears on, then again you can only go up, over time as you make your chapter 13 plan payments. This is not to say that filing of a bankruptcy does not take a negative toll on your credit score, but it is balanced by the positives. In many situations, Debtors, especially those with a mortgage can rebuild their credit with in 24 – 30 months to the point of obtaining new secured debt loans. I do however, caution my clients to be careful not to fall into their old bad habits which created the need for the bankruptcy filing.
The bottom lines is that if you are facing a foreclosure or have a significant amount of unsecured debt, it is always a good idea to talk to a bankruptcy attorney or consumer debt advocate in your area before making any decision. Most of these attorneys such as me do not charge a consultation fee for the initial meeting and can provide you with a great deal of insight.
This post was originally published on the blog of Goldstein and Clegg, LLC
Challenging a Charge on your Credit Card
As originally posted on the Massachusetts bankruptcy Blog, the process and procedures to dispute an inaccurate charge on a credit card is well documented and supported by Massachusetts & Federal Laws. Consumer laws have been protecting individuals from wrongful actions of creditors. There are certain steps an individual must take to take advantage of the law’s consumer protection: contacting the creditor, waiting for response, settling dispute.
The Fair Credit Billing Act was established to protect consumers from creditors. The settlement procedures apply to disputes of “billing error”. These may be unauthorized charges, charges with wrongful date or amount, charges for goods or services that were not accepted by you or never delivered, math errors, and failure to bill to current address. It is important to acknowledge the law applies to “open end” credit accounts. Credit accounts would include credit cards, revolving charge accounts or department store accounts.
An individual may find protection under the Fair Credit Billing Act against wrongful credit card fees. The individual must write to the creditor inquiring the information of the charges. The individuals name, address, account number and description of errors must be included in the letter. Additionally you must attach copies of documentation that supports your claim. The letter must be delivered within 30 days after the bill is recieved, containing the error. This is clearly stated in Section 166 of the FCBA. It is advantageous for you to send the letter by certified mail and return receipt request. This allows you to have proof the creditor received the letter within the time frame.
Within thirty day the creditor must acknowledge your complaint. The creditor must explain the error or inaccurate amount on bill through writing. If the creditor recognizes the mistakes the letter back will include a change to your bill. Also, the creditor must remove all finance charges, late fees or other charges obtained during or related to this issue. However, the creditor may pursue the balance of the disputed amount (Section 166(a).
If the creditor questions and pursues the disputed amount, it is necessary you keep the received letter from the creditor of the disputed amount. At this time the creditor will investigate the charges; information may be requested to prove the charges.
During the dispute, all other payments not in dispute must be paid. A legal or other action to collect the dispute amount is restricted during investigation. The closing of your account is also restricted to creditor. However, the disputed amount may be applied against your current credit card limit. The dispute must be resolved within ninety days or two billing cycles after receiving the letter.
Throughout the dispute process, under the Fair Credit Billing Act section 161(a), “a creditor or his agent may not directly or indirectly threaten to report to any person adversely on the obligor’s credit rating or credit standing because of the obligor’s failure to pay the amount indicated by the obligor”. This section protects an individual’s credit report allowing stability while the claims are in dispute.
It is important to realize the creditor’s investigation may result in the determination that the bill was correct. If this happens, the creditor must immediately send notification with a descriptive reasoning. The individual may request documentations proving the bill was correct. At this time, the individual will need to pay the owed amount and finance charges collected during disputation. There may be a minimum payment required because of the dispute (Fair Credit Billing)”.
If you disagree with the findings of the investigation, you can act within 10 days. The letter must state your refusal to pay the disputed amount because you do not feel you owe the funds. Collection procedures may begin at this time. What if the creditor fails to follow procedure? In the case the creditor does not follow procedure, the creditor will not be able to collect amount disputed or any related funds up to 50 dollars. The collector may not collect the funds if the investigation result is finding the billing was correct.
