Tag Archives: credit bureau

Dealing With a Collection Agency

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440 companies with revenues of half a billion a year, that’s the size of the collection agency business. Unfortunately, millions of Canadians are going to meet one of them sooner or later. It’s one of the most stressful things you can go through. But it doesn’t need to be.

Collection agencies are all licensed so they do have rules to follow. They’re also all on commission, as is every collector you may talk to. That makes them highly motivated to get the money. Most follow the law – lots do not. Remember that they are collecting money that has no collateral. It’s not like they can just foreclose your home or repossess your vehicle. They’re collecting smaller amounts, largely credit card debt that’s over six months old.

Since they can’t use the “repossession” threat, they have to intimidate and borderline harass you to the point where you will do anything to make them stop. That’s the game they play – to the edge of the law…if not further.

Collection agencies will first send you a letter giving you a heads up about the debt and start calling you five days later and really never stop. You do have the rights, however. But you have to send them a letter in writing or they will likely claim they never got it.

It’s your right to have them stop calling you at work.Its’ your right to have the debt fully broken down in writing – the original amount, interest, fees, penalties, etc.They cannot sue you after two years of last activity. So if it’s been two years since your last payment, they cannot take you to court. They can, however, keep calling and attempting to collect.Do not ever send them a note or email acknowledging the debt or paying even one dollar. That simple step will re-set the two year clock and they can now take you to small claims.

If you do not have the money, there is no debtor prison in Canada. Take a deep breath, tell them once you don’t have the money or assets and stop calling. Then hang up the phone and stop answering their calls.

If they take you to small claims court, you must show up on the date of the summons. Just showing up gives you a 50-50 chance the debt will be wiped out. You need to ask for the full breakdown and the documents you signed to prove you legally owe the money. It’s likely the collection agency does not have any of that. If they can’t produce it – the claim is dismissed. If you do not show up, there will be an automatic judgment against you for the full amount. That half a day at small claims matters a lot!

If you have the money and want to settle the matter, negotiate the amount. It’s likely half of it is interest and fees. Offer them 30 cents on the dollar and haggle from there. When you agree on an amount, you must get it in writing from them. If not, they’ll take your money and start collections on the rest all over again and you have no proof that you settled for less. If you’ve settled and have it in writing send them a bank draft or money order. NEVER send a personal cheque. Many have been known to take your banking account information and jam through a second charge for the rest of the balance.

Lastly, keep the settlement letter and your money order receipt for the rest of your life! They may re-sell the collection to another company who will now start calls again. You must have the proof that you paid. You will also need to send it to the credit bureau to have the collection now shown as paid and removed after six years.

When You Get Told “You Need to Contact The Credit Bureau”

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Good morning George! I listen to you every Wednesday and I hope you can help! We returned from Arizona on March 15th and went into mandatory quarantine. We addressed a ton of mail after 4 months, during that time my RBC(Westjet)credit card had renewed and I had numerous letters from RBC concerning payment. Two weeks ago was the first opportunity to go into my bank to pay the full amount as I never had my RBC on my online banking.

I have always had a strong credit rating in the 800’s on my credit score. I was shocked to see my credit score now was dropped to 721 due to this one bill. I have spoken to numerous contacts within RBC and all they do is point me to the credit bureau. Due to their reduced hours/staff I have been unable to get thru to them. I feel under these circumstances it is really unfair and wondering if you can assist me in any way.    N.B.

Thanks for the email, N.B. While I understand your disappointment and frustration, reporting your missed payments to the credit bureau was factual and correct. Yes, there are always reasons, but you were past due.

It’s a common question, so let’s go through three things:

Read the chapter of the Money Tools book on credit reporting, the impact on your credit score and how to deal with it and/or fix it. A great credit score such as his, with one past due plummets it by about a hundred points – as N.B. pointed out. It’ll come back within a couple of years and it’s still good enough to not impact him that much. I call this a stupid fee: Almost a hundred bucks in late fees is a reasonably cheap lesson.

You need to make a minimum payment or 31 days later the lenders’ computer tells the credit bureau – period. It takes less than 10 seconds to set any bill up online. Whether it’s travel, missing statement, forgetting, or whatever – none of that matters. I have a small chart that I use every month with the bill and the due date. Mortgage 27th, tax 30th, utilities 8th, Amex 10th, etc. to make sure I never forget – ever.

Now to what the Royal is telling you, which is that you need to deal with the credit bureau on this. It’s a big fat lie that every lender from banks to credit card companies to GMAC, Ford Credit – literally everybody uses. It’s a quick way to shift blame. It’s a lie. Who told the credit bureau that you were late? Right – it was the Royal. So they’re telling you to go to the people who just note down the information and not the people who told them to do it!

