Can a Debt Collector Legally Promise to Delete a Derogatory Credit Mark In Exchange for Payment of the Debt?

February 4th, 2010

Hello Readers,

I just received this question from Bankrate.com and thought I’d share both the question and the answer, since this is a very relevant inquiry:

Question: With the practice of payment for deletion, a consumer agrees to pay a debt collector and the debt collector agrees to delete the collection account from the consumer’s credit report. Is it correct that a debt collector that complies with such a request would be in violation of the Fair Credit Reporting Act?

Answer: technically, yes. Under the Fair Credit Reporting Act, creditors are legally bound to accurately report a consumer’s known credit and debt activity, and this includes accurate reporting of negative, or derogatory, information. Debt collectors have the same obligation. 15 U.S.C. Section 1681s-2 (a) (1): “A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.”
Of course, any creditor or debt collector can determine that a derogatory mark is, in its own judgment, false, inaccurate or that cannot be verified. 15 U.S.C. Section 1681s-2 (b) (1) (E). In such a case, a creditor or debt collector can delete the derogatory credit reporting, but, to comply with the law, the creditor or debt collector would have to have a good faith basis for concluding that a derogatory is false, inaccurate or cannot be verified.

My firm has seen several cases where debt collectors specifically have promised deletion of a derogatory mark in exchange for payment of the debt. What the debt collector is not disclosing is that the debt collector may, in reality, be promising to cease reporting on its own reporting of the debt, but the debt collector has no ability to change the reporting from the original creditor. So, for instance, let’s say someone has a “Dinosaur” credit card which runs late and Dinosaur reports to the credit bureaus a 30-60-90 days late derogatory. Dinosaur then assigns or sells the debt to XYZ Debt Collectors. XYZ may tell the consumer that it will cease credit reporting the debt in exchange for payment, and in fact, in a misleading way, XYZ is telling the truth—it will cease its own negative reporting. However, XYZ does not disclose that it has no ability to affect any reporting being done by Dinosaur. Thus, the derogatory mark remains on the consumer’s credit. By law, it remains on the consumer’s credit report for seven years and six months following the date of first delinquency.

I have also encountered cases where the debt collectors simply lie to collect payment. Remember, the individual debt collectors are usually working on commission, and are given to lying, cheating and stealing to get the consumer to pay the debt. The individual collector rarely is the person at the debt collection agency who is responsible for changing credit reporting, which instead is a task usually given to someone in at least a supervisorial role. The individual debt collectors try just about anything to get the consumer to pay. It is the game. They can and will lie about credit reporting, and the only way a consumer will ever prove that they lied would be if the collector made the promise in writing. However, this will never happen—the promises to clean up credit will always be verbal only, because the individual collectors usually do not have the power to change credit reporting on the accounts.

Also, what debt collectors frequently do is simply to change the reporting from, say, “30-days late” to “settled for less than full amount.” The credit bureaus have created a special derogatory mark for consumers who negotiate down a debt—“settled for less than full amount”—for reporting on consumers who do not pay the full debt and/or who settle it for less than the full amount. This is considered a derogatory mark. So far as is known, it has the same effect as a derogatory mark for “30-days late,” so it makes little difference that a debt collector changes one derogatory for another. However, some debt collectors may believe that they are “cleaning up a consumer’s credit” by making this change. The proof is in the pudding, however—the consumer’s credit score will not change, or will change very little, when one derogatory mark is exchange for another.

So, if someone promises to “clean up your credit” in exchange for paying the debt in full, this promise is probably bogus.

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Experian Releases Data on Common Traits of ID Theft Victims

January 29th, 2010

Hello Readers and thanks for reading,

Experian has compiled a list of traits common to many identity theft victims. Definitely worth reading! There’s a lot of information which is of course irrelevant–the fact that many ID theft victims enjoy tennis is not relevant to identity theft unless it’s an identity theft that occurs at a tennis club, for instance–but really what Experian is releasing is a description of the “ideal target” for an identity thief. It’s a good read and check it out. Here’s the article:

Most Common Traits of ID Theft Victims
by Jeremy M. Simon
Friday, January 29, 2010

Wealthy consumers who enjoy leisure activities such as tennis, skiing and international vacations are top targets for identity thieves, according to a new report.

A report released Wednesday by credit bureau Experian shows that fraudsters are on the hunt for the most affluent suburban consumers. Compared to the general population of credit applicants, Experian says these consumers live in and around metropolitan areas, favor leisure activities, have college diplomas or advanced degrees and more often tend to be married.