If a creditor has contacted a credit collections agency during the period of investigation, it is against the law. The creditor is breaking Section 166(a) of the FCBA and chapter 93 Section 49 regulation of trade. Under this section (d) the creditor communicates with alleged debtors through the use of forms or instruments that simulate the form and appearance of judicial process. This action would break the process and violate the judicial process. However, the letter of dispute must have been received by the creditor within 30 days of the incorrect bill. The creditor may pursue the individual for liable amounts if this was not fulfilled.
All in all, the procedures to dispute an incorrect fee are a timely mannered process. The federal and state laws established will help the individual fight the creditor. It is important to realize the creditor may result in correct billing. Also, it is important to remember the finance charges which can be established throughout the process that you will be liable if the creditor is correct.
Loan mods are not the only option
The term loan modification is not a new one, but it has picked up a lot of speed over the past year. In the past, homeowners and lenders have been able to workout deals to change the essential terms of a mortgage through private negations. However, in March of 2009, the United States government released their Home Affordable Modification Program (“HAMP”) and all of a sudden it was the new craze. The problem is now that the Government is involved at least to some extent, consumers seem to believe that banks have an obligation to “modify” or change a loan. When in reality, the government has no teeth to force the banks to do anything. A loan modification or credit workout is purely an optional program.
With that said, many consumers and frankly even Consumer Debt Advocates have been taken advantage of by the banks who have at the very least given the appearance of acting in a deceptive manor with respect to these loan modifications. Many homeowners were accepted into a loan modification trial program, in order to prove that they could make modified payments. The homeowners has made these payments for several months and after they have been faithfully making good on that agreement are kicked out for no reason, or even fraudulent or deceptive reasons and are facing foreclosure.
Many of use know the deal; the bank requests a bunch of documentation to review. They claim that they have not had a chance to review it and so ask for updated information. They do this while arrears are building up, and then finally offer a trial plan. Once the homeowner is in the trial plan for what is represented to them as 3 months, they soon learn that it can become two to three times as long, all the while the homeowner faithfully performs their obligations under a new agreement and pays sometimes tens of thousands of dollars to the bank, instead of investing that money in other avenues that my be more effective, such as filing for a chapter 13 bankruptcy, or challenging the standing of the banks.
It has been suggested by many on the interest though various blogs and chat rooms that this loan modification is nothing more then the banking industry’s “well-thought-out scam where the lender, knowing full well they ultimately intend to foreclose string the homeowner along to collect a few additional payments.
What many people do not seem to realize, is that there are other opportunities to save your home, or in the alternative, cut your losses before they arrears get too great to manage. The key to remember is that should you want to walk away from your home, if the home is sold for less then you owe, you may be liable for the debt. In order to avoid this, a simple Chapter 7 bankruptcy can eliminate that risk. Additionally, you can file a Chapter 13 case and pay back the missed payments over 5 years interest free. Perhaps more importantly, when you file a bankruptcy, the bank must stop any foreclosure or collection attempts for past due amounts. It may provide you with the time you need to go into court whether it be through the bankruptcy court, the land court or even superior court to challenge the standing of the bank.
The lender must prove that they even have a right to foreclose and in order to do this, they must have a copy of your original mortgage and note. If they can not produce that note, then a judge may indefinitely stay their foreclosure. If they file a claim for past due amounts, the bankruptcy court may hear this as evidence of a challenge to the proof of claim. You also may request a copy of your loan application and find out that there are many untrue statements that bank used to issue the loan. If this is the case, you may even be able to strengthen your position and negotiate a “real modification” where you have now come full circle.
Additionally, should you have a second mortgage that is not supported by any equity, you may be able to strip the lien entirely though a Chapter 13. In the event that the home is not your primary home, but rather an investment, you may even be able to cram down the principal to its current fair market value and a reasonable interest rate through a court order.
