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

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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.

The National Average Credit Score

Check out this article about New Hampshirirites having more debt but being more responsible about it! The national average for credit scores is now 673. Do you know where you stand compared to others? If you don't, go to my web site and get yours now, http://www.iwantafreecreditreport.com.



Study: N.H. residents have more credit cards, debt, better credit
February 25, 2007

CONCORD, N.H. --A study by credit reporting agency Experian finds New Hampshire residents have more debt and charge cards than people in other states, but also are better at managing their credit.

An analysis of 3 million people who sought credit reports from the agency included 12,000 New Hampshire residents. It found the typical New Hampshire resident owes $17,200 in revolving payments for credit cards, cars and home equity loans while the national average is $12,100.

The study also found that the average New Hampshire consumer keeps 5.3 credit cards, higher than the national average of four. But while New Hampshire residents might be deeper in debt, they appear to handle it more responsibly than others -- the state ranks sixth best in the nation for credit scores. The average score here is 701, or 28 points higher than the national average of 673.

"While it might be surprising (that New Hampshire consumers) might have more debt on average, more credit cards on average, in general, on average, they're managing that debt," said Pete Bolin, who conducted the Experian study.

The trend corresponds to a regional profile -- New Englanders as a whole have more debt but better credit scores than their fellow Americans.

Gerald Little, president of the New Hampshire Bankers Association, calls it a modern-day twist on the old stereotype of the penny-pinching Yankee.

"The flinty Yankee is clever about the way they use the cards and understands them and is probably taking advantage of things like points programs," he said.

Of course, there are exceptions.

Dave Deziel of Credit Counseling Services of New Hampshire and Vermont sees the people trying to get their credit under control. The average client has more than 9 credit cards owes around $21,000. Many are elderly and got into trouble by relying on credit cards to get through an emergency, he said.

"As a state, we're pretty well off, so it doesn't surprise me that we might have a significant number of people with more credit cards in their wallet than in other parts of the country," he said. "You've got to remember that credit cards are financial tools. Some people use those tools very well, and some don't."

------

Information from: Concord Monitor, http://www.cmonitor.com

Insurance companies quoting "astonishing" higher rates to lower income applicants based on credit scores but having identical driving records.

Credit scoring, used in Florida in part to determine insurance rates is being challenged by Florida Insurance Commissioner Kevin McCarty. Seems a blind study has shown a fictional blue collar vs white collar driver with identical records were given a 15% higher quote in Florida and a 40% higher quote nationally. The only difference was occupation and educational levels but the applicants were placed in high risk pools and not even allowed "preferred" pricing because low income profiles indicate lower credit scores.



From the Daytona Beach News Journal

EDITORIAL

January 30, 2007

A logical leap

Job, schooling shouldn't affect insurance


For years, Florida has prohibited automobile insurance companies from discriminating on the basis of race, income or other factors that have no bearing on a person's trustworthiness.

For years, insurance companies have tried to weasel around those restrictions.

And they've been successful -- astonishingly so, given the straightforward nature of the anti-discrimination rules. The most onerous provision allows Florida insurers to base rates partially on credit scores. Because low-income people are far less likely to have established credit (or to have troubled credit histories) this provision ensures that they pay more.

The most agile mind would have trouble establishing a cause-and-effect relationship between paying Visa bills late and crashing your car into a light pole. But that stretch looks easier, compared to the practice uncovered last year by the Consumer Federation of America, and under investigation now by Florida Insurance Commissioner Kevin McCarty.

Last year, the federation conducted an investigation, comparing rates for fictional drivers whose history, vehicle and other factors were nearly identical. The only variants the group used were occupation and education level.

The differences were astonishing. Nationally, rate quotes for blue-collar workers averaged 40 percent higher than quotes provided for highly educated professionals. The gap in Florida was less, but a blue-collar price quote still came in $112 higher for a six-month policy -- a gap of more than 15 percent.

The federation targeted GEICO, a company that advertises car insurance nationwide, for its study. The rate differences were largely due to the fact that GEICO, like many insurance companies, divides its business among sub-corporations. Blue-collar workers -- even with spotless driving records -- were not eligible to be covered by GEICO's "preferred" company and were shuffled into subsidiaries with higher base rate structures.