In this case, the Royal Bank computer downloads every card holders information for the month: The credit limit, balance on your statement, last payment made or not made and the amount, and whether the account is up to date, a month, two months, etc. in arrears. The two credit bureaus take the information and file it on your account that other lenders can now access and see.

When the Royal told you to call the credit bureau they knew they were lying to you. But it worked – you went away and tried to contact the bureau. Bad news: The odds of reaching them are zero – most of their staff is in India and you’re dealing with companies that don’t care and can’t help you. They didn’t do the damage as I explained, and you’re not their customer: Their customers are lenders, landlords, bonding agencies, etc. who purchase their credit reports.

If there is factually incorrect information on your file, then it’s the credit bureau who needs to fix it. If you have a car loan on there and you don’t owe money on a car, if you have a collection showing up that isn’t yours, or stuff from an identity theft, that is the responsibility of the credit bureau to fix and/or remove by law. That’s the case for around 25% of files and the reason to check your report at least every couple of years.

It was accurately reported by the Royal. The only way to get them to have a heart and forgive and forget this one mistake is for the Royal to fix their computer. It can be done if you are a valued client with lots of business with them. Tell them it’s a one-time error and ask them to remove it or you’ll take your business elsewhere. In this case, N.B. only has the credit card with the Royal and isn’t likely to have a chance of getting it removed.

Getting Financially Fit For 2008

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The good news: It’s a new year! The chance to start over, to resolve to do better, to do more, or in the case of your payments and all that interest – to do a lot less.

The bad news? It’s likely that you’re already broke! How is that? Well, we spend more than 120% of our disposable income, half of us have no savings and almost 70% of us don’t make RRSP contributions. Why? Because every dollar we earn goes to make a long list of lenders really really rich, and there’s simply nothing left at the end of the month.

So when it comes to making some commitments about our debt, credit and all those bills, perhaps we should think small to make sure we set ourselves up for a win, and not a sure-fire let-down. But small doesn’t mean pointless, small just means some little steps you can actually keep, that’ll pay off big for 2008.

If you need additional motivation, remember that every $100 you don’t pay out making lenders rich is really about $150 or more. Why? Because you earn gross income, then all the deductions and tax come off your pay, and it’s only the net income that you have left over to pay bills.

So here are some more points, continuing our list from last week:

6. Set yourself a credit limit. If you won’t leave your credit cards at home for at least 90 days – pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. But anything below that, you’ll spend with real money, instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways. After all, look at your statement. Almost all the charges are for pretty mickey mouse amounts that add up in huge debts – twenty bucks at a time.

7. Destroy your line of credit cheques and unhook the account from your bank card. Your line of credit was set up for emergencies and not for monthly bills. It’s too tempting to use the account if there are cheques around. Because when you use a line of credit for a monthly bill – the next bill will be here in thirty days, while you’re paying the last one off with interest over a year or more!

8. Close your overdraft. I know – it’s like being hooked on drugs. It’s so convenient and always there and you can’t live without it any more. Well, that’s what the banks were counting on, and where they make a huge amount of their profit. But it’s killing you. Just a $1,000 overdraft will cost you between $200 and $300 in interest and fees. It’s a one-time pain to cancel the overdraft, but it’s worth it.

9. Change to a credit card that isn’t a credit card. We’re now averaging three credit cards each, and it’s rising, while card issuers keep upping our limit to make sure we have much less chances of paying them off every month. With no grace period and over-limit charges, it’s a recipe for spending a ton of money needlessly. Get yourself an American Express Green card. That’s not a credit card – it’s a charge card. At the end of the month, there are no payments to make – the balance has to be paid off in full. Oh sure, the first month that’ll be painful. But after that, you’ll watch what you’re charging pretty carefully, and you’ll never ever have a credit card balance again. What’s that kind of financial freedom worth?

10. Contact the credit bureau to get a free copy of your credit report. Almost all lenders now base your interest rate on your credit report and its credit score. So you have to know what’s in there and whether there are errors on your file. The how-to is in the It’s Your Money book and will take under five minutes. Less than 30% of us ever look at our file and that can easily cost us two or three percent on everything we borrow. After all, knowing is always better than hoping.

11. Keep your car for another year. If you believe a cool car is a status symbol and a must-have, you’re doomed to be in debt for decades to come. Not to mention that almost 50% of people trade their vehicle and STILL owe more than it’s worth – that’s financial suicide when you take your extra debt and just roll it over to the next new car with interest for another five or six years. It makes things worse – much worse. And your car will never increase in value. So the goal should be to drive a reliable vehicle that doesn’t have payments with it which are killing your chances to save or get ahead financially. Imagine a couple of years without car payments and the huge financial advantage you’ll create for yourself. And remember: Those $400 car payments are actually more than $600 in gross earnings. If you can’t get a $600 raise this month – here’s a way to get it – you’ll just be giving it to yourself!