Banks, Feeling the Heat from the Democratic Congress Begin to Address Universal Default Abuses

Finally the credit card companies are taking some action, but it's just to get the heat off them. Hopefully, Congress will not let them squirm their way out of being on the receiving end of tighter regulations, which are sorely needed.

This is an article by Pamela Yip of the Dallas Morning News addressing the responses being touted by the banks which, in my opinion, are nothing more than just a couple of displays of basic decency that has been lacking for way too long. They should have never allowed additional credit history to affect the rates of credit cards as long as the payment history was acceptable in the first place.

When I see the banking regulations in place that should have addressed the industry abuses long before now, I will actually have cause for celebratory cheers.

Credit card companies pushed to change

07:39 AM CDT on Monday, March 12, 2007

Credit card companies are starting to feel the heat from Congress.

Democrats, aiming to fulfill their promise to improve the financial lot of average Americans, have cast a sharp eye at the lending practices of financial institutions, particularly in the area of credit cards.

"The credit card industry thrives on the confusion and powerlessness of consumers to both nickel-and-dime the average cardholder and to commit highway robbery of anyone who slips up even in the slightest," said Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, which held a hearing last week on credit card practices.

Credit card issuers are taking notice – and action.

Citi Cards said recently it's ending "universal default," the policy of increasing your interest rate if it discovers any late payments on your credit report. It didn't matter if you'd never made a late payment to that particular credit card company.

Citi also said it's doing away with "any time, for any reason" increases to the rates and fees of its cardholders.

Chase Card Services, meanwhile, has announced its "Clear and Simple Initiative," which includes expanding its program of contacting cardholders having financial problems and recommending options to solve their problems. The bank also said it's studying ways to make its disclosures clearer.

"We are both looking at our practices and looking at public perception and what our customers are saying about things," said Paul Hartwick, Chase spokesman. "We thought this was the right time to take a look at how we could be more clear with our customers."

Chase also plans to offer online payment calculators to help customers understand how their credit card payments will affect their account balances over time. It's reminding consumers about their ability to get free online alerts to help them stay current on their card payments.

Capital One boasts that it has "never had a universal default policy."

"There is only one circumstance in which a customer might be subject to default repricing – if they pay us more than three days late twice in a 12-month period," John Finneran, general counsel for Capital One, told Congress. "The decision to reprice is not automatic. For many customers, Capital One often chooses not to do so. If we do reprice someone for paying late twice, we will let them earn back their prior rate by paying us on time for 12 consecutive months."

Raising rates, fees

Credit card issuers traditionally have taken the position that they can increase the rates and fees of a cardholder's account at any time for any reason for things as nebulous as "general conditions in the financial markets."

Under Citi's new policy, the bank won't increase the rates and fees of a card account until the card expires and a new card is issued, which typically is in two years.

The company said now it will hike rates and fees before a card expires only if you pay your bill late, exceed your credit limit or pay with a check that bounces.

Another exception is if the prime rate moves up. Most variable-rate cards are tied to the prime rate.

"We believe that making changes to what have been – until now – basic credit card practices is proof of our ongoing commitment to put our customers first," said Vik Atal, chairman and chief executive at Citi Cards.

Yeah, right.

Industry responds

The only reason card issuers are doing all this is because they can smell the scent of tougher regulation on their heels. They frame it as wanting to remain competitive in the marketplace – what they're really doing is realizing that Congress is listening to consumers who are fed up with the heavy-handed tactics of credit card companies.

"The industry is sensitive to congressional needs," said Ken Clayton, managing director of card policy at the American Bankers Association. "It's also sensitive to the marketplace. Clearly, the hearings bring a greater focus on some of these practices and the industry response to it."

Bigger steps needed

Consumer advocates haven't been impressed with the credit card companies' actions.

"So far, many of the proposals center around providing more consumer education, greater disclosure and are Web-based," said Norma Garcia, senior attorney at Consumers Union. "These changes, however, are no substitute for the real reform consumers need to make the marketplace fair. What good is it to tell consumers in a more clear fashion that your company engages in unfair practices when what really needs to happen is to stop engaging in the practices in the first place?"

Credit card companies also needed to clean up their act on their own, not just after politicians and regulators started breathing down their necks.

"Congress is finally taking a hard look at the credit card industry," said Ed Mierzwinski, consumer advocate in the Washington office of the Texas Public Interest Research Group. "The industry is simply taking minimal prophylactic steps to deter actual reform legislation and protect the most profitable form of banking – credit card banking."

The buzz over credit cards comes at a time when the issue is starring in the movies: Maxed Out, a documentary now playing at the Inwood Theatre at 5458 W. Lovers Lane, is about how easy it is to fall into credit card debt and the sometimes tragic consequences.

Some credit card executives should buy a ticket.

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An Answer to Conservative Critics that Call for More Personal Responsibilty for Individual Consumer Debt Increases

Some of this is old news but it is what the congressional committees are investigating at this moment, i.e., Tricks and Traps to squeeze every last dime out of the credit card customer.

There is a term one finds in the real estate industry that, if ignored, can get one sued very quickly. It is, "Operating from a position of superior knowledge". If a professional Realtor takes advantage of a less knowledgeable client by using their superior knowledge to steer or fail to advise a client in order to benefit from a transaction, then they are operating from a position of superior knowledge and are subject to criminal penalities imposed by the legal system.