The bottom line is this, do not trust that you will obtain a loan modification even if you have been put into a trial period. You have several options, and should contact a qualified consumer debt attorney to learn what options are at your disposal.
How to handle medical debt
There are many forms of unsecured debt, including credit cards, personal loans and essentially, any debt that is not secured by an actual asset or collateral. However, the one form of unsecured debt that does not get much treatment or conversation is medical bills.
Incurring significant medical bills could happen to you as a consumer at anytime. If you are injured or become sick and require a trip to the emergency room or surgical room, it could result in thousands of dollars in medical bills. Even with health care insurance, you may end up with appalling debt due to your medical situation. To make matters worse, many health care providers have unfair billing practices that only add to the financial issues you may confront. The problem is that many patients simply do not think about this and what happens if the insurance declines to pay, or there is a large co-payment required.
Medical Bills are viewed in the same way as Credit card debt, it is unsecured. However, if you don’t pay your bills you can be sued for the balance. Health care providers can send medical debts to collections, file judgments, garnish wages, obtain home liens, and even take you to court over medical bills that you can’t afford to pay.
Let’s take a quick look at exactly how medical insurance Works. Typically, you have an insurance policy that will require you to pay the first part of a bill, say $25 – $500. The heath care insurance picks up the balance, so long as the treatment is determined to be medically necessary. In some case, after you are admitted to a hospital, a doctor must determine if it is medically necessary for you to stay. Each day a decision is made for the following day. If you are able to transition on, and you want to stay, then a Nurse Case Manager will discuss your situation with the insurance company, and if the insurance company decides they will not pay, the financial burden shifts to you as the patient.
If the insurer decides they will not pay, you do have many options. First, you should look into the decision and in many states just as there are consumer protection laws, there are mirror laws specific to the regulation of insurance and fraudulent and deceptive denials of coverage. For example, in Massachusetts, M.G.L. 176(D).
If it is determined that the denial was proper, or you simply did not have coverage, you may want to consider the following solutions to the medical debt:
- Evaluate all the insurance, Medicaid, and charity options available to you.
- It’s is very common to find double billings and errors on health care invoices. Take the time to closely review each of your bills and challenge any costs that you feel are incorrect.
- File a Bankruptcy to discharge your obligation to pay back all unsecured debt.
- Pay the bill with third party funds or a credit card. The problem is that you are going to incur interest on the debt higher then the bill itself.
- Negotiate with the Creditor and enter into a payment plan
- Settle the Debt with the creditor for less then full amount, and then negotiate a release of liability
The bottom line is that even if you have a massive medical bill, do not panic, there are solutions and opportunities out there for you. Your first step is to get all the facts, and then speak to a consumer debt advocate who may be able to direct appropriately.
How to Find the Owner of Your Mortgage
Concerns continue about parties filing foreclosures when they do not own the note. Florida recently enacted a rules requiring plaintiffs in foreclosure to verify ownership of the note. (Here’s a brief article on the rules, with the original subheading “Bankers Don’t Like It”). While these concerns may be interesting for those of us who understand civil procedure, standing, and the importance of the rule of law, the practical problem looms for homeowners who want to know who owns their note. Particularly, in non-judicial foreclosure states or for those families who are not in foreclosure, they do not have the option to ask the judge to order the plaintiff (foreclosing lender) to prove ownership.
John Rao, an attorney at the National Consumer Law Center and Credit Slips guest blogger, wrote a great short piece in the National Association of Bankruptcy Trustees publication this winter called “Six Ways to Find Out Who Owns and Services the Mortgage.” I can’t seem to find an online version, so I’ll give the short story here. For ownership (rather than servicing), the best options that John identifies are:
1) Send a request to the servicer asking it to tell you (the borrower) who the actual holder of the mortgage is, and to provide the address and telephone number of the owner of the obligation. These requests are authorized by Truth in Lending section 1641(f)(2). Importantly, the Helping Families Save Their Homes act of 2009 amended the Truth in Lending Act to provide a remedy for non-compliance. Borrowers can recover actual damages, statutory damages, costs and fees.
