credit card
How to reduce Credit Card Interest Rate
The Credit Card Act has provided a great deal of added protection for consumers in the use of credit cards and the manor in which banks can market to its customers. However, one area that was not addressed was limiting the rate that can be charged after proper notice is provided to existing customers. As a result, many consumers have found that just trying to stay current on their credit card payments is very difficult, especially when you try to pay back the amount that you charge each month. The reason for this is that the past debt with its interest payments tends to increase each month through negative amortization.
There are a number of ways to reduce your inertest rates. However, one way that will work very well for those high rate cards, which consumers typically do not use any longer, but do carry significant balances is to negotiate with your credit card company on the rate based upon some consideration the consumer can provide. For example, you may want to propose to not use the card any longer, but just pay back the principal and interest currently owed to the creditor. In consideration for that, ask if the credit card company will reduce the interest rate. This in affect will shut off your credit card, but at the same time, allow you to pay the debt down.
The key to negotiating to pay and not use the card is to not harm your credit rating or FICO Score. The reason being, you do not want other creditors to reduce your limits or raise your interest rates based upon a reduction in your credit score. The question then begs to be asked, how will such an arrangement be reported on your credit report? It is imperative that when negotiating with the Credit Card Company, you require them to continue to report your account as open and current. This type of negotiation is not a debt settlement, and you are not proposing to pay any less then 100% of the unsecured balance. All that is happening is the Credit Card Company can take solace in knowing that the consumer poses no additional risk to incur fees that can not be paid back
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.
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.
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.
Foreclosure or Bankruptcy – Which Is the Lesser of Two Evils?
In the past, “bankruptcy” and “foreclosure” were dirty words. But in today’s economy, they’re realistic solutions to financial black holes brought on by job joss, medical catastrophe, or predatory mortgage lenders and credit card companies. If you’re a homeowner struggling with financial disasters, you probably know that you need to decide whether a foreclosure or a bankruptcy is the lesser of two financial evils.
If you choose bankruptcy, you may be able to eliminate credit card debt, medical bills, court-ordered judgments, and even debts for overdue utilities. With a discharge of these overwhelming debts, you can often keep up with the mortgage, thus saving the family home.
In contrast, choosing foreclosure means you’ll lose the house… but the house may not be worth saving if its value is less than the remaining mortgage. Homeowners who’ve worked with us have chosen to rent, or sometimes they own investment properties that they can move into, such as a multi-family house.
But neither bankruptcy nor foreclosure is an easy, one-size-fits-all, solution. For example, a bankruptcy stays on your credit report for 10 years, while a foreclosure is there for 8 years. Because a foreclosure drops off a credit report 2 years earlier than a bankruptcy, many homeowners believe it’s a “better” solution. But many reputable credit counselors report that a foreclosure has twice the negative impact on a credit score as a bankruptcy. It’s extremely difficult to get a new mortgage after losing a property to foreclosure. And some individuals who’ve gone through foreclosure report that they haven’t qualified for apartments they wanted, even though they’re able to afford the rent after the mortgage is gone.
On the other hand, we’ve seen that individuals who’ve gone through bankruptcies are better candidates for future financing, and often receive it earlier than individuals who’ve gone through foreclosures. The reason is simple: bankruptcy erases debt. After a bankruptcy, you don’t owe anything to anyone. Your income is yours again. And creditors also know that you can’t file for bankruptcy for another 8 years, so you can’t walk away from any new debt that you incur.
In some cases, a homeowner may be so far behind on the mortgage that a foreclosure is inevitable. There are two typical solutions. First, the homeowner could file for bankruptcy right before the foreclosure. If the mortgage lender sells the property for less than the mortgage owed, the difference between the foreclosure price and the mortgage (which the homeowner would ordinarily have repay to the lender) is discharged through the bankruptcy. Second, mortgage lenders know very well that homeowners can discharge this difference in bankruptcy instead of paying it back. So they’ll often wait to foreclose, which gives the homeowner an option to do a short sale (to be discussed in an upcoming blog).
In short, if you’re a homeowner struggling with debt, you have a lot of options. If you’re facing a financial crisis that may end in either foreclosure or bankruptcy, talk to an experienced attorney who can help you determine your best option. The right decision can save you years of financial trouble.
Understanding the new credit card laws
Credit cards, if used properly, can be useful and convenient tool, and can even help build a strong credit score that will assist you with future borrowing. However, owning a credit card makes it easy to spend money you don’t have and when the interest is taken into account, consumers can build massive debt. According to The Nilson Report, April 2009, In the average American owed $10,637 in credit card debt. The U.S. Census Bureau reported that credit card debt is growing and predicted that about 181 million Americans would owe credit card debt by 2010. That figure is up from 163 million Americans in 2008. As a nation we have become a plastic society, using our credit cards instead of actual money in our pockets.
The Credit card companies understand the temptation that has been provided to their clients and in the past have made it extremely easy for consumers to obtain credit cards. Recently, these same credit card companies have significantly increased interest rates, decreased spending limits and targeted young consumers with little experience managing their own finances. In order to combat this practice, the Federal Government has recently passed the Credit Card Accountability, Responsibility and Disclosure Act which will take effect in February 2010.
There are many sweeping changes to the way credit card companies conduct business. the following are some of the key changes including restrictions on raising interest rates permanently on borrowers who are delinquent 60 or more days. If the Consumer pays on time for 6 straight months, the credit card interest rate must be reinstated to the original lower rate.
The new law also requires that the advertised low interest rates must have a minimum 6 month period of time and prohibits increased rates in the first year a cardholder has a new account. This is important because it limits the Consumer’s liability on initial purchases.
The law also addresses late fees and penalties for paying your bill by phone, mail, or online and makes it unlawful to access additional fees to accept payments in this way. In the past, if a consumer wanted to pay at the last minute by phone, they would have to pay an extra fee, which is not lawful any longer.
Finally, the law also includes several measures aimed at protecting young consumers and college students, who until now have been blindsided with offers of easy credit. The law requires that consumers under the age of 21 will now be required to have co-signers, such as parents or other adults over the age of 21, who will take on joint liability for any card debts that are incurred. This will essentially end the marketing campaigns on college campuses. “Young people thrown on college campuses can be extremely vulnerable to these practices,” says Brad Lazarus, principal at Omega Advisors, a Chicago financial planning firm. Some credit card companies offer students nominal gifts, free food or free T-shirts just for applying. But the Credit Card Accountability, Responsibility and Disclosure Act makes this practice unlawful at application sites on or near college campuses. As an additional protection of the most vulnerable consumers under the new law, credit reporting agencies can’t provide the credit reports of under-21 year old consumers to credit card companies unless the consumer specifically requests that they do so.
