California Debt Blog

New FDCPA Proposal

The Federal Government, through the FTC, has proposed changes to the Fair Debt Collection Practices Act. These changes are good, at least in my opinion. Maryland attorney Sonya Smith-Valentine summarized these changes nicely on her blog:

• Debt collectors should provide better information in debt validation notices, including: (1) the name of the original creditor; and (2) itemization of: the principal, the total of all interest, and the total of all fees and other charges
• The statutory damages awarded under the FDCPA should be increased to account for inflation.
• The FTC should have regulatory authority under the FDCPA.
• The law should generally prohibit debt collectors from contacting consumers via cell phones unless they have obtained prior express consent to such contacts.

These changes are good. Debt validation notices now are a waste of paper. They barely contain any information. I would actually like to see more required in a validation notice. The increase in damages would be very nice. It has been over 30 years since the law was enacted and the damages have not been increased since then. Finally, debt collectors should not be calling consumers on cell phones. That is simply ridiculous.

Debt Collectors Want to Avoid You

Somehow I got on the mailing list of a company that assists debt collectors. I don't know how, but I got 6 emails from them yesterday. Then, two more today. The emails were all the same.

The gist of the emails is that for $90, this company will check out a debtor and see if the debtor has any FDCPA lawsuits against debt collectors. According to the email, this will save a debt collector over $8,500 which they say is the cost of defending one of these cases.

Yes, the debt collection industry wants to avoid you if you have asserted your rights. What does this mean? It means that if you know your rights and you assert your rights, debt collectors will be notified about this and may decide it is not cost effective to pursue you.

So, learn your rights under the FDCPA and Rosenthal Act and it could make debt collectors go away.

Be Wary of Foreclosure Consultants

I wrote before about being wary of attorney based  services. Well, some people are now calling themselves foreclosure consultants. Most of these people are out of work mortgage brokers who need a job. The easiest job: call yourself a consultant.

But, the State Bar is warning attorneys not to work with these people. There are potential ethical violations for working with a consultant. While the warning applies to attorneys, consumers should ask any attorney if the attorney works with a consultant or will be paying any of the fee to a consultant. If the answer is yes, the consumer should be concerned.

Do not hire anyone without thoroughly checking out the person. If you are going to hire an attorney, check the State Bar website and Avvo. If you are going to hire a real estate agent, check with the state DRE.

FAQ: Should I pay a store credit card?

Q: I have a credit card with a store that is going out of business. I have read on the internet that I should stop paying my credit card. Is this true?

A: NO! Do not stop paying your credit card, unless you want your credit score to fall or you want to be sued - or both.

Store credit cards, such as Circuit City or Mervyns, are not owned by the store. Rather, a large bank, say Chase or Citibank, owns the card. Your payments are to that company. You do not pay Circuit City or Mervyns. So, when Circuit City shuts its doors, your credit card balance does not zero out. Rather, the money is still owed to Chase or Citibank.

If you stop paying your card, the bank will either send you to a collection agency, report you to the credit reporting agencies or sue you for the balance. And you still owe it. The store going out of business is not a defense to this case.

So, if you have a card with Circuit City, keep paying it until it is paid off!

Interest Rates Raised by Capital One

News out of the world of credit cards: Capital One has raised interest rates for almost 70% of its customers. Why? Because it can.

Yes, your credit card company can change your interest rate for any reason -or no reason at all. Capital One, in an effort to stay "competitive," has decided to raise its rates and convert fixed rate cards to variable rate cards tied to the LIBOR.

I spoke with a contact at Capital One who confirmed for me that they reviewed all of their customers and somewhere between 70 and 75% of all customers have been affected by this. Notices are being mailed out. Capital One is doing this in an effort to be more competitive with other credit card companies.

Some people may notice a small change as the LIBOR is currently down. But, for most people, this is going to be an increase of 4 to 7%. And as the economy comes out of the recession, the LIBOR will go up. This means that the rates will go even higher.

If you have a Capital One card, now  is the time to look around.

New Report for Tenants

I am expanding my consumer law practice to include tenant's rights. Face it - more foreclosures lead to tenant's being evicted. Banks apparently think they can sell unoccupied homes, despite the evidence that occupied homes sell faster. Landlords are trying to get tenants out and think they will have 10 more waiting to move in. Eviction filings are increasing.

But your rights as a tenant need to be protected. That is why I am now releasing my new report, 10 Things Tenants Must Know to Protect Their Rights. And, as always, I am giving it away - for FREE! All you have to do is email me at tenants@jonathangstein.com and you will get the report sent to you.

Banks Agree to Foreclosure Moratorium

Now four banks have agreed to a foreclosure moratorium. These are Bank of America, Wells Fargo, JP Morgan Chase, and Citigroup. According to CNN, the moratoriums are until the end of the first week of March, for the most part.

Most analysts see this as a good thing. And, for some people it is. If you are behind but not in foreclosure, this will give you time to get a modification done with your lender. It will also give the lenders time to get a new program in place to work with you.

But, if you are in foreclosure and there has been no sale date yet, your sale date will be postponed. That can be good news, if the banks will work with you. However, if the banks will not work with you, your sale date may be changed with no notice - ever. You may not find out that your house has sold until a real estate agent comes up and offers you cash for keys.

I am going to give the banks the benefit of the doubt on this. I am going to assume that they will work with people who are in foreclosure and give notice before the sale, if it is after the moratorium expires. But, I will not be surprised if they start selling homes like hotcakes after the March deadline.

Loan Modifications: A Simple DIY Error

Okay, so everyone wants a loan modification. Well, maybe not everyone, but a lot of people. And some people want to try it as a DIY project. This would be like trying to stitch yourself up after a serious cut and not like changing a shower head.

But, for those people who want to try a DIY approach, here is the biggest problem I see: in the documentation, these DIY folks are showing that they have cash left over at the end of the month or show a lot of assets.

A loan modification works under very specific circumstances: you cannot afford to pay your mortgage. If the bank looks at your budget and sees that you have money left over at the end of the month, the bank will be less inclined to give you a modification. If you can make your payment and have money left over, why do you need a modification?

Just one more reason why you should make sure that you have someone helping you with your loan modification.