What Credit Card Companies Don't Want You to Know
by David Bach, March 12th, 2007

Of all the games the credit card companies play that end up costing you thousands of dollars (late fees, over-limit fees, transfer fees, and so on), it's always been the interest rate game that hurt the most -- until now.
There's a new, completely legal game they're playing, and it can literally wipe you out financially if you're not careful.
The Universal Default Clause
If you own a credit card, you know by now that if you're late with a payment the credit card company will charge you a late fee in addition to raising your interest rate. But did you know that they can raise your interest rate if you've made a late payment on any of your other cards, including those issued by other companies?
Not only that, but your interest rates can skyrocket to 30 percent or more if you make a late payment on your car loan, mortgage, or even your phone bill!
"How can that be legal?" you may ask. The answer is found in the fine print of your credit card agreement, and it's called a universal default clause. According to the Institute of Consumer Financial Education, currently almost 40 percent of credit card issuers apply this policy to their customers.
A Late Payment 'Trigger'
Generally, a universal default clause states that a creditor reserves the right to penalize you with an increased interest rate if you're late -- that is, in default -- of a payment to any other creditor. They justify this practice because, in theory, if you pay any of your creditors late, you pose a greater credit risk and are less likely to pay your debt.
Your creditors also have the right to routinely monitor your credit file. So a creditor with a universal default clause will be watching -- and waiting.
Let's say your Visa card has a universal default clause. Any late payment -- whether it's on your utility bill, home equity loan, or Macy's credit card -- acts as a "default trigger" allowing the bank that issued the Visa card to double or even triple your interest rate overnight. Your all-important credit score will be hurt as well.
According to a study by the nonprofit advocacy and education group Consumer Action the top three default triggers that cause your interest rates to spike are a decline in credit score, paying your mortgage late, and paying your car loan late.
Other Triggers to Worry About
Under the universal default clause, your interest rates can be increased for several other reasons, including exceeding your credit limit, bouncing a check, having too much debt, having too much credit, getting a new credit card, applying for a car loan, and applying for a mortgage loan.
How does this affect your financial future? Take a look at the numbers. Let's say you're an average American household, with $8,000 of credit card debt. Assuming you make no additional purchases on your card, you have a 9 percent interest rate, and you make the minimum monthly payment, it'll take you 218 months (18 years) to pay off your debt and you'll end up paying $3,334 in interest.
Now let's assume that for whatever reason you were late one month with your car payment. This late payment triggers the universal default clause with your credit card issuer, and now your penalty rate gets increased to 24 percent (the average default rate in 2005). It'll now take you 679 months (56 years) to pay off your credit card debt, and get this -- you'll pay $30,813 in interest.
Staying Ahead of the Clause
Here are six ways to protect yourself from interest rate hike triggers:
1. Stay away from credit cards with a universal default clause.
If you're looking to open a new credit card account, be sure to choose one without a universal default clause. This means you have to truly read the fine print. If you're confused by the fine print (as many are), call the credit card company and ask what specific circumstances will affect your interest rate.
I read recently that Capital One cards don't have a universal default clause (although you should double-check before applying), and Citi has dropped its universal default policy as well. In addition, sites like CardWeb.com, Bankrate.com, and LowerMyBills.com let you compare credit card offers, so visit them before you apply.
2. Know your current obligations.
Check your current statements and credit card agreements to find out your current interest rates, and to identify which cards have a universal default clause that you weren't aware of until now. Again, if you're uncertain after reading the fine print, call your credit card company.
Consider transferring your balance from a card that has the universal default clause to one of your cards that doesn't. But don't rush to cancel the card altogether, because it could have a negative effect on your credit score.
3. Run your credit report.
Not only do you need to know exactly what your current interest rates are, you also need to know exactly what's on your credit report. Visit Freecreditreport.com or MyFico to order your credit report and credit score today.
4. Pay your bills on time.
According to the American Bankers Association, late payments for most types of consumer loans were on the rise during the third quarter of 2006. If you're having trouble with your credit card payments, at the very least strive to make your minimum payment on time.
5. Be proactive -- call your lender for relief.
If you're struggling to make monthly payments on your other bills, like utilities, car payments, or mortgage payments, call your lender to see what options they might be able to offer you. They might be able to adjust your monthly payments so that they're more manageable.
Your goal is to protect your credit report and credit score with a consistent record of on-time payments.
6. Fight back for your money -- write your local legislator.
Right now, there are amendments to the Truth in Lending Act that, if passed, would prohibit many unfair practices within the credit card industry -- including the universal default clause.
As a consumer, you can take action by letting Congress know that you want laws to protect your rights. For more information on how you can be heard, visit Consumer Action's web site.
As I write this, Congress is holding hearings to discuss the abusive and deceptive practices of the credit card industry.
A Good Night's Sleep
Obviously, what you don't know really can hurt you. Check today and see if you have the universal default clause on your credit cards.
If you do, be careful to stay on top of your debt. Better yet, find a credit card that doesn't have the clause -- you'll sleep better at night.

