FINANCIAL MANAGEMENT WORKBOOK
from CREDIT INFO CENTER www.creditinfocenter.com In Association with:
BOLEMAN Legal Solutions for Financial Problems
Boleman Law Firm, P.C. 2201 West Broad Street, Suite 205 Richmond, Virginia 23230 (804) 355-2057 www.bolemanlaw.com
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BEFORE YOU BEGIN… People experience financial distress for many reasons. Sometimes, things happen that no amount of planning could have helped; sometimes, things could have been improved with better planning and better money management skills. Regardless of your current situation, you can always benefit from increased information, knowledge and understanding of your finances. This workbook is based around proven keys that form the foundation for good financial planning. The keys are highlighted throughout the book and summarized at the end. If you follow them, chances are high that your financial situation will improve. Keep in mind that it probably took a while for your financial problems to mount up, so it may take some time to undo them. There is no quick fix. But with some concentration and effort, you can get back on solid financial footing faster than you think. Keep this workbook for future reference. Use it for yourself and your family, and share the information with others who can benefit from it. Okay. Let’s get started!
Published by: Techartist Publishing 7904 East Chaparral Road Suite 110-604 Scottsdale, Arizona 85250 www.web-nation.com 877-WE-DO-WEB (877-933-6932) Content borrowed gratefully and liberally with the permission p ermission of Alison Scott Community Outreach Coordinator – Boleman Law
BOLEMAN Legal Solutions for Financial Problems
Boleman Law Firm, P.C. 2201 West Broad Street, Suite 205 Richmond, Virginia 23230 (804) 355-2057 www.bolemanlaw.com
1
BEFORE YOU BEGIN… People experience financial distress for many reasons. Sometimes, things happen that no amount of planning could have helped; sometimes, things could have been improved with better planning and better money management skills. Regardless of your current situation, you can always benefit from increased information, knowledge and understanding of your finances. This workbook is based around proven keys that form the foundation for good financial planning. The keys are highlighted throughout the book and summarized at the end. If you follow them, chances are high that your financial situation will improve. Keep in mind that it probably took a while for your financial problems to mount up, so it may take some time to undo them. There is no quick fix. But with some concentration and effort, you can get back on solid financial footing faster than you think. Keep this workbook for future reference. Use it for yourself and your family, and share the information with others who can benefit from it. Okay. Let’s get started!
Published by: Techartist Publishing 7904 East Chaparral Road Suite 110-604 Scottsdale, Arizona 85250 www.web-nation.com 877-WE-DO-WEB (877-933-6932) Content borrowed gratefully and liberally with the permission p ermission of Alison Scott Community Outreach Coordinator – Boleman Law
BOLEMAN Legal Solutions for Financial Problems
Boleman Law Firm, P.C. 2201 West Broad Street, Suite 205 Richmond, Virginia 23230 (804) 355-2057 www.bolemanlaw.com
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UNIT 1: MONEY THOUGHTS Money Money means different things to different people, and each of us have our own reactions to and thoughts about what it is and what it means. For some people, money means happiness; for others, money means power; for others, money means security; for others it means anxiety. Some people do just fine on very little money, while others never seem to have enough. Many rich people are unhappy, and lots of people with limited wealth are very content. Money can be used to acquire and do many things – and yet, there are a lot of things money cannot buy or accomplish. Money, in and of itself, is neither good nor bad. It is merely one of the many tools and resources available to us. It is up to you to determine the role that money plays in your life and how you use it. Assignment: Sharpen Assignment: Sharpen that pencil and take a few moments to determine what money really means to you. Here are a few questions to get you started:
What Do You Think about Money? 1. How did you learn to handle money? From whom did you learn?
2. What did you not learn learn about money that you wished you would have?
3. What is important to you that can be bought with money?
4. What is important to you that cannot be be bought with money?
3 5. A common saying is “The best things in life are free.” Name some of them.
6. People often talk about wanting to “Keep up with the Jones.” Why do we try? What do we care about that the Jones’ do? Should we?
7. More than most cultures in the world, American society is focused on the importance of material wealth and on buying things (consumerism). What problems does consumerism cause for people in managing their money? How has it influenced you?
8. Who or what influences you the most when it comes to spending money? Are these influences positive or negative? What would you like to change about these effects on you?
9. How much control do you feel you have over your financial situation? Why?
10. If you feel you do not have much control over your financial situation, how might you get more control?
11. Are there some things you already know that you want to do differently in the future as far as how you spend money? Name several of them.
AFTER ALL, IT IS YOUR MONEY AND YOUR LIFE!
KEY #1: GET TO KNOW HOW YOU HANDLE MONEY AND WHY. AWARENESS CAN LEAD TO CHANGE – IF YOU WANT IT TO.
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UNIT 2: PLANNING AND GOAL SETTING In a survey a few years ago, it was discovered that: 37% of people don’t have any goals at all; 50% have goals, but only short-term ones; 10% have clear goals, but only 3% write down their goals. Of that 3%, however, 95% accomplish most or all of their goals!
Goal Setting 1.
2.
In general, what are the benefits of goal setting?
Does it make a difference if you write down your goals? Why or why not?
Goal setting is not only effective – it is vitally important. If you don’t already do it, it’s not too late to start. Setting goals will give your life more direction and purpose. Accomplishing those goals will bring you satisfaction!
Needs versus Wants Before you start setting goals, it will help if you decide exactly what you need and what you want from life – both “material” and “non-material.” Let’s deal with the material things first: 1. a. b. c. d. e.
What five material things do you (or people in general) NEED TO SURVIVE at a minimal level? ______________________________ ______________________________ ______________________________ ______________________________ ______________________________
5 2. a. b. c. d. e.
Now, what else do you WANT? _____________________ _____________________ _____________________ _____________________ _____________________
f. g. h. i. j.
____________________ ____________________ ____________________ ____________________ ____________________
Do you need more space to write down more items? What does that tell you about your wants? 3.
What is the difference between what you need and what you want in terms of: a. b. c. d. e. f.
Clothes? Food? Housing? Vehicle? Entertainment Other categories? Remember : There’s a difference between needs and wants. Financial problems are usually caused by the wants, not the needs. If you can’t sleep at night because you’re worried about how you will pay for your wants – what good are they?
Values Goals are also influenced by our values. Values are the source of the “non-material” things we need and want. Some common values relate to the following broad areas: Spirituality Recognition Pride 1.
2.
Career Friendship Love
Health Family Community
Peace Challenge Respect
Which of these are most important to you? (Indicate the most important values with a star.) What else is important to you that is not on the list?
Now, can you buy any or all of the above items with money?
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3.
If this were the last year of your life, what five things would you do in the coming year? a._____________________________ b._____________________________ c._____________________________ d._____________________________ e._____________________________
4.
Did money play a role in those five things? Explain.
5.
What five things do you want people to remember or know about you? a._____________________________ b._____________________________ c._____________________________ d._____________________________ e._____________________________ 6.
Does money play a role in those five things? Explain. Thought: What most people discover is that one can have a good, happy, fulfilling life with the things that really matter without a great deal of money and without going into debt.
Suggestions for Goal-Setting Now that you have given thought to your needs, wants, and values, the next step is writing down some of your goals. Goals should be personal. Goals should be ambitious, but achievable. Goals should be specific. Goals should be measurable. Goals should be kept where you will see them.
7 Assignment: Draw a picture (or find a photo or picture in a magazine or newspaper) that shows some of your goals. Keep these where you can see them (like the frig door or bathroom mirror). For example, if you want to save money for you or your kids to go to school, keep a photo of a cap and gown at a graduation. Traditional strategic planning processes can be adapted to goal setting: 1. 2. 3. 4. 5. 6. 7. 8.
Define long-term goals – where you want to be, what kind of life you want; Assess your current situation – its strengths and weaknesses; Set short term goals – to take you from where you are to where you want to be; Prioritize actions and strategies; Begin to take action(s); Establish checkpoints to measure your progress; Evaluate how things are going; and Modify your plan if necessary. Thought: If you do not begin to focus on your long-term goals now, it will be next to impossible to achieve them.
Turn the page for some forms that can help you get started with goal setting. Once you get in the habit and find it works, you will develop your own system. Of course, goalsetting works for other areas of your life, too, not just for finances. Remember: Post your goals where you will see them (on the bathroom mirror or the refrigerator or in your daily calendar). It’s easier to keep them in mind if you see them every day. When you have definite goals, share them with people you can trust. They can help you achieve them. And once you reach your initial goals, set new ones!
Thought: If you don’t need or want much, then you don’t need much money. That gives you a lot of freedom! “Less” may be “more” in the long run.
8 Your Financial Goals Where I want to go financially:
Long term goals (2-5 years or more)
$ needed
By date
1.________________________________
________
________
2. ________________________________
________
________
3.________________________________
________
________
Short term goals (1-2 years)
$ needed
By date
1.________________________________
________
________
2. ________________________________
________
________
3.________________________________
________
________
How to get there: Having a goal is a good start, but action is needed to make something happen! Goal
Action to be taken
By date
1._______________________
____________________________ ____________________________
_______
2. _______________________
____________________________ ____________________________
_______
3. _______________________
____________________________ ____________________________
_______
4. _______________________
____________________________ ____________________________
_______
9 Obstacles Often the first thing people do after they write down their goals is think of all the reasons they won’t be able to achieve them. So, let’s do that. Write one of your goals in the blank space below. Then, list the reasons you have not achieved this goal and/or the obstacles you see in achieving it in the future. 1.
Goal: _____________________________________________________ _______________________________________________ BUT . . . _______________________________________________ _______________________________________________
2.
Now, list three possible solutions to just ONE of the obstacles you listed.. a. b. c.
3.
If you can’t come up with solutions, try this: Pretend this is the list of a close friend. Now, what would you tell your friend to do in order to achieve their goal?
Thought: Everyone experiences obstacles in reaching their goals. When faced with an obstacle, you have two choices: let it stop you, or overcome it. Those who are successful in life persevere and find a way around, over, under or through the obstacles that face them.
KEY #2: DETERMINE YOUR GOALS, WRITE THEM DOWN, and DEVELOP A PLAN OF ACTION TO ACHIEVE THEM.
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UNIT 3: HOW TO CREATE YOUR OWN FINANCIAL PLANS Now that you have an idea of what your goals are, the next step is seeing how they fit with your finances to form a financial plan. First, you need to assess your current monetary situation. Second, you need to compare it with where you want to be. Third, you need to work with your action plan to move toward your ultimate financial goals. This will involve some trial and error and is an ongoing process. Patience and determination will get you there! Benefits of a Financial Plan A financial plan is probably necessary, at least for a while. Such a plan provides formal goal setting and action steps for you to follow in your management of money. Furthermore, 1.
IT HELPS YOU MAKE DECISIONS ABOUT HOW YOU USE YOUR MONEY.
2.
IT MAKES YOU AWARE OF WHERE YOUR MONEY IS GOING.
3.
IT PROVIDES A WAY TO SAVE FOR SPECIFIC ITEMS.
4.
IT HELPS YOU LIVE WITHIN YOUR INCOME – OR TO DECIDE IF YOU NEED TO CHANGE YOUR LIFESTYLE OR YOUR INCOME (If you’re having money problems, there are options: spend less, earn more, or both!)
5.
IT HELPS YOU DECIDE WHERE TO CUT SPENDING IF NECESSARY.
6.
IT PROVIDES DOCUMENTATION AND RECORDKEEPING FUNCTIONS.
7.
IT ALLOWS YOU TO SPEND MONEY WITHOUT GUILT.
8.
IT IS A LEARNING EXPERIENCE. IT ALLOWS YOU TO SEE HOW YOU COULD LIVE DIFFERENTLY.
9.
IT IS A COMMUNICATION TOOL BETWEEN YOU AND OTHERS WITH WHOM YOU SHARE FINANCIAL BENEFITS AND BURDENS.
10.
IT GIVES YOU A WAY TO ASSESS YOUR PROGRESS.
11 Spending Plans (often called Budgets) A Spending Plan (budget) is simply the documentation for your financial plan. It includes keeping track of how much you spend and how you spend it. It also gives you a set of limits to aim for in future money management. Keep in mind budgets are flexible and changeable, depending on your goals and circumstances. Three broad types of income and expenses form a budget: fixed, variable, and periodic. Fixed: Expenses and income that are regular in time and amount are fixed . Items like your rent or mortgage, your car payment and your paycheck are usually fixed items. These are easily planned for, and hence, there are few surprises here. These items are not easy to change, and as a result, they form the “core” of your budget. Variable: Expenses and income that change, and over which you have control, are variable. What you spend on entertainment or food, and any income you pick up from odd jobs are variable items. This is where you have a lot of choice – and where you can plug a lot of leaks in your financial plumbing. Periodic: Expenses and income that come up from time-to-time but which may not be predictable or controllable in certain respects are periodic . Your car’s transmission going out would be a periodic expense; a cash birthday gift is an example of periodic income. In dealing with budgets, there are two very important principles: 1.
If you are serious about getting a handle on your finances, you MUST WRITE DOWN EVERY SINGLE PENNY YOU SPEND, EVERY SINGLE DAY FOR A MONTH.
If you don’t do this, you are kidding yourself about where your money is going. Furthermore, when you are standing in front of the vending machine deciding which candy bar to buy, if you know you have to admit spending your money this way, you may decide not to buy it! A written record will also give you something to work with and evaluate in terms of deciding what changes need to be made. HINT: If a month seems too long, start by keeping track of what you spend in a single day. When you have accomplished that, keep track of what you spend in a week. Then, move up to keeping track of your monthly spending. 2.
EXPECT THE UNEXPECTED.
If you don’t have an unexpected expense this month, you’ll probably have two the next month. These expenses usually are not unpredictable. If you have a 10-year-old water heater with a 5-year guarantee, the fact that it went out this week is really not a surprise. The way you deal with these periodic expenses is covered under the topic of Savings.
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Thought: Don’t deny yourself so much that you rebel and sabotage your plan. Treat yourself now and then – just don’t go overboard. An ice cream cone, a picnic in a park, a walk by a harbor or a lake can be more fun than an expensive dinner. Choices The topic of “choices” is a big one. Your values, goals, Spending Plans (budgeting), needs and wants are all personal choice. The fact is, most people are in the situation they’re in as a result of choices they made in the past. The good news is that if you don’t like the situation you’re in, you can change it through your future choices. The really good news is that you have lots of opportunities to change the choices that effect your financial situation if you want to. 1.
a. b. c. d. e. f.
How do CHOICES made in the following areas affect your finances? Give at least one specific example of a choice you made for each category.
general lifestyle or standard of living family career education health other
Give three examples of ways you can make new choices to improve your financial situation.
Thought: Pay attention to all choices you make! It’s not just the big ones; the little ones really add up too! Savings A lot of things have changed in this country in the past decade or so. One apparent change is that people don’t save as much money as they once did. This is related, of course, to the trends of increased consumerism, easy credit and instant gratification. The result is that many people are living on the edge all of the time and they have nothing put aside to take care of those “unexpected” expenses or events.
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Develop the habit of saving money on a regular basis. Even if you can’t save very much at first, get into the routine of savings. You can increase the amounts over time. The important thing here is to LEARN TO SAVE. Saving is not: ♦ ♦ ♦
a punishment a hardship an impossibility
Saving is: ♦ ♦ ♦ ♦ ♦
a cushion that protects you from those unexpected events what allows you to sleep at night when the brakes need to be fixed what can give you the confidence to make that change in your life a means to greater financial security a way to experience greater freedom in your life
The same compounding of interest that hurts you in credit transactions helps you in savings. If you save just $3.00 a day (which really is that Starbucks coffee, bottle of pop or candy bar), you will save over $1,000 in a year. If this money is put in an interestbearing account at a bank, you will have even more money than that! Assignment: Get a jar. (Decorate it if you like). At the end of each day, put some money in the jar, even if it is only the coins in your pocket. Do this for a week. How much money is in the jar? How do you feel about having this money there? The following thoughts about savings may be helpful. While some are obvious, putting them into practice is more difficult, particularly when others are not practicing the habit of savings. ♦ ♦ ♦
You have to spend less than you make. You don’t have to spend it just because you have it. Living at a little lower standard of living today will allow you to save for those things that will improve your standard of living tomorrow.