Affluent are more often victims of ID theft, report shows”The crooks are going where the money is,” says Gail Hillebrand, senior attorney with Consumers Union, the nonprofit publisher of Consumer Reports magazine.

Most Common Traits, Activities

Experian identifies the common activities of those most often victimized by ID theft:

• Tennis
• Politics
• Foreign travel
• Charities/volunteering
• Cultural/arts
• Skiing

Where — and how — these consumers live also seems to make them more of a target. “The opportunities to steal discarded documents would be greater in suburban areas,” says Linda Sherry, director of national priorities with advocacy group Consumer Action. “More affluent households may have domestic help and service people who may have the opportunity to steal personal info from the home that can be used to acquire credit.”

How did Experian identify this group of wealthy victims? The bureau’s Fraud and Identity Solutions group — in conjunction with Experian Marketing Services — compared credit application data with thousands of individual fraud records between January 2007 and November 2008. It found that three of its 12 demographic groups were the most highly sought-after by identity thieves: “affluent suburbia,” “upscale American” and the more middle-class “American diversity” category of consumers.

Experian found that compared with the general population of credit applicants, the consumers most often victimized by fraudsters tend to own more new and luxury vehicles and live in higher-income neighborhoods that contain many more homeowners than renters. Additionally, these borrowers tend to be based in densely populated metropolitan areas and often reside in multifamily homes or condos.

Thieves aren’t the only group focusing on wealthy borrowers. “Lenders are obviously targeting some of these demographics as well,” with better and more frequent offers of financial goods and services, says Keir Breitenfeld, director of product management for Experian’s Fraud and Identity Solutions group. As a result, thieves who target these consumers and steal their information have an easier time getting credit and services in their victims’ names. “If you’re a fraudster, you want to assume the identity of someone who can go out and get high-value services,” Breitenfeld says.

How to Protect Yourself

Consumer advocates, meanwhile, say that if the affluent can be victimized by ID thieves, anyone can. “You can’t protect yourself. Even the most affluent suburban households, it’s still happening to them,” Hillebrand says. She says that banks and other institutions have an obligation to better guard consumer data. “We don’t have much control over that as individual consumers. People who receive our data decide how carefully to protect our information,” Hillebrand says.

However, Experian says lenders need to strike a balance between guarding consumers and not making them struggle unnecessarily to get approved for credit. If consumers must jump through too many hoops in order to get a loan, Experian says, the bank may end up losing their business. Still, Experian says its report suggests that financial institutions may want to do more to protect certain high-risk borrowers.

But it’s not only lenders who need to take steps to guard against identity theft. “If you fall into that category, you may want to consider those services” aimed at preventing ID theft, says Maxine Sweet, Experian’s vice president of public education.

Those services include:

• Credit Freezes. Both Experian and Consumers Union say freezes offer benefits, but they can also mean added work for the consumer, such as getting a cell phone or utility service. “You have to be willing to be actively engaged in managing your credit report if you freeze,” Sweet says.

• Credit Monitoring. Credit monitoring, meanwhile, offers alerts about credit report activity — typically for a price. Monitoring offers “piece of mind that every month there has been no activity and if there is activity you get a warning,” Sweet says.

Consumers may also decide to fight for more ID theft protection from the government, including more oversight of players in financial system and restrictions on how borrowers’ personal data can be collected and how long it can be kept, Hillebrand says.

She points to one of the interests highlighted by Experian’s report. “If the people who are getting ripped off are interested in politics, they should get politically active,” she says.

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Creditors CANNOT Put Business Debt on Personal Credit Report

January 16th, 2010

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Happy New Year: Lenders are Requiring Higher Credit Scores for Prime Loans

January 7th, 2010

Hello and Happy New Year,

I guess “the other shoe” has dropped on credit score requirements. Lenders are now treating a FICO score between 680 and 739 as mid-range, not suitable for the best rates. Now the minimum score required for the best rates is 740. Here’s the article from BankRate.com, which includes some good pointers on managing your credit score in the coming year. Thanks for reading.

Good Credit Score Not Good Enough Anymore by Melissa Ezarik Tuesday, December 29, 2009, provided byBankrate

With historically low rates, many homeowners are watching closely for the right time to refinance their mortgages. Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score.

That was then. This is now.

A few years ago, a score of 620 or higher was good enough. That increased to 680 in early 2008. Then it jumped to 720 in April last year and 740 in August, says Rodney Anderson, senior managing partner of Plano, Texas-based Rodney Anderson Lending Services.

