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Protecting yourself from deceptive debt collection practices

Nearly 15% of all Americans show at least one item in collection on their credit report, and the average amount of debt in collection is $1,400. Debt collection is a $12.2 billion industry in the United States. Banks and other creditors may collect their own debt, and they can also sell off debt to third parties, which can also choose to collect the debt or sell it off. As a result, it is not surprising that debt collectors sometimes engage in practices that intimidate and harm consumers.

Many debt collection companies play by the rules and treat consumers fairly, but those that don’t can wreak havoc on your finances. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, all covered persons or service providers are legally required to refrain from committing unfair, deceptive or abusive acts or practices. Any entity that is not the original creditor is subject to the Fair Debt Collection Practices Act and is also legally required to refrain from committing unfair, deceptive or abusive acts or practices in the attempted collection of a consumer debt.

But what kinds of debt-collection practices should you be wary of? The following practices are typically deemed to be illegal.

  •   Threatening action the debt collector does not have the authority to pursue. Debt collectors and creditors should not make false threats of lawsuits, arrest, prosecution or imprisonment for non-payment of debt.
  •   Misrepresenting the nature, amount or legal status of the debt. Debt collectors and creditors must not falsely represent who owns the debt, the amount of debt that is owed or the debt’s legal status.
  •   Misrepresenting that a consumer’s debt would be waived or forgiven. Debt collectors and creditors should not misrepresent that a debt would be waived or forgiven if a consumer accepted a settlement offer when the company is not, in fact, forgiving or waiving the debt.
  •   Failing to properly post payments or credit to a consumer’s account with payments. Debt collectors and creditors should not fail to properly post payments or credit to a consumer’s account and then charge late fees to that customer if the customer paid on time.

It is important to point out that debt collection companies must also be careful about making statements regarding the impact of paying a debt on a consumer’s credit score, credit report or creditworthiness. Often times these statements — like telling consumers that paying a debt would improve their credit score — may be deceptive.

The Consumer Financial Protection Bureau has published a consumer bulletin regarding unfair, deceptive and abusive practices, which you can read here.

The CFPB has also published a second bulletin regarding debt collectors discussing consumers’ credit, which you can read here.

Other tips for communication with debt collectors

The CFPB has also published five action letters that consumers can consider using when corresponding with debt collectors. These letter templates are available for download from the CFPB at http://www.consumerfinance.gov/blog/debtcollection/. These letters may help consumers get valuable information about claims being made against them or protect themselves from inappropriate or unwanted collection activities. The letters address the following situations:

Needs more information on the debt: This letter is for consumers who need more information about a debt the collector has told them that they owe. The letter states the consumer is disputing the charges until the debt collector answers specific questions about what is owed. This letter may be useful, for example, for a consumer who may not immediately recognize the debt as their own.

Wants to dispute the debt and for the debt collector to prove responsibility or stop communication: This letter tells the collector the consumer is disputing the debt and instructs the debt collector to stop contacting the consumer until they provide evidence that the consumer is responsible for that debt. For example, consumers who do not want to discuss the debt until they have additional information verifying the debt might use this template.

Wants to restrict how and when a debt collector can contact them: The Fair Debt Collection Practices Act prohibits debt collectors from contacting a consumer about a debt at a time or place they should know is inconvenient. With this letter, the consumer is able to tell the debt collector how they would like to be contacted. This may be a useful option for a consumer who wants to work with a collector to resolve their debt.

Has hired a lawyer: If a consumer has hired a lawyer, the debt collector should be contacting the lawyer instead of the consumer. This letter provides a way for the consumer to give the debt collector the lawyer’s information and instruct the collector to contact only the lawyer.

Wants the debt collector to stop any and all contact: Consumers have the right to tell a debt collector to stop all communication. It is important to note that stopping contact from a debt collector does not cancel the debt or prohibit the collector from potentially pursuing other remedies, such as filing a lawsuit. This letter could be beneficial for consumers who feel they are being harassed by a collector’s communications.

Consumers can submit a complaint to the State of Maine Bureau of Consumer Credit Protection or the CFPB against any company collecting a consumer debt from them. You can submit a complaint at www.credit.maine.gov (BCCP) or www.consumerfinance.gov/Complaint (CFPB), or call their toll-free phone number at 800-332-8529 (BCCP) or 855-411-2372 (CFPB).

