Tag Archives: credit report

Dealing With a Collection Agency

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.

Hacking an ATM Seems Easy & God Can’t Get Credit?

Two 14-year olds in Winnipeg seemed to have no trouble hacking a Bank of Montreal ATM machine. They found an ATM internal operating manual online and decided to test it at a real machine.

They actually managed to get into the operating system of the ATM, and guessed the six digit password on the first try! Gee, when the password is 123456 you think there’s a problem? That was enough for them to get out of the system and go into the branch to share their information. But the branch staff didn’t take them serious. So the kids asked if it would be OK to get the proof and were told good luck trying.

Back at the ATM, they went back into the operating system and printed out the amount of money in the machine, the transaction history and the income made from surcharges.

They even changed the ATM surcharge down to a penny and the greeting to read: Welcome to the BMO ATM. Go away! This ATM has been hacked.

Back in the branch with all the printouts, the staff now realized they had a problem.

BMO Media relations stated in an email to the Calgary Herald that no customer information and contents of the ATM were ever at risk. Yea..right…

God can’t get credit?

A Russian immigrant by the name of God Gazarov can’t get credit. Yes, his first name really is God. He was named after his grandfather, and in Eastern Europe that first name is quite common. It’s kind of like many Latinos name their son Jesus.

But Equifax, one of the credit reporting agencies is refusing to accept his first name. As a result, they won’t open a file with his current credit references. No credit report – no borrowing, no credit cards, or car loan – something he tried to apply for last year. He now has a lawyer and is suing Equifax.

The (Last) Half Hour

For the past two weeks, we talked about a number of financial steps that can be done inside of half an hour that will have a significant impact on your financial life.

Do a budget just once
Set up a separate savings account
See your payroll department: Fill out the payroll form to have some money deducted right off your cheque
Apply for a charge card that has no monthly payments and makes you pay the balance in full each month
Set up a TFSA (Tax Free Savings Account)
Get your kids or grandkids on track with one-third of their money into savings, one-third to giving, and one-third for spending.

Here are the final three steps. We’ve saved the best, or most important, for last:

-Get your free credit report: Once a year you’re entitled to see your credit report. It’s the snapshot of what all lenders report about you. Go to Equifax.ca for the form. It’s free by mail with some ID, or spend the few bucks and get it online. You have to know what’s in your credit file. About one-third of credit files have errors big enough to prevent you from getting preferred interest rates or getting approved at all. You can’t change what you don’t know.

-Make a financial date night with your partner: In relationships, most people do not want to talk about money, debts, or budgeting. Small wonder money and money arguments are the top reasons for divorce. Take half an hour, longer if you can, and just talk about the state of your finances, bills, budget, and what your goals and dreams are. It’s your partner in more than title. It isn’t HER money or HIS money – it’s our money.

If only one of you handles all that, you’re in trouble. The partner in control isn’t your Mommy or Daddy, and the other partner often starts to rebel by dialing out, making an argument, getting entrenched about THEIR money, or lashing out through stupid spending or hiding debts. You need to do this together.

-Cash out your points: Take half an hour and look at the various points or rewards you’re chasing. Unless you’re honestly on track for something big, cash them out. Many expire and even more never get used. Don’t do it – get them redeemed. Rough rule of thumb is the best bang for your buck – or points – is to redeem them for gasoline gift cards. That way they turn to real cash, and you’re guaranteed to use them up. Plan B is to buy that toaster with points, instead of going to a retailer and buying it for half the money…

Today you haven’t reached your financial dreams or goals yet. But you’re one day close than you were yesterday. That’s assuming you have dreams or goals. After all, you can’t reach what you don’t work towards.

You’re Going to Get Ripped Off

Recently, a new wave of ads for debt settlement companies has started. I can’t call them a scam, because they’re perfectly legal. But I can tell you that you’ll get ripped off. That’s the quote from the Clark Howard show which reaches millions of people.

First, here is some of the content from their commercials:
-Our attorneys will work with your lenders to settle your debts for up to 70% less.
-Within 10 minutes, an expert will be able to determine if you’re eligible. What do you have to lose but your debt? Call us.

Well, not so fast. Before you make the call, you have to understand the background, and what will happen:

The ad, of course, is targeting people who are in over their head in debts and who would love to believe that their solution is just a phone call away. They’re praying on the desperation of people in real serious financial trouble. At that point, they’re prepared to try anything to get some help out – from anyone.

As the ad says: What have you got to lose? Our experts will determine inside of 10 minutes if you’re eligible. Oh and you will be eligible. Because it’ll make someone believe that three quarters of their debt will get wiped out.

On the call, the first few minutes will be getting your name and contact information so they can keep calling you. Then they’ll get a list of your debt. What they’re looking for is the amount of unsecured debt. That is, debt without collateral such as you house, line of credit against your home, or your car. Unsecured debts are things like smaller credit lines, and 90% of it is your credit card debt.

Based on the total unsecured debt, they’ll then advise you that you’re eligible and that they’ll work with your creditors to get this total amount settled. But one more thing you need to do first: You’ll need to pay them a fee, up front, of somewhere between $1,000 and $3,000 depending on your total debt. That may sound outrageous, but you’d be amazed how many broke and desperate people will find a way to pay that fee for the hope of getting a huge reduction in their debt.

