Tips And Guide For Debt And Loan Management

Collection agency harassment got so bad that it took congressional action to rein it in. The Fair Debt Collections Practices Act (FDCPA) is a federal law that regulates what creditors may and may not do when trying to collect a debt.
The essence of the FDCPA is that debt collectors must behave in a reasonable manner
and are forbidden from harassing you. Impermissible actions may include

• Calling at the wrong place or the wrong time. A bill collector cannot call before 8:00 A.M. or after 9:00 P.M. If you so desire, the collector cannot call you at work.
• Making inappropriate threats. The collection agency representative cannot use foul language or threaten you with violence, seizure of assets, or imprisonment.
• Using other forms of harassment. The debt collector cannot misrepresent who he is or what he is calling about, cannot repeatedly call you, and is forbidden from publishing your name and the nature of the debt. Knowing what is acceptable creditor behavior can pay tremendous dividends.

If an annoying creditor persists in calling you at work, tell him to stop. If he threatens to have your car sold to pay the debt, tell him such threats are illegal. Make sure that when you speak with an annoying creditor, you use the words “Pursuant to the Fair Debt Collections Practices Act, you cannot ….” This phrase lets him know that you know what you are talking about.
If a collection agency continues to violate the law after being told to stop, you have two options:

1. Contact the proper authorities. The Federal Trade Commission polices the FDCPA. Contact the office closest to you and explain the nature of the problem. State authorities, such as your Attorney General, State’s Attorney, or Department of Consumer Affairs, also may investigate a serious violation of the law.

2. Sue. The FDCPA permits lawsuits for violations of the act. If proven, the violator could be liable for any out-of-pocket expenses you incurred as a result of the violation, penalties up to $1,000, and possible attorneys’ fees and costs. Such a suit would normally be brought in your local small claims court.

There is much collection agencies cannot do. Can they garnish your wages? No. They may threaten to if you do not pay that bill, but the truth is that they cannot do it.
There are only three instances when a creditor can garnish your wages:

• If you owe on a student loan, special rules allow that creditor to garnish your wages.
• If you owe child support, your monthly payment can be garnished from your paycheck.
• Any other creditor can garnish your wages only when it has sued you, won the suit, and received permission from the court to garnish. You will know if this is happening to you.

If none of these situations applies to you, you should understand that when a creditor threatens to garnish your wages, he is blowing smoke. Can collection agencies have you thrown in jail? No. Debtor’s prison was outlawed in this country long ago. Can they threaten you? Sure. But so what? Most of their threats are hollow. They tell you that if five post-dated checks are not received by the next day, a suit will be filed. Or they might say that if $500 is not in hand by Friday, your bank accounts will be seized. Baloney.
The truth is, most of their threats are empty, and there is no deadline. They make it all up. If the deadline passes, nothing happens. The threat and deadline are nothing more than tactics they use to try and get some money out of you. Do not fall for their threats.
Will the collection agency sue you? Probably not. Lawsuits for consumer debts happen in a surprisingly small number of cases. Depending upon the size of your debt, it is normally too expensive for the original creditor or the collection agency to file suit. And even if it did win a judgment, what is the likelihood that it will ever collect on it? These lawsuits are usually just not cost-effective. That is why collection agencies prefer to make threats: They’re cheaper.

When you cannot pay your bills in full, another option is to negotiate with your creditors and see whether any of them would be willing to accept less than full payment. Here is how to do it: Write a letter explaining to your creditor that you would like to settle your account in full, but that you are unable to do so. Your letter should go on to offer a settlement for an amount less than you owe. Why would a creditor accept such a proposal? Because, you explain, if it does not, you will have no choice but to declare bankruptcy, in which case, it will get nothing. Fifty cents on the dollar starts to look like a pretty good deal. It is important to realize that if this letter does not work, or you otherwise ignore your creditors, you will end up with a very negative credit report, not to mention the fact that you will lose peace of mind and future credit. If you can settle these debts before things get out of hand, you are better off.

The first thing to ask yourself is whether you are dealing with the original creditor or a collection agency. As a general rule, original creditors are not nearly as difficult to deal with as collection agencies.
Who you are dealing with usually depends on how late you are with your bill. After a debt is more than say, six months old, the original creditor will probably sell it at a discount or give a percentage of any recovery to a collection agency. Your chances of settling your problem reasonably and with a modicum of dignity are best when you deal with the original creditor. The department store or doctor will usually try to work with you to settle your outstanding debt. The plan usually means that you make regular monthly payments for an amount you can afford. If you do make a concerted effort to pay your bill, even at something like $25 a month, the original creditor will usually accept the payment, albeit begrudgingly. It is when you stop paying altogether that creditors become upset.