While I recognize that there are many critics that are upset when there is no mention of "Personal Responsibility" for the users of credit cards while the banking industry is vilified by articles like this one, I also think one can use the same thought process when making a comparison to the cigarette companies. It was personal choice and not the fault of the cigarette manufacturers to choose to succumb to constant marketing, half truths and lies about nicotine addiction and become a smoker; usually at an early age before one was capable of making truly mature choices (Please see credit card application booths on Spring Break beaches).

So, to me the issue is moral accountability. If it is somehow morally reprehensible or morally deficient to purchase any goods or services but then choose not to pay on a credit card at usury rates with exorbitant Tricks and Traps fees, there is also a corporate moral obligation for the credit card companies as there was with the tobacco companies, to show some accountability, restraint and self regulation as well.

The three main reasons for 92% of bankruptcy in America is job lay off, divorce and medical emergency. There is no statistical proof that the percentage of impulse buying has increased in forty years and bank profits have tripled since 1970 even adjusting for inflation after the introduction of credit cards.

So, how about the banks and credit card companies do some self regulating of their own, if they think the consumer should as well, and cease inundating every mail box in America with six billion "pre-approval" offers as they did last year.

The fastest growing segment of the population with credit card debt are seniors and the fastest growing group within this category are seniors seventy five years of age and older. Why? Health care costs. Just what do we expect people of that age group to do when they simply don't have the income to pay for adequate health care? A recent study found that 29% of families caring credit card debt attributed medical expenses as a major contributing factor.

Again, personal responsibility is certainly something that should be addressed in this discussion, but if that is true, and I do believe it is, then there is corporate moral accountability as well. I personally am indignant and angry that the individual, operating from a position of inferior knowledge to the banking, credit card and collections industry is expected to show personal responsibility by choosing inadequate health care or no health care over using their credit card which they are struggling to pay.

If the individual is expected to show personal responsibility for incurring debt to buy groceries for their families if the husband or wife has been laid off or if there is no child support payment in the mail, then we, as a nation, should expect the same corporate accountability and moral compass to govern the actions of the issuers of credit cards rather than the truly indefensible and morally bankrupt tactics used to pad their profits even more from the wallets of those least able to afford it for which the banking industry currently labels as acceptable common business practices.

The following touches on just some of the tactics used by the banking industry, but certainly not all of them and really, not the worst.

Credit Card Tricks and Tactics: What You Should Know

Rated:

Credit cards are regarded with high suspicion by many people. However, some of these same people use multiple credit cards! If you can't avoid using credit cards (perhaps due to necessity), it's wise to at least watch out for the shady tactics some credit companies employ.

The bottom line is this: Consumers are not properly informed. Rising credit card fees and interest rates, coupled with barely understandable credit card disclosure statements and agreements, make for customers who are easily lured into the jaws of debt.

Some stats to give you an overview: according to this 2004 article, there are more than 641 million credit cards in circulation, and this "plastic money" accounts for an estimated $1.5 trillion of consumer spending in the USA. Alarmingly, penalty fees (e.g. for late payment) nearly tripled from $13 in 1995 to as much as $34 in 2005, as stated in this Consumer Affairs report.

The List of Dread

Watch out for these tricks and tactics, as falling into one might be enough to ruin your personal finances. Some of these might not apply to your credit card company, but as a rule, the big boys of the credit card industry employ a slew of these.

• Incomprehensible, unreadable fine print -- Even lawyers have a tough time deciphering credit cardholder agreements, because companies have spent huge bucks on making sure they're hard to understand. The true risks and fees are all there alright, but covered up in alien text, they're effectively hidden from you.
• Encouraging you to pay late -- This includes mailing your statement as close to the due date as possible, suddenly changing the due date (e.g. from the 25th of each month to the 23rd), setting the due date on a Sunday or holiday, setting a specific time of day when your payment must arrive (and a minute later, you're already considered late!), and even not mailing out statements at all.
• $29 late fees -- Is this a little bit high or what?
• Balance transfer fees -- You might be enticed to transfer debt from an existing card to one with a low interest rate. Beware, as there's usually a high transaction fee (for example, 5%).
• Over-limit fees -- With every month that you're over the credit limit, companies will charge you as much as $39 in over-limit fees. Ah, what happened to the time when they'll just deny any card transaction that puts you over the limit?
• Jacking up your interest rate -- Some companies do this when you carry a big balance (under the guise that you're a "high risk") or when you pay your statements late.
• Low introductory rates that quickly shoot up the stars -- Many people fall for this, but don't realize that once the shortintroductory period is over, they'll suffer rates as high as 24%.
• Not-using-your-card-enough charge -- If you won't use their card for several months (and thus deprive them of earnings), they'll still earn from your account, no matter what, through an inactivity fee.
• 15 days' notice to change the contract -- The terms and conditions of your agreement with the credit card company can be changed at any time, for any reason with 15 days' notice. Who changes the terms? The company, of course. Is this legal? Unfortunately, yes. What can they change? Your interest rate, above all things.
• Minimum payments -- This one might sound good, but when you're only required to pay 2% of your total balance each month, your run the risk of paying off for a long, long time, even passing off your debt to your kids and grandkids.
• Monitoring your credit report -- Yes, some companies check your overall credit history. If they see you've got huge debts and/or late payments with other credit companies, they can slap you an interest rate hike.
• Preying on young consumers -- College students have long been fodder for credit card solicitations, but now companies are reaching out to high school students, who are not only financially dependent most of the time, but are also psychologically and logically unprepared.
• Preying on poor consumers -- Companies do this because know they'll be able to reap all sorts of fees and penalties from these "sweet spots". And if these poor chaps have just emerged from bankruptcy, companies know these customers won't be able to declare bankruptcy for another six years.
• Closure fees -- Because they if you're parting with the credit companies, they'll at least want to milk your wallet one last time.
• Issuing multiple low-limit cards instead of increasing your limit -- This raises the odds of you going over your credit limit, and thus paying more penalties. This article describes one such awful, real life case.
• Anti-customer 'customer service' -- We're guessing that the sooner you give up on the frustrating customer service call, the companies' chances of getting away with their elaborate traps and tricks are better.

