Category Archives: Credit Reports

Bored? Check Your Credit Report

Nobody ever has the time to check their credit reports, go through them carefully, decipher the codes and columns — until they are closing on a new house on Tuesday, and there is a problem.  Then, I get to explain that a credit report dispute takes at least 30 days.

However, when you are sheltering in place or quarantined or social distancing that’s a great time.  You an get a free copy of your credit report from www.annualcreditreport.com  .  You are entitled to one free report from each of the three major Credit Reporting Agencies (CRA’s) every year.  (You can get additional free copies for other reasons, like a denial of credit.)  So, start by downloading your credit report.  Then, go through it carefully.  This is the hard part.  Don’t just check the names of the creditors, like with so many things, the Devil is in the details.  Check the payment history, the outstanding balance, the monthly payment amount, the date of last activity (which should be the last time you used or made a payment on the account, it should not be the time the present owner of the account bought it).   Those things can make huge differences in your access to credit.  Make sure they are all correct.

If you find something that is not correct, dispute it.  You will get information for disputing it online.  If you want to do that for a first dispute, fine; but do a screen shot or otherwise record the terms and time of the dispute just in case.  Remember, the Credit Reporting Agencies don’t work for you.  You are not their customer.  Their customers are the people who pay them, and those people are the creditors who report to the CRA’s.  If the first dispute is not successful.  I suggest doing it again, and doing it in writing and sent by certified mail.  Although, I also suggest talking to a lawyer at that point in time.

Elaine

Medical Debt and Credit Reports

The reporting of medical debt on credit reports has gotten quite a lot of press lately.  The Consumer Financial Protection Bureau has recently done a fairly extensive report that includes a number of findings.  One of these is that 1 in 5 Americans has outstanding medical debt on their credit reports.  Another is that slightly more than half of all debt in collections is medical debt.

The CFPB makes the point that part of the problem with medical debt appearing on credit reports is rooted in the complexities of the health insurance billing process.  No dispute there.  The CFPB also wants to enact regulations to change the way that medical debt is reported on credit reports.  The goal is to make medical debt less detrimental to a credit score (at least as it is currently calculated) than other kinds of debt.  I have a problem with that.

WHAT!?!  I’m supposed to be all pro-consumer.  How can I have a problem with that?  Simple.  First of all, there is no such thing as a single credit score.  We all have many of them, and they change constantly.  Establish rules for how credit scores are to be calculated, and the credit reporting agencies will simply change the way they package the information.  Why?  Because they exist to serve their clients’ needs, and their clients are people who lend money and collect money.

But, but, but, classifying medical debt on credit reports differently from other (presumably less noble debt) only makes sense!  If you do that, than anyone looking at a credit report can tell that this person always pays for his car, he just can’t pay that horrendous hospital bill that his insurance company refused to pay.  So, a car lender ought to be able to glance at a credit report and score and tell that this person makes his car payments, so it would be good business to make him a car loan.  Right?

Not so fast.  If someone applying for a car loan owes $30,000 to the local hospital the fact that he has always made his car payments before is not going to stop the hospital from suing him and garnishing his wages.  If the local hospital is taking 25% of the gross off of just about anyone’s pay check (Oklahoma law, only), that could change whether or not he is still able to make his car payment.

Despite popular opinion, credit reports (and credit scores) don’t measure how good a person you are; and the idea of reporting medical debt differently seems to buy into that fiction.  An outstanding liability that remains legally enforceable — whether it be medical, taxes, child support or credit cards — is always going to be a threat to someone’s ability to repay a new obligation.  Wage garnishments, bank levies or any other form of enforcement action that is available to the creditor will impact on someone’s ability to make future payments.  Changing how something is reported or how it is factored into a magic number won’t change that.

The ways to make meaningful changes in your ability to access credit remain the same.  First, if your insurance company denies a claim — appeal it.  Complain to the State insurance commissioner.  Do everything you can to get the claim paid.  Second, police your credit report.  If something shouldn’t be there, get it removed.  If debt has been re-aged or is otherwise no longer enforceable — dispute it.  If you owe the money and it really is legally enforceable, then you either need to find a way to wait it out (and hope that they don’t sue you just before the Statute of Limitations runs) or consider a bankruptcy filing.  Even if a chapter 7 isn’t the answer, a chapter 13 might be.

Oh, and don’t be afraid to ask for help; and don’t be embarrassed.  No one who knows enough about credit reports or the collection industry to be of any use will confuse anything on your credit report with your value as a human being.

Elaine

Don’t Be Afraid to Sue Somebody

A friend of mine, Louis Green, and I were talking last week about talking to clients about being a plaintiff, i.e., suing somebody.  Louis is a consumer law attorney.  He handles many of the same kinds of issues that I deal with, but he practices in District Court rather than the Bankruptcy Court.

A while ago Louis had a man come to see him – who was seriously embarrassed.  He was an older man, who felt like he should have known better; but — to be blunt — he was suckered by a car dealership.