Related Articles
Improve your credit
An effective credit repair plan goes well beyond disputing negative credit report information—it addresses your individual credit problems, helps reduce your debt, and enables you to establish new, positive lines of credit. Wise Up Financial’s well rounded credit repair approach is going to focus on these solutions as well as your overall financial education. As appropriate, we provide credit score counseling, assistance with building new credit and meeting lender requirements.  Everything possible will be done to help you meet your credit goals.

Our credit repair program has been has been carefully designed to produce the optimal results as efficently as possible.  Upon receipt of your report we will conduct a meticulios line-by-line review , note the issues that are harming your credit and identify opportunites to to optimze your credit scores.  By simultaneously working with your creditors to reduce your debt, maximize your credit rating, and eliminate inaccuracies, we have redefined the standard in the industry.







Call us today 602-235-0153 / Toll free 888-948-3328
Effective Solutions at Discount Savings
Debt collectors calling? Know your rights
By Lucy Lazarony • Bankrate.com

The Fair Debt Collection Practices Act was passed in 1977 to protect consumers from abusive debt collectors. Here's a closer look at the rules a third-party debt collector must follow when collecting a debt.

Contacting a debtor.
A collector may contact you in person, by mail, telephone, telegram or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.
Contacting a third party about your debt.

If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people but only to find out where you live, what your phone number is and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.
Giving written notice.

Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe, the name of the creditor to whom you owe the money and what action to take if you believe you do not owe the money.
When a consumer doesn't owe the money.

A collector may not contact you if within 30 days after you receive the written notice you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.
No harassment
Debt collectors may not harass, oppress or abuse you or any third party they contact.
Debt collectors may not:
•Falsely imply that they are attorneys or government representatives.
•Falsely imply that you have committed a crime.
•Falsely represent that they operate or work for a credit bureau.
•Misrepresent the amount of your debt.
•Give false credit information about you to anyone, including a credit bureau.
•Send you anything that looks like an official document from a court or government agency when it is not.
Debt collectors may not state that:
•You will be arrested if you do not pay your debt.
•They will seize, garnish, attach or sell your property or wages unless the collection agency or creditor intends to do so and it is legal to do so.
•Actions, such as a lawsuit, will be taken against you when such action legally may not be taken or when they do not intend to take such action.
No unfair practices
A debt collector may not engage in unfair practices when they try to collect a debt from you.
Debt collectors may not:
•Collect any amount greater than your debt, unless your state law permits such a charge.
•Deposit a postdated check prematurely.
•Use deception to make you accept collect calls or pay for telegrams.
•Take or threaten to take your property unless this can be done legally.
Source: Fair Debt Collection, a brochure for consumers from the Federal Trade Commission.


Living Debt-Free
Scott Reeves, 01.11.05, 6:00 AM ET
If you dream of living debt-free as the bills pile up, you're not alone.

A survey of 1,000 consumers by LendingTree.com found that most people have no strategy to manage their debt, and some who struggle to make monthly payments still plan to go deeper in the hole with big-ticket purchases.
10 Basic Steps To Living Debt Free
  You almost certainly need fewer credit cards than you now carry. Cut up unneeded cards. Closing unneeded accounts will help you hold down spending and will save you a bundle on interest payments.
  Credit card installment payments can be small. This reduces the immediate pain, but not the overall expense. If you have a credit card with a $10,000 balance at a 20% interest rate, you're paying $2,000 per year in interest. That's money down the rabbit hole--and the credit card issuer thanks you.
  Many people max out their credit cards because they consider it free money. It's a loan--and you've got to pay it back, typically at a high interest rate. You won't master your debt until you learn this basic fact.
  Hitting yourself in the pocketbook with rising interest rates is no smarter than whacking yourself over the head with a two-by-four. The Federal Reserve has raised interest rates five times since June and more increases are expected. This generally raises the cost of consumer debt. So, if you're hurting now, higher interest rates will increase the pain in the near future.
  If you're in hock up to your eyeballs, consolidating the debt may save money on interest payments. Pencil it out. But, this is only the first step. Long-term, you've got to control your spending.
  Living from paycheck-to-paycheck is an invitation to a beheading--yours. Plan to have an emergency fund that will cover your living expenses for at least three-to-six months. The amount will vary depending on your financial circumstances and monthly expenses. For example, if you make $50,000 per year, plan to sock away at least $12,500, or about three months' pay.
  Over time, you can build a hefty savings account with small steps. If you set aside $25 per week, that comes to $1,300 a year, or $13,000 over 10 years--plus interest. Who can't set aside $25 a week? Yikes, think what $100 a week would add up to.
  Compile a list of all monthly bills such as rent, utilities, car loan, gas and cable TV. Don't forget groceries, entertainment and eating out. If your expenses exceed your net income, cut back immediately. If not, look for ways to reduce your expenses. After you've drafted a budget, the real work begins: sticking to it.
  Keep a tally of all expenses. Accurate bookkeeping is vital to keep spending in line because it underscores the importance of writing a budget and sticking to it. Ever wondered how much you spend a month on gourmet coffee?
  Chances are you're not getting any younger. Cleaning up your credit-card expense will take care of the present. It's also necessary to plan for the future by boosting contributions to your 401(k) plan. The maximum contribution to such retirement plans has been increased to $14,000 this year and $18,000 per year if you're age 50 or older.