A final idea: Too many people say, “Oh yeah, savings is a good idea. I’ll put what’s left at the end of the month into savings.” Then, of course, there’s never anything left at the end of the month! PUT ASIDE SAVINGS FOR YOURSELF FIRST, AND LEARN TO LIVE ON THE REST!
14 Thought: PROMISE YOURSELF YOU WILL START SAVING MONEY…RIGHT NOW! Most people are in financial trouble because they did not have sufficient savings to cover unexpected expenses. National Percentages You may want to look at the following national averages of spending to see where you stand in relation to others. There may be some variation in certain categories, depending on what part of the country you live in or depending on any unique circumstances in your household. Nevertheless, it’s a guideline that may show you where you might be spending too much of your income in a certain area. ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪
Housing = 25% Transportation = 19% Personal Business = 15% Food = 14% Utilities = 7% Clothing/Entertainment = 5% Alcohol/Tobacco = 2% Education/Reading = 1%
Note that most people spend the greatest amount of their income on housing. Home ownership is also a reason many people report as the cause of their financial problems. Being able to afford a house is not just making the monthly payments – it’s also being able to afford the maintenance, repairs, potential increase in taxes and insurance premiums that come with home ownership. Transportation is the next major expense. More than just the cost of the car, the recent trend toward bigger, less fuel-efficient vehicles effects transportation costs. Remember, the real purpose of a vehicle is to get you from Point A to Point B. Habit Habit – not logic, not practicality, not good money management techniques – determines how most of us spend money. “But we always do that on the weekend.” “But my family always celebrates the holiday that way.” Realize that you don’t always have to do anything a certain way! You can choose to change a habit with a little concentration and effort. 1.
What are some habits that cause you to spend unnecessary money?
2.
What will it take for you to change those habits?
15 Your Personal Spending Plan The forms on the following pages will help you start tracking your money and putting together a financial plan. If these precise forms don’t work for you, tinker with them to create forms that work better for you. For a while, you probably need to stick with a regular method of budgeting. Then it will become a new habit. There are several key terms you need to know to complete these forms: Gross Income: money you earn before taxes and other items are deducted Installments: payments made on a monthly basis to purchase an item Net Income: money you receive after taxes and other deductions
Thought: IT’S NOT HOW MUCH YOU MAKE THAT MATTERS – IT’S HOW YOU MANAGE WHAT YOU MAKE.
16 Daily Variable Expenses Tracking Sheet – By Week Assignment: Make four copies of this page. Track every cent you spend for four weeks in a row!
ITEM Gasoline Car Maintenance Home Maintenance Groceries Cleaning Supplies Clothing Medical Expenses Child Care Meals Out Laundry/Dry Cleaning Gifts Entertainment (movie rentals; pay per view) Charitable Contributions Cigarettes/Tobacco/Alcohol Personal Grooming Travel/Vacation Education/Tuition/Books Bank Service Charges Hobbies/Club Dues Books/Newspapers/Magazines Miscellaneous
Mon.
Tues.
Wed.
Thurs.
Fri.
Sat.
Sun.
Total
17 Fixed Income Tracking Sheets Use one of the following three sheets that best suits your pay schedule. Monthly Income Sheet MONTHLY GROSS INCOME
$AMOUNT
COMMENTS
Salary Commission Other Income Total Income WITHHOLDING Income Tax FICA (Soc. Sec.) Taxes Unemployment Insurance Health Insurance Life Insurance Contributions Other Total Withholding MONTHLY TOTAL Total Income - (Withholding) = Spendable Money (Net Income)
Bi-Monthly (Paid Twice a Month) Income Sheet Bi-MONTHLY GROSS INCOME
Salary Commission Other Income Total Income WITHHOLDING Income Tax FICA (Soc. Sec.) Taxes Unemployment Insurance Health Insurance Life Insurance Contributions Other Total Withholding Bi-MONTHLY TOTAL Total Income - (Withholding) = Spendable Money (Net Income)
$AMOUNT
COMMENTS
18 Weekly Income Sheet WEEKLY GROSS INCOME
Salary Commission Other Income Total Income WITHHOLDING Income Tax FICA (Soc. Sec.) Taxes Unemployment Insurance Health Insurance Life Insurance Contributions Other Total Withholding WEEKLY TOTAL Total Income - (Withholding) = Spendable Money (Net Income)
$AMOUNT
COMMENTS
19 MONTHLY EXPENSE SHEET MONTHLY EXPENSES Rent/Mortgage Gas Electricity Water Phone/Cell phone Garbage Cable TV Child Care Internet Other INSURANCE Car Health [if not included under Income Sheet] House Life [if not included under Income Sheet] Other Insurance [if not included under Income Sheet] INSTALLMENT Car Credit Cards Other Loans SAVINGS TOTAL MONTHLY EXPENSES
$ AMOUNT
COMMENTS
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Attitude Counts: Think Positivel One of the factors that separate those who do well in life from those who do not is attitude! People with a positive attitude: ● ● ● ● ● ● ● ● ●
accomplish more get the first shot at a good job receive the benefit of the doubt are more enjoyable to be around have more fun bounce back more easily from a “bad break” have better luck are often in the right place at the right time see solutions instead of problems
To a great extent, what we think and what we believe determines what happens to us. If you want to have more money, you have to believe you can do that job with a higher salary. If you think you are only “worth” what you make now, you will never even apply for the higher-level position, let alone do well in an interview! Few of us use even a small portion of our potential. Stretch yourself a bit and see what happens. Maybe you should go back to school. Maybe you should try a different career. Maybe you are scared to take a risk and try something new. IT’S HARD WORK TO BE HAPPY – BUT IT’S WELL WORTH IT. Goals – Again! Goals play a role in getting what you want because they strongly influence you on a subconscious level. They are also closely related to attitude. Once you know what you want, you will talk to people you may not have spoken to before; you will have different conversations than you would have had before; you will see articles you never would have read before; and you will hear comments you otherwise would not have heard. This is why it is so important to have goals. Set aside time to review your goals every month or two and see if you’re on track, and to see if your money behavior needs revising.
KEY #3: FIGURE OUT WHERE YOUR MONEY GOES, MAKE A SPENDING PLAN (budget) and STICK TO IT.
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UNIT 4: SALES, ADS, SCAMS & OTHER MONEY TRAPS If It Sounds Too Good to Be True… Marketing experts are paid tremendous amounts of money to figure out what makes people buy a certain product, spend more money in a store or sign up for a subscription. Most of us are amateurs going up against the pros – and guess who usually wins? Start paying attention to the techniques and promotional activities that encourage people to spend more than what they had originally planned – and often more than they can really afford. They range from common “sales talk” to illegal home improvement fraud. Once you are aware of the ways you can be manipulated, it will be easier to resist such efforts. With television, radio, on-line shopping and telephone solicitations, marketers are reaching into our homes more than ever before. Unlike the past, when consumers frequented stores for everything they needed, stores now come directly to you. You do not even need to leave the house. Assignment: Find an advertisement in a magazine or newspaper that you think is trying more than usual to manipulate you and other readers. Cut it out and put it on your refrigerator or mirror with a big X through it!
Emotions and Money A strong tie exists between emotion and money, and marketers know that. Research shows that people spend unnecessary money in response to certain emotions. If you recognize any of these emotions as a factor in your spending, then money may not be the problem. If you learn how to handle that emotion in a better way, it will help solve your financial problems, too. Depression – When people are depressed, they often spend money on things to make themselves feel better. Unfortunately, this improvement is a temporary feeling. Soon after spending, they’ll usually feel even worse. The next time you feel you are shopping because you are depressed, call a friend (preferably not long distance!), get some exercise or do whatever (other than shopping or spending money) energizes you. Anger – When people get angry, it’s common to spend money to work off the negative emotion. Next time you get angry, clean out a closet, meditate, go for a run, swim, or walk. Do something to make yourself feel better (something that doesn’t cost a lot of money or compromise/sabotage your money plans). Assignment: Other emotions often relate to wasteful or unnecessary spending. On the next page, jot down a few notes about how these emotions affect your use of money – and come up with ways to deal effectively with whichever of these difficult emotional states may be affecting you and sabotaging your financial plans.
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Jealousy Fear Competitiveness Anxiety -
Joy – Boredom – Grief – Success –
Thought: Sometimes emotions can be so overwhelming, professional assistance may be helpful. There are people who can help if you need it. Ways that We May Be Tempted to Spend Money We Can’t Afford Read through the list below and circle the ones that cause you the most trouble: Sales: Sales are not bargains unless you need the item. Coupons: If you buy something you would not normally buy, then it is an unnecessary expense. Even with the coupon, name brands may cost more than generic or store brands at regular price. 1-800 numbers, 24 hours a day, 7 days a week: These are not for your convenience – they are to give you more opportunities to spend your money. Buy One Now, Get One at Reduced Price: Do you really need two? Or even one? You Will Look Younger, Healthier and Happier: These products appeal to our vulnerabilities and rarely provide solutions. They are just expensive! Gadgets: Do you need it? (Fancy choppers, slicers and dicers do no more than a knife can do – at a lot higher cost!) How many do you have already? Do you use them? How much time will it take to use? To maintain? Advertising Techniques: Free samples, appealing to your desire for popularity or security, or to help your children, or improve health, or calm fears… These are all established advertising techniques. Some advertisers prey off your fears and concerns. Be aware of what they are trying to do and remind yourself to stick to your list and budget. Catchy songs and slogans are effective also. Notice how many toy ads are shown during cartoons and to promote popular children’s movies. Television Shopping Channels: Like the 1-800 numbers, the convenience combined with the sales pitch makes these hard to resist. Many of us are lonely and the phone makes us feel connected. If you can’t delete the station from your service, use your willpower to watch something else. Better yet, do something besides watch TV!
23 High Pressure Salespeople: Salespeople receive a lot of training in how to overcome objections to buying. They push until you agree to the deal. They keep you on the phone. Know your limits and stick to them. If you are susceptible to sales pressure, don’t carry your checkbook or credit card with you. That way you can’t buy until you’ve had a chance to calm down and think. The Fine Print: Be sure you understand the details of any contract. If you do not know what something means, ask someone who is on your side (not the salesperson) to explain it to you. Product Placement: Have you ever noticed how the cheaper brands are way up there or way down there? And how the essential foods are at the back of the store? Ever notice how many little items are placed right near the cash register? Candy, gum, gadgets… They are placed there to tempt you to pick them up on the way out of the store, not for your coincidence! Smells, Sounds and Colors: Popcorn in a movie theater and soothing music in a restaurant can influence you to spend more money than you had planned. Buy Now, Pay Later: The problem is that later you haven’t saved up the money you promised yourself you would to pay the item off before the high interest kicks in. And, now you’re bored with the item, it’s outdated, or it’s already broken. Payday Loans: Payday loans charge a very high rate of interest due to their structure and should be avoided! They are a cash “advance” on your paycheck, and are used by people who need quick cash. The problem is that people usually don’t have the money available on payday, and end up taking out additional loans. These can easily add up to 400% or more Annual Percentage Rate (APR) interest. ● You write a check dated two weeks from now for $256. In return, you get $200 cash today – and plan to have the money to pay the amount of the check next payday. Therefore, you are paying $56 in fees and interest. That’s 728% APR! Rent-to-Own: Rent-to-Own schemes are bad deals as well. It is usually far better to save up the money to buy the item a few months from now rather than renting it now and paying for the item over many, many months. ● You rent a $300 TV, paying $16 a week for a year (a total of $832). Therefore, the interest and charges total $532, or over 250% APR! Wait 4-5 months, put the $16/week in a savings account and buy it for the $300 purchase price instead. Home Equity Loans: These loans are popular because money can be borrowed against the equity in a house, and the interest paid on the loan is normally tax-deductible. While this can be a valid method of “using” the equity you have in your home, the danger is that if the loan is not paid as agreed, the creditor can take the house. People commonly use the money to pay off credit card debt (which is unsecured). So, you end up converting unsecured debt to secured debt. Don’t borrow more than you need, and be sure you can repay as scheduled.
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Pawnshops: Pawnshops give loans in exchange for keeping an item of personal property such as a guitar, bicycle, computer or lawnmower. If the loan is not paid on time, the property can be sold. Rates and fees are usually high at pawnshops – and you risk losing your property. Lotteries: You know what the odds are of winning, don’t you? Money spent on lottery tickets is like throwing money in the wastebasket. Hidden Charges: Are batteries included? Is there an additional fee for options or services that you thought were included? Is there a late termination charge? Read the agreement carefully, ask around, and talk to someone who already has the product or service. Consolidation Loans: These loans lump a number of payments together (usually with a new creditor) so that just one payment a month is made. Sometimes, this new amount has a lower overall interest rate. Consolidation only works if you make the payment as agreed, and more importantly, if you don’t incur additional debt. Make sure the lower rate is not just for the introductory period. Also, look at the fees charged to consolidate. Moreover, always look at the length of the repayment loan. You may be paying for many years. 1.
2.
If you circled any of the above items as problematic for you, jot down a few things you are going to do in the future to avoid those problems.
What’s the worst purchase you ever made? How could you avoid this mistake in the future?
Thought: The list of “dangerous” techniques and swindles is endless. It is up to you to pay attention. Learn about anything you are tempted to invest in or spend money on before you make the commitment.
25 Hints to Help Avoid Impulse Buying 80% of items bought on impulse are unnecessary expenses and a waste of money. If you are prone to impulse buying, consider the following to avoid overspending: 1. 2. 3. 4. 5. 6.
Why did you buy the last item “on impulse”? Take some time and answer honestly. (Examples: Perhaps you were depressed, perhaps you didn’t want a friend to think you couldn’t afford it.) Before buying that next item, go away and think about it. If you truly want it two (ten?) days later, and you can afford it, then go buy it. Don’t spend “spare” time in shopping malls or stores. Avoid these “slippery” places. Instead, go to the library, take a walk, balance your checkbook (!), get some exercise or pursue a hobby. Don’t buy it on sale unless you would have bought it at full price. Don’t carry much cash. Cash “spends” easier than a check. Don’t go shopping when tired (or hungry, if shopping for food).
Other Smart Ideas to Cut Shopping Costs 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
Comparison shop – for everything from food to insurance. Buy generic or store brands. Buy on sale (but see #4 above). Plan ahead. Buy in quantity if possible. Don’t pay for convenience; make it yourself. Consider repairing an old one rather than buying a new one: for everything from remodeling your current house to fixing the washing machine. Buy it used: items found at garage sales or used cars are often good bargains. Consider alternatives to expensive gifts – services, homemade items, etc. Simplify your life. Use baking soda, vinegar, and bleach mixtures instead of “specialty” cleaners. For everything you do, first ask yourself, “Can I do the same thing cheaper?” Pay bills online or in person when possible to save postage – which can add up. Better yet, sign up for Automatic Payment plans (monthly bills are directly deducted from your checking or savings account) where possible. Save on utility bills. Insulate your home. Wait as long as possible to turn on air conditioning or heating. Keep thermostat high in summer, low in winter. Use cold water to wash laundry when possible. Save on phone bills. Don’t make long distance calls unless absolutely necessary. Consider a cell phone instead of a traditional phone. Call during off-peak times. Call your phone company every six months to make sure you are getting the best rates.
26 16. 17.
Use free recreation facilities and cultural offerings – the beach, museums, public parks. Instead of renting a VCR or DVD video from the store, see if your local library (or one of its branches) has it. It can be requested, sent to the library of your choice, and you get to keep it for a week. The local library also has computers, which you can use to obtain Internet access. And don’t forget about the books, magazines and newspapers!
Assignment: What can you add to either of the above lists? Chat with a friend, brainstorming other ways to save money, and write them below. Be creative!
How to Combat Sales Techniques and Other Influences ♦
Have clear goals The clearer your goals are, the easier it is to say “no” to items you don’t really need or want. Keep visual reminders of your goals in view.
♦
Be assertive Salespeople and individuals that are close to you know how to “push your buttons” to get what they want. Practice saying “NO” over and over until it is comfortable for you. Remember that you need to protect yourself. Others don’t necessarily have your best interests at heart.
♦
Compromise If people with whom you have close relationships – spouse, children, etc. – disagree on expenditures, maybe a compromise is in order. To your partner: “Yes, we could buy a new DVD Player, but instead of buying one at the store where they cost the most and where we have to pay taxes, let’s watch the want ads and go to garage sales to find one.” Or, to the kids: “I think shoes should cost a maximum of $30.00 – I’ll pay that much, and you have to pay the rest out of your allowance or salary if you want the designer brand.”