In the past, any score of 700 or higher would get a double thumbs-up from credit experts. Now, rate adjustments begin kicking in at 740, with every 20-point drop adding another adjustment.

In other words, many people who were taking pride in their credit habits either must pay significantly higher or try to make quick changes to nudge their scores upward. “What used to be great is now only good,” says mortgage broker Todd Huettner, president of Denver-based Huettner Capital.
Refinancing that would have worked a year ago might well not make sense, he adds.

“I have clients all the time who literally wind up with a score of 739, 719, 699, 679 … and it costs them money to either fix it or pay for it,”
Huettner says.

One of Huettner’s clients, who always had a score of about 740, went to do a refinance and found her current score at 719. “The reason was, she put a new washer and dryer on a store credit card,” he says. Many store cards are actually revolving credit, and your limit may well be equal or about equal to the purchase you’re trying to make that day.

Take the application that Stamford, Conn.-based Luxury Mortgage Corp. got recently. Interested in lowering the rate on an existing mortgage, the borrower could verify substantial income, assets and personal credit history, says chief executive David Adamo. But the borrower’s credit score had taken a hit after co-signing an auto loan for his son that had not been paid timely.

“As a result, the borrower, who otherwise met every other criterion, was unable to refinance the loan at a rate that made economic sense,” Adamo says.

Another wrinkle in today’s market: Even those with FICO scores of 740 or higher are penalized for buying in a geographic market on the downswing.
“This adjustment affects all borrowers, regardless of score, if in a declining market,” says mortgage broker Jim Heidelberg, president of Heidelberg Capital Corp. in Tampa, Fla.

In many cases, the added costs of rate adjustments are “enough to make a refinance that would otherwise make sense have no benefit to the borrower,” Huettner says.

The road to new scoring

How did we get to this new reality?

The nation’s two largest mortgage lenders, Fannie Mae and Freddie Mac, suffered major losses in the market last year and then redefined risk, announcing price adjustments for borrowers with FICO scores below 720, says Sean Cragg, vice president of sales for Ann Arbor, Mich.-based Gold Star Mortgage Financial Group.

And, in case you were wondering, “these fees have nothing to do with your mortgage company or its various products and cannot be negotiated away,”
Cragg says.

All mortgage bankers, brokers and credit unions must comply with the higher interest rates and delivery changes in all traditional mortgages, says Heidelberg. Only entities intending to hold the mortgages in their own portfolios can follow their own guidelines.

Worse news may be on the horizon. “There are many factors, including proposed legislation and regulation, that continue to change the mortgage lending landscape,” says David Chung, managing director of Towson, Md.-based CreditXpert Inc., which provides credit analysis services to consumers. “In the near term, it is more likely that this benchmark will continue to rise than fall.”

Surprise, surprise

Joe and Jane Homeowner have likely heard of the new credit restrictions.
But the actual cost to them is often a surprise when they sit down with a broker.

“Often, lenders will quote rates that include the adjustments, without calling attention to them in order to avoid a negative reaction from their customer,” says James Guthrie, a partner in New Home Finance in Suwanee, Ga.

Less surprising are other factors that go into securing financing for a new or existing mortgage. Paola Kielblock, national products manager for Sun Prairie, Wis.-based Fairway Independent Mortgage Corp., clarifies today’s requirements:

• Good credit.
• Stable job, with a minimum of two years of employment.
• Reserves after closing, including a minimum of two to six months of mortgage principal, interest, taxes and insurance.
• Down payment from the borrower’s own funds.
• Low debt-to-income ratio. The required ratio varies between banks but is generally less than 40 percent, according to many in the industry.
• Good loan-to-value percentage. It also varies, but it’s often cited as less than 80 percent.

Having equity in your home is a major factor in getting approved for a refinance and in finding the best rate, says Cameron Findlay, chief economist for LendingTree.com. The more equity in the home, the less risk there is to the lender if the home is repossessed.

Taking action on your score

What can a homeowner who wants to refinance do with a good FICO score that’s not good enough?

“Virtually everyone can raise their scores by at least 10 (points) to 20 points, sometimes significantly more in 30 days,” Anderson says. Here’s what to do.

1. Find out what might have gone wrong. Applicants should know their credit score, understand what it means to their loan rates and ask their loan officers to use credit analysis on their behalf, says Chung. Credit analysis tools are a simple way to identify key score influencers by scrutinizing the information contained in each of an individual’s three credit reports to look for inconsistencies, errors and omissions that may artificially depress the score.

2. Correct any inaccuracies. Although consumers can improve scores on their own, Kielblock notes that credit agencies offer services to mortgage brokers to help consumers raise their credit scores if something is reported inaccurately and there is proof of a discrepancy.