The typical U.S. household carries $9,200 in credit card debt. The U.S. Federal Reserve reports that debt levels of U.S. households fell $8.7 billion in November after a sharp drop in charge-card and credit activity. Total consumer debt fell 5% to a seasonally-adjusted $2.085 trillion, including a $7.2 billion decline in revolving credit such as credit cards. Non-revolving credit, including car loans, tuition and vacations, fell $1.5 billion.

The monthly decline was the largest since January 1943, when the Fed began collecting consumer-credit data. Wall Street analysts expected consumer credit to increase by $6 billion in November. However, the Federal Reserve revised October's consumer-credit increase to $9.6 billion, up from the originally-reported $7.7 billion rise.

The best way to combat debt, says Ed Powell, chief consumer officer at LendingTree.com in Charlotte, N.C., is to make a plan to manage debt and stick to it, and to be an educated borrower.

"When securing a consumer loan, understand the cost--the points, fees and other charges. Understand the term, or length, of the loan, because low payments over a long term are expensive. With credit cards, understand the escalation clauses that will increase the interest rate--a late payment or a large balance, for example. This can bump you up to 20% from the introductory rate. Finally, read the disclosure statements because this is all spelled out," he says.

LendingTree.com's survey underscores the gap between consumers' intentions to reduce debt and their current spending:
•80% of the respondents said they don't plan to seek professional help to manage their finances or debt.
•30% said they'll develop a plan on their own.
•13% said they have no intention of developing any kind of financial plan.
•33% of those concerned about their debt have a debt-to-income ratio of 50% or above, about 10% higher than the national average. Nearly 25% have a debt-to-income ratio exceeding 50%. Many financial planners say a debt-to-income ratio of about 33% is manageable.
•19% of respondents concerned about debt said they plan to purchase a car in 2005, and 21% plan to make home improvements valued at more than $3,000.
•76% have outstanding balances on their credit cards or have personal loans, and 37% of those make only the minimum monthly payment.
•Despite growing debt and lack of a budget, 40% of the respondents said they're knowledgeable about personal finance.




Five Signs That You're Living Beyond Your Means
by Glenn Curtis
Monday, July 14, 2008
Many people in America are living beyond their means, as personal savings rates are at their lowest levels since the Great Depression, according to the U.S. Bureau of Economic Analysis. Dwindling savings mean that U.S. households are taking on more debt and are less able to absorb a financial blow like the loss of a job or a downturn in the economy.

If you are concerned that your finances could be in danger, there is a way to tell whether you're in over your head. This article will provide you with five key indicators to watch for. If you find that one or more of them apply to you, it is likely time to reevaluate your spending and work on a long-term financial plan. Recognizing the problem is the first step to finding a solution.
Sign No. 1 - Your Credit Score is Below 600
Credit bureaus keep track of your payment history, outstanding loan balances and legal judgments against you. They then use this information to compile a credit score that reflects your credit worthiness. The numerical rankings go from a low of 300 to high of 850. The higher the better. It's this score that lenders use to determine whether they'll grant a loan. In general, any credit score below 600 means that you are probably in over your head.
If you aren't sure what your credit score is, contact any of the major credit bureaus (TransUnion, Equifax, Experian) and have them send you a copy of your credit report. This document will tell you what the bureaus - and ultimately lenders and financial institutions - think of your finances.
Sign No. 2 - You are Saving Less Than 5%
In 2005, the average rate of personal savings was an astonishing -0.5%, according to the U.S. Bureau of Economic Analysis. That means that not only were we spending all of our income, but also that a good number of us were also dipping into personal savings. This was the worst savings rate that Americans have recorded since 1933 when it was -0.7% during the Great Depression. The rate has bounced back into positive territory, but in 2008, it still hadn't cracked 1% (Figure 1).

Figure 1: American household savings rate as a percentage of personal income
Source: U.S. Bureau of Economic Analysis
A savings rate below 5% means you could be in real danger of financial ruin if someone in your family were to have a medical emergency, or your family home were to burn to the ground. With savings this low, it likely means you wouldn't even have the money to pay the necessary insurance deductibles.
Ideally, everyone should try to save as much as they can, but in terms of targets, the rule most financial advisors suggest is 10% of your gross income. Beginning at age 30, if you were to save 10% of your $100,000 annual income in your 401(k), or $10,000 every year, and earn a rate of return of 5%, that money would grow to more than $900,000 by age 65.
Sign No. 3 - Your Credit Card Balances are Rising
If you are one of those people who pays only the minimum due on their credit card balance each month, or if you send in only a small contribution toward the principal balance, then you are most likely in over your head.
Ideally, you should only charge what you can pay off at the end of each month. When you can't afford to pay off the balance in its entirety, you should try to make at least some contribution toward the outstanding principal.
The importance of paying down credit card balances as soon as possible cannot be understated. A person with $5,000 in credit card debt that makes the minimum payment of just $200 per month will end up spending more than $8,000 and take almost 13 years to pay off that debt.
Sign No. 4 - More Than 28% of Income Goes To Your House
Calculate what percentage of your monthly income goes toward your mortgage, property taxes and insurance. If it's more than 28% of your gross income, then you are likely in over your head.
Why is 28% the magic number? Historically, conservative lenders have used the 28% threshold because their experience has told them that this is the rate at which the average person can get by, make their mortgage payments and still enjoy a reasonable standard of living. Certainly, some homeowners can get by spending a higher percentage on their homes, particularly if they cut back elsewhere, but it's a dangerous line to walk.