What Can You Do?

By reading this article, you've taken an important action to protect yourself and your finances. At least by now, you're aware of these nasty credit card pitfalls. Here are a few more pieces of advice:

• Read the fine print -- The credit card's terms and conditions might look convoluted (not to mention miniscule), but this is the first and most important step. Know what you're getting into. If your brain can't handle the stress of reading such hieroglyphical fine print, ask a close relative/friend of yours to read it for you.
• Opt out from junk mail and telemarketing calls -- Save yourself the temptation of pre-approved credit card offers and other too-good-to-be-true things.
• Check your credit report and score often -- As mentioned earlier, some companies check on your credit report, looking for an excuse to charge you more. What they know, you should also know, right?
• Read up on the latest news and federal policies relating to credit cards
• Check your monthly statements -- It won't do any good for your debt if improper charges and penalties make it to your bill, and you actually pay for them in ignorance.
• Avoid 'debt elimination' scams -- Case in point can be found here. Always remember that there are no magic quick fixes to credit card debt. It takes time and discipline, among other things.
• Don't max out your credit cards -- A simple tip that isn't observed by a lot of cardholders.
• If you have been wronged, report it to the proper authorities
• Don't accept new credit cards, especially from the same company -- Instead, ask for a higher credit limit on the card you already have.
• Call up your company and ask for lower rates -- Sounds difficult? Surprisingly not. You are the customer, after all, and they want/need your money. Be polite but firm when talking to the representative (or supervisor, if you work your way up the chain). Tell them of great offers from other creditors (and be sure to know these offers well, don't lie, don't just bluff!), and if they aren't budging, tell them you'll take your money elsewhere.
• Know your consumer rights -- A good place to start would be the Federal Trade Commission website.

Of course, the best tip we can give you is to use your credit cards sparingly!

This was found at Article Interest:
http://www.interest.org/article/interest-basic-information/credit-card-tricks-and-tactics-what-you-should-know.html

Don't you just love it?! More tricks by the Credit Card companies you need to know about.

Ten Secrets Banks Don't Want You to Know About Credit Cards

• Interest Backdating Most card issuers charge interest from the day a charge is posted to your account if you don't pay in full monthly. But, some charge interest from the date of purchase, days before they have even paid the store on your behalf!

  
  Remedy: Find another card issuer, or always pay your bill in full by the due date.

  
  
• Two-Cycle Billing: Issuers using this method of calculating interest charge two months’ worth of interest for the first month you failed to pay off your total balance in full. This issue arises only when you switch from paying in full to carrying a balance from month to month.

  
  Remedy: Switch issuers or always pay your balance in full.

  
  
• The Right to Setoff: If you have money on deposit at a bank and also have your credit card there, you may have signed an agreement when you opened the deposit account that permits the bank to take those funds if you become delinquent on your credit card.

  
  Remedy: Bank at separate institutions, or avoid delinquencies.

  
  
• Fees Are Negotiable: You may be paying up to $50 a year or more as an annual fee on your credit card. You may also be subject to finance charges of more than 18 percent.

  
  Remedy: If you are a good customer, ask the bank to drop the annual fee and reduce the interest rate. Otherwise, you can switch issuers to a lower-priced card.

  
  
• Interest Rate Hikes Are Retroactive: If you sign up for a credit card with a low "teaser" rate, such as 7.9 percent, when the low rate period expires, your existing balance will likely be subject to the regular and substantially higher interest rate.

  
  Remedy: Pay in full before the rate increase or close the account.

  
  
• Shortened Due Dates: Most card issuers offer a 25-day grace period in which to pay for new purchases without incurring finance charges. Some banks have shortened the grace period to 20 days -- but only for customers who pay in full monthly.

  
  Remedy: Ask to go back to 25 days.

  
  
• Eliminating Grace Periods: That fabulous offer you received in the mail for a gold card with a $10,000 credit limit and lots of features may not be so great. The most common "string" attached is the card has no grace period. You are charged interest on everything from the day you buy it, even if you pay on time.

  
  Remedy: Throw the offer out!

  
  
• Disappearing Benefits: Many banks entice you to sign up with extra benefits such as lifetime warranty, a 5 percent discount on all travel or protection if an item purchased is lost. Now, some banks have cut back on these extras without the fanfare that launched them.

  
  Remedy: Read annual disclosure of changes, and switch cards if need be.

  
  
• Double Fees on Cash Advances: Most credit cards impose both finance charges and a transaction fee on cash advances. Interest starts from the day of the advance, and the transaction fee can be up to 2.5 percent of the amount taken. Beware of cards advertising "no finance charges." Transaction fees may still apply.