3. Decrease the percentage of available credit used. This can be done by paying down balances or increasing credit limits, says Guthrie. Ideally, this means keeping balances as close to zero as possible, and definitely below 30 percent of the available credit limit, experts say.

“We’ve seen people increase their scores by as much as 90 points or more, simply by paying off the right cards,” Anderson says.

4. Move things around. If one income can be used to qualify for the loan, transfer accounts to “park” the debt in the other party’s name, Guthrie says.

5. Get a rapid rescore. It’s the only way to find out fast if an attempt to improve a score was successful. It’s done through your lender and a rescoring company. The process takes about a week, but it can get the loan process back on track. The downside is it costs a few hundred dollars. The credit bureau Experian has seen an increase in rapid rescoring requests, says spokeswoman Cynthia Baker. “While we haven’t done a direct cause-and-effect analysis, anecdotally, the volume does appear to have increased as interest rates have dropped in March,” she says.

Aside from working toward a better score, there are two additional options. One is paying points to buy down the interest rate. “This is only a good idea if the borrower will then live in the house beyond the break-even point, meaning the time where the money they’ve paid in points is made up for by way of less expensive monthly payments,” says Findlay.

The other option: shopping around. Some lenders, such as Palo Alto, Calif.-based Addison Avenue Federal Credit Union, have loans, known as “portfolio” loans, that aren’t subject to blanket rules on credit scores because the lender intends to keep them rather than sell the loans in the secondary market.

Michelle Edwards, national mortgage sales director, reports that for these loans, her company increases the cost of a mortgage only for consumers whose credit scores are below 680. One customer looking to refinance avoided a pricing adjustment because of compensating factors such as loan-to-value ratio, assets and length of employment.

In a perfect world, anyone contemplating a refinance or a new mortgage anytime within the next year or so would start working on getting the ideal credit score now.

But what if that didn’t happen? Try not to let your emotions drive how you feel about your interest rate. A mortgage is a financial decision that should be driven by economics, “not the pursuit of the world’s lowest rate because having it would make you feel good,” Heidelberg says.

He also says some consumers wait six months for a slightly better rate when a refinance could save $500 a month means missing $3,000 in savings.
As Heidelberg says,

“This is foolish.”
Copyrighted, Bankrate.com. All rights reserved.

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Latest Important Information about Credit Reports Jan. 2010

January 5th, 2010

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Secrets of FICO Credit Scoring Revealed…FINALLY!

December 16th, 2009

By Robert F. Brennan, Esq.

Brennan, Wiener & Assoc.

La Crescenta, California

www.socalcreditdamage.com

Copyright © 2009 by Robert F. Brennan, Esq.  All rights reserved.


Shrouded in mystery for years, the Fair Isaac Company has finally let consumers have a slight peek into the vault of their credit scoring model which is responsible for “FICO Scores,” otherwise known as your credit score. (FICO, by the way, is a shortened version of “Fair Isaac Company”.)

FICO’s revelation of information comes at an interesting crossroads for the Fair Isaac Company.  Just last month, Fair Isaac lost a case against credit bureau giant Experian in Minneapolis, in which Fair Isaac was attempting to prevent Experian from using a scoring model with a similar point range (300 to 850) as is used by Fair Isaac.

Personally, I believe that Fair Isaac’s decision to now begin to release tidbits of its credit scoring model has more to do with wanting to avoid the negative public relations image of being “the wizard behind the curtain,” and less to do with wanting to service consumers.  Fair Isaac has had it scoring model for decades hidden in the deepest vaults; the timing of its decision to finally begin to release parts of it suggests to me motivations grounded more in competition than in any desire to enlighten the millions of consumers they confuse and damage on a daily basis.

The Traditional Information on How FICO Calculates Credit Scores

FICO has for some years published on its website a broad outline of how it calculates credit scores.  This information is a good general recipe but generally does not provide consumers with specific information for rapidly improving their credit scores, as is often necessary when time-sensitive loan applications are pending.  Here is the traditional information:

  • -35% of the score comes from payment history: have you paid your bills on time? And if not, how late were you, when were you late, and how often?
  • -30% of the score comes from amounts owed: how much do you owe on each account, and how much of your credit limit have you used?  This last measure, called debt utilization ratio, refers to the percentage of available borrowing power you have actually used vs. what you have.  In other words, if you have $100,000.00 in available credit card limits but have only borrowed $5,000, your credit utilization ratio would be very, very good: 5%.  However, if you had borrowed $85,000, your credit utilization ratio would be very, very bad: 85%.  This is a very important factor in all credit scoring.
  • -15% of the score derives from credit history: how long have you had each account?
  • -10% of the score derives from the types of credit you maintain, i.e. revolving debt (credit card debt) gives you less credit on your credit score than mortgage debt.
  • -10% of the score comes from applying for, or opening, new credit accounts.  The FICO scoring model penalizes you for shopping for new credit or for opening up new credit accounts.