Sign No. 5 - Your Bills are Spiraling Out of Control
Buying on credit and paying by installment has become a national pastime. It's much easier to buy a new flatscreeen TV when the salesman breaks down the price in monthly installments. What's an extra $50 per month, right? The problem is that all of these bills start to add up, and you end up nickel and diming yourself into bankruptcy. If your monthly income is being sliced and diced to pay for dozens of unnecessary installment purchases and services, you are likely in over your head.
Lay out all of your monthly bills on your kitchen table, and go through them one by one. Do you have a cell phone bill, a PDA bill, an internet bill, a premium cable TV package, a satellite radio bill, and all of those other gadgets that generate countless monthly bills? Ask yourself whether each product or service is really necessary. For example, do you really need a 500-channel premium cable TV package, or would you really notice the difference if you had fewer channels (and paid less)?
Some of the best places to find savings include your telephone bills (cell and land line), your utility bills (turn off the lights, and don't run the air conditioning if nobody is home) and your entertainment expenses (you could stand to dine out less and to pack a lunch for work).
Bottom Line
As a nation, we are digging ourselves ever deeper into debt. To avoid becoming part of the gloomy bankruptcy and foreclosure statistics, it's important to measure your financial health regularly. The five signs presented here are not a death sentence; instead, they should be seen as symptoms that allow you to diagnose a problem before it gets worse.

Consumer Concerns for Older Americans -  Dealing with Debt Collection Harassment

Debt collectors have been the most complained-about industry on the Federal Trade Commission’s consumer website for many years running. And abuses by out-of-control collectors appear to be getting worse.
Debt collection harassment and abuse can take a particular toll on vulnerable older consumers.  The good news is that there are federal and state laws that are intended to protect consumers from debt collection and harassment.  These laws apply regardless of whether the consumer owes money on the debt being collected.  The bad news is that many collectors still do not comply with the law. 
The information below will help advocates counsel clients about what a debt collector can and cannot do and how consumers can protect themselves.  It is also important to work with older consumers to help them evaluate which debts are highest priorities and what the possible consequences might be if they are unable to repay all of their debts.
What Can a Debt Collector Really Do?
A debt collector working on behalf of a creditor can do little more than demand payment.  If the creditor has not taken the client’s house, car, or other property as collateral on a loan, then legally the creditor can only do three things:
1.Stop doing business with the consumer.
2.Report a default to a credit bureau.
3.Sue the consumer in court.  This threat may not be as serious as many consumers think.  Many creditors do not follow through on their threats.  Even if they do, consumers can raise defenses to paying the debt.  And even if the creditor obtains a judgment, this judgment still does not force the consumer to pay the debt.  It only gives the creditor the right to try to seize part of a consumer’s wages or property.
How To Avoid Harassment
Federal law and many states prohibit harassment by collection agencies.  In many cases, the state laws provide additional protections.    For example, the federal law applies only to third party collectors.  Some state laws also cover creditors collecting their own debts.
Consumers should consider the following eight steps.  In most cases, they will want to consider more than one.
1.Try to Head off Harassment Before it Starts.   It is to the consumer’s advantage to try to deal with the problem before the creditor refers the debt to a collection agency.  Consumers should consider calling up the creditor to explain their situation. It is important to advise consumers that they should not over-promise in these negotiations.  They should also take into account whether they actually the money or whether they have defenses to raise that would eliminate all or part of the obligation.      
2.The Cease Letter.  The simplest strategy to stop collection harassment is to write the collector a cease letter. Consumer rights vary depending on whether the collector is a creditor or a collection agency.

Federal law requires collection agencies to stop their collection efforts (sometimes referred to as dunning) after they receive a written request to stop. The federal law does not apply to creditors collecting their own debts, but even these creditors will often honor such requests.

It is very important for consumers to keep a copy of the written request and to send it by certified mail (return receipt requested). This gives proof that the collector received the letter.

Here is an example of such a letter:

Sample "Cease" Letter

Sam Consumer
10 Cherry Lane
Flint, MI 10886

January 1, 2006
NBC Collection Agency
1 Main Street
Flint, MI 10887

Dear Sir or Madam:

I am writing to request that you stop contacting me about an account number _______ with [name of creditor] as required by the Fair Debt Collection Practices Act 15 U.S.C. section 1692c(c).  (Note:  Delete reference to the Act where the letter is to a creditor instead of to a collection agency.  Some, but not all, state laws prohibit further contact by creditors).

[Describe any harassing contact by the collection agency.  If appropriate, provide information about why you cannot pay the bill or do not owe the money].

This letter is not meant in any way to be an acknowledgment that I owe this money.  I will take care of this matter when I can.  Your cooperation will be appreciated.