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♦
Analyze Think through the purchase, particularly if it’s on credit. Some good questions to ask yourself: Do I need it? What is the interest rate? Will I use it? Can I maintain it? Will I become bored with it?
What is the finance charge? What is the total purchase price? Do I have time for it? Where will I put it? Can I wait longer before I buy it?
KEY #4: IT IS YOUR MONEY! THE ONLY POWER THAT OTHER INFLUENCES HAVE ON YOU IS THE POWER THAT YOU GIVE THEM.
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UNIT 5: CREDIT USAGE Many people who find themselves in debt decide they are never going to use credit again – after all, that’s what got them into trouble in the first place! However, the practicality is that credit is increasingly important in this society – as a method of payment as well as a means to facilitate activities such as renting a car. Therefore, learning how to use credit wisely is important.
To begin, you need to appreciate the differences between credit cards, debit cards and stored value cards. ●
Credit Card: You borrow money when you use a credit card and if you do not repay the borrowed amount in full when required, you are charged interest on the unpaid debt. You must make at least a minimum payment if you cannot pay in full. There are penalties added for late payments. Credit cards have a maximum amount that can be charged on the card and that differs from person to person.
●
Debit Card: This is a convenient way for you to withdrawn your own money at locations across the world using a special PIN number. Some places charge you a fee to withdraw your own funds, in addition to what your own bank may charge you. The debit card can also be used to pay for items purchased in a store or supermarket. Purchases are sometimes charged a fee at some merchants, so pay attention.
●
Stored Value Card: This is a convenient way to pay for items (transportation; phone). It works by requiring a customer to pay in advance for the desired service. The amount paid is coded into the card and each time the card is used, the balance is reduced. If you lose a stored value card, you are out of luck since anyone who finds it can use it.
Credit Rules 1.
Taking out a loan (which is what a credit card offers) should be a last resort. If you don’t have the cash, then you can’t afford it.
2.
Loans should only be used for needs, not wants
3.
Never use credit for a short-term item. Use it only for something with a useful life beyond the payoff on the loan. A home and a car are examples of items for which credit borrowing is acceptable. Furniture is not essential, nor is jewelry, nor are gadgets.
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4.
Determine the cost of the credit. Look at the amount of interest you will be paying and compare that to the purchase price if bought only with cash. Interest shows up as a percentage: 5%, 14% and 21%. The higher the number, the greater the cost to you. Credit-related charges (late fees; penalty fees) may make the total purchase price extremely high. Is that how you really want to use your money? The money goes to the lender, not you!
5.
Pay off loans as quickly as possible. The longer you borrow, the more you pay in interest. EXAMPLE You want to buy an MP3 player that costs $169.00. The salesperson says, “It’s just $15/month for one year with a $30.00 down payment” Sound good? (After all, that’s only $.50 a day!!)
But how much will the MP3 player really cost you?? The answer is $210.00!! To figure this out, here’s what you do: a. Count the number of payments (12) and multiply that by the amount of each payment ($15): 12 x $15 = $180.00 b. Add the down payment ($30) to that: $180.00 + $30.00 = $210.00 ($210 is what you will pay for the MP3 player!) c. The total finance charge is determined by subtracting what you will pay in total from the cash price of the item: $210 - $169 = $41.00 d. Total interest paid: $41.00. That’s over 24% interest! Is this a good deal? Before answering, you may want to look at the following information.
30 Interest Rates Interest rates DO make a difference. Lenders who offer “easy credit’ or who aim at borrowers with poor credit histories make up for taking that risk somehow. They normally do it by charging a higher purchase price for the item and/or by charging very high interest rates. Compare the following examples: Loan Amount $15,000 $15,000 $15,000 $15,000 $15,000
Loan Term 5 years 5 years 5 years 5 years 5 years
Interest Rate 5% 10% 15% 20% 25%
Monthly Pmt. $283 $319 $357 $397 $440
Total Interest $ 1,984 $ 4,122 $ 6,411 $ 8,845 $11,416
TOTAL COST $16,984 $19,122 $21,411 $23,845 $26,416
Thought: If you borrow $15,000 at 25% interest, your interest payments over five years ($11,416) are almost as much as the loan itself.
Loan Amount $50,000 $50,000 $50,000 $50,000 $50,000
Loan Term 10 years 10 years 10 years 10 years 10 years
Interest Rate 5% 10% 15% 20% 25%
Monthly Pmt. $ 530 $ 661 $ 807 $ 966 $1,137
Total Interest $13,639 $29,290 $46,801 $65,953 $86,490
TOTAL COST $ 63,639 $ 79,290 $ 96,801 $110,953 $136,490
Thought: If you borrow at 25% rather than 5%, you end up paying $86,490 in interest rather than $13,639. That is a huge difference.
Length of the Loan The time period over which you pay off a loan also makes a difference. The quicker you pay off a loan, the less you pay in interest. Loan Amount $80,000 $80,000
Loan Term 30 years 15 years
Interest Rate 7% 7%
Interest Paid $111,607 $ 49,431
TOTAL COST $191,607 $129,431
$15,000 $15,000
3 years 5 years
10% 10%
$ $
$ 17,424 $ 19,122
2,424 4,122
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Another way to pay off a loan quicker is to make additional principal payments each month. Compare the numbers below with the loans in the box on the previous page. Loan Amount $80,000 $15,000
Term/Interest Rate 30 years, 7% 5 years, 10%
Additional Payment $50/month $10/month
Interest Paid $81,864 $ 3,953
TOTAL COST $161,864 $ 18,953
Thought: Creditors must tell you what the Annual Percentage Rate (APR) of the loan will be, and give you the total interest and total cost of the item if bought on credit. Demand this information BEFORE you sign anything. If they do not provide it to you, you may have rights against them. Compare what one creditor offers with what another creditor offers. That way, you can find the better deal. Problem to Solve Suppose you need to borrow $6,000 to purchase a used car. Look at these deals. Consider which is best. Can you explain why you would choose one over the other? What factors might affect your decision? Lender’s Name Abby’s Bob’s Carla’s
APR 14% 14% 15%
Length of Loan 3 years 4 years 4 years
Monthly Payment $205.07 $163.96 $166.98
Credit Cards and Minimum Payments One of the common traps people fall into is making only the minimum payment on revolving charge cards. This may be easier to handle in the short run, but it will cost a lot more money in the long run. Plus, it will take longer to pay off the debt. The best thing to do is pay off the total balance every month. If that is truly impossible, make the largest payment you can afford to make. And if you are not paying the balance off every month, do not continue to charge purchases – you can’t afford them. Thought: If you make only minimum payments and continue to borrow, you get deeper and deeper into debt.
32 If you make only the minimum payment due each month, look at how much it costs you and how long it will take to pay off the account (figures are rounded): Amount Borrowed $1,000 $3,000
Interest Rate (APR) 19% 19%
Minimum Monthly Payment $20.00 $60.00
Total Repayment Time 14 years 36 years
Total Dollars Paid $ 2,700 $ 12,300
And that’s if you make no further charges to the account! Imagine how bad it gets when the charges continue to grow each month. Types of Loans Long Term Loans: Loans that are to be repaid over many months or years are long term in nature. Mortgages and car loans are common examples. Loans for very expensive household items such as appliances and furniture can also fall into this category. Short Term Loans: Loans that are paid within a few weeks or months are considered short term loans. A loan to cover dental work that you will pay off from your next two paychecks is a short term loan. Secured Loans: Secured loans have “collateral” backing them up. Collateral is usually an item of personal property (or with a mortgage, real property like a house or a mobile home). With a secured loan, the creditor can take back (repossess) and sell the collateral if the loan is not paid as promised. Car loans are usually secured loans. Unsecured Loans: Unsecured loans have no collateral behind them and are given in return for the promise of the debtor to pay back the money in the manner agreed. Credit cards are usually unsecured loans. The interest rates are usually higher on unsecured debt as the lender is taking more risk; they have no specific collateral to repossess. Revolving Credit: These accounts allow you to make charges up to a pre-set limit. You only pay interest on the amount you have borrowed. Credit cards are an example of revolving credit .
KEY #5: CREDIT IS EXPENSIVE. USE IT RARELY, CAREFULLY AND KNOWLEDGEABLY.
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UNIT 6: UNDERSTANDING CREDIT REPORTS AND SCORING Credit Reporting Virtually everyone over the age of 18 has a credit report . Your credit report is a summary of past financial behavior, particularly your history of payments on contracts and credit-related transactions. Lenders look at your credit report to determine whether or not to give you a loan, and if you do get a loan, what interest rate your loan will have. Credit reports contain a credit score but it is not generally printed so consumers (as opposed to creditors) can see it. But unless you’ve been living in a cave all your life, you probably are at least somewhat aware of these facts. However, your credit affects so much more than just the interest rates on your credit cards. Many property owners will pull a credit report and use it to decide whether or not they will rent to a person. Insurance companies, potential employers and other businesses are increasingly using credit report and the credit scores calculated from your report to make decisions on any number of transactions. Therefore, it is important for you to know what information is contained in your credit report. Be sure everything on the report is related to you. Identity theft is a big concern these days. Your Credit Score Credit scoring is a method lenders use to decide whether or not you meet their criteria for a loan. It is a statistical calculation used by creditors to evaluate your creditworthiness, based on your past credit history and other factors. In a sense, this score is like a financial report card. The actual formula is not publicly available. Credit scoring takes into account approximately 25 different variables about your life and finances. Among other things, a credit score looks at whether you own or rent, how long you have lived at your present address, whether you maintain bank accounts (checking and savings), your employment history, the number and nature of credit cards you have, your repayment history, the amount of unused credit available, balances maintained on open accounts and number of credit inquiries. Recently, people have been able to receive their actual credit scores based on the scoring system employed by a company called Fair Isaacs. Your credit score (known as a FICO Score) is a number ranging between 300 – 900. (This number range can vary from creditor to creditor.) The higher the number, the better the score. This number, and the explanation accompanying it, tells you a great deal about how creditors view you. Credit scores are available for a small fee. Once you know why your score is what it is, you may be able to take steps to remedy some aspects of your life. Then, you can get your credit score again to see if there is improvement. Some organizations offer it for free but be careful because this often requires signing up for some expensive monitoring service. Your credit score is available on the Internet. One good place to order it is www.myfico.com.
34 Now that you have a better understanding of the types of information on credit reports, it would be a good thing to request a copy of your credit report from each of the three major credit reporting agencies (or Bureaus): Equifax, Experian and TransUnion. As stated before, as many as 1 in 4 credit reports contain a serious error which could disqualify a consumer from buying a home, opening a bank account or getting a job. It has also been stated that as many as 80% of all credit reports contain some type of error, so chances are good that your reports may need some correction. Free Reports With the new amendment to the Fair Credit Reporting Act (FCRA), all consumers can now get one free credit report a year from each of the three major credit bureaus. It’s important to note that you will not get your credit score with these free reports. Assignment: It’s time to request copies of your credit reports. Call 877-322-8228 or visit www.annualcreditreport.com. This central site allows you to request your free reports, once every 12 months, from each of the nationwide consumer credit reporting companies. When you order, you will need to provide your name, address, Social Security number, and date of birth to verify your identity. Once your credit reports are in hand, you’ll be ready for the next Unit which explains how to decipher them.
Thought: It’s a good idea to pull your credit report more than once a year, especially if you are working on fixing errors, so you can see the results of your efforts. There will be a small fee for the second set of reports. There is also a fee to have your credit score included.
KEY #6: LEARN HOW THE FINANCIAL WORLD VIEWS YOU BASED ON YOUR CREDIT REPORT.
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UNIT 7: HOW TO READ YOUR CREDIT REPORT In this section we will learn how to read your credit report and understand the information it contains. Along the way, you will have the opportunity to write things down that look questionable or things which need to be fixed in order to lessen the chances of identity theft. Credit reports contain a lot of information, including: -
Name – past, present and any aliases Phone number Birth date Creditors Dates and types of loans Credit limits, highest amount used Disputed items Accounts sent for collection Credit report Inquiries
- Address – past and present - Social Security Number - Work history - Payment history - Marital status - Current balances - Number of active accounts - Comments or explanations - Judgments, bankruptcies
It is important to note which credit bureau contains what information. If you dispute the information with the bureaus, you will have to write a separate letter to each one. We’ve provided spaces for each credit bureau in each category, so you can list the information separately for each bureau. Even if the three bureaus contain identical information, write it down for each bureau. For example, if Experian and TransUnion each list the same variation of your name, write the variation under both the Experian and TransUnion boxes. Assignment: If your credit reports included your credit scores, write them in the following boxes. Experian Score
Equifax Score
TransUnion Score
Incorrect Personal Information Name – More than One Spelling of Your Name? The first thing you should notice on your report is your name. Often you will have several variations, nicknames, misspellings and perhaps your maiden name. In order to protect yourself from identity theft and to get erroneous negative information removed from your report you really should only have one version of your name, address and social security number on your report. Sometimes credit files get
36 accidentally merged based on similar names or past addresses so you want only one version of your name and address on your credit report. Assignment: Write any multiple versions of your name in the spaces below.
Experian
Equifax
TransUnion
Address – More than One? You should really dispute everything except your current address, even if the old addresses are correct. Any address other than your current one increases the chance that information that is not yours will appear on your credit report. This is especially important if you live in an apartment or rental house. It is not uncommon for your credit file to get mixed up with someone else who has had your address in the past or rented the property after you. Assignment: Write any multiple versions of your address in the spaces that follow.
37 Experian
Equifax
TransUnion
Social Security Number – More than One? This one should be pretty obvious – since your ID is your Social Security Number, any variations should be disputed to prevent erroneous information from getting on your credit report. Assignment: Write any multiple versions of your Social Security Number in the spaces provided below. Experian
Equifax
TransUnion
38 Thought: Identity theft is rampant. In addition, credit bureaus often mistakenly merge your file with others because of erroneous personal information. You can reduce your chances of this happening by making sure your personal information is correct. Overall Credit Report Information In most cases, a credit report provides a summary of all accounts you’ve had over the last seven years on the front page (or on the left side if you are looking at your report on the Internet). The summary should tally accounts by type, used credit, and total amount owed. Assignment: Write your account summaries from your credit report in the following chart. If your report doesn’t include summary information, tally each type from the detailed listings on your reports. Number of Accounts Experian
Equifax
TransUnion
Total number of credit card accounts Total number of mortgages (including equity lines of credit) Total number of auto loans
Percentage of Maximum Limits on Credit Cards You won’t find this information on your credit report, but it’s important to know the maximum limits on your credit cards because it is used to calculate your credit score. First, we’ll be looking at “High Limit” numbers on your credit report for credit cards only . Then we’ll look at your credit card “Balances.” This exercise involves using a calculator, but don’t panic. We’ll walk you through it. Here’s an example account: VISA Acct Number: 4017XXXXXXXXXXXX Acct Type: Revolving or Option Acct Status: Open Monthly Payment: $29 Date Open: May, 1999 Balance: $968 Terms: N/A High Balance: $1,033 Limit: $1,000 Past Due: $0 Remarks: CREDIT CARD
39 Assignment: Identify, add together and write down the Total of Limits for all of your credit card accounts. Use a calculator. Hint: The card “Limit” in the example above is $1,000. Don’t let the High Balance of $1,033 confuse you. This consumer exceeded their limit at some point. Total of Limits: $_______________________ Assignment: Identify, add together and write down the Total of Balances for all of your credit card accounts. Use a calculator. Hint: Don’t let the High Balance confuse you. You want the Balance (which is the current balance on the card), not the High Balance (which is the highest balance you’ve had during the time you’ve used the card). Total of Balances: $____________________ Now you can calculate how much of your available credit you are using. Assignment: Using a calculator, plug the numbers above into the following formula: (Total of Balances ÷ Total of Limits) X 100 = __________% If this number is over 25%, you are being docked points on your credit score. Paying down your credit card balances will help your credit score tremendously. To target the accounts that are doing you the most damage, calculate the percentage of the limits that are being utilized for each card individually. In other words, calculate: (Balance of Account ÷ Limit of Account) X 100 = ___________% In the VISA example provided earlier, the consumer is using 96.8% of the credit card’s available credit! ($968 Balance ÷ $1,000 Limit x 100 = 96.8% of available credit.) That’s way too high! Thought: Concentrate on paying down accounts that use the highest percentage of available credit first. You may see dramatic improvements in your credit score!