GEICO isn't alone. Other companies -- Allstate, Progressive and Liberty Mutual -- also use some form of occupational and educational rating.

Companies argue that there's a numerical correlation between occupation, education level and the number of claims filed. In fact, they may be able to demonstrate a statistical coincidence -- but it's hard to imagine how the companies could prove a solid, causative relationship between driving skill and education or occupation. Particularly one that doesn't trace back to the forbidden factors of race or income.

The federation makes a compelling case that these policies do constitute illegal discrimination. Black and Hispanic Floridians are less likely to have advanced degrees, and more likely to work blue-collar jobs. Even if the insurance companies didn't intend to discriminate based on race or income, this policy may well do so.

In the long run, state leaders should see good public policy isn't behind a move to make insurance less affordable for the people who can least afford it already. McCarty is right to be looking into this -- and lawmakers should take heed, making these illogical rate structures off-limits -- a prohibition that should include credit scores as well as occupation and educational level.

Distinguished Professor of Law Testimony to the Senate Banking Committee

Here is the link to Dr. Elizabeth Warren's testimony to the Committee on Banking, Housing and Urban Affairs of the United States Senate. Ms Warren is the Leo Gottlieb Professor of Law at Harvard Law School. She is also the author of, "The Two Income Trap: Why Middle Class Mothers and Fathers are Going Broke". Her testimony is gripping and powerful.

http://banking.senate.gov/_files/warren.pdf

Teens are paying with plastic but know you can get burned.

The good news is that this generation of teens are seeing the massive amount of debt their parents and friends are incurring with credit cards and 38% don't think it is a good idea. The bad news is, 62% think it is ok to have credit card debt as a teen.



Plastic is a hot teen accessory
Credit, debit card youths' increasing use concerns many
By LESLIE A. PAPPAS, The News Journal

Posted Sunday, January 28, 2007

Amanda Jett (left), 17, was a little older than her 14-year-old sister, Brittany, when she started paying with plastic. Though Amanda uses a debit card, she said she's not ready for a credit card, and her parents agree.

The News Journal/WILLIAM BRETZGER

Amanda Jett has paid with plastic since she was 15 years old.

The 17-year-old from Bear uses her PNC Bank debit card, linked to a checking account her mother co-signed, to buy gas and occasionally clothes.

"I'd rather carry it than cash," she said.

She's not alone. Whether their wallets hold debit or credit cards, teenagers under 18 are using plastic more than ever.

According to Teenage Research Unlimited, a research firm based in Northbrook, Ill., 15 percent of teens ages 16 to 17 have their own debit card, and 5 percent have a credit card in their name.

"Recent research shows that the fastest growth of credit-card use is among 16- to 18-year-olds," Robert Manning, the author of "Credit Card Nation," told the U.S. Senate Committee on Banking, Housing, and Urban Affairs last week.

Children under 18 are unable to apply for a credit card on their own, but can become an authorized user on a parent's card.

Now credit card companies are trying to increase the amount teenagers put on plastic by introducing new products like prepaid credit cards, such as the VISA Buxx card or MasterCard's Allow card, which are essentially gift cards that teens can use at any retailer. Parents and authorized adults, such as grandparents or employers, can load money onto the card. Card companies profit through fees.

Credit-card issuers "definitely are aiming at teenagers," said Ellen Cannon, who covers the credit card industry for Bankrate.com. "It's an untapped market. There are millions of them."

And they're spending more every year. America's 33.5 million teenagers (ages 12-19) spent a record $179 billion in 2006, Teenage Research reported in its fall 2006 survey.

Some financial educators worry that teenagers won't be able to handle credit cards.

"Cognitively to really understand the nature of credit, it doesn't really hit until we're 23 or 24 years of age," said Maria Pippidis, who teaches financial literacy classes at the University of Delaware's Cooperative Extension. As a group, teenagers are often unaware of the pitfalls of credit, she said.

Part of the problem is that many teenagers don't have good examples to learn from, said Robin Smith, who teaches personal finance classes at Smyrna High School. She advises her students to freeze their credit cards in a block of ice if they're not able to pay the entire bill off each month.

"Many of them comment, 'My father should be in here,' " Smith said.