Very truly yours,

Sam Consumer

Even though it is against the federal law, not all debt collectors will stop contacting consumers after they receive a letter.  Consumers may have to send another letter and once again keep a copy.  Advocates should advise clients to keep a careful record of any letters and phone calls received after sending the letter.  This record may help if the consumer later decides to sue the debt collector. 
3.The Lawyer's Letter.   If a cease letter does not stop collection calls, a letter from a lawyer usually will. In addition, the lawyer may be able to raise legal claims for violations of the federal law that prohibits debt collection harassment.

Federal law requires collection agencies to stop contacting a consumer known to be represented by a lawyer, as long as the lawyer responds to the collection agency's inquiries. Even though this requirement does not apply to creditors collecting their own debts, these creditors also will usually honor requests from a lawyer.  A lawyer working for a creditor or collection agency also is generally bound by legal ethics not to contact debtors represented by a lawyer.
4.Negotiate with the creditor or collector.  It is often easier to negotiate with a creditor before a debt is sent to a collection agency, but consumers can negotiate with collection agencies as well. Regardless of the type of deal, consumers should avoid offering too much.  Even a small payment to an unsecured creditor is unwise if this prevents payment of mortgage or rent.
5.Raise Complaints About Billing Errors and Other Defenses.  When a collection letter contains a mistake, consumers can write to request a correction. Collection agencies, by law, must inform consumers of their right to dispute the debt.  They must do this the first time they communicate with the consumer or within five days after the first communication.  If the consumer then disputes the debt in writing within the next thirty days, the collection agency must stop collection efforts while it investigates.

If the dispute involves a line of credit, a credit card, or an electronic transfer of money, you have the additional legal right to require the creditor to investigate the bill. 
6.Complain to a Government Agency.  Consumers should consider writing to government agencies responsible for enforcing laws that prohibit debt collection abuse, like the Federal Trade Commission or your state's attorney general's office.

A letter of complaint should be sent to the Consumer Response Center at Federal Trade Commission, CRC-240, Washington, D.C. 20580.  Consumers can also call the Commission toll-free at 1-877-FTC-HELP (382-4357) or file a complaint on-line at www.ftc.gov. Copies of the letter should also be sent to the consumer protection division within the state attorney general's office, usually in the state capitol, and also to any local office of consumer protection listed in the local telephone book or on the Internet.  Addresses can be obtained from a local better business bureau or office of consumer affairs.
7.Bankruptcy.  In most cases, filing  initial papers for personal bankruptcy     triggers the "automatic stay."  This is a very powerful tool because it stops all collection activity  from collectors, creditors, or even government officials. But, as a general rule, a bankruptcy filing is not the best strategy where the consumer’s only concern is debt harassment. Bankruptcy should be saved for when consumers have serious financial problems. Debt collection harassment can usually be stopped without having to resort to bankruptcy.  It is a good idea to consult a bankruptcy attorney in these cases. 
8.Sue the Debt Collector for Illegal Conduct.  Federal and state fair debt laws provide consumers with strong protections from debt collection harassment.  Debt collectors often break these rules because they know that in most cases they can get away with it.  Most consumers either do not know about their rights or lack the resources to fight back.