The Newly-Released “Damage Points” Information from FICO

Not surprisingly, FICO employs a method called “damage points” to downgrade credit scores depending on the type of negative credit information.  So, as I have been saying for some time, for people with average-to-excellent credit, FICO scoring (and, most likely, the scoring models which the credit bureaus themselves will be releasing and promoting in the coming months and years) is akin to scoring an Olympic dancing or diving contest: the judges can sometimes look for picayune stuff to seriously downgrade one’s score.  FICO scoring begins to look more like “American Idol” every day.

Jeremy Simon, a contributing writer for Yahoo! Finance, describes this “American Idol” effect in his recent article on FICO “damage points”:

“Those with good or excellent credit—so-called prime borrowers—put more points at risk with each (credit) mistake.  For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points.  But for someone with an excellent credit score—780—that same delinquency can send a FICO score tumbling by 90 to 100 points.”

Fair Isaac provided the following chart of “damage points” in its news release:

Credit Mistake If Your Score is 680 If Your Score is 780
Maxed-out card Down 10 to 30 pts. Down 25 to 45 points.
30-day late payment Down 60 to 80 pts. Down 90 to 110 pts.
Debt Settlement Down 45 to 65 pts. Down 105 to 125 pts.
Foreclosure Down 85 to 105 pts. Down 140 to 160 pts.
Bankruptcy Down 130 to 150 pts. Down 220 to 240 pts.

One wonders why FICO is so eager to penalize prime borrowers disproportionally.  The answer is relatively simple when one understands that FICO remains true to its clientele—big banks, big mortgage companies, big credit card companies, major credit bureaus—who in turn have every incentive to put the fear of god into their best borrowers to ensure repayment.  In turn, better-risk borrowers create higher-value debt instruments which are then bundled and packaged into new investment vehicles.  This is called “securitization” and is one of the elements of the “mortgage meltdown” of 2007 and 2008, when low-grade mortgage debt was packaged and sold as high-grade mortgage debt.

Why Do “Damage Points” Cause Disproportional Damage to Consumers with Higher Scores?

To fully understand credit scoring, it is important to understand that the consumer is only seeing the first half of the picture: the retail transaction in which the consumer’s credit is being considered to determine if he is a worthy credit risk.  That’s the “front door” of credit scoring.  The “back door” is the fact that investment banks rely on unnecessarily harsh and unfairly punitive credit scoring to select out the best loans which will then be bundled and securitized so that investment bankers can continue to make seven- and eight-figure incomes while the rest of us toil in the fields.  At the end of the day, FICO serves its masters at the large investment banks; individual consumers are pawns in the overall scheme, which is why credit scoring is flatly unfair to many credit-worthy consumers.

Is It Really Important to Get a Score Above 800?

I meet a lot of consumers who carry over their “grades-obsession” from high school into a “credit-score obsession” as adults.  My overall advise: it’s really a blind obsession, and you start getting the best credit offers at about credit score 730 or 740.  Beyond that, it’s an ego thing and it probably is not necessary.  Banks do not present you with a different-colored diploma if you manage to get your credit score above 800.  Any time spent getting a credit score better than about 750 is time wasted.

Further, past a point no one really knows why one person has an 800-plus score and another has a score between 750 and 800.  As with any mathematical process, there are invariably “fudge points” one way or another which ultimately have no bearing on whether you will get the best credit offers when you apply for credit.

That said, here are a few time-honored techniques to getting your score into the 700’s or above:

  1. Pay your bills on time.
  2. Keep your credit utilization ratio low, ideally below 10%.  Credit utilization ratio refers to your available credit vs. how much of your credit you have used.  If you have available credit of $100,000.00 and you have only used $5,000.00, your credit utilization ratio is 5%, which is excellent.  On the other hand, if you have used $85,000.00 of your $100,000.00 available credit, this is a credit utilization ratio of 85% and is poor.  A high credit utilization ratio will have a certain negative impact upon your credit score even if you do not have any late payments.
  3. Have types of credit other than credit cards.  Look around: everyone can get at least some kind of credit card these days.  Having a current mortgage or a current car loan will improve your score.  Mortgage debt is usually considered the best possible type of credit for a good credit score.
  4. Keep your old accounts open, even if you do not carry a balance on them, and shy away from opening new credit accounts unless you have to do so.  One factor in credit scoring is length of credit history.  Some of my friends like to close out cards whenever they can transfer balances to new cards with promotional zero percent interest rates, and will repeat this cycle for as long as they can continue it.  It’s a bad practice: the credit inquiries from any new credit applications alone will cause your score to drop.  Opening up new lines of credit with balances can negatively affect your credit utilization ratio.  Closing out older lines of credit—particularly ones with a good payment history—will deprive you of the positive influence of these credit items.  The better practice is simply to pay down and pay off older credit cards, and then just keep them locked in the desk drawer for a rainy day.
  5. Avoid the other types of activities that can result in derogatory credit reporting: bankruptcies, foreclosures, repossessions are the best known ones, but these days debt collectors are reporting “debt settlements” as derogatories on credit reports.  As seen in the chart above, these can have a major negative impact on your credit score.

I hope this article answers some of your questions about credit scoring.


    Please visit our website at www.socalcreditdamage.com and feel free to contact us with issues related to wrongful credit reporting, wrongful credit damage, identity theft or wrongful debt collection practices.  Our law firm is an expert in these areas.

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Federal Jury in Los Angeles Orders Debt Collector Arrow Financial Services to Pay Consumer $100,000.00 for Unfair Debt Collection and False Credit Reporting.

May 8th, 2009
May 8th, 2007

On May 4, 2007, a unanimous federal jury in Los Angeles, California ordered debt collector Arrow Financial Services to pay Laura Nelson $100,000.00 for a multi-year pattern of unfair debt collection and false credit reporting practices.  Laura Nelson v. Arrow Financial Services, LLC, United States District Court Case No. CV06-1568 RGK (PLAx).

Los Angeles, Ca., May 9, 2007 (PRWeb)—Following a three-day civil jury trial, a Los Angeles jury unanimously ordered debt collector Arrow Financial Services to pay Laura Nelson a total sum of $100,000.00 for false credit reporting and unfair debt collection practices.  The jury awarded Ms. Nelson $85,000.00 for her emotional distress and mental anguish, and also added a $15,000.00 penalty against Arrow for its repeated violations of the Fair Debt Collection Practices Act.  Laura Nelson v. Arrow Financial Services, LLC, United States District Court Case No. CV06-1568 RGK (PLAx).

Ms. Nelson was represented in the case by Robert F. Brennan, Esq. of Brennan, Wiener & Associates in La Crescenta, Ca.

The account reported to Ms. Nelson’s credit reports was false from the start, as Ms. Nelson never owed the alleged debt.  The false reporting of the account began in 2001 and Ms. Nelson had previously disputed the account numerous times to Arrow, to the three major credit bureaus and also to Direct Merchants, the supposed original creditor on the account.  Direct Merchants even wrote to Arrow to advise them not to report the account.

Ms. Nelson previously sued Arrow in 2003 over the account, and part of the settlement of that case included a permanent removal from her credit reports.  However, literally as she was signing the settlement agreement from the previous lawsuit, Arrow began re-reporting the account to Equifax, one of the “big three” credit bureaus, using a different account number.  When Ms. Nelson later disputed the account’s re-appearance to Equifax, Equifax could not locate the account because it had been re-reported with a different account number.  Ms. Nelson then brought the lawsuit.

“Arrow subjected Ms. Nelson to five years of false credit reporting, and insisted until the very end that it had done nothing wrong,” stated Brennan.  “What was most upsetting was the fact that Arrow had kept the account in its system, adding interest to it and continuing to credit-report it, all the while knowing it was a completely fraudulent account.  I certainly hope Arrow re-evaluates some of its business practices in the wake of this verdict.”

Mr. Brennan also expressed his characteristic dismay at the way in which the debt collectors and large creditors are becoming the new slave masters in our culture.  “America no longer creates any new products.  All it creates any more is debt.  The key product of our economy is debt, plain and simple, and the debt collectors and major banks use debt to control, and destroy, our entire lives.  I’m picking up more and more discontent from consumers because of this debt-driven economy and how we’re all hamsters in hamster-wheels working our tails off just to pay interest to debt collectors and big banks.  One day, it’s all gonna break and it just might be a good thing when it does.”