  
  Remedy: Limit cash advances.

  
  
• Misleading Monthly Minimums: You may think it is beneficial to have a card where you only need to pay 2 percent to 3 percent of your balance monthly. It is just the opposite. The bank stands to make far more money from finance charges the longer you carry out payments -- and you foot the bill.

  
  Remedy: Pay all you can monthly.

Congress Investigates Credit Card Interest Rate Abuses

Congress is investigating the imcomprehensible language in credit card agreements that address the interest rates to be charged. Here is the latest salvo.

Panel slams banks over credit practices

By MARCY GORDON, AP Business Writer 1 hour, 42 minutes ago

WASHINGTON - An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

Executives of three major banks defended their credit card practices as responsible and responsive to consumers' needs in testimony at the hearing of the Senate

Homeland Security

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Homeland Security and Governmental Affairs' investigative subcommittee. Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.

The interest charges and fees on Wannemacher's account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin (news, bio, voting record), D-Mich., the subcommittee's chairman.

"Unfair? Clearly, I think," Levin said. He said an investigation by the panel found that "sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers."

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said.

Srednicki said the company has decided it no longer will charge over-the-credit-limit fees to customers who have been in a chronic over-limit position for 90 days.

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.

"Debt seems to invoke a feeling of hopelessness unlike any other problem I've encountered," Wannemacher testified at the hearing. "When a debtor calls you on the phone and you make a minimum payment, you know that you've made no real progress and that in a month, they will be calling again."

Sen. Norm Coleman (news, bio, voting record) of Minnesota, the panel's senior Republican, said high interest rates on credit cards, "hefty fees and crippling penalties impede more and more hard-working families from pursuing their American dream."

The problem is worsened by the "impenetrable" language of credit card disclosures provided to consumers, he said.

While the credit card practices in question are legal, Levin is threatening possible legislation to outlaw them as a spur to the banking industry for voluntary changes.

Senate Banking Committee Chairman Christopher Dodd (news, bio, voting record) and other Democratic senators challenged credit card executives at a hearing in January over rising late fees and other penalties and marketing practices they portrayed as predatory. Dodd, D-Conn., said he was putting the industry on notice that if it doesn't improve practices on its own, legislation may be warranted.

Since Democrats assumed control of Congress in January, they have put a number of consumer issues on the legislative agenda. With Americans weighed down by some $850 billion in consumer debt, the practices of the robustly profitable credit card industry are a compelling subject for scrutiny.

Citigroup, the nation's largest financial institution, announced last week that it was eliminating the practice of so-called universal default — raising interest rates for card customers because of their failure to pay other creditors on time. In addition, Citigroup said it would eliminate some types of interest rate increases that have been criticized.

Credit card issuers raise customers' rates and fees, for example, when they believe it is warranted by conditions in the financial markets. But under Citigroup's new policy, rates and fees will be increased before a card expires only if the customer pays late, exceeds his credit limit or pays with a check that bounces. Or if the rate is linked to the prime interest rate, it would rise or fall in tandem.

Verification/Validation

I recently received a request for advice from a member of one of my groups as follows:

"Any help would be welcomed. I have an old debt. One that was at a local [Name Withheld], then the [Name Withheld] closed down. I had a 300 credit limit. This was exchanged to a new company [Name Withheld]. By the time I had received it the debt was jacked up in interest and late payment rates, to the tune of 1001.75. I recently got a letter from a new debt collection agency, So I used the validation letter, sent it certified mail. They opened it and signed for it 1 day after the 30 days even though I sent it in ample time. This was signed for Nov 13. I just received a letter from them typed,

"Our records indicate the account was opened on Nov 22, 1998, last purchase Oct 9, 1999 and last payment May 25, 2002. We have no record of returned mail sent to the current or previous billing address on this account. The fair credit billing act requires that any dispute be received no later than 60 days after the first bill was transmitted that reflects the alleged billing error and the Fair Credit Reporting Act requires that information sufficient to identify the specific information in dispute be provided. This information should included the exact date of the transaction and amount in dispute. Additionally, the Fair Credit Collections Practices Act does not state that we have an obligation to forward copies of previously sent billing statements. We have no record of your disputing the account balance or specific transaction during the applicable time periods and your letter does not provide sufficient information for us to investigate any possible dispute, we shall consider our provision of the information above as validation of the debt. If you have information concerning a specific dispute, please forward it to us for consideration. Due to the serious level of delinquency, the account was charged off on February 17,2003 and placed with the first of several outside collection agencies. The unpaid balance will remain on our records and the account will continue to report as an unpaid charge off for the period of time permitted by federal law.

Please be advised that we reserve the right to take whatever action are legally available to protect our interest. "

It is with a collection agency. I'm really confused. I thought that I send a letter to have them prove the charges, I only used 300 on my old [Name Withheld] card. Then if they couldn't prove it Poof. What legal rights do they have here with a charge off???"

I feel this letter serves as an excellent example of how a collection agency should NOT respond to a request for validation and my response to the poster was as follows:

"First … lets address the issue of whether or not your dispute of the debt was timely.