2) Review the transfer of ownership notices that are required to be sent as of May 20, 2009 and thereafter under the Helping Families Save Their Homes Act. This one won’t help for loans bought and sold long ago, but at least Congress heard the message that tracking down ownership is a problem.
3) Send a “qualified written request” under the Real Estate Servicing Procedures Act (RESPA). While this statute primarily is aimed at servicers, John Rao points out that because the servicer acts as an agent for the owner of the mortgage, the request is related to the servicing. The servicer has 60 business days to comply, which may be too long for families facing foreclosure. Actual damages, costs and attorneys fees are available for violation. HUD provides a little information on how to make a qualified written request on its website.
It’s important to note what is NOT on this list: the old-fashioned method of searching the land records. John includes that method in his list of six ways, but cautions not to rely solely on the registry of deeds because many assignments are not recorded. I think in a world of MERS, and missing paper, the land record system needs a hard look. The point of that system is to provide a public record of security interests in land, but it’s clearly no longer serving that function in the way it historically has. In what ways is the land record system failing? How should we fix it? Do we need penalties for not recording assignments? Or federal regulation of MERS? Or something else entirely?
Consumer Protection Laws
There are a number of consumer protection laws which protect you from creditors taking advantage of you or misrepresenting information. The following is a short description of the most important credit laws:
The Fair Debt Collection Practices Act
is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
Fair Credit Reporting Act:
Cconsumers are able to receive one free credit report a year, and can verify what is reported about them. The free report can be requested by telephone, mail, or through the government-authorized website, annualcreditreport.com.
Truth in Lending Act
The Truth in Lending Act was created to protect consumers in credit transactions, by requiring clear disclosure of key terms of the lending arrangement and all costs.
The purpose of Truth in Lending is to promote the informed use of consumer credit, by requiring disclosures about its terms, cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. The act also provides consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes.
Freddie Mac comments on the SAFE Act
There has been much talk recently about the SAFE Act and if it applys to those negotiating loans. The key to remember is that the act is really intended to apply to loan originators, not those dealing with short term loan modifications. To that end, Freddie Mac and Fannie Mae drafted a response to HUD, an excerpt of this can be found below.
The language of the SAFE Act is consistent with the conclusion that it does not apply to servicers or loss mitigation specialists. The Act requires registration of “loan originators”, defined as individuals who —
(i) take residential mortgage loan applications; and
(ii) offer or negotiate terms of residential mortgage loans for compensation or gain. 12U.S.C. 5102(3)(A).
Loss mitigation specialists do not meet the statutory definition because they do not accept residential mortgage loan applications.
The legislative history confirms that the SAFE Act’s licensing and registration requirements were designed to apply only to “loan originators.” When Senator Feinstein introduced the S.A.F.E. Licensing Act of 2008 (S.2595), which was later incorporated into the Housing and Economic Recovery Act, she stated that the legislation “would create a comprehensive database of all residential mortgage loan originators. This includes mortgage brokers and lenders, as well as loan officers of national banks and their subsidiaries.” Congressional Record-Senate, 734 (February 6, 2008). Similarly, in a floor statement in July 2008, Senator Dodd made clear that the provisions of the bill were intended to cover only “loan originators.” Congressional Record-Senate, S6520 (July 10, 2008). The legislative history does not support an interpretation that covers loss mitigation specialists.
How to fix a false statement on your credit report
In order to determine if you should be granted the use and privilege of a credit card, mortgage, car loan or other source of funding, most creditors rely heavily on your credit report. These credit reports are generated by information provided by your current creditors, that is those who you owe money for goods and services. The score itself is derived by looking at several factors including you new debt, the type of credit used, the total amounts owed, your payment history and how long you have owed a certain debt.