Once the fee is paid, they should start to get to work contacting your creditors. But first, you have to work. They’ll advise you that you now need to stop paying all these bills. It’ll soften up the creditors and then they’ll be able to arrange a settlement when the debt is old and unpaid for three months.

Yes, that’s the extent of their work. Get your money up front and tell you to stop paying. That advice I can give you for free right now. When lenders haven’t been paid for two months or so, they’ll repossess your vehicle, or start foreclosure on your home. Unsecured lenders don’t have collateral. At 90 days, and then again at 180 days behind, they have a big problem. But they’re much more likely to sue you, or pursue some pretty strong collections, as they are to settle with you.

At the end of the day, you’re out some huge up-front fees and your credit is destroyed for seven years. You’ve then got no chance of re-financing, consolidating, or even getting a lot of jobs that run your credit report. You’re right back where you started, but three months behind, the stress gets much more intense with these arrears, and you’ve added more debt to pay their fee. Don’t do it. Don’t make the call. They ask what you’ve got to lose? I’ve just described some of it.

Eight Financial Legislation Changes That Would Really Help Us

Recently NDP leader Jack Layton held a press conference here in Edmonton to put the spotlight on credit card issuer. Mr. Layton comments focused on the high merchant fees and on credit card interest rates.

He’s half right, and half off the mark. The merchant fees that retailers have to pay in order to accept credit cards average around two percent. In addition, there are also a ton of other fees which add up to another one or two percent. They’re not optional, because it’s impossible for a retailer not to accept credit cards, they keep rising, and they are certainly built into the retail price of what you and I pay.

The issue of credit card rates is another matter. I’m always hopeful that Mr. Layton will use the massive media attention he can draw in a positive and constructive way. But, once again, I was disappointed. Two years ago, Mr. Layton called for the elimination, or drastic reduction of ATM fees. Sorry, but an ATM fee is a “lazy fee,” as we discussed at the time. Nobody has to pay them, if they just go another two or three blocks to their own bank machine where there’s never a charge.

Mr. Layton wants the government to force financial institutions to have at least one credit card at prime plus 5%. Sorry, but with write offs and other costs, that can’t happen, and won’t happen. But then, for anyone carrying a balance, there are cards with 11% rates out there. If you are going to carry a balance, it’s a quick fix to change from a 20% card to the low-rate card. Forget the perks and points. Most are never claimed in the first place, the worst of which are airline miles. where Consumer Report found that over 75% are never redeemed.

There isn’t a law that says you HAVE to use your credit card. It’s your choice and it’s one of the most expensive ways to finance things.

If you carry a credit card balance – stop using it until it’s paid off! Broke people can’t keep spending! We’re at 150% debt to net income – and it’s getting worse, and we’re now more broke, and saving less, than Americans! No law Mr. Layton may want to pass will stop broke people from continuing to dig their financial hole deeper and deeper.

Needless to say, I would do anything to get one-one hundredth of the media attention Mr. Layton can garner to make a difference in financial education and to actually help families. Mr. Layton missed a great opportunity to shine the spotlight on financial issues that matter and that can, and should, be addressed.

How about some legislation that Universities and Colleges can’t sell their student lists to credit card issuers? It’s our educational institutions selling out their students for a kick-back.

How about that you actually need a job to get a credit card, and preventing them from being issued to students until age 21 and with proof of an actual income?

How about changing the giant rip off of mortgage insurance with CMHC? CMHC has $8 billion in net assets and made almost a billion dollars in 2009. Yet we have to pay the insurance on less than 20% down payments. In the U.S. it’s monthly premiums until you do reach the 20% equity. At that point, the premium charge stops.
Here in Canada, it’s entirely front loaded, and adds $14,000 to $18,000 in costs to the average mortgage.
How about re-starting Bill C27 that died, making it a criminal offence to steal someone’s identity, with up to five years prison?

How about a credit freeze law that allows individuals to totally block their credit report, making it impossible to be the victim of identity theft? Because it’s the ONLY way to accomplish that.

How about legislation that forces financial institutions to advice customers when their transaction will trigger an overdraft with huge fees? This opt-in rule would be a no-brainer in having an ATM screen display that you are about to go into overdraft with this withdrawal.

Better yet, how about matching the U.S. legislation that requires customer consent before every allowing an overdraft? That way, people can’t be trapped into huge overdrafts they never consented to.

And back on credit cards, how about restricting the $30 or $40 over-limit fees to a percentage of the balance, or requiring specific customer permission before over-limiting the account in the first place? Right now, a $2 coffee can trigger a $30 overdraft.

How about championing a consumer bill of rights, including the right or ability to speak to a human being at the credit bureau with inquiries, or concerns about their credit file. Because, right now, one-third of files have errors serious enough to prevent obtaining credit.

Those are eight reasonable and reasonably simply issues that can be passed through the House of Commons and become legislation. Unfortunately, they are certainly not as sexy as talking about ATM fees, or mandated low-interest credit cards. But then, is it about cranking people up, or wanting to help and make a difference?

Getting Financially Fit For 2008

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!