Timely Dispute

30 Days run from the date “validation letter” is received … not from the date it was sent.

"The Supreme Court has stated that "[a] statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." U.S. v. Campos-Serrano, 404 U.S. 293, 92 S.Ct. 471, 30 L.Ed.2d 457 (1971) (quoting Washington Mkt. Co. v. Hoffman, 101 U.S. 112, 115-16, 25 L.Ed. 782(1879)). All provisions of the statute must be considered and each term must be interpreted equally, so as not to deflect from the meaning of the statute. West v. Nationwide Credit, 998 F.Supp. 642, 644 (W.D.N.C.1998). Specifically, as to 15 U.S.C. § 1692, every clause and word must be given force" http://caselaw.home.comcast.net/files/BLAIR-v-SHERMAN.doc

The courts do not simply ignore words within statute.

Fair Debt Collection Practices Act 1692g a 3 > http://www4.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00001692---g000-.html

(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

You have 30 days from the date you RECEIVED the “validation letter”, not from the time they sent it, no matter what claims or demands are made along with the above required statements.

Dispute must be mailed within 30 days, not be received by the Collection Agency within 30 days.

They need not receive your dispute letter within that 30 days so long as you mailed it within 30 days. To claim otherwise would undercut the validation period clearly specified within the Fair Debt Collection Practices Act.

“Nothing in Section 1692g requires, and we have found no other court decision which has required, that the debt collector must receive notice of the dispute within thirty days as defendant insists….. If we were to hold that the validation request must be received by the thirtieth day, we would be rewriting Section 1692g, which we are not entitled to do.” http://caselaw.home.comcast.net/files/CHAUNCEY-v-JDR.rtf

You have proof of when you sent your letter; do you still have the postmarked envelope their letter came in? Or, did you mail your dispute within 30 days of the date of the letter? You can also safely add 3 days to the postmark date ... if you don't recall exactly what date you received the letter.

Having all three dates … Date you received the letter, Date of the postmark and Date of the letter are all nice to have. The date you received the letter is the important date but the other dates can help establish the date it was received if you don’t know the date it was received. A notation of when it was received is best, Date it was postmarked is the next, Date of the letter itself is the least important. If you mailed your dispute within 30 days of the date on the letter itself you are in the clear. I have personally seen a letter sent by a Collection Agency where the letter was dated 10 days before the postmark, which is why that date is the least important or reliable.


Having established that you did in fact timely dispute the debt, we move on to whether or not the collection agency appropriately verified the debt.

Verification of the Debt

Does reiterating information from the Collector Own database suffice as verification?

1692g b states as follows: “(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.”


As noted above, “every clause and word must be given force”.

The use of the word “until” by the drafters clearly indicates that the Collection Agency does NOT currently posses what is required to provide appropriate verification of the debt. To assume otherwise would render the word “until” meaningless within the context of the statute. The same applies to the word “obtains”. One does not need to obtain what they already posses. To assume they already have what is necessary to provide appropriate verification would render the word “obtain” meaningless within the context of the statute.

To conclude that the Collection Agency must only refer to the information already in their possession would not only render the words “until” and “obtain” meaningless but would render entire sections of the statute meaningless. Namely: 1692 g a 3, 1692 g a 4 and 1692 g b.

ver·i·fy to ascertain the truth or correctness of

If we concluded that the Collection Agency does already posses the information required to verify … what would they be ascertaining the correctness of? That the printer in fact printed correctly and/or that the post office is actually capable of delivering a letter to the correct address? (no comments from the peanut gallery!)

The conclusion is that the Collection Agency MUST (if they wish to continue to attempt to collect) contact the original creditor to obtain the necessary information and documents to verify the debt. This must then be forwarded to the Consumer.

A Collection Agency who merely parrots information already contained in their database in response to a dispute violates the statute as soon as they make another demand for payment.

What information must be obtained and forwarded to verify the debt?

This is an elusive answer. This issue has been relegated to being judged on a case by case basis in the courts. As such it is extremely difficult lay out in no uncertain terms what constitutes appropriate verification. We can look to court cases for guidance.

In GUERRERO-v-RJM the Collection Agency attempted to claim a letter was verification of a debt. It contained only "date that the account was opened, the date that the last payment was posted, the name and social security number listed on the account, and the current balance". The court found that this was not adequate verification of the debt and found that the letter also constituted an improper (given the lack of verification) attempt to collect the debt prior to providing verification and granted a summary judgment for the Plaintiff (consumer) on both issues. http://caselaw.home.comcast.net/files/GUERRERO-v-RJM.doc

In your case they did not provide you with the SS# nor did it state the current balance. As in the Guerrero case ... "The letter did not indicate the amount or basis of the charges underlying the current balance, nor did it indicate the dates on which such charges were incurred. ........The letter also failed to indicate whether interest was factored into the current balance, and, if so, at what rate and for what time period."

We can also look to the statute for some clarification. 15 U.S.C. § 1692 f 1 forbids “The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Similarly, 1692 e 2 A forbids “The false representation of— (A) the character, amount, or legal status of any debt; or…”

The courts also strive to interpret statute so that the results are not absurd or irrational. The assumption that appropriate verification does not include an account statement detailing the amount and basis of the charges underlying the current balance, would lead to the absurd and irrational result that only by filing suit for violations of 1692 f 1 or 1692 e 2 A could the consumer confirm that they have not violated those sections.