40 Negative Information Negative information is any listing on your credit report which highlights problems you may have had paying your bills on time in the past. These include: late pays, charge offs, collections, judgments and bankruptcies. Assignment: Make Assignment: Make a copy of your credit report. On the copy, as you read each item, label each as either “good” or “bad.” You can use a yellow highlighter for good entries and a blue one for bad ones, if you like. If you’re not sure if something is negative, list it anyway.
Public records Note any public record information appearing on your credit report. Public records are bankruptcies, tax liens, judgments and child support delinquencies. This information appears at either the beginning of your credit report or at the very end. Assignment: Write Assignment: Write down any public records appearing on your credit report in the spaces that follow. Experian
Equifax
TransUnion
41 Repossessions or Foreclosures It’s easy to identify these types of accounts on your credit report since they will have the words “repossession” or “foreclosure” listed next to them. They may also have the word “skipped” in them.
Assignment: Write Assignment: Write down any repossessions or foreclosures appearing on your credit reports in the spaces below. Experian
Equifax
TransUnion
Late Pays Late pays are only reported by original creditors (mortgage companies, auto finance companies, banks, utilities and credit card companies). Note any accounts indicating that you have paid late in the last seven years. Note the account number and the number of times and the length of time you were late. You will see 1x30, 2x60, 3x90, etc., listed beside an account. In some cases, you will see a two-year history which looks look s something like this: Jun 2002
Dec 2002
Jun 2003
Dec 2003
Jun 2004
1 1 1 1 1 1 1 1 2 2 3 1 1 1 1 1 1 1 2 2 1 1 1 1 1 1 1 1 1
The example above shows current payments (the 1s) from Jun 2002 to Jan 2003, then two 30-day late payments (the 2s) and one 60-day late (the 3) early in 2003. Two more 30-day lates happened in Dec 2003 and Jan 2004.
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Or like this: Jun 2002
Dec 2002
Jun 2003
Dec 2003
C C C C C C 30 C 60 60 90 C C C C C C C -
- -
-
Jun 2004 C C C C C C
The above example shows current payments (the Cs) from Jun 2002 to Nov 2002 and then a 30-day late payment in December 2002 (30), followed by two 60 days+ late in February and March 2003 (the 60s), then one 90-days+ late in April 2003 (90). Payments were then current until Nov 2003. There was no activity (or the finance company did not report data) from December 2003 through March 2004 (the –s). Assignment: Now Assignment: Now that you know what to look for, write down any accounts with late pays appearing on your credit reports in the spaces below. Experian
Equifax
TransUnion
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Thought: Sometimes you can identify negative accounts from credit card companies by the words: “account closed by credit grantor.”
Collection Accounts? Note any collection accounts appearing on your report. Companies having collection accounts do not include credit card companies, mortgage companies, finance companies or utilities, even if the notation says “account placed for collection.” Typically, accounts with late pays or charge offs and collection accounts are placed at the very top of your credit file. Assignment: Write down any collection accounts appearing on your credit reports in the spaces below. Experian
Equifax
TransUnion
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Inquiries Inquiries occur anytime a company pulls your credit report. The only time someone is allowed to pull your credit report is for a firm offer of credit, insurance purposes, employment or court orders. Thought: Inquiries can do more damage to your credit score than you think. In addition, excessive inquiries can also indicate identity theft. You will see a section of your credit report saying something like “the following companies have requested your information.” Go through each one of these on your report and draw a line through any from: • • •
Companies with whom you have an account, Employment, or Companies with names you recognize with whom you applied for a credit card, job, mortgage or auto loan. Assignment: Write down any inquires appearing on your credit report (that you HAVE NOT already lined out) in the spaces below.
Experian
Equifax
45 TransUnion
KEY #7: IN ORDER TO PROTECT YOUR CREDIT, YOU NEED TO UNDERSTAND WHAT MAY BE BRINGING DOWN YOUR CREDIT SCORES!
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UNIT 8: HOW TO REPAIR YOUR CREDIT REPORT As stated in Unit 6, a recent study indicated that as many as one in four credit reports contain a serious error which could disqualify a consumer from buying a home, opening a bank account or getting a job. Therefore, as we discussed in the last unit, you should obtain a copy of your credit report from each of the three credit reporting agencies at least once a year . By law, errors must be fixed without charge if you notify the credit reporting agency. The errors may be affecting your credit. The basic strategy for repairing your credit: 1. Get your credit report. 2. Analyze your report. 3. Make a list of all items you consider to be questionable or negative. Clearly identify each item in your report that you dispute. 4. Write a dispute letter to the credit bureaus. 5. Send the letter to the credit bureaus. Make sure you send it registered or certified mail. 6. Document your efforts. Record when you sent your letters, and the results. 7. Wait for the bureaus to investigate your claims. 8. Analyze the results. 9. Was the item deleted or changed to your satisfaction? You may continue steps 1, 2 and 3 above until you feel the dispute is settled satisfactorily. Remember, there is no charge for a reinvestigation. If you don’t get the results you want, dispute the listing again. Unit 6 explained how to pull your credit report (step 1 above) and Unit 7 helped you to analyze your report and find all negative and questionable items (steps 2 & 3 above). Since you already did this, the rest is pretty straightforward. Items you will need for your credit repair process: 1. 2. 3. 4. 5.
This workbook (or a spiral-bound notebook if you prefer) A file folder Pens Money for postage Copies of your credit report Thought: The credit repair process can seem intimidating. However, it only requires one or two hours a month, a small monetary investment (for postage), and patience. Think positively!
47 Dispute Information with the Credit Bureaus It is your legal right to dispute anything on your credit report. Let’s look at our typical account listing again. VISA Acct Number: Acct Type: Acct Status: Monthly Payment: Date Open: Balance: Terms: High Balance: Limit: Past Due: Remarks:
4017XXXXXXXXXXXX Revolving or Option Open $29 May, 1999 $968 N/A $1,033 $1,000 $0 CREDIT CARD
Jun 2002 Dec 2002 Jun 2003 Dec 2003 Jun 2004 C C C C C C 30 C 60 60 90 C C C C C C C - - - - C C C C C C
There are many things about this listing that you can say are incorrect: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Not mine Wrong amount Wrong account number Wrong original creditor Wrong Charge-off Date Wrong Date of Last Activity Wrong Balance Wrong Credit limit Wrong Status (there are about 20) Wrong High Credit (the highest balance you have had on this account)
Usually if anything about the account can’t be verified, the credit bureau will remove the entire account, which can sometimes work to your advantage. The next thing you want to do is to write a dispute letter and list all of the information you have found on your credit report that you wish to challenge, and clearly define the reason you are challenging the information. Write one for each credit bureau, and make sure that you send them certified mail, return receipt requested . You can also do disputes on-line or via the telephone. If you do your disputes over the phone or the Internet, you will receive a confirmation number. Sending your disputes via the mail is more expensive, but it gets more of your information into the right hands, plus you will have proof when you sent in your dispute. If you don’t know which information you should challenge, go back to the information you entered in Unit 7 and select the items you have identified as being negative.
48 Here are all the things worth disputing: 1. Multiple versions of your name. You should shoot for just one, your full legal name. Other than your Social Security Number, sharing the same name as someone else can cause your file to be merged with his or hers. 2. Multiple addresses – dispute any former addresses. There are many cases of consumers having their credit files merged with someone else by accident, just because they shared the same address. 3. Multiple employers – File merging because of shared previous employers are rare, but if your name is similar to someone else who also works for a former company of yours, your files could be merged. You want to list your current employer ONLY. 4. Multiple versions of your Social Security Number. This one should be obvious. Only one Social Security Number should appear on your credit report. 5. Judgments 6. Bankruptcies 7. Tax Liens 8. Child Support Payments 9. Late Pays 10. Collection accounts 11. Inquiries Thought: You need to write a separate letter to each credit bureau. You do NOT need to write separate letters for each item, as long as each item and the reason for each dispute is clearly defined. A good example of a dispute letter can be found in Appendix A.
Keep a Log of Your Disputes This may be the most important part of your workbook. You need to keep track of all of your correspondence and the sequence of events. If you ever get sued or need to go to court, you will be glad you have this information at your fingertips. What to Expect After Submitting a Dispute Under the Fair Credit Reporting Act (FCRA), the credit bureaus have 30 days to finish their investigations, and they will notify you of the results in writing when they have completed them. If you tell them you have found the information on your free credit report, then legally, they have 45 days to investigate. You really cannot do anything more than wait for them to finish once you have started the dispute process. Along with the results, you may receive an updated credit report, but don’t count on this happening. For each one of your disputes, a result will be listed. The investigation result will be one of three things:
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1. Item verified 2. Item updated 3. Item removed Most likely, you will receive your results in a timely manner, often before the 30-day deadline, but if you do not hear back from the credit bureaus in 30 days (or 45 days), then they are in violation of the FCRA and you have a nice little crowbar to use against them. Technically you can sue them for noncompliance with the law. To remind them that they are out of compliance, you can insist on a follow-up letter. Demand nothing less than complete removal of the listing, per the law, or tell them you intend to sue. (There is a sample “intent to sue” letter in Appendix A.) You can also report them to the Federal Trade Commission at www.ftc.gov.
Thought: Don’t let the credit bureaus off the hook. They have a duty, prescribed by law, to make sure your disputes are addressed and their investigations are handled in a timely fashion.
Re-disputing Items on Your Credit Report You know the old saying, "If at first you don't succeed, try, try, again…" Take this same attitude when disputing items on your credit report. Chances are that your listing will come back as “verified” for reasons we will discuss a little later. But that doesn’t mean you’re done. You will need to change the reason for the investigation so the credit bureau will have something new to investigate. The order of the reasons should be: • • • • • • • • • •
Not mine Wrong amount Wrong account number Wrong original creditor Wrong Charge-off Date Wrong Date of Last Activity Wrong Balance Wrong Credit limit Wrong Status (there are about 20) Wrong High Credit (the highest balance you have had on this account)
You can dispute the same account again and again, as long as you provide new information for the bureau to use in its investigation or a new reason for the dispute. It’s a good rule of thumb to wait 60 days before resubmitting a dispute on the same item.
50 We’ve provided numerous spaces on the following pages for you to record your multiple disputes. Record the date, time and tracking information of each dispute. If you disputed via the phone or the Internet, be sure to record the tracking information. You should also write down each bureau’s results in the tables below. You can make copies of the pages if you need to do more than three rounds of disputes. Assignment: Fill in the blanks about your disputes to Experian, Equifax and TransUnion. If you are disputing via mail, you won’t need the Phone Dispute Confirmation Number and Online Confirmation number blanks.
First Dispute with Equifax Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
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Second Round Dispute Information to Equifax Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
Third Round Dispute Information to Equifax Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
52 Accounts or Negative Information Verified:
First Dispute with Experian Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
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Second Round Dispute Information to Experian Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
Third Round Dispute Information to Experian Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
54 Accounts or Negative Information Verified:
First Dispute with TransUnion Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
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Second Round Dispute Information to TransUnion Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
Accounts or Negative Information Verified:
Third Round Dispute Information to TransUnion Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Phone Dispute Confirmation Number: Online Dispute Confirmation Number: Date Response Received: Accounts Deleted or Corrected to Positive Information:
56 Accounts or Negative Information Verified:
Reminder – Document Everything! This may be the most important part of your workbook. You need to keep track of all of your correspondence and the sequence of events. If you ever get sued or need to go to court, you will be glad you have this information at your fingertips.
KEY #8: PATIENCE AND PERSISTANCE ARE THE KEYS TO SUCCESSFUL CREDIT REPAIR.
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UNIT 9: ACCOUNT REINSERTION Okay. You’ve worked hard and gotten a few items off of your credit report. However, you’ve just noticed that one or more of these were placed back on your report. This is called reinsertion. You should always check to see that previously removed items are not reinserted. If they were, and the credit bureau did not notify you in writing that they were reinserting the item within five days of doing it, they have violated the FCRA. This is where recording the results of your credit repair efforts start paying large dividends. Why would the credit bureaus reinsert a deleted listing? Creditors send the credit histories of all their clients to the bureaus each month, sometimes multiple times a month. If the deleted account was not flagged correctly in the credit bureau’s database, it can sneak back on. Again, the credit bureaus have a responsibility to safeguard the public’s credit information under the law. Make sure they are honoring this responsibility. Since reinsertions are a violation of the FCRA (unless they notify you in writing within five days), you can use this information to either have the credit bureaus remove the information or remove the information AND sue them for damages. Violations of the FCRA are serious and are subject to a $1,000 fine. Thought: Credit bureaus are not government agencies. They are for- profit corporations that make millions in profit each year, and can afford to spend money on software and quality assurance measures to ensure that your credit information is correct. How to Check for Reinserted Items 1. Get the latest version of your credit report. 2. Review your list of items (in the last unit) which were removed from your credit reports as a result of a credit dispute. 3. Are any of these items back on your credit report? 4. If there are any, write them down in the spaces below.
Assignment: On the following page, list any items you suspect were reinserted after deletion by the credit bureaus.
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Equifax - Any Accounts Reinserted?
Experian - Any Accounts Reinserted?
TransUnion - Any Accounts Reinserted?
Assignment: If you found any reinserted items on your credit report, it’s time to immediately fire off a letter to the offending credit bureau demanding the removal of the item. Include a copy of the information sent to you by the bureau, proving that they indeed did remove the item(s) from your credit report. A good sample letter for this is included in Appendix A.
KEY #9: DON’T LET YOUR GUARD DOWN. WATCH FOR REAPPEARING ITEMS ON YOUR CREDIT REPORT.
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UNIT 10: DISPUTES WITH ORIGINAL CREDITORS (aka INFORMATION FURNISHERS) Challenging Incorrect Information It all starts back with the original creditor , otherwise known as the information furnisher . After all, they are the source of the information on your credit report and, by law, must report it correctly. According to the new FACTA laws (which revised the FCRA in December 2003), the consumer may now contact the information furnisher directly and challenge information the original creditor is reporting. Recent case law has set precedent for a number of years, but case law is always subject to interpretation, and the new laws do not require a judge (or anyone else) to interpret previous case decisions. The revised FCRA spells out in no uncertain terms that the original creditor can be held liable for not correcting incorrect or unproven information. You must, however, dispute account information with the credit bureaus first, or the section of the FCRA regarding this does not apply. This is worth repeating! In order to challenge the original creditor you must first dispute the listing with the credit bureaus! If you do not do this, the provision of the FCRA which covers your rights in contacting the information furnisher does not apply. If the original creditors are sloppy with their recordkeeping, or cannot provide clear evidence that you were late or if the account is even yours, they must remove it. You can see how powerful this can be. Under the FCRA, they have 30 days to complete an investigation of your dispute, just like the credit bureaus. A good dispute letter to send original creditors (or information furnishers) is included in Appendix A.
Thought – You may also use this method with a collection agency, since they are also an information furnisher to the credit bureaus.
Assignment: Turn the page and fill in the blanks about your investigation request to an information furnisher. If you have more than one request, you may also use the log forms provided in Appendix B.
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Request for Investigation with Information Furnisher Name of Company: Type of Account (collection, credit card, auto loan, mortgage, etc): Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Date Response Received: Account Number: Account Deleted or Corrected to Positive Information: Yes [ ]
No [ ]
If the answer is no, make a phone call to ask how information was verified. Date of Follow-up Call: To Whom Did You Speak? Notes on Conversation:
Were you notified of any negative information added to your credit report? The revised FCRA under the FACT Act, as part of its identity theft provisions, also made it law to notify consumers the first time negative information is placed on your credit report. This law took effect on July 1, 2004. Please note: they do not need to send you a separate letter; verbiage on your monthly statement is enough.
Reminder – Document Everything! Keep track of all of your correspondence and the sequence of events. You will be glad you have this information at your fingertips if you ever need to go to court.
KEY #10: CREDIT BUREAUS AREN’T THE ONLY KEEPERS OF YOUR CREDIT.