It’s estimated that 3 out of 4 credit reports contain some sort of inaccurate information. If one of your creditors reports something negative, such as a missed payment, or an improper amount of debt owed, your credit score can decline. So what do you do if someone has misrepresented a fact to the major credit boroughs?
The first step that you must take is become informed. More specifically, you must know that there is a misrepresentation on your credit report and in order to do that, you need to get a copy of your credit report and review it. The Federal Trade Commission, (“FTC”) is the government agency that regulates and monitors credit scoring, credit collections and all debt issues. Several years ago, the FTC and other political figures pushed for a law that allows consumers to get a free credit report annually without needing to pay. In order to obtain a free credit report you can go to www.annualcreditreport.com or call 877-322-8228.
Once you have confirmed that your credit report contains inaccurate information, The Fair Credit Reporting Act provides a means for correcting these mistakes by allowing you to challenge any information you believe to be incorrect. If you challenge something and the information isn’t verified within a certain period of time, the Act even requires that it be automatically removed. You can complete this process of challenging the information on your own or you can hire a professional to assist you; it is a very time consuming process oftentimes, so you must decide how much time you are able and willing to devote to the process when deciding whether or not to seek out help.
As you move forward in an effort to repair your credit, it is also helpful to be aware that there are protections available to you from debt collectors as outlined in the FDCPA (Fair Debt Collection Protection Act) that protects you from excessive and inappropriate collection methods. You can set what times collection calls can come and where, especially if you do so in writing. Generally they’re allowed to call any number they have between 8AM and 9PM. However, if you make them aware of a certain time or place that calls would be inappropriate; they are not allowed to call.
Top 5 Reasons Why People Go Bankrupt
by Mark P. Cussen, Source: Yahoo Finance, March 23, 2010
1. Medical Expenses
A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.
Rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.
Whether due to layoff, termination or resignation, the loss of income from a job can be equally devastating. Some are lucky enough to receive severance packages, but many find pink slips on their desks or lockers with little or no prior notice. Not having an emergency fund to draw from only worsens this situation, and using credit cards to pay bills can be disastrous.
2. Job Loss
The loss of insurance coverage and the cost of COBRA insurance also drain the job seeker’s already limited resources. Those who are unable to find similar gainful employment for an extended period of time may not be able to recover from the lack of income in time to keep the creditors at bay.
3. Poor/Excess Use of Credit
Some people simply can’t control their spending. Credit card bills, installment debt, car and other loan payments can eventually spiral out of control, until finally the borrower is unable to make even the minimum payment on each type of debt. If the borrower cannot access funds from friends or family or otherwise obtain a debt-consolidation loan, then bankruptcy is usually the inevitable alternative.
Statistics indicate that most debt-consolidation plans fail for various reasons, and usually only delay filing for most participants. Although home-equity loans can be a good remedy for unsecured debt in some cases, once it is exhausted, irresponsible borrowers can face foreclosure on their homes if they are unable to make this payment as well.
4. Divorce/Separation
Marital dissolutions create tremendous financial strain on both partners in several ways. First come the legal fees, which can be astronomical in some cases, followed by a division of marital assets, decree of child support and/or alimony, and finally the ongoing cost of keeping up two separate households after the split. The legal costs alone are enough to force some to file, while wage garnishments to cover back child support or alimony can strip others of the ability to pay the rest of their bills. Spouses who fail to pay the support dictated in the agreement often leave the other completely destitute.
5. Unexpected Expenses
Loss of property due to theft or casualty, such as earthquakes, floods or tornadoes for which the owner is not insured can force some into bankruptcy. Many homeowners are likely unaware that they must take out separate coverage for certain events such as earthquakes. Those who do not have coverage for this type of peril can face the loss of not only their homes but most or all of their possessions as well. Not only must they then pay to replace these items, but they must also find immediate food and shelter in the meantime. Furthermore, those who lose their wardrobes in such a catastrophe may not be able to dress appropriately for their work, which could cost them their jobs.
To read the full article, click here