Credit-card debt in the United States has skyrocketed to $872 billion. As a nation, Americans now charge over $1.8 trillion on more than 640 million cards annually.

Senate Banking Committee chairman Christopher J. Dodd, D-Conn., pointed out last week the average American household has more than $9,300 of credit-card debt.

But there are signs that America's teenagers may be growing up more financially savvy than previous generations.

Hannah Rittenhouse, 17, of Newark, said she buys what she wants with the cash she earns at her job at Friendly's restaurant. She doesn't have a credit card and doesn't want one.

"I'd end up getting in debt with it," she said. "Once I get cash it burns a hole in my pocket."

Amanda said she's not ready for a credit card either, and her parents agree.

"We would probably never consider credit cards at that young age," said Amanda's father, John Jett. "We're trying to instill in her that you only purchase what you can afford."

A Teenage Research survey in 2004 showed that teens, though familiar with plastic, are wary of credit card debt. About 38 percent of adolescents 12 to 19 said cards should be limited to adult use. Only 3 percent believed it was OK to make purchases on a credit card without having the money to pay off the full monthly bill.

"I think they're very realistic about debt," said Teen Research's vice president Michael Wood. "If there's one word to describe this generation of teens, it's pragmatic."

Wood also said that this generation, which has grown up counting cell-phone minutes, has learned earlier how to manage credit-card-type accounts. Open discussions with their parents about finances has made many more aware of the dangers of debt. And the increasing use of cards in general has taken the cachet out of owning a credit card.

"Their wallets are full of plastic, whether it's a phone card or a gift card or an ATM card," Wood said. "It's no big deal."

Contact Leslie A. Pappas at 324-2880 or lpappas@delawareonline.com.

WHICH IS RIGHT FOR MY TEEN?

DEBIT CARD


Pros: Uses money in checking or savings account. Easy to set up.


Cons: Risk of overdrafting account and incurring fees. Does not build credit history. Must report lost or stolen card within two business days or may be liable for $500 of unauthorized transactions.


PREPAID OR STORED-VALUE CARD Pros: Spending limited to amount loaded on card. Online checking of balances and spending. Authorized adults can load funds. Employers can load wages onto some cards. Can be used many places.


Cons: Fees are charged for activation, loading money, monthly maintenance and many more actions. Does not build credit history.


JOINT CREDIT CARD Pro: Builds credit history.


Con: Parent and teen responsible for debt.


SECURED CARD Pros: Credit limit set by savings account balance. Builds credit history.


Con: Fully collateralized account may have higher interest rate than noncollateralized account. Really.


AUTHORIZED USER


Pro: Easy to set up.


Cons: Teen can piggyback on parent's credit history. Parent solely responsible for debt. Potentially puts parent's credit score at risk.


Source: Bankrate.com

Senate Banking Committee looks at credit card rates and fees. And not favorably!

Presidential elections are still two years off but I predict this kind of Congressional oversight is going to intensify as Democrats continue to gain control of committees. The situation is affecting just too many people adversely and is a viable issue of major concern for voters of every demographic and age. Oversight is long overdue and abuse is now plainly visible to anyone that has a credit card. And now, with 640 MILLION cards in circulation, pretty much everyone has experienced the abuse of credit card companies with their contemptible practices of hidden fees and usury rates. Even members of Congress.


Critics urge Congress to rein in credit card companies
Posted 1/25/2007 12:50 PM ET

WASHINGTON (Reuters) — Consumer advocates urged Congress on Thursday to limit the rates and fees that credit card companies can impose, saying the industry's heavy-handed tactics are piling on debt for many Americans.

"No industry in America is more deserving of oversight by Congress," Travis Plunkett, legislative director of the Consumer Federation of America, said in prepared testimony for a Senate Banking Committee hearing.

The panel, led by Democratic presidential hopeful Christopher Dodd of Connecticut, is looking at billing, marketing and disclosure practices in the U.S. industry.

Critics say some credit card issuers use practices that victimize lower income households with an unexpected rise in interest rates or extra fees because of a drop in their credit scores. Meanwhile, richer Americans are able to pay off charges each month and enjoy perks such as frequent flier miles.

For example, if a consumer is late in paying another credit card bill, home mortgage, utility bill or even a book club membership, some credit card issuers declare a "universal default" and trigger higher interest rates on their credit card.