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UNIT 11: DEALING WITH COLLECTION AGENCIES How does an account go to collection? It's obvious, isn't it? You haven't paid your bills. It's not a rule set in stone but, typically, credit card debts may be turned over to a collection agency 180 days after the debt is owed. In the case of medical collections, some hospitals - especially for people who don't have any insurance - turn medical bills over for collections immediately. Credit card companies typically package up whole portfolios of bad debt and sell them as securities on Wall Street. The debts are purchased by collection agencies, who are junk debt buyers (JDBs), for pennies on the dollar. These JDBs then try to collect on these debts. In the majority of cases (over 95% of the time), the JDBs do not receive any kind of paperwork from the original creditors regarding the debts. It’s important to realize that you really have no fiduciary relationship with these JDBs. (Yeah, we’ve thrown another legal term at you. All fiduciary means is that you have no contractual relationship with them, you’ve never borrowed money from them and have received no goods or services from them for which you need to give them money.) This is an important distinction. If a collection agency does take you to court, they really have no legal basis on which to stand and it’s easy to beat them. Thought: The most important thing when dealing with a collection agency is to get the collection off your credit report. Collections are a real credit score killer. Removing Collections from Your Credit Report There are five main methods to do this: 1. Check the statute of limitations Every state in the US has laws specifying how long a creditor has to sue you over a debt. If this time period has passed, the creditor may not take you to court to sue you for this debt. This protection is absolute. To calculate the statute of limitations: 1. Take the date you last made a payment and add six months. 2. Find the most current list of statutes for your state at: www.creditinfocenter.com/rebuild/statuteLimitations.shtml 3. Add the number of years of the statute of limitations in your state.
62 For example: Let’s say that the last payment you made on a credit card was on Jan 15, 2001. The statute of limitations for credit cards (usually regarded as open accounts) in your state is six years. The date at which you are “safe” from having a creditor sue you over this debt is: Jan 15, 2001 + 6 months = July 15, 2001 6 years + July 15, 2001 = July 15, 2007 Therefore, a creditor cannot sue you for this debt after July 15, 2007. Okay, so the statute of limitations has passed on a debt. Now what? Well, if a collection agency is reporting this account on your credit report, they are misrepresenting the status of this debt as “collectable” when it is not. Many collection agencies have been taken to court by the FTC and by state attorneys general for pursuing consumers for debts past the statute of limitations. Under the FDCPA, this is illegal, and you could definitely sue the collection agency for misrepresentation. A threatening letter to write a collection agency regarding the statute of limitations is included in Appendix A. Please note that the statute of limitations has nothing to do with how long negative items can appear on your credit report per the FCRA. Negative items stay on for seven years (except bankruptcies and some tax liens). If you dispute a debt based on the statue of limitations with the credit bureaus, you will get nowhere. You need to apply pressure to the collection agency, not to the credit bureau.
2. Is the collection agency licensed to collect in your state? Appendix C lists the collection licensing rules for each state. If your state requires that a collection agency be licensed in your state (the one in which you live) and they are not, you can threaten to turn them over to your state attorney general who will most certainly be interested in hearing about it. To find out if a collection agency is licensed visit: www.registeredagentinfo.com All you need to do is write the collection agency a letter telling them you know of their illegal activities and if they don’t remove the listing from your credit report, you will notify the authorities. A sample letter to an unlicensed collection agency is included in Appendix A. 3. Debt validation This is the gold standard of dealing with a collection agency. It basically challenges a collection agency’s right to collect the debt. Under the Fair Debt Collection Practices Act (FDCPA), if you request a debt validation from a collection agency, they must stop collection practices until they can provide it.
63 What constitutes debt validation? 1. A letter of sale or assignment from the original creditor 2. A copy of a statement from the original creditor 3. A copy of the signed contract between you and the original creditor As we explained before, most collection agencies do not have any kind of documentation on these debts. Most of the time, when asked to provide debt validation, a collection agency will either not respond or provide a computer printout on their letterhead of the debt they say you owe them. This is not debt validation, and if you wanted to, you could take them to court over the fact that they don’t have any proof that they are entitled to collect your debt. Here is the procedure: 1. Send a letter requesting validation to the collection agency. (Sample letters are included in Appendix A.) If you don't know the address, one of these online resources should help you find it: www.residentagentinfo.com www.bbb.org 2. Wait 30 days. 3. If they haven't sent you satisfactory proof, as outlined above, send a copy of the receipt for your registered mail, a copy of the first letter you sent and a statement that they have not complied with the FDCPA and are now in violation of the act. (Use the follow-up letter in Appendix A as a template.) Tell them they need to immediately remove the collection listing from your credit report or you are going to file a lawsuit because they are in violation of the FDCPA, section 809 (b). 4. Wait 15-20 days. They will either remove it or not respond. 5. If they do provide complete debt validation per the requirements stated above, check to see if licensing is required in your state. If you believe they are not licensed and licensing is required in your state, write them another letter and tell them they are in violation of your state's collection laws and are subject to prosecution and fines. (You'll have to cite your state's fines and procedures here. This is a last ditch effort, but has worked in some cases.) 6. Typically, your work will stop here, as most collection agencies will bow down to your demands and send you a letter agreeing to remove the listing. Now all you need to do is send a copy of the letter to all three credit reporting agencies. If the collection agency did not agree to remove the listing, then you need to move on to the next steps: 7. File a lawsuit in small claims court against the collection agency on the basis of violating the FDCPA. 8. Have the papers served to the collection agency. (You can find a paper server on the Internet at www.guaranteedsubpoena.com/rules.htm for about $25.)
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In the meantime, in a parallel effort with your lawsuit against the collection agency: 9. Dispute the collection if it appears on your credit report. 10. If the credit bureaus come back to you and say the collection is "verified," you have just been provided proof of a violation by the collection agency. Since they are not allowed to pursue collection activities after you request debt validation, they cannot report the collection on your credit report. In the opinion of the Federal Trade Commission, reporting a collection on a credit report is collection activity. Continue on with your dispute with the credit bureau by requesting method of verification of the credit investigation, etc. 11. If the credit bureaus are refusing to work with you, then it’s time to sue them as well. File a suit on the credit bureaus in small claims court on the basis of violations of the FDCPA or FCRA. Credit bureaus are usually eager to stay out of court, so if you have them on anything, they will usually call to settle with you. Thought – Many people mistakenly assume that the collection agency is required to respond to your debt validation request within 30 days after making the request. In fact, under the FDCPA, the collection agency is not required to give ANY response, however, if they do not respond, they cannot continue collection activities.
Assignment: Fill in the blanks below about your debt validation request to a collection agency. If you have more than one request, use the Debt Validation Log provided in Appendix B.
Request for Debt Validation with Collection Agency Name of Company: Original Creditor Name: Date Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: Date Response Received: Account Number: Account Validated: Yes [ ]
No [ ]
65 List of Validation Information (list documents sent as validation):
Date 15-day Follow-up Letter Sent: REGISTERED MAIL Type: Registered Mail Tracking No: To Whom Did You Speak? Did the collection agency call you or contact you after first letter sent? Yes [ ] No [ ]
Reminder – Document Everything! We can’t say it enough! Keep track of all of your correspondence and the sequence of events. If you ever get sued or need to go to court, you will be glad you have this information at your fingertips.
4. Dispute with the information furnisher In the last section, we went over how you can request an investigation from the original creditor, and noted how you can use this technique not just on credit card companies, but also collection agencies. This technique works wonders. Unlike the debt validation method, the collection agency MUST RESPOND TO YOUR REQUEST FOR AN INVESTIGATION. Moreover, since most of them will not be able to prove that they have any relationship to you at all, you could very easily take them to court for reporting negative information without proof. 5. Pay for delete If you have some cash, this is the easiest technique to use to clean collections off your credit report. The concept is simple: you agree to pay them the entire amount, netting them a handsome profit, and you get the account deleted from your credit report, netting you a handsome increase in your credit score. If the amount is $500 or less, I always advise that you do a pay for delete with the collection agency. If it's over $500, I still think this is an excellent technique. For debts over $500, I suggest paying a maximum of 25% of the total. As we mentioned, most bad-debt collection companies pay literally pennies on the dollar for the debts they are trying to collect so paying them 25% still makes them a
66 handsome profit. The amount that companies pay for bad debt depends on the type of account and its age: • •
•
Debts that have recently been charged off: 6 to 7 cents on the dollar. Accounts that are slightly older and on which a collection agency or two has already tried to collect: 1.5 cents to 2 cents on the dollar. Years-old, out-of-statute debts: A penny or less.
The technique for you to use: 1. Write the collection agency and offer to pay the amount in full (or whatever you would like to offer them) in return for removing the collection account. 2. Attach a settlement offer. (A sample template for both the letter and settlement offer are included in Appendix A.) 3. Wait until you receive a signed, written acceptance of your offer from the collection agency before sending in your payment. 4. Once you have a written, signed agreement (a fax is fine), send the collection agency a money order or cashier's check for the amount you agreed to pay them. Remember – Never send a collection agency ANY money without a written agreement. And always send your payment in the form of a money order or cashier’s check.
KEY #11: DON’T BE INTIMIDATED BY COLLECTION AGENCIES. THERE ARE EASY WAYS TO DEAL WITH THEM.
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UNIT 12: I’VE BEEN SUED BY A CREDITOR! Consequences of Judgments No matter how many times it’s happened before, it always causes a cold lump to form in the pit of your stomach when you open your mail and discover that a complaint has been filed against you in court by one of your creditors. The situation seems hopeless: if you didn’t have enough money to pay the creditor in the first place, where on earth will you find the money to hire a lawyer to fight the lawsuit? Your first instinct is to throw the complaint away and pretend it never happened. After all, you think, I don’t have the money to pay, so how can a legal judgment hurt me? Many people faced with substantial debt feel this way, but disregarding a complaint is the worst thing you can do. Let’s consider the consequences: if you do not respond within the time specified by your state, the creditor will receive a default judgment. That means that they win the lawsuit due to your inaction and a public record will be made which states that you owe the amount of money requested by the creditor. If the creditor claimed that you owe more than you really do, or calculated the interest incorrectly, there’s little you can do about it once it has been reduced to a judgment. There’s a second problem. Once a judgment has been filed, it will be reflected on your credit report and will negatively affect your credit rating for seven years after the judgment has been granted. If the creditor has already reported your lack of payments, and perhaps also sent the debt to a collection company, the judgment will be the third time that your credit has been negatively impacted for the same debt. Avoiding a judgment will prevent your credit from being lowered further. Finally, in many states, a judgment will allow your creditor to garnish your wages, your bank accounts, or in some places even prevent the sale of your real estate without first paying the amount due. If you are already having a hard time making ends meet, the last thing you need is to have part of your paycheck taken by the creditor before you even see it, or having what little money is in your bank account taken, causing checks to bounce. FIGHT BACK! – Did you know that most lawsuits filed against consumers for unpaid debts can be easily beaten? The word you should latch onto in that last sentence is EASILY. Think positively! Most collection agencies have no documentation proving you owe the debt and many of the complaints are filed in a paperwork-mill situation. When this happens, attention to proper procedure is not paid and you can have the complaint dismissed or thrown out on a technicality if you answer the summons/complaint properly. You can beat them by merely answering the complaint via the mail. You do not even have to physically shown up in court.
68 Thought – If you can afford an attorney to handle your lawsuit, you should always hire one. The steps to defend yourself will often be minimal as the lawsuit can be easily beaten, and costs should be low. In addition, most places have a legal aid society that will represent you after receiving proof that you don’t have sufficient funds to hire a lawyer. If you cannot afford an attorney, though, you can handle the paperwork yourself. Many people have successfully beaten lawsuits without the aid of an attorney. Steps in a Lawsuit A lawsuit begins with the filing of a Complaint . A Complaint is a document filed with the court by the plaintiff, which sets forth (or “pleads”) the facts upon which the plaintiff’s claim is based and the legal theories (you failed to pay a debt, received goods and services, etc.) upon which he or she intends to rely to support his or her claim for damages. Once a Complaint is filed with the court, it must be served upon the defendant (you). The defendant then has two choices on how to proceed: 1. Answer the Complaint An Answer to a complaint is a document that either admits or denies each specific allegation of fact in the plaintiff's Complaint. It also sets forth the legal defenses that the defendant intends to assert to the plaintiff's claim. Once an Answer is filed, the court must make a ruling, or determine if the Complaint has any merits to proceed further. Or 2. Do Nothing (BAD IDEA!) If the defendant does nothing, the defendant (you) automatically loses. This should NEVER be the chosen course of action. At the bare minimum, the defendant should file an Answer – it takes almost no time and can be handled via snail (regular USPS) mail. Most law firms who file lawsuits against consumers for debts count on the fact that the consumer will do nothing, even if they have no case against them. If a Motion to Dismiss is not filed by the defendant, or if the Motion is denied by the trial court, the case usually proceeds to the Fact Discovery Stage, which involves the plaintiff or defendant asking for documentation from each other in the form of discovery or interrogatories. The topic of law is very lengthy and because of this, we are prohibited from proceeding any further in this workbook. At the very minimum, though, we want to stress that you should always file an Answer to a Complaint . In many cases, simply filing an Answer can make the case go away.
69 Preventing a Judgment 1. Answer the Complaint! You usually only have 20-25 days in which to answer the complaint/summons – so this is something you need to DO IMMEDIATELY, even if you plan to hire an attorney later. Failing to answer the complaint means you automatically lose the case. If you hire an attorney at a later date, you can always amend your answer. Typical Complaint/Summons Format Most complaints follow the following format: Complaint number #XXXXXXX Collection Attorney Plaintiff vs. YOU Defendant Allegation 1: Allegation 2: Allegation 3: Typically, this next allegation will say something like “Defendant obtained a credit card from Credit card Company X” Allegation 4: Typically, this next allegation will say something like “Defendant used the credit card to obtain goods and services using the card” Allegation 5: Typically, this next allegation will say something like “Defendant racked up charges totally $XX and then refused to pay” In addition to the complaint, there will usually be a document with proof that the complaint was properly served. There could be other documents such as affidavits from the collection agency. There might be documents from the original creditor, although this is extremely rare. Assignment: Get a plain piece of paper or, better yet, open a new document on your computer and write an Answer to the Complaint. We’ll walk you through each step. At the top of the document, list the complaint number, the case name e.g. “Them vs. You” and title it “Answer to Complaint.” Responding to the Allegations: In your answer, you would admit allegation 1, that the plaintiff is who they say they are. You would also admit allegation 2: that you (the defendant) are who they say you are. We are assuming that allegation 3, that you opened a credit card account with them, has been backed up by zero evidence. For instance, some lawsuits are filed by Junk Debt Buyers acting as collection agencies who don’t even list the account number of the original credit card. They don’t have any statements from the credit card companies, nothing. They’ve provided no proof so you, as a result, have no idea what they are talking about. The same holds true for allegations 4 and 5.
70 Affirmative Defenses: The next thing your answer should contain is affirmative defenses , legal reasons why the complaint should be thrown out. Some of the best affirmative defenses are: •
• • •
•
Failed to state the basis of the lawsuit: They did not cite an actual state law which was violated. Debt is time-barred: The statute of limitations has passed. Statute of frauds: No contract exists as proof. Failure of Consideration: No exchange of money or goods occurred between the plaintiff and the defendant. Lack of Privity: No relationship exists between the collection agency and you. You never signed a contract or agreement with the collection agency, remember?
So you would write your responses to the allegations listed in the Complaint on the previous page like this: Allegation 1: admit Allegation 2: admit Allegation 3: the Defendant is at this time without knowledge or information sufficient to form a belief as to the truth of the allegation contained therein, and on that basis generally and specifically denies the allegation contained therein, and leaves the Plaintiff to provide proof. Defendant demands strict proof thereof. Allegation 4: the Defendant is at this time without knowledge or information sufficient to form a belief as to the truth of the allegation contained therein, and on that basis generally and specifically denies the allegation contained therein, and leaves the Plaintiff to provide proof. Defendant demands strict proof thereof. Allegation 5: the Defendant is at this time without knowledge or information sufficient to form a belief as to the truth of the allegation contained therein, and on that basis generally and specifically denies the allegation contained therein, and leaves the Plaintiff to provide proof. Defendant demands strict proof thereof. Now add Affirmative Defenses to your Answer: As and for a First Defense Plaintiff failed to state a claim upon which relief can be granted. Plaintiff's Complaint and each cause of action therein fail to state facts sufficient to constitute a cause of action against the Defendant for which relief can be granted. As and for a Second Defense Defendant alleges that this action is time-barred under § O.S. 12-95-2 of the laws of Oklahoma. As and for a Third Defense Plaintiff's Complaint violates the statute of Frauds as the purported contract or agreement falls within a class of contracts or agreements required to be in writing.