These claims may be brought affirmatively or defensively in response to a collection action.
Federal Fair Debt Collection Practices Act
The federal Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. §1692 et seq.) prohibits collectors from engaging in a wide range of abusive and harassing conduct.  Below is an outline of key provisions of this law.
Who is covered?
Only consumer debt transactions, as defined in the law, are covered.  Only “debt collectors” are covered.  Original creditors and their employees are excluded from the federal law, but attorney debt collectors are covered.  Only collectors that regularly attempt to collect debts are covered.
Privacy Protections
The law protects a consumer’s privacy by limiting the ways in which debt collectors are allowed to communicate with consumers.  Key privacy provisions include:
•Collectors are prohibited from communicating with third parties.  The consumer’s spouse, parent (if the consumer is a minor) guardian, executor or administrator are not considered to be third parties. 
•No communication at any unusual time or place.  In the absence of other knowledge, the law assumes that after 8:00 a.m. and before 9:00 p.m. is the only convenient time.
•No communication with consumer if the collector knows the consumer is represented by an attorney.  Communication must then be with the attorney.
•No communication at consumer’s place of employment if the collector knows or has reason to know that the employer prohibits such communication.
•If the consumer notifies the collector in writing that s/he refuses to pay the debt or wishes the collector to cease communication, the collector must cease communication with limited exceptions:
•to advise the consumer that the collector’s further efforts are being terminated;
•to notify consumer that the collector or creditor may invoke specified remedies;
•where applicable, to notify the consumer that the collector intends to invoke a specified remedy.
The collector can still sue on the debt.  This section limits further communications only.
Harassment and Abuse Is Prohibited
The law includes a non-exhaustive list of harassing tactics, including prohibitions on threats of violence; obscene language; causing a telephone to ring repeatedly; and placing calls without meaningful disclosure of the caller’s identity.
False or Misleading Representations Are Prohibited
For example, collectors may not make false representations of the character, amount, or legal status of any debt.  They cannot threaten to take any action that cannot legally be taken.
In addition, the collector must disclose in the initial written communication with the consumer (and in addition, if the initial communication is oral, in that oral communication) that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and must disclose in subsequent communications that the communication is from a debt collector.
Unfair Practices Are Prohibited
For example, collectors are prohibited from collecting any amount unless such amount is expressly authorized by the agreement creating the debt or permitted by law; accepting a check or other payment postdated by more than five days (unless certain conditions met); soliciting a postdated payment for the purpose of threatening or instituting criminal prosecution; communicating by post cards; using language or symbols other than the debt collector’s address on any envelope (a business name is allowed only if the name does not indicate the collector is in the debt collection business).
Validation of Debts
Within five days after the initial communication, debt collectors must provide information about the consumer’s right to validate the debt.  Consumers have thirty days to dispute validity.  The collector must cease collection if validation is requested until the collector obtains verification of the debts.
Private Remedies
•Up to $1,000 in statutory damages
•Attorney’s Fees
•Unlimited Actual Damages
•Injunctive Relief generally not available.
There is a one year statute of limitations
Collector’s Defenses
The collector has specific defenses under the law, including a bona fide error defense.  This is a limited defense and applies only where violation results from an unintentional error, notwithstanding maintenance of reasonable procedures adopted to avoid the error.
Other Claims
Additional claims to consider in debt collection harassment cases include:
•Tort claims such as invasion of privacy or defamation
•State debt collection remedies
•State unfair and deceptive acts and practices laws
•State credit repair organization laws
•Unauthorized practice of law statutes
•Criminal laws
Useful Information and Web Sites
National Consumer Law Center Publications and Articles
National Consumer Law Center, Fair Debt Collection (5th ed. 2004 and Supp.).
National Consumer law Center, Unfair and Deceptive Acts and Practices (6th ed. 2004 and Supp.).
National Consumer Law Center, Guide to Surviving Debt (2006).
Also see NCLC’s brochure on Dealing with Debt Collection Harassment.
The Federal Trade Commission also has information about debt collection issues.  You can get more information on-line at www.ftc.gov.
This brochure was supported by a grant, number 90-AP-2647, from the Administration on Aging, Department of Health and Human Services, Washington, D.C.  Points of view or opinions are entirely those of the National Consumer Law Center. 

Expert Tips For Cutting Credit Card Debt
by Gregory Bresiger 

Being smart about credit card debt can help the average investor bank a guaranteed 18%. It is a conscious decision that could save the average household approximately $1,500 a year. So how can you bank these savings? Read on for tips from financial experts on how to tackle debt and grow you savings.


The Debt Dilemma
Let's say you owe $5,000 on your credit cards and are paying 18% interest. The credit card companies, which of course like having a steady stream of revenue, might ask you to make a minimum payment of $150 a month. But just making a minimum payment will result in years of debt.

Assuming you make no new purchases and pay a fixed $150 each month for the next several years, how long will it take to pay off the $5,000 debt? Three years and 11 months. You will also end up paying approximately $2,000 in interest. That's a lot of money to pay for credit.

Average Household Credit Card Debt
In relying on credit cards, some people throw away tens of thousands of dollars over decades.

As of 2007, the median amount of credit card debt carried by the average American household was $6,600, according to CardTrak.com. There are millions of cardholders who carry what advisors would say are dangerous amounts of card debt.

"No matter how you slice or dice it Americans owe a significant amount on their credit cards," says Robert McKinley of CardTrak. He estimates the average American household pays some $1,500 a year in credit card interest.

Lewis J. Altfest, a certified financial planner in New York whose clients tend to be professionals with large incomes says that "to financial planners, debt often represents risk. Too frequently, [financial planners] see abusive use of credit leading to financial difficulties. They recommend that debt be limited to investment items such as the purchase of a home," Altfest writes. That's because credit card debt, unlike some other kinds of debt, is not tax deductible.

For example, credit incurred in the purchase of a home, which is an asset that usually can be resold for a profit, can often be used as a tax deduction. The government is, in effect, helping to underwrite your purchase of an asset. On the other hand, interest incurred on a loan to buy a car or run up credit card debt is generally not deductible. (For more on this, read The Mortgage Interest Tax Deduction.)
Credit card interest is also very expensive compared to other debts. That's because card interest, on average, is about twice the nominal interest rate as the home equity loan or mortgage. (To learn more, read Understanding Credit Card Interest.)

From Debt to Savings?
The credit card debt that many people carry also presents an opportunity for considerable savings. Eliminated credit card debt can free up money that could be devoted to everything from luxury to investment. Advisors also say that there is a guaranteed investment opportunity. An easy way to earn 18% or better is to get rid of credit card debts as soon as possible.

How to Attack Credit Card Debt
"Let's say you have four credit card debts. The first thing I would recommend is to categorize all of your debts," said Charles Hughes, a Certified Financial Planner® in Bayshore, New York. (For more on this see, Take Control of Your Credit Cards.)