Dodd put the credit card industry on notice.

"If you currently engage in any business practices that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice," Dodd told credit card executives at the hearing.

But Dodd also said that consumers must take more responsibility for understanding their credit card contracts.

In 2005, about 44% of credit card issuers surveyed by the non-profit group Consumer Action assessed universal default interest rates. Those issuers included Citigroup, Washington Mutual, HSBC Holdings and Wells Fargo, according to the group.

"Even consumers who always pay on time cannot avoid the price abuses," said Michael Donovan, an attorney at the National Consumer Law Center.

Donovan and Plunkett urged senators to protect consumers by limiting rates and fees charged by credit card issuers.

Credit card companies defended the industry.

Richard Vague, chief executive of Barclays Bank Delaware, a unit of Barclays, said it is not in his company's interest to issue credit cards to consumers who cannot pay back money they have borrowed.

"For that reason issuers strive to provide credit cards only to consumers who can handle the credit offered them," Vague said.

Capital One Financial, the fifth-largest issuer of credit cards with 30 million accounts, said it does not use the practice of universal default.

Capitol One General Counsel John Finneran told the panel the company has limited what circumstances can trigger higher rates. "There is only one circumstance in which a customer might be subject to default pricing — if they pay us more than three days late twice in a 12-month period," Finneran said.

JPMorgan Chase's Chase Bank USA acknowledged that some credit card disclosures are too complex for consumers to understand.

"Disclosure language should be simple, clear and focused on the most relevant terms and conditions consumers need to understand," Carter Franke, chief marketing officer at JPMorgan Chase, said in testimony.

Critics said many credit card issuers have lowered the monthly minimum payment amounts to about 2% from about 5% in the 1970s. This has encouraged consumers to accept more credit offered by the companies, resulting in lengthier periods to pay off the debt, they said.

Other questionable tactics involve applying penalty interest rates retroactively to prior purchases and lowering loan limits that trigger fees and higher rates.

Based on Federal Reserve figures, Plunkett estimated outstanding credit card debt amounted to $750 billion to $800 billion in November 2006. The industry has more than 640 million cards in circulation.

Copyright 2007 Reuters Limited.

Millionaire in the making: Sherelle Derico Valuable Lessons to be Learned

What I love about this lady is that she has accomplished all that she has without CREDIT CARDS!! While she has sacrificed more (and therefore appreciates what she has) than may be required of the average person, she is demonstrating what is really the key to staying out of the quicksand of "bad" debt. She also understands what "bad" debt is and what "good" debt is as evidenced by her $460,000 in home equity and almost $140,000 in savings!

Millionaire in the making: Sherelle Derico
Single mother sacrifices, then savors, prosperous course for herself and her daughter.
By Christian Zappone, CNNMoney.com staff writer
January 25 2007: 9:48 AM EST


NEW YORK (CNNMoney.com) -- Sherelle Derico, 36, had a three-week-old daughter and no job when she and her husband split in 1996. But the challenges of the separation and single motherhood didn't deter her from seeking financial success.

"It was frightening. Most definitely," said Derico of the experience.

At the time of her divorce Derico, who held an accounting degree, was already considering earning a master's degree.

"As soon as the baby turned one I started on a Masters in Financial Management at the University of Maryland," she said.

The period brought changes not just in her educational and career goals but in her spending habits, too. Derico, who enjoys interior design, says she used to spend a lot of money on clothes and furniture. She used to travel more.

Today, she prefers to pay off debt and to save money down to the penny. When this journalist contacted Derico on her cell phone, one of the first things she asked is, "Can you call me back on my land line? I want to save on my minutes."

Derico's personal history helps explain her habits. After becoming a mother and getting divorced she returned to a former employer who hired her back - for a lower-paying job. Then 9/11 happened, and she got laid off.

"I found myself in lots of debt. That's when I started to save a lot of money," said Derico, who now works as senior consultant in project management for Booz Allen Hamilton in the Washington, D.C., area.

25 rules to grow rich by
Derico has paid off roughly $25,000 in student debt, personal loans, and credit cards debt she racked up in 10 years. She paid for her master's degree mostly in cash along with matching plans from her employers.

Also, five years ago she started receiving a small amount of child support which is now $700 a month.