Contact Information: Robert F. Brennan, Brennan, Wiener & Associates, 3150 Montrose Ave., La Crescenta, Ca. 91214, (818) 249-5291. Mr. Brennan and his firm are the leading consumer protection and credit damage attorneys in Southern California. Mr. Brennan has been selected as a “Southern California Super Lawyer” for two years running, for both 2006 and 2007.

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Credit Card and Credit Reporting Abuse Trial against HSBC Proceeding to Trial

February 15th, 2008
February 15th, 2008

Hello all, sorry I haven’t written for a while.

My next big credit damages trial comes up in April against HSBC, formerly known as “Household Bank”. I suppose they formerly called themselves “Household” because that’s what they would grab, in its entirety, whenever you were late on a payment to them.

Our current case indeed shows their rapacious ways. It turns out HSBC is the actual credit card retailer and provider behind several retail stores, which HSBC does not disclose to the stores’ customers. In the current case, it was the former electronics store The Good Guys! HSBC was the actual credit card provider, and owned all of the credit accounts, for all of The Good Guys! customers.

My client, Stewart, had an established relationship with The Good Guys! in purchasing electronics on a “same as cash/no monthly payments” basis, and in fact had made four such previous purchases and had never defaulted on any of his obligations. On his fifth and final transaction with The Good Guys!, however, The Good Guys! clerk offered him the exact same terms but entered the purchase into The Good Guys!/HSBC’s system as “same as cash/minimum monthly payments required.” One month later, HSBC send my client a bill for a monthly payment, using The Good Guys! letterhead on the bill. There is no mention whatsoever of HSBC. My client disputes it, but rather than risk damage to his credit, he pays off the entire credit account, in full, figuring that would take care of it.

But Stewart did not realize which bank he was dealing with. Rather than accept the payment in full of the entire account, HSBC accelerated the entire account (Stewart had not finished paying off two of his previous transactions, as the time for final payment had not yet arrived) and charged him a hefty late fee. HSBC also dinged his credit. HSBC then adopted the terrorist tactic of “refusing to negotiate”. Stewart had to hire me to get anywhere with them.

HSBC’s defense, which I’m confident a jury would love, is that a “bill stuffer” which HSBC had sent around to its customers contained a whole bunch of small-print terms & conditions which essentially stripped Stewart, along with every other HSBC account holder, of all of his rights. Stewart never had to read and sign this bill stuffer (which identified itself as having come from HSBC, not The Good Guys!, further concealing HSBC’s role in this rip-off), because the bill-stuffer declared that if he’d used his card for any reason, or made a payment, following the mailing of the bill-stuffer, this was the same as signing off on the agreement. The bill-stuffer is about 14 pages long and has tiny, tiny print. It would take a trained lawyer a half-day to read it. Like we all have a half-day to read this crap when all we’re doing is buying some electronics?

Anyway, HSBC filed a bunch of motions to have the case thrown out of court, but the San Diego Superior Court said that Stewart gets a trial in this case. Trial is set for early April. Should be interesting. I’ll keep all & everyone updated on the progress of the case. Hopefully, a jury will see it our way & teach HSBC a good lesson about this kind of anti-consumer conduct.

Thanks for reading & hope you’re doing well.

Posted in Credit Damage | 1 Comment »

Halliburton Proves for You That Binding Arbitration is UNFAIR, CORRUPT AND ONE-SIDED!!!

December 21st, 2007
December 21st, 2007

Hello,

For some time, my clients have known that my firm consistently opposes efforts by big corporations, car dealers, credit card companies and the like to deprive consumers of their rights to have their disputes decided in a court of law with “binding arbitration agreements” often hidden in consumer finance and purchase contracts. You rarely see the binding arbitration agreement in anything you sign; in fact, sometimes big corporations trick consumers into “signing” binding arbitration agreements by putting them into fine-print bill-stuffers so they’re not read. These “agreements” provide that you have agreed to binding arbitration and a waiver of any class action remedies if you even use your credit card after having received the bill-stuffer for a single charge. Fair? Hardly.

Big corporations have for years argued that binding arbitration is really fair, and that’s why big corporations are really doing everyone a favor by depriving them of their right to choose to go to court. Mind you, my firm is not opposed to choice: if a consumer wants to go to binding arbitration with a single arbitrator or retired judge, and wants to go there voluntarily, we’re happy to go that route, but we always insist that the client should have the choice.

Binding arbitration agreements deprive consumers of the choice to go to court. That’s precisely what they’re designed to do, and that’s why big corporations, car dealers, etc. hide them in small print in the midst of the multi-page consumer contracts that they force people to sign.