David Stolt

By David Stolt, Home Ownership Services Manager

What people are saying about the value of our Homebuyer Education Courses

“I didn’t realize all that was involved with the home buying process, but that has changed by taking this class.”

“More helpful than other homebuyer classes I’ve taken.”

“The best $15 I ever spent.”

We love getting this feedback on the evaluations of our Homebuyer Education Courses. It means we’re succeeding in making sure people enter into homeownership with all the knowledge they need to be successful and to sustain their investment for the long-term. (And yes, our classes are just $15.)

A recent study by NeighborWorks (of which Avesta Housing is a chartered member) found that buyers who go through a pre-purchase counseling program are one-third less likely to fall behind on their mortgage in the first two years of homeownership.

Bri and her fiancé, Chris, recently took the class and used what they learned to buy their first home in Gorham. Here’s what Bri had to say about her experience.

How did you hear about the Homebuyer Education Class?

We got a housing loan through USDA Rural Development and it was a requirement to take this class to get our home mortgage loan. We’re glad it was. 🙂

What did you learn at the class that was the most useful or interesting?

Information on credit and how much it affects the home buying process, and in general a detailed review of all the steps of purchasing a home — there is so much information that we weren’t aware of. Also, learning about programs/loans that assist with home maintenance/making homes more energy efficient.

What did you learn that helped you when you were buying your home?

We were already in the process of purchasing a home when we took this class, so probably just to make sure our credit remained stable, what to look for during inspection, and what’s involved in the closing process.

Would you recommend the class to others?

Definitely! It was interactive and very applicable. David was a great presenter and used a lot of real life examples, which was helpful.

 

Are you looking to buy a home, or just wondering if homeownership makes sense for you? Our next class starts May 13. Click here to register.

By Mindy Woerter, Communications Manager

Why you need to shop around for a mortgage

Interest rates are at a record low, but many borrowers are still reluctant to shop for the best mortgage loan – a decision that could cost them money.

Looking at data from the November 2012 National Housing Survey, Fannie Mae researchers found that close to half of lower-income mortgage borrowers said they did not obtain more than one quote when signing up for their current mortgage.

Comparatively, three out of four higher-income respondents explored competitive offers and said better deals would definitely have an influence on their decisions.

“Although a home purchase is the largest financial obligation most people will ever make, many borrowers do not fully understand their mortgage products and costs,” said Fannie Mae chief economist Doug Duncan. “As a result, some homeowners in this position may find themselves with unsustainable payments down the road.”

Fannie Mae reported that failing to shop around for a mortgage can end up costing borrowers $1,000 or more in closing costs.

As a housing counselor, it’s my job to educate people on the importance of comparative shopping. I encourage clients to attend first-time homebuyers’ workshops as well as one-on-one pre-purchase and post-purchase counseling.

Education is the best way to avoid paying too much for a mortgage. Want to know more? Get in touch with me.

By David Stolt, Home Ownership Services Manager

Free tax preparation services for families who need them

As we’ve done in the past, Avesta is spreading the word about free tax preparation services available for households who need them. Families are fortunate that there are so many ways to get free tax help instead of paying someone to file your taxes, or, worse, getting a refund anticipation loan that carries excessive fees and ridiculous interest.money jar

We’re partnering with Gorham Savings Bank and the United Way to sponsor a week of free tax preparation events beginning today. IRS-certified tax preparers will be on hand to help you prepare and file your taxes, check your credit report, and apply for Maine’s property tax and rent refund programs. The events are February 26-28 from 5-8 p.m. and Saturday, March 2, from 9 a.m.-2 p.m., happening at United Way’s office at 1 Canal Plaza, third floor. They’re available to people who made less than $51,000 in 2012.

If you can’t make it to an event, you can stop by our new HomeOwnership Center any time during tax season. Contact me to find out more or make an appointment. The United Way is also open to help, so give them a call at 874-1000.

If you’d rather take care of your taxes from your living room, and you made less than $57,000 in 2012, you can go to myfreetaxes.com/Maine and file both their state and federal taxes for free. The online software is easy to use and features a toll-free number to call if you have questions.

Taking advantage of these free services will save you up to $200 in fees you’d pay elsewhere for tax preparation, and we’ll help you apply for the Earned Income Tax Credit, which could give you up to $5,891.

Visit cashgp.org for more information.

And check out this space in a couple weeks for smart ways to spend your tax refund. Hint: playing the slots at Oxford Casino is not on the list.

By David Stolt, Home Ownership Services Manager