As for her own money, Derico puts 20 percent of her income into her 401(k) and IRA.

She says she's adamant about paying into her savings like she would any other bill.

She has $95,000 in an account with TIAA-CREF. Her Booz Allen 401(k) account has $36,000. She keeps about $8,000 in her regular savings.

"My friends say I'm pretty obsessive [about my savings]," Derico says, pointing out that she 'loses it' if her savings fall below a certain amount.

Buying a home
Although Derico faced lean times, she has managed to set and keep financial goals - like homeownership.

But Derico's 1999 purchase of the four-bedroom, two-bath, 1,300 sq. foot Fairfax, Virginia, town home didn't come without sacrifice.

She was enrolled in her master's program at the time and had to ask for a refund on that semester's tuition in order to come up with the down payment for the house.

To scrimp for the rest of the payment, she says she didn't go to the grocery store for three months and instead ate only the food she had stockpiled in her pantry.

"The majority was canned food," she said. "Spam. Ramen noodles soup."

But her daughter Sharmon didn't mind. Sharmon, who was 4 years old at the time, wanted to be able to jump; living in an apartment with neighbors in the unit below meant she couldn't.

Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.

Not long after, she refinanced and brought the length of the mortgage down to 15 years.

More Millionaires in the Making
The value of the property has soared in Fairfax County's overheated real estate market. Similar homes in the area sell for $500,000-$600,000.

Derico has racked up $460,000 in equity in the town home.

She wants to pay off the mortgage in 10 years, which would mean she would own the home outright by 2009.

She points out that "any extra money goes towards [her] mortgage."

Although Derico still sacrifices today, she no longer has to buy ramen.

Money handling
Today her one indulgence is a new 2007 LS460 Lexus. She bought it after paying off her 1996 ES300 Lexus. She financed the new car through her credit union.

Derico has no credit cards and pays for everything in cash with the exception of her Lexus. If she can't use cash, she uses a debit card. She also uses coupons and savings cards when eating out and for groceries and toiletries.

She eats turkey sandwiches every day at work and never eats out during the week. Her entertainment/dining out budget is $100. For the month.

One trick that has helped Derico, who still confesses to a weakness for impulse buys, is to save money in her ING money market account. Once you contribute money to it, you can't touch it for two or three days, which she says prevents spur-of-the-moment purchases.

In terms of stretching dollars, "my friends try to figure out how I do so much on my little income. I've been called a penny-pincher, a thrift-saver, a cheapskate."

Derico says she learned little about financial management from her parents. Instead, her money education came from financial literacy lessons she took at her church.

She wants to pass those lessons on to her daughter.

Sharmon doesn't get a fixed allowance, but Sherelle makes sure she always has some money on hand. Sherelle expects her daughter to save at least 10 percent of the money. As an incentive, at the end of each month, Sherelle matches whatever Sharmon takes to the bank. Including change.

Sherelle then shows Sharmon what's going into her account every month and how much her money has grown.

"My friends say [Sharmon] knows a lot more about finances than they do now," Sherelle says, noting, "she understands credit cards aren't a good thing."

Sherelle does the same with the 529 education plan she opened up for her daughter last year, which so far has more than $3,000 in it.

And finally, Sherelle has Sharmon tithe 10 percent to the church, as Sherelle does when not contributing to the renovation of her grandmother's 30-year-old house.

Future plans
Since Derico is on track to be debt-free in five years, including her mortgage, her prospects of a comfortable retirement are substantially raised.

She says she would like to retire from her current profession one day and move back to her home state of Georgia to teach financial literacy in the schools there. She'd also consider working part time.

She toys with the idea of starting an interior design business if it didn't mean going back to school. Sharmon, now 11, would one day like to be a graphic designer.

With the financial lessons applied to her own life, Sherelle Derico says she doesn't understand people who don't pay attention to their money. "It's nothing you can ignore," she said.

She marvels at people who can't make their finances work while they're employed, because if they can't succeed now that they're making an income how will they survive when they're not working?

"You can finance everything else," said Derico. "But retirement is the one thing that can't be financed."

Here is a lesson plan for teaching financial literacy from the previous post.

This is one of the courses from the previous post.