71 The purported contract or agreement alleged in the Complaint is not in writing and signed by the Defendant or by some other person authorized by the Defendant and who was to answer for the alleged debt, default or miscarriage of another person. As and for a Fourth Defense Defendant claims a Failure of Consideration as there has never been any exchange of any money or item of value between the Plaintiff and the Defendant. As and for a Fifth Defense Defendant claims Lack of Privity as Defendant has never entered into any contractual or debtor/creditor arrangements with the Plaintiff. See a complete sample Answer to a Complaint/Summons in Appendix A. File your Answer. Once you write your Answer to the Complaint, you MUST file your Answer to the court by deadline. Many times you can file your answer by sending it registered mail to the court. In other cases, you may have to physically go down to the court house. Call the court house in which the complaint is filed to get specific instructions. You should also send a copy of your Answer (registered mail) to the attorney who filed the complaint. What if the Court Goes Ahead with the Case after You File Your Answer? Sometimes the court will set a court date, even if your answer was filed correctly and by deadline. Don’t panic. You can still win. You have two options: 1. You can file a motion to dismiss the plaintiff’s claim. This is a document filed with the court, in which the defendant argues that, even if the facts alleged in the Complaint are true, the law that applies to those facts doesn’t allow the plaintiff to recover. A motion to dismiss could be filed when, for example, the facts set forth in the plaintiff’s Complaint make it clear that he or she has waited too long to file the claim, or if there is some other legal reason justifying dismissal. A Sample Motion to Dismiss is in Appendix A. Once a Motion to Dismiss is filed, the court must make a ruling, or determine if the motion has any merits. If the judge decides the reasons for the motion are valid, the judge will grant the motion. In this happens, the case is dismissed and doesn’t proceed any further at the trial level. The plaintiff can appeal the dismissal to an appeals court, which decides whether the trial court made a mistake in dismissing the claim. But unless an appeal is filed and the appeals court reverses the decision of the trial court, the case is over. 2. You can go to the court date and insist that the attorney present proper evidence. This is easier than it sounds. One of two things will happen:
72 a. The attorney will not show up. This happens a lot. Really! It’s the same as if you were fighting a traffic ticket in court. If the cop fails to show up in court on your traffic court date, you automatically win! b. If the attorney does show up, you can basically object to every statement that the attorney makes on the basis of hearsay. This is because the attorney was not present during the creation of the debt (they did not witness your application for the card, nor process payments). This is called “lack of intimate knowledge of the creation of the debt.” So whenever the attorney makes any statement about your debt, you object on the grounds of hearsay. If the attorney presents documents, you can object to them based on lack of authentication (how did they get the document and how does the court know the document wasn’t just manufactured?). And of course, you can also claim hearsay. So basically, they will have no evidence. If the judge asks you if this is your debt, you respond by saying “The Plaintiff has not provided me with any evidence to show me that this is my debt or that the debt has not been paid. If they can provide evidence, I will be happy to pay the debt.” Really, a collection agency and their attorney have no way to win if you object to all evidence based on hearsay. All evidence they have IS hearsay. If You Lose the Case (or if a Judgment Has Already Been Filed against You) If a judgment has already been filed in a lawsuit against you, don’t despair, but do try to get it paid off as quickly as you can. The faster you pay it off, the better it will look on your credit report. Once it has been paid, make sure that a Satisfaction of Judgment is filed in your case. A Satisfaction of Judgment, just like it sounds, is a document that states that you have paid off the debt reflected by the judgment. It’s important to have a Satisfaction of Judgment because once a judgment has appeared on your credit report, it will not be removed. It can, however, be improved through a Satisfaction of Judgment proving that you no longer owe the money. Then, just chalk the whole experience up as an important lesson in your financial education.
KEY #12: DON’T BE INTIMIDATED BY LAWSUITS. A ONE-PAGE LETTER CAN GET A CASE DISMISSED.
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UNIT 13: IS BANKRUPTCY THE SOLUTION? It happens to the best of us so don’t feel embarrassed. In the majority of cases, a bankruptcy is beyond the control of the debtor. The most common reasons for consumer bankruptcy are:
Unemployment; Excessive medical expenses; Seriously over-extended credit; Personally guaranteeing business loans or credit cards; and Marital problems.
A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial "fresh start" from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision: [I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. You are not alone in having financial difficulties. Hundreds of thousands of people file bankruptcy each year. That being said, even with a very high debt load, most of the time, bankruptcy may not be the solution to your problems.
Remember , nothing will destroy your credit faster than a bankruptcy. Make sure that this is really the only choice available to you. Alternatives to Bankruptcy There are many factors to consider before choosing this drastic step, and it is drastic. Here are some alternatives to bankruptcy that you may not have considered. 1. If your credit isn't in terrible shape, can you reduce your other expenses while you pay the debt off? Perhaps some fairly painless changes to your lifestyle can bring your bills in line with your income. Review the early units of this workbook for budgeting options and savings ideas that may help. If this won’t work for you, some hard choices may be required. 2. If you are willing to negotiate with your creditors’ customer service people you can try and settle your debts yourself for less than you owe, sometimes without damaging your credit rating. Here is our online resource with more information: www.creditinfocenter.com/debt/settle_debts.shtml
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3. If your credit is already hosed and the suggestions above won't make a dent in your debt, consider going through Consumer Credit Counseling Services (CCCS). Check your Yellow Pages or go to www.NFCC.org to find an office near you. CCCS will give you a plan for paying off your debts as if you were in a Chapter 13 bankruptcy without ever filing a bankruptcy. You can read more about CCCS here: www.creditinfocenter.com/debt/cccs.shtml 4. Don't pay your bills. This may sound immoral or illegal, but there are no debtor's prisons in the US, and besides, you can’t get blood out of a turnip. Here are some reasons to consider this option: •
• •
If you don't have any assets such as a home or a 401K, creditors are less likely to go after you. Your credit will be in much better shape than if you had filed a bankruptcy. If you had filed bankruptcy, you still wouldn't be paying back the debts, right?
If you do decide to just let your bills go, please take the following advice: •
•
•
If you DO have a mortgage, and you don't want to file a bankruptcy, by all means make sure you make your mortgage payments on time. You must be prepared for the credit card companies to hound you mercilessly until the debts are charged off. Change your phone number. Collection agencies take over accounts which have been charged off by credit card companies. Once collection agencies get the account you may be besieged by letters and calls. To counter these activities, follow the debt validation advice outlined in Unit 11. You may also legally prevent further contact from the collection agency by sending a Cease and Desist letter to the collection agency. An example letter is included in Appendix A.
Is Bankruptcy the Answer?
Likely Warning Signs
Interpretation
Behind on your mortgage payment and see You likely are in trouble if no way to catch up you have one sign from the Resorted to payday loans trying to catch up column to the left. Using credit cards to pay off other credit cards Missed several car payments Collectors are calling you at home and work You cannot make your minimum monthly credit card payment
Start looking for a good lawyer if you have at least two signs. Get to a bankruptcy expert as fast as possible if you have three signs or more.
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Definite Warnings
Interpretation
Received official notice of: •
•
•
Foreclosure Wage garnishment Repossession of your car or furniture or appliances
Get to a bankruptcy expert as fast as possible if you have even one sign from the section to the left
Do You Need a Lawyer? Bankruptcy is a long and complicated process. If you don’t follow all the rules and steps, you could find yourself in worse shape than when you started. It’s not impossible to do it yourself, but we always recommend that you consult with a lawyer. What Happens in a Bankruptcy? Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts. To find out which property is exempt (meaning which property you can keep), you can ask your lawyer or refer to this webpage: www.creditinfocenter.com/bankruptcy/bkProperty.shtml The Difference between Chapter 13 and Chapter 7 In a Chapter 13 bankruptcy, you are in a court-overseen program to pay back your debts. In a Chapter 7 bankruptcy, your debts are discharged. You can only receive a Chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a Chapter 13 case. You must prove to the court that your finances qualify for a Chapter 7 bankruptcy through a series of Means Tests. We can give you a rough idea of your qualifications, but even if you pass the tests on the following pages, you may still not qualify when you file your “real” paperwork . We suggest you talk to an attorney.
76 MEANS TEST # 1 (Median Income): Is your family earning above the average income for your state? Assignment: Look up the maximum income in the table on this website: www.usdoj.gov/ust/eo/bapcpa/20080317/bci_data/median_income_table.htm Compare your income with the maximum income you find. Does your family income exceed the maximum listed in the median income table? Yes [ ] No [ ] If the answer is "No" move on to the next Means Test! If the answer is “Yes” you do not qualify for a Chapter 7 bankruptcy. MEANS TEST #2 (Disposable Income): Would your income minus living expenses be enough to pay $10,000 toward your debt over five years? The amount of your income you would have to put toward the $10,000 is calculated by the US Bankruptcy court as follows from IRS standards. Step 1. Food, Clothing and Other Item expenses: Assignment: Look up the food and clothing expense allowance for your family in the table on this webpage: www.usdoj.gov/ust/eo/bapcpa/20080317/bci_data/national_expense_standards.htm Write the amount below. Food, Clothing and Other Item expense allowances for your family: $______________ Step 2. Out of pocket healthcare expenses: Assignment: Look up the out-of-pocket healthcare expense allowances for your family from the table on this webpage: www.usdoj.gov/ust/eo/bapcpa/20080317/bci_data/national_oop_healthcare.htm Write the amount below. Out-of-pocket healthcare expense allowances for your family: $__________________ Step 3. Housing/utility expenses for your area: Assignment: Look up the housing and utility expense allowances in your state in the table toward the bottom of this webpage: www.usdoj.gov/ust/eo/bapcpa/20080317/meanstesting.htm Write the amount below. Housing and utility expense allowance for your family: $__________________
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Step 4. Transportation Costs in your area: Assignment: Look up the transportation costs expense allowance in your state in the table toward the bottom of this webpage: www.usdoj.gov/ust/eo/bapcpa/20080317/meanstesting.htm Write the amount below. Transportation expense allowances for your family: $__________________ Step 5. Calculate your total monthly expense allowance: Assignment: Add the allowable expenses you looked up in Steps 1-4.
__________ + _____________ + ____________ + ____________ = ____________ Food
Health
Housing
Transportation
Total
Step 6. According to the Bankruptcy Court, you need to calculate if your leftover income over five years is greater than or equal to $10,000. Assignment: Calculate your leftover income using the formula below. (_____________ ÷ / 12 ) = ____________ Gross Income (Last year’s tax return)
= Monthly Income
- ______________ = $______________ Total Allowable Expenses (from Step 5 above)
Leftover Income
Assignment: Now calculate the amount of leftover income you would have if you put that amount aside each month for five years. ________________________ X 60 months = _________________________ Leftover Income (from Step 6 above)
5 years of Leftover Income
Is 5 years of Leftover Income equal to or greater than $10,000? Yes [ ] No [ ] If the answer is "No" move on to the next Means Test! If the answer is “Yes” you do not qualify for a Chapter 7 bankruptcy.
78 MEANS TEST #3: (Can You Repay $6,000 or 25% of Your Debt?) Step 1: Calculate your Total Debt. Assignment: Get out your latest statements and put them in a pile. Add the totals up with a calculator to find the total amount of debt you would be including in your bankruptcy. Write the total below. $ ________________________ Total Debt
Step 2: Calculate 25%. Assignment: Do the math. _____________ ÷ 4 = ____________________ Total Debt
25% of Total Debt
Step 3: Is your 5 year’s worth of Leftover Income more than $6,000? Assignment: $6,000 - ____________________________ = $__________________ 5 years of leftover income (from Means Test #2, step 6)
Total
Is the total above greater than $6,000? Yes [ ] No [ ] If the answer is “No” you qualify for Chapter 7 bankruptcy. If the answer is “Yes” you still may qualify but you have to pass one more test. Assignment: Is 5 years of Leftover Income (from Means Test #2, step 6) greater than 25% of Total Debt (this means test, step 2)? Yes [ ] No [ ] If the answer is "Yes" you can file Chapter 7. If the answer is "No" Chapter 7 cannot be filed but Chapter 13 may be filed.
You’ve earned a rest after all those calculations, so there’ll be no more assignments, just a little more reading to give you the rest of the information you may need.
79 Debt Counseling Programs In a Chapter 7 bankruptcy, debtors must complete two mandatory programs: credit counseling before filing the initial bankruptcy paperwork and an additional debt counseling program before the discharge of bankruptcy. Only approved agencies can certify that you took the required classes. To find an approved counseling organization, you can visit this webpage: www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm The Costs As of June 2008, the courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission, however, individual debtors may pay in installments. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. The debtor may also pay the $39 administrative fee and the $15 trustee surcharge in installments. If the debtor's income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the Chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. § 1930(f). How Long Does the Process Take? Generally, from the time of filing, a Chapter 7 bankruptcy takes about four months from filing to the actual discharging of debts, at which time you are done with the process. A Chapter 13 bankruptcy takes from three to five years during which time the debtor pays back the debts owed through a court-supervised program. Documentation Requirements A Chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: 1. schedules of assets and liabilities; 2. a schedule of current income and expenditures; 3. a statement of financial affairs; 4. a schedule of real estate and equipment leases; 5. Any uncompleted contracts in which you would receive a fee when completed; and 6. Licenses to intellectual property.
80 Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Individual debtors with primarily consumer debts have additional document filing requirements. They must file: 1. a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; 2. evidence of payment from employers, if any, received 60 days before filing; 3. a statement of monthly net income and any anticipated increase in income or expenses after filing; and 4. a record of any interest the debtor has in federal or state qualified education or tuition accounts. Bankruptcy Forms Online You can find all of the forms you need online at the US Bankruptcy Court’s website: www.uscourts.gov/bankruptcycourts.html
KEY #13: BANKRUPTCY IS NOT THE END OF THE WORLD, BUT IT SHOULD BE YOUR LAST RESORT.
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UNIT 14: RESOURCES There are so many additional resources available on the topics covered in this workbook that a complete list is impossible. Here’s a basic start: Public libraries increasingly offer not only books, but also videotapes and Internet access. Agencies of many types can offer financial services to specific groups, such as the elderly or single parents, in addition to those that serve the general public. Ask around for those who offer advice, free seminars, and other information on money management. Some are run by the federal or state government. Others are private. Professional organizations that specialize in bankruptcy and consumer finance may have websites with specific information for the general public. Since these groups cater to professionals, the information they provide is usually quite reliable. The Internet has many websites devoted to money management information. Many of these offer free “financial calculators” that will enable you to determine monthly payments on loans or figure out whether it’s best to rent or own. New sites are appearing daily. For those who cannot afford an in-home computer, computers may be available at public schools, libraries or colleges. Some favorites: www.creditinfocenter.com – easy to use, easy to understand website which provides a host of information on credit issues and more. www.ftc.gov – Federal Trade Commission www.fairisaac.com – Fair Isaac Credit Scoring www.pueblo.gsa.gov – a government online guide to all consumer affairs www.jumpstart.org – JUMPSTART Coalition for Personal Financial Literacy www.consumerfed.org – Consumer Federation of America www.abiworld.org - American Bankruptcy Institute For-profit businesses such as insurance companies, banks, stockbrokers and financial planners often offer free information via seminars, printed materials and over the Internet. Check them out, but be careful not to get trapped into buying something you can’t afford by initially free “come-ons.” Books: Welsh, Kristy, Good Credit is Sexy: How to Make Your Credit As Attractive As Possible, Fourth Edition, Techartist Publishing, 2008. KEY #14: FIND AND USE ALL AVAILABLE SOURCES OF INFORMATION.
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ALL THE KEYS TO FINANCIAL MANAGEMENT KEY #1: GET TO KNOW HOW YOU HANDLE MONEY AND WHY. AWARENESS CAN LEAD TO CHANGE – IF YOU WANT IT TO.
KEY #2: DETERMINE YOUR GOALS, WRITE THEM DOWN, AND DEVELOP A PLAN OF ACTION TO ACHIEVE THEM.
KEY #3: FIGURE OUT WHERE YOUR MONEY GOES, MAKE A SPENDING PLAN (budget) and STICK TO IT.
KEY #4: IT’S YOUR MONEY! THE ONLY POWER THAT OTHER INFLUENCES HAVE ON YOU IS THE POWER YOU GIVE THEM.
KEY #5: CREDIT IS EXPENSIVE. USE IT RARELY, CAREFULLY AND KNOWLEDGEABLY.