The first thing he needed to understand is that he was taken advantage of by professionals.  This can be hard for a lot of us to grasp (umm, that would include me), but people who are truly professionals at things tend to be better at them than those of us who are really just amateurs.  I hate this.  There are all kinds of things that I think I ought to be just as good at as anybody else — but I’m not, and my kidding myself is hurting no one but myself.  (Why, yes, I do self-manage my IRA — your point?  Sigh.)

This man was old enough to know better.  He had bought cars before.  He knew better than to sign things without reading them, but the print was small; and his eyesight isn’t what it used to be; and the pros made him feel rushed and uncomfortable.  Well, even though he should have known better, that wasn’t his fault.  He was damaged by it, and he stuck to his guns.  He hired a good lawyer; and he won — an award large enough the car dealership required that it be kept confidential for fear anyone might find out how much they were having to pay.

Was all of this embarrassing?  Yes.  Did his adult children find out he had been scammed?  Yes.  Did he have to take the time to go to court and participate in discovery and deal with lawyers?  Yes.  Was it worth it?  That is a question that only he can answer, but I can say it was the right thing to do.

When people come to see me, they are tired of dealing with it all; and they just want it over.  Bankruptcy is good at that, but sometimes, they really do need to step up and be a plaintiff.  Sometimes, you just need to say — No, what you’ve done is wrong; and I am going to put up with the embarrassment and the inconvenience to make you pay for it.  Is it worth it?  More often than not, yes.  Is it the right thing to do?  Yes.

So, think about it.  Sure, you can file a bankruptcy and discharge the underlying debt, but if someone has been incorrectly reporting on your credit report or illegally harassing you about a debt, if a car is a lemon (for information on Oklahoma’s lemon law) or you were scammed by the dealer, at least consider whether or not you should be a plaintiff, as well as, a debtor.

Elaine

Student Loans, Auto Default Clauses: or, Everything Old is New Again

I was recently discussing issues with student loans, and private student loans in particular, with a staffer for one of my Congressmen. The staffer said something along the lines of, but isn’t student loan debt good debt? My response? Student loans, especially private student loans, may be the worst kind of debt – even worse than credit cards. His expression was fun. He did keep his coffee off his tie, though. Points for that.

There are a lot of reasons I’m not just real gung ho on student loans – especially private student loans. One of those reasons has been getting some press this week. Here is a link to a NY Times article on auto default clauses in private student loans. There have been several others recently, but this was the first one I saw.

http://m.washingtonpost.com/business/economy/us-agency-urges-private-lenders-to-ease-automatic-default-rules-on-student-loans/2014/04/21/d06adeee-c97f-11e3-95f7-7ecdde72d2ea_story.html

Most private student loans require a co-signer, usually a parent or grandparent. Many of those loan documents also include language known as an auto default clause. An auto default clause means that the loan is deemed to be in default if a particular event happens – EVEN IF PAYMENTS ON THE LOAN ARE CURRENT. The current press is about auto default clauses that trigger an event of default if the co-signer files for bankruptcy or dies.

To be quite blunt:
Bad news – Dad is dead.
More bad news – your student loans are now being reported in default to the credit reporting agencies, even though you’ve never missed a payment.

There is a good argument that the an auto default triggered by a bankruptcy filing of the co-signer is unenforceable, and I foresee some interesting litigation on that issue. The death of the co-signer, though, is going to be valid unless some lawyer who is far more creative than I am comes up with something I haven’t thought of.

A lot of the NY Times article referenced above has to do with encouragement from the Consumer Financial Protection Bureau for lenders (or, more accurately the loan servicers) to find ways to avoid placing otherwise performing loans into default status. There are a number of problems with that encouragement. First of all, it is just that, encouragement. I am not aware of any authority the CFPB has to require anything. Second, the same problem is showing up here that we had getting loan modifications during the mortgage crisis. Most of these loans have been securitized. The entity that the borrower deals with (Sallie Mae, AES, etc.) isn’t actually the lender. They are the servicer, they just manage the loans on behalf of the ultimate investors, and they do so pursuant to the terms of a contract that limits their ability to modify the loans.

Part of the securitization process is taking a large body of loans, pooling them together and using their income stream to support payments to investors who invest in the large pool. To do that, the individual loans that go into a pool must share certain qualities; and one of the qualities that makes a pool of loans like this more attractive to investors is the presence of co-signers – or, having more than one person responsible for repaying the loans. So, encouragement from the CFBP is nice, but I don’t think I will hold my breath on seeing any real changes here.

Of course, the real victims are the college graduates who are making their loan payments and then find out that the interest rate on a car loan is going to be sky high or they can’t qualify for a mortgage; why? Because their student loans are in default – yea, the ones they are PAYING every month.

I’m sorry, but that sucks.

They took out those loans (for the most part) when they didn’t have a lot of experience with financial products. Their parents (or grandparents) signed. Their school told them to sign. So, they signed. Even if they read the fine print, they very well might not have realized with an automatic event of default means. Their school should have. Their parents (or grandparents) should have, and they might have; but they saw no other (or no better) way to pay for college.