Money Math: Lessons for Life
is a teacher's guide for helping middle school math students learn how to manage their money, stay out of debt, and save for retirement. Lesson plans, reproducible activity pages, and teaching tips are included in the 86-page guide, which draws on real-life examples from personal finance. (Department of the Treasury)

20% of 12 year olds have at least one credit card!

The most recent statistic that I have seen says that 20% of 12 year olds in this country have a credit card! Fifty percent of 18 year olds have at least one but more often have two.

This is a FREE site that teaches Financial Literacy and is provided by the Federal Government. It targets teenagers to them finance basics. Educators and others can obtain these materials free of charge and is a good resource.

The link is: http://www.free.ed.gov/
subjects.cfm?subject_id=189&res_feature_request=1

"Credit card companies have a special word for the customers who pay in full every month. They're called deadbeats."

This couple, the Peterson's, story was shown on ABC and their situation is not atypical for many Americans even though the numbers are higher than most. While the couple profiled do bear personal responsibility, it also true that credit card company's don't want the average consumer to pay off their credit card debt each month. Hence, the term "deadbeats" because these people don't make them any money.

"Nothing helps the credit card companies' bottom line more than the fees and high interest rates they earn from consumers who are struggling with their payments.... According to the Government Accounting Office, credit card issuers make 70 percent of their profit from the interest payments made by cardholders who carry a balance every month."

The issue for me and for many consumer advocates, is that if the Peterson's bear some responsibility for their circumstances, so too do the credit card companies both on a personal level and corporately for charging usury interest rates and exorbitant fees.

Certainly, the corporate culture and mentality that classifies anyone that pays off their monthly bill as a "deadbeat" because the prohibitively excessive fees and interest rates are lost on them, is a violation of two hundred years of American business ethical standards and in any other setting are and would be considered criminally predatory.

I also vehemently disagree with the strategy of selling their home and rental property to pay off unsecured debt. While downsizing to cut expenses is not a bad thing, there are alternatives to trading the roof over their heads and most of their home equity to pay unsecured credit card debt. Short term gain, long term mistake in my opinion and very poor one dimensional advice.

By LEE HOFFMAN, JONEIL ADRIANO, and JESSICA HORNIG

ABC News

Jan. 19, 2007 — Meet the Petersons. Matt is a software engineer and Suzie works mostly at home raising their three daughters: Julianne, 12, Rachel, 11, and Caroline, 9.

They live in an upscale California neighborhood in a 4,000-square-foot home with a pool, a huge walk-in wine cellar and even its own movie theater. They drive nice cars and own a second home and two vacation time shares.

How do they do it? They're in debt up to their eyeballs.

"I know that we don't make ends meet each month, and to make ends meet, we use credit cards, and then the credit card payments start increasing, and you just can't make ends meet even doing that," Suzie said.

Their monthly household income of $8,750 isn't enough to cover all of their expenses, which total $15,000 a month. For over a year, the Petersons have relied on credit cards to keep afloat financially.

Using one card to pay off the other, their credit card balances eventually ballooned to $60,000. Their Bank of America Visa alone has a balance of $19,000, at an interest rate of nearly 33 percent.

The burden of their debt is something that keeps Suzie up at night. "I woke up at 2:30 a.m. this morning because yesterday we went to the diner and tried to use the debit card and it didn't work."

An Epidemic of Debt

The Peterson's financial situation may sound shocking, but they are not alone. Nationally, credit card debt is growing — almost tripling since 1989. Today, American consumer debt is over a trillion dollars. More than half of all cardholders don't pay their cards off each month and carry an average balance of around $2,000.

Ironically, families like the Petersons — who struggle to make the minimum monthly payments — are more valuable to credit card companies than customers who pay in full every month. According to the Government Accounting Office, credit card issuers make 70 percent of their profit from the interest payments made by cardholders who carry a balance every month.

Still, credit card companies insist they are not banking on customers' inability to pay.

"Credit card issuers are concerned about people who are only able to make the minimum payment because those people are at significant risk of not repaying the loan in the short term and that means the bank loses the money," said Nessa Feddis, a lawyer with the American Bankers Association, an industry trade group.

For that reason, Feddis says, credit card companies are constantly adjusting their policies to minimize the number of customers paying only the minimum amount.