Yet despite these failures ... your Collection Agency’s response clearly is a continued effort to collect the debt in stating "The unpaid balance will remain on our records and the account will continue to report as an unpaid charge off for the period of time permitted by federal law. Please be advised that we reserve the right to take whatever action are legally available to protect our interest."

Other violation contained in this letter

There are other violations contained in the letter you have quoted. The following addresses those violations.

15 U.S.C. § 1692 e states as follows: “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.”


"We have no record of returned mail sent to the current or previous billing address on this account."

This is irrelevant ... what is relevant is that you received their letter containing the statements required by 1692g and that you timely responded by disputing the debt. That being the case they are required to cease collection until they have OBTAINED and provided verification, they have failed to do either as noted above. This also violates 1692 e generally and 1692 e 10, by falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute.

They have also stipulated in this letter that “Due to the serious level of delinquency, the account was charged off on February 17,2003 and placed with the first of several outside collection agencies”

It is highly unlikely, especially after having been through “several outside collection agencies”, that they would have any record of any previous communications to or from anyone regarding this account. It is highly likely that the only information they received on assignment of this account was: Name, last known address, last known phone number, SS#, Date of birth, Date of last purchase, Date of last payment, Date of Charge off, current (as of the time assigned) past due balance. The implication that such a record even exists false and deceptive. As such is another violation of 1692 e generally and 1692 e 10.

Any representation of what a record that does not exist does or does not contains is a false and deceptive means to collect a debt. As such, that representation is a violation of 1692 e generally and 1692 e 10.

The Fair Credit Billing Act

“CONSUMER CREDIT COST DISCLOSURE” is a subsection of CHAPTER 41—CONSUMER CREDIT PROTECTION. Fair Debt Collection Practices Act and Fair Credit Reporting Act also fall under the Chapter 41. What is commonly referred to as “The Fair Credit Billing Act” is a subsection of the “CONSUMER CREDIT COST DISCLOSURE” provisions of Federal Law and it can be found here: http://www4.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_41_20_I_30_D.html

Since the Fair Credit Billing Act is a subsection of “CONSUMER CREDIT COST DISCLOSURE”, the definitions contained in “CONSUMER CREDIT COST DISCLOSURE” apply to its subsections unless otherwise specified within a section.

The Fair Credit Billing Act defines “creditor” as follows: “creditor” refers only to a person who both

1. regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and
   
2. is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a finance charge are creditors. For the purpose of the requirements imposed under part D of this subchapter and sections 1637 (a)(5), 1637 (a)(6), 1637 (a)(7), 1637 (b)(1), 1637 (b)(2), 1637 (b)(3), 1637 (b)(8), and 1637 (b)(10) of this title, the term “creditor” shall also include card issuers whether or not the amount due is payable by agreement in more than four installments or the payment of a finance charge is or may be required, and the Board shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms applicable only to creditors offering open-end credit plans. Any person who originates 2 or more mortgages referred to in subsection (aa) of this section in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this subchapter.”

A Collection Agency is NOT a creditor as defined by the Fair Credit Billing Act. The Fair Credit Billing Act applies only to “creditors” as defined by the Fair Credit Billing Act. A Collection Agency cannot enforce the Fair Credit Billing Act.

"The fair credit billing act requires that any dispute be received no later than 60 days after the first bill was transmitted that reflects the alleged billing error"

This is actually true, however, what they are leaving out is that the Fair Credit Billing Act does NOT apply to a 3rd party Collection Agency, it only applies to the Original Creditor and even if it did, the Fair Credit Billing Act does NOT exempt a Collection Agency from compliance with the Fair Debt Collection Practices Act. This situation/dispute is governed by the Fair Debt Collection Practices Act and as such they must meet the requirements of the Fair Debt Collection Practices Act.

If we accepted the contention that the requirements of disputes under the Fair Credit Billing Act could be applied to third party Collection Agency’s it would create an absurd and irrational result, that being … in the case of an identity theft or mistaken identity, the consumer cannot dispute the debt under the Fair Debt Collection Practices Act because they failed to dispute a debt that they likely did not know existed timely under the Fair Credit Billing Act. This would leave the victim of identity theft or mistaken identity powerless to defend their rights.

This would also in effect re-write the Fair Debt Collection Practices Act to exclude those who are collecting any debt, which at any point fell under the Fair Credit Billing Act, from the requirement to comply with 1692 g b. A statute cannot be read in such a way as to effectively re-write a different statute. Also an absurd and irrational result.

The implication that the Fair Credit Billing Act even applies to the current situation is a violation of 1692 e generally and 1692 e 10.

The implication that you have lost your rights under the Fair Debt Collection Practices Act because you failed to assert your rights under the Fair Credit Billing Act is a violation of 1692 e generally and 1692 e 10.

"Fair Credit Reporting Act requires that information sufficient to identify the specific information in dispute be provided."

(Actually, after further review, I stand corrected from my previous post.)

The Fair Credit Reporting Act does in fact require that specific information be provided. However, this situation is also governed by the Fair Debt Collection Practices Act and the Fair Debt Collection Practices Act places no such requirements on consumers.

"Unsophisticated consumers, whatever else may be said about them, cannot be expected to assert their § 1692 rights in legally precise phrases. It is therefore enough to put debt collectors on notice under § 1692 when a consumer states in plain English…." http://caselaw.home.comcast.net/files/HORKEY-v-JVDB.pdf

By implying that your failure to provide “specific information in dispute” under the Fair Credit Reporting Act excuses them from the requirement to comply with the Fair Debt Collection Practices Act they have violated 1692 e generally and 1692 e 10.