"Instead of making four equal payments on all of the cards, consider making the biggest payment on the card with the highest interest rate." Hughes also said that as you reduce debt, you should keep a cash reserve to avoid running out of money. Otherwise, after running down a credit card debt, you could quickly fall back into the red. (To learn how to build this reserve, read Build Yourself An Emergency Fund.)

Set goals for yourself, Hughes says. Have a realistic plan to eliminate the debt as soon as possible. "Also, make a list of where your money is going," he adds. In making what Hughes calls a "cash flow analysis", superfluous spending can often be spotted. 

Also avoid new debts that will pile on the existing ones. Put cards away for a while and try to pay for daily purchases in cash. (For more on making this budget, read The Beauty Of Budgeting.)

As debt declines and one starts achieving goals, "a person will become enthusiastic about eliminating more and more debt," Hughes said. He added that the same techniques can be used to build up savings, but credit card debt should be eliminated first.

Making Cards Work for You
Once you have gotten out of the habit of paying interest on cards, there is a way to make cards work for you. However, the credit card companies expect that most people won't use this technique.

Most cards "provide the consumer with an interest-free loan from the date of purchase to the date of the billing," writes David Evans and Richard L. Schmalensee, credit card industry analysts. That means the card company has extended you an interest-free loan. However, remember that this grace period generally does not apply when you take a cash advance on a credit card, which is probably the most expensive way of accessing credit.

Card companies, which are under pressure to obtain as much business as possible to survive, refer to the sage cardholders who pay off balances each month "transactors".

So why do companies offer them free loans?

Because they know that many customers will be "revolvers". In other words, most people will carry some kind of credit balances from month to month, which is the main way the credit card companies make their money. The card companies also try to get as many revolvers as possible and (of course) hope that some transactors will become revolvers, too.

Generally, transactors tend to be those with higher incomes. For example, Altfest, who works with high net worth clients, says he spends a lot of time counseling clients on how to use credit safely.

"Sometimes people just get in too deep. They eat dinners at expensive restaurants three or four times a week and I try to get them to put some limits on their use of cards," he said. In this case, he advises clients to cut back on luxury expenses.


How do you know when you have a problem?
Howard S. Dvorkin, a Certified Public Accountant and founder of Consolidated Credit Counseling Services, says that financial advisors generally suggest that the average person shouldn't be paying more than 10% of net take-home pay on credit card and other consumer debt.

"These same financial experts also advise that however much debt you have, you should be able to repay all of it within 12 to 18 months," Dvorkin writes in his book, "Credit Hell: How to Dig Out of Debt" (2005).

Saving $1,500 a year in credit card interest may not seem like much - and it probably isn't over the short term. But over the long term, it's huge; over 30 years, it adds up to $45,000 in interest savings.

Let's say you took $100 per month ($1,200 per year) of that $1,500 and invested it in a mutual fund that earned an average rate of return 9% per year.

At the end of 30 years, you would have roughly $184,000 before taxes. That's $184,000 just because you started using credit more intelligently and invested your money instead. In our example, the difference between $45,000 of credit card interest over 30 years and the amount gained by investing can be substantial.

Conclusion
For most individuals, a savings of $45,000 over 30 years could make a big difference. Think of the opportunities for productive use for that money! For those with a credit card debt problem, eliminating it could be the best chance over the course of 30 years to build up savings and investments. Being smart about credit card debt is one surefire way to increase wealth over the long run.

That's quite an investment!


"Credit-Card Users Face Higher Fees, Rates" wallstreetjournal.com

•The Federal Reserve has slashed its benchmark rate to 1%, yet many people are getting hit with higher rates and fees on their credit cards.
•Normally, when the Fed cuts rates, credit-card issuers follow suit, resulting in lower monthly payments for cardholders. Though average credit-card rates have fallen slightly as the Fed has cut interest rates, banks and retailers are trying to offset rising losses in their credit-card operations by raising rates and fees across a broader swath of their existing customers.
•Banks had already been tightening the screws on people with less-than-perfect credit in recent months. Now, even customers who pay their bills on time will find it more expensive to carry a balance.
•J.P. Morgan Chase & Co.'s Chase unit is raising its rates on credit-card cash advances and overdraft protection, as well as its default rate, which is triggered when cardholders exceed their credit limit or are late on their payments. The bank will also start charging a new $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5% of their outstanding balance, from 2%. Citigroup Inc.'s Citibank unit and American Express Co. have been notifying groups of cardholders that they will be raising their regular interest rates by two to three percentage points. In addition, Amex is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fees to 2.7% from 2% on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards.
•Retailers are also getting stingier with credit. Home Depot Inc. reduced credit lines on its in-store cards, which are issued by Citibank, for customers with delinquent accounts or those whose credit scores have dropped dramatically. Nordstrom Inc. began notifying customers that it was raising interest rates on its store credit cards, while Target Corp., which has also raised interest rates and late fees, is issuing fewer cards and reducing spending limits as customer delinquencies have jumped sharply.
•Many big banks reported weak credit-card results for the third quarter, with "charge-offs" -- reflecting loans considered to be uncollectible -- rising to over 5% of total credit-card balances and poised to deteriorate further.
•"Some credit-card issuers are desperately looking to recoup their charge-off losses by increasing interest rates or hiking punitive fees," says Gwenn Bezard, a research director at Aite Group LLC, a research firm. "Those rates or fee increases can affect consumers that are perfectly good customers."
Card issuers cite the current economic turmoil to explain the changes. "Obviously, this is something we're doing to reflect the cost of doing business," says Desiree Fish, an American Express spokeswoman