Read the Fine Print

Elizabeth Warren, who teaches bankruptcy and commercial law at Harvard University, disagrees. "Credit card companies have a special word for the customers who pay in full every month. They're called deadbeats."

Nothing helps the credit card companies' bottom line more than the fees and high interest rates they earn from consumers who are struggling with their payments. For example, one of the Petersons' credit cards charges a $39 fee for going over the spending limit or being late on a payment.

And even if the Petersons always pay their bill on time, the bank can still increase their interest rate to 32 percent if the Petersons are late with a car or mortgage payment, or any other payment to a creditor. That's because a "universal default" clause is buried in the fine print of the Peterson's credit card agreement, the terms of which can be changed by the credit card company "at any time for any reason."

"There's no contract like that anywhere else in America," said Warren, a contract law expert who admits that even she has trouble understanding some of the terms of credit card agreements. "They're deciding all the rules."

"We agree that the disclosures could be better," said Feddis. But she also argued that some responsibility has to fall on the consumer. "Pay off at the end of the month and pay no interest. Every cardholder has that opportunity. They make that choice."

They Never Stopped Spending

In the Peterson case, a series of bad choices contributed to their massive debt. Six years ago, Matt lost his job and spent more than a year out of work. During that time, Suzie decided to open two scrapbooking stores. When her business folded last year, they ended up losing about $200,000 — most of it borrowed money. There were also some bad real estate and stock investments.

Even as their financial situation worsened, however, the Petersons continued to spend. Last year alone, they took three vacations — a cruise through the Carribean, a trip to Whistler, Canada and another to Hawaii.

he cruise was a contest prize, while other expenses were covered by their time shares. But all together, those vacations still cost the Petersons $4,000.

Matt concedes the vacations may have been unwise, given their dire finances. "OK, we need to be punished, I guess," he said.

Suzie, however, has no regrets. She saw the vacations as a way to bond with her daughters. "The cruise was my gift to my family."

'The Ship Is Starting to Go Down'

To help them dig out from under all of their debts, "20/20" introduced the Petersons to financial planner Robert Pagliarini, author of "The Six-Day Financial Makeover," a step-by-step guide to transforming your financial life.

After reviewing the Petersons' financial records, Pagliarini calculated that they were about five months away from bankruptcy. All of their debts translated to a loss of $200 each day.

Pagliarini, the president of Pacifica Wealth Advisors in Los Angeles, likened the Peterson's situation to the Titanic.

"You've already hit the iceberg," he explained. "The ship is starting to go down. That's the bad news. The good news is you still have a small window of opportunity to make some changes."

Taking Action

Pagliarini devised a six-month action plan to rescue the Petersons from economic ruin. First, he advised them to dump their expensive time shares, even though this will mean the Petersons will lose $46,000 on their investment.

Pagliarini hopes they can recoup some of those losses by also selling their home and their second rental property. He believes those transactions will net the Petersons about $113,000.

Pagliarini then wants the Petersons to use that money to pay off their $60,000 credit card debts. If they take all of these steps, Pagliarini believes, the Petersons will actually have a few thousand dollars leftover to save and invest.

The catch? It's an all or nothing proposition. "Do all the big things or do none of them, because if you just do one, two or three, it's not going to work," said Pagliarini.

Matt Peterson is excited by Pagliarini's plan. "We can't wait. I mean we literally can't wait," he said.

Suzie was less enthused, saying, "We have no place to live and $3,000."

Digging Out of Debt

But by getting rid of all of their real estate, the Petersons will also unload expensive tax bills, mortgage payments and maintenance fees — drastically cutting their monthly expenses.

When all the dust settles, Pagliarini believes the Petersons will be able to afford to rent a house in their neighborhood on Matt's current salary, and still have about $1,200 extra cash every month to save and invest. Compare that with the $6,250 the Petersons are now losing every month.

Pagliarini told them, "At the end of the day, after the cameras are off, it's you two. And you really have to decide, 'Are we willing to make these kinds of changes?'"

In the last week, the Petersons have begun contemplating some of those changes. They spoke to a real estate broker about listing their house and rental property. Pagliarini says he is always a phone call away to offer support, but whether this family can dig out from all that debt is now up to two people — Matt and Suzie Peterson.