KEY #6: LEARN HOW THE FINANCIAL WORLD VIEWS YOU BASED ON YOUR CREDIT REPORT.
KEY #7: IN ORDER TO PROTECT YOUR CREDIT, YOU NEED TO UNDERSTAND WHAT MAY BE BRINGING DOWN YOUR CREDIT SCORES!
KEY #8: PATIENCE AND PERSISTANCE ARE THE KEYS TO SUCCESSFUL CREDIT REPAIR.
2 KEY #9: DON’T LET YOUR GUARD DOWN. WATCH FOR REAPPEARING ITEMS ON YOUR CREDIT REPORT.
KEY #10: CREDIT BUREAUS AREN’T THE ONLY KEEPERS OF YOUR CREDIT.
KEY #11: DON’T BE INTIMIDATED BY COLLECTION AGENCIES. THERE ARE EASY WAYS TO DEAL WITH THEM.
KEY #12: DON’T BE INTIMIDATED BY LAWSUITS. A ONE-PAGE LETTER CAN GET A CASE DISMISSED.
KEY #13: BANKRUPTCY IS NOT THE END OF THE WORLD, BUT IT SHOULD BE YOUR LAST RESORT.
KEY #14: FIND AND USE ALL AVAILABLE SOURCES OF INFORMATION.
APPENDIX A: SAMPLE LETTERS With all letters you send, include copies of proof (cancelled checks showing timely payments, paid off accounts, loans) that demonstrate that the information in incorrect. Keep copies of everything! Send letters return-receipt registered mail and file those receipts with your letters when they come back to you.
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Requesting the Removal of Inaccurate Information Your Name 123 Your Street Address Your City, ST 01234 (Current address for the last 5 years) SSN XXX-XX-XXXX DOB: 1/1/00 Credit Bureau Credit Bureau Address Some City, Any State 56789 Date: To Whom it May Concern: Dear Credit Bureau: This letter is a formal complaint that you are reporting inaccurate credit information on my credit report. I am very distressed that you have included the information noted below in my credit profile due to its damaging effects on my good credit standing. As you no doubt are aware, credit reporting laws ensure that bureaus report only accurate credit information. No doubt the inclusion of this inaccurate information is a mistake on either your or the reporting creditor's part. Because of the mistakes on my credit report, I have been wrongfully denied credit recently for a , which was highly embarrassing and has negatively impacted my lifestyle. (Optional) With the proof I'm attaching to this letter, I'm sure you'll agree that the inaccurate information is harmful to me and, thus, needs to be removed ASAP. The following information, therefore, needs to be verified and deleted from the report as soon as possible: CREDITOR AGENCY, acct. XXXX-XXX-XXXX-XXXX Sincerely, Your Signature Your Name enclosure
2
Follow-Up after Initial Contact with the Bureau Contact Your Name 123 Your Street Address Your City, ST 01234 SSN Credit Bureau Credit Bureau Address Some City, Any State 56789 Date: RE: Dispute Letter of Dear Credit Bureau: This letter is formal notice that you have failed to respond to my dispute letter of . I sent the initial letter registered mail and have enclosed a copy of the return receipt that you signed on . As you are well aware, federal law requires you to respond within 30 days. It has now been over that period since your receipt of my letter. As you no doubt are aware, failure to comply with federal regulations by credit reporting agencies is a serious violation of the Fair Credit Reporting Act and may be investigated by the FTC. Obviously, I am maintaining detailed records of all my correspondence with you. I am aware that you may have misplaced my letters or have failed to respond to my letter because of an oversight due to the high volume of the requests you receive daily. If this is the case, I'm sure you'll want to handle this matter as soon as possible. For this purpose, I have included a copy of my original request, the dated receipt of your reception of the original letter, and a copy of the proof verifying the incorrectness of the credit item you have mistakenly placed on my records. The following information, therefore, needs to be verified and deleted from my credit report as soon as possible: CREDITOR AGENCY, acct. XXXX-XXXX-XXXX-XXXX Sincerely, Your Signature Your Name enclosure
3
Notice of Intent to File a Lawsuit - Credit Bureaus Your Name 123 Your Street Address Your City, ST 01234 Anytown USA Date: April 22, 2008. Re: Acct # XXXX-XXXX-XXXX-XXXX To Whom It May Concern: I have disputed my account XXXX_XXXXX_XXXXX with you on March 18, 2008, and sent my dispute certified mail. I’ve included the receipt in this letter showing that you received the letter on March 21, 2008. It has now been more than 30 days. Under the Fair Credit Reporting Act (FCRA), you have only 30 days to complete your investigation. Since I have not heard back from you, you are now out of compliance with the FCRA. I’m sure we would both like to handle this outside of court, so all I ask is that you remove this listing. If you refuse, I will be forced to take legal action. Best Regards,
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Requesting the Removal of Inquiries Prepare letters to each inquiring creditor asking them to remove their inquiry. The Fair Credit Reporting Act allows only authorized inquiries to appear on the consumer credit report. You must challenge whether the inquiring creditor had proper authorization to pull your credit file. Keep a copy for your files and send the letter registered mail.
Your Name 123 Your Street Address Your City, ST 01234 Credit Bureau Credit Bureau Address Some City, Any State 56789 Date: Re: Unauthorized Credit Inquiry Dear American BestGuess, I recently received a copy of my credit report. The credit report showed a credit inquiry by your company that I do not recall authorizing. I understand that you shouldn't be allowed to put an inquiry on my file unless I have authorized it. Please have this inquiry removed from my credit file because it is making it very difficult for me to acquire credit. I have sent this letter certified mail because I need your prompt response to this issue. Please be so kind as to forward me documentation that you have had the unauthorized inquiry removed. If you find that I am remiss, and you do have my authorization to inquire into my credit report, then please send me proof of this. Thanking you in advance, Your Name
5
Notification to Collection Agency: The Statute of Limitations on a Debt has Passed Your Name 123 Your Street Address Your City, ST 01234 ABC Collections 123 NotOnYourLife Ave Chicago, IL Date Re: Acct # XXXX-XXXX-XXXX-XXXX To Whom It May Concern: I was recently made aware of a debt which is claimed to be in collection by your firm. I’m sure you are aware of the provisions in the Fair Debt Collection Practices Act (FDCPA), and I am requesting validation of this debt. I am requesting proof that I am indeed the party you are asking to pay this debt, and there is some contractual obligation which is binding on me to pay this debt. I request that your firm not contact me on the telephone and restrict your contact with us to writing, and only when you can provide adequate validation of this alleged debt. The statute of limitations on this debt has passed. I’m sure you are aware of the provisions in the Fair Debt Collection Practices Act (FDCPA). However, I would like to point out that your firm has violated provisions of the FDCPA in the following respects: 15 USC 1692e(2)(A). falsely representing the legal status of the alleged debt. The statute of limitations on the original alleged debt, as reported on my credit report, would have already have passed, therefore making the status uncollectible. I’m sure your legal staff will agree that non-compliance with this request could put your company in serious legal trouble with the FTC and other state or federal agencies. Under the FCRA and the FDCPA, each violation is subject to a $1000 fine, payable to me.
Your Name
6
Notification to Collection Agency: Unlawfully Collecting in Your State Your Name 123 Your Street Address Your City, ST 01234 ABC Collections 123 NotOnYourLife Ave Chicago, IL Date Re: Acct # XXXX-XXXX-XXXX-XXXX To Whom It May Concern: I was recently made aware of a debt which is claimed to be in collection by your firm. Under section XXXX-XXX of civil code, all collection agencies must be licensed and bonded. I checked and your firm is not registered as a collection agency with the state. Please cease and desist all collection activities, including reporting this account on my credit report or I will be forced to take legal action. I am notifying our state attorney general’s office that you are practicing illegally in this state.
Your Name
7
Cease and Desist Letter to Collection Agency Cheatem Collections 123 Fagetaboutit Ave Chicago, IL 17 April 2000 RE: Account XXXX-XXXX-XXXX-XXXX Dear Sir or Madam: I request that you CEASE and DESIST in your efforts to collect on the above referenced account (See letter attached). It is my personal policy not to deal with collection agencies and I will only deal with the original creditor of this account. You are hereby instructed to cease collection efforts immediately or face legal sanctions under applicable Federal and State law. GIVE THIS LETTER THE IMMEDIATE ATTENTION IT DESERVES. Cordially, Scott Free
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Pay for Delete Debt Settlement Offer Your Name 123 Your Street Address Your City, ST 01234 ABC Collections 123 NotOnYourLife Ave Chicago, IL Date Re: Acct # XXXX-XXXX-XXXX-XXXX To Whom It May Concern: I am willing to pay your company the full amount of $XXX (XXX dollars and XX/100) as payment in full for the satisfaction of this account. Upon receipt of payment, I ask that you agree to remove this account from my credit reports (Experian, TransUnion, Equifax) or change the status of my account from Collection to Pays As Agreed. Furthermore, I ask that you also agree, that once paid in full, this account is not to be resold/transferred to any other collection agency. If you concur with these terms, please acknowledge with your signature and return a copy of this letter to me within fifteen (15) days of the receipt of this letter. No payment will be made without written confirmation. Any and all correspondence to me is to be sent to the address noted in this letter. Upon receipt of this signed acknowledgment, I will immediately mail you the full amount of $XX.XX (ninety nine dollars and XX/100) that is owed on this account in the form of a money order by certified mail via USPS. Once you have received my payment, please send me a letter that states to the effect that this outstanding collection account has been settled and paid in full. Collection Service Name: Authorized Signature: Date:
Sincerely, Your name
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OFFER TO SETTLE ABC Collections Inc, referred to as COLLECTION AGENCY and John Q. Consumer, referred to as CONSUMER, agree to resolve the matter of the alleged debt, originally held by the ______________________ Company hereafter referred to as the CLIENT. COLLECTION AGENCY, hereby agrees to settle this alleged debt claimed by COLLECTION AGENCY on the following terms and conditions: The COLLECTION AGENCY certifies that it is legally authorized to act in behalf of its CLIENT and that any agreement that the COLLECTION AGENCY makes on behalf of Client is legally binding on the Client. The COLLECTION AGENCY and the CONSUMER agree that the alleged debt is $500.00 five hundred & 00/100 dollars). The parties agree that the COLLECTION AGENCY shall accept the sum of $400 (four hundred dollars & no/100 dollars) as full payment on the alleged debt. The acceptance of the payment will serve as a complete discharge of all monies due, and the COLLECTION AGENCY agrees to consider the debt paid in full and agrees to not take further action to collect on the alleged debt. The payment shall be made in the form of a cashier’s check. Upon payment of the $400, the COLLECTION AGENCY agrees to remove any listing or information that the CLIENT may have placed on the CONSUMER’S credit report. The COLLECTION AGENCY agrees to never at any time in the future place any information on the CONSUMERS credit report. The CONSUMER feels that the negative information on CONSUMER’s credit report is damaging and while the exact estimation of the damage is not currently known, the CONSUMER estimates it to be $10,000. Should the COLLECTION AGENCY fail to remove the listing or reinsert it at a later date, the COLLECTION AGENCY agrees to award liquidated damages of $10,000 to CONSUMER. This compromise is expressly conditioned upon the payment being received by . If the CONSUMER fails to pay the compromised amount by , the original amount owed by the CONSUMER will be reinstated in full, and immediately due. The person signing this agreement, __________________________________, hereby declares that he/she is authorized to act as an agent of the COLLECTION AGENCY. This Agreement shall be binding upon and inure to the benefit of the parties, their successors, and assignees. Dated: Signature: Legal Representative of ABC Collections Inc. Signature: John Q. Consumer CONSUMER
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Reinsertion of Listing by a Credit Bureau March 10, 2008 Experian P.O. Box 9595 Allen, Texas 75013 Re: Account(s): #XXXX-XXXX-XXX My Social Security number is:123-45-6789 My date of Birth is 1900-01-01 Dear Sir or Madam; I disputed the referenced accounts above on March 2003. The credit report of May 19, 2003 and your report shows that these items were deleted from the credit file. Now I notice these items have been reinserted on my credit report. In accordance with the requirements of the FCRA as shown below, I am hereby requesting your complete compliance with any and all of the provisions: FCRA § 611, Procedure in case of disputed accuracy [15 U.S.C. § 1681i] Requirements relating to reinsertion of previously deleted material. Certification of accuracy of information. If any information is deleted from a consumer's file pursuant to subparagraph (A), the information may not be reinserted in the file by the consumer reporting agency unless the person who furnishes the information certifies the information is complete and accurate. If any information that has been deleted from a consumer's file pursuant to subparagraph (A) is reinserted in the file, the consumer reporting agency shall notify the consumer of the reinsertion in writing not later than 5 business days after the reinsertion or, if authorized by the consumer for that purpose, by any other means available to the agency. Additional information. As part of, or in addition to, the notice under clause (ii), a consumer reporting agency shall provide to a consumer in writing no later than 5 business days after the reinsertion date. (I) a statement that the disputed information has been reinserted; (II) the business name and address of any furnisher of information contacted and the telephone number of such furnisher, if reasonably available, or of any furnisher of information that contacted the consumer reporting agency, in connection with the reinsertion of such information; and (III) a notice that the consumer has the right to add a statement to the consumer's file disputing the accuracy or completeness of the disputed information. I received no such notification. This is a serious violation of the FCRA, and I reserve the right to pursue further action. Your agency may avoid such action by immediately deleting this listing from my credit report. Thank you, Your Name
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Request for Investigation with Information Furnisher Re: Acct #XXX-XXX-XXXXXXX To Whom It May Concern: I recently pulled my credit report from Experian and TransUnion and, to my amazement, saw that you recently have decided to report me 30 days late on this account in Nov 2007. I immediately disputed this information with Experian and TransUnion and the results of the investigation came back "verified." Not only was I never late on this account, but according to the Fair Credit Reporting Act (FCRA), as the information furnisher, you are required to notify me of the insertion of negative listings. Since I have disputed the lates with the credit bureaus, and you obviously "verified" them, I am very curious as to what kind of "records" you may have for this alleged account. Under the FCRA, you are required to conduct an investigation on this account if I request it. I therefore am submitting my written request to you to conduct an investigation. Per the FCRA, you have 30 days to conduct this investigation and respond to my request. If you do not respond within this time period, per the FCRA, you must remove this negative information. Sincerely,
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Debt Validation Request to a Collection Agency Your Name 123 Your Street Address Your City, ST 01234 ABC Collections 123 NotOnYourLife Ave Chicago, IL Date: Re: Acct # XXXX-XXXX-XXXX-XXXX To Whom It May Concern: I am continually being called on the telephone by your firm over an alleged $9000 debt. I’m sure you are aware of the provisions in the Fair Debt Collection Practices Act (FDCPA), and I am requesting validation of this debt. I am requesting proof that I am indeed the party you are asking asking to pay this debt, and there is some contractual obligation which is binding on me to pay this debt. I request that you stop contacting us on the telephone and restrict your contact with us to writing, and only when you can provide adequate validation of this alleged debt. To refresh your memory on what constitutes legal validation, I am giving giving a list of the required documentation: •
• •
•
Complete payment history, the requirement of which has been established via Spears v Brennan 745 N.E.2d 862; 2001 Ind. App. LEXIS 509 and Agreement that bears the signature of the alleged alleged debtor wherein he agreed agreed to pay the original creditor. Letter of sale or assignment from the original original creditor to your company. (Agreement with your your client that grants you the authority to collect on this alleged debt.) Intimate knowledge knowledge of the creation of the debt by you, the collection agency
I’m sure you know, under FDCPA Section 809 (b), you are not allowed to pursue collection activity until the debt is validated. You should be made aware that in TWYLA TWYLA BOATLEY, Plaintiff, vs. DIEM CORPORATION, No. CIV 030762 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, 2004, the courts ruled that reporting a collection account indeed is considered collection activity. This is my second request for debt validation – my first request, sent within 30 days of receipt of your initial contact, has gone unanswered. In addition, according to the information given to us by your firm, the date of last activity by the original creditor is July of 1999. The Statute of Limitations on this alleged debt, even even should it be ours, is 5 years in the state of Illinois. I’m sure you are aware of the provisions in the Fair Fair Debt Collection Practices Act (FDCPA). However, I would like to point out that your firm has violated provisions of the FDCPA in the following respects: (a) by using deceptive or misleading representation for collection of the alleged debt and therefore violating 15 USC 1692e. and (b) by falsely representing the legal status of the alleged debt and therefore violating 15 USC 1692e(2)(A). I’m sure your legal staff will agree that non-compliance with this request could put your company in serious legal trouble with the FTC and other state or federal agencies. agencies. Under the FCRA and the FDCPA, each violation is subject to a $1000 fine, payable to me.