There isn’t much I can do about people dying; but filing bankruptcies for people who might have co-signed student loans is part of my job. I’m currently thinking through some ideas with other attorneys to mitigate the consequences of a bankruptcy filing when the debtor has co-signed private student loans. Keep in touch.

Elaine

 

 

Bankruptcy, Tax Returns and Identity Theft

Looking at the title to this post, I must say that those are not words I ever expected to be putting in one sentence — but then this morning happened.  Let me begin at the beginning.  Early this morning I got an email from a friend of mine with a link to this article:

http://krebsonsecurity.com/2014/03/experian-lapse-allowed-id-theft-service-to-access-200-million-consumer-records/

Evidently, some time ago Experian (one of the three major credit reporting services) bought a company called Court Ventures.  Now, from what I gleaned from Google, Court Ventures is a company that collects public record information on people.  I assume from the name that they tend to focus on court house type records.  Whether or not they are collecting Bankruptcy court records, I don’t know.  Regardless, many bankruptcy cases wind up being referenced in State Court files.  The most common reason for that is when a bankruptcy is filed and there is a pending state court case (a foreclosure, a collection case, anything like that), a Notice is filed in the state court case that the case has been stayed by the Bankruptcy filing.  This notice is sometimes called a Suggestion of Bankruptcy.  This notice includes the bankruptcy case name, case number, and the bankruptcy court in which the bankruptcy is filed.  So, if Court Ventures is collecting courthouse based public records, they are collecting bankruptcy filing notices — albeit indirectly.

Court Ventures then had a contract with another data collection company, US Info Search.  From them a Vietnamese man, who was in the ID theft business,  bought access to both US Info Search data and Court Ventures data — kind of the warehouse shopping model for Identity theft.  Ultimately, this Vietnamese man was able to sell to his customers access to names, Social Security numbers, dates of birth, addresses, former addresses, phone numbers and email addresses — among other things.

The article goes into considerably more detail, and it is quite interesting and well worth reading.  Still, you might be wondering what this has to do with tax returns and bankruptcy clients.  An increasingly common form of ID theft is to file a fraudulent tax return for the victim of the ID theft in an attempt to steal the victim’s tax refund.

Shortly after reading this article this morning I received an email from a Chapter 13 client of mine letting me know that she didn’t have her tax return ready quite yet.  You see, she was working with the IRS to unravel it, but evidently someone had filed a tax return for her in an attempt to abscond with her refund.

That got me thinking.  I wonder how many bankruptcy clients assume (rightly or wrongly) that their Trustee is entitled to their tax refunds, so when the refund doesn’t appear; they don’t go looking for it?  I have had a number of clients over the years receive correspondence from the IRS that they don’t understand (and that may or may not make sense to me), but they don’t follow up on it.  They don’t call the IRS and get them to explain something to them or ask what something means or why it happened.  They just assume.

So, don’t do that.  Nobody in Vietnam deserves your refund more than you do.

Elaine

Credit Reports, Freezes and Thaws

When my clients don’t understand why they are having certain problems with credit reporting agencies (“CRA’s”), I ask them how much money they have paid the three major credit reporting agencies lately. I usually get a blank look followed fairly quickly by the realization that they aren’t the CRA’s’ customer — the creditors are. That understanding is central to understanding why the credit reporting agencies’ trade organization pays two full-time lobbyist to lobby State Legislatures and Congress opposing legistlation increasing consumer’s access to and control over their credit reports.

A credit freeze allows a consumer to place a freeze on his credit history — which means the CRA’s may not issue a report to any creditor on that consumer. It is from those reports that the CRA’s make their money. So, credit freezes are not good for the CRA’s business.  However, a credit freeze is usually the best tool to fight new account fraud and other types of credit fraud stemming from identity theft.

Hence, the current political game. The CRA’s, through their industry organization, hire lobbyists to argue that credit freezes are too expensive, too much trouble and not really worth it. Despite those efforts by the end of this year 35 States will have some laws requiring companies to inform consumers when the consumers’ personal data turns up missing — and a lot of those States also provide for some form of credit freeze.

The next player on the field are car lenders. Impulse car purchases can get lost if creditors have to wait three days (standard waiting time) to remove (or thaw) a credit freeze so that a car loan can be approved. Car lenders want a 24-hour time period to thaw a freeze — or less.
Finally, Congress is being hauled into what started at the State level. The CRA’s want a national standard, and hopefully one that is at least as lenient as the most lenient of the State statutes. Consumer advocates only want a federal standard if it is at least as effective as the most effective state statutes.

In April Sen. Mark Pryor from Arkansas introduced a bill to implement a national standard for credit freezes. His bill is modeled after the California legislation which allows for a $10 fee per CRA and application by certified mail only. If a Federal bill passes it will preempt all conflicting State statutes. Most of the State statutes I am familiar with require the payment of a smaller fee ($10 per CRA adds up to $30) and request by regular mail instead of certified.

USA Today has run an article recently on this issue, but it hasn’t made my local paper. I think it is an issue that warrants some attention and public discussion.

Elaine