You can do several things to make sure that you do not fall for the “buy now, pay later” ruse again. The most important is to begin to use credit cards properly, to use them as the financially literate do.
These suggested proper uses of credit cards won’t get you further into debt:

• Pay the bill in full every month. This is the first rule for a reason. Every time you allow your balance to carry forward to another month, you are giving your credit card issuers more of you hard-earned money. If you can’t afford to pay for the charge, then you shouldn’t be charging it.
• Borrow when it costs you nothing. As we said earlier, charging something at the right time of the month allows you to go almost two months without paying any interest.
• Budget for an emergency. As we discussed in earlier chapters, you should have some money set aside for a rainy day. Some of that money ($3,000 is a good amount) should be earmarked for credit card emergencies. Credit cards come in most handy in a crisis. If you need a tow truck or have to go on a sudden trip, charging it makes a lot of sense. Just remember to use your emergency stash to pay off the card when the bill comes and then replenish your emergency fund. Budget for pleasure. Credit cards are a necessity when you travel for fun. Use them all you want, but be sure that you won’t be breaking the first rule by doing so.
• Toss solicitations in the trash. Throw away, unopened, all credit card offers you are receiving in the mail. You don’t need more credit.
• Cut up cards you are no longer using and cancel the accounts.
• Credit cards are great. They are easy to use and allow you the opportunity to buy and do things you would otherwise normally not be able to. In fact, they are too easy to use. That is how you fell into the trap in the first place, and it is a difficult trap to get out of. It will take time and effort on your part.

Credit card billing errors do occur, but they can easily be resolved if you know the law. In 1975, Congress passed the Fair Credit Billing Act (FCBA) to help consumers challenge disputes over credit card bills.
Pursuant to the FCBA, if you ever see a mistake on your credit card statement, you need to write the company a letter explaining the problem within 60 days after your receipt of the bill. They then have 30 days to respond to you and begin to investigate the matter. As they investigate, they cannot harm your credit rating or take any action against you.
In your letter, provide the following information:

•   Name
•   Address
•   Account number
•   Reason for the dispute and why you think there is a mistake

The creditor must then investigate the matter. If an error is found, the FCBA mandates that the creditor write to you, explain the corrections it will make to your account, and remove all finance charges and late fees. Similarly, if they conclude there was no mistake, you must be told this in writing too and be given an explanation.

Understanding what the grace period is and how it works can help you stay out of debt. Remember that a grace period is only available on cards with a zero balance. Using a card with a zero balance and timing your purchase correctly can mean that you will never have to pay interest again on any major purchase; in effect, the credit card company will be loaning you money interest-free if you play the game correctly.
Say that you want to buy a new washer and dryer. You are billed on the first of the month, and your payment is due on the 25th. That means that you have 25 days to repay the debt without getting charged interest. It is quite possible, however, to effectively double that interest-free time.
If you buy the washer and dryer on the second of the month, you won’t even receive a bill until the first of the following month. You then won’t be charged interest until the 25th of that month. Thus, just by timing your purchase correctly, you can avoid all interest payments for the washer and dryer and still have almost two months to pay it off (or transfer the balance to another card if absolutely necessary).

If you do what we tell you to in this section, the big, bad giant of a credit card company can be tamed. One way credit card issuers get away with murder is with their beloved fees. Card issuers make a lot of money off of late fees, over-the-limit fees, and the like. Let’s say that you are late one time or that your husband used the card without telling you, thereby putting you over your limit. Can you do anything about it? Absolutely. Pick up the phone and complain. The discussion will be much like the one when you requested a lower interest rate. Tell the credit card issuer:

• You are a loyal customer and have been for some time.
• The fee is outrageous, and you won’t pay it.
• You will transfer your balance elsewhere and cancel your account if it does not reverse the charge.

Especially if you have no consistent history of being charged fees, this tactic should work when you need it.

Locate a card that you do not have yet that offers a low introductory rate. When you get the new card (need we say), do not charge with it. Transfer your high balances onto it and use its introductory rate to your advantage.
What you have to be especially conscious of is how long the rate is good for; this fact is often buried in the fine print. Sometimes these teaser rates can last up to a year; other cards may only offer them for three months. Make sure that when the card comes in the mail, the rate you will be paying is the one you agreed to.
Azriela was offered a card once with a great rate and a $4,000 limit. She accepted the offer, got the card, and transferred $4,000 from a different card with a higher rate onto this new card. She was shocked when the transfer check bounced. It turned out that the new card charged a $4 transfer fee, so she was over her limit by $4. The card issuer assessed her a $25 bounced check fee to boot!
About a month before the introductory rate is set to expire, call up the company and see whether they will extend it another six months. Many will. If not, plenty more cards out there offer introductory rates that you can use. A few phone calls and a couple of simple forms to fill out can save you thousands of dollars a year.

Where can you find cards with low interest rates? We suggest that you begin with the cards that you already have. Call your existing card issuers and ask for a lower rate:

• Tell them that you are a loyal, existing customer and that you therefore deserve a lower interest rate.
• Find out what your existing card issuer offers as introductory rate and go up from there: “You offer new customers 5.9 percent; I am paying 17.9 percent, and I have been with you for six years. I think 7.9 percent is a good idea if you want to keep my business.”
• Explain that if they agree to a lower rate and increase your credit limit, you will transfer your other balances onto their cards. This negotiation then becomes a win-win situation; you get a lower interest rate, and the credit card issuers get to make more money off of the higher balance.
• Finally, tell them that if they cannot agree to a new, lower interest rate, another card has offered you an incredible introductory rate and that you will be transferring your balance from this card to the new card.

Asking for more than you want is a basic tenet of any good negotiator, so ask for a rate lower than what you hope to get. If you want to get all of your debts onto one card with a 7.9 percent interest rate, ask for 5.9 percent to begin with. If this tactic does not work, then we suggest that you find a new card with a lower interest rate that really wants your business