Your Name
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Answer to a Summons CACV OF COLORADO LLC LLC. Plaintiff Vs. xxxxxxxxxxxxxxxx Defendant
Defendant’s Answer to Complaint # XXXXX, County of XXXXX, State of XXXXX Defendant answers the complaint by stating and showing that: 1. ADMITS the allegations of paragraph 2. 2. DENIES having information and knowledge sufficient to form a belief as to the truth of the allegations at paragraph 1. Defendant demands strict proof of the allegation. 3. DENIES having information and knowledge sufficient to form a belief as to the truth of so much of paragraph 3 as alleges CACV purchased credit card accounts from Fleet Bank and DENIES the remaining allegations of paragraph 3. 4. DENIES the allegations of paragraphs 4, 5, 6, 7, 8. Defendant demands strict proof of the allegation. 5. DENIES every other allegation not previously admitted, denied or controverted.
AS AND FOR AFFIRMATIVE DEFENSES 6. Plaintiff fails to state a cause of action against the defendant. 7. Plaintiff, as the defendant is informed and believes, lacks the legal standing to bring and maintain this action. 8. The action is barred by the Statute of Frauds. 9. The action is barred by the Statute of Limitations. 10. The court would unjustly enrich the plaintiff by granting the relief sought herein.
WHEREFORE, the defendant asks the Court prayer for relief: a. dismissing the complaint herein with prejudice. b. such other and different relief as the Court finds proper.
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Motion to Dismiss Summary Judgment
IN THE SUPERIOR COURT OF THE STATE OF IN AND FOR THE COUNTY OF Plaintiff Vs. Joseph Consumer Defendant(s)
) ) ) )
Case No._____________________ )
MOTION FOR DISMISSAL OF SUMMARY JUDGMENT
)
Comes now the Defendant, XXXXXXX, and files this REPLY AND OPPOSITION TO PLANTIFF’S MOTION FOR SUMMARY JUDGEMENT in response to Motion For Summary Judgment And Supplement filed herein by Plaintiff, , Inc., as follows: 1. The Motion For Summary Judgment filed by the Plaintiff is insufficient as a matter of law. A party moving for summary judgment has the responsibility of informing the court of the basis for its motion, a nd identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file with the affidavits, if any, which it believes demonstrates the absence of a genuine issue of material fact. Plaintiff has failed to discharge this responsibility in the Motion for Summary Judgment and Supplemental Motion filed with the Court. The Motion does not set forth the True facts upon which Plaintiff seeks a summary judgment. Rather the Motion states only “That there is no genuine issue as to any material fact and that Plaintiff is entitled to a judgment as a matter of law with regard to all Counts. ” Motion for Summary Judgment should be denied. 2. Defendant received the Plaintiff's Summons on . Defendant answered the request on . 3. Trial was set for . 4. Motion for discovery was filed on . Documents requested from plaintiff included any documentation of relationship between plaintiff and RSC, the alleged original plaintiff, any payment history, and any breakdown of the sum requested by plaintiff. Defendant cannot make a legitimate defense on claims by the Plaintiff that are incorrect, untrue, and undocumented. [The appeals court overturned the default summary in Spears vs. Brennan Court of Appeals, 745 N.E.2d 862; 2001 Ind. App. LEXIS 509; because the collection agency lawyer did not meet the rules of the FDCPA 15 U.S.C. § 1692g (b) Validation of Debts.] 5. The Plaintiff has failed to provide any contract, an agreement bearing the signature of the Defendant or any itemized statements or billing of said debts which would constitute intimate knowledge of the creation of the debt. Even if such documents were available, a purchasing/assignee’s plaintiff would be unable to swear to the authenticity of the originating or source documents of a credit transaction because they do not have personal knowledge of the events which transpired at that period of time in the life of the credit agreement. The original cardholder agreement, any correspondence, and monthly statements issued by the original credit grantor are not admissible as the purchasing plaintiff's business records, as the purchasing plaintiff has no personal knowledge of how those records were created or maintained. 6. Defendant alleges that this action is time-barred under § 735 ILCS 5/13-204- 735 ILCS 5/13-206 under Illinois’s civil code (statute of limitations for open accounts is 5 years). Per the Plaintiff’s own summons, date of last payment was 10/07/2000. Date of summons was 10/31/2005. 7. Plaintiff failed to state a claim upon which relief can be granted. Plaintiff's Complaint and each cause of action therein fails to state facts sufficient to constitute a cause of action against the Defendant for which relief can be granted.
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8. Plaintiff has failed to provide a detailed list of the debts to the Defendant in the initial debt collection notice as require by the FDCPA and as evidence by case law. Coppola v. Arrow Financial Services, 302CV577, 2002 WL 32173704(D.Conn., Oct. 29, 2002) – Information relating to the purchase of a bad debt is not proprietary or burdensome. Debtor must phrase their request clearly to obtain: The source of a debt and the amount a bad debt buyer paid for plaintiff’s debt, how amount sought was calculated, where in issue a list of reports to credit bureaus, and documents conferring authority on defendant to collect debt. WHEREFORE, Defendant, XXXXXXXXXX, respectfully submits that the Court should deny the Plaintiff's Motion and Supplemental Motion for Summary Judgment, filed herein by National Check Bureau and prays for Dismissal of the complaint by the Plaintiff for damages of $983.73 and any further relief this court deems just and proper. Defendant's motion for dismissal of summary judgment submitted this ___________ day of Dec 9, 2007.
APPENDIX B: LOGS Use these logs to keep track of all of your correspondence and phone calls and the sequence of events. If you ever get sued or need to go to court, you will be glad you have this information at your fingertips. There are two copies of each log. We can’t say it enough: Document everything!
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Credit Bureau Dispute Log – Names Name
Negative Mark after January 2004?
Did you receive Date you sent notification a Request for that a negative Verification mark was being inserted & into your report? Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Date response received from Credit Bureau
Experian
2
Credit Bureau Dispute Log – Names Name
Negative Mark after January 2004?
Did you receive Date you sent notification a Request for that a negative Verification mark was being inserted & into your report? Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response received from Credit Bureau
2
Credit Bureau Dispute Log – Names Name
Negative Mark after January 2004?
Did you receive Date you sent notification a Request for that a negative Verification mark was being inserted & into your report? Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Date response received from Credit Bureau
Experian
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Original Creditor Response Tracking Name
Negative Mark after January 2004?
Did you receive notification that a negative mark was being inserted into your report?
Date your Request for Investigation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response was received from Original Creditor
3
Original Creditor Response Tracking Name
Negative Mark after January 2004?
Did you receive notification that a negative mark was being inserted into your report?
Date your Request for Investigation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Date response was received from Original Creditor
Experian
4
Original Creditor Response Tracking Name
Negative Mark after January 2004?
Did you receive notification that a negative mark was being inserted into your report?
Date your Request for Investigation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response was received from Original Creditor
4
Original Creditor Response Tracking Name
Negative Mark after January 2004?
Did you receive notification that a negative mark was being inserted into your report?
Date your Request for Investigation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Date response was received from Original Creditor
Experian
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Collection Agency Response Tracking Debt Validation Name
Date Request for Debt Validation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response was received from Collection Agency
Collection Validated? (Check if yes)
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Collection Agency Response Tracking Debt Validation Name
Date Request for Debt Validation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Date response was received from Collection Agency
Experian
Collection Validated? (Check if yes)
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Collection Agency Response Tracking Debt Validation Name
Date Request for Debt Validation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response was received from Collection Agency
Collection Validated? (Check if yes)
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Collection Agency Response Tracking Debt Validation Name
Date Request for Debt Validation was sent & Mail Tracking Number
Date Verified By Credit Bureau
TransUnion
Equifax
Experian
Date response was received from Collection Agency
Collection Validated? (Check if yes)
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Collection Agency Telephone Log (Tracking Calls to You) Name
Date & time of call
Notes on Call
Violation? List Statute in FDCPA or FCRA
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Collection Agency Telephone Log (Tracking Calls to You) Name
Date & time of call
Notes on Call
Violation? List Statute in FDCPA or FCRA
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Collection Agency Telephone Log (Tracking Calls to You) Name
Date & time of call
Notes on Call
Violation? List Statute in FDCPA or FCRA
8
Collection Agency Telephone Log (Tracking Calls to You) Name
Date & time of call
Notes on Call
Violation? List Statute in FDCPA or FCRA
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APPENDIX C: LICENSING REQUIREMENTS FOR COLLECTION AGENCIES State Collection Agency Bond & License AL
AR AK
AZ CA CO
Bond: No License: Yes Fee: $25 - Population under 20,000; $100 - Population over 20,000 Exemption for out-of-state collectors: Business License not required for out-of-state agency. Bond: $5,000 to $25,000 License: Yes Fee: $125 - $5 each employee Bond: $5,000 License: Yes Fee: $100 – Application; $200 - Agency Biennially Bond: $10,000 minimum (based on gross income) License: Yes Fee: $1,500 Application Fee; $600 Annual Fee; $23 per Officers/Managers No license or bond required. Bond: $12,000 - 20,000 License: Yes
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APPENDIX C: LICENSING REQUIREMENTS FOR COLLECTION AGENCIES State Collection Agency Bond & License AL
AR AK
AZ CA CO
CT DE DC FL
GA HI ID
IA IL
Bond: No License: Yes Fee: $25 - Population under 20,000; $100 - Population over 20,000 Exemption for out-of-state collectors: Business License not required for out-of-state agency. Bond: $5,000 to $25,000 License: Yes Fee: $125 - $5 each employee Bond: $5,000 License: Yes Fee: $100 – Application; $200 - Agency Biennially Bond: $10,000 minimum (based on gross income) License: Yes Fee: $1,500 Application Fee; $600 Annual Fee; $23 per Officers/Managers No license or bond required. Bond: $12,000 - 20,000 License: Yes Fee: Determined by collection agency board Exemption for out-of-state collectors: Out of st ate collectors are exempt if [1] collecting only by interstate means (phone, fax, mail); [2] have no Colorado client; and [3] are regulated and licensed in the state in which they reside. Bond:$5000 License: Yes Fee: $200 Yearly; $50 Investigation Bond: No License: Merc. License Fee: $50 Yearly Bond: No License: No Fee: No Bond: Yes - $50,000 (Commercial) License: Yes Fee: $200 – Registration; $50 – Investigation; $200 - Renewal Exemption for out-of-state collectors: Registration is required for out-of-state collectors if [1] soliciting accounts; [2] if client (creditor, its affiliate or subsidiary) has an office in Florida. Bond: No License: No Fee: No Collection agency bond & licenses Bond: $25,000 / $15,000 each branch License or registration: Required to solicit/collect Bond: $5,000 initial License: Yes Fee: $100 -permit fee; $50 - renewal Exemption for out-of-state collectors: Out-of-state collectors may qualify for a special license if [1] only collecting f or client; and [2] are licensed and bonded by any state Bond: No License: No Fee: No Bond: $25,000 License: Yes Fee: $750 – Original; $750 - Renewal Exemption for out-of-state collectors: Out-of-state collectors may be exempt if [1] not soliciting accounts in Illinois; [2] their state of residence has laws which provide similar reciprocity (allow out-of-state agencies to collect only); and [3] the state in which the non-Illinois agency resides extends the same privileges to out-of-state agencies.
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IN
KS KY LA
ME
MD MA MI
MN
MS MO MT
NC
ND
NE
NH
Bond: $5,000 each office License: Yes Fee: $100 plus $5 per annum, each unlicensed employee; $30 branch office; $80 - Renewal Exemption for out-of-state collectors: Out-of-state collectors are exempt from licensing if [1] collecting for a non-resident creditor; and [2] collection activities limited to interstate communications (phone, fax, mail). Bond: No License: No Fee: No Bond: No License: No Fee: No Bond: Yes - $10,000 License: Yes Fee: $200 Initial; $200 Investigation; $200 Renewal; $100 Branch; $100 Branch Renewal Bond: $25,000 to $50,000 License: Yes Fee: $400 Yearly Exemption for out-of-state collectors: Contact state authority. Licensing authority is allowing some exemptions to out-ofstate agencies that collect for non-resident creditors and are not soliciting. Bond: $5,000 License: Yes Fee: $200 each office Bond: $10,000 - $25,000 License: Yes Fee: Determined by commissioner (RETAIL ONLY) Bond: $5,000 - $50,000 License: Yes Fee: $150 – Investigation; $225 – Initial; $125 - Annually Exemption for out-of-state collectors: Out-of-state collectors are exempt if [1] collecting by interstate means; and [ 2] have no clients in the state of Michigan. Bond: $5,000 to $20,000 License: Yes Fee: $1,000 – Initial; $400 – Annual; $10 - Per Collector Bond: No License: City-Business Fee: $15-$50 Bond: No License: No Fee: No Bond: No License: No Fee: No Caveats: Foreign corporations should register with MT Sec. of State prior t o any suit in MT Courts or risk dismissal. Attorney fees only if provided by a signed written agreement. Bond: $5,000 to $50,000 License: Yes Fee: $500 Exemption for out-of-state collectors: Contact state authorities. Unofficially, licensing authorities may allow out-of-state agencies to bypass requirements if they do not solicit in state and/or work for in-state cli ents. Bond: $20,000 License: Yes Fee: $200 Exemption for out-of-state collectors: Out-of-state collectors may be exempt if [1] collecting only; [2] t heir office is located in a state t hat has a reciprocal law; and [3] the state has "enacted similar legislation". Bond: Based on Lic. Solic. Less Than 5 = $5,000; 5-15=$10,000; 16-Up=$15,000 License: Yes Fee: (not to exceed) $250 – I nvestigation; $200 – Original; $100 – Renewal; $50 - Investigation Branch Office; $35 Original Branch Office Exemption for out-of-state collectors: Out-of-state collectors are exempt if [1] communicating by interstate means (phone, fax, mail); and [2] are "regulated" by the laws of another state. Bond: No License: No Fee: No
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NJ NM
NV
NY
OH OK OR
PA RI SC
SD TN
TX
UT VA VT
Bond: $5,000 Surety License: No Fee: No Bond: $5,000 minimum - based on volume License: Yes Fee: $500 - original collection agency or branch; $300 - renewal collection agency or branch; $100 - examination fee for manager's license ; $50 - m anager renewal Exemption for out-of-state collectors: Out-of-state agency is exempt if [1] collecting by interstate means (phone, fax, mail); and [2] debt was incurred outside the state of New Mexico. Bond: $25,000 to $50,000 License: Yes Fee: $250 - App. Survey; $300 – Original; $200 - Renewal Exemption for out-of-state collectors: Out-of-state collectors are exempt if [1] collecting by interstate means (phone, fax, mail); and [2] collecting for an out-of-state client. Bond: No License: No Fee: No Buffalo: $5,000 Bond - $50 fee NYC: License - $150 - 2 yr. f ee Bond: No License: No Fee: No Bond: No License: No Fee: No Bond: No License: Registration only Fee: Established by director Exemption for out-of-state collectors: Contact state authorities. Out -of-state agencies may be exempt if [1] collecting f or out-of-state client; [2] t he debt was incurred by an Oregonian outside the state; and [3] the state where the collection agency is headquartered has a registration program comparable to Oregon's law. Bond: No License: No Fee: No Bond: No License: No Fee: No Bond: No License: Yes - all business Fee: No Exemption for out-of-state collectors: License required for in-state agency only. Bond: No License: No Fee: No Bond: $15,000 1-4 employees; $20,000 5-9 employees; $25,000 10 or more License: Yes Fee: $600 – Original; $350 – Renewal; $25 - Each Solicitor Exemption for out-of-state collectors: Contact state licensing authority. Out-of-state agencies may be exempt if they [1] maintain office in another state; [2] resides in a state t hat provides reciprocity; and [3] comply with provisions of licensing. Bond: Yes License: No Fee: No Always consult counsel to charge interest - Texas has very onerous usury laws & penalties. Bond: $10,000 License: Yes Fee: Varies by City and County. Bond:$5,000 License: Depends on Locality Fee: No Bond: No License: No Fee: No