•     "Interest Rate Cuts? Not on Credit Cards" - usatoday.com

•The majority of credit cards on the market have variable, or floating, rates. Theoretically, that means that as the Federal Reserve lowers its federal funds rate — the latest cut took place this month — card holders should also see their borrowing costs fall.
•In reality, though, banks often set a "floor" that credit card rates can't fall below, and in many cases, that floor has already been reached, analysts say.
•Imposing a floor on credit card rates allows the bank to "continue lending even in challenging environments," says Todd Morgano, a spokesman for National City.
•But such interest rate restrictions mean that borrowers with good credit may not see their rates fall below 10%, while those with bad credit may not see rates lower than 20%, says Greg McBride, a senior analyst at Bankrate.com.
•Even without such policies, banks are historically slow to pass along interest-rate reductions. Since August 2007, the Federal Reserve has cut rates by 3.75 percentage points, but the average credit card rate has fallen only 1.4 percentage points, to 13.9%, according to Justin McHenry, research director at IndexCreditCards.com.
•Issuers have also become more aggressive about tacking on fees and raising borrowers' rates — as high as 32% — for the slightest misstep, such as going over the limit or paying late.
•Joseph Ridout, a spokesman for Consumer Action, an advocacy group, believes the rate increases are banks' attempt to "make up" for ballooning mortgage losses.
•"Credit card issuers don't have to follow the same rules as other lenders do," Ridout says. "They can really change terms of your contract as they want."
•Borrowers with good credit who aren't getting the benefits of interest-rate reductions should consider changing lenders even though their credit scores may temporarily drop, McBride says.

  "When Credit Cards Put You In Jeopardy" - cnn.com

•Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year. And it's become a habit for them to spend more than they have. The overall credit card debt grew by 315 percent from 1989 to 2006, according to public policy research firm Demos.
•The percentage of people delinquent on their credit cards is the highest it's been in three years, according to CardTrack.com.
•If you have a $2,000 balance at a 14 percent interest rate -- and make just the minimum payments -- it will take you more than 14 years to pay off that debt plus the interest. Try to pay more than the minimum payments on your credit cards whenever you can.
•The people with the best credit have a utilization rate of no more than 7 percent," he says.
•If your credit utilization is 50 percent or more of your credit limit, you are doing some real damage to your credit score, says Craig Watts of Fair Isaac, one of the companies that provides credit scores. When the new FICO '08 scoring model is adapted in May, if you have a utilization of over 50 percent, you'll be penalized even more heavily

  "25 fascinating facts about personal debt" - Bankrate.com

•A $1,000 charge on an average credit card will take almost 22 years to pay, and will cost more than $2,300 in interest ($3,300 total) -- if only 2 percent minimum payments are made.
•Average card debt among people who have at least one card is $9,205 -- triple what it was in 1990.
•The average interest rate on credit cards is 18.9 percent.
•Last year the credit card industry took in $43 billion in card fees.
•Twenty-three percent of Americans admit to maxing out a credit card.
•The average graduate student has six credit cards and one in seven owes more than $15,000.
•People using credit cards in fast food restaurants spend up to 50 percent more than when they pay cash.
•The personal savings rate in the United States has dropped from 8 percent in the 1980s to just under 2 percent since 2000.

  "Credit Card Debt Statistics" - Money-zine.com

•Roughly 2.0 to 2.5 million Americans seek the help of a credit counselor each year, mostly to avoid bankruptcy.
•From 1990 to 2000, the number of Americans seeking the help of a credit counselor doubled.
•The size of the total consumer debt grew nearly five times in size from 1980 ($355 billion) to 2001 ($1.7 trillion). Consumer debt in 2007 now stands at $2.5 trillion.
•According to latest information gathered by the US Census bureau, there were 164 million credit card holders in the United States in 2003 and that number is projected to grow to 176 million Americans by 2008. These same Americans own approximately 1.5 billion cards - an average of nearly nine credit cards issued per credit card holder.
•The data tells us that Americans carried approximately 786 billion dollars in credit card debt and that number is expected to grow to a projected 965 billion dollars by the year 2008. This works out to approximately $4,800 in credit card debt per cardholder and that number is expected to increase to nearly $5,500 by 2008.

Credit and Debt Servicesreport
My credit was in bad shape. Your staff educated me on how to improve my credit and helped me clean up my credit . Your credit repair service helped put me back on track - Nancy A  Chicago, IL.



See some examples
Did you know?
35% - Payment History
30% - Balances Carried
15% - Credit History
10% - Mix of Accounts
10% - Inquiries

The process for calculating a score is very complicated, but there are some basic factors used by all bureaus that are easy to understand. Think of your credit score as a pie chart, each piece is given a percentage.  The higher the percentage the more affect it has on your credit score.