“This information should included the exact date of the transaction and amount in dispute.”

Falsely and deceptively implies that the consumer include more than “I dispute this debt” in violation of 1692 e generally and 1692 e 10.

“Additionally, the Fair Credit Collections Practices Act does not state that we have an obligation to forward copies of previously sent billing statements”

Was this a typo on your part?

“Fair Credit Collections Practices Act” Falsely and deceptively names the law that does govern them. I would guess in an effort to prevent you from finding out what your rights actually are.

I would label this not only as False and deceptive but also unfair and unconscionable means in attempting to collect a debt in violation of 1692 e generally and 1692 e 10, and 1692 f generally.

"We have no record of your disputing the account balance or specific transaction during the applicable time periods"

This is again falsely and deceptively implies that you must provide specific information in a dispute in violation of 1692 e generally and 1692 e 10. This also falsely and deceptively implies that you did not timely dispute, which you did, in violation of 1692 e generally and 1692 e 10.

“and your letter does not provide sufficient information for us to investigate any possible dispute"

I believe this is another repeated statement. This falsely and deceptively implies again that you must do more than state “I dispute this debt” in violation of 1692 e generally and 1692 e 10.

"we shall consider out provision of the information above as validation of the debt"

Falsely and deceptively implies that this letter suffices as appropriate verification in violation of 1692 e generally and 1692 e 10.

"If you have information concerning a specific dispute, please forward it to us for consideration."

Again, falsely and deceptively implies that you must dispute specific information in violation of 1692 e generally and 1692 e 10.

“The unpaid balance will remain on our records…”

Section e 5 of 15 U.S.C. § 1692 forbids “The threat to take any action that cannot legally be taken or that is not intended to be taken.”

This constitutes a threat to take an action, which cannot legally (they cannot legally continue to attempt to collect without providing verification) be taken especially since it was not qualified whether or not they consider it disputed. The letter makes it clear that they feel that you have not made a “valid” dispute. A possibly mistaken yet reasonable interpretation by an unsophisticated consumer, especially considering that the letter unequivocally denies that you have made a “valid” dispute. This is in violation of 1692 e generally, 1692 e 5, and 1692 e 10. This is also a separate violation than if they actually continue to collect, which would violate 1692 g b. As noted previously, this letter itself is an attempt to collect.

“…the account will continue to report as an unpaid charge off for the period of time permitted by federal law.”

Section e 8 of 15 U.S.C. § 1692 forbids “Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”

This letter also violates 15 U.S.C. § 1692 e 8 because they clearly states, “the account will continue to report as an unpaid charge off”, without clarifying that it will also be noted as disputed by the consumer. A possibly mistaken yet reasonable interpretation by an unsophisticated consumer, especially considering that the letter unequivocally denies that you have made a “valid” dispute. If in fact they fail to properly report that you have disputed this debt, it would constitute a separate violation of the same section of the statute.

They cannot legally report this debt without also reporting it as disputed. This makes the threat and the action also a violation of 15 U.S.C. § 1692 e 5.

“Please be advised that we reserve the right to take whatever action are legally available to protect our interest."

This constitutes a threat to take an action, which is not intended to be taken, that they will sue you. This statement violates of 1692 e generally, 1692 e 5, and 1692 e 10.

If this debt is time barred, then legal action cannot be taken. Any attempt to do so would constitute a separate violation of 1692 e generally, 1692 e 5, and 1692 e 10. The threat to take legal action on a time barred debt also misrepresents the legal status of the debt in violation of 1692 e 2 A. See http://caselaw.home.comcast.net/files/FREYERMUTH-v-CBS.pdf (also cites several other cases which held that the threat to take legal action on a time barred debt is a violation)



This letter as a whole violates the act generally (yes this is a legitimate legal claim under the act) because the letter as a whole is an attempt to mislead you as to what your rights and what their legal responsibilities are.

In review, this letter contains the following violations: each one is a separate and distinct violation.

1. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute. ("We have no record of returned mail sent to the current…”)
   
2. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that since you have allegedly failed to previously dispute the debt, the Collection Agency now has no obligation to acknowledge or respond to your dispute. ("We have no record of returned mail sent to the current…”)
   
3. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that a record of previous correspondence regarding this debt with other entities exists and they have possession of that record. ("We have no record of returned mail sent to the current…”)
   
4. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that a record of previous correspondence regarding this debt with other entities exists and they have possession of that record. ("We have no record of returned mail sent to the current…”)
   
5. 15 U.S.C. § 1692 e generally: making false and deceptive representation as to what a non-existent record contains. ("We have no record of returned mail sent to the current…”)
   
6. 15 U.S.C. § 1692 e 10: making false and deceptive representation as to what a non-existent record contains. ("We have no record of returned mail sent to the current…”)
   
7. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that the Fair Credit Billing Act applies to the current situation. ("The fair credit billing act requires…”)
   
8. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that the Fair Credit Billing Act applies to the current situation. ("The fair credit billing act requires…”)
   
9. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that by failing to assert your rights under the Fair Credit Billing Act you have waived your rights under Fair Debt Collection Practices Act. ("The fair credit billing act requires…”)
   
10. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that by failing to assert your rights under the Fair Credit Billing Act you have waived your rights under Fair Debt Collection Practices Act. ("The fair credit billing act requires…”)
    
11. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that you must “provide specific information in dispute under the Fair Debt Collection Practices Act” (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
    
12. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that you must “provide specific information in dispute under the Fair Debt Collection Practices Act” (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
    
13. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that any failure on your part under a different act (Fair Credit Reporting Act) excuses them from complying with the Fair Debt Collection Practices Act. (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
    
14. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that any failure on your part under a different act (Fair Credit Reporting Act) excuses them from complying with the Fair Debt Collection Practices Act. (Fair Credit Reporting Act reference) ("Fair Credit Reporting Act requires that information sufficient…”)
    
15. 15 U.S.C. § 1692 e generally: Falsely and deceptively implies that the consumer include more than “I dispute this debt” (“This information should included the exact date…”)
    
16. 15 U.S.C. § 1692 e 10: Falsely and deceptively implies that the consumer include more than “I dispute this debt” (“This information should included the exact date…”)
    
17. 15 U.S.C. § 1692 e generally: Falsely and deceptively misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
    
18. 15 U.S.C. § 1692 e 10: Falsely and deceptively misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
    
19. 15 U.S.C. § 1692 f generally: Unfairly and unconscionably misnaming the law that governs debt collection. (“Additionally, the Fair Credit Collections Practices Act….”)
    
20. 15 U.S.C. § 1692 e generally: falsely and deceptively implying again that you must provide specific information. ("We have no record of your disputing the account balance…”)
    
21. 15 U.S.C. § 1692 e 10: falsely and deceptively implying again that you must provide specific information. ("We have no record of your disputing the account balance…”)
    
22. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that you failed to timely dispute. ("We have no record of your disputing the account balance…”)
    
23. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that you failed to timely dispute. ("We have no record of your disputing the account balance…”)
    
24. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that you must include specific information disputed. (“and your letter does not provide sufficient…”)
    
25. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that you must include specific information disputed. (“and your letter does not provide sufficient…”)
    
26. 15 U.S.C. § 1692 e generally: falsely and deceptively implying that this letter suffices as appropriate verification. ("we shall consider our provision of the information…”)
    
27. 15 U.S.C. § 1692 e 10: falsely and deceptively implying that this letter suffices as appropriate verification. ("we shall consider our provision of the information…”)
    
28. 15 U.S.C. § 1692 e generally: falsely and deceptively implies that you must dispute specific information (“"If you have information concerning a specific dispute….”)
    
29. 15 U.S.C. § 1692 e 10: falsely and deceptively implies that you must dispute specific information (“"If you have information concerning a specific dispute….”)
    
30. 15 U.S.C. § 1692 e generally: The letter as a whole attempt to mislead you as to what your rights are and their responsibilities are.
    
31. 15 U.S.C. § 1692 e 10: The letter as a whole attempt to mislead you as to what your rights are and their responsibilities are.
    
32. 15 U.S.C. § 1692 e generally: Falsely and deceptively implies again that you have not made a valid dispute. (“The unpaid balance will remain on our records…”)
    
33. 15 U.S.C. § 1692 e 5: Threatens to take an action which cannot be legally taken, they will continue to collect. (“The unpaid balance will remain on our records…”)
    
34. 15 U.S.C. § 1692 e 10: Falsely and deceptively implies again that you have not made a valid dispute. (“The unpaid balance will remain on our records…”)
    
35. 15 U.S.C. § 1692 g b: Failure to cease attempts to collect the debt until they have provided verification of the debt. (“The unpaid balance will remain on our records…”)
    
36. 15 U.S.C. § 1692 e generally: Again Falsely implies that you have not made a “valid” dispute. (“the account will continue to report as an unpaid charge off”)
    
37. 15 U.S.C. § 1692 e 5: Threatening to take an action which cannot legally be taken, failure to report as disputed. (“the account will continue to report as an unpaid charge off”)
    
38. 15 U.S.C. § 1692 e 5: Taking an action which cannot legally be taken, failure to report as disputed. (“the account will continue to report as an unpaid charge off”)
    
39. 15 U.S.C. § 1692 e 8: Threatening to communicate credit information which is known to be inaccurate, failure to note as disputed. (“the account will continue to report as an unpaid charge off”)
    
40. 15 U.S.C. § 1692 e 8: Failing to report this account as disputed by the consumer. (“the account will continue to report as an unpaid charge off”)
    
41. 15 U.S.C. § 1692 e 10: Again Falsely implies that you have not made a “valid” dispute. (“the account will continue to report as an unpaid charge off”)
    
42. 15 U.S.C. § 1692 e generally: Again, falsely implies that you have not made a “valid” dispute. (“Please be advised that we reserve the right….”)
    
43. 15 U.S.C. § 1692 e 5: Threatens to take an action which is not intended to be taken. (“Please be advised that we reserve the right….”)
    
44. 15 U.S.C. § 1692 e 10: Again, falsely implies that you have not made a “valid” dispute. (“Please be advised that we reserve the right….”)
    
    If the debt is time barred ….
    
    
45. 15 U.S.C. § 1692 e generally: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.
    
46. 15 U.S.C. § 1692 e 2 A: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.
    
47. 15 U.S.C. § 1692 e 10: Misrepresents the legal status of the debt. Threatens to sue on a time barred debt.