Some of my clients, however, have posed the question to me: what is unfair about binding arbitration? The arbitrator is supposed to be fair, right? Well, the answer is no. Corporations usually use captive arbitration providers, such as JAMS, NAF (National Arbitration Forum) or AAA (American Arbitration Association), where the corporation, NOT the consumer, is the repeat customer. The judges know that their paychecks and their repeat business comes from the corporations, not from the consumers, so these forums are hardly impartial.

If you have any remaining doubts about whether these forums are impartial, consider one of their biggest proponents: Dick Cheney. Our venerable Vice President has done pretty much everything within his power, and quite a few things very much outside of his power, to make a mockery of our system of justice. His recent refusal to comply with legal and congressional subpoenas is but a “tip of the Cheney iceberg,” towards which our ship of state is sadly headed.

Cheney’s distaste for pesky little things like constitutional guarantees, the Bill of Rights and due process of law date back to his Halliburton days, if not before. In the 1990’s, when Cheney was CEO of Halliburton, he tricked all of the employees of Halliburton and its subsidiaries into “signing” binding arbitration agreements simply by showing up to work. In other words, the company sent out a fine-print notice indicating that by the simple act of showing up to work, you had consented to waive your right to trial by jury and consented to having any disputes against Halliburton decided by in a binding arbitration. Halliburton has a long history of terminating workers who have filed worker’s comp claims and has a reputation of firing or laying off “the old, the sick and the halt,” so it’s little wonder Halliburton decided that none of its employees deserved any right to a jury trial.

Fast forward to 2005, and Jamie Leigh Jones, an employee of Halliburton subsidiary KBR, goes to Iraq and encounters a slightly upsetting employment situation: she is drugged and gang-raped by her fellow employees, who then lock her in a shipping container and warn her that if she tries to go for medical treatment, she’d be fired. The US Embassy eventually had to free her from the shipping container. Jamie had evidently managed to contact her father, who, after having no luck pursuing her daughter’s protection or safety with KBR or Halliburton, called his US Representative, Ted Poe. Representative Poe similarly had no luck with calling the company, so Rep. Poe had to involve the US Embassy. Obviously, there are embassy witnesses to the allegations.

When Ms. Jones tried to sue in court…SURPRISE!!! Halliburton invoked its binding arbitration clause, and Ms. Jones cannot pursue her claims against her employer in a court of law.

All thanks to Dick Cheney.

So, if you ever ask me in the future why I oppose involuntary binding arbitration, or if I detect that you might be buying the corporate PR messages about how wonderful it is, I’ll simply respond: would you want your consumer dispute against a corporation decided by Dick Cheney?

I would certainly hope not.

Have a wonderful Christmas and you’ll hear from me in the New Year.

Bob Brennan

Posted in Credit Damage | 3 Comments »

More Debt Collection Horror Stories

December 10th, 2007
December 10th, 2007

I often write my own posts to this blog but my clients and contacts often write their own. This is just in from Arizona:

“I am not writing to you seeking advice as I live in Arizona and have consulted an attorney here. My son has been sued by Arrow Financial Services. Nevermind the details of his debt, but they have named as a defendant in the lawsuit. My guess is that either they think I am his spouse or they are extending scare tactics in my direction. I am not a cosigner/ joint holder on this account. I’m sure they were annoyed when I wouldn’t give the process servers Eric’s address. I was annoyed with process servers that identified themselves as “employees of the State of Arizona” that could not produce supporting ID.

“Anyway, I just want to tell you that I couldn’t agree more with the following statement that you had made and that I found while researching AFS cases:

“’America no longer creates any new products. All it creates any more is debt. The key product of our economy is debt, plain and simple, and the debt collectors and major banks use debt to control, and destroy, our entire lives. I’m picking up more and more discontent from consumers because of this debt-driven economy and how we’re all hamsters in hamster-wheels working our tails off just to pay interest to debt collectors and big banks. One day, it’s all gonna break and it just might be a good thing when it does.’”

“I am truly disgusted by this whole junk debt buying industry. This week I am in the middle of final exams, but when they are finished I plan to find out how I can become more involved in this issue. Although I don’t have credit issues, I do have a lot of debt and nothing has been more motivating to me to pay it off than what I see this industry has done to young people, their parents and this country.

“Thank you for doing what you do.”

If any of you, my faithful readers, out there would like to write up something to put onto my blog, write it to me at rbrennan@brennanlaw.com. If it’s appropriate, I’ll put it up & leave your name out unless you specify that you’d like it up there.

Thanks for reading!!!

Bob Brennan

Posted in Credit Damage | 1 Comment »

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